-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PYCsJLZ5/oB6isx/FqkErIktAagRnN8/f5exGitCiXaeRTzFJl7geqAgdEqU94vM s1/J8iv3yCk7xdoLk+ek4w== 0001061778-98-000011.txt : 19980630 0001061778-98-000011.hdr.sgml : 19980630 ACCESSION NUMBER: 0001061778-98-000011 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980629 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOJECT MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000810084 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 931099680 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-15360 FILM NUMBER: 98656458 BUSINESS ADDRESS: STREET 1: 7620 S W BRIDGEPORT RD CITY: PORTLAND STATE: OR ZIP: 97224 BUSINESS PHONE: 5036397221 MAIL ADDRESS: STREET 1: 7620 S W BRIDGEPORT ROAD CITY: PORTLAND STATE: OR ZIP: 97224 FORMER COMPANY: FORMER CONFORMED NAME: BIOJECT MEDICAL SYSTEMS LTD DATE OF NAME CHANGE: 19920703 10-K405 1 ANNUAL REPORT FOR BIOJECT MEDICAL TECH., INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------------- FORM 10-K (Mark one) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 1998 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to ________ Commission File No. 0-15360 BIOJECT MEDICAL TECHNOLOGIES INC. (Exact name of registrant as specified in its charter) Oregon 93-1099680 (State of other jurisdiction of (I.R.S. identification no.) incorporation or organization) 7620 SW Bridgeport Road Portland, Oregon 97224 (Address of principal executive offices) (Zip code) (Registrant's telephone number, including areas code) (503) 639-7221 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Title of Class Common Stock, no par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of voting stock held by non-affiliates of the registrant, as of May 31, 1998: $40,833,088 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of May 29, 1998: Common Stock, no par value, 27,218,758 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive Proxy Statement for the 1998 Annual Shareholders' Meeting are incorporated by reference into Part III Table of Contents PART I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Item 6. Selected Consolidated Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 8. Consolidated Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K PART I ITEM 1. BUSINESS FORWARD-LOOKING STATEMENTS Certain statements in this Report constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and factors include, among others, those described under "Business -- Risk Factors." GENERAL Bioject Medical Technologies Inc. ("Bioject" or the "Company") develops, manufactures and markets a jet injection system for needle-free drug delivery. Using this technology to administer injections virtually eliminates the risk of contaminated needlestick injuries and resulting blood- borne pathogen transmission, a major concern throughout the healthcare industry. The Company manufactures and markets a professional jet injection system, the Biojector(R) 2000, which allows healthcare professionals to inject medications through the skin, both intramuscularly and subcutaneously, without a needle. The Biojector 2000 system consists of two components: a hand-held, reusable jet-injector (the "Biojector 2000"); and a sterile, single-use disposable syringe ("Biojector syringe"). The system is capable of delivering variable-dose needle-free injections up to 1 ml. Additionally, the Company has developed and is awaiting regulatory clearance to begin selling the B4000 jet-injection system for self-delivery of various medications up to 1 ml. for use by non-professionals. The Company is also developing systems for Hoffmann-La Roche to use with certain of their products pursuant to an agreement signed January 10, 1995. On March 23, 1998 the Company entered into a transaction with Vitajet Corporation ("Vitajet") whereby the Company acquired, along with certain other assets, the rights to the Vitajet(R), a spring-powered self-injection device which currently has regulatory clearance for administering injections of insulin. See "Research and Product Development". In October 1997, the Company entered into a joint development agreement with Elan Corporation, plc ("Elan") for the license of certain blood glucose monitoring technology from Elan and the development and commercialization of that technology by a newly formed subsidiary of the Company. See "Research and Product Development." The Company intends to operate as two distinct business segments: the jet-injection business and the blood glucose monitoring business. Needle-Free Injection Business. Currently, medications are administered using various methods, each of which has advantages and limitations. The leading drug delivery techniques include oral ingestion, intravenous infusion, subcutaneous and intramuscular injection, inhalation and transdermal diffusion "patch." Many drugs are effective only when administered by injection. Published data indicates more than 1.7 billion needle-syringes sold annually in the U.S. The Company believes that approximately 80% of these syringes are used for subcutaneous or intramuscular injections up to 1 ml. Injections using traditional needle-syringes suffer from many shortcomings including (i) the risk of needlestick injuries, (ii) the risk of penetrating a patient's vein and (iii) patients' aversion to needles and discomfort. The most important of these, the contaminated needlestick injury, occurs when a needle that has been exposed to a patient's blood accidentally penetrates a healthcare worker's skin. Contaminated needles can transmit deadly blood-borne pathogens including such viruses as HIV and hepatitis B. Published data estimates the total number of reported needlestick injuries in the U.S. at between 370,000 and 800,000 annually. In recent years, with the growing awareness of blood-borne pathogen transmission, safety has become a critical concern for hospitals and healthcare professionals as well as patients. As a result, pressures on the healthcare industry to eliminate the risk of contaminated needlestick injuries have increased. For example, the U.S. Occupational Safety and Health Administration ("OSHA") issued regulations, effective in 1992, which require healthcare institutions to treat all blood and other body fluids as infectious. These regulations require the implementation of "engineering and work practice controls" to "isolate or remove the blood-borne pathogens hazard from the workplace." Among the required controls are special handling and disposal of contaminated "sharps" in biohazardous "sharps" containers and follow-up testing for victims of needlestick injuries. These regulations have significantly increased the cost of using needle-syringes. The costs resulting from needlestick injuries vary widely. Uncontaminated needlesticks involve relatively little cost, while investigating and following up contaminated needlestick injuries are much more expensive. Investigation typically includes identifying the source of contamination, testing the source for blood-borne pathogens and repeatedly testing the needlestick victim over an extended period. Some healthcare providers are requiring additional measures, including presuming that all needlestick injuries involve contaminated needles unless proven otherwise and, under certain circumstances, administering prophylactic treatment such as zidovudine (AZT) or other drugs. The costs associated with treating needlestick injuries that result in infection by life-threatening pathogens, such as HIV or hepatitis B, are dramatically higher. In an effort to protect healthcare workers from needlestick injuries, many healthcare facilities have adopted more expensive, alternative technologies. One such technology is an intravenous ("IV") port that permits the injection of medication directly into the IV line without requiring the use of a sharp needle for each administration. Another is the "safety syringe," generally a disposable needle-syringe with a plastic sheath mechanism intended to cover the needle after use. Despite many efforts to reduce the risk of needlestick injuries, such injuries remain a major health concern. The Company's long-term goal is to establish its needle-free injection systems as the preferred drug delivery method for all medications administered by intramuscular or subcutaneous injection. The Company currently markets the Biojector 2000 system to public health and flu immunization clinics, has developed and is awaiting regulatory clearance of a gas-powered self-injection device for the delivery of various medications by non-professionals in the home. In addition, through a transaction with Vitajet Corporation, the Company has acquired the Vitajet spring-powered self-injection system, and is developing application-specific devices to be marketed by Hoffmann-La Roche. The Company is also seeking relationships with pharmaceutical and biotechnology companies to market its Biojector 2000 and self injector products for specific applications and to develop other application-specific devices and companion syringes. Blood Glucose Monitoring Business. Diabetes mellitus is a disorder of carbohydrate metabolism that affects an estimated 16.5 million Americans and 125 million people worldwide, half of whom remain undiagnosed. Insulin facilitates the uptake of circulating blood glucose into tissues, a fundamental process of metabolism. A lack of, or resistance to, the hormone insulin characterizes the disease. Incidence of the disease, which can originate from many factors, is rising, particularly in developing countries as non-Caucasian populations begin to adopt western diet and culture. Type I diabetics are individuals dependent on external administration of insulin who must frequently measure their blood glucose level and, depending on the results, administer injections of insulin or consume a carbohydrate-rich snack. Fluctuation of a person's blood glucose level outside a normal range, which may occur in the time interval between measurements frequently causes serious health complications and even death. Using currently available blood glucose monitoring systems to check their blood glucose level, diabetic patients must lance their finger with a disposable lancet, draw a drop of blood, and place the blood on a reagent strip which is then read by an electronic reader which displays the results. Many patients find this procedure painful and inconvenient, and as a result, many diabetics do not measure their blood glucose with sufficient frequency. The Company has licensed and intends to develop a convenient, easy to use continuous blood glucose monitoring system which will permit diabetics to better monitor and, thereby, better regulate their blood glucose levels so as to diminish or eliminate the long-term complications of this disorder. THE COMPANY The Company's needle-free jet injection operations are conducted by Bioject Inc., an Oregon corporation, which is a wholly owned subsidiary of Bioject Medical Technologies Inc., an Oregon corporation. The Company's blood glucose monitoring system development operations are conducted by a subsidiary, Bioject JV Subsidiary Inc., an Oregon corporation. Although Bioject Inc. commenced operations in 1985, the Company was formed in December 1992 for the sole purpose of acquiring all the capital stock of Bioject Medical Systems Ltd., a company organized under the laws of British Columbia, Canada, in a stock-for-stock exchange in order to establish a U.S. domestic corporation as the publicly traded parent company for Bioject Inc. and Bioject Medical Systems Ltd. Bioject Medical Systems Ltd. was terminated in fiscal 1997. Bioject JV Subsidiary Inc. ("JV or JV Sub") was formed in October 1997 for the purpose of developing and commercializing the blood glucose monitoring technology. All references to the Company herein are to Bioject Medical Technologies Inc. and its subsidiaries, unless the context requires otherwise. The Company's executive offices and operations are located at 7620 SW Bridgeport Road, Portland, Oregon 97224, and its telephone number is (503) 639-7221. "Biojector", "Bioject", "Vitajet" and "Medivax" are registered trademarks of the Company. DESCRIPTION OF THE COMPANY'S PRODUCTS Needle-free Injection Business. The Company's current product, the Biojector 2000 system, is a refinement of jet injection technology that enables healthcare professionals to reliably deliver measured variable doses of medication through the skin, either intramuscularly or subcutaneously, without a needle. Giving an injection with a Biojector 2000 system is easy and straightforward. The healthcare worker checks the CO2 pressure on the easy-to-read gauge at the rear of the injector, draws medication up into a disposable plastic syringe, inserts the syringe into the power injector, presses the syringe tip against the appropriate disinfected surface on the patient's skin, and then presses an actuator thereby injecting the medication. Medication is expelled rapidly through a precision molded, small diameter orifice in a thin stream at a velocity sufficient to penetrate the skin and force the medication into the tissue at the desired level. The Biojector 2000 system consists of two components: a hand-held, reusable jet injector; and a sterile, single-use, disposable plastic syringe capable of delivering variable doses of medication up to 1 ml. The first component, the Biojector 2000, is a portable hand-held unit which is approximately the size of a flashlight and is designed both for easy use by healthcare professionals, as well as to be attractive and non-threatening to patients. As described in the June 7, 1993 issue of BUSINESSWEEK, the Biojector 2000 won the 1993 Gold Industrial Design Excellence Award given by Industrial Designers Society of America for its aesthetically pleasing and ergonomic design. In July 1994, the Biojector 2000 also received the Alliance of Children's Hospitals Seal of Approval. The Biojector 2000 injector uses disposable CO2 cartridges as a power source. The CO2 cartridges, which are purchased by the Company from an outside supplier, give an average of ten injections before requiring replacement. The CO2 gas provides consistent, reliable pressure on the plunger of the disposable syringe, thereby propelling the medication into the tissue. The CO2 propellant does not come into contact with either the patient or the medication. The second component, the Biojector single-use disposable syringe, is provided in a sterile, peel-open package and consists of a plastic, needle- free, variable dose syringe containing a plunger, accompanied by a disposable plastic vial adapter which is used to fill the syringe. (If requested by a customer, the product can also be supplied with a needle which is used as an alternative to the vial adapter for filling the syringe.) The body of the syringe is transparent and has graduated markings to aid filling by healthcare workers. There are five different Biojector syringes, each of which is intended for a different injection depth or body type. The syringes are molded using the Company's patented manufacturing process. The healthcare worker selects the syringe appropriate for the intended type of injection. One syringe size is for subcutaneous injections, while the others are designed for intramuscular injections, depending on the patient's body characteristics. The Vitajet is also made-up of two components, a portable injector unit and a disposable syringe. It is smaller and lower in cost than other products in the Company's needle-free offering. The method of operation and drug delivery is similar to the Biojector, except that the Vitajet is powered by a spring rather than by CO2. It is designed for self-injection and was acquired to fill a gap in the Company's product line for a low-cost, home use, needle-free device. Vitajet's current regulatory labeling limits its use to the injection of insulin. The Company believes that the product has the potential to achieve regulatory labeling for additional subcutaneous injections. See "Forward Looking Statements" and "Risk Factors Government Regulation." The current suggested retail list price for the Biojector 2000 professional jet injector is $995, and the suggested retail list price for Biojector syringes is $1.00 a piece. CO2 cartridges are sold for a suggested retail price of $0.50 per cartridge and average ten injections per cartridge. Discounts are offered for volume purchases. The current suggested retail price for the Vitajet 3 needle-free injector is $399. A three month supply (13-count) of Vitajet syringes is sold for a suggested retail price of $60. The Company has other products in development which are intended to address other markets or to enhance the Biojector 2000 system. See "Research and Product Development." Blood Glucose Monitoring Business. The Company is currently in the development phase of its continuous blood glucose monitoring product and currently has no products on the market in the blood glucose monitoring business segment. See "Research and Product Development." MARKETING AND COMPETITION Needle-free Injection Business. Currently, the traditional needle-syringe is the primary method by which intramuscular and subcutaneous injections are administered. During the last 20 years, there have been many attempts to develop portable one-shot jet injection hypodermic devices. Some of the problems which have arisen in the attempts to develop such devices include: (a) inadequate injection power; (b) little or no control of pressure and depth of penetration; (c) complexity of design with related difficulties in cost and performance; (d) difficulties in use, including filling and cleaning; and (e) the necessity for sterilization between uses. In recent years, several spring-driven needle-free injectors have been developed and marketed primarily for the injection of insulin. Each of these devices requires regular cleaning as well as filling from a separate medication bottle or vial. Current prices for such injectors range from approximately $400 to $600 per injector. The Company believes that market acceptance of these devices has been limited due to a combination of the cost of the devices coupled with the difficulties of their use. Also in recent years, various versions of a "safety syringe" have been designed and marketed. Most versions of the safety syringe generally involve, as their basic design, a standard or modified needle-syringe with a plastic guard or sheathing surrounding the needle. Such covering is usually retracted or removed in order to give an injection. Although the intent of the safety syringe is to reduce or eliminate needlestick injuries, the syringes require manipulation after injection and, therefore, still pose the risk of needlestick injury. They are also bulky and add to contaminated waste disposal problems. The Company is currently focusing it marketing efforts for the Biojector system in two primary directions. The first of these marketing efforts continues the Company's historical strategy of marketing directly to the end-user of the product by gaining acceptance of the Biojector system as a safe, reliable alternative to the needle-syringe and safety syringe. These efforts build on the Company's established presence in the U.S. public health clinic and flu immunization markets. The Company is also focusing its direct marketing on creating arrangements to market the Biojector 2000 system to the home healthcare market and the U.S. military. The second area of marketing emphasis focuses on creating licensing and supply arrangements with leading pharmaceutical and biotechnical companies for whose products the Biojector technology provides either better medical efficacy or a higher degree of market acceptance. Sales though this channel would be to the pharmaceutical or biotechnology company whose salesforce would then sell that company's own products along with the Biojector system to the end user. Development of an injection system for specific applications which is anticipated to be marketed by Hoffmann-La Roche is an example of such an arrangement. Other opportunities include the possibility of pre-filled Biojector syringes which, if developed, could be filled and marketed by the pharmaceutical or biotechnology company whose product is involved. Pursuing both of these marketing strategies, the Company plans eventually to expand into international markets. To lead its direct sales and marketing efforts, The Company currently employs a national sales manager who manages a staff of two full-time nurse trainers, 5 to 8 per diem part-time nurse trainers and a half-time U.S. military sales representative. Bioject's direct sales efforts have resulted in the signing of public health agreements for the state of North Carolina, the New York City Middle Schools, and the health departments in the states of New Mexico, Oklahoma and Illinois. The Company expects to sign additional agreements with other public health agencies. In addition, the Company works closely on a national basis with the Visiting Nurses Associations for use of the Biojector 2000 system for flu immunization. The Company intends to leverage its success in these immunization programs to attract pharmaceutical company strategic partners to assist it in gaining access to the physician office and other specialized markets where the benefits of jet injection drug delivery will enhance distribution of their injectable medications. In August 1994, Bioject signed an agreement with Homecare Management, Inc. ("HMI"), granting HMI exclusive rights to purchase Bioject's Needle-Free Injection Management System, the Biojector 2000, for use in the home healthcare market. Sales to HMI commenced in August 1994. In return for HMI's commitment to purchase a minimum of 8,000 Biojector units over the ensuing two years, the Company granted volume pricing discounts to HMI. Throughout the term of the contract the selling price of Biojectors to HMI exceeded their standard cost. During fiscal 1995 and 1996, the Company sold approximately 2,100 and 4,300 Biojectors to HMI for total sales revenue including syringes of $1.1 million and $2.2 million, respectively. HMI had not placed the great majority of these Biojectors with patients pending completion of negotiations with pharmaceutical companies for certain pricing concessions for medication to be administered with the Biojectors. In January 1996, HMI requested that further shipments under the contract be suspended. In February 1996, the Company learned from HMI's press releases that HMI expected to default under its loan, to take significant write-offs for accounts receivable and inventories, planned operational consolidations, and would restate certain prior period financial statements. In fiscal 1997, the Company agreed to repurchase certain of the Biojector inventories (including up to 6,000 devices) which HMI had on hand for a total of $660,000 including $322,000 of forgiveness of accounts receivable and payment of $338,000 in two installments, one-half of which was paid in July 1996 and with the balance remaining outstanding. The Company was under no obligation to repurchase these inventories, and the repurchase was at a substantial discount to the original selling price to HMI. The sale of new technologies to hospitals, large clinics and other large institutions is typically a lengthy process. Introduction of new technologies to a hospital or other large institution typically involves screening by several individuals and committees within the institution, including new product evaluation committees, infection control officers, medical staff and business office personnel. Therefore, in order to shorten the sales cycle, the Company has focused its primary direct sales strategy on the public health and flu immunization markets where there are fewer and more concentrated decision makers. The medical equipment market is highly competitive, and competition is likely to intensify. Many of the Company's existing and potential competitors have been in business longer than the Company and have substantially greater technical, financial, marketing, sales and customer support resources. The Company believes the primary competition for the Biojector 2000 system and other jet injectors it may develop is the traditional disposable needle- syringe and the safety syringe. Leading suppliers of needle-syringes include: Becton-Dickinson & Co., Sherwood Medical Co., a subsidiary of American Home Products Corp., and Terumo Corp. of Japan. Manufacturers of traditional needle-syringes compete primarily on price, which generally ranges from approximately $0.17 to $0.15 per unit. Manufacturers of safety syringes compete on features, quality and price. Safety syringes generally are priced in a range of $0.25 to $0.45 per unit. The Company expects to compete with traditional needle-syringes and safety syringes based on healthcare worker safety, ease of use, reduced cost of disposal, patient comfort, and reduced cost of compliance with OSHA regulations, but not on purchase price. However, the Company believes that when all indirect costs (including disposal of syringes and testing, treatment and workers' compensation expense related to needlestick injuries) are considered, the Biojector 2000 system will compete effectively. See "Forward Looking Statements" and "Risk Factors." The Company is aware of other portable needle-free injectors on the market today which are generally focused on subcutaneous self-injection applications of 0.5 ml. or less and compete with the Vitajet. However the Company is not aware of any competing products with features and benefits comparable to the Biojector 2000 system. The Biojector is suitable for both intramuscular and subcutaneous injections of up to 1 ml. in the professional and home injection markets. Manufacturers of needle-syringes, as well as other companies, may develop new products that compete directly or indirectly with the Company's products. There can be no assurance that the Company will be able to compete successfully in this market. See "Risk Factors - Competition,- "Dependence on Two Technologies". A variety of new technologies (for example, transdermal patches) are being developed as alternatives to injection for drug delivery. While the Company does not believe such technologies have significantly affected the use of injection for drug delivery to-date, there can be no assurance that they will not do so in the future. Blood Glucose Monitoring Business. The diabetic blood glucose monitoring market is currently dominated by four companies: LifeScan, a subsidiary of Johnson and Johnson, Boehringer Mannheim, Miles Laboratories, a subsidiary of Bayer, and MediSense, a subsidiary of Abbott Laboratories. All of these companies have in vitro blood glucose monitoring systems which use blood test strips and an electronic reader. Emerging technologies for less invasive monitoring of blood glucose have been in development for many years. There are three broad modalities of blood glucose analysis: Near infrared spectroscopy (near-IR), measurement of interstitial fluid ("ISF"), the liquid between cells of the skin, and transdermal technologies, where a patch applied to the skin causes diffusion of bodily fluids to the skin surface from which levels of blood glucose can be measured. There have been several recent attempts to introduce noninvasive in vivo blood glucose sensors, based on near-IR spectroscopy. These instruments are currently large and costly (around $10,000), as well as difficult to calibrate. Though some are billed as "portable," they are impractical for ambulatory use. Two companies, TCPI and Cygnus Therapeutics, are developing systems for measuring the blood glucose concentration with patch membrane technologies. Through application of an electrical current through the skin, interstitial fluid is brought to the skin's surface, where it is captured by a patch from which the glucose element can be measured. In the case of the TCPI device, the patch is then removed from the skin and placed into a reader for glucose measurement. The Cygnus device has a reader and membrane integrated in a wristwatch which takes periodic readings and averages them to determine blood glucose levels. The Company has not yet fully developed and commercialized its continuous blood glucose monitoring technology. However, based on the expected design and performance of its continuous blood glucose monitoring device, the Company expects to compete effectively based on the following anticipated key benefits: To patients: - - Real-time measurement of blood glucose concentration leading to a better, more reliable monitoring of the blood sugar level with the resulting opportunity to reduce the near and long-term medical complications of diabetes. - - Superior Information: Continuous availability of blood glucose levels in a convenient and pain free format. - - Lightweight and discreet. - - Convenience; anticipated once-per-day application to provide continuous results all day without further activation by the patient. To third party payors: - - Real-time measurement of blood glucose concentration leading to a better, steadier regulation of the blood sugar level, translating to a potential reduction of diabetic complications and their associated cost. - - Freedom from the pain and inconvenience of frequent blood tests leading to better patient compliance, which translates to better blood glucose control, fewer long term complications, and lower costs. To healthcare providers: - - Superior Information: Real-time measurement of blood glucose concentration leads to steadier regulation of the blood sugar levels, superior provider capabilities, and improved patient care. - - Continuous monitoring via once-a-day application greatly reducing the labor requirements associated with patient-nurse interactions required by the static tests currently employed to monitor patients' blood glucose levels. PATENTS AND PROPRIETARY RIGHTS Needle-free Injection Business. The Company believes that technology incorporated in its currently marketed injection device and single-dose disposable plastic syringes as well as the technology of products under development in both the jet injection and blood glucose monitoring business segments coupled with the technology and ease of use of the products acquired in the Vitajet acquisition give it significant advantages over the manufacturers of other jet injection systems and over prospective competitors seeking to develop similar systems. The Company attempts to protect its technology through a combination of trade secrets, confidentiality agreements and procedures and patent prosecution. The Company has three U.S. patents which were issued with respect to jet injection technology incorporated in earlier versions of its jet injection systems and which expire from July 2007 to November 2008. Seven additional U.S. patents have been issued which protect developments incorporated in the Biojector 2000 system. These patents incorporate a number of claims including claims regarding the jet injection system's design, method of operation, certain aspects of the syringe design and the method of manufacturing the syringe orifice. The Company has also been granted a patent relating a drug vial adapter. The Company has made additional patent filings regarding pre-filled syringe technologies and adapters for drug vial access. The Company also generally files patent applications in Canada, Europe and Japan at the times and under the circumstances it deems filing to be appropriate under the procedures in place in each jurisdiction. There can be no assurance that any patents applied for will be granted or that patents held by the Company will be valid or sufficiently broad to protect the Company's technology or provide a significant competitive advantage. See "Risk Factors." The Company also relies on trade secrets and proprietary know-how that it seeks to protect through confidentiality agreements with its employees, consultants, suppliers and others. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known to or be developed independently by competitors. In addition, the laws of foreign countries may not protect the Company's proprietary rights to its technology, including patent rights, to the same extent as the laws of the U.S. Although the Company believes that it has independently developed its technology and attempts to assure that its products do not infringe the proprietary rights of others, if infringement were alleged and proved, there can be no assurance that the Company could obtain necessary licenses on terms and conditions that would not have an adverse affect on the Company. The Company is not aware of any asserted claim that the Biojector 2000, Vitajet or any product under development violates the proprietary rights of any person. If a dispute arises concerning the Company's technology, litigation that could result in substantial cost to and diversion of effort by the Company might be necessary to enforce the Company's patents, to protect the Company's trade secrets or know-how or to determine the scope of the proprietary rights of others. Adverse findings in any proceeding could subject the Company to significant liabilities to third parties, require the Company to seek licenses from third parties or otherwise adversely affect the Company's ability to manufacture and sell its products. Blood Glucose Monitoring Business. The continuous blood glucose monitoring system concept and proprietary aspects of the design are covered by various patents . Corresponding patent applications have been filed with the PCT, designating all member countries, including the United States, E.U. and Japan, as well as in Taiwan and South Africa. Additional patent applications will be filed in the course of the GlucoTrax development program. These applications will cover new, innovative aspects and refinements of the product. GOVERNMENTAL REGULATION Needle-free Injection and Blood Glucose Monitoring Businesses. The Company's products and manufacturing operations are subject to extensive government regulations, both in the U.S. and abroad. In the U.S., the Food and Drug Administration ("FDA") administers the Federal Food, Drug and Cosmetic Act (the "FD&C") and has adopted regulations, including those governing the introduction of new medical devices, the observation of certain standards and practices with respect to the manufacturing and labeling of medical devices, the maintenance of certain records and the reporting of device-related deaths, serious injuries, and certain malfunctions to the FDA. Manufacturing facilities and certain Company records are also subject to FDA inspections. The FDA has broad discretion in enforcing the FD&C and the regulations thereunder, and noncompliance can result in a variety of regulatory steps ranging from warning letters, product detentions, device alerts or field corrections to mandatory recalls, seizures, injunctive actions and civil or criminal penalties. The FD&C provides that, unless exempted by regulation, medical devices may not be commercially distributed in the U.S. unless they have been cleared or approved by the FDA. The FD&C provides two basic review procedures for pre-market clearance or approval of medical devices. Certain products qualify for a submission authorized by Section 510(k) of the FD&C, wherein the manufacturer provides the FDA with a premarket notification ("510(k) notification") of the manufacturer's intention to commence marketing the product. The manufacturer must, among other things, establish in the 510(k) notification that the product to be marketed is substantially equivalent to another legally marketed product, (i.e., that it has the same intended use and that it as safe and effective as a legally marketed device and does not raise questions of safety and effectiveness that are different from those associated with the legally marketed device). Marketing may commence when the FDA issues a letter finding substantial equivalence to such a legally marketed device. The FDA may require, in connection with the 510(k) submission, that it be provided with animal and/or human test results. If a medical device does not qualify for the 510(k) procedure, the manufacturer must file a premarket approval ("PMA") application. A PMA must show that the device is safe and effective and is generally a much more complex submission than a 510(k) notification typically requiring more extensive prefiling testing and a longer FDA review process. A 510(k) notification is required when a device is being introduced into the market for the first time. A 510(k) notification is also required when the manufacturer makes a change or modification to an already marketed device that could significantly affect safety or effectiveness, or where there is a major change or modification in the intended use of the device. When any change or modification is made in a device or its intended use, the manufacturer is expected to make the initial determination as to whether the change or modification is of a kind that would necessitate the filing of a new 510(k) notification. The FDA's regulations provide only limited guidance in making this determination. In April 1987, the Company received 510(k) marketing clearance from the FDA allowing the Company to market a hand-held CO2-powered jet injection system. Although the Biojector 2000 system incorporates changes from the system with respect to which the Company's 1987 510(k) marketing clearance was received and expands its intended use, the Company made the determination that these were not major changes or modifications in intended use or changes in the device that could significantly affect the safety or effectiveness of the device and that, accordingly, the 1987 510(k) clearance permitted the Company to market the Biojector 2000 system in the U.S. In June 1994, the Company received clearance from the FDA under 510(k) to market a version of its Biojector 2000 system in a configuration targeted at high volume injection applications. In October 1996, the Company received 510(k) clearance for a non-needle disposable vial access device. In March 1997, the Company received additional 510(k) clearance for certain enhancements to its Biojector 2000 system. The Company currently has applications pending before the FDA for 510(k) clearance of the B2020 1.5ml jet injector, the B4000 self-injector. There can be no assurance that the FDA will concur with the Company's determination that the products can be qualified by means of a 510(k) submission. The continuous blood glucose monitoring system will be designed to meet international standards of product safety, reliability and biocompatibility. In the U.S., while the Company believes that the FDA, based on an earlier clearance of a "Biostator Monitor", sold by Miles Laboratories, will allow the continuous blood glucose monitoring system to be sold under a 510(k) pre-market notification, a final determination has not been made in this regard and there can be no assurance that the FDA will allow the use of a 510(k) pre-market notification. See "Risk Factors - Governmental Regulation". European regulatory clearance will be in accordance with the essential requirements set out in the new Medical Device Directives, which will come into law in June 1998. The Company continues to seek arrangements with pharmaceutical companies to develop pre-filled Biojector syringe applications to permit the pharmaceutical companies to market their products packaged in Biojector prefilled containers. See "Research and Product Development." Before pre-filled Biojector syringes may be distributed for use in the U.S., certain FDA-mandated stability tests may be required of those pharmaceutical companies. Pre-filled syringes involve drugs packaged as a component of a medical device. It is current FDA policy that such pre-filled syringes, which are considered to be combination products, are evaluated by the FDA as drugs rather than medical devices. Marketing of pre-filled syringes by pharmaceutical companies will require prior clearance via a new or amended Drug Application ("NDA") or an Abbreviated New Drug Application ("ANDA"). An NDA is a complex submission required to establish that a drug will be safe and effective for its intended uses. An ANDA is a less detailed process which does not require, among other things, that the applicant provide complete reports of preclinical and clinical studies of safety and efficacy as are required for NDAs. Assuming that the drugs used in the pre- filled syringes have previously been approved by the FDA for injection, the FDA will likely require that ANDAs, rather than NDAs, be submitted. The Company believes that if a drug to be used in the Company's pre-filled syringe were already the subject of an approved NDA or ANDA for intramuscular or subcutaneous injection, the main issue affecting clearance for use in the pre-filled syringe would be the adequacy of the syringe to store the drug, to assure its stability until used and to safely deliver the proper dose. See "Forward Looking Statements" and "Risk Factors Government Regulation." The FDA also regulates the Company's quality control and manufacturing procedures by requiring the Company and its contract manufacturers to demonstrate compliance with current Good Manufacturing Practice ("GMP") Regulations. These regulations require, among other things, that (i) the manufacturing process must be regulated and controlled by the use of written procedures and (ii) the ability to produce devices which meet the manufacturer's specifications must be validated by extensive and detailed testing of every aspect of the process. They also require investigation of any deficiencies in the manufacturing process or in the products produced and detailed record-keeping. Further, the FDA's interpretation and enforcement of these requirements has been increasingly strict in recent years and seems likely to be even more stringent in the future. Failure to adhere to GMP requirements would cause the products produced to be considered in violation of the Act and subject to enforcement action. The FDA monitors compliance with these requirements by requiring manufacturers to register with the FDA, and by subjecting them to periodic FDA inspections of manufacturing facilities. If the inspector observes conditions that might be violated, the manufacturer must correct those conditions or explain them satisfactorily, or face potential regulatory action that might include physical removal of the product from the marketplace. The FDA's Medical Device Reporting Regulation requires that the Company provide information to the FDA on the occurrence of any death or serious injuries alleged to have been associated with the use of the Company's products, as well as any product malfunction that would likely cause or contribute to a death or serious injury if the malfunction were to recur. In addition, FDA regulations prohibit a device from being marketed for unapproved or uncleared indications. If the FDA believes that the company is not in compliance with these regulations, it can institute proceedings to detain or seize products, issue a recall, seek injunctive relief or assess civil and criminal penalties against such company. The use and manufacture of the Company's products are subject to OSHA and other federal, state and local laws and regulations relating to such matters as safe working conditions for healthcare workers and Company employees, manufacturing practices, environmental protection and disposal of hazardous or potentially hazardous substances and the policies of hospitals and clinics relating to compliance therewith. There can be no assurance that the Company will not be required to incur significant costs to comply with such laws, regulations or policies in the future, or that such laws, regulations or policies will not increase the costs or restrictions related to the use of the Company's products or otherwise have a materially adverse effect upon the Company's ability to do business. See "Risk Factors." Laws and regulations regarding the manufacture, sale and use of medical devices are subject to change and depend heavily on administrative interpretations. There can be no assurance that future changes in regulations or interpretations made by the FDA, OSHA or other regulatory bodies, will not adversely affect the Company. Sales of medical devices outside of the United States are subject to foreign regulatory requirements. The requirements for obtaining premarket clearance by a foreign country may differ from those required for FDA clearance. Devices having an effective 510(k) clearance or PMA may be exported without further FDA authorization. FDA authorization is generally required in order to export other medical devices. RESEARCH AND PRODUCT DEVELOPMENT Needle-free Injection Business. Research and development efforts are focused on enhancing the Company's current product offerings and on developing both new jet injection technology and new products. The Company continues to use clinical, magnetic resonance imaging and tissue studies to determine the reliability and performance of new and existing products. As of March 31, 1998, the Company's research and product development staff, including clinical and regulatory staff members, consisted of 7 employees. During fiscal 1996, 1997 and 1998, the Company spent $1.9 million, $1.6 million, and $884,000, respectively, on research and development. In March 1994, the Company entered into an agreement with Schering AG, Germany ("Schering"), for the development of a self-injection device for delivery of Betaseron (R) to multiple sclerosis patients. During fiscal 1995 through 1997, the Company developed prototypes to Schering specifications which were accepted by Schering. During fiscal 1997, the Company entered into a supply agreement with Schering and commenced activities related to full production of the self injector. Schering loaned the Company a total of $1.6 million to purchase molds and tooling for production of the product. In January 1997, the Company received notice that its contract with Schering would be cancelled. Under provisions of the contract, Schering had the option of canceling the agreement if the FDA required extensive clinical studies beyond an originally planned safety study. Schering received a review letter from the FDA which would have required Schering to conduct additional material clinical studies in order to use non-traditional delivery mechanisms with its Betaseron (R) product. Under terms of the contract, Schering was required to convert its $1.6 million note due from Bioject into approximately 460,000 shares of Bioject common stock at a conversion price of $3.50 per share. In addition, $106,000 of accrued interest was converted into approximately 27,000 shares of Bioject common stock at a conversion price of $3.50 per share. The Company retained ownership of the molds and tooling. The B4000 self-injector, which was developed as a result of the Schering agreement, is currently awaiting regulatory clearance prior to marketing. See "Risk Factors - Governmental Regulation". In January 1995, the Company signed a joint development agreement with Hoffmann-La Roche ("Roche") to develop proprietary drug delivery systems for Roche products. The agreement provides for Bioject to develop, manufacture and sell Biojector jet injection drug delivery systems designed to Roche specifications. In return, Bioject has granted Roche exclusive worldwide rights to distribute these systems and their components for use with certain Roche products. Hoffmann-La Roche Inc. is the United States affiliate of the multinational group of companies headed by Roche Holding of Basel, Switzerland, one of the world's leading, research-intensive healthcare companies. As of 1995 fiscal year end, the Company had commenced design of a prototype device and had agreed with Roche on product specifications. During fiscal 1996, the Company developed and delivered to Roche preproduction prototypes for testing and developed the clinical preproduction prototypes which were delivered to Roche in April 1996. As of fiscal 1997 year end, the Company and Roche were finalizing their submission to obtain regulatory clearance to market the product. As of the end of fiscal 1998, the Company had submitted its component of the proprietary drug delivery system for regulatory clearance. In February 1995, Hoffmann-La Roche paid a one-time licensing fee totaling $500,000. The agreement provides that it will pay specified product development fees on an agreed upon schedule of which $400,000 was recognized in fiscal 1996, $500,000 was recognized in fiscal 1997 and $500,000 was recognized in fiscal 1998. In March, 1998 the Company acquired the assets of Vitajet Corporation in a stock-for-assets exchange. The Company paid 100,000 shares of its common stock for certain molds, tooling, patent rights and customer lists, the value of which totaled $134,400 at the date of acquisition. In addition to shares already paid, the Company is obligated to issue 60,000 shares of its common stock in each of the three years subsequent to the acquisition if certain development milestones are met. Up to an additional 90,000 shares is also payable subject to the Company realizing specified, aggregate levels of incremental revenue during the three years subsequent to the Vitajet acquisition as a result of sales of products acquired from or developed by Vitajet In addition to activities described above, the Company is seeking arrangements with pharmaceutical and biotechnology companies for the use of pre-filled syringes to eliminate the filling and measuring procedures associated with traditional injection of medications. Before pre-filled Biojector syringes may be distributed for use in the U.S., these companies must commit to the packaging and distribution of their products in this manner and to the time and financial resources necessary for FDA review and clearance. This process could be lengthy. See "Business - Governmental Regulation." There can be no assurance that such companies will commit efforts to develop pre-filled packaging and pursue regulatory clearance or that regulatory clearance of pre-filled Biojector syringes will be obtained. The Company intends to continue research and development efforts designed to further its understanding of the physics and physiology of jet injection. These efforts will include further clinical studies to demonstrate efficacy of jet injection and to evaluate new products and enhancements to the Company's existing products. To advance these studies, in April 1994 the Company formed a Department of Clinical Affairs research group, which initiates and coordinates these studies. Blood Glucose Monitoring Business. In October 1997, the Company signed a joint development agreement with Elan Corporation, plc ("Elan") to license from Elan certain continuous blood glucose monitoring technology (the "License") and then to commercialize that technology for manufacture and world-wide distribution. To date, the Company has continued testing and development of a clinical prototype and has scheduled a small, human clinical study of the prototype device for the first quarter of fiscal 1999. Based on the results of this study, the Company will then plan and conduct comprehensive clinical trials of the monitoring system which are intended to support its applications to the FDA to market the product in the United States. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". MANUFACTURING Needle-free Injection Business. The Company assembles the Biojector 2000 and related syringes from components purchased from outside suppliers. Prior to introduction of the Biojector 2000 system in 1993, the Company had not engaged in manufacturing on a commercial scale. However, in connection with that introduction, the Company increased its manufacturing capabilities and built inventories to support anticipated product sales. Throughout fiscal 1994 and 1995, the Company's manufacturing processes were primarily manual. These processes did not permit the Company to produce its products at costs which would allow it to operate profitably. During fiscal 1996, the Company implemented a plan to increase manufacturing capacity and refine production methods to meet anticipated future demand and to reduce product costs. For the Biojector 2000, cost reduction efforts included converting from a two-piece to a one-piece housing, converting to continuous process manufacturing and implementing volume purchasing programs from suppliers. For the Biojector syringes, these efforts included increasing supplier mold capacity and automating final assembly and packaging. See "Risk Factors - Limited Manufacturing Experience, Need to Reduce Unit Cost." During fiscal 1998, the Company, having a sufficient inventory of jet injectors on-hand as a result of the repurchase of product from HMI, focused its manufacturing efforts on refining the manufacturing processes and efficiencies of the syringe manufacturing line. See "Marketing and Competition - Needle-Free Injection Business". In order to succeed at expanding manufacturing capacity and reducing unit production cost, the Company must attract and retain qualified assembly workers and must establish and maintain relationships with suppliers that can deliver large quantities of components that meet applicable quality standards in a timely and reliable manner at acceptable prices. Blood Glucose Monitoring Business. At present, the Company has no manufacturing operation related to the blood glucose monitoring system. When approved for sale, the Company intends to manufacture the device in its own facilities, the location of which has not yet been determined. EMPLOYEES As of March 31, 1998, the Company had 33 full-time employees with 4 employees engaged in research and product development, 2 in sales and marketing, 2 in technical product support, 13 in manufacturing and 12 in administration. The Company engages a limited number of part-time consultants who assist with research and development, sales and marketing and investor relations activities. The Company also employs temporary contract workers primarily for assembly operations, the number of which varies, depending upon production requirements. As of March 31, 1998, there were 4 consultants, 5 to 8 per diem nurses and 1 contract/temporary worker employed by the Company. None of the Company's employees is represented by a labor union. PRODUCT LIABILITY The Company believes that its products reliably inject medications both subcutaneously and intramuscularly when used in accordance with product guidelines. The Company's current insurance policies provide coverage at least equal to an aggregate limit of $11 million with respect to certain product liability claims. The Company has not experienced any product liability claims to date. There can be no assurance, however, that the Company will not become subject to such claims, that the Company's current insurance would cover such claims, or that insurance will continue to be available to the Company in the future. The Company's business may be adversely affected by product liability claims. RISK FACTORS Investment in the securities of the Company involves a high degree of risk. In addition to the other information in this annual report, the following factors should be considered carefully in evaluating the Company and its business. The Company cautions the reader that this list of factors may not be exhaustive. Uncertainty of Market Acceptance. The Company's success will depend upon market acceptance of its jet injection drug delivery system, the Biojector 2000 system, the blood glucose monitoring system and, to a lesser extent, other products under development. Currently, the dominant technology used for intramuscular and subcutaneous injections is the hollow-needle syringe. Needle-syringes, while low in cost, have limitations, particularly relating to contaminated needlestick injuries. Use of the Biojector 2000 system for intramuscular and subcutaneous injections virtually eliminates the associated risk of these injuries; however, the cost per injection is significantly higher. There can be no assurance that the Biojector 2000 system will compete successfully. A previous jet injection system manufactured by the Company did not achieve market acceptance and is no longer being marketed. The Biojector 2000 was introduced in January 1993. To date, the major portion of sales have been to HMI, which units were not placed in service and which the Company has repurchased at a substantial discount to the original selling price after the cancellation of its agreement with HMI. Failure of the Biojector 2000 system to gain market acceptance would have a material adverse effect on the Company's financial condition and results of operations. Uncertainty of New Product Development. The Company's joint venture with Elan, JV Sub, intends to develop certain technology licensed from Elan and to create an ambulatory monitoring system which permits the continuous monitoring of blood glucose levels in persons with diabetes. The system is in the early stages of development, and there can be no assurance that JV Sub will be successful in developing a product or that any such product can be manufactured or marketed in a commercially viable manner. It also is likely that significant additional levels of funding will be required to complete development of the technology, which will likely require the future issuance of debt or equity securities by either the Company or JV Sub. Further, there can be no assurance that, should a blood glucose monitoring system be developed, such system would receive the requisite governmental clearance. See "Governmental Regulation." History of Losses; Uncertain Profitability. Since its formation in 1985, the Company has incurred significant annual operating losses and negative cash flow. At March 31, 1998, the Company had an accumulated deficit of $50.9 million, $12 million of which related to the fiscal 1998 write-off, after minority interest, of in-process research and development acquired in connection with the acquisition of blood glucose monitoring technology from Elan. Historically, the Company's revenues have been derived primarily from licensing and technology fees and from limited product sales, which were principally sales to dealers for the stocking of inventories and to HMI. More recently, the Company has sold its products to end-users, primarily to public health clinics for vaccinations and to nursing organizations for flu immunizations. The Company has not attained profitability at these sales levels . There can be no assurance that the Company will be able to generate significant revenues or achieve profitability. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Possible Termination of the License. Pursuant to the terms of the License, the License may be terminated under certain conditions. In the event that 15% of JV Sub's equity is acquired by any one of a number of specified companies identified by Elan as actual or potential competitors, or any other entity to which Elan does not consent, which consent shall not be unreasonably withheld in the case of such other unspecified companies, the License may be immediately terminated at Elan's option. Further, the License itself is contingent, on a country-by-country basis, on JV Sub's diligently seeking and obtaining regulatory marketing clearance for licensed products and on JV Sub's timely commercial launch of the licensed products in countries where such clearance has been obtained. Termination of the License may have a material adverse effect on the Company's financial condition and results of operations. Need for Additional Financing. The Company's revenues from operations have not been sufficient to satisfy its cash requirements and it has relied on the proceeds of sales of equity securities to fund its operations. The Elan Transaction involves significant future financial commitments by the Company to fund the development and marketing activities of JV Sub, as well as significant payment obligations, totaling $15.5 million, by JV Sub to Elan as product development milestones are met. These payment obligations are in addition to the Company's cash requirements relating to current activities involving the Company's jet injection technology. The Company plans to fund its cash requirements through revenues, debt and sales of equity securities, and anticipates that JV Sub will fund its activities through debt and sales of equity securities to the Company and Elan or to third parties. There can be no assurance that financing sufficient to fund either the Company's jet injection business activities or blood glucose monitoring business activities will be obtained on favorable terms or at all. Failure to obtain adequate financing would have a material adverse impact on the Company's business and could result in defaults on the Company's or JV Sub's obligations relating to the Elan Transactions, loss of JV Sub's rights to the technology under the License, dilution of the Company's interest in JV Sub or the need to curtail operations of the Company or JV Sub due to inadequate cash resources or other adverse consequences. The sale of equity securities on unfavorable terms to meet the Company's obligations could result in material dilution to the existing shareholders. Effects of Convertible Preferred Stock. The Company's Common Stock is subject to the rights and preferences of the Series A and B Convertible Preferred Stock, which has a liquidation preference of $12.405 million plus accrued and unpaid dividends. Further, the Series A and B Convertible Preferred Stock is convertible to Common Stock at a conversion price of $1.50 per share at any time, and at the end of seven years unless earlier converted by the holders or redeemed by the Company, the shares Series A and B Convertible Preferred Stock and accrued but unpaid dividends convert automatically into Common Stock at the conversion price equal to the lesser of $1.50 per share or 80% of the then prevailing market price of Common Stock. Accordingly, conversion of Series A and B Convertible Preferred Stock to Common Stock could result in issuances of significant amounts of Common Stock at prices lower than prevailing market prices at the time of conversion. Should the Company issue Series C Convertible Preferred Stock or other similar series of Preferred Stock to Elan to enable the Company to fund capital contributions to JV Sub, the aggregate amount of Preferred Stock liquidation preferences and Common Stock issuable upon conversion of Preferred Stock would increase. Limited Manufacturing Experience; Need to Reduce Unit Cost. The Company has limited experience manufacturing its products in commercially viable quantities. The Company has increased its production capacity for the Biojector 2000 system through automation of, and changes in, production methods. The current cost per injection of the Biojector 2000 system is substantially higher than that of traditional needle-syringes, its principal competition. A key element of the Company's business strategy has been to reduce the overall manufacturing cost through automating production and packaging. There can be no assurance that the Company will be able to develop and implement effective high volume production or achieve necessary unit cost reductions. Failure to do either would adversely affect the Company's financial condition and results of operations. While the Company believes that its experience manufacturing the Biojector enhances the probability of its success in manufacturing the Vitajet, the Company has no experience manufacturing the Vitajet and as of March 31, 1998 has not installed a manufacturing line to produce the Vitajet. There can be no assurance that the Company will be able to successfully manufacture the Vitajet at a unit cost that will allow the product to be sold profitably. Failure to do so would adversely affect the Company's financial condition and results of operation. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Manufacturing" Governmental Regulation. The Company's products and manufacturing operations are subject to extensive government regulation, both in the U.S. and abroad. In the U.S., the development, manufacture, marketing and promotion of medical devices are regulated by the Food and Drug Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act ("FD&C"). In 1987, the Company received clearance from the FDA under Section 510(k) of the FD&C to market a hand-held CO2-powered jet injection system. The FD&C provides that new premarket notifications under Section 510(k) of the FD&C are required to be filed when, among other things, there is a major change or modification in the intended use of a device or a change or modification to a legally marketed device that could significantly affect its safety or effectiveness. A device manufacturer is expected to make the initial determination as to whether the change to its device or its intended use is of a kind that would necessitate the filing of a new 510(k) notification. Although the Biojector 2000 system incorporates changes from the system with respect to which the Company's 1987 510(k) marketing clearance was received and expands its intended use, the Company made the determination that these were not major changes or modifications in intended use or changes in the device that could significantly affect the safety or effectiveness of the device. Accordingly, the Company further concluded that the 1987 510(k) clearance permitted the Company to market the Biojector 2000 system in the U.S. In June 1994, the Company received clearance from the FDA under 510(k) to market a version of its Biojector 2000 system in a configuration targeted at high volume injection applications. In October 1996, the Company received 510(k) clearance for a needle-free disposable vial access device. In March 1997, the Company received additional 510(k) clearance for certain enhancements to its Biojector 2000 system. The Company currently has applications pending before the FDA for 510(k) clearance of the B2020 1.5ml jet injector and the B4000 self-injector. There can be no assurance that the FDA will concur with the Company's determination that the products can be qualified by means of a 510(k) submission. Future changes to manufacturing procedures could necessitate the filing of a new 510(k) notification. Also, future products, product enhancements or changes, or changes in product use may require clearance under Section 510(k), or they may require FDA premarket approval ("PMA") or other regulatory clearances. PMAs and regulatory clearances other than 510(k) clearance generally involve more extensive prefiling testing than a 510(k) clearance and a longer FDA review process. Under current FDA policy, applications involving prefilled syringes would be evaluated by the FDA as drugs rather than devices, requiring FDA new drug applications ("NDAS") or ANDAs. Depending on the circumstances, drug regulation can be much more extensive and time consuming than device regulation. See "Governmental Regulation". No clearances from the FDA have been obtained for the marketing of products that may be developed based on the blood glucose monitoring technology licensed from Elan. The Company is researching and has not finally determined which FDA clearances will be required with respect to any products developed based on this technology. The Company anticipates that extensive testing and FDA review will be required of any such product, and there can be no assurance that FDA clearance will be obtained in a timely manner or at all. FDA regulatory processes are time consuming and expensive. There can be no assurance that product applications submitted by the Company will be cleared or approved by the FDA. In addition, the Company's products must be manufactured in compliance with Good Manufacturing Practices ("GMP") as specified in regulations under the FDA Act. The FDA has broad discretion in enforcing the FDA Act, and noncompliance with the Act could result in a variety of regulatory actions ranging from product detentions, device alerts or field corrections, to mandatory recalls, seizures, injunctive actions, and civil or criminal penalties. Distribution of the Company's products in countries other than the U.S. may be subject to regulation in those countries. An application was made to the Japan Ministry of Health and Welfare to obtain necessary approvals to market the Biojector 2000 system in Japan which was not carried to completion by the Company's then current Japanese distributor. See "Governmental Regulations". Uncertainty in Healthcare Industry. The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement practices and operations of healthcare facilities. During the past several years, the healthcare industry has been subject to increased government regulation of reimbursement rates and capital expenditures. Among other things, third party payors are increasingly attempting to contain or reduce healthcare costs by limiting both coverage and levels of reimbursement for healthcare products and procedures. Because the price of the Biojector 2000 system exceeds the price of needle injection systems, cost control policies of third party payors, including government agencies, may adversely affect use of the Biojector 2000 system. Dependence on Third-Party Relationships. The Company is dependent on third parties for distribution of the Biojector 2000 system to certain market segments, for the manufacture of component parts, and for assistance with the development and distribution of future application-specific systems. The Company's current manufacturing processes for the Biojector 2000 jet injector and disposable syringes as well as manufacturing processes anticipated to produce the Vitajet consist primarily of assembling component parts supplied by outside suppliers. Certain of these components are currently obtained from single sources, with some components requiring significant production lead times. In the past, the Company has experienced delays in the delivery of certain components, although to-date no such delays have had a material adverse effect on the Company's operations. There can be no assurance that the Company will not experience delays in the future, or that such delays would not have a material adverse effect on the Company's financial condition and result of operations. See "Manufacturing". The Company has entered into agreements with certain major pharmaceutical companies for development and distribution of jet injection systems and for the development and commercialization of a continuous blood glucose monitoring system. These companies have the right to terminate these agreements at certain phases as defined in the agreements. There can be no assurance that these companies' interest and participation in the projects will continue. Failure to receive additional funding from these companies could adversely affect the development and production of the products involved and, correspondingly, the Company's financial condition and results of operations. Ability to Manage Growth. If the Company's products achieve market acceptance, the Company expects to achieve rapid growth. This growth strategy will require expanded customer services and support, increased personnel throughout the Company, expanded operational and financial systems, and the implementation of new and expanded control procedures. There can be no assurance that the Company will be able to attract qualified personnel or successfully manage expanded operations. As the Company expands, it may from time to time experience constraints that would adversely affect its ability to satisfy customer demand in a timely fashion. Failure to manage growth effectively could adversely affect the Company's financial condition and results of operations. Competition. The medical equipment market is highly competitive and competition is likely to intensify. The Company's products compete primarily with traditional needle-syringes, "safety syringes" and also with other alternative drug delivery systems. While the Company believes its products provide a superior drug delivery method, there can be no assurance that the Company will be able to compete successfully with existing drug delivery products. Many of the Company's competitors have longer operating histories as well as substantially greater financial, technical, marketing and customer support resources than the Company. There can be no assurance that one or more of these competitors will not develop an alternative drug delivery system that competes more directly with the Company's products, or that the Company's products would be able to compete successfully with such a product. Further, should JV Sub develop an ambulatory blood glucose monitoring system which obtains all necessary regulatory clearances, there can be no assurance that either the Company's or JV Sub's competitors will not develop other competing systems, or that JV Sub's system would be able to compete successfully with other systems or products. Dependence on Two Technologies. The Company's strategy has been to focus its development and marketing efforts on its jet injection technology. The strategy of its Joint Venture with Elan is to focus on development and commercialization of a continuous blood glucose monitoring system. Focus on these two technologies leaves the Company vulnerable to competing products and alternative drug delivery systems, as well as to alternative methods to monitor blood glucose levels in diabetics. The Company believes that healthcare providers' desire to minimize the use of the traditional needle-syringe has stimulated development of a variety of alternative drug delivery systems such as "safety syringes," jet injection systems and transdermal diffusion "patches." In addition, pharmaceutical companies frequently attempt to develop drugs for oral delivery instead of injection. The Company also believes that there will be high market demand for a minimally invasive blood glucose monitoring system such as that being developed by the Company and that the size of that market will likely attract significant competition to the Company's blood glucose monitoring product. While the Company believes that for the foreseeable future there will continue to be a significant need for injections, there can be no assurance that alternative drug delivery methods will not be developed which are preferable to injection. Further, there can be no assurance that alternative blood glucose monitoring systems will not be developed which are preferable to that to be developed by the Company. Patents and Proprietary Rights. The Company relies on a combination of trade secrets, confidentiality agreements and procedures, and patents to protect its proprietary technologies. The Company has been granted a number of patents in the United States and several patents in certain other countries covering certain technology embodied in its current jet injection system and certain manufacturing processes. Additional patent applications are pending in the U.S. and certain foreign countries. There can be no assurance that the claims contained in any patent application will be allowed, or that any patent will provide adequate protection for the Company's products and technology. In the absence of patent protection, the Company may be vulnerable to competitors who attempt to copy the Company's products or gain access to its trade secrets and know-how. In addition, the laws of foreign countries may not protect the Company's proprietary rights to this technology to the same extent as the laws of the U.S. The Company believes that it has independently developed its technology, attempts to ensure that its products do not infringe the proprietary rights of others and the Company knows of no such infringement claims. However, any such claims could have a material adverse affect on the Company's financial condition and results of operations. Product Liability. Producers of medical devices may face substantial liability for damages in the event of product failure or if it is alleged the product caused harm. The Company currently maintains product liability insurance and, to-date, has not experienced any product liability claims. There can be no assurance, however, that the Company will not be subject to such claims, that the Company's current insurance would cover such claims, or that adequate insurance will continue to be available on acceptable terms to the Company in the future. The Company's business could be adversely affected by product liability claims. Dependence upon Key Employees. The Company's success depends on the retention of its executive officers and other key employees. Competition exists for qualified personnel and the Company's success will depend, in part, on attracting and retaining such personnel. Failure in these efforts could have a material adverse effect on the Company's business, financial condition or results of operations. Shares Eligible For Future Sale In December 1996, the Company completed a private placement of 3,434,493 units (each unit representing one share of common stock and a warrant to purchase one share of common stock). The Company also granted a warrant to its placement agent in the private placement to purchase 156,000 shares of common stock. The shares issued in the private placement and the underlying shares issuable upon exercise of the warrants were registered for resale on a Form S-3 registration statement. In June and July 1997, the Company completed a private placement of 2,906,977 units, each unit consisting of one share of Common Stock and one warrant to purchase one-half share of Common Stock. In May 1997, in return for services provided, the Company granted to Amy Factor a warrant to purchase 25,000 shares of Common Stock. The shares issued in the private placement and the underlying shares issuable upon exercise of the warrants were registered for resale on a Form S-3 registration statement. In connection with the Elan transactions in October 1997, Elan purchased 2,727,273 shares of Common Stock and was granted a five year warrant to purchase 1.75 million shares of common stock. In January, 1998, the shares issued to Elan as well as the 487,390 shares issued to Schering (see "Research and Product Development - Needle-free Injection Business") were registered for resale on a Form S-3 registration statement. In October, 1997, the Company granted warrants to purchase 350,000 shares of stock to Robert Gonnelli in connection with his guarantee of an equity investment in the Company. In February, 1998, the Company granted Raphael, L.L.C., a management consulting company which introduced Elan to the Company, a warrant to purchase 100,000 shares of Common Stock. See "Recent Developments." Subsequent to year-end, in June, 1998, the Company granted warrants to purchase 130,243 shares of stock to Robert Gonnelli in return for services to the Company. Also subsequent to year-end, the warrants issued in the June and July 1997 private placement were exercised, in exchange for which the Company issued 147,850 new warrants. Sales of substantial numbers of common stock in the public market, or the availability of such shares for sale, could adversely affect the market price for the common stock and make it more difficult for the Company to raise funds through equity offerings in the future. Possible Adverse Effects on Trading Market. The Common Stock is quoted on the NASDAQ National Market. There are a number of continuing requirements that must be met in order for the Common Stock to remain eligible for quotation on the NASDAQ National Market or the NASDAQ SmallCap Market. In August 1997, NASDAQ approved changes to its quantitative and qualitative standards for issuers listing on NASDAQ. Among the changes are the elimination of the alternative test for issuers failing to meet the minimum bid price of $1.00 and an increase in the quantitative standards for both the NASDAQ National Market and the NASDAQ SmallCap Market. The failure to meet the maintenance criteria in the future could result in the delisting of the Company's Common Stock from NASDAQ. In such event, trading, if any, in the Common Stock may then continue to be conducted in the non- NASDAQ over-the-counter market. As a result, an investor may find it more difficult to dispose of or to obtain accurate quotations as to the market value of the Company's Common Stock. In addition, if the Common Stock were delisted from trading on NASDAQ and the trading price of the Common Stock were less than $5.00 per share, trading in the Common Stock would also be subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a penny stock. The additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in penny stocks, which could reduce the liquidity of the shares of Common Stock and thereby have a material adverse effect on the trading market for the securities. Possible Volatility of Stock Price. The market for the Company's Common Stock and for the securities of other early-stage, small market-capitalization companies has been highly volatile in recent years. The Company believes that factors such as quarter-to-quarter fluctuations in financial results, new product introductions by the Company or its competition, public announcements, changing regulatory environments, sales of Common Stock by certain existing shareholders and substantial product orders could contribute to the volatility of the price of the Company's Common Stock, causing it to fluctuate dramatically. General economic trends such as recessionary cycles and changing interest rates may also adversely affect the market price of the Company's Common Stock. Item 2. PROPERTIES The Company's principal offices are located in Portland, Oregon in approximately 23,000 square feet of leased office and manufacturing space under a lease which expires in September 2002. The monthly minimum lease obligation for this facility is approximately $15,000. These facilities include the Company's sales and administration offices and equipment, research and engineering facilities, a clean room assembly area, assembly line, testing facilities and a warehouse area. The Company leases additional warehouse space totaling approximately 5,000 square feet for finished goods storage and shipments to customers. This lease, which also expires in September 2002, has minimum monthly lease obligations totaling $2,000. The Company believes its current facilities will be sufficient to support its operations for the next 2-3 fiscal years. As the Company requires additional space to accommodate growth in its sales and manufacturing activities, it is the Company's intention to lease additional facilities adjacent to or near its present operations. The Company believes that, if necessary, it will be able to obtain facilities at rates and under terms comparable to those of the current leases. Item 3. LEGAL PROCEEDINGS None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A Special Meeting of Stockholders of Bioject Medical Technologies, Inc. was convened at 1:00 p.m., on February 20, 1998, at the Company's headquarters, 7620 S.W. Bridgeport Road, Portland, Oregon. There were 25,368,342 shares of Common Stock issued and outstanding on the record date, December 23, 1997. Of the total shares outstanding on the record date, there were 16,325,537 shares present at the meeting in person or by proxy, which is 64.35% of the Common Stock entitled to vote, thereby constituting a quorum. All of the proposals as set forth in the proxy statement for the Special Meeting were approved. The voting recorded is as follows: Proposal #1: The proposal to approve the exchange of a promissory note in the original principal amount of $12.015 million issued by the Company to Elan for approximately 832,000 shares of the Company's Series A and Series B Convertible Preferred Stock received the following votes: FOR AGAINST ABSTAIN ---------- ------- ------- 15,964,575 214,940 146,022 Proposal #2: The proposal to approve the issuance of the Company's Series C Convertible Preferred Stock or other similar convertible preferred stock to Elan in connection with future funding of blood glucose monitoring research and development received the following votes: FOR AGAINST ABSTAIN ---------- ------- ------- 15,961,959 216,291 147,287 Proposal #3: The proposal to approve the issuance to Raphael, LLC, of a warrant to purchase 100,000 shares of the Company's Common Stock received the following votes: FOR AGAINST ABSTAIN ---------- ------- ------- 15,696,136 452,669 176,732 As a result of the passage of Proposal #1, the exchange of debt for Series A and Series B convertible preferred stock was completed effective March 2, 1998. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the NASDAQ National Market under the Symbol "BJCT." The following table sets forth the high and low closing sale prices of the Company's Common Stock on the NASDAQ National Market. High Low ----- ----- Fiscal year Ended March 31, 1996: First Quarter 3.00 1.44 Second Quarter 2.97 1.19 Third Quarter 2.81 1.81 Fourth Quarter 1.94 1.25 Fiscal Year Ended March 31, 1997: First Quarter 1.41 1.28 Second Quarter 1.03 0.97 Third Quarter 0.78 0.75 Fourth Quarter 0.78 0.63 Fiscal Year Ended March 31, 1998: First Quarter .94 .47 Second Quarter 1.03 .59 Third Quarter 1.57 1.19 Fourth Quarter 1.50 1.09 The closing sale price on May 29, 1998, as reported on the NASDAQ National Market, was $1.688 per share. The Company has declared no dividends during its history and has no intention of declaring a dividend in the foreseeable future. As of May 29, 1998 the number of shareholders of record of the Company's Common Stock was 1,386. In October 1997, in connection with a joint development agreement entered into with Elan, the Company issued a promissory note to Elan with a principal amount of $12.015 million. Upon receiving shareholder approval to convert the note into the Company's preferred stock, on March 2, 1998, a total of 692,694 shares of Series A Convertible Preferred Stock and 134,333 shares of Series B Convertible Preferred Stock were issued to Elan (the "Elan Issuance"). On March 23, 1998, the Company acquired the assets of Vitajet Corporation in a stock-for assets exchange (the "Vitajet Issuance"). The Company issued 100,000 shares of its common stock in exchange for certain molds, tooling, patent rights and customer lists, the value of which totaled $134,000 at the date of acquisition. The Company is obligated to issue an additional 60,000 shares in each of the next three years if certain development milestones are met. Up to an additional 90,000 shares are also payable subject to the Company realizing specified, aggregate levels of incremental revenue over the next three years. In April 1998, warrants issued in June 1997 were exercised in exchange for the Company's commitment to issue additional warrants to purchase 147,850 shares of the Company's Common Stock (the "Series N Warrants"). The Series N Warrants have an exercise price of $1.348 per share and expire on March 31, 2003. The Company relied upon Rule 506 of Regulation D of the Securities Act for the issuance of the Series N Warrants. The Company relied upon representations and warranties of the warrantholders in addition to its own information. The Elan Issuance and Vitajet Issuance were completed pursuant to an exemption from registration under Section 4(2) of the Securities Act. In relying upon such exemption (i) the Company did not engage in any "general solicitation," (ii) the purchasers represented and the Company reasonably believed that the purchasers had knowledge and experience in financial and business matters such that they were capable of evaluating the merits and risks of the prospective investment, (iii) the purchasers were provided access to all necessary and adequate information to enable the purchasers to evaluate the financial risk inherent in making an investment, (iv) the offers were part of an agreement to establish a joint venture in Elan's case and part of an acquisition agreement in Vitajet's case and as such was made only to Elan and Vitajet, respectively, and (v) the purchasers represented that they were acquiring the shares for themselves and not for distribution. Item 6. SELECTED CONSOLIDATED FINANCIAL DATA FINANCIAL DATA The statement of operations and balance sheet data set forth below for the five fiscal years in the period ended March 31, 1998 have been derived from the consolidated financial statements of the Company. The selected consolidated financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with the detailed consolidated financial statements and notes thereto included elsewhere in this Report. SUMMARY FINANCIAL INFORMATION (in thousands, except per share data) YEAR ENDED MARCH 31, 1998* 1997 1996 1995 1994 ------ ------ ------ ------ ------ Statement of Operations Data: Revenues $1,935 $2,235 $4,209 $2,924 $1,463 Operating expenses 21,157 6,637 9,851 9,008 6,110 Net loss (16,630)* (4,296) (5,431) (5,656) (4,395) Net loss per share (0.72) (0.26) (0.39) (0.43) (0.39) Shares used in per share calculation 23,151 16,705 14,074 13,167 11,230 AS OF MARCH 31, 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ Balance Sheet Data: Working capital $3,019 $2,858 $4,327 $6,404 $12,593 Total assets 6,978 7,088 7,519 9,498 13,836 Long-term debt - - - - - Shareholders' equity 5,975 5,766 6,027 7,964 13,377 *In fiscal 1998, the Company acquired certain blood glucose monitoring technology from Elan for an up-front licensing fee of $15 million which was required to be expensed in the year paid. As a result, the 1998 net loss includes a $12 million, net of minority interest, one-time charge for acquired in-process research and development. The Company has declared no dividends during its history and has no intention of declaring a dividend in the foreseeable future. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Operating losses have resulted in an accumulated deficit of approximately $50.9 million as of March 31, 1998. In fiscal 1996, the Company incurred significantly increased costs associated with the production and sale of the Biojector 2000 system, including sales and marketing efforts, manufacturing ramp-up and inventory build-up. In September 1997, the Company acquired rights to certain continuous blood glucose monitoring technology from Elan Corporation for an initial payment of $15 million and future milestone payments totaling $15.5 million and royalties on future product sales. In fiscal 1998, the $15 million up front payment was expensed as acquired in-process research and development. In March, 1998, the Company acquired the rights to the Vitajet self-injector, along with certain other assets, in a stock-for-assets transaction with Vitajet Corporation. The Company's ability to achieve and sustain profitability will depend in part upon customer acceptance of the Biojector 2000 system and the continuous blood glucose monitoring system, sustained product performance, implementing additional product cost reductions, successful commercial development of the blood glucose monitoring system, and attaining revenues sufficient to support profitable operations. In August 1994, Bioject signed an agreement with Health Management, Inc. (HMI), granting HMI exclusive rights to purchase Bioject's Needle-Free Injection Management System (R), the Biojector 2000, for use in the home healthcare market. In return for HMI's commitment to purchase a minimum of 8,000 Biojector units over the ensuing two years, the Company granted volume pricing discounts to HMI. During the term of the contract, the selling price of Biojectors to HMI exceeded their standard cost. During fiscal 1996, the Company sold approximately 4,300 Biojectors to HMI for total sales revenue including syringes of $2.2 million. HMI did not place the great majority of these Biojectors with patients, pending completion of negotiations with pharmaceutical companies for certain pricing concessions for medication to be administered with the Biojectors. In January 1996 HMI requested that Bioject suspend shipments to HMI. In February 1996, the Company learned from HMI's press releases that HMI expected to default on its debts, anticipated taking significant write-offs relating to accounts receivable and inventories, planned operational consolidations, and would restate certain prior period financial statements. In fiscal 1997, although not obligated to do so, the Company agreed to repurchase certain of the HMI inventories, including up to 6,000 Biojector units, for cash and forgiveness of accounts receivable totaling $660,000. The repurchase of these inventories was at a substantial discount to the original selling price to HMI. In March 1994, the Company entered into an agreement with Schering AG, Germany, for the development of a self-injection device (the "Self-Injector") for delivery of Betaseron (R) to multiple sclerosis patients. During fiscal 1996, the Company delivered the preproduction clinical prototypes to Schering and worked on finalizing the production prototype design. During fiscal 1997, the Company entered into a supply agreement with Schering AG and commenced activities related to full production of the self-injector. Schering loaned the Company a total of $1.6 million to purchase molds and tooling to produce the product. In January 1997, the Company received notice that its contract with Schering AG would be cancelled. Under provisions of the contract, Schering AG had the option of canceling the agreement if the FDA required extensive clinical studies beyond an originally planned safety study. Schering AG received a review letter from the FDA which would have required Schering to conduct additional, material clinical studies in order to use non-traditional delivery mechanisms with its Betaseron (R) product. Under terms of the contract, Schering was required to convert its $1.6 million note due from Bioject plus accrued interest into approximately 487,000 shares of Bioject common stock at a conversion price of $3.50 per share. In addition, Schering was obligated to pay Bioject for the cost of product ordered through the date of cancellation of the contract, which payment was made in June 1997. In January 1995, the Company signed a joint development agreement with Hoffmann-La Roche to develop proprietary drug delivery systems for Roche products. The agreement provides for Bioject to develop, manufacture and sell Biojector jet injection drug delivery systems designed to Roche specifications. In return, Bioject has granted Roche exclusive worldwide rights to distribute these systems and their components for use with certain Roche products. Hoffmann-La Roche Inc. is the United States affiliate of the multinational group of companies headed by Roche Holding of Basel, Switzerland, one of the world's leading research-intensive healthcare companies. As of the 1995 fiscal year end, the Company had commenced design of a prototype device and had agreed with Roche on product specifications. During fiscal 1996, the Company developed and delivered to Roche preproduction prototypes for testing and developed the clinical preproduction prototypes which were delivered to Roche in April 1996. As of March 31, 1998, the Company and Hoffmann-LaRoche were finalizing their submission to obtain regulatory clearance to market the product. Hoffmann- LaRoche is also gathering marketing information which the Company anticipates will lead to the signing of a supply agreement between the Company and Hoffman-LaRoche. In September 1997, the Company and Elan Corporation signed a licensing and joint development agreement for the development and commercialization by the Company of certain continuous blood glucose monitoring technology licensed from Elan. Under terms of the agreement, the Company borrowed $12.015 million from Elan (subsequently converted to Series A and B convertible preferred stock) and Elan invested $2.985 million in a new subsidiary of the Company created for the purpose of developing the technology. The Company's new subsidiary, owned 80.1% by the Company and 19.9% by Elan, paid Elan $15 million for rights to the technology and has committed to pay an additional $15.5 million to Elan as future milestones are achieved as well as royalties on future sales of the product. The new subsidiary will develop the blood glucose monitoring technology and will seek regulatory clearance for the sale of such product. Such regulatory clearance is expected in the next 3-4 years with estimated development costs for the monitoring technology, exclusive of milestone payments, estimated to total at least $10 million. As part of the agreement, in October 1997, Elan acquired 2.7 million shares of common stock and 1.75 million warrants to purchase the Company's common stock at $2.50 per share for $3 million. In addition, Elan agreed to partially fund development of the blood glucose monitoring technology up to a total of $4 million through the purchase of the Company's Series C convertible preferred stock and through direct purchase of additional stock in JV Sub to a maximum of $1 million. Elan also agreed to fund development of the Company's pre-filled jet injection technology through a grant of up to $500,000. In March 1998, in a transaction with Vitajet Corporation, the Company paid 100,000 shares of its common stock for certain molds, tooling, patent rights and customer lists, the value of which totaled $134,400 at the date of acquisition. In addition to shares already paid, the Company is obligated to issue 60,000 shares of its common stock each year in each of the three years subsequent to the acquisition if certain development milestones are met. Up to an additional 90,000 shares are also payable subject to the Company realizing specified, aggregate levels of incremental revenue during the three years subsequent to the Vitajet acquisition as a result of sales of products acquired from or developed by Vitajet. During fiscal 1996, the Company implemented a plan to increase manufacturing capacity and refine production methods to meet anticipated future demand and to reduce product costs. For the Biojector 2000, cost reduction efforts included converting from a two piece to a one piece housing, converting to continuous process manufacturing and implementing volume purchasing programs from suppliers. For the Biojector syringes, these efforts included increasing supplier mold capacity and automating final assembly and packaging. During fiscal 1997, the Company's manufacturing activities focused on retesting the devices repurchased from HMI to ensure their continuing compliance with new product standards and elective upgrade of certain of these units to current version configuration. Also during fiscal 1997 manufacturing focused on finalizing product engineering and on planning for, designing and installing manufacturing lines for the new self injector device syringe manufacturing lines in advance of the launch of that product. During fiscal 1998, having a sufficient inventory of jet injectors on-hand as a result of the repurchase of product from HMI, the Company focused its manufacturing efforts on refining manufacturing processes and efficiencies of the disposable syringe manufacturing line. The Company's revenues to date have not been sufficient to cover operating expenses. However, the Company believes that if its products achieve market acceptance and the volume of sales increases, and its product costs are reduced, its costs of goods as a percentage of sales will decrease and eventually the Company will generate net income. See "Forward Looking Statements" and "Business - - Risk Factors." The level of sales required to generate net income will be affected by a number of factors including the pricing of the Company's products, its ability to attain efficiencies that can be attained through volume and automated manufacturing, and the impact of inflation on the Company's manufacturing and other operating costs. There can be no assurance that the Company will be able to successfully implement its manufacturing cost reduction program or sell its products at prices or in volumes sufficient to achieve profitability or offset increases in its costs should they occur. Revenues and results of operations have fluctuated and can be expected to continue to fluctuate significantly from quarter to quarter and from year to year. Various factors may affect quarterly and yearly operating results including (i) length of time to close product sales, (ii) customer budget cycles, (iii) implementation of cost reduction measures, (iv) uncertainties and changes in purchasing due to third party payor policies and proposals relating to national healthcare reform, (v) timing and amount of payments under technology development agreements, (vi) timing and cost of development of the continuous blood glucose monitoring technology, and (vii) timing of new product introductions by the Company and its competition. In the future, the Company may incur a non-cash charge to compensation expense in connection with the issuance of 100,000 shares of Common Stock to the Company's Chief Executive Officer and 15,000 shares of common stock to the Company's Chief Financial Officer. Under terms of their employment agreements, each will receive the shares of common stock when the Company first achieves two consecutive quarters of positive earnings per share. Upon issuance of such shares the Company will record a non-cash charge to compensation at the fair market value of the stock on the last day of the quarter in which the shares are earned. During the next fiscal year, the Company will continue to focus its efforts on expanding sales of existing products, commencing manufacture and sale of the Vitajet, commencing manufacture and sale of the B4000 Self-Injector if regulatory clearance is obtained, reducing the cost of its products, continuing development and cooperation in pursuing regulatory clearance of a 1.5 ml. injector for Hoffmann-La Roche, developing the blood glucose monitoring technology, pursuing additional alliances with pharmaceutical companies and conserving its fiscal resources. The Company does not expect to report net income from operations in fiscal 1999. See "Forward Looking Statements" and "Risk Factors." RESULTS OF OPERATIONS Product sales decreased from to $3.1 million in fiscal 1996 to $1.3 in fiscal 1997 and increased to $1.4 million in fiscal 1998. Sales in fiscal 1996 consisted of $2.3 million of sales to HMI with the remainder primarily to public health and flu immunization clinics. Sales in fiscal 1997 and 1998, consisted primarily of sales to public health and flu immunization clinics. License and technology fees ranged from $1.2 million in fiscal 1996, to $966,000 in fiscal 1997 and $500,000 in fiscal 1998. The fiscal 1996 and 1997 fees consisted principally of product development revenues recognized for work performed under the Schering and Hoffmann-La Roche agreements. The fiscal 1998 fees consisted of revenues for work on the Hoffmann-La Roche project. Manufacturing expense consists of the costs of product sold and manufacturing overhead expense related to excess manufacturing capacity. The total of these costs varied from $4.8 million in fiscal 1996, to $1.9 million in fiscal 1997 and $1.7 million in fiscal 1998 due in part to changes in sales and, therefore, to changes in the total costs of product sold. The decrease in expense from fiscal 1996 to 1997 and from fiscal 1997 to fiscal 1998 reflects reductions in the cost of materials and labor for injectors and syringes as well as reductions in fixed and variable manufacturing overhead expense. Manufacturing overhead totaled $1.67 million, $1.17 million and $981,000 in fiscal 1996, 1997 and 1998, respectively. Research and development expense decreased from $1.9 million in fiscal 1996 to $1.6 million in fiscal 1997 and to $884,000 in fiscal 1998 (exclusive of acquired in-process research and development). Fiscal 1996 expenditures related entirely to work performed under the Schering and Hoffmann-La Roche agreements. Fiscal 1997 expenditures related to final design and transfer to manufacturing of the Schering device and additional development work on the Hoffmann-LaRoche system. Fiscal 1998 expenditures related to further development of the B4000 Self Injector and to pursuing regulatory clearance for the vial adapter product. See "Risk Factors - Governmental Regulation". Selling, general and administrative expense totaled, $3.2 million in fiscal 1996 and 1997, and $3.5 million in fiscal 1998. During fiscal 1996 through 1998, sales and marketing expense remained constant at $1.6 million per year. General and administrative expense totaled $1.6 million in fiscal 1996 and 1997 and increased to $1.9 million in fiscal 1998 primarily due to consulting fees and certain travel expenditures. As of September 30, 1997, the Company recorded an expense of $15 million related to acquired in-process research and development expenditures. Such expense relates to the blood glucose monitoring technology that has not yet established technological feasibility and at present has no alternate future uses. Accounting rules require that such costs be charged to expense as incurred. The Company believes that these research and development efforts will result in commercially viable products within the next three to four years at an additional cost to the Company of at least $10 million, exclusive of additional milestone payments totaling $15.5 million to Elan. Interest expense in fiscal 1998 relates to the $12.015 million debt due to Elan for the period from October 15, 1997 through March 2, 1998 when the note and accrued interest was converted to Series A and Series B convertible preferred stock. Other income consists of earnings on available cash balances. Other income varied as a result of changes in cash balances and interest rates from year to year. The reduction in net loss in fiscal 1998 resulting from minority interest allocations reflects the portion of the joint venture subsidiary loss allocable to Elan Corporation as a result of its 19.9% ownership in the subsidiary. LIQUIDITY AND CAPITAL RESOURCES Since its inception in 1985, the Company has financed its operations, working capital needs and capital expenditures primarily from private placements of securities, exercises of stock options, proceeds received from its initial public offering in 1986, proceeds received from a public offering of Common Stock in November 1993, licensing and technology revenues and more recently from sales of products. Net proceeds received upon issuance of securities from inception through March 31, 1998 totaled approximately $56.9 million. The Company has no long-term debt. Cash, cash equivalents and marketable securities totaled $2.1 million at March 31, 1997 and $1.9 million at March 31, 1998. The decrease resulted from operating losses and capital expenditures offset in part by net proceeds from a private placement of common stock and warrants in June and July 1997 and October 1997 and the issuance of Series A and B convertible preferred stock in March 1998. Inventories increased from $1.7 million at March 31, 1997 to $1.9 million at March 31, 1998 due to the build-up of syringe inventories to support anticipated future product sales. The Company has fixed commitments for facilities rent and equipment leases which total approximately $250,000 for fiscal 1999. The Company expended approximately $1.6 million for capital equipment in fiscal 1997. Substantially all of these expenditures related to preparation of manufacturing for the Schering product launch. These assets continue to be carried at their cost on the Company's balance sheet because the product is suitable for other home injection applications which the Company is pursuing. The Company expended approximately $380,000 on capital equipment additions in fiscal 1998 approximately $270,000 of which related to Biojector 2000 units transferred from inventories to property and equipment to support the Company's flu season device rental program. The Company has assessed the impact of the Year 2000 issue and has determined that costs to upgrade its information and operating systems are not expected to be material. The Company believes that its current cash position, together with cash received from the exercise of warrants and stock options in April and May 1998, combined with revenues, other cash receipts, proceeds from issuance of the Company's Series C preferred stock and proceeds from the purchase by Elan of additional stock in JV Sub may not be sufficient to fund the Company's operations through the end of fiscal 1999. The Company has identified a number of potential financing sources and is pursuing them aggressively. See "Forward Looking Statements." Even if the Company is successful in raising additional financing, unforeseen costs and expenses or lower than anticipated cash receipts from product sales or research and development activities could accelerate or increase the financing requirements. The Company has been successful in raising additional financing in the past and believes that sufficient funds will be available to fund future operations. See "Forward Looking Statements." However, there can be no assurance that the Company's efforts will be successful, and there can be no assurance that such financing will be available on terms which are not significantly dilutive to existing shareholders. Failure to obtain needed additional capital on terms acceptable to the Company, or at all, would significantly restrict the Company's operations and ability to continue product development and growth and materially adversely affect the Company's business. The Company has no banking line of credit or other established source of borrowing. The Company's independent accountants have qualified their opinion with respect to their audit of the Company's 1998 consolidated financial statements as the result of doubts concerning the Company's ability to continue as a going concern in the absence of sufficient additional financing. Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TABLE OF CONTENTS TO FINANCIAL STATEMENTS Report of Independent Public Accountants Consolidated Balance Sheets at March 31, 1998 and 1997 Consolidated Statements of Operations for the years ended March 31, 1998, 1997 and 1996 Consolidated Statements of Shareholders' Equity for the years ended March 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended March 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements Supplementary Data (none required) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Bioject Medical Technologies Inc: We have audited the accompanying consolidated balance sheets of Bioject Medical Technologies Inc. (an Oregon corporation) and subsidiaries as of March 31, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1998. 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 financial statements referred to above present fairly, in all material respects, the financial position of Bioject Medical Technologies Inc. and subsidiaries, as of March 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and, at March 31, 1998, has an accumulated deficit of $---- million that raises substantial doubt about the Company's ability to continue as a going concern. Management's plan in regards to these matters is also described in Note 1. The financial statements do not include any adjustments relating to recoverability and classification of asset carrying amounts that might result should the Company be unable to continue as a going concern. /S/ ARTHUR ANDERSEN LLP Portland, Oregon April 30, 1998 BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1998 1997 ------------ ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents $1,900,839 $ 2,116,478 Accounts receivable, net of allowance for doubtful accounts of $83,000 and $27,500, respectively 153,721 311,856 Inventories 1,891,970 1,706,456 Other current assets 75,292 45,222 ------------ ----------- Total current assets 4,021,822 4,180,012 ------------ ----------- PROPERTY AND EQUIPMENT, at cost: Machinery and equipment 2,241,904 1,923,174 Production molds 1,945,267 1,878,858 Furniture and fixtures 158,477 176,897 Leasehold improvements 94,115 80,447 ------------ ----------- 4,439,763 4,059,376 Less - accumulated depreciation (1,947,006) (1,462,338) ------------ ----------- 2,492,757 2,597,038 OTHER ASSETS 463,031 310,981 ------------ ---------- $6,977,610 $ 7,088,031 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 497,180 $ 659,973 Accrued payroll 218,424 213,130 Other accrued liabilities 277,122 199,384 Deferred revenue 10,000 250,000 ------------ ----------- Total current liabilities 1,002,726 1,322,487 ------------ ----------- COMMITMENTS (Note 6) SHAREHOLDERS' EQUITY: Preferred stock, 10,000,000 shares authorized; issued and outstanding Series A Convertible-692,694 shares, $15 stated value 7,826,157 - Series B Convertible -134,333 shares, $15 stated value 1,491,289 - Common stock, no par, 100,000,000 shares authorized; issued and outstanding 25,503,038 and 19,540,413 shares at March 31, 1998 and 1997, respectively 47,557,297 40,035,736 Accumulated deficit (50,899,859) (34,270,192) ------------ ----------- Total shareholders' equity 5,974,884 5,765,544 ------------ ----------- $6,977,610 7,088,031 ============ =========== The accompanying notes are an integral part of these consolidated financial statements. BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year Ended March 31, 1998 1997 1996 ----------- ---------- ---------- REVENUES: Net sales of products $1,435,107 $1,269,882 $3,059,018 Licensing/technology fees 500,000 965,500 1,150,000 ----------- ---------- ---------- 1,935,107 2,235,382 4,209,018 ----------- ---------- ---------- OPERATING EXPENSES: Manufacturing 1,749,064 1,862,922 4,797,218 Research and development 883,632 1,596,708 1,885,303 Selling, general and administrative 3,524,615 3,177,228 3,168,618 Acquired in-process research & development 15,000,000 - - ---------- ---------- ---------- Total operating expenses 21,157,311 6,636,858 9,851,139 ---------- ---------- ---------- Operating loss (19,222,204) (4,401,476) (5,642,121) Interest expense (390,411) - - Other income 109,983 105,149 211,049 ----------- ----------- ---------- LOSS BEFORE TAXES (19,502,632) (4,296,327) (5,431,072) PROVISION FOR INCOME TAXES - - - ----------- ----------- ----------- NET LOSS BEFORE MINORITY INTEREST (19,502,632) (4,296,327) (5,431,072) MINORITY INTEREST ALLOCATION 2,985,000 - - ------------ ----------- ---------- NET LOSS (16,517,632) (4,296,327) (5,431,072) PREFERRED STOCK DIVIDEND 112,035 - - ----------- ----------- ----------- NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS $(16,629,667) $(4,296,327) $(5,431,072) =========== =========== ============ BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.72) $ (0.26) $ (0.39) ============ =========== =========== SHARES USED IN PER SHARE CALCULATION 23,151,135 16,705,274 14,074,349 ============ =========== =========== The accompanying notes are an integral part of these consolidated financial statements BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK ---------------- ------------------- Accumulated Series A Series B Shares Amount Deficit Total -------- ---------- ------- -------- --------- -------- Shares Amount Shares Amount ------ ------- ------ ------ ------- -------- -------- -------- BALANCES, MARCH 31, 1995 - $ - - $ - 13,259,074 $32,507,095 $(24,542,793) $7,964,302 Issuance of common stock in exchange for services - - - - 23,149 39,962 - 39,962 Issuance of common stock and warrants in a private placement in November and December 1995 - - - - 2,303,009 3,454,101 - 3,454,101 Net loss applicable to common shareholders - - - - - - (5,431,072) (5,431,072) ------- ------- ------ ------ ----------- ----------- ---------- ---------- BALANCES, MARCH 31, 1996 - - - - 15,585,232 36,001,158 (29,973,865) 6,027,293 Issuance of common stock in exchange for services - - - - 33,298 159,350 - 159,350 Issuance of common stock and warrants in a private placement in December 1996 - - - - 3,434,493 2,163,000 - 2,163,000 Issuance of stock to Schering AG in exchange for debt - - - - 487,390 1,712,228 - 1,712,228 Net loss applicable to common shareholders - - - - - - (4,296,327) (4,296,327) ------- ------- ------ ------- ----------- ---------- ----------- ----------- BALANCES, MARCH 31, 1997 - - - - 19,540,413 40,035,736 (34,270,192) 5,765,544 Issuance of common stock in exchange for services - - - - 49,646 94,936 - 94,936 Issuance of common stock and warrants in a private placement in June and July 1997 - - - - 2,906,977 1,225,000 - 1,225,000 Issuance of common stock and warrants in a private placement in October 1997 - - - - 2,727,273 2,800,000 - 2,800,000 Issuance of common stock pursuant to stock option exercises - - - - 136,098 154,869 - 154,869 Issuance of common stock under 401(k) matching plan - - - - 42,631 31,006 - 31,006 Issuance of warrants in exchange for services - - - - - 81,350 - 81,350 Issuance of common stock in acquisition of assets - - - - 100,000 134,400 - 134,400 Issuance of preferred stock in exchange for debt, net of expenses 692,694 10,220,411 134,333 1,985,000 - - - 12,205,411 Adjustment for inherent dividend - (2,500,000) - (500,000) - 3,000,000 - - Preferred stock dividend - 105,746 - 6,289 - - - 112,035 Net loss applicable to common shareholders - - - - - - (16,629,667)(16,629,667) --------- ---------- --------- ---------- ----------- --------- ------------ ----------- BALANCES, MARCH 31, 1998 692,694 $7,826,157 134,333 $1,491,289 25,503,038 $47,557,297 $(50,899,859) $5,974,884 ========= ========== ========= ========= ========== ========== ============ ===========
The accompanying notes are an integral part of these consolidated financial statements. BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended March 31, 1998 1997 1996 ------------ ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss applicable to common shareholders $(16,629,667) $(4,296,327) $(5,431,072) Adjustments to net loss: Depreciation and amortization 514,668 443,700 520,714 Contributed capital for services 207,292 159,350 39,962 Acquired in-process R&D, net of minority interest 12,015,000 - - Preferred stock dividends 112,035 - - Interest paid in preferred stock 390,411 - - Net changes in assets and liabilities: Accounts receivable 158,135 113,003 305,864 Inventories (455,514) (450,511) (147,237) Other current assets (30,070) 492 6,435 Accounts payable (162,793) 109,799 (257,704) Accrued payroll 5,294 54,905 (92,512) Other accrued liabilities 77,738 (17,540) (102,080) Deferred revenue (240,000) (316,000) 410,000 --------- ---------- ----------- Net Cash Used in Operating Activities (4,037,471) (4,199,129) (4,747,630) ----------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Securities purchased - - (1,977,856) Securities sold - 993,056 4,974,268 Property and equipment (110,387) (1,617,052) (597,100) Other assets (47,650) (33,876) (64,916) Acquisition of blood glucose monitoring technology (15,000,000) - - ------------ ----------- ----------- Net Cash Provided By (Used In) Investing Activities (15,158,037) (657,872) 2,334,396 ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash proceeds from common stock 4,179,869 2,163,000 3,454,101 Borrowing from long-term debt subsequently converted to common stock - 1,712,228 - Issuance of preferred stock 12,015,000 Minority interest capital contribution to subsidiary 2,985,000 Preferred stock issuance costs (200,000) - - ----------- ---------- ----------- Net Cash Provided by Financing Activities 18,979,869 3,875,228 3,454,101 --------- ---------- ----------- CASH AND CASH EQUIVALENTS: Net increase (decrease) in cash and cash equivalents (215,639) (981,773) 1,040,867 Cash and cash equivalents at beginning of year 2,116,478 3,098,251 2,057,384 --------- ---------- ----------- Cash and cash equivalents at end of year $1,900,839 $2,116,478 $3,098,251 ========== ========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ - $ - $ - Cash paid for income taxes - - - Purchase of goodwill for stock 134,400 - - ------- -------- ------- $134,400 $ - $ - ======== ========== =========== The accompanying notes are an integral part of these consolidated financial statements. BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY: The consolidated financial statements of Bioject Medical Technologies Inc. (the "Company" or "Bioject"), include the accounts of Bioject Medical Technologies Inc. ("BMT"), an Oregon Corporation, and its wholly owned subsidiary, Bioject Inc., an Oregon Corporation ("BI"), and its 80.1% owned subsidiary, Bioject JV Subsidiary Inc. ("JV"), an Oregon corporation. All significant intercompany transactions have been eliminated. Although Bioject Inc. commenced operations in 1985, the Company was formed in December 1992 for the purpose of acquiring all of the capital stock of Bioject Medical Systems Ltd., a Company organized under the laws of British Columbia, Canada, in a stock-for-stock exchange in order to establish a U.S. domestic corporation as the publicly traded parent company of Bioject Inc. and Bioject Medical Systems Ltd. Bioject Medical Systems Ltd. was terminated in fiscal 1997. Bioject JV Subsidiary Inc. was formed in October 1997 in connection with a joint venture arrangement with Elan Corporation, plc ("Elan"). All references to the Company include Bioject Medical Technologies Inc. and its subsidiaries, unless the context requires otherwise. The Company commenced operations in 1985 for the purpose of developing, manufacturing and distributing a new drug delivery system. Since its formation, the Company has been engaged principally in organizational, financing, research and development, and marketing activities. In the last quarter of fiscal 1993, the Company launched U.S. distribution of its Biojector 2000 system primarily to the hospital and large clinic market. The Company's products and manufacturing operations are subject to extensive government regulation, both in the U.S. and abroad. In the U.S., the development, manufacture, marketing and promotion of medical devices is regulated by the Food and Drug Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act ("FFDCA"). In 1987, the Company received clearance from the FDA under Section 510(k) of the FFDCA to market a hand-held CO2-powered jet injection system. In June 1994, the Company received clearance from the FDA under 510(k) to market a version of its Biojector 2000 system in a configuration targeted at high volume injection applications. In October 1996, the Company received 510(k) clearance for a non-needle disposable vial access device. In March 1997, the Company received additional 510(k) clearance for certain enhancements to its Biojector 2000 system. On September 30, 1997, the Company entered into a joint venture agreement with Elan for the development and commercialization of certain blood glucose monitoring technology which the Company licensed from Elan (see Note 2 regarding "Accounting Policies-Research and Development and Licensing/Technology Revenues"). Such technology is also subject to government regulation in the U.S. by the FDA and abroad by various agencies. Since its inception the Company has incurred operating losses and at March 31, 1998 has an accumulated deficit of approximately $51 million. The Company's revenues to date have been derived primarily from licensing and technology fees for the jet injection technology and more recently from sales of the Biojector 2000 system and Biojector syringes to public health clinics, flu immunization clinics and physicians offices. Future revenues will depend upon acceptance and use by healthcare providers of the Company's jet injection technology and successful development, regulatory clearance and market acceptance of its blood glucose monitoring technology. Uncertainties over government regulation and competition in the healthcare industry may impact healthcare provider expenditures and third party payer reimbursements and, accordingly, the Company cannot predict what impact, if any, subsequent healthcare reforms and industry trends might have on its business. In the future the Company is likely to require substantial additional financing. Failure to obtain such financing on favorable terms could adversely affect the Company's business. The Company's revenues to date have not been sufficient to cover operating expenses. However, the Company believes that if its products achieve market acceptance and the volume of sales increase, and its product costs are reduced, its cost of goods as a percentage of sales will decrease and eventually the Company will generate net income. The level of sales required to generate net income will be affected by a number of factors including the pricing of the Company's products, its ability to attain efficiencies that can be attained through volume and automated manufacturing, and the impact of inflation on the Company's manufacturing and other operating costs. There can be no assurance that the Company will be able to successfully implement further manufacturing cost reductions or sell its products at prices or in volumes sufficient to achieve profitability or offset increase in its costs should they occur. The Company believes that its current cash position, combined with revenues, other cash receipts, proceeds from the exercise of stock warrants and options, proceeds from the issuance of the Company's Series C preferred stock and proceeds from the purchase by Elan of additional stock in JV, may not be sufficient to fund the Company's operations through the end of fiscal 1999. The Company has identified a number of potential financing sources and is pursuing them aggressively. Even if the Company is successful in raising additional financing, unforeseen costs and expenses or lower than anticipated cash receipts from product sales or research and development activities could accelerate or increase the financing requirements. The Company has been successful in raising additional financing in the past and believes that sufficient funds will be available to fund future operations. However, there can be no assurance that the Company's efforts will be successful, and there can be no assurance that such financing will be available on terms which are not significantly dilutive to existing shareholders. Failure to obtain needed additional capital on terms acceptable to the Company, or at all, would significantly restrict the Company's operations and ability to continue product development and growth and materially adversely affect the Company's business. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts that might result should the Company be unable to continue as a going concern. 2. ACCOUNTING POLICIES: CASH EQUIVALENTS The Company considers cash equivalents to consist of short-term, highly liquid investments with an original maturity of less than three months. SECURITIES AVAILABLE FOR SALE The Company accounts for its investments in marketable securities in accordance with Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115) as securities available for sale. There were no significant realized gains or losses in fiscal 1998, 1997, and 1996. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined in a manner which approximates the first-in, first out (FIFO) method. Costs utilized for inventory valuation purposes include labor, materials and manufacturing overhead. Net inventories consist of the following: March 31, 1998 1997 ---------- ---------- Raw Materials $ 754,715 $ 815,868 Work in Process 9,763 9,763 Finished Goods 1,127,492 880,825 ----------- ---------- $1,891,970 $1,706,456 ========== ========== PROPERTY AND EQUIPMENT For financial statement purposes, depreciation expense on property and equipment is computed on the straight-line method using the following lives: Furniture and Fixtures............................5 years Machinery and Equipment...........................7 years Computer Equipment................................3 years Production Molds..................................5 years Leasehold improvements are amortized on the straight-line method over the shorter of the remaining term of the related lease or the estimated useful lives of the assets. Included in machinery and equipment and production molds are molds, tooling and production fixtures constructed or acquired by the Company under a supply agreement with Schering AG for the manufacture and sale of a needle-free self-injection system. The construction of these assets commenced in May and June 1996 and continued until January 1997 when they were ready for their intended use. Schering loaned the Company $1.6 million to fund acquisition of the assets, and therefore, in accordance with SFAS 34, the Company has capitalized $106,000 of interest incurred on this debt. OTHER ASSETS Other assets include costs incurred for the application of patents, totaling $503,344 and $455,694 at March 31, 1998 and 1997, respectively. These costs are amortized on a straight-line basis over 17 years. Accumulated amortization totaled $174,713 and $144,713 at March 31, 1998 and 1997, respectively. Amortization expense for the years ended March 31, 1998, 1997 and 1996 totaled $30,000, $30,000, and $20,000 respectively. Also included in other assets is the cost of assets acquired from Vitajet Corporation in a stock for assets exchange. In March 1998 the Company paid 100,000 shares of its common stock for certain molds, tooling, patent rights and customer lists, the value of which totaled $134,400 at the date of acquisition and is being amortized over 15 years. In addition to shares already paid, the Company is obligated to issue 60,000 shares of its common stock each year in each of the three years, subsequent to the acquisition if certain development milestones are met. Up to an additional 90,000 shares is also payable subject to the Company realizing specified, aggregate levels of incremental revenue during the three years subsequent to the Vitajet acquisition as a result of sales of products acquired from or developed by Vitajet ACCOUNTING FOR LONG-LIVED ASSETS In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of"(SFAS 121), which requires the Company to review for impairment of its long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. In certain situations, an impairment loss would be recognized. SFAS 121 became effective for the Company's year ended March 31, 1997. The Company continues to study the implications of SFAS 121 and, based on its evaluation, does not believe that an adjustment to the carrying value of its long-lived assets is necessary. REVENUE RECOGNITION FOR PRODUCT SALES The Company records revenue from sales of its products upon shipment. In fiscal 1998, 1997 and 1996, sales to one customer (different for each period presented) accounted for 12%, 17% and 75%, respectively, of net sales of products. At March 31, 1998, 1997 and 1996 accounts receivable from one customer (different for each period presented) accounted for 19%, 62%, and 67%, respectively, of total accounts receivable. RESEARCH AND DEVELOPMENT AND LICENSING/TECHNOLOGY REVENUES Licensing fees are recognized as revenue when due and payable. All licensing fee arrangements have been on a non-refundable basis and impose no future performance requirements or other obligations on the Company. Product development revenue is deferred upon receipt and is recognized as revenue as qualifying expenditures are incurred. Expenditures for research and development are charged to expense as incurred. SCHERING AG. In March 1994, the Company entered into a joint development agreement with Schering AG, a major pharmaceutical manufacturer, for the development of an application-specific self injection system (the "Self-Injector"). Under terms of the agreement, the Company received a $500,000 licensing fee in April 1994 and received partial funding of product development expenses on an agreed schedule. In fiscal 1995, the Company received a total of $1.1 million from Schering, consisting of $500,000 in licensing fees, which were recognized as revenue during fiscal 1995, and $600,000 of Phase I product development revenues, $444,000 of which were recognized as revenue in fiscal 1995. In fiscal 1996, the Company received an additional $660,000 and a total of $751,000 was recognized as revenue. In fiscal 1997, the Company received final product development payments totaling $349,500 and recognized revenue of $414,500. During fiscal 1997, the Company entered into a supply agreement with Schering and commenced activities related to preparing for production of the Self Injector. Schering loaned the Company a total of $1.6 million to purchase molds and tooling to produce the product. In January 1997, the Company received notice that its contract with Schering would be cancelled. Under provisions of the contract, Schering had the option of canceling the agreement if the FDA required extensive clinical studies beyond an originally planned safety study. Schering received a review letter from the FDA which would have required Schering to conduct additional material clinical studies in order to use non-traditional delivery mechanisms with its Betaseron (R) product. Under terms of the contract, Schering was required to convert its $1.6 million note due from Bioject into approximately 460,000 shares of Bioject common stock at a conversion price of $3.50 per share. In addition, $106,000 of accrued interest was converted into approximately 27,000 shares of Bioject common stock at a conversion price of $3.50 per share. Additionally, Schering was obligated to pay Bioject for the cost of product ordered through the date of cancellation of the contract. HOFFMANN-LA ROCHE. In January 1995, the Company entered into a joint development agreement with Hoffmann-La Roche, a major pharmaceutical manufacturer, for the development of application specific-products. The Company received a licensing fee totaling $500,000 which was recognized as revenue in fiscal 1995. The Company is also receiving specified product development fees on an agreed schedule. In fiscal 1996, the Company received $900,000, of which $399,000 was recognized as revenue. In fiscal 1997, the Company received $250,000 in product development fees and recognized revenue of $501,000. In fiscal 1998, the Company received $250,000 in product development fees and recognized revenues of $500,000. ELAN CORPORATION. On September 30, 1997, the Company signed a binding letter agreement (the "Agreement") with Elan Corporation, plc ("Elan") the goals of which included the development and commercialization of Elan's blood glucose monitoring technology and a collaborative arrangement to further develop the Company's jet injection technology. Among various terms, all of which were determined in arms-length negotiation, the Agreement provides for: - - Investment by Elan of $3 million in Bioject in exchange for approximately 2.7 million shares of common stock and a five year warrant to purchase 1.75 million shares of common stock at $2.50 per share. - - Formation of JV which is owned 80.1% by Bioject and 19.9% by Elan to further develop and commercialize the blood glucose monitoring technology. - - Payment of a $15 million up front fee and future milestone payments totaling $15.5 million and royalties on net sales in exchange for North American rights to Elan's blood glucose monitoring technology. - - The loan of $12.015 million to Bioject on a long-term promissory note bearing interest at 9% per annum through December 31, 1997 and 12% thereafter for the purpose of Bioject's investment in the new subsidiary's common stock. - - The investment by Elan of $2.985 million in JV's common stock. - - The commitment by Elan to further develop the blood glucose monitoring technology until the earlier of human clinical trials, March 31, 1998 or $2.5 million is expended by Elan. - - The submission to Bioject's shareholders of a proposal to approve the exchange of the long-term promissory note for $10 million plus accrued interest for the Company's Series A Convertible Preferred Stock and $2.015 million for Series B Convertible Preferred Stock, with the Series A Convertible Preferred Stock accruing dividends at the rate of 9% per annum (compounded semi-annually) and the Series B Convertible Preferred Stock accruing no mandatory dividends. - - The submission to Bioject's shareholders of a proposal to approve the issuance of up to $4 million of Bioject's Series C Convertible Preferred Stock to Elan to provide Bioject with funds to contribute toward JV's additional development funding needs. - - The agreement by Elan to extend the license on a worldwide basis if the shareholders approve the exchange of the $12.015 million promissory note for convertible preferred stock. - - The agreement by Elan to provide a grant of $500,000 toward development of Bioject's jet injection technology in a pre-filled application. Final closing agreements were signed among the Company, Elan and the Company's new subsidiary on October 15, 1997. On that date the $3 million investment in the Company was made by Elan and approximately 2.7 million shares of common stock and a warrant to purchase 1.75 million shares at $2.50 per share were issued. Elan loaned Bioject $12.015 million which Bioject transferred to the new subsidiary in exchange for 801,000 shares of the subsidiary's common stock. Elan invested $2.985 million in the new subsidiary in exchange for 199,000 shares of the subsidiary's common stock. The new subsidiary paid $15 million to Elan as its initial payment on the licensing agreement. On February 20, 1998, the Company's shareholders approved the exchange of the long-term promissory note plus accrued interest for Series A and Series B Convertible Preferred Stock and the issuance to Elan of Series C Convertible Preferred Stock or other similar convertible preferred stock to fund JV development work. Accordingly, on March 2, 1998, a total of 692,694 shares of Series A Convertible Preferred Stock and 134,333 shares of Series B Convertible Preferred Stock were issued to Elan and the promissory note was cancelled. The Company believes that the license is likely to run for most of the useful life of the products that may be commercialized under it. The license itself is contingent, on a country-by-country basis, on JV's diligently seeking and obtaining regulatory marketing clearance for licensed products and on JV's timely commercial launch of the licensed products in countries where such clearance has been obtained. In addition, in the event that a significant percentage of JV's equity is acquired by any one of a number of specified companies identified by Elan as actual or potential competitors, or any other entity to which Elan does not consent (which consent shall not be unreasonably withheld in the case of such other, unspecified companies), the license may be immediately terminated at the option of Elan. As of September 30, 1997, the Company recorded an expense of $15 million related to acquired in-process research and development expenditures. Such expense relates to the blood glucose monitoring technology that has not yet established technological feasibility and at present has no alternate future uses. Accounting rules require that such costs be charged to expense as incurred. The Company believes that these research and development efforts will result in commercially viable products within the next three to four years at an additional cost to the Company of at least $10 million, exclusive of additional milestone payments totaling $15.5 million due to Elan. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting For Income Taxes (SFAS 109). Under the liability method specified by SFAS 109, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates for the years in which the taxes are expected to be paid. At March 31, 1998, the Company had total deferred tax assets of approximately $20 million, consisting principally of available net operating loss carryforwards. No benefit for these operating losses has been reflected in the accompanying financial statements as they do not satisfy the recognition criteria set forth in SFAS 109. Total deferred tax liabilities were insignificant as of March 31, 1998. As of March 31, 1998, BMT has net operating loss carryforwards of approximately $668,000 available to reduce future federal taxable income, which expire in 2008 through 2013. BI has net operating loss carryforwards of approximately $38.9 million available to reduce future federal taxable income, which expire in 2001 through 2013. JV has net operating loss carryforwards of approximately $12.6 million available to reduce future federal taxable income, which expire in 2013. Approximately $3.0 million of BI's carryforwards were generated as a result of deductions related to exercises of stock options. When utilized, this portion of BI's carryforwards, as tax effected, will be accounted for as a direct increase to contributed capital rather than as a reduction of that year's provision for income taxes. The principal differences between net operating loss carryforwards for tax purposes and the accumulated deficit result from capitalization of certain start-up costs and deductions related to the exercise of stock options for income tax purposes. 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain reclassifications have been made to the prior years' expenses to conform to the current year's presentation. NET LOSS PER SHARE Beginning with Fiscal 1998, basic earnings per shares (EPS) and diluted EPS are computed using the methods required by Statement of Financial Accounting Standard No. 128, Earnings per Share (SFAS 128). Under SFAS 128, basic EPS is calculated using the weighted average number of common shares outstanding for the period. The computation of diluted earnings per share includes the effects of stock options, warrants and convertible preferred stock, if such effect is dilutive. Prior period amounts have been restated to conform with the presentation requirements of SFAS 128. For the periods presented, the Company has been in a loss position and, accordingly there is no difference between basic EPS and diluted EPS since the common stock equivalents and the effect of convertible preferred stock under the "if-converted" method would be antidilutive. All earnings per share amounts in the following table are presented to conform to the SFAS 128 requirement: Year ended March 31, 1998 1997 1996 Net loss ($16,629,667) ($4,296,327) ($5,431,072) Weighted average number of shares of common stock and common stock equivalents outstanding: Weighted average number of common shares outstanding for computing basic earnings per share 23,151,135 16,705,274 14,074,349 Dilutive effect of warrants and stock options after applications of the treasury stock method * * * ---------- ----------- ----------- Weighted average number of common shares outstanding for computing diluted earnings per share 23,151,135 16,705,274 14,074,349 ========== ========== ========== Net loss per share - basic and diluted ($0.72) ($0.26) ($0.39) ========== ========== ========== *The following common stock equivalents are excluded from earnings per share calculations as their effect would have been antidilutive: Year ended March 31, 1998 1997 1996 Warrants and stock options 11,578,490 7,962,146 4,139,034 Convertible preferred stock 8,270,270 ----------- ----------- ----------- 19,848,760 7,962,146 4,139,034 ========== ========= ========= 3. SEGMENT INFORMATION The Company has adopted the segment reporting requirements of SFAS No.131, Disclosures about Segments of an Enterprise and Related Information. At present, the Company has two reportable segments which offer different products and are managed separately because each business requires different technology and marketing strategies. The following sets forth the unaudited results of operations of the Company for its two segments of operations - jet injection technology and blood glucose monitoring technology (in thousands): Jet Injection Blood glucose Monitoring Year Ended Year ended March 31, March 31, ------------- ---------------- 1998 1997 1998 1997 ----- ----- ----- ----- REVENUES $1,935 $2,235 $ - $ - EXPENSES: Manufacturing 1,749 1,863 - - R&D 884 1,596 - - Selling, general & administrative 3,427 3,177 97 - Acquired in-process R&D - - 15,000 - ---- ----- --------- ----- 6,060 6,636 15,097 - ----- ----- --------- ------ Operating loss (4,125) (4,401) (15,097) - Interest expense (390) - - - Other income 109 105 - - ------ ----- -------- ------ (4,406) (4,296) (15,097) - MINORITY INTEREST ALLOCATION - - 2,985 - ------- ------- ------- ------ NET LOSS (4,406) (4,296) (12,112) - LESS - PREFERRED STOCK DIVIDENDS (112) - - - ------- ------- ------- -------- NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS $(4,518) $(4,296) $(12,112) $ - ======== ======= ======== ======== At March 31, 1998, no significant assets exist related to the blood glucose monitoring technology other than the acquired in-process research and development which, as discussed in Note 2 above, was required to be written off at acquisition. Accordingly, the accompanying consolidated balance sheets effectively represent the assets of the jet injection business segment. In the future, certain proceeds from the sale of equity or issuance of debt by JV may be restricted to JV operations only. To the extent that they meet certain reporting requirements, the separate assets, liabilities and equity of the parent and its subsidiary will be appropriately disclosed. 4. 401(K) RETIREMENT BENEFIT PLAN: The Company has a 401(k) Retirement Benefit Plan for its employees. All Employees, subject to certain age and length of service requirements, are eligible to participate. The plan permits certain voluntary employee contributions to be excluded from the employees' current taxable income under provisions of the Internal Revenue Code Section 401(k) and regulations thereunder. Effective January 1, 1996, the Company amended the plan to provide for voluntary employer matches of employee contributions up to 6% of salary and for discretionary profit sharing contributions to all employees. Such employer matches and contributions may be either in cash or Company common stock. For calendar 1996, the Company agreed to match 25% of employee contributions up to 6% of salary with Company stock. For calendar 1997 and 1998, the Company agreed to match 37.5% of employee contributions up to 6% of salary with Company stock. In fiscal 1998, 1997 and 1996, the Company recorded an expense of $21,755, $25,000 and $4,800, respectively, related to voluntary employer matches under the 401(k) Plan. The Board of Directors has reserved up to 100,000 shares of common stock for these voluntary employer matches of which 42,631 shares have been issued and 30,470 shares have been committed through March 31, 1998. 5. SHAREHOLDERS' EQUITY: PREFERRED STOCK The Company has authorized 10 million shares of preferred stock to be issued from time to time with such designations and preferences and other special rights and qualifications, limitations and restrictions thereon, as permitted by law and as fixed from time to time by resolution of the Board of Directors. During fiscal 1998, as described in note 2 regarding the Elan transactions, the Company borrowed $12.015 million from Elan for the purpose of investing such funds in JV. On February 20, 1998, the Company's shareholders approved the exchange of this debt, plus accrued interest, for Series A and Series B convertible preferred stock and approved the future issuance of Series C Convertible Preferred Stock. At March 31, 1998, the Company had preferred stock authorized and outstanding as follows: Series A Convertible Preferred Stock. Series A preferred stock accumulates dividends at 9% per annum, compounded semi-annually, payable in additional Series A Convertible Preferred Stock. Each original share may be converted at the holder's election into 10 shares of common stock and may be redeemed at the Company's election on the third, fourth and fifth anniversaries of issuance if the Company's common stock is greater than or equal to $2.25 per share by the payment to the holder of an amount equal to the original issuance price plus accumulated dividends thereon. If not earlier converted or redeemed, the original issuance price of the Series A Convertible Stock plus accumulated dividends thereon must be converted into common stock of the Company on October 15, 2004 at the lesser of $1.50 or 80% of the average of the closing prices of common stock for the ten trading days ending on October 13, 2004. The Series A Convertible Preferred Stock has preference in liquidation to the common stock of the Company. A total of 692,694 shares with an original issuance value of $15.00 per share has been issued. Series B Convertible Preferred Stock. Series B preferred stock has all of the rights and preferences of the Series A Convertible Preferred Stock including optional conversion, optional redemption and mandatory conversion except that it bears no mandatory dividend but participates in dividends pro rata with the common shareholders. A total of 134,333 shares of Series B Convertible Preferred Stock with an original issuance value of $15.00 per share have been issued. Series C Convertible Stock. Series C preferred stock has all of the rights and preferences of the Series A Convertible Preferred Stock including optional conversion, optional redemption and mandatory conversion except that it bears no mandatory dividend but participates in dividends pro rata with the common shareholders. Its original issuance price will be equal to market value, if and when such shares are issued. Proceeds are restricted for use in the JV. There are no shares issued and outstanding at March 31, 1998. Inherent dividend. As described above, under certain conditions the Series A and Series B Convertible Preferred Stock is convertible into common stock of the Company at a price which represents a 20% discount to its par value of $15.00 per share. The value of this inherent dividend has been recorded as a discount to preferred stock and an increase to common stock totaling $3 million and is being accreted as additional preferred stock dividends on a straight-line basis from March 2, 1998 until mandatory conversion on October 15, 2004. COMMON STOCK Holders of common stock are entitled to one vote for each share of record held on all matters to be voted on by shareholders. No shares have been issued subject to assessment, and there are no preemptive or conversion rights and no provision for redemption, purchase or cancellation, surrender or sinking or purchase funds. Holders of common stock are not entitled to cumulate their shares in the election of directors. A total of 100,000 shares of common stock have been reserved by the Board of Directors for issuance to 401(k) plan participants (see note 4) of which 42,631 shares have been issued and 30,470 shares are committed to be issued through March 31, 1998. STOCK OPTIONS Options may be granted to directors, officers and employees of the Company by the Board of Directors under terms of the Bioject Medical Technologies Inc. 1992 Stock Incentive Plan (the "Plan"), which was approved by the Company's shareholders on November 20, 1992 and adopted by the Board effective December 17, 1992. Under the terms of the Plan, eligible employees may receive statutory and nonstatutory stock options, stock bonuses and stock appreciation rights for purchase of shares of the Company's common stock at prices and vesting as determined by a committee of the Board. Except for options whose terms were extended, options granted under a prior plan maintain their previous option price, vesting and expiration dates. As amended in fiscal 1995, a total of up to 3,000,000 shares of the Company's common stock, including options outstanding at the date of initial shareholder approval of the Plan, may be granted under the Plan. Options outstanding at March 31, 1998 expire through April 2006. In October 1995, the Financial Accounting Standards Board issued Statement No. 123, Accounting for Stock-Based Compensation (SFAS 123), which establishes a fair value-based method of accounting for stock-based compensation plans and requires additional disclosures for those companies that elect not to adopt the new method of accounting. The Company has elected to continue to account for stock options under APB Opinion No. 25, Accounting for Stock Issued to Employees. However, as prescribed by SFAS 123 the Company has computed, for pro forma disclosure purposes, the value of all options granted during fiscal 1998, 1997 and 1996 using the Black-Scholes option- pricing model and the following weighted average assumptions: Year ended March 31, 1998 1997 1996 ------ ------ ------ Risk-free interest rate 6% 6% 6% Expected dividend yield 0% 0% 0% Expected life 1.5 yrs. 1.5 yrs. 1.5 yrs. Expected volatility 78% 47% 47% The total value of options granted during fiscal 1998, 1997 and 1996 would be amortized on a pro forma basis over the vesting period of the options. Options generally vest equally over three years. If the Company had accounted for these plans in accordance with SFAS 123, the Company's net loss and net loss per share would have increased as reflected in the following pro forma amounts (in thousands of $): Year ended March 31, 1998 1997 1996 ------ ------ ------ Net loss: As reported $(16,630) $(4,296) $(5,431) Pro forma $(16,969) $(4,480) $(5,541) Net loss per share: As reported $(0.72) $(0.26) $(0.39) Pro forma $(0.73) $(0.27) $(0.39) The above determination of proforma expense has been calculated consistent with SFAS 123 which does not take into consideration limitations on exercisability and transferability imposed by the Company's Stock Incentive Plan. Further, the valuation model is heavily weighted to stock price volatility, even with a declining stock price, which tends to increase calculated value. The actual value, if any, and, therefore, imputed proforma expense will vary based on the exercise date and the market price of the related common stock when sold. Stock option activity is summarized as follows: Exercise Shares Price Amount --------- ------------ ---------- Balances - March 31, 1995 1,543,650 $2.60 - 5.00 $5,906,967 Options granted 1,316,439 1.25 - 4.50 3,129,177 Options exercised - - - Options canceled or expired (1,161,150) 2.34 - 5.00 (4,302,332) ---------- ------------ ----------- Balances - March 31, 1996 1,698,939 1.25 - 4.50 4,733,812 Options granted 705,525 1.00 - 1.30 830,006 Options exercised - Options canceled or expired (472,906) 1.00 - 4.00 (809,880) ---------- ------------ ----------- Balances March 31, 1997 1,931,558 1.00 - 4.50 4,753,938 Exercise Shares Price Amount --------- ------------ ---------- Options granted 2,086,642 .625 - 1.25 1,506,818 Options exercised (136,098) .75 - 1.31 (154,869) Options canceled or expired (1,567,179) 1.00 - 4.88 (4,179,757) ---------- ------------ ----------- Balances - March 31, 1998 2,314,923 $.625 - 4.88 $1,926,130 ========== ============ =========== The following table sets forth as of March 31, 1998 the number of shares outstanding, exercise price, weighted average remaining contractual life, weighted average exercise price, number of exercisable shares and weighted average exercise price of exercisable options by groups of similar price and grant date: OPTIONS OUTSTANDING OPTIONS EXERCISABLE Exercise Outstanding Weighted Average Weighted Exercisable Weighted Price shares Remaining Average Options Average at 3/31/98 Contractual Exercise Exercise Life(Years) Price Price - ------------ ----------- ----------- -------- --------- -------- $0.625 - 0.99 1,946,140 5.21 $0.71 989,910 $0.73 1.00 - 1.25 289,583 2.48 1.12 251,748 1.12 1.26 - 3.75 44,200 3.71 1.49 24,565 1.45 3.76 - 4.09 35,000 2.00 4.09 35,000 4.09 WARRANTS Warrant activity is summarized as follows: Exercise Shares Price Amount --------- ------------ ---------- Balances - March 31, 1995 - $ - $ - Warrants issued in a private placement expiring Nov. 2000 1,864,343 1.97 - 2.00 3,724,401 Warrants issued in a private placement expiring Feb. 1998 575,752 2.00 1,151,505 Warrants exercised - - - Warrants canceled or expired - - - --------- ------------ ---------- Balances - March 31, 1996 2,440,095 1.97 - 2.00 4,875,906 Warrants issued in a private placement expiring Dec. 2001 3,590,493 .82 - 1.00 3,562,413 Warrants exercised - - - Warrants canceled or expired - - - --------- ------------ ---------- Balances - March 31, 1997 6,030,588 .82 - 2.00 8,438,319 Warrants issued in a private placement expiring June 2002 1,478,488 .50 - .71 1,044,476 Warrants issued in a private placement expiring Sep. 2002 450,000 .85 - 1.10 450,000 Warrants issued in a private placement expiring Oct. 2002 1,750,000 2.50 4,375,000 Warrants issued for services expiring September 2002 130,243 1.10 143,267 Warrants exercised - - - Warrants canceled or expired (575,752) 2.00 (1,151,505) --------- ------------ ---------- Balances - March 31, 1998 9,263,567 $ .50 - 2.50 $13,299,557 ========= ============ ========== Warrants issued for services are accounted for in accordance with SFAS 123, "Accounting for Stock-Based Compensation," and accordingly, an expense totaling $81,350 has been recorded in the financial statements for the year ended March 31, 1998. All other warrants have been issued in connection with equity transactions. Subsequent to year end, the warrants issued in a private placement which would have expired in June 2002 were exercised in exchange for the Company's commitment to issue 147,850 new warrants with an expiration date of March 2003 and as an exercise price of $1.348 per share. 6. COMMITMENTS: Leases. BI has operating leases for its manufacturing, sales and administrative facilities and warehouse facilities with options to renew for an additional five-year term upon expiration. BI also leases office equipment under operating leases for periods up to five years. At March 31, 1998, future minimum payments under noncancellable operating leases with terms in excess of one year are as follows: Year Ending March 31, Facilities Equipment ---------- --------- 1999 $ 202,308 $ 29,250 2000 203,058 9,132 2001 216,888 9,132 2002 204,048 9,132 95,424 5,347 Thereafter Lease expense for the years ended March 31, 1998, 1997 and 1996 totaled $255,000, $283,000 and $221,000 respectively. 7. RELATED PARTY TRANSACTION: On October 22, 1997, Robert Gonnelli was elected Chairman of Bioject's joint venture subsidiary Board of Directors. From October 1997 through April 1998 he received no fees for such services but will participate in any future subsidiary director compensation programs including any subsidiary stock incentive plans. Effective May 1, 1998, Mr. Gonnelli became interim president of JV and will receive compensation totaling $15,000 per month. In addition to his position on the JV Board, Mr. Gonnelli serves as a consultant to the Company for which he received monthly consulting fees of $8,500 per month, aggregating to $50,500, in fiscal 1998. He was also issued 350,000 five year warrants in connection with the private placement completed with Elan and 130,243 warrants for his services related to investor relations and sales consulting. In fiscal 1999, in addition to his monthly fees through April 30, 1998, the Company has committed to issue up 100,000 warrants for his investor relations and sales consulting services. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III The Company has omitted from Part III the information that will appear in the Company's definitive proxy statement for its annual meeting of shareholders to be held on September 10, 1998(the "Proxy Statement"), which will be filed within 120 days after the end of the Company's fiscal year pursuant to Regulation 14A. Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is incorporated by reference to the information under the caption "DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT" in the Proxy Statement. Item 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference to the information under the caption "EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS" in the Proxy Statement. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference to the information under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy Statement. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated by reference to the information under the caption "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in the Proxy Statement. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: (1) Consolidated Financial Statements and Report of Independent Public Accountants are included under Item 8, in Part II. (2) Consolidated Financial Statement Schedules and Report of Independent Public Accountants on those schedules: None required (3) Exhibits: The following exhibits are filed as part of this report. an asterisk (*) beside the exhibit number indicates the subset of the exhibits containing each management contract, compensatory plan, or arrangement required to be identified separately in this report. Exhibit Number Exhibit Description - ------- ----------------------------------------------------------------- 3.1 Articles of Incorporation of Bioject Medical Technologies Inc. incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended January 31, 1993. 3.1.1 Articles of Amendment to the Articles of Incorporation of the Incorporation of the Company incorporation by reference to the Same exhibit number of the Company's Form 8-K filed March 6, 1998. 3.2 Amended and Restated By-laws of Bioject Medical Technologies Inc. Incorporated by reference to the same exhibit number of the Company's Form 10-Q for the quarter ended September 30, 1994. 4.3* Bioject Medical Technologies Inc. 1992 Stock Incentive Plan, as amended through April 3, 1997. Incorporated by reference to the same exhibit number of the Company's From 10-Q for the year ended December 31, 1997. 10.4 Lease Agreement dated March 21, 1989 between Spieker-Hosford- Eddy-Souther #174, Limited Partnership and Bioject Inc. for the Portland, Oregon facility incorporated by reference to the same exhibit number of Company's Form 10-K for the year ended January 31, 1989. 10.4.1 Amended Lease Agreement dated June 18, 1992 between Bridgeport Woods Investors (successors in interest to Spieker-Hosford-Eddy- Souther #174 Limited Partnership) and Bioject Inc. for the Portland, Oregon facility incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended January 31, 1993. 10.4.2 Lease Agreement dated September 10, 1996 between Bridgeport Woods Business park and Bioject Inc. for the Portland, Oregon facility. Incorporated by reference to the same exhibit number of the Company's Form 10-Q for the period ended September 30, 1996. 10.5 Lease Extension Agreement dated October 4, 1994, between Earl J. Itel and Loris Itel Trust and Bioject, Inc., for the 6000 sq. ft. Tualatin, Oregon warehouse. Incorporated by reference to the same exhibit number of the Company's Form 10-Q/A for the period ended December 31, 1996. 10.7* Executive Employment Contract with Peggy J. Miller, dated January 18, 1993 incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended January 31, 1993. 10.8* Executive Employment Contract with J. Michael Redmond, dated February 8, 1996. Incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended March 31, 1996. 10.14 Common Stock Purchase Agreement between Eli Lilly and Company and Bioject Medical Systems Ltd. dated April 29, 1992 incorporated by reference to the same exhibit number of Company's Form 8, dated May 28, 1992, amending Company's Form 10-K for the year ended January 31, 1992. 10.17 Development and Licensing Agreement between Eli Lilly & Company and Bioject Inc., dated April 29, 1992 incorporated by reference to the same exhibit number of Company's Form 8, dated October 9, 1992, amending Company's Form 10-Q for the quarter ended April 30, 1992. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10.17.1 Amendment to Development and Licensing Agreement between Eli Lilly and Company and Bioject Inc., effective May 5, 1993 incorporated by reference to the same exhibit number of Company's Form S-1, No. 33-68846, dated November 1, 1993. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 406 under the Securities Act of 1933, as amended. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10.23 Development and Licensing Agreement between Schering, AG, Bioject Inc. and Bioject Medical Technologies Inc. dated March 28, 1994 incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended March 31, 1994. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities exchange Act of 1934, as amended. 10.26 Heads of Agreement between Hoffmann-La Roche Inc. and Bioject Inc. dated January 10, 1995. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934 as amended. 10.27* Employment Agreement with James C. O'Shea dated October 3, 1995 incorporated by reference to the same exhibit number of the Company's Form 10-Q for the quarter ended September 30, 1995. 10.28 Form of Amended and Restated Registration Rights Agreement between Bioject Medical Technologies Inc. and the participants in the 1995 private placement incorporated by reference to exhibit 4.2 of the Company's Registration Statement on Form S-3 (No. 33-80679). 10.29 Form of Amended and Restated Series "A" Common Stock Purchase Warrant incorporated by reference to exhibit 4.3 of the Company's Registration Statement on Form S-3 (No. 33-80679). 10.30 Form of Series "B" Common Stock Purchase Warrant incorporated by reference to exhibit 4.4. of the Company's Registration Statement on Form S-3 (No. 33-80679). 10.31 Form of Amended and Restated Series "C" Common Stock Purchase Warrant incorporated by reference to exhibit 4.5 of the Company's Registration Statement on Form S-3 (No. 33-80679). Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10.32 Supply Agreement dated June 26, 1996 between Bioject Inc. and Schering Aktiengesellschaft. Incorporated by reference to the same exhibit number of the Company's Form 8-K/A dated June 26, 1996. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities exchange Act of 1934, as amended. 10.32.1 Security Agreement dated June 26, 1996 between Bioject Inc. and Schering Aktiengesellschaft. Incorporated by reference to the same exhibit number of the Company's Form 10-Q for the period ended June 30, 1996. 10.33 Form of Series "D" Common Stock Purchase Warrant. Incorporated by reference to exhibit 4.6 of the Company's form 8-K dated December 11, 1996. 10.34 Form of Series "E" Common Stock Purchase Warrant. Incorporated by reference to exhibit 4.7 of the Company's Form 8-K dated December 11, 1996. 10.35 Form of Registration Rights Agreement between Bioject Medical Technologies Inc. and the participants in the 1996 private placement. Incorporated by reference to exhibit 4.8 of the Company's Form 8-K dated December 11, 1996. 10.36 Form of Series "F" Common Stock Purchase Warrant. 10.37 Form of Series "G" Common Stock Purchase Warrant. 10.38 Form of Registration Rights Agreement between Bioject Medical Technologies Inc. and the participants in the 1997 private placement. Incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended March 31, 1997. 10.39 Agreement between Elan Corporation, plc, Elan International Services, Ltd. and Bioject Medical Technologies, Inc. dated September 30, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed October 3, 1997. Confidential treatment has been requested with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2(b) under the Securities Exchange Act of 1934, as amended. 10.40 License Agreement between Elan Corporation, plc and Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K/A filed January 22, 1998. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an application for Confidential Treatment filed with the Commission under Rule 24b-2(b) under the Securities Exchange Act of 1934, as amended. 10.40.1 Amendment to License Agreement between Elan Corporation, plc and Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.41 Securities Purchase Agreement between Elan International Services, Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997. 10.41.1 Amendment to Securities Purchase Agreement between Elan International Services, Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997 incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.42 Bioject Medical Technologies Inc. Registration Rights Agreement between Elan International Services, Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed October 31, 1997. 10.43 Series K Warrant to Purchase Shares of Common Stock dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed October 31, 1997. 10.44 Promissory Note dated October 15, 1997 in favor of Elan International Services, Ltd. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.45 Newco Subscription and Stockholders Agreement between Elan International Services, Ltd., Bioject Medical Technologies Inc. and Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by Reference to the same exhibit number of the Company's Form 8-K/A filed January 22, 1998. 10.45.1 Amendment to Newco Subscription and Stockholders Agreement between Elan International Services, Ltd., Bioject Medical Technologies Inc. and Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.46 Bioject JV Subsidiary Inc. Registration Rights Agreement between Elan International Services, Ltd. and Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed November 3, 1997. 10.47 Form of Series "H" Common Stock Purchase Warrant. 10.48 Form of Series "I" Common Stock Purchase Warrant. 10.49 Form of Series "J" Common Stock Purchase Warrant. 10.50 Form of Series "L" Common Stock Purchase Warrant. 10.51 Form of Series "M" Common Stock Purchase Warrant. 10.52 Form of Series "N" Common Stock Purchase Warrant. 10.53 Asset Purchase Agreement among Bioject Medical Technologies, Inc. Vitajet Corporation and Serio Landau and Mara C. Landau dated March 23, 1998. 10.54* Executive Employment Agreement dated April 17, 1998 between Bioject Medical Technologies Inc., Bioject Inc., and Michael A. Temple. 10.55 Form of Termination Agreement between Bioject Technolgies, Inc. and Peggy Miller. 10.56 Form of Massachussetts Biotechnology Research Park, Three Biotech Park, Space Lease dated April 20, 1998. 10.57 Amendment to Massachusetts Biotechnology Research Park Space Lease. 10.58 Restated 1992 Stock Incentive Plan 21 List of Subsidiaries 23 Consent of Independent Public Accountants 27 Financial Data Schedule (b) Forms 8K filed since last report: Form 8-K/A (Amendment No. 1) filed on January 22, 1998 amending Form 8-K originally filed on January 14, 1997 regarding a private placement in December 1996. Form 8-K filed on January 22, 1998 regarding amendments to Exhibit 10.40, Exhibit 10.41 and Exhibit 10.45 and filing such amendments as Exhibit 10.40.1, Exhibit 10.41.1 and Exhibit 10.45.1. 8-K/A (Amendment No. 2) filed on January 22, 1998 which refiled Exhibit 10.40 and Exhibit 10.45. Confidential Treatment was granted with regard to portions of Exhibit 10.40. Form 8-K filed on March 6, 1998 regarding results of Special Meeting Of Shareholders held on February 20, 1998. Form 8-K filed on March 27, 1998 for the purpose of filing as an exhibit the press release announcing the resignation of the Chief Financial Officer. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Bioject Medical Technologies Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized: BIOJECT MEDICAL TECHNOLOGIES INC. (Registrant) By: /S/ JAMES C. O'SHEA James C. O'Shea Chairman of the Board, President and Chief Executive Officer Pursuant to the request of the Securities Exchange Act of 1934, this report has been signed below on behalf of the Registrant and in the capacities indicated on the dates shown. SIGNATURE TITLE /S/ JAMES C. O'SHEA Chairman of the Board, President James C. O'Shea and Chief Executive Officer /S/ MICHAEL A. TEMPLE Vice President, Chief Financial Michael A. Temple Officer and Secretary/Treasurer /s/ DAVID H. DE WEESE Director David H. de Weese /S/ GRACE K. FEY Director Grace K. Fey /S/ WILLIAM A. GOUVEIA Director William A. Gouveia /S/ ERIC T. HERFINDAL Director Eric T. Herfindal /S/ RICHARD PLESTINA Director Richard Plestina /S/ JOHN RUEDY, M.D. Director John Ruedy, M.D. Director Michael Sember INDEX TO EXHIBITS Exhibit Number Exhibit Description - ------- ----------------------------------------------------------------- 3.1 Articles of Incorporation of Bioject Medical Technologies Inc. incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended January 31, 1993. 3.1.1 Articles of Amendment to the Articles of Incorporation of the Incorporation of the Company incorporation by reference to the Same exhibit number of the Company's Form 8-K filed March 6, 1998. 3.2 Amended and Restated By-laws of Bioject Medical Technologies Inc. Incorporated by reference to the same exhibit number of the Company's Form 10-Q for the quarter ended September 30, 1994. 4.3* Bioject Medical Technologies Inc. 1992 Stock Incentive Plan, as amended through April 3, 1997. Incorporated by reference to the same exhibit number of the Company's From 10-Q for the year ended December 31, 1997. 10.4 Lease Agreement dated March 21, 1989 between Spieker-Hosford- Eddy-Souther #174, Limited Partnership and Bioject Inc. for the Portland, Oregon facility incorporated by reference to the same exhibit number of Company's Form 10-K for the year ended January 31, 1989. 10.4.1 Amended Lease Agreement dated June 18, 1992 between Bridgeport Woods Investors (successors in interest to Spieker-Hosford-Eddy- Souther #174 Limited Partnership) and Bioject Inc. for the Portland, Oregon facility incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended January 31, 1993. 10.4.2 Lease Agreement dated September 10, 1996 between Bridgeport Woods Business park and Bioject Inc. for the Portland, Oregon facility. Incorporated by reference to the same exhibit number of the Company's Form 10-Q for the period ended September 30, 1996. 10.5 Lease Extension Agreement dated October 4, 1994, between Earl J. Itel and Loris Itel Trust and Bioject, Inc., for the 6000 sq. ft. Tualatin, Oregon warehouse. Incorporated by reference to the same exhibit number of the Company's Form 10-Q/A for the period ended December 31, 1996. 10.7* Executive Employment Contract with Peggy J. Miller, dated January 18, 1993 incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended January 31, 1993. 10.8* Executive Employment Contract with J. Michael Redmond, dated February 8, 1996. Incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended March 31, 1996. 10.14 Common Stock Purchase Agreement between Eli Lilly and Company and Bioject Medical Systems Ltd. dated April 29, 1992 incorporated by reference to the same exhibit number of Company's Form 8, dated May 28, 1992, amending Company's Form 10-K for the year ended January 31, 1992. 10.17 Development and Licensing Agreement between Eli Lilly & Company and Bioject Inc., dated April 29, 1992 incorporated by reference to the same exhibit number of Company's Form 8, dated October 9, 1992, amending Company's Form 10-Q for the quarter ended April 30, 1992. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10.17.1 Amendment to Development and Licensing Agreement between Eli Lilly and Company and Bioject Inc., effective May 5, 1993 incorporated by reference to the same exhibit number of Company's Form S-1, No. 33-68846, dated November 1, 1993. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 406 under the Securities Act of 1933, as amended. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10.23 Development and Licensing Agreement between Schering, AG, Bioject Inc. and Bioject Medical Technologies Inc. dated March 28, 1994 incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended March 31, 1994. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities exchange Act of 1934, as amended. 10.26 Heads of Agreement between Hoffmann-La Roche Inc. and Bioject Inc. dated January 10, 1995. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934 as amended. 10.27* Employment Agreement with James C. O'Shea dated October 3, 1995 incorporated by reference to the same exhibit number of the Company's Form 10-Q for the quarter ended September 30, 1995. 10.28 Form of Amended and Restated Registration Rights Agreement between Bioject Medical Technologies Inc. and the participants in the 1995 private placement incorporated by reference to exhibit 4.2 of the Company's Registration Statement on Form S-3 (No. 33-80679). 10.29 Form of Amended and Restated Series "A" Common Stock Purchase Warrant incorporated by reference to exhibit 4.3 of the Company's Registration Statement on Form S-3 (No. 33-80679). 10.30 Form of Series "B" Common Stock Purchase Warrant incorporated by reference to exhibit 4.4. of the Company's Registration Statement on Form S-3 (No. 33-80679). 10.31 Form of Amended and Restated Series "C" Common Stock Purchase Warrant incorporated by reference to exhibit 4.5 of the Company's Registration Statement on Form S-3 (No. 33-80679). Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10.32 Supply Agreement dated June 26, 1996 between Bioject Inc. and Schering Aktiengesellschaft. Incorporated by reference to the same exhibit number of the Company's Form 8-K/A dated June 26, 1996. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2 under the Securities exchange Act of 1934, as amended. 10.32.1 Security Agreement dated June 26, 1996 between Bioject Inc. and Schering Aktiengesellschaft. Incorporated by reference to the same exhibit number of the Company's Form 10-Q for the period ended June 30, 1996. 10.33 Form of Series "D" Common Stock Purchase Warrant. Incorporated by reference to exhibit 4.6 of the Company's form 8-K dated December 11, 1996. 10.34 Form of Series "E" Common Stock Purchase Warrant. Incorporated by reference to exhibit 4.7 of the Company's Form 8-K dated December 11, 1996. 10.35 Form of Registration Rights Agreement between Bioject Medical Technologies Inc. and the participants in the 1996 private placement. Incorporated by reference to exhibit 4.8 of the Company's Form 8-K dated December 11, 1996. 10.36 Form of Series "F" Common Stock Purchase Warrant. 10.37 Form of Series "G" Common Stock Purchase Warrant. 10.38 Form of Registration Rights Agreement between Bioject Medical Technologies Inc. and the participants in the 1997 private placement. Incorporated by reference to the same exhibit number of the Company's Form 10-K for the year ended March 31, 1997. 10.39 Agreement between Elan Corporation, plc, Elan International Services, Ltd. and Bioject Medical Technologies, Inc. dated September 30, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed October 3, 1997. Confidential treatment has been requested with respect to certain portions of this exhibit pursuant to an Application for Confidential Treatment filed with the Commission under Rule 24b-2(b) under the Securities Exchange Act of 1934, as amended. 10.40 License Agreement between Elan Corporation, plc and Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K/A filed January 22, 1998. Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an application for Confidential Treatment filed with the Commission under Rule 24b-2(b) under the Securities Exchange Act of 1934, as amended. 10.40.1 Amendment to License Agreement between Elan Corporation, plc and Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.41 Securities Purchase Agreement between Elan International Services, Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997. 10.41.1 Amendment to Securities Purchase Agreement between Elan International Services, Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997 incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.42 Bioject Medical Technologies Inc. Registration Rights Agreement between Elan International Services, Ltd. and Bioject Medical Technologies Inc. dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed October 31, 1997. 10.43 Series K Warrant to Purchase Shares of Common Stock dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed October 31, 1997. 10.44 Promissory Note dated October 15, 1997 in favor of Elan International Services, Ltd. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.45 Newco Subscription and Stockholders Agreement between Elan International Services, Ltd., Bioject Medical Technologies Inc. and Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by Reference to the same exhibit number of the Company's Form 8-K/A filed January 22, 1998. 10.45.1 Amendment to Newco Subscription and Stockholders Agreement between Elan International Services, Ltd., Bioject Medical Technologies Inc. and Bioject JV Subsidiary Inc. dated October 15, 1997 incorporated by reference to the same exhibit number of the Company's Form 8-K filed on November 3, 1997. 10.46 Bioject JV Subsidiary Inc. Registration Rights Agreement between Elan International Services, Ltd. and Bioject JV Subsidiary Inc. dated October 15, 1997. Incorporated by reference to the same exhibit number of the Company's Form 8-K filed November 3, 1997. 10.47 Form of Series "H" Common Stock Purchase Warrant. 10.48 Form of Series "I" Common Stock Purchase Warrant. 10.49 Form of Series "J" Common Stock Purchase Warrant. 10.50 Form of Series "L" Common Stock Purchase Warrant. 10.51 Form of Series "M" Common Stock Purchase Warrant. 10.52 Form of Series "N" Common Stock Purchase Warrant. 10.53 Asset Purchase Agreement among Bioject Medical Technologies, Inc. Vitajet Corporation and Serio Landau and Mara C. Landau dated March 23, 1998. 10.54* Executive Employment Agreement dated April 17, 1998 between Bioject Medical Technologies Inc., Bioject Inc., and Michael A. Temple. 10.55* Form of Termination Agreement between Bioject Technolgies, Inc. and Peggy Miller. 10.56 Form of Massachussetts Biotechnology Research Park, Three Biotech Park, Space Lease dated April 20, 1998. 10.57 Amendment to Massachusetts Biotechnology Research Park Space Lease. 10.58 Restated 1992 Stock Incentive Plan 21 List of Subsidiaries 23 Consent of Independent Public Accountants 27 Financial Data Schedule EX-10.47 2 WARRANT H EXHIBIT 10.47 FORM OF WARRANT H001 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF WARRANTHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. SERIES "H" COMMON STOCK PURCHASE WARRANT Bioject Medical Technologies Inc. THIS CERTIFIES that for good and valuable consideration received, Robert Gonnelli, a(n) individual or registered assigns, is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from Bioject Medical Technologies Inc., an Oregon corporation (the "Corporation") up to 200,000 fully paid and nonassessable shares of common stock, without par value, of the Corporation ("Warrant Stock") at a purchase price per share (the "Exercise Price") of $1.00. 1. Term of Warrant Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time part, at any time on or after the date hereof and at or prior to 11:59 p.m., Pacific Standard Time, on September 21, 2002 (the "Expiration Time"). 2. Exercise of Warrant The purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 7620 S.W. Bridgeport Road, Portland, Oregon 97224 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the holder hereof, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Warrant Stock so purchased. 3. Issuance of Shares; No Fractional Shares of Scrip Certificates for shares purchased hereunder shall be delivered to the holder hereof by the Corporation's transfer agent at the Corporation's expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or, subject to applicable laws, other name as shall be requested by such holder. If, upon exercise of this Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Warrant Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Warrant Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Stock). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the holder of this Warrant. 4. Charges, Taxes and Expenses Issuance of certificates for shares of Warrant Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Warrant Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof. 5. No Rights as Shareholders This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof. 6. Registration Rights The Warrant Stock purchasable upon exercise of this Warrant has not been registered under the Securities Act of 1933 or any state securities law. The Corporation shall have no obligation to register such Warrant Stock for resale. The foregoing notwithstanding, any obligation undertaken by the Corporation to register the Warrant Stock shall be limited to the Corporation's use of its best efforts to do so, and in no event shall the Corporation be required to file or maintain the effectiveness of a registration statement on Form S-1. 7. Exchange and Registry of Warrant This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry. 8. Loss, Theft, Destruction or Mutilation of Warrant Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant. 9. Saturdays, Sundays and Holidays If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 10. Merger, Sale of Assets, Etc. If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the holder of this Warrant fifteen (15) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate. 11. Subdivision, Combination, Reclassification, Conversion, Etc. If the Corporation at any time shall, by subdivision, combination, reclassification of securities or otherwise, change the Warrant Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the holder to acquire such number and kind of securities as would have been issuable in respect of the Warrant Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Warrant Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such even bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder. 12. Transferability; Compliance with Securities Laws (a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed. (b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Stock issuable upon exercise hereof are being acquired solely for the holder's own account and not as a nominee for any other party, and for investment, and that the holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Warrant Stock so purchased are being acquired solely for holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Except as contemplated in the Registration Rights Agreement, the Warrant Stock has not been and will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Stock or other securities issued in respect of the Warrant Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. 13. Representations and Warranties The Corporation hereby represents and warrants to the holder hereof that: (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant; (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Warrant Stock issuable upon exercise of this Warrant; (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Warrant Stock hereunder, to issue the common stock issuable upon exercise of the Warrant Stock and to carry out and perform its obligations under the terms of this Warrant; and (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Stock, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken; (e) the Warrant Stock, when issued in compliance with the provisions of this Warrant and the Corporation's Articles of Incorporation (as they may be amended from time to time (the "Articles")), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and (f) the issuance of the Warrant Stock will not be subject to any preemptive rights, rights of first refusal or similar rights. 14. Corporation The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrant against impairment. 15. Governing Law This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon. IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officers. Dated: _________________________, 1997 BIOJECT MEDICAL TECHNOLOGIES INC. By: Name: Peggy J. Miller Title: Vice President, Chief Financial Officer & Secretary NOTICE OF EXERCISE To: Bioject Medical Technologies Inc. (1) The undersigned hereby elects to purchase _________ shares of common stock of Bioject Medical Technologies Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below: (Name) (Address) (3) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. (Date) (Signature) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of Bioject Medical Technologies Inc. set forth below: Name of Assignee Address No. of Shares and does hereby irrevocably constitute and appoint Attorney _____________________ to make such transfer on the books of Bioject Medical Technologies Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Dated: Holder's Signature: Holder's Address: --------------------------------------------------------- --------------------------------------------------------- Guaranteed Signature: NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those action in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10.48 3 WARRANT I EXHIBIT 10.48 FORM OF WARRANT I001 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF WARRANTHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. SERIES "I" COMMON STOCK PURCHASE WARRANT Bioject Medical Technologies Inc. THIS CERTIFIES that for good and valuable consideration received, Robert Gonnelli, a(n) individual or registered assigns, is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from Bioject Medical Technologies Inc., an Oregon corporation (the "Corporation") up to 150,000 fully paid and nonassessable shares of common stock, without par value, of the Corporation ("Warrant Stock") at a purchase price per share (the "Exercise Price") of $1.10. 1. Term of Warrant Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time part, at any time on or after the date hereof and at or prior to 11:59 p.m., Pacific Standard Time, on September 21, 2002 (the "Expiration Time"). 2. Exercise of Warrant The purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 7620 S.W. Bridgeport Road, Portland, Oregon 97224 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the holder hereof, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Warrant Stock so purchased. 3. Issuance of Shares; No Fractional Shares of Scrip Certificates for shares purchased hereunder shall be delivered to the holder hereof by the Corporation's transfer agent at the Corporation's expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or, subject to applicable laws, other name as shall be requested by such holder. If, upon exercise of this Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Warrant Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Warrant Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Stock). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the holder of this Warrant. 4. Charges, Taxes and Expenses Issuance of certificates for shares of Warrant Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Warrant Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof. 5. No Rights as Shareholders This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof. 6. Registration Rights The Warrant Stock purchasable upon exercise of this Warrant has not been registered under the Securities Act of 1933 or any state securities law. The Corporation shall have no obligation to register such Warrant Stock for resale. The foregoing notwithstanding, any obligation undertaken by the Corporation to register the Warrant Stock shall be limited to the Corporation's use of its best efforts to do so, and in no event shall the Corporation be required to file or maintain the effectiveness of a registration statement on Form S-1. 7. Exchange and Registry of Warrant This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry. 8. Loss, Theft, Destruction or Mutilation of Warrant Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant. 9. Saturdays, Sundays and Holidays If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 10. Merger, Sale of Assets, Etc. If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the holder of this Warrant fifteen (15) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate. 11. Subdivision, Combination, Reclassification, Conversion, Etc. If the Corporation at any time shall, by subdivision, combination, reclassification of securities or otherwise, change the Warrant Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the holder to acquire such number and kind of securities as would have been issuable in respect of the Warrant Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Warrant Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such even bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder. 12. Transferability; Compliance with Securities Laws (a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed. (b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Stock issuable upon exercise hereof are being acquired solely for the holder's own account and not as a nominee for any other party, and for investment, and that the holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Warrant Stock so purchased are being acquired solely for holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Except as contemplated in the Registration Rights Agreement, the Warrant Stock has not been and will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Stock or other securities issued in respect of the Warrant Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. 13. Representations and Warranties The Corporation hereby represents and warrants to the holder hereof that: (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant; (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Warrant Stock issuable upon exercise of this Warrant; (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Warrant Stock hereunder, to issue the common stock issuable upon exercise of the Warrant Stock and to carry out and perform its obligations under the terms of this Warrant; and (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Stock, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken; (e) the Warrant Stock, when issued in compliance with the provisions of this Warrant and the Corporation's Articles of Incorporation (as they may be amended from time to time (the "Articles")), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and (f) the issuance of the Warrant Stock will not be subject to any preemptive rights, rights of first refusal or similar rights. 14. Corporation The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrant against impairment. 15. Governing Law This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon. IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officers. Dated: _________________________, 1997 BIOJECT MEDICAL TECHNOLOGIES INC. By: Name: Peggy J. Miller Title: Vice President, Chief Financial Officer & Secretary NOTICE OF EXERCISE To: Bioject Medical Technologies Inc. (1) The undersigned hereby elects to purchase _________ shares of common stock of Bioject Medical Technologies Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below: (Name) (Address) (4) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. (Date) (Signature) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of Bioject Medical Technologies Inc. set forth below: Name of Assignee Address No. of Shares and does hereby irrevocably constitute and appoint Attorney _____________________ to make such transfer on the books of Bioject Medical Technologies Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Dated: Holder's Signature: Holder's Address: --------------------------------------------------------- --------------------------------------------------------- Guaranteed Signature: NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those action in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10.49 4 WARRANT J EXHIBIT 10.49 FORM OF WARRANT J001 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF WARRANTHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. SERIES "J" COMMON STOCK PURCHASE WARRANT Bioject Medical Technologies Inc. THIS CERTIFIES that for good and valuable consideration received, Raphael, L.L.C., a(n) partnership or registered assigns, is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from Bioject Medical Technologies Inc., an Oregon corporation (the "Corporation") up to 100,000 fully paid and nonassessable shares of common stock, without par value, of the Corporation ("Warrant Stock") at a purchase price per share (the "Exercise Price") of $0.85. 1. Term of Warrant Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time part, at any time on or after the date hereof and at or prior to 11:59 p.m., Pacific Standard Time, on September 29, 2002 (the "Expiration Time"). 2. Exercise of Warrant The purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 7620 S.W. Bridgeport Road, Portland, Oregon 97224 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the holder hereof, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Warrant Stock so purchased. 3. Issuance of Shares; No Fractional Shares of Scrip Certificates for shares purchased hereunder shall be delivered to the holder hereof by the Corporation's transfer agent at the Corporation's expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or, subject to applicable laws, other name as shall be requested by such holder. If, upon exercise of this Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Warrant Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Warrant Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Stock). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the holder of this Warrant. 4. Charges, Taxes and Expenses Issuance of certificates for shares of Warrant Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Warrant Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof. 5. No Rights as Shareholders This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof. 6. Registration Rights The Warrant Stock purchasable upon exercise of this Warrant has not been registered under the Securities Act of 1933 or any state securities law. The Corporation shall have no obligation to register such Warrant Stock for resale. The foregoing notwithstanding, any obligation undertaken by the Corporation to register the Warrant Stock shall be limited to the Corporation's use of its best efforts to do so, and in no event shall the Corporation be required to file or maintain the effectiveness of a registration statement on Form S-1. 7. Exchange and Registry of Warrant This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry. 8. Loss, Theft, Destruction or Mutilation of Warrant Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant. 9. Saturdays, Sundays and Holidays If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 10. Merger, Sale of Assets, Etc. If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the holder of this Warrant fifteen (15) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate. 11. Subdivision, Combination, Reclassification, Conversion, Etc. If the Corporation at any time shall, by subdivision, combination, reclassification of securities or otherwise, change the Warrant Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the holder to acquire such number and kind of securities as would have been issuable in respect of the Warrant Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Warrant Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such even bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder. 12. Transferability; Compliance with Securities Laws (a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed. (b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Stock issuable upon exercise hereof are being acquired solely for the holder's own account and not as a nominee for any other party, and for investment, and that the holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Warrant Stock so purchased are being acquired solely for holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Except as contemplated in the Registration Rights Agreement, the Warrant Stock has not been and will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Stock or other securities issued in respect of the Warrant Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. 13. Representations and Warranties The Corporation hereby represents and warrants to the holder hereof that: (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant; (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Warrant Stock issuable upon exercise of this Warrant; (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Warrant Stock hereunder, to issue the common stock issuable upon exercise of the Warrant Stock and to carry out and perform its obligations under the terms of this Warrant; and (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Stock, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken; (e) the Warrant Stock, when issued in compliance with the provisions of this Warrant and the Corporation's Articles of Incorporation (as they may be amended from time to time (the "Articles")), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and (f) the issuance of the Warrant Stock will not be subject to any preemptive rights, rights of first refusal or similar rights. 14. Corporation The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrant against impairment. 15. Governing Law This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon. IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officers. Dated: _________________________, 1998 BIOJECT MEDICAL TECHNOLOGIES INC. By: Name: Peggy J. Miller Title: Vice President, Chief Financial Officer & Secretary NOTICE OF EXERCISE To: Bioject Medical Technologies Inc. (1) The undersigned hereby elects to purchase _________ shares of common stock of Bioject Medical Technologies Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below: (Name) (Address) (3) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. (Date) (Signature) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of Bioject Medical Technologies Inc. set forth below: Name of Assignee Address No. of Shares and does hereby irrevocably constitute and appoint Attorney _____________________ to make such transfer on the books of Bioject Medical Technologies Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Dated: Holder's Signature: Holder's Address: --------------------------------------------------------- --------------------------------------------------------- Guaranteed Signature: NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those action in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10.50 5 WARRANT L EXHIBIT 10.50 FORM OF WARRANT L001 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF WARRANTHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. SERIES "L" COMMON STOCK PURCHASE WARRANT Bioject Medical Technologies Inc. THIS CERTIFIES that for good and valuable consideration received, Robert Gonnelli, a(n) individual or registered assigns, is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from Bioject Medical Technologies Inc., an Oregon corporation (the "Corporation") up to 50,000 fully paid and nonassessable shares of common stock, without par value, of the Corporation ("Warrant Stock") at a purchase price per share (the "Exercise Price") of $1.10. 1. Term of Warrant Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time part, at any time on or after the date hereof and at or prior to 11:59 p.m., Pacific Standard Time, on March 30, 2003 (the "Expiration Time"). 2. Exercise of Warrant The purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 7620 S.W. Bridgeport Road, Portland, Oregon 97224 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the holder hereof, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Warrant Stock so purchased. 3. Issuance of Shares; No Fractional Shares of Scrip Certificates for shares purchased hereunder shall be delivered to the holder hereof by the Corporation's transfer agent at the Corporation's expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or, subject to applicable laws, other name as shall be requested by such holder. If, upon exercise of this Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Warrant Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Warrant Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Stock). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the holder of this Warrant. 4. Charges, Taxes and Expenses Issuance of certificates for shares of Warrant Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Warrant Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof. 5. No Rights as Shareholders This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof. 6. Registration Rights The Warrant Stock purchasable upon exercise of this Warrant has not been registered under the Securities Act of 1933 or any state securities law. The Corporation shall have no obligation to register such Warrant Stock for resale. The foregoing notwithstanding, any obligation undertaken by the Corporation to register the Warrant Stock shall be limited to the Corporation's use of its best efforts to do so, and in no event shall the Corporation be required to file or maintain the effectiveness of a registration statement on Form S-1. 7. Exchange and Registry of Warrant This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry. 8. Loss, Theft, Destruction or Mutilation of Warrant Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant. 9. Saturdays, Sundays and Holidays If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 10. Merger, Sale of Assets, Etc. If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the holder of this Warrant fifteen (15) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate. 11. Subdivision, Combination, Reclassification, Conversion, Etc. If the Corporation at any time shall, by subdivision, combination, reclassification of securities or otherwise, change the Warrant Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the holder to acquire such number and kind of securities as would have been issuable in respect of the Warrant Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Warrant Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such even bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder. 12. Transferability; Compliance with Securities Laws (a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed. (b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Stock issuable upon exercise hereof are being acquired solely for the holder's own account and not as a nominee for any other party, and for investment, and that the holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Warrant Stock so purchased are being acquired solely for holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Except as contemplated in the Registration Rights Agreement, the Warrant Stock has not been and will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Stock or other securities issued in respect of the Warrant Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. 13. Representations and Warranties The Corporation hereby represents and warrants to the holder hereof that: (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant; (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Warrant Stock issuable upon exercise of this Warrant; (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Warrant Stock hereunder, to issue the common stock issuable upon exercise of the Warrant Stock and to carry out and perform its obligations under the terms of this Warrant; and (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Stock, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken; (e) the Warrant Stock, when issued in compliance with the provisions of this Warrant and the Corporation's Articles of Incorporation (as they may be amended from time to time (the "Articles")), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and (f) the issuance of the Warrant Stock will not be subject to any preemptive rights, rights of first refusal or similar rights. 14. Corporation The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrant against impairment. 15. Governing Law This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon. IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officers. Dated: _________________________, 1998 BIOJECT MEDICAL TECHNOLOGIES INC. By: Name: Michael A. Temple Title: Vice President, Chief Financial Officer & Secretary NOTICE OF EXERCISE To: Bioject Medical Technologies Inc. (1) The undersigned hereby elects to purchase _________ shares of common stock of Bioject Medical Technologies Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below: (Name) (Address) (4) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. (Date) (Signature) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of Bioject Medical Technologies Inc. set forth below: Name of Assignee Address No. of Shares and does hereby irrevocably constitute and appoint Attorney _____________________ to make such transfer on the books of Bioject Medical Technologies Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Dated: Holder's Signature: Holder's Address: --------------------------------------------------------- --------------------------------------------------------- Guaranteed Signature: NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those action in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10.51 6 WARRANT M EXHIBIT 10.51 FORM OF WARRANT M001 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF WARRANTHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. SERIES "M" COMMON STOCK PURCHASE WARRANT Bioject Medical Technologies Inc. THIS CERTIFIES that for good and valuable consideration received, Robert Gonnelli, a(n) individual or registered assigns, is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from Bioject Medical Technologies Inc., an Oregon corporation (the "Corporation") up to 80,243 fully paid and nonassessable shares of common stock, without par value, of the Corporation ("Warrant Stock") at a purchase price per share (the "Exercise Price") of $1.10. 1. Term of Warrant Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time part, at any time on or after the date hereof and at or prior to 11:59 p.m., Pacific Standard Time, on March 30, 2003 (the "Expiration Time"). 2. Exercise of Warrant The purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 7620 S.W. Bridgeport Road, Portland, Oregon 97224 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the holder hereof, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Warrant Stock so purchased. 3. Issuance of Shares; No Fractional Shares of Scrip Certificates for shares purchased hereunder shall be delivered to the holder hereof by the Corporation's transfer agent at the Corporation's expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or, subject to applicable laws, other name as shall be requested by such holder. If, upon exercise of this Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Warrant Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Warrant Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Stock). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the holder of this Warrant. 4. Charges, Taxes and Expenses Issuance of certificates for shares of Warrant Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Warrant Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof. 5. No Rights as Shareholders This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof. 6. Registration Rights The Warrant Stock purchasable upon exercise of this Warrant has not been registered under the Securities Act of 1933 or any state securities law. The Corporation shall have no obligation to register such Warrant Stock for resale. The foregoing notwithstanding, any obligation undertaken by the Corporation to register the Warrant Stock shall be limited to the Corporation's use of its best efforts to do so, and in no event shall the Corporation be required to file or maintain the effectiveness of a registration statement on Form S-1. 7. Exchange and Registry of Warrant This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry. 8. Loss, Theft, Destruction or Mutilation of Warrant Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant. 9. Saturdays, Sundays and Holidays If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 10. Merger, Sale of Assets, Etc. If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the holder of this Warrant fifteen (15) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate. 11. Subdivision, Combination, Reclassification, Conversion, Etc. If the Corporation at any time shall, by subdivision, combination, reclassification of securities or otherwise, change the Warrant Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the holder to acquire such number and kind of securities as would have been issuable in respect of the Warrant Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Warrant Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such even bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder. 12. Transferability; Compliance with Securities Laws (a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed. (b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Stock issuable upon exercise hereof are being acquired solely for the holder's own account and not as a nominee for any other party, and for investment, and that the holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Warrant Stock so purchased are being acquired solely for holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Except as contemplated in the Registration Rights Agreement, the Warrant Stock has not been and will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Stock or other securities issued in respect of the Warrant Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. 13. Representations and Warranties The Corporation hereby represents and warrants to the holder hereof that: (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant; (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Warrant Stock issuable upon exercise of this Warrant; (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Warrant Stock hereunder, to issue the common stock issuable upon exercise of the Warrant Stock and to carry out and perform its obligations under the terms of this Warrant; and (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Stock, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken; (e) the Warrant Stock, when issued in compliance with the provisions of this Warrant and the Corporation's Articles of Incorporation (as they may be amended from time to time (the "Articles")), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and (f) the issuance of the Warrant Stock will not be subject to any preemptive rights, rights of first refusal or similar rights. 14. Corporation The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrant against impairment. 15. Governing Law This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon. IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officers. Dated: _________________________, 1998 BIOJECT MEDICAL TECHNOLOGIES INC. By: Name: Michael A. Temple Title: Vice President, Chief Financial Officer & Secretary NOTICE OF EXERCISE To: Bioject Medical Technologies Inc. (1) The undersigned hereby elects to purchase _________ shares of common stock of Bioject Medical Technologies Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below: (Name) (Address) (3) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. (Date) (Signature) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of Bioject Medical Technologies Inc. set forth below: Name of Assignee Address No. of Shares and does hereby irrevocably constitute and appoint Attorney _____________________ to make such transfer on the books of Bioject Medical Technologies Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Dated: Holder's Signature: Holder's Address: --------------------------------------------------------- --------------------------------------------------------- Guaranteed Signature: NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those action in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10.52 7 WARRANT N EXHIBIT 10.52 FORM OF WARRANT N001 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF WARRANTHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. SERIES "N" COMMON STOCK PURCHASE WARRANT Bioject Medical Technologies Inc. THIS CERTIFIES that for good and valuable consideration received, __________i, a(n) ________ or registered assigns, is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from Bioject Medical Technologies Inc., an Oregon corporation (the "Corporation") up to ______ fully paid and nonassessable shares of common stock, without par value, of the Corporation ("Warrant Stock") at a purchase price per share (the "Exercise Price") of $1.348. 1. Term of Warrant Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or from time to time part, at any time on or after the date hereof and at or prior to 11:59 p.m., Pacific Standard Time, on March 31, 2003 (the "Expiration Time"). 2. Exercise of Warrant The purchase rights represented by this Warrant are exercisable by the registered holder hereof, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation at 7620 S.W. Bridgeport Road, Portland, Oregon 97224 (or such other office or agency of the Corporation as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation or by cancellation of indebtedness of the Corporation to the holder hereof, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the holder of this Warrant shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Warrant Stock so purchased. 3. Issuance of Shares; No Fractional Shares of Scrip Certificates for shares purchased hereunder shall be delivered to the holder hereof by the Corporation's transfer agent at the Corporation's expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or, subject to applicable laws, other name as shall be requested by such holder. If, upon exercise of this Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Warrant Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Warrant Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the holder of the Warrant Stock). The Corporation agrees that the shares so issued shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the holder of this Warrant. 4. Charges, Taxes and Expenses Issuance of certificates for shares of Warrant Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Warrant Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof. 5. No Rights as Shareholders This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Corporation prior to the exercise hereof. 6. Registration Rights The Warrant Stock purchasable upon exercise of this Warrant has not been registered under the Securities Act of 1933, as amended, or any state securities law. The Corporation is not obligated to and does not plan to register such Warrant Stock for resale. The foregoing notwithstanding, any obligation undertaken by the Corporation to register the Warrant Stock shall be limited to the Corporation's use of its best efforts to do so, and in no event shall the Corporation be required to file or maintain the effectiveness of a registration statement on Form S-1. 7. Exchange and Registry of Warrant This Warrant is exchangeable, upon the surrender hereof by the registered holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered holder of this Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry. 8. Loss, Theft, Destruction or Mutilation of Warrant Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant. 9. Saturdays, Sundays and Holidays If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 10. Merger, Sale of Assets, Etc. If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the holder shall have the right to receive, upon exercise of the Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a holder of a number of shares of common stock equal to the number of shares issuable upon exercise of the Warrant immediately prior to such reorganization, consolidation, merger, sale or conveyance. If the property to be received upon such reorganization, consolidation, merger, sale or conveyance is not equity securities, the Corporation shall give the holder of this Warrant fifteen (15) business days prior written notice of the proposed effective date of such transaction, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate. 11. Subdivision, Combination, Reclassification, Conversion, Etc. If the Corporation at any time shall, by subdivision, combination, reclassification of securities or otherwise, change the Warrant Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the holder to acquire such number and kind of securities as would have been issuable in respect of the Warrant Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Warrant Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such even bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder. 12. Transferability; Compliance with Securities Laws (a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 1 hereof. Any such transfer shall be made in person or by the holder's duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed. (b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Stock issuable upon exercise hereof are being acquired solely for the holder's own account and not as a nominee for any other party, and for investment, and that the holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Warrant Stock so purchased are being acquired solely for holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Except as contemplated in the Registration Rights Agreement, the Warrant Stock has not been and will not be registered under the Securities Act of 1933, as amended, and this Warrant may not be exercised except by (i) the original purchaser of this Warrant from the Corporation or (ii) an "accredited investor" as defined in Rule 501(a) under the Securities Act of 1933, as amended. Each certificate representing the Warrant Stock or other securities issued in respect of the Warrant Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT. 13. Representations and Warranties The Corporation hereby represents and warrants to the holder hereof that: (a) during the period this Warrant is outstanding, the Corporation will reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant; (b) the issuance of this Warrant shall constitute full authority to the Corporation's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Warrant Stock issuable upon exercise of this Warrant; (c) the Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Warrant Stock hereunder, to issue the common stock issuable upon exercise of the Warrant Stock and to carry out and perform its obligations under the terms of this Warrant; and (d) all corporate action on the part of the Corporation, its directors and shareholders necessary for the authorization, execution, delivery and performance of this Warrant by the Corporation, the authorization, sale, issuance and delivery of the Warrant Stock, the grant of registration rights as provided herein and the performance of the Corporation's obligations hereunder has been taken; (e) the Warrant Stock, when issued in compliance with the provisions of this Warrant and the Corporation's Articles of Incorporation (as they may be amended from time to time (the "Articles")), will be validly issued, fully paid and nonassessable, and free of all taxes, liens or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable federal and state securities laws; and (f) the issuance of the Warrant Stock will not be subject to any preemptive rights, rights of first refusal or similar rights. 14. Corporation The Corporation will not, by amendment of its Articles or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrant against impairment. 15. Governing Law This Warrant shall be governed by and construed in accordance with the laws of the State of Oregon. IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officers. Dated: _________________________, 1998 BIOJECT MEDICAL TECHNOLOGIES INC. By: Name: Michael A. Temple Title: Vice President, Chief Financial Officer & Secretary NOTICE OF EXERCISE To: Bioject Medical Technologies Inc. (1) The undersigned hereby elects to purchase _________ shares of common stock of Bioject Medical Technologies Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below: (Name) (Address) (4) The undersigned represents that (a) he, she or it is the original purchaser from the Corporation of the attached Warrant or an "accredited investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as amended and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. (Date) (Signature) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of common stock of Bioject Medical Technologies Inc. set forth below: Name of Assignee Address No. of Shares and does hereby irrevocably constitute and appoint Attorney _____________________ to make such transfer on the books of Bioject Medical Technologies Inc., maintained for the purpose, with full power of substitution in the premises. The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale. Dated: Holder's Signature: Holder's Address: --------------------------------------------------------- --------------------------------------------------------- Guaranteed Signature: NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever, and must be guaranteed by a bank or trust company. Officers of corporations and those action in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10.53 8 ASSET PURCHASE AGREEMENT EXHIBIT 10.53 ASSET PURCHASE AGREEMENT This Agreement is dated March 23, 1998, by and among BIOJECT MEDICAL TECHNOLOGIES INC., an Oregon corporation ("Purchaser"), VITAJET CORPORATION, a California corporation ("Seller"), and SERGIO LANDAU and MARA L. LANDAU (collectively, "Landau"). R E C I T A L S: Seller manufactures and sells a needle-free injection system under the trademark "Vitajet" (the "Business"). Landau owns all of the issued and outstanding stock of Seller. Seller wishes to sell substantially all of the assets of the Business to Purchaser, and Purchaser wishes to purchase such assets, in accordance with the terms of this Agreement. NOW, THEREFORE, the parties agree as follows: 1. Sale and Purchase. Subject to the terms and conditions of this Agreement, Seller agrees to sell and transfer to Purchaser on the Closing Date (as defined below) and Purchaser agrees to buy from Seller, substantially all of the assets of the Business, which shall include the inventory specified in Section 2, molds, trademarks, tradenames, patents, copyrights, trade secrets, FDA approval to market the Vitajet injector, customer lists, pending contracts to which Seller is a party, and records of the Business, together with the name "Vitajet" and all goodwill associated with such name (the "Assets"). A list of the Assets as of the date of this Agreement is attached hereto as Exhibit A. Items listed in Exhibit D and Exhibit E attached hereto are also Assets being transferred. 2. Assets and Business Not to be Transferred. Seller shall retain, and Purchaser shall not acquire, Seller's cash, cash equivalents, bank accounts, corporate franchise, prepaid expenses, receivables, furniture, computers, office materials and vehicles. In addition, Seller shall retain all inventory of finished Vitajet injector units and syringes except for 12 injector units and 50 boxes of syringes, which shall be included in the Assets. 3. Liabilities. Purchaser does not assume any actual or contingent liability, obligation or commitment of Seller, other than liabilities and obligations related to the contracts that Purchaser is assuming that arise after Closing. Seller shall satisfy all liabilities being retained by Seller out of the proceeds of the sale or from other assets of Seller. 4. Consideration. The consideration (the "Purchase Price") for the transfer of the Assets shall be as follows. (a) Purchaser shall issue to Seller at Closing (as defined in Section 9) 100,000 shares of Purchaser's common stock. (b) Purchaser shall issue to Seller payments of 60,000 shares of Purchaser's common stock on each of March 31, 1999, 2000 and 2001, provided that Seller or Seller's agent, Landau, is making reasonable progress toward the achievement of the following goals (which are not necessarily listed in order of importance or priority): (i) Technology transfer of current Vitajet 3 to Purchaser's Portland facility to be completed by September 30, 1998. (ii) Designing, prototyping and validation testing of a modified version of the Vitajet 3, and an adaptation of Purchaser's standard disposable syringe, so that both products can work together, for subcutaneous injections of 0.5 cc. or less. (iii)Designing, prototyping and validation testing of a low cost and small (marker size) needle-free injector with disposable syringe for subcutaneous injections of 0.5 cc. or less. (iv) Designing, prototyping and validation testing of a syringe/spacer and necessary adaptation of the standard Biojector or alternate injector, for intradermal injections of 0.5 cc. or less. The goals specified above, which currently are expected to be completed by March 31, 2001, except as specified above, are subject to reasonable modifications by Purchaser. (c) Purchaser shall issue to Seller up to an additional 90,000 shares of Purchaser's common stock if certain conditions are met by March 31, 2001. Seller will be entitled to receive such shares in the amounts specified below if Seller's existing products or new products designed by Seller or Seller's agent, Landau (such existing and new products to be referred to herein as the "Products"), result in aggregate revenues to Purchaser in the amounts specified below: Aggregate Revenues Number of Shares Up to $1,000,000 30,000 $1,000,001 to $2,000,000 Additional 30,000 More than $2,000,000 Additional 30,000 Aggregate revenues to be received by Purchaser from the Products will be calculated as follows: (i) If one or more partnership agreements relating to the Products are signed by Purchaser and a third party by March 31, 2001, the revenues to be earned by Purchaser under each such partnership agreement will equal the amounts committed to be paid to Purchaser under such partnership agreement with respect to the Products during the first ten years after the partnership agreement is signed; and (ii) If the Products are sold outside of a partnership arrangement, revenues from such sales will be included in the calculation as Products are shipped to third-party purchasers of the Products; provided, however, that Products must be shipped by March 31, 2001 to be included in the calculation of aggregate revenues. All revenues committed to be received under each partnership agreement during the first ten years after the agreement is signed and all sales of the Products outside of partnership arrangements will be aggregated in meeting the milestones specified above. Once Seller has met a milestone, Purchaser will issue a stock certificate representing the earned shares within 30 days thereafter. (d) The stock certificates representing the shares issued hereunder will bear such legends as the Company shall deem appropriate to reflect the restrictions on transfer imposed by federal and applicable state securities laws. Purchaser agrees to use reasonable efforts to file Form S-3 (or successor form) to register the shares issued hereunder within 90 days after each such issuance of shares. (e) With respect to each Vitajet injector unit purchased in excess of the 12 units specified in Section 2, Purchaser shall pay to Seller $110. For each box of three-month supply of disposable items for inventory that Purchaser purchases in excess of the 50 boxes of syringes specified in Section 2, Purchaser shall pay Seller $19. 5. Purchase Price Allocation. Each of the parties shall report this transaction for all state and federal tax purposes in accordance with the allocation set forth on Exhibit B attached hereto and shall not file any tax return or report (including Form 8594) or otherwise take a position with federal or state tax authorities which is inconsistent with such allocation. The allocation is intended to comply with Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and the related regulations. 6. Taxes. Seller shall pay when due the entire amount of any sales, use, transfer, excise, documentary and other like taxes or recording, filing or notary fees imposed by any state or governmental subdivision within such state in connection with the sale and transfer of the Assets. Personal property taxes shall be prorated as of Closing. 7. Risk of Loss. All right, title and interest and risk of loss with respect to the Assets shall pass to Purchaser at the Closing. 8. Non-Competition. In consideration of Purchaser's obligations under this Agreement, Landau and Seller each agree that neither of them shall, for a period of three years from the Closing Date, own, operate, represent, be employed by, or have any interest in any business that competes with Purchaser with respect to the design, manufacture or sale of needle-free injection systems anywhere in the world. In addition, Seller and Landau shall not suggest or encourage any customer or potential customer not to do business with Purchaser or to purchase products similar to, or sold in competition with, those sold by Purchaser from anyone other than Purchaser or do any act which may be detrimental to Purchaser. 9. Closing. The transactions contemplated by this Agreement shall be consummated (the "Closing") by facsimile at 2:00 p.m. on March 26, 1998, or by such other method or on such other date and time, as the parties shall mutually agree (the "Closing Date"). At the Closing, Purchaser and Seller shall take the following actions: (a) Seller shall execute and deliver to Purchaser a bill of sale and other documents in a form reasonably acceptable to Purchaser transferring title to the Assets to Purchaser. Such documents shall include assignment of the name "Vitajet," and documents in form ready for filing changing Seller's corporate name to exclude such name. (b) Purchaser shall take possession, or arrange for taking possession, of the Assets. (c) Purchaser and Landau shall enter into an Employment Agreement in the form of Exhibit C attached hereto. (d) Purchaser shall deliver to Seller a stock certificate representing 100,000 shares of Purchaser's common stock. 10. Representations and Warranties of Seller and Landau. Seller and Landau jointly and severally represent and warrant to Purchaser that: (a) Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of California. Seller has all requisite corporate power and authority to, and is entitled to, carry on its business as now conducted and to own or lease its properties as and in the places where such business is now conducted and such properties are now owned, leased or operated. (b) Authorization. Seller has all requisite corporate power and authority to enter into this Agreement and to consummate the contemplated transactions. Seller's execution and delivery of this Agreement and consummation of the transactions contemplated by this Agreement have been duly authorized by all requisite corporate action. Seller and Landau have each duly executed and delivered this Agreement, which constitutes the valid and binding obligation of Seller and Landau, enforceable in accordance with its terms, subject to all applicable bankruptcy, insolvency, reorganization and other laws applicable to creditors' rights and remedies and to the exercise of judicial discretion in accordance with general principles of equity. No consent or approval or filing (with any governmental agency or otherwise) is required for the execution of this Agreement. Landau owns all of the issued and outstanding stock of Seller. (c) Effect of Agreement. The execution and delivery of this Agreement by Seller and Landau and consummation of the transactions contemplated by this Agreement shall not result in a breach, default (with or without notice or lapse of time, or both) or violation of, or the creation of any lien, charge or encumbrance pursuant to any provision of the Articles of Incorporation or Bylaws of Seller, any law or regulation of any governmental authority, foreign or domestic, or any provision of any agreement, instrument, understanding, order, judgment or decree to which Seller or any of its properties or assets is bound or affected. (d) Title to Assets. Seller has good and marketable title to all of the Assets, all of the Assets are free and clear of restrictions on or conditions to transfer, and at the Closing, Seller shall transfer to Purchaser good title to all of the Assets, free and clear of any mortgages, liens, security interests, pledges, encumbrances, claims, conditions and restrictions, of any nature whatsoever, direct or indirect, whether accrued, absolute or contingent, known or unknown. Purchaser shall receive from Seller all of Seller's rights in the name "Vitajet" and Seller shall not attempt to convey any rights in such name to any other party. (e) Environmental Matters. (i) Neither Seller nor Landau nor, to the best of their knowledge and belief, any other person has used, sold, treated, released, stored or disposed of any Hazardous Material (as defined below) used in or with or affecting the Assets in violation of any Applicable Law (as defined below). (ii) Seller has not exposed its employees or others to Hazardous Materials in violation of Applicable Laws. (iii)No action, investigation, proceeding, permit revocation, permit amendment, writ, injunction or claim is pending, nor has Seller received notice of any of the foregoing, concerning or relating to (i) the use, storage, sale or disposal of any Hazardous Material related to or affecting the Assets, (ii) the release of or the exposure of any person to Hazardous Materials as a consequence of the activities related to or affecting the Business, or (iii) the presence of any Hazardous Material in or on any property that has been owned, leased, operated or occupied by Seller which is related to or affecting the Assets. (iv) For purposes of this Agreement, the term "Applicable Law" shall mean any statute, regulation, rule, order or law that relates to the use, sale, treatment, disposal or storage of any material ("Hazardous Material") including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the Clean Water Act and all applicable state and local laws and regulations. (f) Employees. Seller has no liability to any of its employees or former employees for severance or termination pay, or for any unfunded pension liability, which will either attach to the Assets being sold to Purchaser hereunder or in any way become the liability of Purchaser following the closing of the purchase and sale transaction contemplated by this Agreement. Any such liability will be funded by Seller from the payment being made to Seller by Purchaser hereunder. (g) Plant Closure Notice. Seller has provided all notices, if any, that may be required by the Worker Adjustment and Retraining Notification Act on account of employment terminations arising from the transactions contemplated by this Agreement. Such notices fully comply with requirements of such Act and the related regulations. Seller has paid any and all compensation and benefits that may be due to Seller's employees and former employees under such Act. (h) Compliance with Laws. Seller has complied with, is not in material violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation (including all applicable laws of Brazil) with respect to the conduct of its business, or the ownership or operation of its business or the Assets. (i) Litigation. There are no pending or threatened claims, litigation or proceedings of any nature against Seller or Landau or to which Seller or Landau is a party which could result in any lien or encumbrance on the Assets or in any way impair the ability of Seller or Landau to fully perform their obligations under this Agreement. (j) Tax Matters. Seller has filed with the appropriate United States, state and local governmental agencies all tax returns and reports required to be filed by Seller and has paid, or has made provision for the payment of, and has made adequate reserves therefor on its books and records, all taxes which have become due. All such returns and reports are accurate and complete to the best of Seller's knowledge, and Seller has paid in full or has made adequate provision for the payment of, and has made adequate reserves therefore on its books and records, all taxes, interest, penalties, assessments or deficiencies shown to be due on such tax returns and reports. Seller has made withholding of tax (and transmittals of the same) required to be made under all applicable tax regulations. (k) Condition of Assets. The Assets are in good repair and operating condition and are fit for their intended purpose, except for reasonable wear and tear. (l) Financial Statements. Seller's financial statements (the "Financial Statements") have been delivered to Purchaser. The Financial Statements are complete and correct in all material respects, were prepared from the books and records of Seller and fairly present the financial position of Seller at the date thereof. All assets reflected on the Financial Statements remain the assets of Seller located on its business premises as of the date hereof, except for sales of inventory and other assets consumed in the ordinary course of business. (m) Intellectual Property. Attached hereto as Exhibit D is a true and complete list of all patents and patent applications owned or pursued by Seller, and of all trademarks, tradenames and copyrights of Seller for which Seller has applied for or received a registration from any federal, state or local governmental authority (collectively the "Intellectual Property"). Seller is the sole owner of the Intellectual Property free of all liens, encumbrances and security interests, and none of the Intellectual Property infringes upon the rights of any third party. (n) Manufacturing Cost. The manufacturing cost of the Vitajet device does not exceed $110. (o) FDA Approval. Seller has received FDA approval to market the Vitajet injector. Purchaser agrees to pay the expenses of transferring such FDA approval to Purchaser. (p) Status of Contracts. Attached hereto as Exhibit E is a list of all contracts to which Seller is a party and that Seller is assigning to Purchaser hereunder. Each of such contracts is a binding agreement of the parties thereto, and each of the parties thereto is current in its obligations to the other parties thereto. No consent of any party is required to assign the contracts to Purchaser. 11. Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller and Landau as follows: (a) Organization. Purchaser is a corporation duly organized, validly existing and having an active status under the laws of the state of Oregon. Purchaser has all requisite corporate power and authority to carry on its business as now conducted and to own or lease its properties as and in the places where such business is now conducted. (b) Authorization. Purchaser has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated by this Agreement have been duly authorized by all requisite corporate action. This Agreement has been duly executed and delivered by Purchaser and constitutes the valid and binding obligation of Purchaser enforceable in accordance with its terms, subject to all applicable bankruptcy, insolvency, reorganization and other laws applicable to creditors' rights and remedies and to the exercise of judicial discretion in accordance with general principles of equity. No consent or approval or filing (with any governmental agency or otherwise) is required for the execution of this Agreement. 12. Operation of Business Prior to Closing Date. During the period from the date of this Agreement up to the Closing Date, Seller shall operate its business in the usual, regular and ordinary course and in substantially the same manner as operated previously. 13. Employees. At or before the Closing, Seller shall terminate the employment of all of its employees. Following Closing, Purchaser may, without obligation, accept and consider applications from Seller's employees and may offer employment, at Purchaser's sole discretion, to any of such persons under terms acceptable to Purchaser. 14. Conditions Precedent to the Obligations of Seller and Landau. The obligations of Seller and Landau to consummate and effect this Agreement and the transactions contemplated by this Agreement shall be subject to the satisfaction at the Closing of each of the following conditions, any of which may be waived, in writing, by Seller or Landau: (a) Representations, Warranties and Covenants. The representations and warranties of Purchaser in this Agreement shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of such date and Purchaser shall have performed and complied with all covenants, obligations and conditions of this Agreement required to be performed and complied with by it as of the Closing Date. (b) No Litigation. No action, suit, proceeding or investigation shall be pending or threatened before any court or government entity to restrain or prohibit, or to obtain specific damages, in respect of this Agreement or the consummation of the transactions contemplated by this Agreement and which, in the reasonable judgment of Seller or Landau, has a reasonable likelihood of success. (c) Employment Agreement. At or prior to the Closing, Purchaser shall have executed an Employment Agreement in the form of Exhibit C. 15. Conditions Precedent to the Obligations of Purchaser. The obligations of Purchaser to consummate and effect this Agreement and the transactions contemplated by this Agreement shall be subject to the satisfaction at the Closing of each of the following conditions, any of which may be waived, in writing, by Purchaser: (a) Representations, Warranties and Covenants. The representations and warranties of Seller and Landau in this Agreement shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of such date, and Seller and Landau shall have performed and complied with all covenants, obligations and conditions of this Agreement required to be performed and complied with by either of them as of the Closing Date. (b) Employment Agreement. At or prior to the Closing, Landau shall have executed an Employment Agreement in the form of Exhibit C. (c) No Litigation. No action, suit, proceeding or investigation shall be pending or threatened before any court or government entity to restrain or prohibit, or to obtain specific damages, in respect of this Agreement or the consummation of the transactions contemplated by this Agreement and which, in the reasonable judgment of Purchaser, has a reasonable likelihood of success. (d) No Adverse Changes. There shall have been no material adverse changes in Seller or its Business. 16. Indemnification. (a) By Seller and Landau. Seller and Landau shall defend, indemnify and hold Purchaser harmless from and against any and all claims, losses or liabilities (including reasonable attorney fees, court costs and expenses of investigation as determined by a court of competent jurisdiction), incurred by Purchaser or any of its affiliates: (i) as a result of any breach of Seller's or Landau's representations, warranties or covenants contained in this Agreement, or (ii) with respect to any liability of Seller or Landau not expressly assumed by Purchaser. (b) By Purchaser. Purchaser shall defend, indemnify and hold Seller and Landau harmless from and against any and all claims, losses or liabilities (including reasonable attorney fees, court costs and expenses of investigation as determined by a court of competent jurisdiction), incurred by Seller, Landau or any of their affiliates as a result of any breach of Purchaser's representations, warranties or covenants contained in this Agreement. 17. Registration Rights. At any time within one year from the date of each issuance of shares to Seller pursuant to Section 4, Seller shall be entitled to request Purchaser to register such shares under the Securities Act of 1933; provided, however, that Purchaser shall only be required to register such shares on a Form S-3 Registration Statement (or successor form). 18. Miscellaneous Provisions. (a) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. No party shall assign its rights or obligations under this Agreement to any third party without the prior written consent of the other parties. (b) Notices. All notices which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be delivered personally or by certified mail, return receipt requested, postage prepaid, or sent by facsimile, with receipt confirmed, or sent by overnight delivery service as follows: If to Purchaser: Bioject Medical Technologies Inc. Attn: Chief Executive Officer 7620 SW Bridgeport Rd. Portland, Oregon 97224 Facsimile: (503)642-9002 with copy to: Tonkon Torp LLP Attn: Carol Dey Hibbs 1600 Pioneer Tower 888 S.W. Fifth Avenue Portland, Oregon 97204-2099 Facsimile: (503) 972-3716 If to Seller or Vitajet Corporation or Landau: Sergio Landau at 27071 Cabot Road, Suite 110 -or- 49 South Peak Laguna Hills, California 92653 Laguna Niguel, CA 92677 Facsimile: (714) 582-8095 Facsimile: (714) 240-2059 Any of the addresses or facsimile numbers set forth above may be changed from time to time by written notice from the party requesting the change. Such notices and other communications shall for all purposes of this Agreement be treated as being effective immediately if delivered personally, or five days after mailing by certified mail, return receipt requested, first-class postage prepaid, or upon confirmation of receipt of a notice sent by facsimile, or one day after deposit for delivery by an overnight delivery service. (c) Alterations and Waivers. The waiver, amendment or modification of any provision of this Agreement or any right, power or remedy under this Agreement, whether by agreement of the parties or by custom, course of dealing or trade practice, shall not be effective unless in writing and signed by the party against whom enforcement of such waiver, amendment or modification is sought. No failure or delay by either party in exercising any right, power or remedy with respect to any of the provisions of this Agreement shall operate as a waiver of such provisions with respect to such occurrences. (d) Governing Law. This Agreement shall be construed, governed and enforced in accordance with the laws of the state of Oregon, without regard to principles concerning the conflict of laws. (e) Severability. In the event any provision of this Agreement or the application of any such provision shall be held to be prohibited or unenforceable in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability. The remaining provisions of this Agreement shall remain in full force and effect, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties shall use their best efforts to replace the provision that is contrary to law with a legal one approximating to the extent possible the original intent of the parties. (f) Exhibits. The exhibits that are attached to and referred to in this Agreement are incorporated into and are a part of this Agreement. (g) Integration and Entire Agreement. This Agreement and the exhibits and other documents referred to in this Agreement set forth the entire understanding between the parties and supersede all previous and contemporaneous written or oral negotiations, commitments, understandings, and agreements relating to the subject matter of this Agreement and merge all prior and contemporaneous discussions between the parties. No party shall be bound by any definition, condition, representation, warranty, covenant or provision other than as contained in this Agreement. (h) Counterpart and Headings. For the convenience of the parties, this Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. All headings and captions are inserted for convenience of reference only and shall not affect meaning or interpretation. (i) Specific Performance. The parties acknowledge that damages would be an inadequate remedy for any breach of the provisions of this Agreement. The parties agree that, in the event of a violation of this Agreement, the nonbreaching party shall have the right to obtain injunctive or other similar relief, as well as any relevant damages, without the requirement of posting bond or similar measures. (j) Survival. All representations and warranties of the parties made in this Agreement, as well as all obligations of the parties under this Agreement which by their nature require performance following Closing, shall survive the Closing. (k) Joint and Several Liability. Seller and the Landau shall be jointly and severally liable with respect to the obligations of Seller and Landau under this Agreement. (l) Bulk Sales Compliance. The parties waive compliance with the provisions of any applicable Bulk Sales Law, and Seller and Landau hereby agree to indemnify and hold Purchaser harmless with respect to any claims related to the failure to comply with such law. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above. PURCHASER: BIOJECT MEDICAL TECHNOLOGIES INC. By: /s/ James O'Shea James O'Shea Chairman, President and Chief Executive Officer SELLER: Vitajet Corporation By: /s/ Sergio Landau Sergio Landau, President LANDAU: Sergio Landau --------------------------- Mara L. Landau --------------------------- LIST OF EXHIBITS EXHIBIT A - ASSETS EXHIBIT B - TAX ALLOCATION EXHIBIT C - EMPLOYMENT AGREEMENT EXHIBIT D - INTELLECTUAL PROPERTY EXHIBIT E - CONTRACTS EX-10.54 9 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.54 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT is dated the 17th day of April, 1998, between: BIOJECT MEDICAL TECHNOLOGIES INC. ("BMT"), a Corporation incorporated under the laws of the State of Oregon having its principal offices at 7620 SW Bridgeport Rd., Portland, Oregon 97224 BIOJECT INC., a Corporation incorporated under the laws of the State of Oregon having its principal offices at 7620 S.W. Bridgeport Road, Portland, Oregon, 97224 (collectively referred to as the "Company") AND: Michael A. Temple, an individual residing at: 2408 N.W. Benson Lane Portland, OR 97229 (the "Executive") RECITALS: 1. The Company desires to secure the services and expertise of the Executive and to ensure the availability of the Executive to the Company; and 2. The Executive desires to serve in the employ of the Company on a full-time basis for the period and upon the terms and conditions provided for in this agreement. 3. The Executive and the Company desire to execute an agreement entered into between them. NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties noted above agree as follows: SECTION 1 1.1 Employment The Company appoints the Executive to and retains the Executive for the position of Chief Financial Officer for the Company, and the Executive accepts such appointment. This appointment becomes effective as soon as the Executive can make appropriate arrangements with his current employer, or on April 20 th, 1998, whichever date is earlier. 1.2 Approval by the Board The Company represents, if required by its Bylaws, that the appointment of the Executive to the position referred to in Section 1.1 will be approved by the Board of Directors of the Company (the "Board") and that all corporate action required to effect the appointment will be taken. 1.3 Definitions As used in this agreement: a. "Confidential Information" means any of the company's customers, employees, products, processes, services, financial information, marketing techniques, merchandising, business strategies, or plans, research, development, systems, inventions or any other trade secret or information pertaining to any of the preceding terms. b. "Conflicting Product" means any product, process or service of any person or organization other than the Company, in existence or under development, which resembles or competes with the current or projected products, processes or services of the Company. c. "Conflicting Organization" means any person or organization engaged or about to become engaged in research, development, production, marketing or selling of a Conflicting Product. d. "Inventions" means discoveries, concepts, and ideas, whether patentable or not, including but not limited to, procedures, processes, methods, formulas, and techniques, as well as improvements thereof or know-how related thereto, concerning any present or prospective activities of the Company with which the Employee becomes acquainted as a result of his employment by the Company. SECTION 2 - DUTIES/RESPONSIBILITIES 2.1 Duties/Responsibilities During the employment term and any renewals thereof, the Executive will devote such time, attention, skill and efforts as may be necessary to assure the full performance of his duties and responsibilities, to the best of his abilities, with such authority as is customarily associated with the position of Chief Financial Officer. The Executive hereby accepts and agrees to such engagement of services, and will devote himself solely to the operation of the Company's business. The Executive may continue his existing involvement in an advisory or board capacity with non-competing organizations. 2.2 Reporting In conducting his duties under this Agreement, the Executive shall report to the Chief Executive Officer and Chairman of the Board of Directors of the Company. 2.3 Location of Employment The Executive shall conduct his duties under this Agreement at the offices of the Company in Portland, Oregon, or such other geographical locations as shall be reasonably required in order to assure the efficient and proper operation of the Company. In the event that the location of the Company is moved outside the Portland metropolitan area, the Executive will be offered a choice to either relocate to the new location, or to accept a severance package as described in Section 4.2b(ii). SECTION 3 - COMPENSATION 3.1 Salary For the Executive's services to the Company, the Executive shall be entitled to receive a minimum annual gross salary of $110,000. Not less than once during each year of employment, the Chief Executive Officer shall review the Executive's performance, duties and compensation for the purpose of promotion and/or increasing the compensation payable to the Executive. Executive's salary shall be paid in bi-weekly installments during the calendar year for the term of this Agreement. The Company shall deduct or withhold from such payments to the Executive the sums as are required under applicable laws for worker's compensation, income taxes and other benefits in accordance with Company policy. 3.2 Bonus Program The Executive shall not be eligible to earn a cash bonus until the fiscal year following the year the Company has achieved profitability. In the interim, the Executive is eligible to earn bonuses in the form of stock options for fiscal years in which the Company achieves its financial performance objectives, including budget projections. Specific bonus requirements and objectives will be determined by the Chief Executive Officer and the Board of Directors, and are subject to approval by the Board. At such time during Executive's employment by the Company, that the Company attains two consecutive fiscal quarters of positive earnings per share from ordinary income and expenditures (i.e., computed by utilizing customer sales revenues less ordinary and usual operating expenses for each month, as well as GAAP), the Executive will receive a grant of 15,000 incentive shares from the Company's incentive stock plan, having a tax basis to Executive of zero. The Executive is eligible for only one such bonus during his employment. 3.3 Reimbursement of Expenses The Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses, including, without limitation, all travel and entertainment expenses payable or incurred by the Executive in connection with his duties under this Agreement. It is the policy of the Company for employees to travel as inexpensively as possible, utilizing economy airfare and standard rental cars. All payments or reimbursements shall be made promptly upon submission by the Executive of vouchers, bills or receipt for all expenses. 3.4 Disability Should Executive become disabled and unable to perform substantially all of his duties hereunder, as documented by an independent physician selected jointly by the Executive and the Company, the Company will continue paying the Executive any bonus earned and previously awarded, together with his then- current salary at seventy-five percent (75%) of current salary for a period of not less than six (6) months from the disability date, then reduced to fifty percent (50%) of current salary for any remaining period of disability for a period of up to an additional six (6) months, with health and dental insurance and other benefit coverage to continue for the duration of such payments. Should payments to Executive under worker's compensation and/or disability insurance programs, when combined with Company payments, exceed seventy-five percent (75%) of employee's current salary, the Company will reduce its payment by the excess amount. SECTION 4 - TERMS OF EMPLOYMENT 4.1 Duration The term of this Agreement shall commence on a mutually agreeable date, but not later than April 20th, 1998. It shall continue for an initial term period of two, consecutive one-year terms, subject to the early termination provisions of this Section. Upon expiration of the initial term period, this Agreement will be automatically renewed for successive one-year terms unless either the Executive or the Company shall, upon three months written notice to the other, elect not to renew this Agreement for any year. 4.2 Termination by the Company (a) The Company may terminate this Agreement: (i) Immediately if it is determined by the Board of Directors that the Executive's actions: (1) constitute a material breach of his duties hereunder or (2) constitute a criminal act reflecting adversely on the business or reputation of the Company or (3) have resulted in the Executive, in his personal capacity, being indicted or sanctioned or his entering into a consent decree, in connection with any investigation of, allegation of wrongdoing by, or other formal proceeding against the Executive, by the United States Food and Drug Administration or the United States Securities and Exchange Commission, whether related to the business of the Company or to any other employment or activity of the Executive, past or future; or (ii) With or without other cause at any time by giving sixty (60) days prior written notice to the Executive; or (b) Upon termination of this Agreement by the Company: (i) Pursuant to Sections 4.2(a)(i): A. The salary payable to the Executive pursuant to Section 3.1 shall be paid in regular bi-weekly installments for sixty (60) days following the date of termination; B. All other forms of compensation payable to the Executive pursuant to Section 3 shall terminate on the date of termination, except that as expeditiously as possible following the termination, the Company shall pay or reimburse the Executive for all expenses incurred prior to the termination pursuant to Section 3.3, together with any bonuses earned by and previously awarded to the Executive pursuant to Section 3.2 prior to the date of termination. (ii) Pursuant to Section 4.2(a)(ii), and Section 2.3: A. The salary payable to the Executive pursuant to Section 3.1 shall be paid for the period commencing on the date of the termination, and continuing for: One hundred twenty (120) days following the date of termination. B. All other forms of compensation payable to the Executive pursuant to Section 3 shall terminate, except that as expeditiously as possible after the termination the Company shall pay or reimburse the Executive for all expenses incurred prior to the termination pursuant to Section 3.3, together with any bonuses earned by and previously awarded to the Executive pursuant to Section 3.2, prior to the date of termination. 4.3 Termination by Executive The Executive may terminate this Agreement by giving sixty (60) days prior written notice to the Company. Upon termination of this Agreement by the Executive pursuant to this Section: (a) The salary payable to the Executive pursuant to Section 3.1 shall be prorated to the date of the termination; (b) Except for the severance package made available to the Executive pursuant to Section 2.3, all other forms of compensation payable to the Executive pursuant to Section 3 shall terminate on the date of the termination. As expeditiously as possible after termination of the Executive's employment, the Company shall pay or reimburse the Executive for all expenses incurred prior to the termination pursuant to Section 3.3, together with any bonuses earned by and previously awarded to the Executive pursuant to Section 3.2, prior to the date of termination. (c) Executive shall utilize his best efforts to continue to perform all duties assigned by the Company in the manner stated in paragraph 2.1 hereof, prior to the date of termination. 4.4 Termination Upon Death This Agreement shall terminate immediately upon the Executive's death. In the event of the Executive's death: (a) The Company shall pay to the Executive's estate the salary otherwise payable to the Executive pursuant to Section 3.1 through the last day of the calendar month in which the Executive's death occurs and for a period of one hundred twenty (120) days thereafter. (b) As expeditiously as possible after the Executive's death the Company shall pay or reimburse the Executive's estate for all expenses incurred pursuant to Sections 3.3 prior to such death, together with any bonuses earned by and awarded to the Executive pursuant to Section 3.2, prior to the date of such death. 4.5 Reorganization, Merger or Sale If at any time during the term of this Agreement there is effected any consolidation or merger of the Company with another corporation (other than a consolidation or merger in which the Company is a continuing corporation) or the sale of all or substantially all of the assets of the Company, then, as to such consolidation, merger or sale, the Company will utilize its best efforts to make appropriate provisions to preserve the rights and interests of the Executive pursuant to this Agreement. Additionally, in the event of merger or acquisition, all stock options which have been awarded to the Executive, but are not yet vested, will vest immediately. 4.6 Acts Upon Termination Upon termination of Executive's employment with the Company, all documents, records, notebooks, and similar repositories of or containing Confidential Information, including copies thereof, then in the Executive's possession, whether prepared by himself or others will be delivered to the Company within thirty (30) days of such termination. The obligations of the Executive in Sections 6.1 and 6.2 of this Agreement shall survive any termination of the Executive. SECTION 5 - STOCK 5.1 Grant of Stock Options As soon as possible following the execution hereof the Executive and the Company shall execute an Incentive Stock Option Agreement granting the Executive the following: 150,000 options to purchase shares of BMT at the mean between the bid and asked price on April 20, 1998. These options vest as follows: 25% (37,500) on each of the Executive's next four annual anniversaries of employment with the Company, provided he remains employed by the Company during each year. All options granted will be subject to the same terms and conditions as provided in the Company's incentive stock program. 5.2 Registration It is understood that BMT is a reporting company within the requirements of the Securities and Exchange Commission ("SEC") and has elected to register the options granted hereunder with the SEC. SECTION 6 - MISCELLANEOUS 6.1 Disclosure of Information and Employee Restrictions Executive agrees to the following: a. Executive agrees that he shall not, during his employment, either as an individual or as part of an organization, throughout North America or Europe, compete with the Company or render services directly or indirectly, to any conflicting organization or himself establish or acquire any interest, directly or indirectly, in a conflicting organization, nor will he assist any other person or entity to do so; b. Executive will not during his employment solicit or sell to any of the Company's present or future customers, a conflicting product or service nor will he assist any other person or entity to do so; c. Except as required in his duties to the Company, the Executive will never, during or after his employment, directly or indirectly use, disseminate, disclose, lecture upon, or publish any Confidential Information without Company's written consent. In the event this Agreement is terminated, for whatever reason, Executive agrees that he shall not, for two years following the date of termination: a. Either as an individual or as part of an organization, throughout Canada or the United States, compete with the Company or render services directly or indirectly, to any conflicting organization or himself establish or acquire any interest, directly or indirectly, in a conflicting organization, nor will he assist any other person or entity to do so; and b. He will not employ, without the consent of the Company, directly or indirectly, any past or present employees of the Company, nor will he assist any other person or entity to do so; and 6.2 Arbitration and Jurisdiction Subject to the remedies stated in Section 6.1, any controversy or claim arising out of or relating to this Agreement or any breach of this Agreement shall be finally settled by arbitration in accordance with the provisions of the Commercial Arbitration Rules of the American Arbitration Association. Such arbitration shall be conducted in Portland, Oregon by one arbitrator, with one discovery allowed by each party to this agreement. This agreement is entered into and shall be interpreted and enforced according to the laws of the State of Oregon; both parties consent to personal jurisdiction for that purpose. 6.3 Notices Any notice or other communication required or permitted to be given under this Agreement shall be in writing, given by personal delivery or sent by first class mail, postage prepaid, addressed as follows: To the Executive: Michael A. Temple 2408 N.W. Benson Lane Portland, OR 97229 To the Company: Secretary to the Board of Directors Bioject Medical Technologies Inc. 7620 S.W. Bridgeport Road Portland, Oregon 97224 Either party, by notice as provided above, may change the address to which subsequent notice shall be given. Any notice given herein shall be deemed received seven (7) days after posting in a post office box; PROVIDED, HOWEVER, that if there should be a postal strike, slow-down or other labor dispute which may effect the delivery of such notice through the mail between the time of mailing and the actual receipt of the notice, then such notice shall be effective only if actually delivered. 6.4 Assignment This Agreement is a personal services agreement and may not be assigned by either party without the prior written consent of the other party; however, during his employment term, the Executive may by written assignment assign all or any portion of the compensation or benefits to which he is entitled under Section 3 to any member of his immediate family or to any corporation, partnership or other business entity controlled by the Executive. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect. 6.5 Indemnity The Executive, his heirs, executors, administrators, estate and effects, shall at all times be indemnified and held harmless by the Company from and against: a. All costs, charges and expenses whatsoever sustained or incurred as a result of any action, suit or proceeding, whether civil, criminal, administrative, or investigative, that is brought, commenced or prosecuted for or in respect of any act, deed, matter or thing whatsoever made, done or permitted in or about the execution of the Executive's duties; and b. All other costs, charges and expenses sustained or incurred in or about or in relation to the affairs of the Company; Except such costs, charges or expenses as are occasioned by the criminal act, willful neglect or default of duties by the Executive. At all such times that the Company obtains and maintains directors and officers errors and omissions insurance, Executive shall be a beneficiary of such policy(ies). 6.6 Amendment and Severability This Agreement may not be amended or otherwise modified except by an instrument in writing signed by both parties. All agreements and covenants herein contained in this Agreement are deemed to be severable, and in the event any portion of this Agreement is declared to be invalid, this Agreement shall be interpreted as if such invalid portion or covenant were severed and not contained herein, with all other terms of this Agreement remaining valid and binding on the parties hereto. 6.7 Entire Agreement This agreement specifies all of the terms and conditions of an employment agreement entered into between the parties on April 17th, 1998, which terms and conditions have been negotiated prior to that date. 6.8 Binding Effect This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns, except as otherwise expressly provided herein. 6.9 Review of Legal Counsel The Executive acknowledges that he has had adequate time and opportunity to consult with legal counsel of his own selection prior to entering into and executing this Agreement. IN WITNESS WHEREOF the parties have executed this Agreement effective on the day and year first written above. /s/ Michael Temple Michael Temple BIOJECT MEDICAL TECHNOLOGIES INC. /s/ James C. O'Shea James C. O'Shea Title: Chairman of the Board and Chief Executive Officer BIOJECT INC. /s/ Kurt Lynam Kurt Lynam Title: Director, Human Resources EX-10.55 10 TERMINATION AGREEMENT EXHIBIT 10.55 SEPARATION AGREEMENT AND RELEASE This Separation Agreement and Release (hereafter the "Agreement") is made effective as of the eighth (8th) day after this Agreement has been signed by both parties, by and between BIOJECT MEDICAL TECHNOLOGIES INC., BIOJECT MEDICAL SYSTEMS LTD. and BIOJECT INC. (hereafter collectively referred to as "Bioject") on the one hand, and Peggy J. Miller ("Employee") on the other hand. The purpose of this Agreement is to set forth the terms of Employee's voluntary resignation from employment with Bioject. For purposes of this Agreement, the "parties" refers to Bioject and Employee. Nothing contained in this Agreement shall constitute an admission of wrongdoing or liability by any of the parties to this Agreement. The parties do hereby acknowledge and agree: 1. On March 9, 1998, Employee voluntarily tendered her resignation to Bioject. Employee's employment with Bioject will end on April 30, 1998. Bioject agrees to continue providing normal salary and employee benefits to which Employee would otherwise be entitled including 401(k) matching contributions through April 30, 1998. Bioject acknowledges and confirms that on April 30, 1998, Employee will receive all wages and accrued and untaken vacation pay (known as FTO) earned through April 30, 1998. The public announcement of Employee's departure from Bioject will be approved and agreed upon between the parties before publication. Bioject, including James C. O'Shea, agrees to provide excellent references to prospective employers of Employee, upon Employee's request and authorization to release such information. 2. In addition, for good and due consideration recited herein, the parties agree to the following: Bioject will provide Employee the following severance pay and benefits after the effective date of this Agreement and within the time periods specified below: a. On April 30, 1998, a lump sum payment in an amount equal to 4 months of Employee's current salary, less applicable federal, state and local taxes; b. Employee's current salary pro-rated for a period of 2 months to be paid to Employee during the period May and June 1998, consistent with Employer's current bi-weekly payment schedule, less applicable federal, state and local taxes; c. Bioject will pay Employee's premium payment (102% of the Employer's contribution) for Employee's health and dental insurance under COBRA during the period May l, 1998 through October 31, 1998; and d. The parties acknowledge that Employee currently has Bioject common stock and options to purchase Bioject common stock in the amounts, prices and subject to the conditions set forth in the statement of Stock and Option Ownership dated November 24, 1997 (hereafter "Stock and Option Statement" and attached hereto as Attachment B). The parties further acknowledge and agree that all of the stock options listed on Attachment B are currently vested except for the 25,000 options granted on June 11, 1997 (subject to performance vesting at 3/31/98) and the 25,000 options granted on September 19, 1997 (subject to one-third vesting on September 19, 1998, 1999 and 2000). Under Section 5 of the Employee's Bioject Officer/Insider Stock Option Agreement (the "Stock Option Agreement") dated September 19, 1997 (attached hereto as Attachment C), Employee's vested 130,000 stock options will expire and terminate one-year after April 30, 1998 (i.e., April 30, 1999). In consideration for this Agreement, and within thirty (30) calendar days after its effective date, Bioject will cause the Stock Option Committee of Bioject Medical Technologies Inc. ("BMT") to exchange Employee's 130,000 currently vested stock options as identified in Attachment B for 130,000 vested stock options with an expiration date of April 30, 2000. The exercise price per share of all of the foregoing options will remain as stated on Attachment B. In consideration for Employee's cooperation in the transition to a new chief financial officer (defined to mean Employee's telephone consultation and assistance, to be reasonably scheduled in advance, but limited on-site work effort from May 1, 1998 through September 1, 1998, with hours not to exceed 40 in the aggregate and 8 hours in any one week) and within thirty (30) calendar days after the effective date of this Agreement, Bioject will cause the Stock Option Committee of BMT to exchange the September 19, 1997, 25,000 unvested options identified in Attachment B for 25,000 stock options which will vest at 5,000 per month beginning May 1, 1998, and which will have an exercise date identical to their vesting date and an expiration date of April 30, 2000. However, in the event that Employee fails to so cooperate, any unvested options shall be forfeited. The exercise price per share of all of the foregoing options will remain as stated on Attachment B. In consideration for this Agreement, Employee agrees to waive and forfeit any right to the June 11, 1997, 25,000 unvested options identified in Attachment B. An appropriate amendment to the Stock Option Agreement will be executed by the parties reflecting this change in stock options. All other obligations of the Employee under the Stock Option Agreement shall remain enforceable. Employee acknowledges and agrees that after executing this Agreement, she will have no Bioject stock options other than the 130,000 vested options with an expiration date of April 30, 2000 and the 25,000 unvested options which will vest at 5,000 per month beginning May 1, 1998 and expire on April 30, 2000, as described above. The parties acknowledge and agree that Employee's remaining 25,000 unvested stock options (granted June 11, 1997) are deemed terminated, as of the effective date of this Agreement. Employee further acknowledges and agrees that she is not entitled to any options in the future beyond the exchanged options stated herein. Bioject acknowledges that it has obtained all necessary approvals and authorizations from Bioject's Boards of Directors and appropriate committees for the consideration granted Employee in paragraph 2 herein. 3. Employee acknowledges and warrants that by April 30, 1998, she will have submitted any and all vouchers, bills and receipts verifying all out-of-pocket business expenses necessarily incurred by Employee during her employment with Bioject. Bioject agrees to reimburse Employee in a timely manner for all such out-of-pocket business expenses in accordance with Bioject's reimbursement policies. 4. The parties acknowledge that BMT is a reporting company within the requirements of the Securities and Exchange Commission ("SEC"). Employee expressly agrees to fully comply with all applicable reporting and trading restrictions in exercising or trading any of the stock options provided herein, including Section 16(b) of the Securities Exchange Act of 1934. 5. Employee accepts Bioject's undertakings in this Agreement as full settlement of any and all claims, known or unknown, arising out of, or related to, Employee's employment with Bioject, or its termination, including, but not limited to, any claims of discrimination or wrongful discharge. This includes, but is not limited to, claims under the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. ss. 621 et seq, the Americans with Disabilities Act of 1990 ("ADA"), 42 U.S.C. ss. 12101 et seq, Title VII of the Civil Rights Act of 1964, 42 U.S.C. ss. 1981, and Chapters 652 and 659 of the Oregon Revised Statutes. These claims are examples, not a complete list, of the released claims, as it is the parties' intent that Employee release any and all claims, of whatever kind or nature, in exchange for the severance arrangements set forth in paragraph 2 above. Employee realizes this constitutes a full and final settlement of any and all such claims, and except for obligations arising under this Agreement, this settlement releases Bioject and any related companies (and their owners, officers, directors, employees, and anyone else against whom Employee could assert a claim based on her employment or termination thereof) from any further liability to Employee (or to anyone else Employee has power to bind in this settlement) in connection with such claims. In exchange for Employee's agreements and obligations herein, Bioject, on behalf of themselves and their officers and directors, hereby releases, acquits, and forever discharges Employee and her past, current and future agents, assigns, attorneys, representatives and affiliates from any and all claims, demands, damages, costs, attorney fees, liabilities, claims for contribution, and claims for indemnity, of every kind and nature, whether known or unknown, fixed or contingent, including but not limited to, any and all claims arising out of, or in any way related to, Employee's employment with Bioject through April 30, 1998. 6. Tender and delivery of the wages, severance pay and benefits as described in paragraphs 1-2 herein shall constitute full satisfaction by Bioject of any and all claims by Employee for wages, vacation pay (FTO), severance pay, and any other compensation, benefits or leave of any kind to which Employee may be entitled. 7. Employee acknowledges that her obligations under the parties' Executive Employment Contract dated January 18, 1993 (hereafter "Executive Employment Contract" and attached hereto as Attachment A) shall continue following her separation from employment with Bioject. These obligations specifically include, but are not limited to, the restrictions imposed on Employee regarding competition with Bioject and involvement with conflicting organizations, products and services, as fully set forth in section 6.1 of the Executive Employment Contract, and Employee's obligations with respect to patents and copyrights, as fully set forth in section 6.2 of the Executive Employment Contract. These obligations are in addition to any obligations imposed under federal or state law. 8. Bioject acknowledges that its indemnity obligations under the parties' Executive Employment Contract (section 6.6) shall survive Employee's separation from employment with Bioject and continue indefinitely. These obligations are in addition to obligations imposed by state law, Bioject's by-laws, and Bioject's directors and officers' and other insurance policies. 9. Employee agrees to keep confidential all confidential or proprietary information disclosed directly or indirectly by Bioject and agrees that she will not, directly or indirectly, use, disclose, or divulge for any purpose such confidential or proprietary information obtained during her employment with Bioject or at any other time without the prior written approval of Bioject. Such confidential and proprietary information includes, but is not limited to, the agenda, decisions or other information relating to meetings or discussions held by and between Bioject's officers, directors or board of directors, any and all employment information relating to any past or present Bioject employees or prospective employees including salaries, severance, and disciplinary actions, Bioject's product design and development information, proprietary production processes, research and development strategies, scientific and technological data, formulae or prototypes, non-public financial information, business or marketing strategies, customer lists and information regarding Bioject's past, present, prospective and future customers. 10. The parties agree to keep the terms and conditions of this Agreement confidential and not disclosed to any individual or entity that is not a party to this Agreement except as required by law or provided herein. Employee may disclose the fact and terms of this Agreement to her immediate family members, attorney, tax advisor, accountant and financial consultant and to Bioject's internal financial management, outside auditors and legal counsel as may be required to fulfill Employee's duties as Chief Financial Officer and agrees to instruct them to make no further disclosures, except as required by law. Bioject may disclose the fact and terms of this Agreement to its officers, directors, internal financial management, outside auditors, legal counsel and as required by law as a publicly traded company. 11. The parties to this Agreement expressly agree to refrain from making any disparaging, misleading or false remarks concerning each other or any of the entities or individuals released in paragraph 5 above and will conduct themselves in a manner that does not damage or undermine the reputation of each other or any entity or person identified in paragraph 5 above. 12. Employee warrants that upon her departure, she will return to Bioject all company property in her possession, including documents and all materials of any nature pertaining to her work with Bioject whether or not they contain confidential or proprietary information. 13. Employee expressly waives and will not assert any claim of right to reinstatement of employment with Bioject or its related entities. 14. The parties acknowledge and agree that any breach of this Agreement by either party shall subject that party to liability for the actual and consequential damages resulting from the breach. The non-breaching party shall also be entitled to all available equitable relief as a result of the breach, including imposition of an injunction. This provision applies to any breach of this Agreement. 15. The parties agree that this Agreement shall be construed and interpreted according to the laws of the State of Oregon (excluding choice of law provisions). The parties agree that the forum for resolution of any dispute arising out of or relating to: (1) Employee's employment with Bioject; (2) Employee's termination of employment with Bioject; or (3) any breach of this Agreement will be by final and binding arbitration in Multnomah County, Oregon, utilizing the mediation services of Arbitration Service of Portland, Inc. ("ASP") or other mutually agreed upon arbitration service. The arbitrator shall have the same authority to award remedies and damages as provided to a judge and/or jury under applicable law. The arbitrator shall apply Oregon State law (excluding choice of law provisions) and applicable federal law in deciding all substantive aspects of the dispute, and all procedural issues not covered by the ASP arbitration rules. The arbitrator shall not have the power to alter, amend, or modify any provision of this Agreement. The prevailing party shall be entitled to recover reasonable attorney fees and other costs of the arbitration from the other party. Judgment on the award rendered pursuant to such arbitration may be entered in any court having jurisdiction thereof. 16. The parties agree that this Agreement supersedes any and all other prior agreements or understandings, both oral and written, except the Employer's and Employee's obligations under the Agreements attached hereto and referenced herein. The parties further agree that this Agreement cannot be modified without the express written consent and agreement of both parties hereto. 17. The parties agree that the provisions in this Agreement are separable and that in the event any provision is deemed ineffective or unenforceable, they are separable from the remaining provisions of the Agreement, which provisions shall remain binding on the parties. 18. Employee confirms that she has carefully read this Agreement. Employee acknowledges that she has been advised to consult with an attorney, and has in fact done so, before signing this Agreement, which Employee has been given twenty-one (21) days to consider, and which she may revoke within seven (7) days after signing. Employee acknowledges that she has signed this Agreement of her own free will and with the advice of counsel. This offer expires on the 22nd day after it has been extended to Employee by Bioject. /S/ Peggy J. Miller 3/9/98 _________________________________ Dated: ____________________ Peggy J. Miller BIOJECT MEDICAL TECHNOLOGIES INC. /s/ James C. O'Shea 3/9/98 __________________________________ Dated: ____________________ By: James C. O'Shea Title: Chairman, President and Chief Executive Officer BIOJECT MEDICAL SYSTEMS LTD. /s/ James C. O'Shea 3/9/98 __________________________________ Dated: ____________________ By: James C. O'Shea Title: President BIOJECT INC. /s/ James C. O'Shea 3/9/98 __________________________________ Dated: ____________________ By: James C. O'Shea Title: Chairman, President and Chief Executive Officer EX-10.56 11 LEASE EXHIBIT 10.56 FORM OF MASSACHUSETTS BIOTECHNOLOGY RESEARCH PARK Worcester, Massachusetts THREE BIOTECH PARK SPACE LEASE WORCESTER BUSINESS DEVELOPMENT CORPORATION to BIOJECT MEDICAL TECHNOLOGIES, INC. April 20, 1998 MASSACHUSETTS BIOTECHNOLOGY RESEARCH PARK THREE BIOTECH PARK SPACE LEASE THIS LEASE is made in Worcester, Massachusetts effective on the Date of Lease stated in Article 1 between the Landlord and the Tenant named in Article 1. In consideration of the Rent payable by Tenant and of the agreements to be performed and observed by Tenant, Landlord hereby leases the Premises to Tenant, and Tenant hereby takes the Premises from Landlord, subject to the provisions and for the term stated below: ARTICLE 1 Reference Data and Definitions Section 1.01 - Terms and Titles Referred To. Each reference in this lease to any of the following terms and titles incorporates the data stated for that term or title in this Section 1.01: DATE OF LEASE: April 20, 1998 LANDLORD: WORCESTER BUSINESS DEVELOPMENT CORPORATION, a Massachusetts corporation established pursuant to the provisions of Chapter 600 of the Acts of 1965, acting on behalf of Waldo Corporation, Trustee of Three Biotech Realty Trust under an Assignment and Assumption of Leases dated December 20, 1995 recorded with Worcester District Registry of Deeds in Book 17557, Page 379, its successors and assigns. LANDLORD'S ADDRESS: One Innovation Drive Worcester, Massachusetts 01605 TENANT: BIOJECT MEDICAL TECHNOLOGIES, INC., an Oregon corporation TENANT'S ADDRESS: After the Term Commencement Date, Tenant's address will be the Premises; before the Term Commencement Date, Tenant's address will be: 7620 S.W. Bridgeport Road Portland, Oregon 97224 TERM COMMENCEMENT DATE: May 1, 1998, or as defined in Section 1.03, if different. STATED EXPIRATION DATE: May 31, 1999, or as defined in Section 1.03, if different. DESIGN START DATE: Not Applicable. PERMITTED USE: Research and Development; and limited light manufacturing to the extent authorized under the City of Worcester Zoning Ordinance. LAND: The parcel of land on Innovation Drive in Worcester, Worcester County, Massachusetts, shown on the plan entitled "Plan of Property Owned by Worcester Business Development Corporation, Three Biotech Park, off Plantation Street, Worcester, Massachusetts" dated January 31, 1990 and recorded with the Worcester District Registry of Deeds in Plan Book 633, Plan 79, containing a total area of 8.8048 acres, more or less, according to said plan, plus or minus any additions or deletions resulting from the change of any abutting street line. PREMISES: That portion of the fourth floor of the Building shown as outlined or hatched on the Lease Plan attached as Exhibit B (the "Exclusive Premises") and the right in common with other tenants to use Glasswash Room 438, Conference Room 401, Lunch Room 403/404, and the corridors needed to access the Premises. RENTABLE AREA OF THE PREMISES: 2,197 square feet RENTABLE AREA OF THE BUILDING: 115,179 square feet TENANT'S SHARE: 1.91% LEASE TERM: The period between the Term Commencement Date and the Stated Expiration Date. BASIC RENT: $28.50 per square foot of Rentable Area of the Premises for each Lease Year of the first Fixed Rental Period. $62,615.00 per Lease Year during the first Fixed Rental Period. $5,218.00 per month during the first Fixed Rental Period. FIXED RENTAL PERIOD: Not Applicable. ESTIMATED OPERATING EXPENSES: Not Applicable. ESTIMATED TAXES: Not Applicable. INITIAL MONTHLY PAYMENT: Not Applicable. SECURITY DEPOSIT: Not Applicable. GUARANTOR: Not Applicable. Section 1.02 - General Provisions. For all purposes of this Lease, unless the context otherwise requires: (a) A pronoun in one gender includes and applies to the other genders as well. (b) Each definition stated in Section 1.01 or 1.03 of this Lease applies equally to the singular and the plural forms of the word or term defined. (c) Any reference to a document defined in Section 1.03 of this Lease is to the document as originally executed, or, if amended or supplemented as provided in this Lease, to the document as amended or supplemented and in effect at the relevant time of reference. (d) All accounting terms not otherwise defined in this Lease have the meanings assigned to them under generally accepted accounting principles. (e) All references in Section 1.01 are subject to the specific definitions (if any) in Section 1.03. Section 1.03 - Definitions. Each underlined word or term in this Section 1.03 has the meaning stated immediately after it. Additional Rent. All Taxes, Operating Expenses, costs, expenses and other charges (other than Basic Rent) due from Tenant to Landlord or incurred by Landlord as the result of a Default. Additional Services. Services provided to Tenant or in respect of the Premises which are not Basic Services described in Exhibit A. Authorizations. All franchises, licenses, permits and other governmental consents issued by Governmental Authorities under Legal Requirements which are or may be required for the occupancy of the Premises and the conduct of a Permitted Use on the Premises. Basic Services. The Landlord's services described in Exhibit A. Building. The building on or to be constructed or under construction on the Land. Business Day. A day which is not a Saturday, Sunday or other day on which banks in Worcester, Massachusetts, are authorized or required by law or executive order to remain closed. Common Areas. All areas of the Building devoted to the common use of the occupants of the Building or all occupants of multi-tenant floors or the provision of Basic or Additional Services to occupants of the Building, including but not limited to air shafts, pipes, wires, ducts, conduits, elevator shafts and elevators, stairwells and stairs, restrooms, mechanical rooms, janitor closets, vending areas, loading docks and loading facilities. Default. Any event or condition specified in Article 20 so long as any applicable requirements for the giving of notice or lapse of time have not been fulfilled. Event of Default. Any event or condition specified in Article 20 if all applicable requirements for the giving of notice or lapse of time have been fulfilled. Governmental Authority. United States of America, Commonwealth of Massachusetts, City of Worcester, County of Worcester, and any political subdivision, agency, department, commission, board, bureau or instrumentality of any of them. Ground Lease. The lease of the Land from the Ground Lessor to Landlord dated July 20, 1990 for which a Notice of Lease is recorded at the Worcester District Registry of Deeds in Book 12906, Page 1. Ground Lessor. Massachusetts Biotechnology Research Institute, Inc., a Massachusetts non-profit corporation, or any successor under or assignee of the Ground Lease. Hazardous Substances. "Oil", "hazardous materials", "hazardous wastes" and "hazardous substances" as those terms are defined under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., as amended, the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., as amended, Massachusetts General Laws, Chapters 21C and 21E, as amended, and the regulations from time to time adopted under those laws. Improvements. All (i) structures located in and forming a part of the Premises, including but not limited to, walls, ceilings, doors and floor covering, (ii) pipes, wires, conduits, controls and fixtures relating to utilities located in and serving the Premises, (iii) casework, including but not limited to, benches, tables, cabinets and storage facilities, connected to a utility or affixed to the Premises or the Building and (iv) fixtures, equipment and personal property of any kind installed on the Premises in such a manner that they become part of the Premises or the Building under law or that they cannot be removed without material damage to the structure, fixtures, equipment or personal property or to the Premises or the Building. Insurance Requirements. All terms of any policy of insurance maintained by Landlord or Tenant and applicable to the Land, the Building or the Premises; all requirements of the issuer of any such policy; and all orders, rules, regulations and other requirements of the National Fire Protection Association (or any other body exercising similar functions) applicable to any condition, operation, use or occupancy of all or any part of the Premises. Land Disposition Agreement. The agreement dated June 13, 1984 between the Commonwealth of Massachusetts, Division of Capital Planning and Operations, and WBDC relating to the acquisition by WBDC of the land in the Park. Landlord's Fixtures. All fixtures and equipment paid for by Landlord and installed in the Building or the Premises for use by Tenant, whether before or during the Lease Term and whether or not shown in the Working Drawings, irrespective of whether or how the fixtures or equipment may be affixed to the Premises or the Building. Landlord's Work. The work to be done by Landlord with respect to the Premises described in the Work Letter. Lease. This document, all exhibits and riders attached and referred to in this document and all amendments to this document, the exhibits and riders. Lease Term. The period stated in Section 1.01 beginning on the Term Commencement Date. The Lease Term includes the period of any extension exercised by Tenant as provided in this Lease. Lease Termination Date. The earliest to occur of (a) the Stated Expiration Date, (b) the termination of this Lease by Landlord as the result of an Event of Default or (c) the termination of this Lease under Article 17 (Damage or Destruction) or Article 18 (Eminent Domain). Lease Year. Each twelve consecutive calendar month period ending on the day before an anniversary of the Term Commencement Date (or on the day before the first day of the next succeeding calendar month if the Term Commencement Date occurs other than on the first day of a month); provided that (a) the first Lease Year includes the partial month, if any, between the Term Commencement Date and the first day of the next calendar month and (b) the last Lease Year will end on the Lease Termination Date. Legal Requirements. (a) All statutes, codes, ordinances (and rules and regulations thereunder) and all executive, judicial and administrative orders, judgments, decrees and injunctions of or by any Governmental Authority which are applicable to any condition or use of the Premises, Building or Land, and (b) the provisions of all Authorizations. Occupancy Arrangement. With respect to all or any part of the Premises or this Lease, and whether (a) written or unwritten or (b) for all or any portion of the Lease Term, an assignment, a sublease, a tenancy at will, a tenancy at sufferance or any other arrangement (including but not limited to a license or concession) under which a Person occupies the Premises for any purpose. Operating Expenses. All expenses, costs, and disbursements of every kind which Landlord pays or becomes obligated to pay in connection with the operation, management, repair, cleaning and maintenance of the Land and the Building (including all facilities and equipment in operation on the Term Commencement Date and such additional facilities and equipment in subsequent years as may be determined by Landlord to be necessary or beneficial in reducing Operating Expenses or protecting the health and safety of occupants of the Building) and the provision of Basic Services, including, but not limited to (a) wages, salaries and fees, including taxes, insurance, and benefits of all Persons engaged in connection with Basic Services, (b) the cost of (i) supplies and materials, electricity and lighting, for Common Areas, (ii) water, heat, air conditioning, and ventilating for the Building, (iii) maintenance, janitorial, and service agreements, (iv) snow removal and maintenance of parking and landscaped areas, (v) insurance, including casualty and liability insurance applicable to the Building and Landlord's personal property used in connection with the Building, (vi) repairs and general maintenance, (vii) capital items and improvements which are primarily for the purpose of reducing Operating Expenses, or which are designed to protect the health and safety of occupants of the Building or which may be required by a Governmental Authority, amortized over the reasonable life of the capital items with the reasonable life and amortization schedule being determined by Landlord in accordance with generally accepted accounting principles, (viii) pursuing an application for an abatement of Taxes to the extent not deducted from the abatement, if any, received, (ix) independent auditors, (x) that portion of Landlord's central accounting functions allocable to the Building and (xi) office space for the manager of the Building, (c) management fees, not to exceed eight percent (8%) of Basic Rent in any Lease Year, and (d) maintenance charges with respect to the Land imposed on the Landlord under the Ground Lease. Operating expenses will be determined on the accrual basis in accordance with generally accepted accounting principles consistently applied. Operating Expenses do not include (i) costs of services in excess of Basic Services billed to and payable by specific Tenants; (ii) Taxes, any sales tax, gross receipt tax or similar tax based on Rent, and any income, profits or similar tax imposed on Landlord; (iii) expenditures for capital improvements, and any depreciation or amortization, except amortization of certain capital expenditures as provided in clause (vii) above; (iv) executive salaries above the grade of building manager; (v) advertising and promotional expenses; (vi) brokerage commissions; (vii) interest, principal and other amounts payable under any mortgage, and rent payable under the Ground Lease; (viii) expenditures for correcting construction defects in the Building; (ix) expenditures for any alteration, renovation, redecoration, subdivision, layout or finish of any tenant space in the Building; (x) cost of any curative action required to remedy damage caused by or resulting from the negligence or willful act of Landlord, its agents, servants or employees; (xi) legal and other professional fees incurred by Landlord in connection with the leasing of space in the Building and in connection with enforcing leases, or for any other matters not directly connected to the administration or operation of the Building; and (xii) costs of any type relating to the development of the Building. Park. Massachusetts Biotechnology Research Park created by WBDC pursuant to the provisions of Chapter 317 of the Acts of 1983, as it may be expanded by amendment of Chapter 317 or by virtue of any other legislation or acquisition by WBDC. Permitted Exceptions. Any liens or encumbrances on the Premises of the following character: (a) Provisions of Chapter 317 of the Acts of 1983, as amended; (b) Provisions of the Land Disposition Agreement; (c) Rights, easements and restrictions in the deed dated June 13, 1984 from the Commonwealth of Massachusetts, Division of Capital Planning and Operations, to WBDC recorded with Worcester District Registry of Deeds in Book 8233, Page 106; (d) Present and future zoning laws, ordinances, resolutions and regulations of the City of Worcester, including, without limitation, Chapter 17 of the Revised Ordinances of 1986 - Regulations Relative to Biomedical Research in the City of Worcester; (e) The lien of any Taxes assessed but not yet due and payable; (f) The Ground Lease; (g) Mortgages of record; (h) The rights of Landlord and other Persons to whom Landlord has granted rights to use the Common Areas in common with Tenant; (i) The easements created by instruments recorded with Worcester District Registry of Deeds in Book 9538, Page 142 (as modified by Release in Book 12860, Page 119), Book 12717, Page 3 and Book 12860, Page 123, insofar as they affect the Land; (j) All declarations, covenants, conditions, restrictions, reservations, rights, rights-of-way, easements and other matters of record or apparent affecting the Land or the use of the Land now or in the future in force and applicable; and (k) Provisions of the Declaration of Protective Covenants, Conditions and Restrictions recorded with the Worcester District Registry of Deeds in Book 12860, Page 145, as they may from time to time in the future be amended. Person. An individual, a corporation, a company, a voluntary association, a partnership, a trust, an unincorporated organization or a Governmental Authority. Premises. The space referred to in Section 1.01 located in the Building shown outlined or hatched on Exhibit B (the Lease Plan), excluding exterior walls of the building except the inner surfaces thereof and excluding any Common Areas located within such space. Rent. Basic Rent and all Additional Rent. Rentable Area of the Premises. The number of square feet stated in Section 1.01, irrespective of whether the number should be more or less as a result of minor variations resulting from actual construction of the Building or the Premises so long as such construction is done in accordance with the provisions of this Lease. Stated Expiration Date. The later to occur of (i) date as stated in Section 1.01, or (ii) last day of the final Lease Year of the Lease Term. Substantial Completion Date. The later to occur of (i) the date on which a certificate of occupancy for the Premises is issued by the City of Worcester, or (ii) the date on which Tenant Fit-up, together with the appurtenant areas of the Building necessary for access and service to the Premises, have been completed as provided in Article 7, except for items of work and adjustment of equipment and fixtures which are not necessary to make the Premises reasonably tenantable for the Permitted Use or which, because of season or weather or nature of the item, cannot practicably be done at the time. Taking. The taking or condemnation of title to all or any part of the Land or Building or of possession or use of the Land, the Building or the Premises by a Governmental Authority for any public use or purpose, or any proceeding or negotiations which might result in such a taking, or any sale or lease in lieu of such a taking. Taxes. All (i) taxes (or payments in lieu of taxes), special or general assessments, water and sewer charges, and other charges of every nature imposed by Governmental Authorities which are assessed, become due or become liens upon or with respect to the Land, the Building, the Premises, Landlord's Fixtures, equipment owned by Landlord on the Land or in the Building or the Premises, or this Lease under all present or future Legal Requirements, and (ii) taxes based on a percentage fraction or capitalized value of the Rent (whether in lieu of or in addition to the taxes described above) computed as if the Land and the Building were the only property of Landlord subject to such tax. Taxes do not include (a) inheritance, estate, excise, succession, transfer, gift, franchise, income, gross receipt, or profit taxes except to the extent they are in substitution for Taxes now imposed on the Building, the Land, the Premises or this Lease, or (b) assessments for streets, water or sewer installations or other municipal improvements made in connection with the initial development of the Building or the Park. Tenant Fit-up. All Improvements and other work provided for in the Work Letter necessary to prepare the Premises for Tenant's initial occupancy other than Landlord's Work. Tenant's Cost. The cost of designing and constructing Tenant Fit-up. Term Commencement Date. The earliest to occur of (a) the Substantial Completion Date, (b) any other date for commencement of the Term determined as provided in Article 7 or (c) the date on which Tenant first occupies the Premises for the Permitted Use. Total Taking. (i) a Taking of: (a) the fee interest in all or substantially all of the Land or the Building or (b) such title to or easement in, over, under or such rights to occupy and use any part of the Land or the Building to the exclusion of Landlord as, in the good faith judgment of Landlord, unreasonably restricts access to the Building by vehicle or renders the portion of the Building remaining after such Taking (even if restoration were made) unsuitable or uneconomical for the continued use and occupancy of the Building for the Permitted Use or (ii) a Taking of all or substantially all of the Premises or such title to or easement in, on or over the Premises to the exclusion of Tenant which in the good faith judgment of Landlord prohibits access to the Premises or the exercise, to any material extent, by Tenant of its rights under this Lease. Unavoidable Delays. Acts of God, strikes, lock outs, labor troubles, inability to procure materials, failure of power, riots and insurrection, acts of the public enemy, wars, earthquakes, hurricanes and other natural disasters, fires, explosions, any act, failure to act or default of the other party to this Lease or any other reason (except lack of money) beyond the control of any party to this Lease. Work Letter. The agreement between Landlord and Tenant with respect to Tenant Fit-up, substantially in the form of Exhibit C. Working Drawings. The detailed plans and specifications developed by Landlord and Tenant as provided in the Work Letter, prepared in compliance with all applicable Legal Requirements, stamped by registered Massachusetts professionals, and consisting of all architectural and engineering plans which are required to construct Tenant Fit-up and to obtain any Authorization required for the Premises. WBDC. Worcester Business Development Corporation, a Massachusetts corporation established pursuant to the provisions of Chapter 600 of the Acts of 1965. ARTICLE 2 Premises Section 2.01 - Premises. Landlord hereby leases the Premises to Tenant, and Tenant hereby takes the Premises from Landlord, subject to the provisions of this Lease and the Permitted Exceptions. Landlord reserves the right to relocate within or without the Premises pipes, ducts, vents, flues, conduits, wires and appurtenant fixtures which service other parts of the Building; provided that such work is done in a manner that it does not unreasonably interfere with Tenant's use of the Premises. Section 2.02 - Appurtenances. Tenant may use the Common Areas and the Land as appurtenant to the Premises for the purposes for which they were designed. Tenant, its employees and business invitees have the non-exclusive right to use the parking areas on the Land. Section 2.03 - Landlord's Fixtures. Tenant may use the Landlord's Fixtures during the Lease Term. Landlord's Fixtures remain the property of Landlord and may not be removed by Tenant whether or not they are affixed to the Building. ARTICLE 3 Term Section 3.01 - Term Commencement. The Lease Term will begin on the Term Commencement Date. Section 3.02 - Termination. The Lease Term will end on the Lease Termination Date. Section 3.03 - Estoppel Certificate. If either the Term Commencement Date or the Stated Expiration Date occurs on a date other than as stated in Section 1.01, Landlord and Tenant agree to execute a certificate in the form of the estoppel certificate referred to in Section 25.02 or such other form as either may request, establishing the Term Commencement Date and the Stated Expiration Date. ARTICLE 4 Rent Section 4.01 - Basic Rent. Tenant agrees to pay Landlord the Basic Rent as annual rent for the Premises for each Lease Year, without offset or deduction and without previous demand. Tenant agrees to pay Basic Rent in equal monthly installments in advance on the first day of each calendar month during the Lease Term, except that the first installment of Basic Rent, pro-rated for the partial month, if any, at the beginning of the Lease Term, will be paid on the Term Commencement Date. Section 4.02 - Adjustment of Basic Rent. The Basic Rent for each Lease Year during the first Fixed Rental Period will be as stated in Section 1.01. The Basic Rent for each Lease Year of each successive Fixed Rental Period, if any, will be as stated in Exhibit E, the Rent Rider. ARTICLE 5 Use of Premises Section 5.01 - Use Restricted. The Premises may be used for the Permitted Use and for no other purpose. Tenant agrees not to make any use of the Premises that would cause the Premises to be considered a "place of public accommodation" under the Americans with Disabilities Act of 1990. No Improvements, alterations or additions may be made in or to the Premises except as provided in this Lease. ARTICLE 6 Operating Expenses; Taxes Section 6.01 - Operating Expenses and Taxes. Tenant agrees to pay Landlord, as Additional Rent, (i) Tenant's Share of Operating Expenses and Taxes as provided in this Article 6, pro-rated for any partial calendar year falling within the Lease Term, and (ii) all Taxes assessed with respect to Improvements or structures anywhere in the Park constructed by or on behalf of Tenant after the Substantial Completion Date. Section 6.02 - Monthly Payments of Additional Rent. Tenant agrees to pay to Landlord in advance for each calendar month of the Lease Term, as Additional Rent, Operating Expenses and Taxes in an amount equal to (a) 1/12th of the product of (i) Estimated Operating Expenses for the then current calendar year times (ii) the Rentable Area of the Premises, plus (b) 1/12th of the product of (i) Estimated Taxes for the then current calendar year times (ii) the Rentable Area of the Premises. Tenant agrees to pay the amount payable under this Section 6.02 with Tenant's monthly payments of Basic Rent. The amounts paid will be credited by Landlord to Tenant's obligations under Section 6.01. For the balance of the first calendar year at the beginning of the Lease Term the amount payable by Tenant each month with respect to Tenant's Share of Estimated Operating Expenses and Estimated Taxes will be the Initial Monthly Payment stated in Section 1.01, which amount will be pro-rated for the partial month, if any, at the beginning of the Lease Term and paid beginning on the Term Commencement Date. Section 6.03 - Annual Statements. Within sixty (60) days after the end of each calendar year, Landlord agrees to render to Tenant a statement, prepared in accordance with generally accepted accounting practices, showing in reasonable detail (i) for the calendar year just ended (if any) (a) the amount of Taxes, (b) the amount of Operating Expenses and (c) a calculation of Tenant's Share of Taxes and Operating Expenses, and (ii) for the then current calendar year, the amount of Estimated Operating Expenses and Estimated Taxes determined by Landlord in the reasonable exercise of its judgment. Estimated Operating Expenses and Estimated Taxes for the calendar year in which the Lease Term begins are the sums set forth in Section 1.01. If the total amount paid by Tenant on account of Operating Expenses or Taxes or both in any calendar year exceeds the actual amount of Tenant's Share of Operating Expenses or Taxes for the year, then the excess will be credited by Landlord against the monthly installments of Additional Rent next falling due or refunded to Tenant upon the expiration or termination of this Lease, if earlier (unless such expiration or termination is the result of an Event of Default). If the total amount of Operating Expenses or Taxes or both paid by Tenant in any calendar year is less than the actual amount of Tenant's Share of Operating Expenses or Taxes for the year, then Tenant agrees to pay the difference to Landlord within thirty (30) days after receipt by Tenant of Landlord's statement. Not more frequently than once each Lease Year, Tenant may, at its expense and after ten (10) Business Days prior notice, audit Landlord's records relating to Operating Expenses. Section 6.04 - Assessments and Other Taxes. Landlord agrees that all special and general assessments will be paid in installments over the longest period permitted by law and that the amount of Taxes shown on each annual statement will include only the portion due in that year. Nothing in this Lease shall be construed to require Tenant to pay any inheritance, estate, excise, succession, transfer, gift, franchise, income, gross receipt, or profit taxes that are, or may be, imposed upon Landlord, its successors or assigns, except to the extent such taxes are in substitution for Taxes as now imposed on the Building, the Land, the Premises or this Lease. Section 6.05 - Accounting Periods. Landlord may from time to time change the periods of accounting under this Lease to any annual period other than a calendar year. Upon any such change, all items referred to in this Article 6 will be appropriately apportioned. In all statements rendered under Section 6.03, amounts for periods partially within and partially outside of the accounting periods will be appropriately apportioned. Any items which are not determinable at the time of a statement will be included on the basis of Landlord's estimate. Promptly after determination, Landlord will render a supplemental statement in which appropriate adjustment will be made. Section 6.06 - Abatement of Taxes. Landlord may at any time and from time to time make application to the appropriate Governmental Authority for an abatement of Taxes. Landlord agrees to make such an application at any time tenants occupying more than 60% of the Rentable Area of the Building under written Occupancy Arrangements directly with the Landlord request that Landlord do so. If (i) such an application is successful and (ii) Tenant has made any payment in respect of Taxes under this Article 6 for the period with respect to which the abatement was granted, Landlord agrees (a) to deduct from the amount of the abatement all expenses incurred by it in connection with the application (b) within thirty (30) days after receipt of the abatement amount, to pay to Tenant Tenant's Share (adjusted for any period for which Tenant had made a partial payment) of the abatement, with interest, if any, paid by the Governmental Authority on such abatement, and (c) retain the balance, if any. Section 6.07 - Exemption From Taxes. As provided in Section 6 of Chapter 317 of the Acts of 1983, Landlord may be or become exempt from the obligation to pay Taxes if it leases any part of the Building to an organization exempt from taxes under the United States Internal Revenue Code. If Tenant is able to establish to Landlord's satisfaction the amount of the reduction in Taxes during any calendar year which is a result of this Lease and Tenant's tax-exempt status, Tenant's obligation to pay Taxes for such calendar year as provided in this Article 6 will abate in the same amount, or the amount, if previously paid, will be refunded to Tenant. If Tenant is not tax-exempt but Landlord's obligation to pay Taxes is abated because of the tax-exempt status of any other tenant or tenants of the Building, Landlord reserves the right to increase Tenant's Share as it relates to Taxes so that the Taxes payable with respect to the Land and the Building for any calendar year during the Lease Term are equitably apportioned among the tenants of the Building who are not exempt from taxation. ARTICLE 7 Improvements Section 7.01 - Tenant Fit-up. In connection with the preparation of the Premises for Tenant's initial occupancy, Landlord agrees to do Landlord's Work and Tenant Fit-up as described in the Working Drawings. Landlord agrees to perform all work in a good and workmanlike manner and in compliance with all Legal Requirements and Insurance Requirements, subject to the provisions of the Work Letter. Unless otherwise agreed, Tenant agrees to pay Tenant's Cost as Additional Rent in installments as the work progresses as provided in the agreement with the contractor performing the work and in any event on or before the Term Commencement Date. Section 7.02 - Time for Completion. Landlord agrees to use due diligence to have the Premises ready for occupancy on or before the Term Commencement Date referred to in Section 1.01. Reference is made to the Work Letter for details of the completion process. Section 7.03 - Notice of Substantial Completion Date. Approximately fifteen (15) days before it occurs, Landlord agrees to give Tenant a notice stating the Substantial Completion Date. Section 7.04 - Delays. If Landlord is delayed in substantially completing Tenant Fit-up as the result of (a) delay by Tenant or any Person employed by Tenant in delivery to Landlord of any plans, design work and detailed drawings, or (b) Tenant's requests for special work not part of the work described in the Working Drawings or for changes to the Working Drawings after approval by Tenant (notwithstanding Landlord's approval of such changes), or (c) delays in performance by Tenant or any Person employed by Tenant which cause delays in the completion of any work to be done by Landlord or which otherwise delay the substantial completion of the Premises, or (d) any fault, negligence, omission, or failure to act on the part of Tenant or its agents, contractors, workmen, mechanics, suppliers or invitees, provided Tenant has been given notice of each such delay, the Premises will be substantially completed on (and the Term Commencement Date will be) that date determined by Landlord, in the reasonable exercise of its judgment, on which the Substantial Completion Date would have occurred but for the delays referred to in this Section 7.04. Section 7.05 - Tenant's Access to the Premises. Tenant and Tenant's agents, at Tenant's sole risk, may, with Landlord's prior consent, enter the Premises before the Term Commencement Date in order to (a) install its furniture, furnishings and equipment and (b) perform or inspect work necessary to make the Premises ready for Tenant's use and occupancy. If Landlord permits entry before the Term Commencement Date, the permission is conditioned upon (i) Tenant delivering to Landlord evidence of the insurance required under Section 15.01 and (ii) Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers and invitees, working in harmony with Landlord and contractors working for Landlord and with other tenants of the Building. If at any time Tenant's entry causes or threatens to cause disharmony or interfere with the orderly completion or operation of the Building, Landlord may withdraw the permission upon notice to Tenant. Any entry by Tenant will be deemed to be under all of the provisions of this Lease except the covenant to pay Rent. Except for negligence of Landlord and its employees, if Tenant or its agents enter the Premises before the Term Commencement Date, Landlord will not be liable for and Tenant agrees to assume the entire risk for any loss or damage which may occur to any Improvements or to any property placed in the Premises before the Term Commencement Date. Section 7.06 - Improvements by Tenant. Tenant agrees not to hang shades, curtains, signs, awnings or other materials in any window, attach any materials to or make any change in the appearance of any glass visible from outside of the Premises, add any window treatment of any kind or make Improvements or install furniture visible from outside of the Premises, without Landlord's prior written consent. Tenant agrees not to make any Improvements before or during the Lease Term, the total cost of which during any twelve (12) consecutive months exceeds $5,000, unless Landlord first approves the plans and specifications for the Improvements and the contractors performing the work. Tenant agrees not to make any Improvements which would (a) delay completion of the Premises or the Building, or (b) require unusual expense to readapt the Premises to normal research and development, general office and limited light manufacturing use upon termination of this Lease or (c) increase (i) the cost of Landlord's Work or insurance or (ii) Taxes. All Improvements will become part of the Premises and property of Landlord upon their completion or installation except to the extent Landlord specifies that they must be removed at Tenant's expense on the Lease Termination Date as an express condition to Landlord's approval of their initial installation. The construction of Improvements by Tenant and the installation of Tenant's furniture, furnishings and equipment will be coordinated with any work being performed by Landlord and will be performed in such manner as to maintain harmonious labor relations and not to damage the Building or the Premises or interfere with Building operation. Except for work done by or through Landlord before making any Improvements, Tenant will: secure all necessary Authorizations; deliver to Landlord a statement of the names of all its contractors and subcontractors and the estimated cost of all labor and material to be furnished by them; cause each contractor to carry (1) worker's compensation insurance in statutory amounts covering all the contractor's and subcontractor's employees, (2) comprehensive public liability insurance with such limits as Landlord may reasonably require, but in no event less than $1,000,000, and (3) property damage insurance with limits of not less than $300,000 (all such insurance to be written by companies approved by Landlord and insuring Landlord and Tenant as well as the contractors), and to deliver to Landlord certificates of all such insurance; and secure casualty insurance against loss or damage to the Improvements pending completion and deliver evidence of such insurance to Landlord. Tenant agrees to pay promptly when due the entire cost of any work done in the Premises by Tenant, its agents, employees, or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection with its work to attach to the Premises and immediately to discharge any such liens which may attach. All construction work done by Tenant, its agents, employees or independent contractors will be done in a good and workmanlike manner and in compliance with all Legal Requirements and Insurance Requirements. Landlord may inspect the work at any time and will promptly give notice to Tenant of any observed defects. ARTICLE 8 Building Services Section 8.01 - Basic Services. During the Lease Term, Landlord agrees to furnish, or cause to be furnished, the Basic Services. Section 8.02 - Other Janitors. No Person will be employed by Tenant to do janitorial work in the Premises and no Person other than the janitors of the Building will clean the Premises unless first approved in writing by Landlord. Any Person employed by Tenant with Landlord's approval to do janitorial work will, while in the Building, either inside or outside the Premises, be subject to and under the control and direction of the superintendent of the Building (but not as agent or servant of the superintendent or of Landlord). Section 8.03 - Additional Services. Tenant agrees to pay Landlord a reasonable charge for any extra cleaning of the Premises required because of the carelessness or indifference of Tenant and for any Additional Services rendered at the request of Tenant. If the cost of cleaning the Premises is increased due to the installation in the Premises, at Tenant's request, of any unique or special materials, finish or equipment, Tenant agrees to pay the Landlord an amount equal to the increase in cost. All charges for Additional Services will be payable within ten (10) days after the date on which they are billed. Section 8.04 - Limitations on Landlord's Liability. Landlord will not be liable in damages nor in default under this Lease for any failure or delay in furnishing Basic Services or Additional Services when the failure or delay is caused by Unavoidable Delays. No failure or delay by Landlord in furnishing Basic Services or Additional Services caused by Unavoidable Delays may be claimed or pleaded as an eviction or disturbance of Tenant's possession or give Tenant any right to terminate this Lease or give rise to any claim for set-off or abatement of Rent or excuse Tenant from the performance of any of its obligations under this Lease. Section 8.05 - Electric Service. Tenant agrees to make its own arrangements for the provision of electricity to the Premises and to pay the full cost (as shown on a separate electric meter to be installed at Landlord's expense) directly to the utility company providing the electricity. Tenant's use of electricity in the Premises will not at any time exceed the capacity of any of the electrical conductors or equipment in or serving the Premises. In order to insure that such capacity is not exceeded and to avert possible adverse effect upon the Building electric service, Tenant agrees it will 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 208 volts nominal or make any alteration or addition to the electric system of the Premises. Unless Landlord objects to the connection of any such fixtures, appliances or equipment, all additional risers or other equipment required for the connection will be provided by Landlord, and the cost will be paid by Tenant on Landlord's demand. ARTICLE 9 Tenant's Covenants Section 9.01 - Pay Rent. Tenant agrees to pay when due and without notice, demand, offset or deduction all Rent and all charges for utility services rendered to the Premises not included in Rent and, as Additional Rent, all charges of Landlord for Additional Services. Section 9.02 - Occupancy of the Premises. Tenant agrees to occupy the Premises continuously from the Term Commencement Date for the Permitted Use only. Tenant will not (i) injure or deface the Premises or the Building, (ii) install any sign in or on any window, demising wall, corridor, elevator foyer or other Common Area, (iii) permit in the Premises any inflammable fluids or chemicals not reasonably related to the Permitted Use, nor (iv) permit any nuisance or use of the Premises which is improper, offensive, contrary to any Legal Requirement or Insurance Requirement or liable to render necessary any alteration or addition to the Building. Section 9.03 - Rules and Regulations. Tenant agrees not to obstruct in any manner any portion of the Building or the Land. Tenant agrees to comply with all reasonable rules and regulations of which Tenant has notice promulgated by Landlord and uniformly applicable to Persons occupying the Building regulating the details of the operation and use of the Building. Section 9.04 - Safety. Tenant agrees to keep the Premises equipped with all safety appliances required by Legal Requirements or Insurance Requirements applicable to Tenant specifically because of any use made by Tenant and not applicable generally to all other tenants of the Building. Tenant agrees to procure all Authorizations required because of Tenant's use of the Premises and to do any work required under any Authorization because of such use, it being understood that the provisions of this Section may not be construed to broaden in any way the Permitted Use. Section 9.05 - Equipment. Tenant agrees not to place a load upon the floor of the Premises exceeding the live load for which the floor has been designed. Tenant agrees not to move any safe or other heavy equipment into, about or out of the Premises except in the manner and at the time authorized by Landlord in each instance. Tenant agrees to isolate and maintain all of Tenant's equipment which causes or may cause airborne or structure-borne vibration or noise, whether or not it may be transmitted to any other part of the Building, so as to eliminate such vibration or noise. Section 9.06 - Pay Taxes. Tenant agrees to pay promptly when due all Taxes upon personal property (including, without limitation, fixtures and equipment) in the Premises irrespective of the Person to whom the Taxes may be assessed. Section 9.07 - Maintenance. Tenant agrees, at all times during the Lease Term, and at its own expense, (i) to maintain the Premises in good repair and condition (except for (a) ordinary wear and tear, (b) damage by fire or casualty and (c) any defect in material or workmanship performed by Landlord in connection with initial preparation of the Premises for Tenant's use and occupancy), (ii) to use all reasonable precautions to prevent waste, damage or injury to the Premises or any other part of the Building and (iii) to repair all damage to any part of the Building caused by Tenant or any of Tenant's agents, employees or invitees, to the extent that such damage is not covered by Landlord's insurance. Section 9.08 - Redelivery. On the Lease Termination Date, Tenant agrees to leave the Premises and surrender possession to Landlord free of (i) all tenants or occupants claiming through or under Tenant, and (ii) all liens encumbrances, restrictions or reservations caused or consented to by Tenant. Tenant agrees, subject to the provisions of Articles 17 and 18, to surrender the Premises, including all Landlord's Fixtures and all Improvements except those which Tenant is required to remove as provided in Section 7.06, to Landlord broom clean and in good condition and repair (ordinary wear and tear and damage by fire or other casualty only excepted) with all damage resulting from removal of (i) Tenant's furniture, furnishings and equipment and (ii) any Improvements which Tenant is required to remove as provided in Section 7.06 repaired at Tenant's expense to Landlord's reasonable satisfaction. Section 9.09 - Tenant Financial Information. Tenant agrees to deliver to Landlord (i) within thirty (30) days after the last day of each fiscal quarter other than the fourth quarter, a management prepared statement of Tenant's income and expense for the preceding quarter and Tenant's balance sheet as of the end of the quarter, and (ii) as soon as available and in any event within ninety (90) days after the end of Tenant's fiscal year, a year-end financial report audited by Tenant's certified public accountants and containing statements of Tenant's income and expenses for the preceding fiscal year and Tenant's balance sheet as of the end of the fiscal year. Whenever requested by Landlord in connection with financing of the Building or its own operations, Tenant agrees to provide to Landlord all information currently available relating to Tenant's existing and future financial condition, including but not limited to internally and externally prepared financial statements and reports, prospectuses and offering circulars, underwriting agreements private placement memoranda and similar documents involving public and private funding sources. Landlord agrees to maintain all the information in strictest confidence except to the extent necessary to share it with lenders in connection with financing of the Building or its own operations. ARTICLE 10 Compliance With Requirements Section 10.01 - Legal Requirements. Tenant agrees, at its expense, promptly to observe and comply with all Legal Requirements relating to it specifically or its use of the Premises and not applicable generally to all other tenants of the Building. Tenant agrees to pay all costs, liabilities, losses, damages, fines, penalties, claims and demands, that may arise out of or be imposed because of the failure of Tenant to comply with the covenants of this Article 10. Section 10.02 - Contests. Tenant has the right to contest by appropriate legal proceedings diligently conducted in good faith, in the name of Tenant or Landlord (if legally required) or both (if legally required), without expense or liability to Landlord, the validity or application of any Legal Requirement. If compliance with the terms of any Legal Requirement may legally be delayed pending the prosecution of any such proceeding, Tenant may delay compliance until the final determination of the proceeding. Section 10.03 - Land Disposition Agreement. As required under the Land Disposition Agreement, Tenant, working with the public and private higher educational institutions of Worcester and existing or future federal, state and local job training programs, agrees to endeavor to establish education and training programs to assist Worcester residents and women and minority group members in developing skills necessary for future employment within or ancillary to the Park and to establish fair and equitable procedures to provide employment opportunities for qualified residents of the City of Worcester and women and minority group members on a priority basis. Section 10.04 - Environmental Legal Requirements. Except to the extent permitted under applicable Legal Requirements, Tenant agrees not to cause or permit any Hazardous Substances to be released on the Land or in the Building or the Premises or into the air, or to be introduced into the sewage or other waste disposal system serving the Premises. Tenant agrees to generate, store or dispose of Hazardous Substances in the Premises or dispose of Hazardous Substances from the Premises to any other location only in compliance with all applicable Legal Requirements and to notify Landlord of any incident which would require the filing of a notice under any Legal Requirement. Tenant agrees to provide Landlord with such information required by Governmental Authorities as Landlord may reasonably request from time to time with respect to compliance with this Section. ARTICLE 11 Covenant Against Liens Section 11.01 - No Liens. Tenant agrees not to create any lien on the Premises, the Building or the Land and to discharge any lien on the Premises, the Building or the Land arising out of any act or omission by Tenant, including but not limited to any tax, mechanic's, laborer's or materialman's lien or lien arising under Massachusetts General Laws, Chapter 21E. Section 11.02 - Discharge. If any lien is filed against the Premises, the Building or the Land as a result of any act or omission by Tenant, Tenant agrees to cause the lien to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise, within sixty (60) days after (i) Tenant has actual or constructive notice that it is filed, or (ii) final judgment in favor of the holder of the lien. If Tenant fails to cause the lien to be discharged, then, in addition to any remedies available to Landlord in case of an Event of Default, Landlord may, but is not obligated to, discharge the lien either by paying the amount claimed to be due or by procuring the discharge of the lien by deposit or by bonding proceedings. Any amount paid by Landlord and all costs incurred by Landlord in connection the removal of any lien will constitute Additional Rent and will be paid by Tenant to Landlord on demand with interest as provided in Section 21.06. ARTICLE 12 Access to Premises Section 12.01 - Access. Landlord or Landlord's agents and designees will have the right, but not the obligation, to enter the Premises at all reasonable times during ordinary business hours, after not less than twenty-four hours notice except in the case of an emergency, to examine the Premises, to make necessary repairs and replacements and to exhibit the Premises to prospective purchasers, mortgagees, and, during the last six (6) months of the Lease Term, prospective tenants. Except in the case of an emergency, any Person entering the Premises under this Section 12.01 will be accompanied by a Person designated by Tenant, if Tenant requires. ARTICLE 13 Assignment and Subletting: Occupancy Arrangements Section 13.01 - Assignment and Subletting. Tenant agrees not to enter into any Occupancy Arrangement, either voluntarily or by operation of law, (other than with a Person who is affiliated with Tenant and for a period ending when and if such Person ceases to be affiliated with Tenant) without the prior written consent of Landlord. For purposes of this Article 13, a Person will be considered to be affiliated with Tenant if such Person, directly or indirectly, controls, is controlled by or is under common control with Tenant. Section 13.02 - Procedure. If Tenant intends to enter into an Occupancy Arrangement which requires Landlord's consent, Tenant agrees to give Landlord notice of the name of (and a financial statement with respect to) the proposed occupant, the exact terms of the Arrangement and a precise description of the portion of the Premises intended to be subject to the Occupancy Arrangement. Within thirty (30) days after receipt of the notice, Landlord will (i) consent to the Occupancy Arrangement, or (ii) refuse to consent to the occupancy Arrangement, or (iii) notify Tenant of Landlord's election to terminate this Lease with respect to so much of the Premises as is intended to be subject to the Occupancy Arrangement. If Landlord consents to the Occupancy Arrangement, Tenant agrees (i) to enter into the Arrangement on the exact terms described to Landlord within thirty (30) days after Landlord's consent and to deliver to Landlord and to the holder of any first mortgage on the Building an executed original counterpart of the Occupancy Arrangement and (ii) to remain liable for the payment and performance of the provisions of this Lease. If Tenant enters into an Occupancy Arrangement, Tenant agrees to pay to Landlord when received the excess, if any, of amounts received in respect of the Occupancy Arrangement over the Rent. Any Occupancy Arrangement will expressly incorporate and be subject to the terms of this Lease, which terms will be binding on all parties to the Occupancy Arrangement. If Landlord consents to and Tenant does not enter into the Arrangement within the thirty (30) day period, such consent will be deemed revoked and Tenant will again comply with the terms of this Section. If Landlord elects to terminate this Lease with respect to that portion of the Premises to be subject to the Occupancy Arrangement, this Lease will terminate as of the date specified in the election, which date will be not less than thirty (30) days nor more than sixty (60) days after the date of the election; provided that Tenant may, at any time before the date of termination, withdraw its request for Landlord's consent to an Occupancy Arrangement. Such withdrawal by Tenant will nullify Landlord's election to terminate, and this Lease will remain in effect as if no election by Landlord had been made. If Landlord terminates this Lease, all Rent due will be adjusted as of the day the Premises (or the portion affected by the termination) are redelivered to Landlord. Any portion of the Premises redelivered to Landlord will be in the condition specified in Section 9.08. ARTICLE 14 Indemnity Section 14.01 - Tenant's Indemnity. Except to the extent waived by Landlord under the provisions of Section 16.02, Tenant agrees to indemnify Landlord against all claims, losses and expenses, including reasonable attorneys' fees, which may be imposed upon or incurred by Landlord by reason of any of the following occurrences: (a) any act or omission on the Premises by Tenant or any Person other than Landlord, its agents, contractors, licensees or invitees; (b) any use, non-use, possession, occupation, condition, operation, maintenance or management of the Premises; (c) any act or omission on the part of Tenant, or any of its agents, contractors, licensees or invitees, whether or not occurring on the Premises; (d) any accident, injury or damage to any Person or property occurring in the Premises, not due to any act or omission of Landlord, its agents, contractors or licensees; (e) any failure on the part of Tenant to comply with any of its obligations under this Lease, whether or not such failure constitutes a Default or Event of Default; (f) any untrue or misleading statement of a material fact or any misrepresentation of a material fact made by or on behalf of Tenant in connection with the negotiation of this Lease; or (g) any release or threat of release of Hazardous Substances by Tenant, or any of its agents, contractors, licensees or invitees, whether or not occurring on the Premises. Section 14.02 - Claims by Landlord. If a proceeding is brought against Landlord arising out of an occurrence described in Section 14.01, upon notice from Landlord Tenant agrees, at its expense, to defend the proceeding using legal counsel reasonably satisfactory to Landlord or, if applicable, Tenant's insurer, provided that Tenant has not been prejudiced by failure or delay on the part of Landlord to give Tenant prompt notice of the proceeding. If Tenant has supplied Landlord with insurance covering an occurrence described in Section 14.01, no claim may be made against Tenant with respect to that occurrence unless the insurer fails or refuses to defend and/or pay all claims, losses and expenses incurred by Landlord. Notwithstanding the foregoing, Landlord has the right to make claims, institute legal proceedings, or otherwise seek redress against Tenant before the expiration of any statute of limitations or other limitation on the time or manner in which Landlord may seek redress regardless of whether or not an insurer is responding. Tenant's obligation to indemnify Landlord as provided in Sections 14.01 and 14.02 will survive the expiration or earlier termination of this Lease. Section 14.03 - Landlord's Liability. Except for its intentional acts or negligence or the intentional acts or negligence of its agents, contractors or licensees, Landlord will not be responsible or liable for any loss, damage or injury to the Premises or to any Person or property at any time on the Land or in the Building or the Premises. ARTICLE 15 Insurance Section 15.01 - Tenant's Insurance. Tenant agrees to provide, at its expense, and to keep in force: (a) Comprehensive general liability insurance against claims for personal injury, death and property damage occurring with respect to Tenant's occupancy of the Premises having primary combined single limit coverage of at least $1,000,000 for bodily injury and property damage. (b) Casualty insurance against loss or damage to (i) all inventory, furniture, furnishings and equipment other than Landlord's Fixtures owned, controlled or in use by Tenant and situated in the Building, (ii) all Improvements made by Tenant pending completion and (iii) all Improvements made by Tenant which Tenant is required to remove on the Lease Termination Date under Section 7.06, under a so-called "All Risk" policy in an amount sufficient to replace the same without allowance for depreciation, if available, and if not, in the amount necessary to avoid the effect of co-insurance provisions under the applicable policies. (c) Worker's compensation insurance for all Tenant's employees working in the Premises in an amount sufficient to comply with Legal Requirements. (d) Such greater limits and such other insurance and in such amounts as may from time to time be reasonably required by Landlord against other insurable hazards which at the time are customarily insured against in the case of buildings similarly situated and used. Section 15.02 - General Insurance Provisions. (a) All insurance provided for in Section 15.01 will be written as primary policies (without "contribution" or "solely in excess of coverage carried by Lessor" provisions) and will be effected under valid and enforceable policies, issued by insurers of recognized responsibility authorized to write such insurance in Massachusetts and having a Best's financial rating of B or better. Not less than five (5) days before the Term Commencement Date, and thereafter not less than ten (10) days before the expiration dates of the expiring policies furnished under to Section 15.01, binders, certificates or other evidence of such insurance satisfactory to Landlord bearing notations evidencing the payment of premiums or accompanied by other evidence satisfactory to Landlord of such payment, will be delivered by Tenant to Landlord. (b) Nothing in this Article 15 will prevent Tenant from taking out insurance of the kind and in the amounts provided for under this Article under a blanket insurance policy or policies covering other properties as well as the Premises. Any policy or policies of blanket insurance (i) will specify, or Tenant will furnish Landlord with a written statement from the insurers specifying, the amounts of the total insurance allocated to the Premises, which amounts will not be less than the amounts required by Section 15.01 and will be sufficient to prevent any of the insureds from becoming a co-insurer within the terms of the applicable policy or policies, (ii) will contain an "Agreed Amount" clause as to the Premises and (iii) will otherwise comply as to endorsements and coverage with the provisions of this Article. (c) All policies of insurance provided for in Section 15.01 will name Landlord and Tenant as the insured, as their respective interests may appear, and also the Ground Lessor and any mortgagee, when requested, as their respective interests may appear, except that Landlord, the Ground Lessor and any such mortgagee will have no interest in the insurance on Tenant's personal property. Each such policy or certificate issued by the insurer will, to the extent obtainable, contain an agreement by the insurer that the insurance will not be cancelled without at least twenty (20) days prior written notice to Landlord and to any other named insureds. Landlord agrees not to carry any insurance concurrent in coverage and contributing in the event of loss with any insurance required to be furnished by Tenant if the effect of such separate insurance would be to reduce the protection or the payment to be made under Tenant's insurance. Section 15.03 - Landlord's Insurance. Landlord agrees to cause the Building (including Landlord's Fixtures but excluding any Improvements and leasehold improvements (a) by any tenant prior to their completion, or (b) which any tenant may be required to remove upon termination of its lease) to be insured for the benefit of Landlord, the Ground Lessor and any mortgagee of Landlord, as their respective interests may appear, against loss or damage under a so-called "All Risk" policy in an amount equal to (i) the replacement value or (ii) the amount necessary to avoid the effect of co-insurance provisions of the applicable policies. Landlord also agrees to maintain comprehensive form boiler insurance, rental value insurance and such other insurance against such perils and in such amounts as may be required by the Ground Lessor or any mortgagee of Landlord or as Landlord may consider prudent. The cost of such insurance will be part of the Operating Expenses. ARTICLE 16 Waiver of Subrogation Section 16.01 - Waiver of Subrogation. If available, all insurance policies carried by either party covering the Building and/or the Premises will contain a clause or endorsement expressly waiving any right on the part of the insurer to make any claim against the other party and against the Ground Lessor. The parties agree to use reasonable efforts to insure that their policies will include such waiver clause or endorsement. Section 16.02 - Waiver of Rights. Landlord and Tenant each waive all claims, causes of action and rights of recovery against the other and against the Ground Lessor and their respective partners, agents, officers and employees, for any loss or damage to persons, property or business which occurs on or about the Premises or the Building and results from any of the perils insured under any policy of insurance maintained by Landlord and/or Tenant, regardless of cause. This waiver includes the negligence and intentional wrongdoing of either party and their respective agents, officers and employees but is effective only to the extent of recovery, if any, under any such policy. This waiver will be void to the extent that any such insurance is invalidated by reason of this waiver. ARTICLE 17 Damage and Restoration Section 17.01 - Substantial Damage. If the Building is damaged by fire or other casualty, Tenant agrees to give prompt written notice to Landlord. If as a result of fire or other casualty, (i) the Building is so damaged that substantial alteration or reconstruction of the Building is, in Landlord's sole opinion, required (whether or not the Premises have been damaged), or (ii) the Ground Lease is terminated, or (iii) any mortgagee of the Building requires that all or a substantial portion of insurance proceeds payable be used to retire the mortgage debt, Landlord may, at its option, terminate this Lease by giving notice to Tenant within sixty (60) days after the date of the damage. If, within sixty (60) days after the date of the damage, Landlord does not begin to restore the Building as provided in Section 17.02 or notify Tenant of its election to terminate this Lease, Tenant may terminate this Lease by giving notice to Landlord within ten (10) days after the expiration of the sixty (60) day period. If this Lease is terminated by Landlord or Tenant as provided in this Section 17.01, Rent will be abated as of the date of the damage. Section 17.02 - Restoration. If Landlord does not terminate this Lease as provided in Section 17.01 within sixty (60) days after the date of the damage, Landlord agrees to begin to restore the Building to substantially the same condition in which it was immediately before the damage, and, subject to Unavoidable Delays, to continue the restoration with reasonable diligence. Landlord's restoration work will include Landlord's Fixtures, the scope of the work done by Landlord in originally finishing the Premises according to the Working Drawings and subsequent Improvements made by Tenant under the provisions of Section 7.06 which are to remain part of the Premises. Landlord will not be required to rebuild, repair, or replace (i) any part of Tenant's furniture, furnishings or equipment, or (ii) any Improvements made by Tenant which Tenant is required to remove on the Lease Termination Date under Section 7.06. Landlord will not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting from the damage to or the repair of the Building, except that Landlord will allow Tenant a fair reduction of Rent to the extent the Premises are unfit for occupancy from the date of the occurrence of the damage to a date thirty (30) days after completion of Landlord's repairs. ARTICLE 18 Eminent Domain Section 18.01 - Total Taking. If there is a Total Taking, then this Lease will terminate as of the earlier to occur of (i) the date when physical possession of the Building or the Premises is taken by the condemning Governmental Authority or (ii) the date when title vests in the condemning Governmental Authority. Section 18.02 - Partial Taking. If there is a Taking of the Premises which is not a Total Taking, Landlord may terminate this Lease by giving notice to Tenant within sixty (60) days after receiving notice of the Taking, in which event this Lease will terminate as of the earlier to occur of (i) the date when physical possession of such portion of the Premises is taken by the condemning Governmental Authority or (ii) the date when title vests in the condemning Governmental Authority. If this Lease is not terminated, Rent will be abated from the date the Premises are rendered unfit for occupancy by an amount representing that part of the Rent properly allocable to the portion of the Premises taken, and Landlord will, at Landlord's expense, restore the Building and the Premises to substantially their former condition to the extent that restoration, in Landlord's judgment, may be feasible. Landlord's restoration work will not exceed the scope of Tenant Fit-up as shown in the Working Drawings and subsequent Improvements made by Tenant under the provisions of Section 7.06 which are to remain part of the Premises. Section 18.03 - Awards and Proceeds. All proceeds payable in respect of a Taking will be the property of Landlord. Tenant hereby assigns to Landlord all rights of Tenant in or to such awards and proceeds, provided that Tenant will be entitled to separately petition the condemning authority for a separate award for its moving expenses and trade fixtures but only if such a separate award will not diminish the amount of award or proceeds payable to Landlord. ARTICLE 19 Quiet Enjoyment Section 19.01 - Landlord's Covenant. Landlord covenants that it has good title to the Premises and the Common Areas, subject to the Permitted Exceptions, and that it has sufficient authority to enter into this Lease. Landlord also covenants that if Tenant pays the Rent and performs all of its obligations under this Lease, subject to the Permitted Exceptions, it will quietly have and enjoy the Premises during the Lease Term, without interference from any Person lawfully claiming under Landlord or by paramount title. Landlord agrees that it will pay and perform all of its obligations under the Ground Lease. Section 19.02 - Subordination and Non-Disturbance. This Lease is subordinate to (i) the Ground Lease and (ii) any mortgage now or hereafter on the Building and to each advance made under any such mortgage, and to all renewals, modifications, consolidations, replacements and extensions of such mortgage. This Section 19.02 is self-operative and no further instrument of subordination will be required, provided that before a future subordination is effective Landlord will cause the mortgagee or Ground Lessor to deliver to Tenant a non-disturbance agreement, binding upon itself and any successor in interest, to the effect that no foreclosure of the mortgage or termination of the Ground Lease will disturb the possession of Tenant under this Lease so long as no Event of Default exists. In confirmation of such subordination, Tenant agrees to execute and deliver promptly any certificate that Landlord or the Ground Lessor or any mortgagee may request. If any mortgagee or Ground Lessor succeeds to the interest of Landlord and agrees to recognize the interest of Tenant under this Lease, Tenant agrees to attorn to such mortgagee or Ground Lessor, to recognize such mortgagee or Ground Lessor as its landlord and to execute any instrument reflecting its attornment and recognition reasonably requested by such mortgagee or Ground Lessor. Section 19.03 - Notice to Mortgagee and Ground Lessor. 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 under or to terminate this Lease, will result in a release or termination of such obligations or a termination of this Lease unless (i) Tenant first gives written notice of Landlord's act or failure to act to Landlord's first mortgagee of record, if any, and to the Ground Lessor specifying the act or failure to act on the part of Landlord which could or would give basis to Tenant's rights; and (ii) the mortgagee or Ground Lessor, after receipt of such notice, fails or refuses to correct or cure the condition complained of within a reasonable time. Nothing contained in this Section 19.03 will be deemed to impose any obligation on any mortgagee or Ground Lessor to correct or cure any condition. "Reasonable time" means a period of not less than thirty (30) Business Days and includes (but is not limited to) a reasonable time to obtain possession of the Building if the mortgagee or Ground Lessor elects to do so and a reasonable time to correct or cure the condition if the condition is determined to exist. Tenant has no obligation to give notice under this Section 19.03 until the mortgagee or the Ground Lessor has given Tenant notice of its interest as such and the address to which notices under this Section 19.03 are to be sent. Section 19.04 - Other Provisions Regarding Mortgagees. If this Lease or the Rent is assigned to a mortgagee as collateral security for any obligation, the mortgagee will not be deemed to have assumed any of Landlord's obligations under this Lease solely as a result of the assignment. A mortgagee to whom this Lease has been assigned will be deemed to have assumed such obligations only if (i) by the terms of the assignment the mortgagee specifically elects to assume the obligations, or (ii) the mortgagee has (a) foreclosed its mortgage, (b) accepted a deed in substitution of foreclosure, or (c) taken possession of the Premises. Even if the mortgagee assumes the obligations of Landlord, the mortgagee will be liable for breaches of any of Landlord's obligations only to the extent the breaches occur during the period of ownership by the mortgagee after foreclosure (or any conveyance by a deed in substitution of foreclosure) or after entry, and the mortgagee will have no liability for any act or omission or for any obligations incurred by any prior Landlord, including liability with respect to any Security Deposit except to the extent actually received by such mortgagee. ARTICLE 20 Defaults; Events of Default Section 20.1 - Defaults. The following will (i) if any requirement for notice or lapse of time has not been met, constitute Defaults, and (ii) if there are no such requirements or if such requirements have been met, constitute Events of Default: (a) The failure of Tenant to pay Rent when due, and the continuation of the failure for a period of ten (10) days after notice from Landlord specifying the failure; (b) The failure of Tenant to perform any of its obligations under this Lease, other than its obligation to pay Rent, and the continuation of the failure for a period of twenty (20) days after notice from Landlord specifying in reasonable detail the nature of the failure; (c) The failure of Tenant to pay Rent when due or to perform any of its obligations under this Lease, if Landlord has given Tenant notice of the same or similar failure at least twice during the twelve (12) month period preceding the date on which the Rent or performance was due. (d) The occurrence with respect to Tenant or any Guarantor of one or more of the following events: the death, dissolution, termination of existence (other than by merger or consolidation), insolvency, appointment of a receiver for all or substantially all of its property, the making of a fraudulent conveyance or the execution of an assignment or trust mortgage for the benefit of creditors by it, or the filing of a petition of bankruptcy or the commencement of any proceedings by or against it under a bankruptcy, insolvency or other law relating to the relief or the adjustment of indebtedness, rehabilitation or reorganization of debtors; provided that if such petition or commencement is involuntarily made against it and is dismissed within sixty (60) days of the date of such filing or commencement, such events will not constitute an Event of Default; (e) The issuance of any execution or attachment against Tenant or any other occupant of the Premises as a result of which the Premises are taken or occupied by a Person other than Tenant; and (f) The cancellation of, refusal to review or denial of liability under any insurance policy relating to the Premises as a result of the Premises being unoccupied. Section 20.2 - Tenant's Best Efforts. If the Default of which Landlord gives notice is of such a nature that it cannot be cured within twenty (20) days, then the Default will not be deemed to continue so long as Tenant, after receiving notice of the Default, begins to cure the Default as soon as reasonably possible and continues to take all steps necessary to complete the curing of the Default within time which, under all prevailing circumstances, is reasonable. No Default will be deemed to continue so long as Tenant is acting to cure the Default in good faith or is delayed in or prevented from curing the Default by reason of Unavoidable Delays. ARTICLE 21 Landlord's Remedies; Damages on Default Section 21.01 - Landlord's Remedies. Landlord may, at its option: (a) Whenever an Event of Default exists, give Tenant a notice terminating this Lease on a date specified in the notice. On the date specified in the notice, this Lease and all rights of Tenant under this Lease will end without further notice or lapse of time, but Tenant will continue to be liable to Landlord as provided in this Article 21. (b) If an Event of Default results from Tenant's failure to pay Tenant's Cost as required by Section 7.01 and the Work Letter, in addition to or in substitution of the other remedies available to Landlord, refuse Tenant access to the Premises. In such event the Term Commencement Date will be the earlier of (i) the date determined under Section 7.04 or (ii) the Substantial Completion Date. (c) If an Event of Default results from Tenant's failure to pay a charge for Additional Services, without further notice to Tenant, discontinue any or all Additional Services. Section 21.02 - Possession. Upon termination of this Lease as the result of an Event of Default, Tenant agrees to leave the Premises peacefully and surrender possession to Landlord as provided in Section 9.08. Landlord may, at any time after any termination of this Lease and without further notice, enter the Premises and recover possession by summary proceedings or any other manner permitted by law, and may remove Tenant and all other Persons and property from the Premises. After termination of this Lease, Landlord will be entitled to receive all rental income from the Premises. Section 21.03- Right to Relet. After termination of this Lease as a result of an Event of Default, Landlord may relet all or any part of the Premises in the name of Landlord or otherwise, for such term (which may be greater or less than the period which would have constituted the balance of the Lease Term) and on such conditions (which may include concessions or free rent) as Landlord, in its reasonable discretion, may determine. Landlord agrees to use reasonable efforts but will not be liable for failure to relet the Premises or for failure to collect any rent due upon reletting, and Landlord will not be obligated to show the Premises in preference to other space available in the Building. Section 21.04 - Survival of Covenants, Etc. If this Lease is terminated as provided in Section 21.01: (a) The termination will not relieve Tenant of its obligations under this Lease, which obligations will survive the termination. Tenant agrees to indemnify Landlord against all claims, losses and expenses arising out of the termination. (b) At the time of termination, Tenant agrees to pay to Landlord the Rent up to the date of termination. Tenant also agrees to pay to Landlord, on demand, as liquidated damages for Tenant's Default, the excess of (1) the total Rent that would have been payable under this Lease by Tenant from the date of the termination until the Stated Expiration Date, over (2) the fair and reasonable rental value of the Premises for the same period reduced by Landlord's reasonable estimate of expenses to be incurred in connection with reletting the Premises, including, without limitation, all repossession costs, brokerage commissions, legal expenses, reasonable attorneys' fees, alteration costs, and expenses of preparation for reletting. (c) If all or part of the Premises are relet by Landlord, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon the reletting will be, prima facie, the fair and reasonable rental value for the part or the whole of the Premises relet during the term of the reletting. (d) Nothing contained in this Section 21.04 will limit or prejudice the right of Landlord to prove and obtain as liquidated damages by reason of the termination, 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, such damages are to be proved, whether or not such amount is greater, equal to, or less than the amount determined as provided in clause (b) above. Section 21.05 - Right to Equitable Relief. If a Default occurs, Landlord will be entitled to enjoin the Default and may invoke any remedy allowed at law or in equity as though re-entry, summary proceedings and other remedies were not provided for in this Lease. Section 21.06 - Right to Self Help; Interest On Overdue Rent. If an Event of Default occurs, Landlord has the right, but not the obligation, to enter the Premises and to perform any obligation of Tenant under this Lease notwithstanding the fact that no specific provision for substituted performance by Landlord is made in this Lease. In performing the obligation, Landlord may make any payment of money or perform any other act. The total of (i) all sums paid by Landlord (ii) interest (at the rate of 1-1/2% per month or the highest rate permitted by law, whichever is less) on such sums plus all Rent not paid when due and (iii) all expenses in connection with the performance of the obligation by Landlord, will be deemed to be Rent under this Lease and payable to Landlord on demand. Landlord may exercise its rights under this Section 21.05 without waiving any other of its rights or releasing Tenant from any of its obligations under this Lease. ARTICLE 22 Notices Section 22.01 - Notices and Communications. All notices, demands, requests and other communications provided for or permitted under this Lease must be in writing and be delivered by hand or sent by telecopy, nationally recognized and reputable overnight delivery service, express mail, certified mail or first-class mail, postage prepaid, to the parties, respectively at the following addresses: (a) if to Landlord, at the address stated in Section 1.01 (or at such other address as Landlord designates in writing to Tenant), with a copy to such Persons as Landlord designates in writing to Tenant, or (b) if to Tenant, at the address stated in Section 1.01 (or at such other address as Tenant designates in writing to Landlord), with a copy to such Persons as Tenant designates in writing to Landlord. Section 22.02 - When Effective. Any communication provided for in this Lease will become effective only when received or deemed received by the Person to whom it is given. If it is mailed by express, certified or first-class mail, it will be deemed to be received on (i) the second Business Day after being mailed or (ii) the day of its receipt, whichever is earlier. If given by telecopy, it will be deemed received when confirmation of complete receipt is received by the transmitting person during normal business hours on a Business Day, or on the next Business Day if confirmation is received after normal business hours. ARTICLE 23 Waivers Section 23.01 - No Waivers. Failure of Landlord or Tenant to complain of any act or omission on the part of the other no matter how long the act or omission may continue, will not be deemed to be a waiver by either Landlord or Tenant of any of its rights under this Lease. No waiver by Landlord or Tenant at any time, expressed or implied, of the breach of any provision of this Lease will be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. No acceptance by Landlord of any partial payment will constitute an accord or satisfaction but will only be deemed a partial payment on account. None of Tenant's obligations under this Lease and no Default or Event of Default may be waived or modified except in writing by Landlord. ARTICLE 24 Security Deposit Section 24.01 - Security Deposit. Tenant has deposited with Landlord the Security Deposit in the amount, if any, stated in Section 1.01. Landlord will hold the Security Deposit as security for the payment or performance by Tenant of its obligations under this Lease and not as a prepayment of Rent. Landlord may commingle the Security Deposit with other funds of Landlord. Landlord will not be liable to Tenant for the payment of interest. Landlord may expend such amounts from the Security Deposit as may be necessary to cure any Default or Event of Default and, in such case, Tenant agrees to pay to Landlord the amount expended, on demand. Landlord may assign the Security Deposit to any subsequent owner of the Building and thereafter Landlord will have no liability to Tenant with respect to the Security Deposit. As soon as reasonably practicable after the Lease Termination Date, Landlord agrees (i) to inspect the Premises, (ii) to make such payments from the Security Deposit as may be required to reimburse itself for unpaid Rent and all expenses arising out of the termination of the Lease and reletting the Premises and (iii) if no Default or Event of Default has occurred or exists, pay the balance of the Security Deposit to Tenant. ARTICLE 25 General Provisions Section 25.01 - Unavoidable Delays. If Landlord or Tenant is delayed, hindered in or prevented from the performance of any act required under this Lease by reason of Unavoidable Delays, then performance of the act will be excused for the period of the delay and the period for the performance of the act will be extended for a period equivalent to the period of the delay. Section 25.02 - Estoppel Certificates. Tenant agrees to deliver to Landlord within five (5) Business Days after the Term Commencement Date an estoppel certificate substantially in the form of Exhibit D. Within five (5) Business Days after receipt of a request from Landlord, Tenant agrees to deliver to any prospective purchaser, mortgagee or other Person specified in the request an estoppel certificate substantially in the form of Exhibit D or in such other form as the purchaser, mortgagee or other Person may reasonably prescribe. Each estoppel certificate will be (i) signed by a duly authorized representative of Tenant, (ii) delivered without charge to the party requesting it and (iii) binding as to its contents on Tenant. Section 25.03 - Right to Relocate. Landlord may, at its option, upon not less than two (2) months prior notice to Tenant, relocate Tenant (effective as of the date specified in the notice) to other space in the Building or in another building in the Park having Improvements comparable in type, quality and quantity, a substantially similar configuration and a rentable area approximately the same as the Premises. Landlord agrees to place the other space in substantially the same condition as the Premises are then in and to pay all costs associated with the relocation. If Tenant is relocated under this provision (i) the other space will be substituted for the Premises under this Lease (ii) the terms and provisions of this Lease will remain in full force and effect and (iii) Tenant agrees (a) to relocate as requested by Landlord and (b) to execute all documents (including but not limited to a termination or amendment of this Lease with respect to the Premises) as Landlord may reasonably request. Section 25.04 - Holding Over. If Tenant occupies the Premises after the Lease Termination Date without having entered into a new lease of the Premises with Landlord, Tenant will be a tenant-at-sufferance only, subject to all of the provisions of this Lease at twice the then effective Basic Rent. Such holding over, even if with the consent of Landlord, will not constitute an extension or renewal of this Lease. Section 25.05 - Governing Law. This Lease and the performance of its provisions will be governed and construed under the laws of the Commonwealth of Massachusetts. Section 25.06 - Partial Invalidity. If any provision of this Lease or its application to any Person or circumstance is held to be invalid or unenforceable, the remainder of this Lease, or the application of the provision to Persons or circumstances other than those as to which it is held invalid or unenforceable, will not be affected, and each provision of this Lease will be enforced to the fullest extent permitted by law. Section 25.07 - Notice of Lease. At the request of either one, Landlord and Tenant agree to execute promptly duplicate originals of a statutory notice of lease, in recordable form, setting forth a description of the Premises, the Lease Term and any other terms of this Lease, except the rental provisions, as may be required by law or as either party may request. Section 25.08 - Interpretation. The section headings used in this Lease are for reference and convenience only, and do not enter into the interpretation of this Lease. This Lease may be signed in several counterparts, each of which is an original, but all of which constitute a single instrument. The term "Landlord" means only the owner at the time of the Building. Upon any sale of the Building or assignment (other than as collateral security for an obligation) of the interest of Landlord in this Lease, Landlord will be relieved of all liability under this Lease and its successor in interest and/or assign will be deemed to be Landlord so long as it owns the Building. The liability of Landlord under this Lease is limited to Landlord's interest in the Building. Section 25.09 - Consents. Except for the consents of Landlord required under Section 7.06 and Article 13, consents or approvals required or requested of either Landlord or Tenant shall not be unreasonably withheld or delayed. Section 25.10 - Entire Agreement; Changes. All prior agreements between the parties are merged within this Lease, which alone fully states the entire understanding and agreement of the parties. This Lease may not be changed or terminated orally or in any manner other than by an agreement in writing and signed by the party against whom enforcement of the change or termination is sought. Section 25.11 - Binding Effect. The provisions of this Lease are binding on and inure to the benefit of Landlord, its successors and assigns, and Tenant, its successors and assigns and any Person claiming under Tenant. Section 25.12 - Time of the Essence. Any provision of law or equity to the contrary notwithstanding, it is agreed that time is of the essence of this Lease. Section 25.13 - Table of Contents. The table of contents preceding this Lease but under the same cover is for the purpose of convenience and reference only and is not to be deemed or construed in any way as part of this Lease. EXECUTED as a sealed instrument as of the Date of Lease specified in Section 1.01. LANDLORD: WORCESTER BUSINESS DEVELOPMENT CORPORATION By: TENANT: BIOJECT MEDICAL TECHNOLOGIES, INC. By: Title MASSACHUSETTS BIOTECHNOLOGY RESEARCH PARK SPACE LEASE TABLE OF CONTENTS Page No. ARTICLE 1 REFERENCE DATA AND DEFINITIONS: 1.01 Terms and Titles Referred To 1 1.02 General Provisions 3 1.03 Definitions 3 ARTICLE 2 PREMISES 2.01 Premises 9 2.02 Appurtenances 9 2.03 Landlord's Fixtures 9 ARTICLE 3 TERM 3.01 Term Commencement 10 3.02 Termination 10 3.03 Estoppel Certificate 10 ARTICLE 4 RENT 4.01 Basic Rent 10 4.02 Adjustment of Basic Rent 10 ARTICLE 5 USE OF PREMISES 5.01 Use Restricted 10 ARTICLE 6 OPERATING EXPENSES; TAXES 6.01 Operating Expenses and Taxes 11 6.02 Monthly Payments of Additional Rent 11 6.03 Annual Statements 11 6.04 Assessments and Other Taxes 12 6.05 Accounting Periods 12 6.06 Abatement of Taxes 12 6.07 Exemption from Taxes 12 ARTICLE 7 IMPROVEMENTS 7.01 Tenant Fit-up 13 7.02 Time for Completion 13 7.03 Notice of Substantial Completion Date 13 7.04 Delays 13 7.05 Tenant's Access to the Premises 14 7.06 Improvements by Tenant 14 ARTICLE 8 BUILDING SERVICES 8.01 Basic Services 15 8.02 Other Janitors 15 8.03 Additional Services 15 8.04 Limitations on Landlord's Liability 15 8.05 Electric Service 15 ARTICLE 9 TENANT'S COVENANTS 9.01 Pay Rent 16 9.02 Occupancy of the Premises 16 9.03 Rules and Regulations 16 9.04 Safety 16 9.05 Equipment 16 9.06 Pay Taxes 17 9.07 Maintenance 17 9.08 Redelivery 17 9.09 Tenant Financial Information 17 ARTICLE 10 COMPLIANCE WITH REQUIREMENTS 10.01 Legal Requirements 18 10.02 Contests 18 10.03 Land Disposition Agreement 18 10.04 Environmental Legal Requirements 18 ARTICLE 11 COVENANT AGAINST LIENS 11.01 No Liens 18 11.02 Discharge 19 ARTICLE 12 ACCESS TO PREMISES 12.01 Access 19 ARTICLE 13 ASSIGNMENT AND SUBLETTING: OCCUPANCY ARRANGEMENTS 13.01 Assignment and Subletting 19 13.02 Procedure 19 ARTICLE 14 INDEMNITY 14.01 Tenant's Indemnity 20 14.02 Claims by Landlord 21 14.03 Landlord's Liability 21 ARTICLE 15 INSURANCE 15.01 Tenant's Insurance 21 15.02 General Insurance Provisions 22 15.03 Landlord's Insurance 23 ARTICLE 16 WAIVER OF SUBROGATION 16.01 Waiver of Subrogation 23 16.02 Waiver of Rights 23 ARTICLE 17 DAMAGE AND RESTORATION 17.01 Substantial Damage 24 17.02 Restoration 24 ARTICLE 18 EMINENT DOMAIN 18.01 Total Taking 24 18.02 Partial Taking 25 18.03 Awards and Proceeds 25 ARTICLE 19 QUIET ENJOYMENT 19.01 Landlord's Covenant 25 19.02 Subordination and Non-Disturbance 25 19.03 Notice to Mortgagee and Ground Lessor 26 19.04 Other Provisions Regarding Mortgagees 26 ARTICLE 20 DEFAULTS; EVENTS OF DEFAULT 20.01 Defaults 26 20.02 Tenant's Best Efforts 27 ARTICLE 21 LANDLORD'S REMEDIES; DAMAGES ON DEFAULT 21.01 Landlord's Remedies 28 21.02 Possession 28 21.03 Right to Relet 28 21.04 Survival of Covenants, Etc 28 21.05 Right to Equitable Relief 29 21.06 Right to Self Help; Interest on Overdue Rent 29 ARTICLE 22 NOTICES 22.01 Notices and Communications 30 22.02 When Effective 30 ARTICLE 23 WAIVERS 23.01 No Waivers 30 ARTICLE 24 SECURITY DEPOSIT 24.01 Security Deposit 31 ARTICLE 25 GENERAL PROVISIONS 25.01 Unavoidable Delays 31 25.02 Estoppel Certificates 31 25.03 Right to Relocate 31 25.04 Holding Over 32 25.05 Governing Law 32 25.06 Partial Invalidity 32 25.07 Notice of Lease 32 25.08 Interpretation 32 25.09 Consents 32 25.10 Entire Agreement; Changes 32 25.11 Binding Effect 33 25.12 Time of the Essence 33 25.13 Table of Contents 33 EXHIBIT A LANDLORD'S SERVICES EXHIBIT B LEASE PLAN EXHIBIT C WORK LETTER EXHIBIT D ESTOPPEL CERTIFICATE EXHIBIT E RENT RIDER RIDER AND ADDENDUM CLERK'S CERTIFICATE CLERK'S CERTIFICATE I, Jim O'Shea, hereby certify that I am the duly elected and qualified Clerk/Assistant Clerk of BIOJECT MEDICAL TECHNOLOGIES, INC., a Massachusetts corporation whose principal place of business is in Cambridge, Massachusetts, and that the following vote was duly adopted by its Board of Directors: "VOTED: That Jim O'Shea, President of Bioject Medical Technologies, Inc. authorized and directed to execute and deliver a lease with Worcester Business Development Corporation, in respect of the premises in the Massachusetts Biotechnology Research Park, located on Innovation Drive in Worcester, Massachusetts known as "Three Biotech Park," upon all the terms set forth in the lease presented to the Directors; and the execution thereof by said President shall be conclusive evidence of the fact that the Lease signed by him was the one presented to and approved by the Directors." I further certify that the foregoing vote is in full force and effect. Dated: April 13, 1998 Attest: James O'Shea Clerk/Assistant Clerk (SEAL) EX-10.57 12 LEASE EXHIBIT 10.57 MASSACHUSETTS BIOTECHNOLOGY RESEARCH PARK SPACE LEASE to BIOJECT MEDICAL TECHNOLOGIES, INC. RIDER AND ADDENDUM The Space Lease of the Premises in the building known as Three Biotech Park from WORCESTER BUSINESS DEVELOPMENT CORPORATION to BIOJECT MEDICAL TECHNOLOGIES, INC. to which this Rider and Addendum is attached is modified and amended by incorporation of the following additional provisions: A. The following provisions (i) will continue in effect so long as Teachers Insurance and Annuity Association of America ("TIAA"), its successors or assigns, holds a mortgage of the Building and will be considered permanent amendments to this Space Lease upon the foreclosure or granting of a deed in lieu of foreclosure of any such mortgage, but (ii) will cease to be in effect automatically upon the discharge of any such mortgage: A-1. Occupancy Arrangements. Notwithstanding the provisions of Article 13 to the contrary, Tenant agrees that Tenant may not enter into an Occupancy Arrangement with a Person who is affiliated with Tenant unless (a) the Person has a net worth, determined in accordance with generally accepted accounting principles, at least equal to Tenant's net worth and (b) the Person agrees to be bound by the obligations of Tenant under the Lease, including, without limitation, the covenant against further Occupancy Arrangements. Tenant agrees not to enter into any Occupancy Arrangement which provides for Rent based in whole or in part on the net income or profits derived by any Person from the Premises, and any such Occupancy Arrangement will be void, provided that nothing in this paragraph A-1 will be deemed to prohibit Occupancy Arrangements which provide for Rent based upon a percentage of sales or receipts. A-2. Hazardous Materials. In addition to and not in limitation of the provisions of Section 10.04, Tenant agrees to execute affidavits, representations and certificates from time to time at Landlord's request concerning Tenant's best knowledge and belief regarding the presence of Hazardous Substances on the Premises. A-3. Tenant's Insurance. In addition to the limits required under Section 15.01, Tenant agrees to keep in force comprehensive general liability insurance against claims for personal injury, death and property damage occurring with respect to Tenant's occupancy of the Premises having primary combined single limit coverage of at least $3,000,000 per occurrence. A-4. Restoration. Notwithstanding the provisions of Article 17, Landlord's obligation to restore the Building following damage by fire or other casualty is limited to the amount of insurance proceeds available to Landlord for restoration purposes. A-5 Partial Taking. Notwithstanding the provisions of Section 18.02, Landlord's obligation to restore the Building following a Partial Taking is limited to the amount of condemnation proceeds available to Landlord for restoration purposes. B. The following provisions will continue in effect throughout the Lease Term: B-1 Delete the definition of "Substantial Completion Date" and insert the following: The date on which the improvements to be constructed by Landlord pursuant to B-3 of this Rider are completed. B-2 The only rent obligation of the Tenant under this Lease shall be the obligation to pay the Basic Rent and notwithstanding Article 6 of this Lease or any other term or provision of this Lease, no Additional Rent shall be owing to the Landlord. B-3 The Exclusive Premises shall be remodeled for Tenant's use at the cost of Landlord as follows: a. Install a demising partition to create separate office areas 425 and 425A. b. Install a new entry door and sidelight from Common Corridor A into Office 425A. c. Install a new door from Office 425A into Lab 429. d. Remove existing casework and partition and create new opening between Lab 429 and Lab 430A. e. Install new 8-foot frame hood and associated mechanical and plumbing systems in Lab 430A. B-4 Upon execution of this Lease, Tenant shall pay $7,500.00 to Landlord to be applied to the cost of the frame hood to be installed by Landlord pursuant to B-3 of this Rider. If Tenant and Landlord enter a new lease or lease extension of at least one (1) year in length, Landlord agrees to provide a credit to Tenant against rent due under the new lease or the extension in the amount of $7,500.00. B-5 Landlord agrees to clean the Premises, repair any damaged surfaces, repaint walls as needed, and ensure that all building systems serving the Premises are in working order. B-6 Article 6 and Article 24 are deleted in their entirety. B-7 Sections 7.01, 7.02, 7.03, 7.04 and 8.05 are deleted in their entirety. B-8 Exhibit D and Exhibit E are deleted in their entirety. EX-10.58 13 RESTATED 1992 STOCK INCENTIVE PLAN EXHIBIT 10.58 BIOJECT MEDICAL TECHNOLOGIES INC. RESTATED 1992 STOCK INCENTIVE PLAN Restated Effective April 15, 1998 1. Purpose. The purpose of this Restated 1992 Stock Incentive Plan (the "Plan") is to enable Bioject Medical Technologies Inc., an Oregon corporation (the "Company"), to attract and retain the services of (a) selected employees, officers and directors of the Company or of any parent or subsidiary corporation of the Company, and (b) selected nonemployee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary. 2. Subject to the Plan. Subject to adjustment as provided below and in paragraph 11, up to 3,650,000 shares of Common Stock of the Company (the "Shares") shall be offered and issued under the Plan. No more than 3,000,000 of such Shares offered and issued under the Plan may be offered and issued pursuant to grants under the Plan of Incentive Stock Options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). If an option or a stock appreciation right granted under the Plan expires, terminates or is cancelled, the unissued Shares subject to such option or stock appreciation right shall again be available under the Plan. If Shares sold or awarded as a bonus under the Plan are forfeited to the Company or repurchased by the Company, the number of Shares forfeited or repurchased shall again be available under the Plan. 3. Effective Date and Duration of Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors of the Company (the "Board"). However, no option granted under the Plan shall become exercisable until the Plan is approved by the affirmative vote of the holders of a majority of the Common Stock of the Company represented at a shareholder meeting at which a quorum is present, and any such awards under the Plan prior to such approval shall be conditioned on and subject to such approval. Subject to this limitation, options and stock appreciation rights may be granted and Shares may be awarded as bonuses or sold under the Plan at any time after the effective date and before termination of the Plan. (b) Duration. No options or stock appreciation rights may be granted under the Plan, no stock bonuses may be awarded under the Plan, and no Shares may be sold pursuant to paragraph 8 of the Plan on or after July 29, 2002. However, the Plan shall continue in effect until all Shares available for issuance under the Plan have been issued and all restrictions on such Shares have lapsed. The Board may suspend or terminate the Plan at any time, except with respect to options, stock appreciation rights and Shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding options, stock appreciation rights, any right of the Company to repurchase Shares or the forfeitability of Shares issued under the Plan. 4. Administration. (a) The Plan shall be administered by a committee appointed by the Board consisting of not less than two directors (the "Committee"). The Committee shalldetermine and designate from time to time the individuals to whom awards shall be made, the amount of the awards, and the other terms and conditions of the awards; provided, however, that only the Board may amend or terminate the Plan as provided in paragraphs 3 and 14. At any time when the officers and directors of the Company are subject to Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall consist solely of "non-employee" directors as such term is defined from time to time in SEC Rule 16b-3(b)(3)(i) or successor rule. No member of the Committee shall be eligible to receive any award under the Plan while such person serves as a Committee member, except pursuant to paragraph 10. (b) Subject to the provisions of the Plan, the Committee may from time to time adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any vesting or exercise date, waive or modify any restriction applicable to Shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. 5. Types of Awards; Eligibility. The Committee may, from time to time, take the following actions under the Plan: (i) grant Incentive Stock Options, as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options ("Nonstatutory Stock Options") as provided in paragraph 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell Shares as provided in paragraph 8; and (v) grant stock appreciation rights as provided in paragraph 9. Any such awards may be made to employees (including employees who are officers or directors) of the Company or of any parent or subsidiary corporation of the Company, and to other individuals described in paragraph 1 who the Committee believes have made or will make an important contribution to the Company or its parent or subsidiaries; provided, however, that only employees of the Company or a parent or subsidiary shall be eligible to receive Incentive Stock Options under the Plan, and, provided further, that directors who are not employees shall receive awards only pursuant to paragraph 10. The Committee shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made under the Plan. At the discretion of the Committee, an individual may be given an election to surrender an award in exchange for the grant of a new award. 6. Option Grants (a) Grant. Each option granted under the Plan shall be evidenced by a stock option agreement in such form as the Committee shall prescribe from time to time in accordance with the Plan. With respect to each option grant, the Committee shall determine the number of Shares subject to the option, the option price, the period of the option, and the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Nonstatutory Stock Option. (b) Incentive Stock Options. Incentive Stock Options granted under the Plan shall be subject to the following terms and conditions: (i) No employee may be granted Incentive Stock Options under the Plan such that the aggregate fair market value, on the date of grant, of the Shares with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of the Code) of the Company or of any parent or subsidiary corporation of the Company exceeds $100,000. (ii) An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary corporation of the Company only if the option price is at least 110 percent of the fair market value, as described in paragraph 6(b)(iv), of the Shares subject to the option on the date it is granted, and the option by its terms is not exercisable more than five years from the date of grant. (iii) Subject to paragraphs 6(b)(ii) and 6(d), Incentive Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee, except that no Incentive Stock Option shall be exercisable more than 10 years from the date of grant. (iv) The option price per Share shall be determined by the Committee at the time of grant. Subject to paragraph 6(b)(ii), the option price shall not be less than 100 percent of the fair market value of the Shares covered by the Incentive Stock Option at the date the option is granted. The fair market value shall be deemed to be the average of the closing bid and asked prices for the Common Stock of the Company as reported on the National Association of Securities Dealers, Inc. Automated Quotation System on the day preceding the day the option is granted, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Common Stock of the Company as shall be specified by the Committee. (v) The Committee may at any time without the consent of the optionee convert an Incentive Stock Option into a Nonstatutory Stock Option. (c) Nonstatutory Stock Options. Nonstatutory Stock Options shall be subject to the following additional terms and conditions: (i) The option price for Nonstatutory Stock Options shall be determined by the Committee at the time of grant. The option price may not be less than 75 percent of the fair market value of the Shares covered by the Nonstatutory Stock Option on the date of grant. The fair market value of the Shares covered by a Nonstatutory Stock Option shall be determined pursuant to paragraph 6(b)(iv). (ii) Nonstatutory Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee. (d) Exercise of Options. Except as provided in paragraphs 6(e) and (f) or as determined by the Committee, no option granted under the Plan may be exercised unless at the time of such exercise the optionee is employed by or in the service of the Company or any parent or subsidiary corporation of the Company and shall have been so employed or have provided such service continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Committee shall not, however, be deemed an interruption of employment for purposes of the Plan. Unless otherwise determined by the Committee, vesting of options shall not continue during an absence on leave (including an extended illness) or on account of disability. Except as provided in paragraphs 6(f), 11 and 12, options granted under the Plan may vest and be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Committee, provided that options shall not be exercised for fractional shares. Unless otherwise determined by the Committee, if the optionee does not exercise an option in any one year with respect to the full number of Shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase those Shares in any subsequent year during the term of the option. (e) Restrictions on Transfer. Each option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and each option by its terms shall be exercisable during the optionee's lifetime only by the optionee; provided, however, that, with the consent of the Committee, which consent may be withheld in its sole discretion or conditioned on such requirements as the Committee shall deem appropriate, an officer or director of the Company who is subject to Section 16(b) of the Exchange Act may assign or transfer without consideration all or any portion of a Nonstatutory Stock Option granted under the Plan to such officer's or directors spouse (or former spouse) pursuant to a qualified domestic relations order. The holder of any Nonstatutory Stock Option that has been transferred pursuant to this paragraph 6(e) may be subject to treatment under tax and securities laws with respect to the transferred option which differs from the treatment to which the applicable officer or director was subject with respect to the option prior to the transfer. (f) Termination of Employment or Service. (i) In the event the employment or service of the optionee by the Company or a parent or subsidiary corporation of the Company terminates for any reason other than because of death or physical disability, the option may be exercised at any time prior to the expiration date of the option or the expiration of three months (one year in the case of officers and two years in the case of directors)after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. (ii) In the event of the termination of the optionee's employment or service with the Company or a parent or subsidiary corporation of the Company because the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code), the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. (iii) In the event of the death of an optionee while employed by or providing service to the Company or a parent or subsidiary corporation of the Company, the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such death, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option on the date of death, and only by the person or persons to whom such optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death. (iv) The Committee, at the time or grant or at any time thereafter, may extend the three-month and one-year expiration periods any length of time not later than the original expiration date of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Committee may determine. (v) To the extent that the option of any deceased optionee or of any optionee whose employment or service terminates is not exercised within the applicable period, all further rights to purchase Shares pursuant to such option shall cease and terminate. (g) Purchase of Shares. Unless the Committee determines otherwise, Shares may be acquired pursuant to an option only upon receipt by the Company of notice in writing from the optionee of the optionee's intention to exercise, specifying the number of Shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and, if required to comply with the Securities Act of 1933, as amended, or state securities laws, the notice shall include a representation that it is the optionee's present intention to acquire the Shares for investment and not with a view to distribution. The certificates representing the Shares shall bear any legends required by the Committee. Unless the Committee determines otherwise, on or before the date specified for completion of the purchase of Shares pursuant to an option, the optionee must have paid the Company the full purchase price of such Shares in cash (including, with the consent of the Committee, cash that may be the proceeds of a loan from the Company), or, with the consent of the Committee, in whole or in part, in Shares valued at fair market value, as determined pursuant to paragraph 6(b)(iv). Unless the Committee determines otherwise, all payments made to the Company in connection with the exercise of an option must be made by a certified or cashier's bank check or by the transfer of immediately available federal funds. No Shares shall be issued until full payment therefor has been made. With the consent of the Committee, an optionee may request the Company to apply automatically the Shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the optionee by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, an optionee may deliver Shares to the Company to satisfy the withholding obligation. 7. Stock Bonuses. The Committee may award Shares under the Plan as stock bonuses. Shares awarded as a stock bonus shall be subject to such terms, conditions, and restrictions as shall be determined by the Committee, all of which shall be evidenced in a writing signed by the recipient prior to receiving the bonus Shares. The Committee may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The certificates representing the Shares awarded shall bear any legends required by the Committee. The Company may require any recipient of a stock bonus to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the recipient by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a recipient may deliver Shares to the Company to satisfy the withholding obligation. 8. Stock Sales. The Committee may issue Shares under the Plan for such consideration (including promissory notes and services) as determined by the Committee, provided that in no event shall the consideration be less than 75 percent of the fair market value of the Shares at the time of issuance, determined pursuant to paragraph 6(b)(iv). Shares issued under this paragraph 8 shall be subject to the terms, conditions and restrictions determined by the Committee. The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the Shares issued, together with such other restrictions as may be determined by the Committee. The certificates representing the Shares shall bear any legends required by the Committee. The Company may require any purchaser of stock issued under this paragraph 8 to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the purchaser fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the purchaser by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a purchaser may deliver Shares to the Company to satisfy the withholding obligation. 9. Stock Appreciation Rights. (a) Grant. Stock appreciation rights may be granted under the Plan by the Committee, subject to such rules, terms, and conditions as the Committee prescribes. (b) Exercise. (i) A stock appreciation right shall be exercisable only at the time or times established by the Committee. If a stock appreciation right is granted in connection with an option, the stock appreciation right shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a stock appreciation right, any option or portion thereof to which the stock appreciation right relates terminates. If a stock appreciation right is granted in connection with an option, upon exercise of the option, the stock appreciation right or portion thereof to which the option relates terminates. (ii) The Committee may withdraw any stock appreciation right granted under the Plan at any time and may impose any conditions upon the exercise of a stock appreciation right or adopt rules and regulations from time to time affecting the rights of holders of stock appreciation rights. Such rules and regulations may govern the right to exercise stock appreciation rights granted before adoption or amendment of such rules and regulations as well as stock appreciation rights granted thereafter. (iii) Each stock appreciation right shall entitle the holder, upon exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one Share over its fair market value on the date of grant (or, in the case of a stock appreciation right granted in connection with an option, the option price per Share under the option to which the stock appreciation right relates), multiplied by the number of Shares covered by the stock appreciation right or the option, or portion thereof, that is surrendered. No stock appreciation right shall be exercisable at a time that the amount determined under this subparagraph is negative. Payment by the Company upon exercise of a stock appreciation right may be made in Shares valued at fair market value, in cash, or partly in Shares and partly in cash, all as determined by the Committee. (iv) For purposes of this paragraph 9, the fair market value of the Shares shall be determined pursuant to paragraph 6(b)(iv), on the trading day preceding the date the stock appreciation right is exercised. (v) No fractional Shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash may be paid in an amount equal to the value of the fraction or, if the Committee shall determine, the number of Shares may be rounded downward to the next whole Share. (vi) Each participant who has exercised a stock appreciation right shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the participant fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the participant by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a participant may satisfy this obligation, in whole or in part, by having the Company withhold from any Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Shares to the Company to satisfy the withholding amount. (vii) Upon the exercise of a stock appreciation right for Shares, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued. Cash payments of stock appreciation rights shall not reduce the number of Shares reserved for issuance under the Plan. 10. Option Grants to Non-Employee Directors. (a) Automatic Grants. Immediately after the close of each annual shareholder meeting (commencing with the 1993 annual meeting), each person then serving as a Non-Employee Director, including any such person who is elected at such meeting, shall automatically be granted a Nonstatutory Stock Option to purchase 17,500 Shares. For purposes of this paragraph, a "Non-Employee Director" is a director of the Company who is not an employee of the Company or of any parent or subsidiary corporation of the Company on the date the option is granted. (b) Terms of Options. The exercise price for options granted under this paragraph 10 shall be the fair market value of the Shares on the date of grant, determined pursuant to paragraph 6(b)(iv). Each such option shall have an eight-year term from the date of grant, unless earlier terminated as provided in paragraph 6(f), and shall vest and become exercisable with respect to 8,750 shares six months after the date of grant, with the remaining 8,750 shares vesting and becoming exercisable on the first anniversary of the date of grant. 11. Changes in Capital Structure. If the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any recapitalization, reclassification, stock split, combination of shares or dividend payable in shares, the Committee shall make appropriate adjustments (i) in the number and kind of shares available for awards under the Plan; and (ii) in the number and kind of shares as to which outstanding options and stock appreciation rights, or portions thereof then unexercised, shall be exercisable, so that the participant's proportionate interest before and after the occurrence of the event is maintained, provided that this paragraph 11 shall not apply with respect to transactions referred to in paragraph 12. The Committee may also require that any securities issued in respect of or exchanged for Shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any such adjustment made by the Committee shall be conclusive. 12. Effect of Reorganization or Liquidation. (a) Cash, Stock or Other Property for Stock. Except as provided in paragraph 12(b), upon a merger, consolidation, reorganization, plan of exchange or liquidation involving the Company, as a result of which the shareholders of the Company receive cash, stock or other property in exchange for or in connection with their Common Stock (any such transaction to be referred to in this paragraph 12 as an "Accelerating Event"), any option or stock appreciation right granted hereunder shall terminate, but the optionee shall have the right during a 30-day period immediately prior to any such Accelerating Event to exercise his or her option or stock appreciation right, in whole or in part, without any limitation with respect to vesting or exercisability (b) Stock for Stock. If the shareholders of the Company receive capital stock of another corporation ("Exchange Stock") in exchange for their Common Stock in any transaction involving a merger, consolidation, reorganization, or plan of exchange, all options granted hereunder shall be converted into options to purchase shares of Exchange Stock and all stock appreciation rights granted hereunder shall be converted into stock appreciation rights measured by the Exchange Stock, unless the Committee, in its sole discretion, determines that any or all such options or stock appreciation rights granted hereunder shall not be converted, but instead shall terminate in accordance with the provisions of paragraph 12(a). The amount and price of converted options and stock appreciation rights shall be determined by adjusting the amount and price of the options or stock appreciation rights granted hereunder to take into account the relative values of the Exchange Stock and the Common Stock in the transaction. (c) The rights set forth in this paragraph 12 shall be transferable only to the extent the related option or stock appreciation right is transferable. 13. Corporate Mergers, Acquisitions, Etc. The Committee may also grant options, grant stock appreciation rights, award stock bonuses and sell stock under the Plan having terms, conditions and provisions that vary from those specified in the Plan; provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock appreciation rights, stock bonuses and stock sold or awarded by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a parent or subsidiary corporation of the Company is a party. 14. Amendment of Plan. The Board may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason. Except as provided in paragraphs 6(b)(v), 11, 12 and 13, however, no change in an award already granted shall be made without the written consent of the holder of such award. 15. Approvals. The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company shall not be obligated to issue or deliver Shares under the Plan if such issuance or delivery would violate applicable state or federal securities laws, or if compliance with such laws would, in the opinion of the Company, be unduly burdensome or require the disclosure of information which would not be in the Company's best interests. 16. Employment and Service Rights. Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon any employee any right to be continued in the employment of the Company or any parent or subsidiary corporation of the Company or shall interfere in any way with the right of the Company or any parent or subsidiary corporation of the Company by whom such employee is employed to terminate such employee's employment at any time, for any reason, with or without cause, or to increase or decrease such employee's compensation or benefits; or (ii) confer upon any person engaged by the Company or any parent or subsidiary corporation of the Company any right to be retained or employed by the Company or the parent or subsidiary or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company or the parent or subsidiary. 17. Rights as a Shareholder. The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Shares until the date of issue to the recipient of a stock certificate for such Shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. EX-21 14 SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF BIOJECT MEDICAL TECHNOLOGIES, INC. 1. Bioject, Inc. 2. Bioject JV Subsidiary, Inc. (80.1% owned) EX-23 15 CONSENT OF ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated April 30, 1998 included in this Form 10-K for the year ended March 31, 1998, into the Company's previously filed Registration Statements on Form S-3, File Nos. 33-80679, 333-18933, 333-30955 and 333-39421, and Registration Statements on Form S-8, File Nos. 33-94400, 33-56454, 33-42156 and 333-37017. /S/ ARTHUR ANDERSEN LLP Portland, Oregon June 26, 1998 EX-27 16 3-31-98 FINANCIALS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FILED AS PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K. 1 YEAR MAR-31-1998 APR-01-1997 MAR-31-1998 1,900,839 0 236,726 83,005 1,891,970 4,021,822 4,439,763 1,947,006 6,977,610 1,002,726 0 0 9,317,446 47,557,297 0 6,977,610 1,435,107 1,935,107 1,749,064 1,749,064 19,408,247 0 390,411 (19,502,632) 0 (19,502,632) 0 0 0 (16,629,667) (.72) (.72)
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