EXHIBIT 10.1

 

 

BIOJECT MEDICAL TECHNOLOGIES INC.

 

SERIES D CONVERTIBLE PREFERRED STOCK

 

WARRANTS TO PURCHASE COMMON STOCK

 

PURCHASE AGREEMENT

 

NOVEMBER 15, 2004

 

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Table of Contents

 

1.

AGREEMENT TO SELL AND PURCHASE

 

1.1

 

Authorization of Shares

 

1.2

 

Sale and Purchase

 

2.

CLOSING, DELIVERY AND PAYMENT

 

2.1

 

Closing

 

2.2

 

Delivery

 

3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

3.1

 

Organization, Good Standing and Qualification

 

3.2

 

Subsidiaries

 

3.3

 

Capitalization; Voting Rights

 

3.4

 

Authorization; Binding Obligations

 

3.5

 

Financial Statements

 

3.6

 

Liabilities

 

3.7

 

Agreements; Action

 

3.8

 

Obligations to Related Parties

 

3.9

 

Changes

 

3.10

 

Title to Properties and Assets; Liens, Etc.

 

3.11

 

Intellectual Property

 

3.12

 

Compliance with Other Instruments

 

3.13

 

Litigation

 

3.14

 

Tax Returns and Payments

 

3.15

 

Employees

 

3.16

 

Obligations of Management

 

3.17

 

Registration Rights

 

3.18

 

Compliance with Laws; Permits

 

3.19

 

Environmental and Safety Laws

 

3.20

 

Offering Valid

 

3.21

 

Full Disclosure

 

3.22

 

Minute Books

 

3.24

 

Insurance

 

4.

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

4.1

 

Requisite Power and Authority

 

4.2

 

Investment Representations

 

4.3

 

Transfer Restrictions

 

5.

CONDITIONS TO CLOSING

 

5.1

 

Conditions to Investor’ Obligations at the Closing

 

5.2

 

Conditions to Obligations of the Company

 

6.

MISCELLANEOUS

 

6.1

 

Governing Law

 

6.2

 

Survival

 

6.3

 

Expenses

 

6.4

 

Attorneys’ Fees

 

6.5

 

Successors and Assigns

 

 

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6.6

 

Entire Agreement

 

6.7

 

Severability

 

6.8

 

Amendment and Waiver

 

6.9

 

Delays or Omissions

 

6.10

 

Notices

 

6.11

 

Titles and Subtitles

 

6.12

 

Counterparts

 

6.13

 

Broker’s Fees

 

6.15

 

Public Announcements and Confidentiality

 

6.16

 

Investors Business Activities

 

6.17

 

Exculpation Among Investors

 

6.18

 

Pronouns

 

 

List of Exhibits

 

Schedule of Purchasers

 

Exhibit A

Articles of Amendment

 

Exhibit B

Form of Warrant

 

Exhibit C

Registration Rights Agreement

 

Exhibit D

Form of Legal Opinion

 

Exhibit E

Second Amendment to Rights Agreement

 

Exhibit F

 

 

 

Schedule of Exceptions

 

 

 

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BIOJECT MEDICAL TECHNOLOGIES INC.

 

SERIES D CONVERTIBLE PREFERRED STOCK

 

WARRANTS TO PURCHASE COMMON STOCK

 

PURCHASE AGREEMENT

 

This Purchase Agreement (this “Agreement”) is made and entered into as of
November 15, 2004, by and among Bioject Medical Technologies Inc., an Oregon
corporation (the “Company”), and the investors whose names and addresses are set
forth on the Schedule of Purchasers attached hereto as EXHIBIT A (individually,
an “Purchaser” and, collectively, the “Purchasers”).

 

RECITALS

 

The Company has authorized the sale and issuance of an aggregate of 2,086,957
shares of its Series D Convertible Preferred Stock pursuant to this Agreement
(the “Shares”) and warrants to purchase common stock (“Warrants”) representing
the right to purchase an aggregate of 626,087 shares of common stock, no par
value (“Common Stock”) of the Company.

 

The Purchasers desire to purchase the Shares on the terms and conditions set
forth herein.

 

The Company desires to issue and sell the Shares to the Purchasers on the terms
and conditions set forth herein.

 

AGREEMENT

 

In consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:

 

1.                                      AGREEMENT TO SELL AND PURCHASE.

 

1.1                               Authorization of Shares.  On or prior to the
Closing (as hereinafter defined), the Company shall have authorized (a) the sale
and issuance to the Purchasers of the Shares and the Warrants and (b) the
issuance of such shares of Common Stock to be issued upon conversion of the
Shares and exercise of the Warrants (the “Conversion Shares”).  The Shares shall
have the rights, preferences, privileges and restrictions set forth in the
Articles of Amendment to the Company’s 2002 Restated Articles of Incorporation,
in the form attached hereto as EXHIBIT B (the “Articles of Amendment”), and the
Warrant shall be in the form attached hereto as EXHIBIT C.

 

1.2                               Sale and Purchase.  Subject to the terms and
conditions hereof, at the Closing the Company hereby agrees to issue and sell to
each Purchaser, severally and not jointly, and each Purchaser agrees to purchase
from the Company, severally and not jointly, the number

 

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of Shares and Warrants set forth opposite each Purchaser’s name on EXHIBIT A at
a purchase price of $1.15 per one Share and a Warrant to purchase 0.3 shares of
Common Stock.

 

2.                                      CLOSINGS, DELIVERY AND PAYMENT.

 

2.1                               Closing.  The closing of the sale and purchase
of the Shares and the Warrants under this Agreement (the “Closing”) shall take
place at 9:00 a.m. on November 15, 2004, at the offices of the Company in
Bedminster, New Jersey, or at such other time or place as the Company and the
Purchasers may mutually agree (such date is hereinafter referred to as the
“Closing Date”).

 

2.2                               Delivery at Closing.  At the Closing, subject
to the terms and conditions hereof, the Company will deliver to each Purchaser
one or more certificates registered in the name of the Purchaser, or in such
nominee name(s) as designated by each Purchaser in writing, representing the
number of Shares and one or more certificates registered in the name of the
Purchaser, or in such nominee name(s) as designated by each Purchaser in
writing, representing the number of Warrants to be purchased at the Closing by
such Purchaser. The name(s) in which certificates are to be registered are as
set forth on EXHIBIT A. The Company’s obligation to complete the purchase and
sale of the Shares and Warrants being purchased hereunder and deliver such
certificates to the Purchasers at the Closing shall be subject to the following
conditions:  (a) receipt by the Company of same-day funds in the full amount of
the purchase price for the Shares and Warrants being purchased hereunder and (b)
the accuracy in all material respects of the representations and warranties made
by the Purchasers and the fulfillment of those undertakings of the Purchasers to
be fulfilled prior to or at the Closing.  The Purchasers’ obligation to accept
delivery of such certificates and to pay for the Shares and the Warrants
evidenced thereby shall be subject to the accuracy in all material respects of
the representations and warranties made by the Company herein and the
fulfillment of those undertakings of the Company to be fulfilled prior to or at
the Closing.

 

3.                                      REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.

 

Except as set forth on a Schedule of Exceptions delivered by the Company to the
Purchasers at the Closing (the “Schedule of Exceptions”) specifically
identifying the relevant Section or Sections hereof and except as disclosed in
the Company’s publicly available filings made with the Securities and Exchange
Commission, the Company hereby represents and warrants to each Purchaser as of
the date of this Agreement as set forth below.

 

3.1                               Organization, Good Standing and
Qualification.  The Company is a corporation duly organized and validly existing
under the laws of the State of Oregon.  The Company has all requisite corporate
power and authority to own and operate its properties and assets, to execute and
deliver the Articles of Amendment, this Agreement, the Warrants, the
Registration Rights Agreement in the form attached hereto as EXHIBIT D (the
“Registration Rights Agreement”), and any other agreements contemplated hereby
(collectively, the “Transaction Documents”), to issue and sell the Shares, the
Warrants, the Conversion Shares, and to carry out the provisions of the
Transactions Documents and to carry on its business as presently conducted.  The
Company is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature of
its activities and

 

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of its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
Material Adverse Effect (as hereinafter defined).

 

3.2                               Subsidiaries.  The Company does not own or
control any equity security or other interest of any other corporation, limited
partnership or other business entity other than Bioject, Inc. and Marathon
Medical Technologies, Inc.  The Company is not a participant in any joint
venture, partnership, or similar arrangement.

 

Each of the Company’s subsidiaries has been duly organized and is validly
existing in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as conducted and as proposed to be
conducted, and is duly qualified and is in good standing as a foreign
corporation in each jurisdiction in which such qualification is required, except
where the failure to be so qualified will not have a Material Adverse Effect. 
All of the issued and outstanding capital stock of each such subsidiary has been
duly authorized and validly issued, is duly paid and nonassessable and is owned
by the Company free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; and none of the outstanding shares of capital
stock of each such subsidiary was issued in violation of any preemptive or
similar rights of any third party.

 

3.3                               Capitalization.

 

(a)                                  The authorized capital stock of the
Company, immediately prior to the Closing, consists of (i) 100,000,000 shares of
common stock, no par value per share (“Common Stock”), 13,667,114 shares of
which are issued and outstanding and (ii) 10,000,000 shares of preferred stock,
no par value per share (“Preferred Stock”), (A) 1,235,000 shares of which are
designated Series A Preferred Stock (the “Series A Preferred”), of which no
shares are issued and outstanding,  (B) 200,000 shares of which are designated
Series B Preferred Stock (the “Series B Preferred”), of which no shares are
issued and outstanding, (C) 500,000 shares of which are designated Series C
Preferred Stock (the “Series C Preferred”), of which no shares are issued and
outstanding, and (D) 12,500 shares of which are designated Series R
Participating Preferred Stock, of which no shares are issued and outstanding.

 

(b)                                  (i) No shares have been issued pursuant to
restricted stock purchase agreements, (ii) options to purchase 2,124,539 shares
of Common Stock have been granted and are currently outstanding, and (iii) the
Company has reserved an additional 1,037,894 shares of Common Stock for future
issuance to officers, directors, employees and consultants of the Company,
including at the discretion of the Company’s Board of Directors, as part of a
stock incentive option plan.

 

(c)                                  Other than (i) as set forth in Section 3.3
of the Disclosure Schedule, (ii) the shares reserved for issuance under Section
3.3(b)(ii), and (iii) except as may be granted pursuant to this Agreement and
the Registration Rights Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal,
whether in favor of the Company or any other person), proxy or stockholder

 

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agreements, or agreements of any kind for the purchase or acquisition from the
Company of any of its securities.

 

(d)                                  All issued and outstanding shares of the
Common Stock and Preferred Stock (i) have been duly authorized and validly
issued, are fully paid and nonassessable, (ii) were issued in compliance with
all applicable state and federal laws concerning the issuance of securities, and
(iii) were not issued in violation or subject to any preemptive rights or other
rights to subscribe for or purchase securities.

 

(e)                                  The rights, preferences, privileges, and
restrictions of the Shares are as stated in the Articles of Amendment.  The
Conversion Shares have been duly and validly reserved for issuance. When issued
in compliance with the provisions of this Agreement and the Articles of
Amendment and the Warrants, as the case may be, the Shares and the Conversion
Shares will be validly issued, fully paid and nonassessable, and, except as
provided in the Registration Rights Agreement, will be free of any liens or
encumbrances; provided, however, that the Shares and the Conversion Shares may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time a
transfer is proposed.

 

(f)                                    No stock plan, stock purchase, stock
option, or other agreement or understanding between the Company and any holder
of any equity securities or rights to purchase equity securities provides for
acceleration or other changes in the vesting provisions or other terms of such
agreement or understanding as the result of (i) termination of employment
(whether actual or constructive); or (ii) the occurrence of any other event or
combination of events.  The Company reasonably believes that the shares of
Common Stock available for future issuance shall be sufficient to meet the
Company’s equity incentive needs for at least the 12 month period following the
Closing.

 

(g)                                 The sale of the Shares and the Warrants, the
subsequent conversion of the Shares into Conversion Shares, ands the issuance of
Conversion Shares upon exercise of the Warrant are not and will not be subject
to any preemptive rights or rights of first refusal that have not been properly
waived or complied with.

 

(h)                                 No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Shares or the Warrants to be sold by the Company as
contemplated herein or for the issuance and delivery of the Conversion Shares.

 

3.4                               Authorization; Binding Obligations.  All
corporate action on the part of the Company, its officers, directors, and
stockholders necessary for the authorization of this Agreement and the other the
Transaction Documents, the performance of all obligations of the Company
hereunder and thereunder at the Closing and the authorization, sale, issuance,
and delivery of the Shares and the Warrants pursuant hereto and the Conversion
Shares pursuant to the Articles of Amendment and the Warrants, as the case may
be, has been taken or will be taken prior to the Closing.

 

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The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions therein
contemplated will not result in the creation of any lien, charge, security
interest or encumbrance upon any assets of the Company pursuant to the terms or
provisions of, or conflict with, result in the breach or violation of, or
constitute, either by itself or upon notice or the passage of time or both, a
default under any material agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which the Company is a party
or by which the Company or any of its properties may be bound or affected and in
each case which individually or in the aggregate would have a material adverse
effect on the condition (financial or otherwise), properties, business, or
results of operations of the Company and its subsidiaries, taken as a whole (a
“Material Adverse Effect”), or any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its respective properties.  No consent, approval, authorization or other
order of, or filing with, any court, regulatory body, administrative agency, or
other governmental body is required for the execution and delivery of the
Transaction Documents or the consummation of the transactions contemplated by
the Transaction Documents, except for (a) the filing of the Articles of
Incorporation, which will be filed on the Closing Date, (b) filings pursuant to
Regulation D of the Securities Act, and applicable state securities laws, which
have been made or will be made in a timely manner, and (c) the filing of the
required notice to the NASDAQ Stock Market.

 

The Transaction Documents when executed and delivered, will be valid and binding
obligations of the Company enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors’ rights,
(b) as limited by general principles of equity that restrict the availability of
equitable remedies, and (c) to the extent that the enforceability of the
indemnification provisions in Section 9 of the Registration Rights Agreement may
be limited by applicable laws.

 

3.5                               Exchange Act Filings; Listing.  During the
twelve (12) calendar months immediately preceding the date of this Agreement,
all reports and statements required to be filed by the Company with the
Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and the rules and regulations thereunder,
have been timely filed. Such filings, together with all documents incorporated
by reference therein, are referred to as “Exchange Act Documents.” The Company’s
Common Stock is quoted on the NASDAQ Stock Market.  As of the Closing Date, the
Company meets all the requirements for continued listing on the NASDAQ Stock
Market, and to the best of the Company’s knowledge, there is no stop order
suspending the trading of the Common Stock on the NASDAQ Stock Market or any
information which would result in the Common Shares being delisted from the
NASDAQ Stock Market.

 

3.6                               Additional Information.  A true and complete
copy of each report, schedule, registration statement, and definitive proxy
statement filed by the Company with the SEC under the Exchange Act during the
twelve (12) months preceding the Closing Date (as such documents have since the
time of their filing been amended, the “Information Documents”), which are all
the documents (other than preliminary material) that the Company was required to
file with the SEC since such date, has been made available to the Purchasers. 
As of their

 

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respective dates, the Information Documents and any forms, reports and other
documents filed by the Company during the period commencing on the date of this
Agreement and ending on the last date on which the Company is required to
maintain the effectiveness of the registration statement referred to in the
Registration Rights Agreement (the “Registration Statement”), complied or will
comply in all material respects with the requirements of the Securities Act of
1933 (the “Securities Act”) or the Exchange Act, as the case may be, and the
rules and regulations of the Commission thereunder applicable to the Information
Documents or such other forms, reports or other documents, and none of the
Information Documents contained, or will contain at the time they are filed, any
untrue statement of a material fact or omitted, or will omit at the time they
are filed, to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.

 

3.7                               Financial Statements.  The Company has made
available to the Purchaser its (or to the extent applicable, those of any
predecessor in interest) (a) The audited financial statements, together with the
related notes of the Company at December 31, 2003 and December 31, 2002, and for
the year and transitional period then ended, respectively, included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2003 (the
“2003 Statements”), and (b) the unaudited financial statements of the Company at
September 30, 2004 (the “Statement Date”), and for the nine months then ended,
(the “Year to Date Statements and together with the 2003 Statements, “Financial
Statements”) included in the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004.  The Financial Statements (a) represent actual
bona fide transactions, (b) have been prepared from the books and records of the
Company in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, except as disclosed therein
or in the Schedule of Exceptions, and (c) fairly present, on the basis stated
therein and on the date thereof, the financial condition and position of the
Company as of December 31, 2003, and the Statement Date and its results of
operations and cash flows for the periods then ended; provided, however, that
the Year-to-Date Statements are subject to normal recurring year-end adjustments
(which are not expected to be material either individually or in the aggregate),
and omit all footnotes required under generally accepted accounting principles.

 

The books of account and other records of the Company are complete and correct
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls.

 

3.8                               Liabilities.  The Company has no material
liabilities and, to the best of its knowledge, knows of no material contingent
liabilities, in each case except as disclosed in the Financial Statements and
except for current liabilities incurred in the ordinary course of business
subsequent to the Statement Date that are not material, either in any individual
case or in the aggregate.

 

3.9                               Agreements; Action.

 

(a)                                  Except for the Registration Rights
Agreement or other contracts or agreements referred to or contemplated herein or
therein, there are no material agreements,

 

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understandings or proposed transactions between the Company and any of its
officers, directors, affiliates or any affiliate thereof.

 

(b)                                  Since the Statement Date, the Company has
not (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or any other liabilities (other than with
respect to dividend obligations, distributions, indebtedness and other
obligations incurred in the ordinary course of business or as disclosed in the
Financial Statements) individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$200,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.  For the purposes of this subsection, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.

 

(c)                                  Other than as described in the Schedule of
Exceptions, the Company is not under any binding obligation to any third party
(other than obligations to keep information or discussions confidential) as a
result of any discussion or negotiation undertaken in the past twelve months
relating to  (i) the consolidation or merger of the Company with or into any
such corporation or corporations, (ii) the sale, conveyance, or disposition of
all or substantially all of the assets of the Company, or a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or (iii)  any other form of acquisition, liquidation,
dissolution, or winding up, of the Company.

 

3.10                        Obligations to Related Parties.  Except as set forth
on the Schedule of Exceptions, there are no obligations of the Company to
officers, directors or employees of the Company other than (a) for payment of
salary for services rendered, (b) reimbursement for reasonable expenses incurred
on behalf of the Company, (c) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company), and (d) obligations for indemnification under the Company’s
organizational documents and applicable law.  Except as set forth on the
Schedule of Exceptions, none of the officers, directors or key employees of the
Company, or any members of their immediate families, are indebted to the Company
or, to the Company’s knowledge, have any direct or, to the best of the Company’s
knowledge, indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation which competes with the Company, other than passive
investments in publicly traded companies (representing less than 1% of such
company) which may compete with the Company.  No officer or director, or any
member of their immediate families, is, directly or, to the best of the
Company’s knowledge, indirectly, interested in any contract with the Company
(other than such contracts as relate to any such person’s ownership of capital
stock or other securities of the Company).  Except as may be disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.

 

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3.11                        Changes.  Since the Statement Date, there has not
been:

 

(a)                                  Any change in the assets, liabilities,
financial condition, or operations of the Company from that reflected in the
Financial Statements, other than changes in the ordinary course of business,
none of which individually or in the aggregate has had or is reasonably expected
to have a Material Adverse Effect;

 

(b)                                  Any resignation or termination of any
officer, key employee or group of employees of the Company; and the Company, to
the best of its knowledge, does not know of the impending resignation or
termination of employment of any such officer, key employee or group of
employees;

 

(c)                                  Any material change, except in the ordinary
course of business, in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise;

 

(d)                                  Any damage, destruction or loss, whether or
not covered by insurance, which is reasonably expected to have a Material
Adverse Effect;

 

(e)                                  Any waiver by the Company of a valuable
right or of a material debt owed to it;

 

(f)                                    Any direct or indirect loans made by the
Company to any employee, officer or director of the Company, other than advances
made in the ordinary course of business;

 

(g)                                 Any material change in any compensation
arrangement or agreement with any employee, officer or director;

 

(h)                                 To the knowledge of the Company, any labor
organization activity related to the Company;

 

(i)                                    Any debt, obligation or liability
incurred, assumed or guaranteed by the Company, except those for immaterial
amounts and for current liabilities incurred in the ordinary course of business;

 

(j)                                    Any sale, assignment or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets, other
than the granting of licenses to strategic partners in the ordinary course of
the Company’s business;

 

(k)                                Any change in any material agreement to which
the Company is a party or by which it is bound which is reasonably expected to
have a Material Adverse Effect;

 

(l)                                    Any other event or condition of any
character that, either individually or cumulatively, has or is reasonably
expected to have a Material Adverse Effect; or

 

(m)                              Any arrangement or commitment by the Company to
do any of the acts described in subsection (a) through (l) above.

 

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3.12                        Title to Properties and Assets; Liens, Etc. The
Company has good and marketable title to its material tangible properties and
assets, including the tangible properties and assets reflected in the most
recent balance sheet included in the Financial Statements, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent, (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those that have otherwise arisen in the
ordinary course of business.  All material facilities, machinery, equipment,
fixtures, vehicles and other tangible assets owned, leased or used by the
Company are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used.  The Company is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.

 

3.13                        Intellectual Property

 

(a)                                  Set forth in the Schedule of Exceptions is
a true and complete list of all patents, patent applications, trademarks,
service marks, trademark and service mark applications, trade names, copyright
registrations and licenses presently used by the Company (with the exception of
licenses and rights in “off the shelf” software publications and sold as such).
To the Company’s best knowledge, the Company has full title and ownership of, or
is duly licensed or otherwise authorized to use, all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, know-how,
information and other proprietary rights and processes and formulae, and
applications for patents, trademarks, service marks, and copyrights
(collectively, “Intellectual Property Rights”) necessary for its business as now
conducted or as presently proposed to be conducted, without any infringement of
the rights of others.  There are no outstanding options, licenses, or agreements
of any kind relating to any of the Intellectual Property Rights that are owned
by the Company, or to the Company’s knowledge, relating to rights that are
licensed to the Company by other parties.  The Company is not bound by nor is it
a party to any options, licenses or agreements of any kind with respect to the
Intellectual Property Rights of any other person or entity other than such
licenses or agreements arising from the purchase of “off the shelf” software or
standard products, and other than licenses granted by sponsors of the Company in
order to enable the Company to perform its production services for such
sponsors.

 

(b)                                  Neither the Company nor any of its
subsidiaries is in default of its obligations to pay royalties or other amounts
to other persons by reason of the ownership or use of any Intellectual Property
Rights used by the Company and its subsidiaries for the conduct of their
respective businesses.

 

(c)                                  To the best of the Company’s knowledge, no
Intellectual Property Right owned by the Company or any of its subsidiaries
violates or will violate any license or infringes or will infringe any
Intellectual Property Rights of another.  To the best of the Company’s
knowledge, no Intellectual Property Right, product or service marketed, sold or
licensed (as licensor or as licensee) by the Company or any of its subsidiaries,
violates or will violate any license or infringes or will infringe any
Intellectual Property Rights of another, nor has the Company or any of its
subsidiaries received any notice that any of the Intellectual

 

9

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Property Rights used by the Company or any of its subsidiaries for the conduct
of their respective businesses, conflicts or will conflict with the rights of
others.

 

(d)                                  There are no claims pending or, to the best
of the Company’s knowledge, threatened with respect to any Intellectual Property
Rights necessary or required for the conduct of the business of the Company or
any of its subsidiaries as currently conducted, nor, to the best of the
Company’s knowledge, does there exist any basis therefor.

 

3.14                        Compliance with Other Instruments.  The Company is
not in violation or default of any provision of its articles of incorporation or
bylaws. The Company and to the best of the Company’s knowledge, each other party
thereto, is not in breach of or default with respect to any provision of any
mortgage, indenture, contract, agreement, instrument, contract, decree, order,
lease, franchise, license, permit, or other instrument to which it is party or
by which it or any of its properties are bound; and there does not exist any
state of facts which, with notice or lapse of time or both, would constitute an
event of default as defined in such documents on the part of the Company, except
for such breaches and defaults which individually or in the aggregate would not
have a Material Adverse Effect. The execution, delivery, and performance of and
compliance with this Agreement, the Articles of Amendment, the Warrants, and the
Registration Rights Agreement, and the issuance and sale of the Shares pursuant
hereto, and of the Conversion Shares pursuant to the Articles of Amendment and
the Warrants, will not, with or without the passage of time or giving of notice
or both, result in any such material violation, or be in conflict with or
constitute a material default under any such term or provision, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or the suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company, its business or operations or any of its assets or
properties.  The Company has avoided every condition, and has not performed any
act, the occurrence of which would result in the Company’s loss of any right
granted under any license, distribution agreement, or other agreement required
to be disclosed on the Schedule of Exceptions.

 

3.15                        Litigation.  There is no action, suit, proceeding,
or investigation pending or, to the Company’s knowledge, currently threatened
against the Company that questions the validity of this Agreement, the Warrants,
the Articles of Amendment, or the Registration Rights Agreement or the right of
the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any Material Adverse Effect, nor is the
Company aware that there is any basis for any of the foregoing. The foregoing
includes, without limitation, actions pending or, to the Company’s knowledge,
threatened or any basis therefor known by the Company involving the prior
employment of any of the Company’s employees, their use in connection with the
Company’s business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers.  The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality.  There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

 

10

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3.16                        Tax Returns and Payments.  The Company has timely
filed all material tax returns (federal, state, and local) required to be filed
by it.  All taxes shown to be due and payable on such returns and to the
Company’s knowledge all other material taxes due and payable by the Company on
or before the Closing, have been paid or will be paid prior to the time they
become delinquent.  The Company has not been notified in writing (a) that any of
its federal, state, or local tax returns have been or are being audited as of
the date hereof, or (b) of any proposed deficiency in or adjustment to its
federal, state or local taxes.  The Company has no knowledge of any liability
for any material tax to be imposed upon its properties or assets as of the date
of this Agreement that is not adequately provided for. The Company has withheld
and paid all taxes required to be withheld and paid in connection with amounts
paid or owing to any employee, creditor, shareholder, or other third party.
There are no agreements, waivers, or other arrangements providing for an
extension of time with respect to the assessment of any taxes or deficiency
against the Company. To the Company’s knowledge, there is no pending or
threatened investigation of the Company by any federal, state, foreign, or local
authority relating to any taxes or assessments, or any claims for additional
taxes or assessments asserted by any such authority.

 

3.17                        Employees.  The Company has no collective bargaining
agreements with any of its employees.  There is no labor union organizing
activity pending or, to the Company’s knowledge, threatened with respect to the
Company. To the Company’s knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in material violation of any
term of any employment contract, proprietary information agreement, or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company’s knowledge the continued employment by the
Company of its present employees, and the performance of the Company’s contracts
with its independent contractors, will not result in any such material
violation.  The Company has not received any written notice alleging that any
such material violation has occurred.  No employee of the Company has been
granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company.  The Company
is not aware that any officer, key employee, or group of employees intends to
terminate his, her, or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee, or group of employees. The Company is not aware of any claims,
actions, proceedings, or threats relating to sexual harassment, wrongful
termination, discrimination, or any other employment matter. To the Company’s
knowledge there is no fact or circumstance that is reasonably expected to, with
the passage of time or otherwise, cause this representation to be no longer true
and correct. To the Company’s knowledge, the Company is in compliance in all
material respects with all provisions of the Fair Labor Standards Act, all
applicable state wage and hour laws, and all applicable workers’ compensation
laws.

 

3.18                        Employee Benefit Plans; ERISA. All pension,
retirement, bonus, profit sharing, stock option, employee, and other benefit or
welfare plans or arrangements maintained by the Company, or to which the Company
contributes or is required to contribute, to the extent required, materially
comply with the provisions of and have been administered and maintained in
material compliance with the provisions of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) and all other applicable laws.  The
Company is not a party to or

 

11

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bound by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement, or other employee compensation plan or agreement, including, but not
limited to, any “employee pension benefit plan” as defined in Section 3 of
ERISA. All unpaid liabilities of the Company with respect to, and all unfunded
benefits (whether vested or not) under, each employee welfare benefit plan as
defined in Section 3(1) of ERISA maintained by the Company have been calculated
and are reflected in the Company’s financial statement in accordance with
generally accepted accounting principles, and any such liabilities incurred
after the date of such financial statements will be incurred in the ordinary
course of business, determined in a manner substantially similar to that used in
such financial statements.

 

3.19                        Obligations of Management.  Each officer and key
employee of the Company is currently devoting substantially all of his or her
business time to the conduct of the business of the Company.  The Company is not
aware that any officer or key employee of the Company is planning to work less
than full time at the Company in the future.  No officer or key employee is
currently working or, to the Company’s knowledge, plans to work for a
competitive enterprise, whether or not such officer or key employee is or will
be compensated by such enterprise.

 

3.20                        Registration Rights and Voting Rights.  Except as
set forth in Section 3.20 of the Disclosure Schedules or as required pursuant to
the Registration Rights Agreement, the Company is presently not under any
obligation, and has not granted any rights, to Register (as defined in
Section 1.1 of the Registration Rights Agreement) in the future any of the
Company’s presently outstanding securities or any of its securities that may
hereafter be issued. To the Company’s knowledge, no stockholder of the Company
has entered into any agreement with respect to the voting of equity securities
of the Company.

 

3.21                        Compliance with Laws; Permits.  The Company is not
in violation of any applicable statute, rule, regulation, order or restriction
of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its properties
which violation would have a Material Adverse Effect.  No governmental orders,
permissions, consents, approvals, or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of the Shares and
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing
(including the filing of relevant notices under applicable state law and a Form
D pursuant to the Securities Act), as will be filed in a timely manner.  The
Company has all franchises, permits, licenses, and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could have a Material Adverse Effect and believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted.

 

3.22                        Environmental and Safety Laws. The Company is not in
violation in any material respect of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law, or regulation. Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by the Company

 

12

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in material compliance with all applicable statutes, laws and regulations.
Except as set forth on the Schedule of Exceptions, the Company has not, and to
the Company’s knowledge, no other person has caused any release, threatened
release, or disposal of any Hazardous Material on any property owned, leased, or
used by the Company. For the purposes of the preceding sentences, “Hazardous
Material” means any substance, chemical, compound, product, solid, gas, liquid,
waste, byproduct, pollutant, compound, or material that is listed or otherwise
regulated as “hazardous” or “toxic” under any applicable local, state and
federal laws and regulations that govern the existence and/or remedy of
contamination on property, the protection of the environment from contamination,
the control of hazardous wastes, or other activities involving medical waste,
biological waste, or hazardous substances (“Applicable Environmental Law”), and
includes asbestos, polychlorinated biphenyls (PCBs), petroleum products, or
nuclear materials.  To the Company’s knowledge, the Company has no material
liability for response or corrective action, natural resource damage, or other
harm pursuant to Applicable Environmental Law.

 

3.23                        Offering Valid.  Assuming the accuracy of the
representations and warranties of each Purchaser contained in Section 4.2
hereof, the offer, sale, and issuance of the Shares, the Warrant, and the
Conversion Shares will be exempt from the registration requirements of the
Securities Act, and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit, or qualification
requirements of all applicable state securities laws.  Neither the Company nor
any agent on its behalf has solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Shares or the
Warrants to any person or persons so as to bring the sale of such Shares by the
Company within the registration provisions of the Securities Act or any state
securities laws.

 

3.24                        Full Disclosure.  None of this Agreement, the
Warrants, the Registration Rights Agreement, the Articles of Amendment, nor any
other certificate delivered by the Company to the Purchaser in connection
herewith or therewith or with the transactions contemplated hereby or thereby,
contains any untrue statement of a material fact nor omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which such statements were made.

 

3.25                        Minute Books.  The minute books of the Company made
available to the Purchasers’ counsel contain a complete summary in all material
respects of all meetings of directors and stockholders since the time of
incorporation.

 

3.26                        Insurance.  The Company has general commercial,
product liability, fire and casualty insurance policies and, to the best of its
knowledge, such policies provide coverage customary for companies similarly
situated to the Company.

 

3.27                        Internal Accounting Controls.  The Company has
established disclosure controls and procedures (as defined in Exchange Act rules
13a-15 and 15d-15) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company is made
known to the certifying officers by others within those entities, particularly
during the period in which the Company’s Form 10-K or 10-Q, as the case may be,
is being prepared.  The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of a date within 90
days prior to the filing date of the

 

13

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Form 10-Q for the Company’s most recently ended fiscal quarter (such date, the
“Evaluation Date”).  The Company presented in its most recently filed Form 10-K
or Form 10-Q the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation Date, there have been no significant
changes in the Company’s internal control over financial reporting (as such term
is defined in Exchange Act rules 13a-15(f) and 15d-15(f)) or, to the Company’s
knowledge, in other factors that could significantly affect the Company’s
internal controls.

 

3.28                        Listing and Maintenance Requirements.  Except as
specified in the Exchange Act Documents, the Company has not, in the two years
preceding the date hereof, received notice from any stock exchange or automated
dealer quotation system to the effect that the Company is not in compliance with
the listing or maintenance requirements thereof.  The Company is, and, other
than the possibility that it may fail to maintain the minimum bid requirement,
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the NASDAQ Stock Market.

 

3.29                        Investment Company.  The Company is not regulated or
required to be registered as an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

3.30                        Integration, Etc.  The Company has not in the past
nor will it hereafter take any action to sell, offer for sale or solicit offers
to buy any securities of the Company which would bring the offer, issuance or
sale of the Shares, as contemplated by this Agreement, within the provisions of
Section 5 of the Securities Act.  Neither the Company nor any of its Affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act) has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any “security” (as defined in the
Securities Act) which is or could be integrated with the sale of the Shares in a
manner that would require the registration under the Securities Act of the
Shares or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
in connection with the offering of the Shares or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.

 

4.                                      REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS.

 

Each Purchaser hereby represents and warrants to the Company as follows:

 

4.1                               Requisite Power and Authority.  Such Purchaser
is an entity duly organized, validly existing and in good standing under the
laws of its state of formation.  Such Purchaser has all necessary power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to carry out their provisions.  All action on such Purchaser’s
part required for the lawful execution and delivery of this Agreement and the
Registration Rights Agreement has been or will be effectively taken prior to the
Closing.  Upon their execution and delivery, this Agreement and the Registration
Rights Agreement to which it is a party will be valid and binding obligations of
such Purchaser, enforceable in accordance with their terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights,
(b) as limited by general

 

14

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principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions of
Section 9 of the Registration Rights Agreement may be limited by applicable
laws.

 

4.2                               Investment Representations.  Such Purchaser
understands that none of the Shares, the Warrants, or the Conversion Shares has
been registered under the Securities Act.  Such Purchaser also understands that
the Shares and the Warrants are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon Purchaser’s
representations contained in the Agreement.  Purchaser hereby represents and
warrants as follows:

 

(a)                                  Purchaser Bears Economic Risk.  Such
Purchaser has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so that
it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests.  Such Purchaser must
bear the economic risk of this investment indefinitely unless the Shares or the
Warrants (or the Conversion Shares) are registered pursuant to the Securities
Act, or an exemption from registration is available.  Such Purchaser has
requested, received, reviewed, and understood all information it deems relevant
in making an informed decision to purchase the Shares, including without
limitation, the information contained in the Information Documents.

 

(b)                                  Acquisition for Own Account.  Such
Purchaser is acquiring the Shares, the Warrants, and the Conversion Shares for
such Purchaser’s own account for investment only, and not with a view towards
their distribution.

 

(c)                                  Purchaser Can Protect Its Interest.  Such
Purchaser represents that by reason of its, or of its management’s, business or
financial experience, such Purchaser has the capacity to protect its own
interests in connection with the transactions contemplated in this Agreement and
the Registration Rights Agreement.

 

(d)                                  Accredited Purchaser.  Such purchaser
acknowledges that the offering of the Shares and the Warrants pursuant to this
Agreement has not been reviewed by the SEC or any state regulatory authority.
Such Purchaser represents that it is an “accredited investor” within the meaning
of Regulation D under the Securities Act. Such Purchaser has also had the
opportunity to ask questions of and receive answers from, the Company and its
management regarding the terms and conditions of this investment.

 

(e)                                  Rule 144.  Such Purchaser acknowledges and
agrees that the Shares, the Warrants, and, if issued, the Conversion Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available, and such
securities will bear a restrictive legend similar to the following:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY STATE SECURITIES LAWS.  THEY MAY
NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED FOR VALUE UNLESS THEY
ARE REGISTERED UNDER THE ACT AND ANY

 

15

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APPLICABLE STATE SECURITIES LAWS OR THE CORPORATION RECEIVES AN OPINION OF
COUNSEL SATISFACTORY TO IT, OR OTHERWISE SATISFIES ITSELF, THAT REGISTRATION IS
NOT REQUIRED.”

 

Such Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring following the required holding period under Rule 144 and the number of
shares being sold during any three-month period not exceeding specified
limitations.

 

(f)                                    Residence.  If the Purchaser is an
individual, then the Purchaser resides in the state or province identified in
the address of the Purchaser set forth on EXHIBIT A; if the Purchaser is a
partnership, corporation, limited liability company or other entity, then the
principal place of business of the Purchaser, or if not the principal place of
business, the office or offices in which its investment decision was made, is
located at the address or addresses of the Purchaser set forth on EXHIBIT A.

 

(g)                                 No General Solicitation.  The Purchaser has
not received any general solicitation or general advertising (including any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising) concerning the Company or the Shares, nor
is the Purchaser aware that any such solicitation or advertising was received by
anyone else.

 

(h)                                 Receipt of Information.  Such Purchaser has
met with officers of the Company, has had an opportunity to ask questions and
receive answers concerning the business, properties, and financial condition of
the Company and the terms and conditions of an investment in the Company, and
has received all information (including projections about the Company) that such
Purchaser believes is necessary or desirable in connection with an investment in
the Company.  Such Purchaser understands that any projections that it has
received are based on numerous important assumptions and that some or all of
such assumptions will likely prove to be incorrect and, accordingly, the actual
results of the Company will vary from the projections and such variations may be
material.  Such Purchaser has been solely responsible for its own due diligence
investigation of the Company and its business, for analysis of the merits and
risks of the investment made pursuant to this Agreement and for analysis of the
terms of the investment.

 

4.3                               Transfer Restrictions.  Each Purchaser
acknowledges and agrees that the Shares, the Warrants, and, if issued, the
Conversion Shares are subject to restrictions on transfer as set forth in the
Registration Rights Agreement.

 

4.4                               Short Sales.  Each Purchaser agrees not to
sell short any shares of Common Stock or engage in other hedging transactions
with respect to the Common Stock so long as such Purchaser owns any Shares or
Conversion Shares and each Purchaser further agrees that it shall not permit its
affiliates to engage in any of the foregoing activities.

 

16

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5.                                      COVENANTS.

 

5.1                               Corporate Existence.  The Company will take
all steps necessary to preserve and continue the corporate existence of the
Company.

 

5.2                               Reservation of Common Stock.  As of the date
hereof, the Company has authorized and reserved and the Company shall continue
to reserve and keep available, free of preemptive rights, shares of Common Stock
for the purpose of enabling the Company to issue the Conversion Shares.  The
number of shares so reserved shall be increased or decreased to reflect
adjustments in the number of Conversion Shares issuable upon conversion of the
Shares.

 

5.3                               Exchange Act Registration.  The Company will
maintain the registration of its Common Stock under Section 12 of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act, until the date which is two years from the Closing
Date.

 

5.4                               Listing of Common Stock.  The Company shall
prepare and file with the NASDAQ Stock Market an additional shares listing
application covering a reasonable estimate of the Conversion Shares issuable
upon conversion of the Shares or exercise of the Warrants.  In addition, if at
any time the number of Conversion Shares issuable upon conversion of the Shares
is greater than the number of shares of Common Stock theretofore listed on the
NASDAQ Stock Market, the Company shall promptly take such action to file an
additional shares listing application covering such additional number of shares
of Common Stock. 

 

5.5                               Increase in Authorized Shares. As such time as
the Company would be, if all outstanding Shares were immediately converted,
precluded from honoring the conversion of the Shares and/or exercise of the
Warrants in full due to the unavailability of a sufficient number of shares of
authorized but unissued Common Stock, the Board of Directors of the Company
shall promptly (an in any case within 90 days from such date) hold a
stockholders meeting in which the stockholders would vote to amend the Company’s
Articles of Incorporation to increase the number of shares of Common Stock which
the Company is authorized to issue to at least a number of shares equal to the
sum of (i) all shares of Common Stock then outstanding, (ii) the number of
shares of Common Stock issuable on account of all outstanding warrants, options,
and convertible securities (other than the Shares) and on account of all shares
reserved under any stock option, stock purchase, or similar plan, and (iii) such
number of Conversion Shares as would then be issuable upon conversion of all
outstanding Shares and exercise of all outstanding Warrants.

 

5.6                               Observer Rights.  So long as the Purchasers
own 50% or more of the number of Shares originally purchased by them at the
Closing, the Company shall allow one representative of the Purchasers to attend
all meetings of the Company’s Board of Directors in a nonvoting capacity, and in
connection therewith, the Company shall give such representative copies of all
notices, minutes consents, and other materials, financial or otherwise, which
the Company provides to its Board of Directors, provided, that any such
representative agrees to leave all or any portion of a meeting of the Board of
Directors in the event that, in the reasonable

 

17

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good faith believe of the Board of Directors, allowing such representative to
remain in the meeting would result in a waiver of the attorney-client
privilege.  The failure to provide the observer rights in this Section 5.5 shall
not affect the validity of any action taken by the Board.

 

6.                                      CONDITIONS TO CLOSING.

 

6.1                               Conditions to Purchasers’ Obligations at the
Closing.  The Purchasers’ obligations to purchase the Shares and the Warrants at
the Closing are subject to the satisfaction, at or prior to the Closing Date, of
the following conditions:

 

(a)                                  Representations and Warranties True;
Performance of Obligations.  The representations and warranties made by the
Company in Section 3 hereof shall be true and correct in all material respects
as of the Closing Date with the same force and effect as if they had been made
as of the Closing Date, and the Company shall have performed in all material
respects, all obligations and conditions herein required to be performed or
observed by it on or prior to the Closing.

 

(b)                                  Legal Investment.  On the Closing Date, the
sale and issuance of the Shares and the proposed issuance of the Conversion
Shares shall be legally permitted by all laws and regulations to which the
Purchasers and the Company are subject.

 

(c)                                  Consents, Permits, and Waivers.  The
Company shall have obtained any and all consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by this
Agreement and the Registration Rights Agreement (except for such as may be
properly obtained subsequent to the Closing).

 

(d)                                  Articles of Amendment of Series D
Convertible Preferred Stock.  The Articles of Amendment shall have been filed
with the Secretary of State of the State of Oregon and shall continue to be in
full force and effect as of the Closing Date.

 

(e)                                  Corporate Documents.  The Company shall
have delivered to the Purchasers or their counsel copies of all corporate
documents of the Company as the Purchasers shall reasonably request.

 

(f)                                    Reservation of Conversion Shares.  The
Conversion Shares issuable upon conversion of the Shares shall have been duly
authorized and reserved for issuance upon such conversion.

 

(g)                                 Compliance Certificate.  The Company shall
have delivered to the Purchasers a Compliance Certificate, executed by the
President of the Company, dated the Closing Date, to the effect that the
conditions specified in subsections (a) through (f) of this Section 6.1 have
been satisfied.

 

(h)                                 Secretary’s Certificate. The Purchasers
shall have received from the Company’s Secretary, a certificate having attached
thereto (i) the Company’s Restated Articles of Incorporation as in effect at the
time of the Closing, which Restated Articles of Incorporation shall include the
Articles of Amendment, (ii) the Company’s bylaws as in effect at

 

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the time of the Closing, (iii) the resolutions approved by the Board of
Directors of the Company authorizing the transactions contemplated hereby, and
(iv) good standing certificates with respect to the Company from the applicable
authority(ies) in Oregon, New Jersey, and any other jurisdiction in which the
Company is qualified to do business, dated a recent date before the Closing.

 

(i)                                    Registration Rights Agreement. The
Registration Rights Agreement substantially in the form attached hereto as
EXHIBIT D shall have been executed and delivered by the parties thereto.

 

(j)                                    Legal Opinion.  The Purchasers shall have
received from Stoel Rives LLP, legal counsel to the Company, an opinion
addressed to them, dated as of the Closing Date, in substantially the form
attached hereto as EXHIBIT E.

 

(k)                                Proceedings and Documents.  All corporate and
other proceedings in connection with the transactions contemplated at the
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Purchasers and
their counsel, and the Purchasers and their counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.

 

(l)                                    Payment of Fees.  The Company shall have
paid the fees and expenses set forth in Section 7.3.

 

(m)                              No Material Adverse Change.  The business,
assets, financial condition, operations or results of operations of the Company
are substantially as have been represented to the Purchasers.  Since
September 30, 2004, there shall not have been any material adverse change in the
business, assets, results of operations, or condition (financial or otherwise)
of the Company.

 

6.2                               Conditions to Obligations of the Company at
the Closing.  The Company’s obligation to issue and sell the Shares and the
Warrants is subject to the satisfaction, on or prior to the Closing, of the
following conditions:

 

(a)                                  Representations and Warranties True.  The
representations and warranties in Section 4 made by the Purchasers shall be true
and correct in all material respects at the date of the Closing, with the same
force and effect as if they had been made on and as of said date.

 

(b)                                  Performance of Obligations.  The Purchasers
shall have performed and complied with all agreements and conditions herein
required to be performed or complied with by Purchasers on or before the
Closing.

 

(c)                                  Registration Rights Agreement. The
Registration Rights Agreement substantially in the form attached hereto as
EXHIBIT D shall have been executed and delivered by the Purchasers.

 

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(d)                                  Amendment to Rights Agreement.  The Company
and American Stock Transfer and Trust Company shall have executed and delivered
the Second Amendment to Rights Agreement substantially in the form attached
hereto as Exhibit F.

 

(e)                                  Consents, Permits, and Waivers.  The
Company shall have obtained any and all consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by the
Agreement and the Registration Rights Agreement.

 

7.                                      MISCELLANEOUS.

 

7.1                               Governing Law.  This Agreement shall be
governed in all respects by the laws of the State of Oregon, without reference
to principles of conflict of laws.

 

7.2                               Survival.  The representations, warranties,
covenants, and agreements made herein shall survive any investigation made by
the Purchasers and the closing of the transactions contemplated hereby for a
period of two years following the Closing Date. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.

 

7.3                               Expenses.  Each party shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery and
performance of the Agreement, the Articles of Amendment and the Registration
Rights Agreement; provided, however, that the Company shall pay the reasonable
fees, up to a maximum of $50,000, and expenses of the Purchasers’ counsel,
Thompson & Knight LLP, in connection with the transactions set forth in this
Agreement.

 

7.4                               Attorneys’ Fees.  In the event that any suit
or action is instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including without limitation,
such reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.

 

7.5                               Successors and Assigns.  Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the Shares from time to
time.

 

7.6                               Entire Agreement.  This Agreement, the
exhibits and schedules hereto, the Registration Rights Agreement and the other
documents delivered pursuant hereto, all of even date herewith between the
parties hereto, constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.

 

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7.7                               Severability.  In case any provision of the
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

7.8                               Amendment and Waiver.

 

(a)                                  This Agreement may be amended or modified
only upon the written consent of the Company and holders of at least a majority
of the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold to the public).

 

(b)                                  The obligations of the Company and the
rights of the holders of the Shares, the Warrants, and the Conversion Shares
under this Agreement may be waived only with the written consent of the holders
of at least a majority of the Shares (treated as if converted and including any
Conversion Shares into which the Shares have been converted that have not been
sold to the public). The rights of the Company under this Agreement may be
waived only by the prior written consent of the Company.

 

7.9                               Delays or Omissions.  It is agreed that no
delay or omission to exercise any right, power or remedy accruing to any party,
upon any breach, default or noncompliance by another party under this Agreement,
the Warrants, the Registration Rights Agreement or the Articles of Amendment,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring.  It is further agreed that any waiver, permit, consent or approval of
any kind or character on the Purchasers’ part of any breach, default or
noncompliance under this Agreement, the Registration Rights Agreement or under
the Articles of Amendment or any waiver on such party’s part of any provisions
or conditions of this Agreement, the Warrants, the Registration Rights Agreement
or the Articles of Amendment must be in writing and shall be effective only to
the extent specifically set forth in such writing.  All remedies, either under
this Agreement, the Warrants, the Registration Rights Agreement, the Articles of
Amendment, by law, or otherwise afforded to any party, shall be cumulative and
not alternative; provided, however, that Purchaser may not recover monetary
damages under more than one remedy for any give breach, default or
non-compliance.

 

7.10                        Notices.  All notices required or permitted
hereunder shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (c) five days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid, or (d) one day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. 
All communications shall be sent to the Company at the address as set forth on
the signature page hereof and to the Purchasers at the addresses set forth on
EXHIBIT A attached hereto or at such other address as the Company or the
Purchasers may designate by ten days advance written notice to the other parties
hereto.

 

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7.11                        Titles and Subtitles.  The titles of the sections
and subsections of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

 

7.12                        Counterparts.  This Agreement may be executed in any
number of counterparts (including by facsimile), each of which shall be an
original, but all of which together shall constitute one instrument.

 

7.13                        Broker’s Fees.  Except for a finders’ fee payable by
the Company to the Maxxim Group, each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker’s or
finder’s fee or any other commission directly or indirectly in connection with
the transactions contemplated herein.  Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.13 being untrue.

 

7.14                        Public Announcements and Confidentiality.

 

(a)                                  Any public announcement, press release, or
similar publicity with respect to this Agreement or the Registration Rights
Agreement will be issued, if at all, at such time and in such manner as the
Purchasers and the Company mutually determine. Except with the prior consent of
the Purchasers or as permitted by this Agreement, neither the Company, its
shareholders, nor any of their representatives shall disclose to any person (a)
the fact that any confidential information of the Company has been disclosed to
the Purchasers or their representatives, that the Purchasers or their
representatives have inspected any confidential information of the Company, that
any confidential information of the Company has been disclosed to the Purchasers
or (b) any information about the this Agreement and the Registration Rights
Agreement, including the status of such discussions or negotiations, the
execution of any documents (including this Agreement) or any of the terms of
this Agreement or the Registration Rights Agreement.  The Company shall not use
the names of any of the Purchasers in any manner, context or format (including,
but not limited to, websites or links to websites, press releases, dealing with
the Company’s customers, suppliers, and employees) without the prior review and
express written consent of the Purchasers.  Notwithstanding anything in this
section to the contrary, the Company may make any disclosures with respect to
this Agreement and the transactions contemplated hereby as are required by law
or the rules of the NASDAQ Stock Market without consent of the Purchasers.

 

(b)                                  Each party hereto agrees that, except with
the prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement or the Registration Rights
Agreement, discussions or negotiations relating to this Agreement or the
Registration Rights Agreement, the performance of its obligations hereunder or
the ownership of the Shares purchased hereunder.  The provisions of this
Section 7.14 shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto.  Notwithstanding any other express or implied agreement or understanding
to the contrary, the parties hereto and their respective

 

22

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employees, representatives, and other agents are authorized to disclose the tax
treatment and tax structure of the transactions contemplated by this Agreement
to any and all persons, without limitation of any kind.  The recipient and each
other party may disclose all materials of any kind (including opinions or other
tax analyses) to the extent (but only to the extent) that they relate to the tax
treatment or tax structure of the transactions contemplated by this Agreement. 
This authorization is not intended to permit disclosure of any other information
including (without limitation) (a) any portion of any materials to the extent
not related to the tax treatment or the tax structure of the transactions, (b)
the identities of participants or potential participants in the transactions,
(c) the existence or status of any negotiations, (d) any pricing information,
(e) any financial, actuarial or insurance underwriting information relating to
the parties hereto, or (f) any other term or detail not related to the tax
treatment or tax structure of the transactions.

 

7.15                        Purchasers Business Activities.  The Company and
each Purchaser hereby acknowledge that some or all of the Purchasers are
professional investment funds and, therefore, invest in numerous portfolio
companies, some of which may be in direct or indirect competition with the
Company.  No Purchaser shall be liable to the Company or to any other Purchaser
for any claim arising out of, or based upon, (i) the investment by any Purchaser
in any entity competitive with the Company, or (ii) actions taken by a partner,
officer, or representative of any Purchaser that may assist such competitive
entity, whether or not such action was taken as a board member, officer,
investor in such company or otherwise, and whether or not such action has a
detrimental effect on the Company (unless such action involves a breach of
Section 7.14(b)).

 

7.16                        Exculpation Among Purchasers.  Each Purchaser
acknowledges that it is not relying upon any person, firm, or corporation, other
than the Company and its officers and directors, in making its investment or
decision to invest in the Company.  Each Purchaser agrees that no Purchaser nor
the respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable to any other Purchaser for any action
heretofore or hereafter taken or omitted to be taken by any of them in
connection with the Shares and Conversion Shares.

 

7.17                        Pronouns.  All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as to the identity of the parties hereto may
require.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed the PURCHASE AGREEMENT as
of the date set forth in the first paragraph hereof.

 

COMPANY:

INVESTORS:

 

 

Bioject Medical Technologies Inc.

LIFE SCIENCES OPPORTUNITIES FUND II, L.P.

 

 

By:

/s/John Gandolfo

 

By:

LOF Partners, LLC,

 

Title:

CFO

 

 

General Partner

 

 

 

211 Somerville Road (Route 202 North)

 

Bedminster, New Jersey

By:

/s/ James C. Gale

 

 

Title: Manager

 

 

 

LIFE SCIENCES OPPORTUNITIES FUND II

 

(INSTITUTIONAL), L.P.

 

 

 

By:

LOF Partners, LLC,

 

 

 

General Partner

 

 

 

 

 

 

By:

/s/ James C. Gale

 

 

Title: Manager

 

 

List Of Exhibits:

 

 

 

 

 

Schedule of Purchasers

Exhibit A

 

 

Articles of Amendment

Exhibit B

 

 

Form of Warrant

Exhibit C

 

 

Registration Rights Agreement

Exhibit D

 

 

Form of Legal Opinion

Exhibit E

 

 

Second Amendment to Rights Agreement

Exhibit F

 

24

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EXHIBIT A

 

Schedule of Purchasers

 

NAME AND ADDRESS

 

SHARES

 

WARRANTS

 

AGGREGATE
PURCHASE
PRICE

 

LIFE SCIENCE OPPORTUNITIES FUND II, L.P.
c/o LOF Partners LLC
126 East 56 Street
New York, New York 10022
Attention: James C. Gale

 

316,884

 

95,065

 

$

364,416.08

 

 

 

 

 

 

 

 

 

LIFE SCIENCE OPPORTUNITIES FUND II
(INSTITUTIONAL),
L.P.c/o LOF Partners LLC
126 East 56 Street
New York, New York 10022
Attention: James C. Gale

 

1,770,073

 

531,022

 

$

2,035,584.47

 

 

 

 

 

 

 

 

 

TOTAL

 

2,086,957

 

626,087

 

$

2,400,000.55

 

 

25

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