EXHIBIT 10.1

 

BIOJECT MEDICAL TECHNOLOGIES INC.

SERIES F CONVERTIBLE PREFERRED STOCK

PURCHASE AGREEMENT

January 22, 2008

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

1.

Agreement To Sell And Purchase

1

 

 

 

 

1.1.

Authorization of Shares

1

 

1.2.

Sale and Purchase

1

 

 

 

2.

Closings, Delivery And Payment

1

 

 

 

 

2.1.

Closing

1

 

2.2.

Delivery at Closing

1

 

 

 

3.

Representations And Warranties Of The Company

2

 

 

 

 

3.1.

Organization and Qualification

2

 

3.2.

Subsidiaries

2

 

3.3.

Capitalization

2

 

3.4.

Authorization; Binding Obligations

3

 

3.5.

Exchange Act Filings; Listing

4

 

3.6.

Additional Information

4

 

3.7.

Financial Statements

4

 

3.8.

Liabilities

5

 

3.9.

Agreements; Action

5

 

3.10.

Obligations to Related Parties

5

 

3.11.

Changes

5

 

3.12.

Title to Properties and Assets; Liens, Etc

6

 

3.13.

Intellectual Property

7

 

3.14.

Compliance with Other Instruments

7

 

3.15.

Litigation

7

 

3.16.

Tax Returns and Payments

8

 

3.17.

Employees

8

 

3.18.

Employee Benefit Plans; ERISA

8

 

3.19.

Obligations of Management

9

 

3.20.

Voting Rights

9

 

3.21.

Compliance with Laws; Permits

9

 

3.22.

Environmental and Safety Laws

9

 

3.23.

Offering Valid

9

 

3.24.

Full Disclosure

9

 

3.25.

Insurance

10

 

3.26.

Internal Accounting Controls

10

 

3.27.

Investment Company

10

 

3.28.

Integration, Etc

10

 

 

 

4.

Representations And Warranties Of The Purchasers

10

 

 

 

 

4.1.

Requisite Power and Authority

10

 

4.2.

Investment Representations

10

 

4.3.

Transfer Restrictions

12

 

4.4.

Short Sales

12

 

 

 

5.

Covenants

12

 

 

 

 

5.1.

Corporate Existence

12

 

5.2.

Reservation of Common Stock

12

 

5.3.

Exchange Act Registration

12

 

5.4.

Listing of Common Stock

12

 

5.5.

Increase in Authorized Shares

12

 

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Page

 

 

 

6.

Conditions To Closing

13

 

 

 

 

6.1.

Conditions to Purchasers’ Obligations at the Closing

13

 

6.2.

Conditions to Obligations of the Company at the Closing

14

 

 

 

7.

Miscellaneous

14

 

7.1.

Governing Law

14

 

7.2.

Survival

14

 

7.3.

Attorneys’ Fees

14

 

7.4.

Successors and Assigns

14

 

7.5.

Entire Agreement

14

 

7.6.

Severability

14

 

7.7.

Amendment and Waiver

15

 

7.8.

Delays or Omissions

15

 

7.9.

Notices

15

 

7.10.

Titles and Subtitles

15

 

7.11.

Counterparts

15

 

7.12.

Broker’s Fees

15

 

7.13.

Public Announcements and Confidentiality

15

 

7.14.

Purchasers Business Activities

16

 

7.15.

Exculpation Among Purchasers

16

 

7.16.

Pronouns

16

 

List of Exhibits:

 

 

 

 

 

Schedule of Exceptions

 

 

Schedule of Purchasers

 

Exhibit A

Articles of Amendment

 

Exhibit B

Registration Rights Agreement

 

Exhibit C

Form of Legal Opinion

 

Exhibit D

 

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BIOJECT MEDICAL TECHNOLOGIES INC.

SERIES F CONVERTIBLE PREFERRED STOCK

PURCHASE AGREEMENT

 

This Purchase Agreement (this “Agreement”) is made and entered into as of
January 22, 2008, 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,
a “Purchaser” and, collectively, the “Purchasers”).

 

RECITALS

 

The Company has authorized the sale and issuance of an aggregate of 8,314 shares
of its Series F Convertible Preferred Stock pursuant to this Agreement (the
“Shares”).

 

The Purchasers desire to purchase the Shares in exchange for the cancellation of
the outstanding principle amount of and accrued interest through the date hereof
on each Purchaser’s promissory note issued by the Company (each a “Note” and
together the “Notes”) listed on Exhibit A hereto 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 (b) the issuance of such shares of
common stock, no par value, of the Company (“Common Stock”) to be issued upon
conversion of the Shares (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”).

 

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 of Shares set forth opposite each
Purchaser’s name on Exhibit A at a price of $75.00 per share payable by
cancellation of the outstanding principle amount of and accrued interest on each
Purchaser’s Note through the date hereof.

 

2.                                      CLOSINGS, DELIVERY AND PAYMENT.

 

2.1.         Closing.  The closing of the sale and purchase of the Shares under
this Agreement (the “Closing”) shall take place at 10:00 a.m. on January 22,
2008, at the offices of the Company in Tualatin, Oregon, 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 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 being purchased
hereunder and deliver such certificates to the Purchasers at the Closing shall
be subject to the following conditions: (a) receipt by the

 

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Company of the original Notes for cancellation 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 deliver the Notes for cancellation 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 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 Registration Rights Agreement in the form attached hereto as
Exhibit C (the “Registration Rights Agreement”), and any other agreements
contemplated hereby (collectively, the “Transaction Documents”), to issue and
sell the Shares and 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 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”), 15,321,121 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,
(D) 2,086,957 shares of which are designated Series D Preferred Stock (the
“Series D Preferred”), all of which are outstanding, (E) 4,000,000 shares which
are designated Series E Preferred Stock (the “Series E Preferred”), 3,308,394 of
which are issued and outstanding, (F) 9,644 shares of which are designated
Series F Preferred Stock (the “Series F Preferred”), of which no shares are
issued and outstanding, and (G) 12,500 shares of which are designated Series R
Participating Preferred Stock (the “Series R Preferred”), of which no shares are
issued and outstanding.

 

(b)           (i) No shares have been issued pursuant to restricted stock
purchase agreements, the restrictions under which have not expired, (ii) options
and restricted stock units to acquire 1,855,305 shares of

 

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Common Stock have been granted or are currently outstanding, (iii) the Company
has reserved 513,598 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 Schedule of
Exceptions, (ii) the shares reserved for issuance under Section 3.3(b)(iii), 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 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, 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.

 

(g)           The sale of the Shares and the subsequent conversion of the Shares
into Conversion Shares 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 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
pursuant hereto and the Conversion Shares pursuant to the Articles of Amendment,
as the case may be, has been taken or will be taken prior to the Closing.

 

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

 

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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 Capital 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 Capital 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
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, 2006 and December 31, 2005, and for the years
then ended included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2006 (the “2006 Statements”), and (b) the unaudited financial
statements of the Company at September 30, 2007 (the “Statement Date”), and for
the nine months then ended, (the “Year to Date Statements” and together with the
2006 Statements, “Financial Statements”) included in the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007.  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, 2006, 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.

 

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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 or in Forms 8-K filed since
September 30, 2007 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, the Registration
Rights Agreement dated November 15, 2004 between the Company and certain
investors, the Securities Purchase Agreement dated March 8, 2006 between the
Company and certain investors, or other contracts or agreements referred to or
contemplated herein or therein, there are no material agreements, 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) except for $500,000 borrowed from
Edward Flynn, $508,896 borrowed from Life Sciences Opportunities Fund II
(Institutional) L.P., $91,104 borrowed from Life Science Opportunities Fund II,
L.P., and an aggregate of $115,000 borrowed from Ralph Makar, David Tierney,
Richard Stout and Christine Farrell, 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 and restricted stock unit
agreements outstanding under any stock option plan approved by the Board of
Directors of the Company), (d) relocation and stock award obligations to the
Chief Executive Officer pursuant to his employment agreement, and
(e) 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,
other than Bioject, Inc.

 

3.11.       Changes.  Since the Statement Date and except as disclosed on any
Form 8-K filed since September 30, 2007, there has not been:

 

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(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.

 

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.

 

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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 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, 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, 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

 

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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.

 

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 (other than to Ralph Makar, Richard
Stout and Christine Farrell pursuant to their respective employment
agreements).  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 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

 

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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 competing enterprise,
whether or not such officer or key employee is or will be compensated by such
enterprise.

 

3.20.       Voting Rights.  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 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 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 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 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

 

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fact nor omits 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.       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.

 

3.26.       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 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.

 

3.27.       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.

 

3.28.       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 that is not a
natural person 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 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 or the Conversion Shares has been registered under the Securities
Act.  Such Purchaser also understands that the Shares 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:

 

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(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 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 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
or relationship with the Company, 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 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,
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 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.

 

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(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 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.

 

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 Capital Market an additional shares listing application covering a
reasonable estimate of the Conversion Shares issuable upon conversion of the
Shares.  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 Capital 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 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.

 

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6.                                      CONDITIONS TO CLOSING.

 

6.1.         Conditions to Purchasers’ Obligations at the Closing.  The
Purchasers’ obligations to purchase the Shares 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 F 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 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 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 C 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 D.

 

(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.

 

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6.2.         Conditions to Obligations of the Company at the Closing.  The
Company’s obligation to issue and sell the Shares 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 C shall have been executed
and delivered by the Purchasers.

 

(d)           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.         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.

 

7.4.         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.

 

7.5.         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.

 

7.6.         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.

 

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7.7.         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 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.

 

7.8.         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 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 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 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.

 

7.9.         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.

 

7.10.       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.

 

7.11.       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.

 

7.12.       Broker’s Fees.  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.

 

7.13.       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

 

15

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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 Capital 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 7.13 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 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.

 

7.14.       Purchasers Business Activities.  The Company and each Purchaser
hereby acknowledge that some of the Purchasers may be 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 7.13(b)).

 

7.15.       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.

 

7.16.       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 Pages Follow]

 

16

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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:

 

BIOJECT MEDICAL.
TECHNOLOGIES INC.

 

 

By:

/s/Ralph Makar

 

Name:

Ralph Makar

 

Title:

President and Chief Executive Officer

 

 

 

20245 S.W. 95th Avenue
Tualatin, Oregon 97062

 

 

INVESTORS:

 

 

 

 

 

/s/Edward L. Flynn

 

 

Edward L. Flynn

 

 

 

 

 

 

 

 

/s/Ralph Makar

 

 

Ralph Makar

 

 

 

 

 

 

 

 

/s/David Tierney

 

 

David Tierney

 

 

 

 

 

 

 

 

/s/Richard Stout

 

 

Richard Stout

 

 

 

 

 

 

 

 

/s/Christine Farrell

 

 

Christine Farrell

 

 

 

Signature Page to

Series F Convertible Preferred Stock Purchase Agreement

 

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Exhibit A

 

SCHEDULE OF PURCHASERS

 

Name and Address

 

Shares

 

Principal
Amount
of Note

 

Accrued
Interest thru
1/22/08

 

 

 

 

 

 

 

 

 

Edward L. Flynn

20245 S.W. 95th Ave.

Tualatin, OR 97062

 

6,760

 

$

500,000

 

$

7,000

 

Ralph Makar

20245 S.W. 95th Ave.

Tualatin, OR 97062

 

676

 

$

50,000

 

$

700

 

David Tierney

20245 S.W. 95th Ave.

Tualatin, OR 97062

 

676

 

$

50,000

 

$

700

 

Richard Stout

20245 S.W. 95th Ave.

Tualatin, OR 97062

 

101

 

$

7,500

 

$

75

 

Christine Farrell

20245 S.W. 95th Ave.

Tualatin, OR 97062

 

101

 

$

7,500

 

$

75

 

 

 

 

 

 

 

 

 

TOTAL

 

8,314

 

$

615,000

 

$

8,550

 

 

A-1

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