ex4-1



 



EXHIBIT 4.1


Name: ________________


SUBSCRIPTION AGREEMENT


     SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on
the signature page hereof between Bioject Medical Technologies Inc., an Oregon
corporation (the “Company”) and the undersigned (the “Subscriber”).


WITNESSETH:


     WHEREAS, the Company is offering in a private placement to accredited
investors (the “Offering”) 350,000 shares of its common stock, no par value
(the “Common Stock”) at a price equal to $11.00 (the “Closing Price”) (the
“Offering Price”). The shares of Common Stock offered hereby are sometimes
referred to as the “Securities;” and


     WHEREAS, the Subscriber desires to purchase that number of Securities set
forth on the signature page hereof on the terms and conditions hereinafter set
forth; and


     WHEREAS, the Company has engaged Leerink Swann & Company (the “Placement
Agent”) as placement agent for the Offering on a “best-efforts” basis.


     NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto agree
as follows:


I. SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY SUBSCRIBER


     1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby irrevocably subscribes for and agrees to purchase from the
Company such Securities as is set forth upon the signature page hereof and the
Company agrees to sell such Securities to the Subscriber for said purchase
price subject to the Company’s right to sell to the Subscriber such lesser
number of Securities as the Company may, in its sole discretion, deem necessary
or desirable. The purchase price is payable by wire transfer of immediately
available funds or money order made payable to the Company contemporaneously
with the execution and delivery of this Agreement by the Subscriber. The funds
will be held by the Company until the Closing is confirmed by the Company and
Placement Agent. If the Closing does not occur, the funds will be returned to
the Subscriber. All wires should be sent to:



	 	U.S. National Bank

Tualatin Branch

7755 S.W. Nyberg Road

P.O. Box 474

Tualatin, OR 97062

Contact: Kara Thompson, Business Banking Officer

Phone: 503-431-6006

Bioject, Inc.       EIN: 93-0881020

General Account

ABA: 123000220

Account #: 1 536 0565 7920



 








 


     Certificates for the shares of Common Stock will be delivered by the
Company to the Subscriber promptly following the Closing (as herein defined).


     1.2 The Subscriber recognizes that the purchase of Securities involves a
high degree of risk in that (i) the Company remains a development stage
business with a limited operating history and may require substantial funds in
addition to the proceeds of the Offering; (ii) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company; (iii) the Subscriber may
not be able to liquidate its investment; (iv) transferability of the Securities
is extremely limited; and (v) in the event of a disposition, the Subscriber
could sustain the loss of its entire investment. The Subscriber has carefully
reviewed the risk factors set forth on Exhibit A attached hereto.


     1.3 The Subscriber represents that the Subscriber is an “accredited
investor” as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended, (the “Act”), as indicated by the
responses to the questions contained in Section VII hereof, and that the
Subscriber is able to bear the economic risk and illiquidity of an investment
in the Securities.


     1.4 The Subscriber hereby acknowledges and represents that (i) the
Subscriber has prior investment experience, including investment in non-listed
and unregistered securities, or that the Subscriber has employed the services
of an investment advisor, attorney and/or accountant to read all of the
documents furnished or made available by the Company both to the Subscriber and
to all other prospective investors to evaluate the merits and risks of such an
investment on the Subscriber’s behalf; (ii) the Subscriber recognizes the
highly speculative nature of an investment in the Securities; and (iii) the
Subscriber is able to bear the economic risk and illiquidity which the
Subscriber assumes by investing in the Securities.


     1.5 The Subscriber (i) hereby acknowledges careful review of Exhibit A
attached hereto, and that it has had a reasonable opportunity to review the
filings of the Company with the SEC (as herein defined) under the Act or the
Exchange Act (herein defined) and exhibits thereto on the SEC’s EDGAR database
or otherwise; (ii) hereby represents that the Subscriber has been furnished by
the Company during the course of this transaction with all information
regarding the Company which the Subscriber has requested or desired to know;
(iii) has been afforded the opportunity to ask questions of and receive answers
from duly authorized officers or other representatives of the Company
concerning the terms and conditions of the Offering; and (iv) has received any
additional information which the Subscriber has requested.


     1.6 (a) In making the decision to invest in the Securities, the Subscriber
has relied solely upon the information provided by the filings of the Company
with the SEC and this Agreement, including Exhibit A attached hereto. To the
extent necessary, the Subscriber has retained, at its own expense, and relied
upon the advice of appropriate professionals regarding the investment, tax and
legal merits and consequences of this Agreement and its purchase of the
Securities hereunder. The Subscriber acknowledges and agrees that the
Placement Agent has not supplied any information to the Subscriber and that the
Subscriber has not relied upon the


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independent investigation or verification, if any, which may have been
undertaken by the Placement Agent.


          (b) The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Securities by the Placement Agent (or an authorized
agent or representative thereof) with whom the Subscriber had a prior
substantial pre-existing relationship and (ii) no Securities were offered or
sold to it by means of any form of general solicitation or general advertising,
and in connection therewith the Subscriber did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit or generally available; or (B) attend any seminar, meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.



     1.7 The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the “SEC”)
because of the Company’s representations that this Offering is intended to be
exempt from the registration requirements of Section 5 of the Act pursuant to
Sections 3(b), 4(2) and 4(6) thereof and Regulation D promulgated under the
Act. The Subscriber agrees that the Subscriber will not sell or otherwise
transfer the Securities unless they are registered under the Act or unless an
exemption from such registration is available.


     1.8 The Subscriber understands that none of the Securities have been
registered under the Act by reason of a claimed exemption under the provisions
of the Act which depends, in part, upon the Subscriber’s investment intention.
In this connection, the Subscriber hereby represents that the Subscriber is
purchasing the Securities for the Subscriber’s own account for investment and
not with a view toward the resale or distribution thereof to others. The
Subscriber, if an entity, was not formed for the purpose of purchasing the
Securities. The Subscriber understands that Rule 144 promulgated under the Act
requires, among other conditions, a one-year holding period prior to the resale
(in limited amounts) of securities acquired in a non-public offering without
having to satisfy the registration requirements under the Act.


     1.9 The Subscriber understands and hereby acknowledges that the Company is
under no obligation to register the Securities under the Act or any state
securities or “blue sky” laws other than as set forth in Section V. The
Subscriber consents that the Company may, if it desires, permit the transfer of
the Securities out of the Subscriber’s name only when the Subscriber’s request
for transfer is accompanied by an opinion of counsel reasonably satisfactory to
the Company that neither the sale nor the proposed transfer results in a
violation of the Act or any applicable state “blue sky” laws (collectively,
“Securities Laws”).


     1.10 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities indicating that such
Securities have not been registered under the Act or any state securities or
“blue sky” laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The Subscriber is
aware that the Company will make a notation in its appropriate records and
issue “stop transfer”


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instructions to its transfer agent with respect to the restrictions on the
transferability of such Securities.


     1.11 The Subscriber understands that the Company will review this
Agreement and, if such Subscriber is an individual, hereby gives authority to
the Company to call Subscriber’s bank or place of employment (in a call in
which the Placement Agent participates) or otherwise review the financial
standing of the Subscriber; and it is further agreed that upon their mutual
agreement the Placement Agent and the Company reserve the unrestricted right,
without further documentation or agreement on the part of the Subscriber, to
reject or limit any subscription, to accept subscriptions for Securities and to
close the Offering to the Subscriber at any time.


     1.12 The Subscriber hereby represents that the address of the Subscriber
furnished by the Subscriber on the signature page hereof is the Subscriber’s
principal residence if the Subscriber is an individual or its principal
business address if it is a corporation or other entity.


     1.13 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Securities subscribed for hereby. This Agreement
constitutes the legal, valid and binding obligation of the Subscriber,
enforceable against the Subscriber in accordance with its terms.


     1.14 If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, Keogh
Plan, or other entity, then (a) it is authorized and qualified to become an
investor in the Company and the person signing this Agreement on behalf of such
entity has been duly authorized by such entity to do so, (b) it is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and (c) the investment made herein is in
accordance with the investment objectives and risk tolerance of this
subscribing entity.


     1.15 The Subscriber acknowledges that if he or she is a registered
representative of a National Association of Securities Dealers, Inc. (“NASD”)
member firm, he or she must give such firm the notice required by the NASD’s
Rules of Fair Practice, receipt of which must be acknowledged by such firm in
Section 7.4 below.


     1.16 The Subscriber represents and warrants that it has not engaged,
consented to nor authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The
Subscriber shall indemnify and hold harmless the Company from and against all
fees, commissions or other payments owing to any such person or firm acting on
behalf of such Subscriber hereunder.


     1.17 The Subscriber acknowledges that (a) the Company has engaged,
consented to and authorized the Placement Agent in connection with the
transactions contemplated by this Agreement, (b) the Company shall pay the
Placement Agent a commission and reimburse the Placement Agent’s expenses in
accordance with the Placement Agency


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Agreement (as defined in Section 5.1(c) below), and the Company shall indemnify
and hold harmless the Subscriber from and against all fees, commissions or
other payments owing by the Company to the Placement Agent or any other person
or firm acting on behalf of the Company hereunder and (c) registered
representatives of the Placement Agent and/or its designees (including, without
limitation, registered representatives of the Placement Agent and/or its
designees who participate in the Offering and sale of the securities sold in
the Offering) will be paid a portion of the commissions paid to the Placement
Agent including a portion of the Placement Warrants (as defined in Section
5.1(c) below).


     1.18 The Subscriber, whose name appears on the signature line below, shall
be the beneficial owner of the Securities for which such Subscriber subscribes.


     1.19 The Subscriber agrees that from the time the Subscriber first
received this Agreement until a point in time equal to the earlier of (i) the
date that the Registration Statement (as defined in Section 5.2(a)) is declared
effective by the SEC or (ii) four months from the date of the Agreement, the
Subscriber has not and shall not, directly or indirectly, through related
parties, affiliates or otherwise, (A) sell “short” or “short against the box”
(as those terms are generally understood) any equity security of the Company or
(B) otherwise engage in any transaction that involves hedging of the
Subscriber’s position in any equity security of the Company.


II. REPRESENTATIONS BY THE COMPANY


     The Company hereby represents and warrants to the Subscriber that:


     2.1 Organization and Qualification. The Company is a corporation duly
organized and validly existing under the laws of the State of Oregon and has
full corporate power and lawful authority to conduct its business as described
in its SEC filings. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business conducted or as proposed to be conducted in its SEC filings, by it
or the properties owned, leased or operated by it, makes such qualification or
licensing necessary and where the failure to be so qualified or licensed would
have a material adverse effect upon the business, prospects or financial
condition of the Company.


     2.2 Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in its SEC filings;
all issued and outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable. Except as set forth in the Company’s SEC
filings, there are no outstanding options, warrants, agreements, commitments,
convertible securities, preemptive rights or other rights to subscribe for or
to purchase any shares of capital stock of the Company nor are there any
agreements, promises or commitments to issue any of the foregoing, or
discussions concerning same. Except as set forth in the Company’s SEC filings,
in this Agreement and as otherwise required by law, there are no restrictions
upon the voting or transfer of the Securities pursuant to the Company’s
Articles of Incorporation, as amended, (the “Articles of Incorporation”),
By-laws or other governing documents or any agreement or other instruments to
which the Company is a party or by which the Company is bound.


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     2.3 Authorization; Enforceability. The Company has all corporate right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Securities and the
performance of the Company’s obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The Securities have been duly and validly
authorized and, upon the issuance and delivery thereof and payment therefor as
contemplated by this Agreement, will be free and clear of liens, duly and
validly authorized and issued, fully paid and nonassessable. The issuance and
sale of the Securities contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.


     2.4 No Conflict; Governmental Consents.


          (a) The execution and delivery by the Company of this Agreement, the
consummation of the transactions contemplated hereby and the offer and sale of
the Securities will not result in the violation of any law, statute, rule,
regulation, order, writ, injunction, judgment or decree of any court or
governmental authority to or by which the Company is bound, or of any provision
of the Articles of Incorporation or By-laws of the Company, and will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Company is a party or
by which it is bound or to which any of its properties or assets is subject,
nor result in the creation or imposition of any lien upon any of the properties
or assets of the Company.



          (b) No consent, waiver, approval, authorization or other order of any
governmental authority or other third-party is required to be obtained by the
Company in connection with the authorization, execution and delivery of this
Agreement or with the authorization, issuance and sale of the Securities,
except such filings as may be required to be made, and which shall have been
made at or prior to the required time (except with respect to the Notification
Form: Listing of Additional Shares with The Nasdaq Stock Market, Inc.
(“Nasdaq”) which will be filed prior to closing), with the SEC, the NASD and
the Nasdaq, and with any state or foreign blue sky or securities regulatory
authority.



     2.5 Licenses. The Company has all licenses, permits and other
governmental authorizations currently required for the conduct of its business
or ownership of properties and is in all material respects complying therewith,
except for any licenses, permits or other governmental authorizations which
would not materially adversely affect the business, property, financial
condition, results of operations or prospects of the Company.


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     2.6 Litigation. The Company knows of no pending or threatened legal or
governmental proceedings against the Company which could materially adversely
affect the business, property, financial condition, results of operations or
prospects of the Company.


     2.7 Accuracy of Reports. All reports required to be filed by the Company
within the three years prior to the date of this Agreement under the Securities
Exchange Act of 1934, as amended, (the “Exchange Act”), have been duly and
timely filed with the SEC, complied at the time of filing in all material
respects with the requirements of their respective forms and, were complete and
correct in all material respects as of the dates at which the information was
furnished, and contained (as of such dates) no untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.


     2.8 Investment Company. The Company is not an “investment company” within
the meaning of such term under the Investment Company Act of 1940, as amended,
and the rules and regulations of the SEC thereunder.


     2.9 Listing. The Company will file a Notification Form: Listing of
Additional Shares with the Nasdaq SmallCap Market and hereby represents and
warrants to the Placement Agent and the Subscriber that it will take any other
necessary action in accordance with the rules of the Nasdaq SmallCap Market to
enable the Securities (and the Common Stock issuable upon exercise of the
Placement Warrants as defined in Section 5.1 (c)) to trade on the Nasdaq
SmallCap Market.


     2.10 No Material Adverse Change. Since the filing of the Company’s most
recent Quarterly Report on Form 10-Q, (i) there has not been any material
adverse change (financial or otherwise) in the assets, properties, financial
condition, operating results or business of the Company, and (ii) there has
been no event or condition of any character that might have a material adverse
effect (financial or otherwise) in the assets, properties, financial condition,
operating results or business of the Company.


     2.11 Financial Statements. The financial statements included in the
Company’s most recent Annual Report on Form 10-K, as amended, for the fiscal
year ended March 31, 2001 and all other reports filed by the Company pursuant
to the Exchange Act since the filing of such Annual Report on Form 10-K, as
amended, and prior to the date hereof (collectively, the “SEC Filings”) present
fairly and accurately in all material respects the financial position of the
Company as of the dates shown and its results of operations and cash flows for
the periods shown, and such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis. Except as set forth in the financial statements of the
Company included in the SEC Filings filed prior to the date hereof, to the best
of the Company’s knowledge, the Company has no liabilities, contingent or
otherwise, except those which individually or in the aggregate are not material
to the financial condition or operating results of the Company.


     2.12 Compliance with Laws. Neither the Company nor, to the Company’s
knowledge, any Person acting on its behalf has conducted any general
solicitation or general


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advertising (as those terms are used in Regulation D of
the Act) in connection with the offer or sale of the Securities. Neither the
Company nor any of its Affiliates, nor, to the Company’s knowledge, any Person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would adversely affect reliance by the Company on Section
4(2) of the Act for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
Act. The Company is in compliance with all applicable Nasdaq continued listing
requirements. There are no proceedings pending or to the Company’s knowledge
threatened against the Company relating to the continued listing of the
Company’s Common Stock on the Nasdaq SmallCap Market and the Company has not
received any notice of, nor to the knowledge of the Company is there any basis
for, the delisting of the Common Stock from the Nasdaq SmallCap Market.


III. TERMS OF SUBSCRIPTION


     3.1 The Offering is for 350,000 shares of Common Stock. The Securities are
offered on a “best efforts” basis.


     3.2 Upon the mutual consent of the Company and the Placement Agent, this
Offering may close (the “Closing”) prior to the sale of all 350,000 shares of
Common Stock and there is no assurance that all 350,000 shares of Common Stock
will be sold. The Closing shall occur no later than December 31, 2001, subject
to change at the discretion of the Company and the Placement Agent (the
“Closing Date”). The purchase price is payable by personal or business check,
wire transfer of immediately available funds or money order made payable as
provided in Section 1.1.


     3.3 The Subscriber hereby authorizes and directs the Company to deliver
the Securities to be issued to the Subscriber pursuant to this Agreement
directly to the Subscriber’s account maintained by the Placement Agent or, if
no such account exists, to the residential or business address indicated on the
signature page hereto.


     3.4 The Subscriber hereby authorizes and directs the Company to return any
funds related to unaccepted subscriptions to the same account from which the
funds were drawn, including any customer account maintained with the Placement
Agent.


IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS AND THE COMPANY


     4.1 The Subscribers’ obligation to purchase the Securities at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions, which conditions may be waived at the option of each Subscriber to
the extent permitted by law:


          (a) Representations and Warranties. The representations and warranties
made by the Company in Section II hereof shall be true and correct in all
material

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respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.



          (b) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase shall
have been performed or complied with in all material respects.



          (c) No Legal Order Pending. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by this
Agreement.



          (d) No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person to issue the Securities which
consent or approval shall not have been obtained (except as may otherwise be
provided in this Agreement).



          (e) Legal Opinion. Upon the Closing, counsel to the Company shall have
delivered to the Placement Agent for the benefit of the Subscribers a legal
opinion with respect to such legal matters relating to this Agreement as the
Placement Agent may reasonably require.



     4.2 The Company’s obligation to sell the Securities at the Closing is
subject to the fulfillment on or prior to the Closing Date of the following
conditions, which conditions may be waived at the option of the Company to the
extent permitted by law:


          (a) Acknowledgements, Representations and Warranties. The
acknowledgements, representations and warranties made by the Subscriber in
Section I hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. If
any such representations, warranties or acknowledgements shall not be true and
accurate in any respect prior to the Closing, the undersigned shall give
immediate written notice of such fact to the Company, to the Placement Agent,
and to his representatives, if any, specifying which representations,
warranties or acknowledgements are not true and accurate and the reason
therefor.



          (b) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Subscriber on or prior to such purchase shall
have been performed or complied with in all material respects.



          (c) No Legal Order Pending. There shall not then be in effect any legal
or other order enjoining or restraining the transactions contemplated by this
Agreement.



          (d) No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or
approval of any person to issue the Securities which consent or approval shall
not have been obtained (except as may otherwise be provided in this Agreement).



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V. REGISTRATION RIGHTS


     5.1 As used in this Agreement, the following terms shall have the
following meanings:


          (a) “Affiliate” shall mean, with respect to any Person (as defined below),
any other Person controlling, controlled by, or under direct or indirect common
control with, such Person (for the purposes of this definition “control,” when
used with respect to any specified Person, shall mean the power to direct the
management and policies of such person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” shall have meanings correlative to the
foregoing).



          (b) “Business Day” shall mean a day, Monday through Friday, on which banks
are generally open for business in each of New York, New York; Boston,
Massachusetts; and Portland, Oregon.



          (c) “Holders” shall mean the Subscriber and any person holding Registrable
Securities as defined below (including the Registrable Securities underlying
the warrants to be issued to the Placement Agent (the “Placement Warrants”) to
be granted to the Placement Agent and/or their designees pursuant to the
engagement letter between the Company and the Placement Agent dated October 23,
2001, (the “Placement Agency Agreement”)), a holder of the Placement Warrants,
or any person to whom the rights under Section V have been transferred in
accordance with Section 5.10 hereof, and who, if known by the Company, shall be
specifically named by the Company as selling stockholders in the Registration
Statement (as defined below).



          (d) “Person” shall mean any person, individual, corporation, limited
liability company, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).



          (e) The terms “register,” “registered” and “registration” refer to the
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Act, and the declaration or ordering by the
SEC of the effectiveness of such registration statement.



          (f) “Registrable Securities” shall mean (i) the Common Stock, and (ii)
shares of Common Stock issuable upon the exercise of the Placement Warrants;
provided, however, that securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed of
pursuant to a registration statement declared effective by the SEC, (B) have
not been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Act so that all transfer restrictions and
restrictive legends with
respect thereto are removed upon the consummation of such sale, and (C) are
held by a Holder or a permitted transferee pursuant to Section 5.10.




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          (g) “Registration Expenses” shall mean all expenses incurred by the
Company in complying with Section 5.2 hereof, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow
fees, fees and expenses of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to, or required by, any such
registration (but excluding the aggregate fees of legal counsel for all
Holders).



          (h) “Registration Statement” shall have the meaning ascribed to such term
in Section 5.2 (a).



          (i) “Registration Period” shall have the meaning ascribed to such term in
Section 5.4 (a).



          (j) “Selling Expenses” shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and the aggregate
fees and expenses of legal counsel for all Holders.



     5.2 (a) The Company shall, as soon as practicable, but not later than
thirty (30) business days after the Closing Date (the “Filing Date”), (i) use
its best efforts to file with the SEC a registration statement on Form S-3 (or
if not eligible for such form, on such other form on which the Company is
eligible) (the “Registration Statement”) with respect to the resale of the
Registerable Securities and use its best efforts to have such Registration
Statement declared effective by the SEC as soon thereafter as is practical and
(ii) cause such Registration Statement to remain effective for the Registration
Period.


          (b) If the Registration Statement is not filed on or prior to the Filing
Date, then for each successive thirty (30) day period beyond the Filing Date,
the Company shall pay to each Subscriber, in cash, as liquidated damages and
not as a penalty, one percent (1%) of the aggregate purchase price previously
paid by such Subscriber for Securities (or a pro rata amount for any periods
less than thirty (30) days) until such time as the filing is made; provided,
however, such Subscriber shall not be entitled to such cash payment if and to
the extent that such delays are the result of the failure of such Subscriber to
provide the Company with written information necessary to complete the
Registration Statement by the Filing Date.



     5.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 5.2
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders
pro rata on the basis of the number of securities so registered.


     5.4 In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company shall:


          (a) use its best efforts to keep such registration, and any qualification,
exemption or compliance under state securities laws which the Holders
reasonably request the

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Company to obtain, continuously effective as to all
Registrable Securities until the Holders have completed the distribution
described in the registration statement relating thereto. The period of time
during which the Company is required hereunder to keep the Registration
Statement effective is referred to herein as “the Registration Period.”
Notwithstanding the foregoing, at the Company’s election, the Company may cease
to keep such registration, qualification, exemption or compliance effective
with respect to any Registrable Securities, and the registration rights of a
Holder with respect to such Registrable Securities shall expire, at such time
as the Holder may sell all Registrable Securities then held by such Holder
under Rule 144 under the Act in a three-month period, but this sentence shall
not relieve the Company of any obligation to comply with this Section V as to
any shares of Common Stock issuable upon exercise of the Placement Warrants;



          (b) advise the Holders (or in the case of (ii) below, to advise the
Placement Agent):



               (i) when the Registration Statement or any amendment thereto has been
filed with the SEC and when the Registration Statement or any post-effective
amendment thereto has become effective;



               (ii) of any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus included therein or for additional
information;



               (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for such purpose;



               (iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities included therein
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and



               (v) subject to the limitations set forth in Section 5.7(b)(ii) hereof, of
the happening of any event that requires the making of any changes in the
Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they
were made) not misleading;



          (c) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time;



          (d) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment or supplement thereto,
including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (excluding those incorporated by reference) in the form filed with
the SEC;



12








 




          (e) during the Registration Period, deliver to each Holder, without
charge, a reasonable number of copies of the prospectus included in such
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use, consistent with
the provisions hereof, of the prospectus and any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by the
prospectus and any amendment or supplement thereto;



          (f) during the Registration Period, deliver to each Holder, without
charge, (i) as soon as practicable (but in the case of the annual report of the
Company to its stockholders, within 120 days after the end of each fiscal year
of the Company) one copy of: (A) its annual report to its stockholders, if any
(which annual report shall contain financial statements audited in accordance
with generally accepted accounting principles in the United States of America
by a firm of certified public accountants of recognized standing); (B) if not
included in substance in its annual report to stockholders, its annual report
on Form 10-K (or similar form); (C) a copy of the full Registration Statement
(excluding exhibits); (ii) upon reasonable request, all exhibits excluded by
the parenthetical to the immediately preceding clause (C); and (iii) such other
documents as may be reasonably requested.



          (g) prior to any public offering of Registrable Securities pursuant to the
Registration Statement, register or qualify or obtain an exemption for the
offer and sale under the securities or blue sky laws of such jurisdictions as
any such Holders reasonably request in writing, provided that the Company shall
not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any and
all other acts or things reasonably necessary or advisable to enable the offer
and sale in such jurisdictions of the Registrable Securities covered by the
Registration Statement;



          (h) cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
pursuant to the Registration Statement free of any restrictive legends to the
extent not required at such time and in such denominations and registered in
such names as Holders may request at least five (5) business days prior to
sales of Registrable Securities pursuant to the Registration Statement;



          (i) upon the occurrence of any event contemplated by Section 5.4(b)(v)
above, the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus, or file any
other required document so that, as thereafter delivered to purchasers of the
Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and



          (j) use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to the Holders not later
than 45 days (or 90 days if the fiscal quarter is the fourth fiscal quarter)
after the end of its fiscal quarter in which the

13








 



first anniversary date of the
effective date of the Registration Statement occurs, an earnings statement
satisfying the provisions of Section 11(a) of the Act.



     5.5 The Holders shall have no right to take any action to restrain, enjoin
or otherwise delay any registration pursuant to Section 5.2 hereof as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.


     5.6 (a) To the extent permitted by law, the Company shall indemnify each
Holder, each underwriter of the Registrable Securities and each person
controlling such Holder and each such underwriter within the meaning of Section
15 of the Act, with respect to which any registration, qualification or
compliance has been sought pursuant to this Agreement, against all claims,
losses, expenses, costs, damages and liabilities (or action in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made, or (ii) any violation or alleged
violation by the Company of the Act, the Exchange Act, or any rule or
regulation promulgated under the Act or the Exchange Act, and shall reimburse
each Holder, each underwriter of the Registrable Securities and each person
controlling such Holder and each such underwriter, for reasonable legal and
other expenses, in connection with investigating or defending any such claim,
loss, damage, liability or action as and when incurred; provided that the
Company shall not be liable in any such case to the extent that any untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder or underwriter and stated to be specifically for use in preparation
of such registration statement, prospectus or offering circular; provided that
the Company shall not be liable in any such case where the claim, loss, damage
or liability arises out of or is related to the failure of the Holder to comply
with the covenants and agreements contained in Section 5.7 hereof, and except
that the foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any such untrue statement or alleged untrue statement
or omission or alleged omission made in the preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement becomes effective or in the amended prospectus
filed with the SEC pursuant to Rule 424(b) of the Act or in the prospectus
subject to completion under Rule 434 of the Act, which together meet the
requirements of Section 10(a) of the Act (the “Final Prospectus”), such
indemnity agreement shall not inure to the benefit of any such Holder, any such
underwriter or any such controlling person, if a copy of the Final Prospectus
furnished by the Company to the Holder for delivery was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Act and the Final Prospectus would
have cured the defect giving rise to such loss, liability, claim or damage.
Notwithstanding any provision herein to the contrary, the Company shall
reimburse each Holder, upon such Holder’s demand, for all
reasonably necessary expenses and costs which are incurred, as and when
incurred, by such Holder as a result of the indemnification claims described in
this Section 5.6(a). Such demand may be made from time to time prior to
resolution of the claim. In no event shall the Company


14








 



be liable for the
expenses and costs of more than one attorney on behalf of the Holders unless in
the reasonable judgement of a Holder, based upon written advice of its
counsel, a conflict of interest exists between the Holders with respect to such
claims, in which case the Company shall reimburse the Holders for additional
attorneys.


          (b) Each Holder will severally, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Registrable Securities and
each person who controls the Company and each underwriter of the Registrable
Securities within the meaning of Section 15 of the Act, against all claims,
losses, expenses, costs, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Company and each underwriter of the Registrable
Securities for reasonable legal and any other expenses or costs reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred, in each case to the extent, but only
to the extent, that such untrue statement or omission or allegation thereof is
made in reliance upon, and in conformity with, written information furnished to
the Company by or on behalf of the Holder and stated to be specifically for use
in preparation of such registration statement, prospectus or offering circular;
provided that the indemnity shall not apply to the extent that such claim,
loss, damage or liability results from the fact that a current copy of the
prospectus or offering circular was not made available to the Holder and such
current copy of the prospectus or offering circular would have cured the defect
giving rise to such loss, claim, expense, costs, damage or liability.
Notwithstanding the foregoing, in no event shall a Holder be liable for any
such claims, losses, expenses, costs, damages or liabilities in excess of the
proceeds received by such Holder in that offering, except in the event of fraud
by such Holder.



          (c) Each party entitled to indemnification under this Section 5.6 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense with its own counsel at such Indemnified Party’s expense unless the
named parties to any proceeding covered hereby (including any impleaded
parties) include both the Company or any others the Company may designate and
one
or more Indemnified Persons, and representation of the Indemnified Persons and
such other parties by the same counsel would be inappropriate due to actual or
potential differing interests between them, and provided further that the
failure of any Indemnified Party to give notice as

15








 



provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, unless
such failure is materially prejudicial to the Indemnifying Party in defending
such claim or litigation. An Indemnifying Party shall not be liable for any
settlement of an action or claim effected without its written consent (which
consent will not be unreasonably withheld).



          (d) If the indemnification provided for in this Section 5.6 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, cost or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, cost or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage, cost or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied or which
should have been supplied by the Indemnifying Party or by the Indemnified Party
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.



     5.7 (a) Subject to the limitations set forth in Section 5.7(b)(ii) below,
upon receipt of any notice from the Company of the happening of any event
requiring the preparation of a supplement or amendment to a prospectus relating
to Registrable Securities so that, as thereafter delivered to the Holders, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, each Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
contemplated by Section 5.2 until its receipt of copies of the supplemented or
amended prospectus from the Company and, if so directed by the Company, each
Holder shall deliver to the Company all copies, other than permanent file
copies then in such Holder’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.


          (b) Any Holder which owns five percent (5%) or more (and with respect to
5.7(b)(ii), “any Holder”) of the Company’s outstanding Common Stock shall
suspend, upon request of the Company, any disposition of Registrable Securities
pursuant to the Registration Statement and prospectus contemplated by Section
5.2 during (i) any period not to exceed one 180-day period within any one
12-month period the Company requires in connection with an underwritten
offering of equity securities and (ii) any period, not to exceed two 45-day
periods within any twelve month period, when the Company determines in good
faith that offers and sales pursuant thereto should not be made by reason of
the presence of material undisclosed circumstances or developments with respect
to which the disclosure that would be required in such a prospectus is
premature, would have an adverse effect on the Company or is otherwise
inadvisable.



          (c) As a condition to the inclusion of its Registrable Securities, each
Holder shall furnish to the Company such information regarding such Holder, the
securities of

16








 



the Company owned beneficially or of record by such Holder and
the distribution proposed by such Holder as the Company may request in writing
because it is required in connection with any registration, qualification or
compliance referred to in this Section V.



          (d) With respect to any sale of Registrable Securities pursuant to a
Registration Statement filed pursuant to this Section V, each Holder hereby
covenants with the Company not to make any sale of the Registrable Securities
without effectively causing the prospectus delivery requirements under the Act
to be satisfied.



          (e) Each Holder acknowledges and agrees that the Registrable Securities
sold pursuant to the Registration Statement described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Registrable Securities is accompanied by
a certificate reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus has been
satisfied.



          (f) Each Holder shall not take any action with respect to any distribution
deemed to be made pursuant to such registration statement, which would
constitute a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.



          (g) At the end of the period during which the Company is obligated to keep
the Registration Statement current and effective as described above, the
Holders of Registrable Securities included in the Registration Statement and
the shares underlying the Placement Warrants shall discontinue sales of shares
pursuant to such Registration Statement upon receipt of notice from the Company
of its intention to remove from registration the shares covered by such
Registration Statement which remain unsold.



     5.8 With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which at any time permit the sale of the
Registrable Securities to the public without registration, the Company shall
use its reasonable best efforts:


          (a) to make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times;



          (b) to file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act; and



          (c) so long as a Holder owns any Registrable Securities, to furnish to
such Holder upon any reasonable request a written statement by the Company as
to its compliance with Rule 144 under the Act, and of the Exchange Act, and a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the
Company as such Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without
registration.



17








 




     5.9 With the written consent of the Company and the Holders holding a
majority of the Registerable Securities that are then outstanding, any
provision of this Section V may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.


     5.10 The rights and obligations of the Holders under this Section V may
not be assigned or transferred to or assumed by any transferee or assignee
except (i) to a transferee that acquires at least 20% of such Holder’s
Registerable Securities or (ii) to an Affiliate or limited or general partner
of a Holder; provided that such transfer was not in violation of this Agreement
or the Securities Laws.


VI. MISCELLANEOUS


     6.1 Any notice or other communication given hereunder shall be deemed
sufficient in writing and sent by (a) telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received); or (b) registered or certified
mail, return receipt requested, or delivered by hand against written receipt
therefor, addressed to Bioject Medical Technologies Inc., 7620 S.W. Bridgeport
Road, Portland, Oregon 97224, Facsimile: (503) 620-6431, Attention: James C.
O’Shea, with a copy to Leerink Swann & Company, 60 State Street, 15th Floor,
Boston, Massachusetts 02019, Facsimile (617) 918-4724, Attention: Stuart R.
Barich. Notices shall be deemed to have been given or delivered on the date of
mailing, except notices of change of address, which shall be deemed to have
been given or delivered when received.


     6.2 Except as set forth in Section 5.9, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.


     6.3 Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of Securities as herein provided, subject to acceptance by the
Company and the Placement Agent; subject, however, to the right hereby reserved
to the Company to enter into the same agreements with other subscribers and to
add and/or delete other persons as subscribers.


     6.4 Notwithstanding the place where this Agreement may be executed by any
of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the
laws of the State of Oregon without regard to principles of conflicts of law.


     6.5 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If
any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being


18








 



enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other
covenant or provision unless so expressed herein.


     6.6 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.


     6.7 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this
Agreement.


     6.8 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.


     6.9 The Subscriber agrees not to issue any public statement with respect
to the Subscriber’s investment or proposed investment in the Company or the
terms of any agreement or covenant between them and the Company without the
Company’s prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation.


     6.10 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except for the
holders of Registrable Securities.


     6.11 Any pronoun herein shall include all genders and/or the plural or
singular as appropriate from the context.


19








 


Name: ________________________


VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE


     7.1 The Subscriber represents and warrants that he, she or it comes within
one category marked below, and that for any category marked, he, she or it has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION VII WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to
furnish any additional information which the Company deems necessary in order
to verify the answers set forth below.



	 	 	 	 
	Category A ___	 	
The undersigned is an individual (not a partnership, corporation,
etc.) whose individual net worth, or joint net worth with his or her
spouse, presently exceeds $1,000,000.
	 
	 	 	 	
Explanation. In calculating net worth you may
include equity in personal property and real
estate, including your principal residence, cash,
short-term investments, stock and securities.
Equity in personal property and real estate should
be based on the fair market value of such property
less debt secured by such property.
	 
	Category B ___	 	
The undersigned is an individual (not a partnership, corporation,
etc.) who had an individual income in excess of $200,000 in each of the
two most recent years, or joint income with his or her spouse in excess of
$300,000 in each of those years (in each case including foreign income,
tax exempt income and full amount of capital gains and losses but
excluding any income of other family members and any unrealized capital
appreciation) and has a reasonable expectation of reaching the same income
level in the current year.
	 
	Category C ___	 	
The undersigned is a director or executive officer of the Company.
	 
	Category D ___	 	
The undersigned is a bank; a savings and loan association; insurance
company; registered investment company; registered business development
company; licensed small business investment company or “SBIC”; or employee
benefit plan within the meaning of Title 1 of Employee Retirement Income
Security Act or “ERISA” and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total assets
in excess of $5,000,000 or is a self-directed plan with investment
decisions made solely by persons that are accredited investors.
	 	 	
     
	 	 	


 




(describe entity)



20








 



	 	 	 
	Category E ___	 	
The undersigned is a private business development company as defined
in section 202(a)(22) of the Investment Advisors Act of 1940.
	 	 	
     
	 	 	

 




(describe entity)
	 
	Category F ___	 	
The undersigned is either a corporation, partnership, Massachusetts
business trust, or nonprofit organization within the meaning of Section
501(c)(3) of the Internal Revenue Code, in each case not formed for the
specific purpose of acquiring the Securities and with total assets in
excess of $5,000,000.
	 	 	
     
	 	 	

 



(describe entity)
	 
	Category G ___	 	
The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Securities where the purchase is directed by a
“sophisticated person” as defined in Regulation
506(b)(2)(ii) under the Act.
	 
	Category H ___	 	
The undersigned hereby certifies that it is an accredited
investor because all of its equity owners are accredited
investors. The Company, in its sole discretion, may request
information regarding the basis on which such equity owners
are accredited.
	 
	Category I ___	 	
The undersigned hereby certifies that it is an accredited
investor because it has total assets in excess of $5,000,000
and was not formed for the specific purpose of acquiring the
Securities.
	 
	Category J ___	 	
The undersigned is not within any of the categories above and
is therefore not an accredited investor.



The Company will notify a prospective Subscriber whether such Subscriber is
eligible to purchase Securities pursuant to this Agreement (and the Company, in
its sole discretion, retains the right to accept or reject all such purchases).
The undersigned agrees that it will notify the Company at any time on or prior
to the Closing Date in the event that the representations and warranties in
this Investor Questionnaire shall cease to be true, accurate and complete.


21








 




     7.2 SUITABILITY (please answer each question)


(a)  For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:






 


 


 


 




(b)  For an individual Subscriber, please describe any college or graduate
degrees held by you:







 


 


 


 


(c)  For all Subscribers, please list types of prior investments:






 


 


 


 



(d)  For all Subscribers, please state whether you have participated in other
private placements before:


YES_______       NO_______


(e)  If your answer to question (d) above was “YES”, please indicate frequency
of such prior participation in private placements of:



	 	 	 	     	 	     	 
	 	 	 	 	 	 	Biotechnology,
	 	 	 	 	 	 	Pharmaceutical and
	 	 	Public	 	Private	 	Other Life Science
	 	 	Companies	 	Companies	 	Companies*
	 	 	
	 	
	 	

	Frequently	 	
     
	 	     
	 	     
	 	 	
	 	
	 	

	Occasionally	 	
     
	 	     
	 	     
	 	 	
	 	
	 	

	Never	 	
     
	 	     
	 	     
	 	 	
	 	
	 	




     *indicate how many companies, whether public or private, are in the
biotechnology, pharmaceutical or other life sciences sectors.


22








 


(f)  For an individual Subscriber, do you expect your current level of income to
significantly decrease in the foreseeable future?


YES_______       NO_______


(g)  For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future?


YES_______       NO_______


(h)  For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you?


YES_______       NO_______


(i)  For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?


YES_______       NO_______


(j)  For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?


YES_______       NO_______


     7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)



	 	 	 
	(a)	 	
Individual Ownership
	(b)	 	
Community Property
	(c)	 	
Joint Tenant with Right of
Survivorship (both parties
must sign)
	(d)	 	
Partnership*
	(e)	 	
Tenants in Common
	(f)	 	
Company*
	(g)	 	
Trust*
	(h)	 	
Other



     *If Securities are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.


23








 


     7.4 NASD AFFILIATION.


Are you affiliated or associated with an NASD member firm (please check one)?


YES _________       NO __________


If yes, please describe:**




















     **If Subscriber is a Registered Representative with an NASD member firm,
have the
following acknowledgment signed by the appropriate party:


The undersigned NASD member firm acknowledges receipt of the notice
required by Article 3, Sections 28(a) and (b) of the Rules of Fair
Practice.



	 	

Name of NASD Member Firm	 




	 	By:	 	 
	 	 	

Authorized Officer — Signature	 




	 	

Authorized Officer — Printed Name	 




	 	Date:	 	, 2001
	 	 	
	 



24








 


     7.5 STOCK OWNERSHIP


Do you beneficially own any shares of the Company’s Common Stock or any
securities convertible into or exercisable for shares of the Company’s Common
Stock?


YES _________       NO __________


If yes, please describe, including number of shares:






















     7.6 COMPANY RELIANCE ON THIS QUESTIONNAIRE


The undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in this Section VII and such answers have
been provided under the assumption that the Company and its counsel will rely
on them.


25








 



	 	 	 	 	 
	SIGNATURE PAGE	 	Date Signed: _____________ , 2001
	 
	Number of shares:	 	 	 	     
	 	 	 	

	Multiplied by Offering Price per share:	 	
x
	$	 
	 	 	 	 	

	Equals subscription amount:	 	
=
	$	 
	 	 	 	 	





	 	 	 
	
	 	


	Signature	 	
Second Signature (if purchasing jointly)
	 
	
	 	


	Printed Name	 	
Printed Second Name
	 
	
	 	


	Entity Name	 	
Entity Name
	 
	
	 	


	Address	 	
Address
	 
	
	 	


	City, State and Zip Code	 	
City, State and Zip Code
	 
	
	 	


	Telephone-Business	 	
Telephone — Business
	 
	
	 	


	Facsimile-Business	 	
Facsimile — Business
	 
	
	 	


	Tax ID # or Social Security #	 	
Tax ID # or Social Security #




	 	 
	Name in which securities should be issued:	 
	 	




	 	 
	Leerink Swann & Company Account Number:	 
	 	





26








 







This Subscription Agreement is agreed to and accepted as of ______________ , 2001.



	 	 
	 	
BIOJECT MEDICAL TECHNOLOGIES INC.
	 
	 	By:
	 
	 	


	 	
Name: James C. O’Shea

Title: Chairman and Chief Executive Officer



27








 


CERTIFICATE OF SIGNATORY


(To be completed if Securities are being subscribed for by an entity)


     I, _________________________________, am the ___________________________________


of _________________________________________________ (the “Entity”).


     I certify that I am empowered and duly authorized by the Entity to execute
and carry out the terms of the Subscription Agreement and to purchase and hold
the Securities, and certify further that the Subscription Agreement has been
duly and validly executed on behalf of the Entity and constitutes a legal and
binding obligation of the Entity.


     IN WITNESS WHEREOF, I have set my hand this ____ day of ____, 2001.



	 	

(Signature)



28








 


EXHIBIT A – RISK FACTORS


     An investment in the Securities offered hereby is highly speculative in
nature, involves a high degree of risk and should not be purchased by persons
who cannot afford a loss of their entire investment. Each prospective investor
should consider carefully the risks inherent in and affecting both the business
of the Company and the value of the Securities and speculative factors
including, without limitation, the following risk factors, as well as other
information contained in this Agreement and filings of the Company with the SEC
before making an investment in the Securities.


     RESTRICTIONS ON TRANSFERABILITY


     The Shares have not been registered under the Securities Act. Although
the Company has an agreement to register such securities for resale by
investors, there can be no assurance that a registration statement will be
declared effective by the SEC. Without an effective registration statement,
prior to a transfer the Company may require an opinion of counsel reasonably
satisfactory to the Company that neither the sale nor the proposed transfer
results in a violation of the Securities Act or any applicable state securities
or “blue sky” laws, and a written agreement by any subsequent transferee that
such party agrees to be bound by the terms of any agreement that may be entered
into between the investors and the Company in connection with the Offering.


     NO PAYMENT OF DIVIDENDS


     The Company has never paid and does not intend to pay any dividends on its
Common Stock in the future. The Company intends to retain any earnings to fund
operations and future growth.


     NO MINIMUM OFFERING COMMITMENT


     Because the Offering is being made on a “best efforts” basis, rather than
a “firm commitment” basis, no assurance can be given that any sales of the
Securities will be made or that the Offering proceeds will be sufficient to
effectively implement the courses of action identified in the “Use of Proceeds”
section.


     FACTORS AFFECTING FUTURE RESULTS OF THE COMPANY


FOR THE PURPOSES OF THE FOLLOWING RISK FACTORS, THE USE OF THE TERMS “WE”,
“OUR”, “US” OR WORDS OF SIMILAR EFFECT SHALL REFER TO THE COMPANY.


If our products are not accepted by the market, our business could fail. Our
success will depend on market acceptance of our needle-free injection drug
delivery systems, the Biojector 2000 system and the Vitajet system and on
market acceptance of other products under development. If our products do not
achieve market acceptance, our business could fail. Currently, the dominant
technology used for intramuscular and subcutaneous injections is the
hollow-needle syringe. Use of the Biojector 2000 system for intramuscular and
subcutaneous injections eliminates the risk associated with needle syringes;
however, the cost per injection is significantly higher. The Biojector 2000,
the Iject system, the Vitajet system or any of our products under development
may be unable to compete successfully with needle-syringes. A previous
needle-free injection system manufactured by us did not achieve market
acceptance and is no longer being marketed.


29








 


We may be unable to enter into additional strategic corporate licensing and
supply agreements or maintain existing agreements, which could cause our
business to suffer. A key component of our sales and marketing strategy is to
enter into licensing and supply arrangements with leading pharmaceutical and
biotechnology companies for whose products our technology provides either
increased medical effectiveness or a higher degree of market acceptance. If we
cannot enter into these agreements on terms favorable to us or at all, our
business may suffer. In January 1995, we entered into an agreement with
Hoffman La Roche Pharmaceuticals, whereby the parties anticipated that the
product development phase of the agreement would develop into a supply and
distribution agreement between us and Roche. In June 1999, Roche advised us
that due to a longer and more costly than expected regulatory process to gain
clearance to use the B-2020 in conjunction with Roche’s products, Roche had
changed its marketing strategy. In making that change in marketing strategy,
Roche abandoned its exclusive distribution rights to the B-2020 and did not
seek a supply of the B-2020 from us. In July 1998, we entered into an
agreement with Merck & Co., whereby the parties anticipated that the initial
July 1998 agreement would lead to a long-term licensing and supply agreement
between the two companies. In February 1999, Merck & Co. advised us that it
would not continue, at that time, to pursue exclusive license to or supply of
our products. Both of these agreements resulted in significant short-term
revenue. Neither agreement developed into the long-term revenue stream
anticipated by our strategic partnering strategy. We may be unable to enter
into future licensing or supply agreements with major pharmaceutical or
biotechnology companies. Even if we enter into these agreements, they may not
result in sustainable long-term revenues which, when combined with revenues
from product sales, could be sufficient for us to operate profitably.


We have a history of losses and may never be
profitable. Since our formation
in 1985, we have incurred significant annual operating losses and negative cash
flow. At September 30, 2001, we had an accumulated deficit of $67 million.
$54 million of the accumulated deficit relates to losses incurred in the
needle-free segment of our operations. Approximately $13 million of the
accumulated deficit relates to losses from our operations to develop the blood
glucose monitoring technology. We may never be profitable, which could have a
negative effect on our stock price. Historically, our revenues have been
derived primarily from licensing and technology fees and from limited product
sales. The product sales were principally sales to dealers in order to stock
their inventories and to Homecare Management Inc., a company that we no longer
sell to. More recently, we have sold our products to end-users, primarily to
public health clinics for vaccinations and to nursing organizations for flu
immunizations. We have not attained profitability at these sales levels. We
may never be able to generate significant revenues or achieve profitability.


We have reduced our sales force and may be unable to penetrate targeted market
segments. In late fiscal 1998 and early fiscal 1999, we dramatically reduced
our direct product sales force from one national and five district sales
managers and we currently have one national sales manager who is focused on
specifically targeted market segments. This reduced sales force may not have
sufficient resources to adequately penetrate one or more of the targeted market
segments. Further, if the sales force is successful in penetrating one or more
of the targeted market segments, we are unable to assure you that our products
will be accepted in those segments or that product acceptance will result in
product revenues which, together with revenues from corporate licensing and
supply agreements, will be sufficient for us to operate profitably.


We may never receive future royalties from the blood glucose monitoring
technology, which could cause our financial condition to suffer. In May
1999, rather than continue to fund the cost of its development, we entered into
negotiations to sell Marathon Medical Technologies Inc.’s blood glucose
monitoring technology, and certain fixed assets related to developing the
technology, to a third party. The sale was completed on June 30, 1999. The
terms of the sale of the blood glucose monitoring technology provide for us to
receive a royalty on net sales of future products, if any, which may be
developed from the licensed technology. The agreement calls for a royalty of
three percent of net sales until we have received total royalty payments of $10
million. The agreement then calls for royalty payments of one percent of net
sales thereafter. Future products may never be successfully developed from the
blood glucose monitoring technology, and if products are developed, they may
not be


30








 



commercially successful, which would mean that we would receive no future
royalties and this could cause our financial condition to suffer.


We will need additional financing in the future, and if we cannot obtain the
necessary financing our business could fail. To date, our revenues from
operations have not been sufficient to meet our cash requirements. As a result,
since our inception in 1985, we have financed our operations, working capital
needs and capital expenditures primarily from private placements of securities,
exercises of stock options and warrants, proceeds received from our initial
public offering in 1986, proceeds received from a public offering of Common
Stock in November 1993, licensing and technology revenues, equity investments
from Elan and Amgen, proceeds from the sale of the glucose monitoring
technology, proceeds received from a private placement of Common Stock in July
and August 2000, proceeds received from two private placements of Common Stock
in May and June 2001, and through sales of products. We do not have a credit
facility. We plan to fund our future cash requirements through revenues, debt,
and sales of equity securities. However, we may be unable to obtain the
financing sufficient to fund our business activities on favorable terms or at
all. Failure to obtain adequate financing would have a material adverse impact
on our business. In addition, sale of our equity securities on unfavorable
terms to meet our obligations could result in material dilution to the existing
shareholders.


We have outstanding convertible preferred stock, which is convertible into
Common Stock at prices which may be lower than market price at the time of
conversion which could result in dilution to existing Common Stock holders.
Our Common Stock is subject to the rights and preferences of the Series A and C
Convertible Preferred Stock, which may be converted into Common Stock at prices
which may be lower than market price at the time of conversion, causing
substantial dilution to existing holders of Common Stock. Each share of Series
A and Series C Convertible Preferred Stock is convertible into two shares of
Common Stock. In October, 2004, unless it is converted earlier by the holders
or redeemed by us, the shares of Series A and C Convertible Preferred Stock and
accrued but unpaid dividends on the Series A Convertible Preferred Stock
convert automatically into Common Stock.


     We have limited manufacturing experience, and may be unable to produce our
products at the unit costs necessary for the products to be competitive in the
market, which could cause our financial condition to suffer. We have limited
experience manufacturing our products in commercially viable quantities. We
have increased our production capacity for the Biojector 2000 system and the
Vitajet product line through automation of, and changes in, production methods,
in order to achieve savings through higher volumes of production. If we are
unable to do so, then our results of operations and financial condition could
suffer. The current cost per injection of the Biojector 2000 system and Vitajet
product line is substantially higher than that of traditional needle-syringes,
our principal competition. A key element of our business strategy has been to
reduce the overall manufacturing cost through automating production and
packaging. This automation is substantially complete. There can be no assurance
that we will achieve sales and manufacturing volumes necessary to realize cost
savings from volume production at levels necessary to result in significant
unit manufacturing cost reductions. Failure to do so will continue to make
competing with needle-syringes on the basis of cost very difficult and will
adversely affect our financial condition and results of operations. We may be
unable to successfully manufacture devices at a unit cost that will allow the
product to be sold profitably. Failure to do so would adversely affect our
financial condition and results of operations.


We are subject to extensive government regulation and must continue to comply
with these regulations or our business could suffer. Our products and
manufacturing operations are subject to extensive government regulation in both
the U.S. and abroad. If we cannot comply with these regulations, we may be
unable to distribute our products, which could cause our business to suffer or
fail. In the U.S., the development, manufacture, marketing and promotion of
medical devices are regulated by the Food and Drug Administration (“FDA”) under
the Federal Food, Drug, and Cosmetic Act (“FD&C”). In 1987, we received
clearance from the FDA under Section 510(k) of the FD&C to market a hand-held
CO2-powered needle-free injection system. The FD&C provides that new premarket
notifications under Section 510(k) of the FD&C are required to be filed when,
among other things, there is a major change or modification in the intended use
of a device or a change or


31








 



modification to a legally marketed device that could significantly affect its
safety or effectiveness. A device manufacturer is expected to make the initial
determination as to whether the change to its device or its intended use is of
a kind that would necessitate the filing of a new 510(k) notification. Although
the Biojector 2000 system incorporates changes from the system with respect to
which our 1987 510(k) marketing clearance was received and expands its intended
use, we made the determination that these were not major changes or
modifications in intended use or changes in the device that could significantly
affect the safety or effectiveness of the device. Accordingly, we further
concluded that the 1987 510(k) clearance permitted us to market the Biojector
2000 system in the U.S. In June 1994, we received clearance from the FDA under
510(k) to market a version of our Biojector 2000 system in a configuration
targeted at high volume injection applications. In October 1996, we received
510(k) clearance for a needle-free disposable vial access device. In March
1997, we received additional 510(k) clearance for certain enhancements to our
Biojector 2000 system. In June 2000, we received 510(k) clearance for the
cool.click, a modified Vitajet. In March 2001, we received 510(k) clearance for
the SeroJet, a modified Vitajet. In April 2001, we received 501(k) clearance to
market a reconstitution kit and vial injector. The FDA may not concur with our
determination that our current and future products can be qualified by means of
a 510(k) submission.


     Future changes to manufacturing procedures could require that we file a
new 510(k) notification. Also, future products, product enhancements or
changes, or changes in product use may require clearance under Section 510(k),
or they may require FDA premarket approval (“PMA”) or other regulatory
clearances. PMAs and regulatory clearances other than 510(k) clearance
generally involve more extensive prefiling testing than a 510(k) clearance and
a longer FDA review process. Under current FDA policy, applications involving
pre-filled syringes would be evaluated by the FDA as drugs rather than devices,
requiring FDA new drug applications or abbreviated new drug applications.
Depending on the circumstances, drug regulation can be much more extensive and
time consuming than device regulation.


     FDA regulatory processes are time consuming and expensive. Product
applications submitted by the Company may not be cleared or approved by the
FDA. In addition, our products must be manufactured in compliance with Good
Manufacturing Practices as specified in regulations under the FD&C. The FDA has
broad discretion in enforcing the FD&C, and noncompliance with the FD&C could
result in a variety of regulatory actions ranging from product detentions,
device alerts or field corrections, to mandatory recalls, seizures, injunctive
actions, and civil or criminal penalties.


If we cannot meet international product standards, we will be unable to
distribute our products outside of the United States, which could cause our
business to suffer. Distribution of our products in countries other than the
U.S. may be subject to regulation in those countries. Failure to satisfy these
regulations would impact our ability to sell our products in these countries
and could cause our business to suffer. In January 1999, we received
certification from TUV Product Services for our quality system, which meets the
requirements of ISO 9001 and EN 46001. In November 1999, we received
certification from TUV Product Services for the applicable requirements of
EC-Directive 93/42/EEC Annex. II.3 Medical Device Directive. This certification
allows us to label our products with the CE Mark and sell them in the European
Community. We may be unable to continue to meet the standards of ISO 9001 or CE
Mark certification.


If the healthcare industry limits coverage or reimbursement levels, the
acceptance of our products could suffer. The price of our products exceeds
the price of needle-syringes and if coverage or reimbursement levels are
reduced, market acceptance of our products could be harmed. The healthcare
industry is subject to changing political, economic and regulatory influences
that may affect the procurement practices and operations of healthcare
facilities. During the past several years, the healthcare industry has been
subject to increased government regulation of reimbursement rates and capital
expenditures. Among other things, third party payers are increasingly
attempting to contain or reduce healthcare costs by limiting both coverage and
levels of reimbursement for healthcare products and procedures. Because the
price of the Biojector 2000 system and Vitajet product line exceeds the price
of a needle-syringe, cost control policies of third party payers, including


32








 



government agencies, may adversely affect acceptance and use of the Biojector
2000 system and Vitajet product line.


We are highly dependent on third-party relationships, and our business could
suffer if we cannot maintain these relationships. We are dependent on third
parties for distribution of the Biojector 2000 system to certain market
segments, for the manufacture of component parts, and for assistance with the
development and distribution of future application-specific systems. If we
cannot maintain these relationships, or if the third parties are unable to
provide the services we require, our business could suffer.


     Our current manufacturing processes for the Biojector 2000 jet injector
and disposable syringes as well as manufacturing processes to produce the
Vitajet consist primarily of assembling component parts supplied by outside
suppliers. Some of these components are currently obtained from single sources,
with some components requiring significant production lead times. In the past,
we have experienced delays in the delivery of certain components. To date, such
delays have not had a material adverse effect on our operations. We may
experience delays in the future, and these delays could have a material adverse
effect on our financial condition and results of operations.


     In the past, we have entered into agreements with certain major
pharmaceutical or biotechnology companies for development and distribution of
needle-free injection systems and for use of our needle-free injection systems
in conjunction with the pharmaceutical companies’ products. In all cases to
date, these companies have had the right to terminate those agreements at
certain phases as defined in the agreements. In several instances, those
agreements have been terminated before yielding sustained long-term licensing
or product sales revenues. Entering into agreements of this nature is an
important part of our overall business strategy. We may be unable to interest
any major pharmaceutical or biotechnology companies in entering into such
agreements. If interested parties are found, we may be unsuccessful at
negotiating and entering into long-term licensing and supply agreements with
the interested parties. Further, if such agreements are entered into, there can
be no assurance that the companies’ interest and participation in the
agreements and projects will continue and result in long-term, sustainable
revenues as contemplated by this aspect of our overall business strategy.
Failure to enter into future licensing and product supply agreements with major
pharmaceutical or biotechnology companies and failure of those future
agreements to result in significant, sustainable long-term revenues could
adversely affect our financial condition.


If we are unable to manage our growth, our results of operations could suffer.
If our products achieve market acceptance or if we are successful in entering
into product supply agreements with major pharmaceutical or biotechnology
companies, we expect to experience rapid growth. Such growth would require
expanded customer service and support, increased personnel, expanded
operational and financial systems, and implementing new and expanded control
procedures. We may be unable to attract sufficient qualified personnel or
successfully manage expanded operations. As we expand, we may periodically
experience constraints that would adversely affect our ability to satisfy
customer demand in a timely fashion. Failure to manage growth effectively could
adversely affect our financial condition and results of operations.


We may be unable to compete in the medical equipment field, which could cause
our business to fail. The medical equipment market is highly competitive and
competition is likely to intensify. If we cannot compete, our business will
fail. Our products compete primarily with traditional needle-syringes, “safety
syringes” and also with other alternative drug delivery systems. While we
believe our products provide a superior drug delivery method, there can be no
assurance that we will be able to compete successfully with existing or newly
developed drug delivery products. Many of our competitors have longer operating
histories as well as substantially greater financial, technical, marketing and
customer support resources. One or more of these competitors may develop an
alternative drug delivery system that competes more directly with our products,
and our products may be unable to compete successfully with such a product.


33








 


We are dependent on a single technology, and if it cannot compete or find
market acceptance, our business will suffer. Our strategy has been to focus
our development and marketing efforts on our needle-free injection technology.
Focus on this single technology leaves us vulnerable to competing products and
alternative drug delivery systems. If our technology cannot find market
acceptance or cannot compete against other technologies, business will suffer.
We perceive that healthcare providers’ desire to minimize the use of the
traditional needle-syringe has stimulated development of a variety of
alternative drug delivery systems such as “safety syringes,” jet injection
systems, nasal delivery systems and transdermal diffusion “patches”. In
addition, pharmaceutical companies frequently attempt to develop drugs for oral
delivery instead of injection. While we believe that for the foreseeable future
there will continue to be a significant need for injections, alternative drug
delivery methods may be developed which are preferable to injection.


We rely on patents and proprietary rights to protect our proprietary
technology. We rely on a combination of trade secrets, confidentiality
agreements and procedures, and patents to protect our proprietary technologies.
We have been granted a number of patents in the United States and several
patents in other countries covering certain technology embodied in our current
jet injection system and certain manufacturing processes. Additional patent
applications are pending in the U.S. and certain foreign countries. The claims
contained in any patent application may not be allowed, or any patent or our
patents collectively may not provide adequate protection for our products and
technology. In the absence of patent protection, we may be vulnerable to
competitors who attempt to copy our products or gain access to our trade
secrets and know-how. In addition, the laws of foreign countries may not
protect our proprietary rights to this technology to the same extent as the
laws of the U.S. We believe we have independently developed our technology and
attempt to ensure that our products do not infringe the proprietary rights of
others. We know of no such infringement claims. However, any claims could have
a material adverse affect on our financial condition and results of operations.


If our products fail or cause harm, we could be subject to substantial product
liability, which could cause our business to suffer. Producers of medical
devices may face substantial liability for damages in the event of product
failure or if it is alleged the product caused harm. We currently maintain
product liability insurance and, to date, have experienced only one product
liability claim. There can be no assurance, however, that we will not be
subject to a number of such claims, that our product liability insurance would
cover such claims, or that adequate insurance will continue to be available to
us on acceptable terms in the future. Our business could be adversely affected
by product liability claims or by the cost of insuring against such claims.


We are highly dependent on our key employees, and our business could suffer if
they were to leave. Our success depends on the retention of our executive
officers, Mr. James O’Shea, Mr. John Gandolfo, Mr. Michael Temple, Dr. Richard
Stout, Mr. Michael Redmond, and other key employees. Competition exists for
qualified personnel and our success will depend, in part, on attracting and
retaining qualified personnel. Failure in these efforts could have a material
adverse effect on our business, financial condition or results of operations.


There are a large number of shares eligible for sale into the public market in
the near future, which may reduce the price of our Common Stock. The market
price of our Common Stock could decline as a result of sales of a large number
of shares of our Common Stock in the market, or the perception that such sales
could occur. We have a large number of shares of Common Stock outstanding and
available for resale beginning at various points in time in the future. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. The shares of our
Common Stock currently outstanding will become eligible for sale without
registration pursuant to Rule 144 under the Securities Act, subject to certain
conditions of Rule 144. Certain holders of our Common Stock also have certain
demand and piggyback registration rights enabling them to register their shares
under the Securities Act for sale. We have registered approximately 11 million
shares for resale on Form S-3 registration statements, including approximately
3.3 million shares issuable upon exercise of warrants and 2.2 million shares
issuable upon conversion of preferred stock held by Elan Pharmaceutical
Investments, Ltd. In addition, we have approximately 1 million shares of Common
Stock reserved for issuance under our stock option plan. As of September 30,
2001,


34








 



options to purchase approximately 1.3 million shares of Common Stock were
outstanding and will be eligible for sale in the public market from time to
time subject to vesting. These stock options generally have exercise prices
significantly below the current price of our Common Stock. The possible sale of
a significant number of these shares may cause the price of our Common Stock to
fall.


We may be unable to maintain our listing on Nasdaq, which could cause our stock
price to fall and decrease the liquidity of our Common Stock. Our Common
Stock is quoted on the Nasdaq SmallCap Market. If we cannot comply with the
continuing requirements, we may be delisted which could cause the stock price
to fall and decrease the liquidity of our Common Stock for existing
shareholders. There are a number of continuing requirements that must be met in
order for the Common Stock to remain eligible for quotation on the Nasdaq
SmallCap Market. The failure to meet the maintenance criteria in the future
could result in the delisting of our Common Stock from Nasdaq. In such event,
trading, if any, in the Common Stock may then continue to be conducted in the
non- Nasdaq over-the-counter market. As a result, an investor may find it more
difficult to dispose of or to obtain accurate quotations as to the market value
of our Common Stock. In addition, if the Common Stock were delisted from
trading on Nasdaq and the trading price of the Common Stock were less than
$5.00 per share, trading in the Common Stock would also be subject to the
requirements of certain rules promulgated under the Exchange Act, which require
additional disclosure by broker-dealers in connection with any trades involving
a stock defined as a penny stock. The additional burdens imposed on
broker-dealers may discourage broker-dealers from effecting transactions in
penny stocks, which could reduce the liquidity of the shares of Common Stock
and thereby have a material adverse effect on the trading market for the
securities.


Our stock price may be highly volatile, which increases the risk of securities
litigation. The market for our Common Stock and for the securities of other
early-stage, small market-capitalization companies has been highly volatile in
recent years. This increases the risk of securities litigation relating to such
volatility. We believe that factors such as quarter-to-quarter fluctuations in
financial results, reduction in the number of outstanding shares due to the
recent reverse stock split, new product introductions by us or our competition,
public announcements, changing regulatory environments, sales of Common Stock
by certain existing shareholders, substantial product orders and announcement
of licensing or product supply agreements with major pharmaceutical or
biotechnology companies could contribute to the volatility of the price of our
Common Stock, causing it to fluctuate dramatically. General economic trends
such as recessionary cycles and changing interest rates may also adversely
affect the market price of our Common Stock.



35