Document:

Exhibit
10.2

 

	
  

  	
  Corporate Offices

  1000 Bishops Gate Blvd, Suite 300

  Mount Laurel, NJ 08054-4632

  

 

November 15, 2004

 

Via Electronic Mail

 

James M. Weiland

15 Marlin Drive

Laguna Beach, CA 92651

 

Dear Jim:

On behalf of
MedQuist Inc. (the “Company”), this Agreement describes the terms of
your new employment as the Company’s Senior Vice President  – Sales, which must commence on a date
mutually agreed to in writing by you and the Company (the “Employment
Commencement Date”).  For purposes of
this Agreement, you are referred to as the “Employee.”  Other capitalized terms used in this
Agreement have the meanings defined in Section 7, below.

 

1.                                       Term.  The Company shall employ Employee hereunder
for a three (3) year term commencing on the Employment Commencement Date hereof
(the “Term”), which Term will be automatically extended for additional
one (1) year periods beginning on the third anniversary of the Employment
Commencement Date and upon each subsequent anniversary thereof unless either
party provides the other party with at least ninety (90) days’ prior written
notice of its intention not to renew this Agreement unless terminated earlier
pursuant to Sections 3 or 5 of this Agreement.

 

2.                                       Consideration.

 

a.               Compensation.  As consideration for all services rendered by
Employee to the Company and for the Covenants contained herein, Employee will
be entitled to:

 

(1)                                  base
salary at an annual rate of $210,000, which shall not be decreased during the
Term;

 

(2)                                  signing
bonus of $75,000 to be paid within thirty (30) days of Employment Commencement
Date, which is on or before December 1, 2004, or a signing bonus of
$65,000 if the Employment Commencement Date is after December 1,
2004.  In the event that you voluntarily
resign from the Company within your first 12 months of employment, this signing
bonus must be repaid on a pro rata basis;

 

(3)                                  participate
in MedQuist’s Management Bonus Plan for 2005. 
Your target bonus in this plan will be 45% of your base salary for 2005
and following years. The target bonus is the payment amount that the Employee
shall be

 

 

eligible to receive if the Company and Employee both attain the
pre-established bonus plan target objectives. Actual bonus award may be higher
or lower than the target bonus amount based upon achievement of the objectives
by Employee and the Company.  Management
Bonus Plan target objectives shall be developed on or before February 28th
of each year of the Management Bonus Plan;

 

(4)                                  participate
in the same employee benefit plans available generally to other full-time
employees of the Company, subject to the terms of those plans (as the same may
be modified, amended or terminated from time to time); (benefits information
package enclosed);

 

(5)                                  receive
relocation support in accordance with the Company Relocation Policy.  (To be forwarded under separate cover).  This Relocation Policy will be in effect for
the first 12 months of your employment;

 

(6)                                  if
Employee’s employment is terminated by the Company without Cause the severance
pay and benefits are described below in Section 5.

 

b.              Long Term
Incentives.  In addition, from time
to time, the Board may review the performance of the Company and Employee and,
in its sole discretion, may grant stock options, shares of restricted stock or
other equity-based incentives to Employee to reward extraordinary performance
and/or to encourage Employee’s future efforts on behalf of the Company.  The grant of any such equity incentives will
be subject to the terms of the Company’s equity-based plans and will be
evidenced by a separate award agreement by and between the Company and
Employee.

 

(1)                                  Upon
joining MedQuist, you will become entitled to a special stock option grant of
10,000 shares of non-qualified stock options (“Special Option Grant”) to
purchase Company common stock, no par value 
(“Common Stock”), pursuant to the Company’s Stock Option Plan adopted
May 29, 2002 (the “Option Plan”). The grant date of the Special Option Grant
will occur on the later of (i) the date the Company becomes current in its
reporting obligations under the Securities Exchange Act of 1934; or (ii) the
first date thereafter when the Form S8 Registration Statement for the Stock
Option Plan complies with the requirement of the Securities and Exchange
Commission provided that you are still an employee on the grant date.  The option price for the Special Option Grant
shall be equal at least to the fair market value of the Company’s Common Stock
as of the grant date.  The Special Option
Grant will be subject to all of the terms and conditions of the Option Plan and
the Stock Option Agreement that will be issued if and when the grant becomes
effective.  Your right to exercise the
option will vest in equal 20% installments on each of the first five (5)
anniversaries of the grant date.  In the event of a “Change of Control” (as
defined below) of the Company while you are an employee, your Special
Option Grant may, from and after the
date which is sixty days after the Change of Control (but not beyond the
expiration date of the option), be exercised for up to 100% of the total number
of shares then subject to the Special Option Grant minus the number of shares
previously purchased upon exercise of such 
option (as adjusted for any change in the outstanding shares of the
Common Stock of the Company in accordance with the terms of the Option

 

2

 

Plan) and your vesting date will accelerate
accordingly.  A “Change of Control” shall
be deemed to have occurred upon the happening of any of the following events:

 

(i)                                     A change within a twelve-month period in the
holders of more than 50% of the outstanding voting stock of the Company; or

 

(ii)                                  Any other event deemed to constitute a “Change
of Control” by the Company’s Board of Directors.

 

(2)                                  Contingent
upon Employee’s continued attainment of performance objectives, the Company
agrees to deliver a long term incentive value of $50,000 annually through one
of the following, as determined in the Company’s sole discretion: (i)  a stock option grant pursuant to the Option
Plan, (ii) a restricted stock grant or (iii) a cash-based long term incentive
program to be developed.  The long term
incentive value of Company stock will be calculated based on an industry
accepted stock valuation methodology.

 

3.                                       Employment
At-Will.  Nothing contained in this
Agreement is intended to create an employment relationship whereby Employee
will be employed other than as an “at-will” employee.  Employee’s employment by the Company may be
terminated by Employee or the Company at any time; provided,
however, that while employed by the Company, the terms and
conditions of Employee’s employment by the Company will be as herein set forth;
and provided further, that Section 4
of this Agreement will survive the termination of Employee’s employment.

 

4.                                       Covenants

 

a.                                       Non-Solicitation.  While employed by the Company and for the
eighteen (18) month period following the cessation of that employment for any
reason (and without regard to whether such cessation was initiated by Employee
or the Company), Employee will not do any of the following without the prior
written consent of the Company:

 

(1)                                  solicit,
entice or induce, either directly or indirectly, any person, firm or
corporation who or which is a client or customer of the Company or any of its
subsidiaries to become a client or customer of any other person, firm or
corporation;

 

(2)                                  influence
or attempt to influence, either directly or indirectly, any customer of the
Company or its subsidiaries to terminate or modify any written or oral
agreement or course of dealing with the Company or its subsidiaries (except in
Employee’s capacity as an employee of the Company); or

 

(3)                                  influence
or attempt to influence, either directly or indirectly, any person to terminate
or modify any employment, consulting, agency, distributorship, licensing or
other similar relationship or arrangement with the Company or its subsidiaries
(except in Employee’s capacity as an employee of the Company).

 

3

 

b.                                      Non-Disclosure.  Employee shall not use for Employee’s
personal benefit, or disclose, communicate or divulge to, or use for the direct
or indirect benefit of any person, firm, association or company other than
Company, any “Confidential Information,” which term shall mean any information
regarding the business methods, business policies, policies, procedures,
techniques, research or development projects or results, historical or
projected financial information, budgets, trade secrets, or other knowledge or
processes of, or developed by, Company or any other confidential information
relating to or dealing with the business operations of Company, made known to
Employee or learned or acquired by Employee while in the employ of Company, but
Confidential Information shall not include information otherwise lawfully known
generally by or readily accessible to the general public.  The foregoing provisions of this subsection shall
apply during and after the period when the Employee is an employee of the
Company and shall be in addition to (and not a limitation of) any legally
applicable protections of Company interest in confidential information, trade
secrets, and the like.  At the
termination of Employee’s employment with Company, Employee shall return to the
Company all copies of Confidential Information in any medium, including
computer tapes and other forms of data storage.

 

c.                                       Non-Competition.  While employed by the Company and for the
eighteen (18) month period following the cessation of that employment for any
reason (and without regard to whether such cessation was initiated by Employee
or the Company), Employee shall not directly or indirectly engage in (as a
principal, shareholder, partner, director, officer, agent, employee, consultant
or otherwise) or be financially interested in any business which is involved in
business activities which are the same as or in direct competition with
business activities carried on by the Company, or being definitively planned by
the Company at the time of termination of Employee’s employment.  Nothing contained in this subsection shall
prevent Employee from holding for investment up to three percent (3%) of any
class of equity securities of a company whose securities are publicly traded on
a national securities exchange or in a national market system.

 

d.                                      Intellectual
Property & Company Creations.

 

(1)                                  Ownership.  All right, title and interest in and to any
and all ideas, inventions, designs, technologies, formulas, methods, processes,
development techniques, discoveries, computer programs or instructions (whether
in source code, object code, or any other form), computer hardware, algorithms,
plans, customer lists, memoranda, tests, research, designs, specifications,
models, data, diagrams, flow charts, techniques (whether reduced to written
form or otherwise), patents, patent applications, formats, test results,
marketing and business ideas, trademarks, trade secrets, service marks, trade
dress, logos, trade names, fictitious names, brand names, corporate names,
original works of authorship, copyrights, copyrightable works, mask works,
computer software, all other similar intangible personal property, and all
improvements, derivative works, know-how, data, rights and claims related to
the foregoing that have been or are conceived, developed or created in whole or
in part by the Employee (a) at any time and at any place that relates directly
or indirectly to the business of the Company, as then operated, operated in the
past or under consideration or development or (b) as a result of

 

4

 

tasks assigned to Employee by the Company (collectively, “Company
Creations”), shall be and become and remain the sole and exclusive property of
the Company and shall be considered “works made for hire” as that term is
defined pursuant to applicable statutes and law.

 

(2)                                  Assignment. 
To the extent that any of the Company Creations may not by law be
considered a work made for hire, or to the extent that, notwithstanding the
foregoing, Employee retains any interest in or to the Company Creations,
Employee hereby irrevocably assigns and transfers to the Company any and all
right, title, or interest that Employee has or may have, either now or in the
future, in and to the Company Creations, and any derivatives thereof, without
the necessity of further consideration. 
Employee shall promptly and fully disclose all Company Creations to the
Company and shall have no claim for additional compensation for Company
Creations.  The Company shall be entitled
to obtain and hold in its own name all copyrights, patents, trade secrets,
trademarks, and service marks with respect to such Company Creations.

 

(3)                                  Disclosure
& Cooperation.  Employee shall
keep and maintain adequate and current written records of all Company Creations
and their development by Employee (solely or jointly with others), which
records shall be available at all times to and remain the sole property of the
Company.  Employee shall communicate
promptly and disclose to the Company, in such form as the Company may
reasonably request, all information, details and data pertaining to any Company
Creations.  Employee further agrees to
execute and deliver to the Company or its designee(s) any and all formal
transfers and assignments and other documents and to provide any further
cooperation or assistance reasonably required by the Company to perfect,
maintain or otherwise protect its rights in the Company Creations.  Employee hereby designates and appoints the
Company or its designee as Employee’s agent and attorney-in-fact to execute on
Employee’s behalf any assignments or other documents deemed necessary by the
Company to perfect, maintain or otherwise protect the Company’s rights in any
Company Creations.

 

e.                                       Acknowledgments.  Employee acknowledges that the Covenants are
reasonable and necessary to protect the Company’s legitimate business
interests, its relationships with its customers, its trade secrets and other
confidential or proprietary information. 
Employee further acknowledges that the duration and scope of the
Covenants are reasonable given the nature of this Agreement and the position
Employee holds or will hold within the Company. 
Employee further acknowledges that the Covenants are included herein to
induce the Company to enter into this Agreement and that the Company would not
have entered into this Agreement or otherwise employed or continued to employ
the Employee in the absence of the Covenants. 
Finally, Employee also acknowledges that any breach, willful or
otherwise, of the Covenants will cause continuing and irreparable injury to the
Company for which monetary damages, alone, will not be an adequate remedy.

 

f.                                         Enforcement.

 

5

 

(1)                                  If
any court determines that the Covenants, or any part thereof, is unenforceable
because of the duration or scope of such provision, that court will have the
power to modify such provision and, in its modified form, such provision will
then be enforceable.

 

(2)                                  The
parties acknowledge that significant damages will be caused by a breach of any
of the Covenants, but that such damages will be difficult to quantify.  Therefore, the parties agree that if Employee
breaches any of the Covenants, liquidated damages will be paid by Employee in
the following manner:

 

(i)                                     any
Company stock options, stock appreciation rights, restricted stock units or
similar equity incentives then held by Employee, whether or not then vested,
will be immediately and automatically forfeited;

 

(ii)                                  any
shares of restricted stock issued by the Company, then held by Employee or his
permitted transferee and then subject to forfeiture will be immediately and
automatically forfeited; and

 

(iii)                                 any obligation of the
Company to provide severance pay or benefits (whether pursuant to Section 5
or otherwise) will cease.

 

(3)                                  In
addition to the remedies specified in Section 4(f)(2) and any other
relief awarded by any court, if Employee breaches any of the Covenants:

 

(i)                                   Employee
will be required to account for and pay over to the Company all compensation,
profits, monies, accruals, increments or other benefits derived or received by
Employee as a result of any such breach; and

 

(ii)                                the
Company will be entitled to injunctive or other equitable relief to prevent
further breaches of the Covenants by Employee.

 

(4)                                  If
Employee breaches Section 4, then the duration of the restriction
therein contained will be extended for a period equal to the period that
Employee was in breach of such restriction.

 

5.                                       Termination.  Employee’s employment by the Company may be
terminated at any time.  Upon
termination, Employee will be entitled to the payment of accrued and unpaid
salary through the date of such termination. 
All salary, commissions and benefits will cease at the time of such
termination, subject to the terms of any benefit plans then in force or
enforceable under applicable law and applicable to Employee, and the Company
will have no further liability or obligation hereunder by reason of such
termination; provided, however, that subject
to Section 4(f)(2)(iii), if Employee’s employment is terminated by
the Company without Cause  Employee will
be entitled to continued payment of his base salary (at the rate in effect upon
termination) for a period of 12 months. 
Notwithstanding the foregoing, no amount will be paid or benefit
provided under this Section 5 unless and until (x) Employee
executes and delivers a general release of claims against the Company and its
subsidiaries in a form prescribed by the Company, and (y) such release becomes
irrevocable.  Any severance pay or
benefits provided under

 

6

 

this Section 5 will be in lieu of, not in addition to, any
other severance arrangement maintained by the Company.

 

6.                                       Miscellaneous.

 

a.                                       Other
Agreements.  Employee represents and
warrants to the Company that there are no restrictions, agreements or
understandings whatsoever to which he is a party that would prevent or make
unlawful his execution of this Agreement, that would be inconsistent or in
conflict with this Agreement or Employee’s obligations hereunder, or that would
otherwise prevent, limit or impair the performance by Employee of his duties to
the Company.

 

b.                                      Entire
Agreement; Amendment.  This Agreement
contains the entire agreement and understanding of the parties hereto relating
to the subject matter hereof, and merges and supersedes all prior and
contemporaneous discussions, agreements and understandings of every nature
relating to the employment of Employee by the Company.  This Agreement may not be changed or modified,
except by an agreement in writing signed by each of the parties hereto.

 

c.                                       Waiver.  Any waiver of any term or condition hereof
will not operate as a waiver of any other term or condition of this
Agreement.  Any failure to enforce any
provision hereof will not operate as a waiver of such provision or of any other
provision of this Agreement.

 

d.                                      Governing
Law.  This Agreement shall be
governed by, and enforced in accordance with, the laws of the State of New
Jersey without regard to the application of the principles of conflicts of
laws.

 

e.                                       Severability.  Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been herein contained.

 

f.                                         Wage
Claims.  The parties intend that all
obligations to pay compensation to Employee be obligations solely of the
Company.  Therefore, intending to be
bound by this provision, Employee hereby waives any right to claim payment of
amounts owed to him, now or in the future, from directors or officers of the
Company in the event of the Company’s insolvency.

 

g.                                      Successors
and Assigns.  This Agreement is
binding on the Company’s successors and assigns.

 

7

 

h.                                      Section Headings.  The section headings in this Agreement
are for convenience only; they form no part of this Agreement and will not
affect its interpretation.

 

i.                                          Counterparts.  This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
together will constitute but one and the same instrument.

 

7.                                       Definitions.  Capitalized terms used herein will have the
meanings below defined:

 

a.                                       “Business”
means electronic transcription services and other health information management
solutions services businesses in which the Company or its subsidiaries are
engaged anywhere within the United States.

 

b.                                      “Cause”
means the occurrence of any of the following: 
(1) Employee’s refusal, willful failure or inability to perform
(other than due to illness or disability) his employment duties or to follow
the lawful directives of his superiors; provided, however, that Employee’s
refusal to relocate from Laguna, California to the Atlanta, Georgia area will
not constitute “Cause”; (2) misconduct or gross negligence by Employee in the
course of employment; (3) conduct of Employee involving any type of disloyalty
to the Company or its subsidiaries, including, without limitation: fraud,
embezzlement, theft or dishonesty in the course of employment; (4) a conviction
of or the entry of a plea of guilty or nolo contendere
to a crime involving moral turpitude or that otherwise could reasonably be
expected to have an adverse effect on the operations, condition or reputation
of the Company, (5) a material breach by Employee of any agreement with or
fiduciary duty owed to the Company; or (6) alcohol abuse or use of controlled
drugs other than in accordance with a physician’s prescription.

 

c.                                       “Covenants”
means the covenants set forth in Section 4 of this Agreement.

 

8

 

To acknowledge
your agreement to and acceptance of the terms and conditions of this Agreement,
please sign below in the space provided within five (5) days of the date of
this Agreement and return a singed copy to my attention.  If the Agreement is not signed and returned
within (5) days, the terms and conditions of this Agreement will be deemed
withdrawn.

 

Sincerely,

 

	
   

  	
  MEDQUIST INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Greg Sebasky

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Greg Sebasky, President

  
	
   

  	
   

  
	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ James M. Weiland

  	
   

  	
   

  
	
   

  	
   

  
	
  James M. Weiland

  	
   

  
					

 

9EXHIBIT 10.1

 

 

BIOJECT
MEDICAL TECHNOLOGIES INC.

 

SERIES
D CONVERTIBLE PREFERRED STOCK

 

WARRANTS
TO PURCHASE COMMON STOCK

 

PURCHASE
AGREEMENT

 

NOVEMBER
15, 2004

 

 

Table of Contents

 

	
  1.

  	
  AGREEMENT TO SELL AND PURCHASE

  	
   

  
	
  1.1

  	
   

  	
  Authorization of Shares

  	
   

  
	
  1.2

  	
   

  	
  Sale and Purchase

  	
   

  
	
  2.

  	
  CLOSING, DELIVERY AND PAYMENT

  	
   

  
	
  2.1

  	
   

  	
  Closing

  	
   

  
	
  2.2

  	
   

  	
  Delivery

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND WARRANTIES OF THE
  COMPANY

  	
   

  
	
  3.1

  	
   

  	
  Organization,
  Good Standing and Qualification

  	
   

  
	
  3.2

  	
   

  	
  Subsidiaries

  	
   

  
	
  3.3

  	
   

  	
  Capitalization;
  Voting Rights

  	
   

  
	
  3.4

  	
   

  	
  Authorization; Binding Obligations

  	
   

  
	
  3.5

  	
   

  	
  Financial
  Statements

  	
   

  
	
  3.6

  	
   

  	
  Liabilities

  	
   

  
	
  3.7

  	
   

  	
  Agreements;
  Action

  	
   

  
	
  3.8

  	
   

  	
  Obligations
  to Related Parties

  	
   

  
	
  3.9

  	
   

  	
  Changes

  	
   

  
	
  3.10

  	
   

  	
  Title to
  Properties and Assets; Liens, Etc.

  	
   

  
	
  3.11

  	
   

  	
  Intellectual
  Property

  	
   

  
	
  3.12

  	
   

  	
  Compliance
  with Other Instruments

  	
   

  
	
  3.13

  	
   

  	
  Litigation

  	
   

  
	
  3.14

  	
   

  	
  Tax Returns
  and Payments

  	
   

  
	
  3.15

  	
   

  	
  Employees

  	
   

  
	
  3.16

  	
   

  	
  Obligations
  of Management

  	
   

  
	
  3.17

  	
   

  	
  Registration
  Rights

  	
   

  
	
  3.18

  	
   

  	
  Compliance
  with Laws; Permits

  	
   

  
	
  3.19

  	
   

  	
  Environmental
  and Safety Laws

  	
   

  
	
  3.20

  	
   

  	
  Offering
  Valid

  	
   

  
	
  3.21

  	
   

  	
  Full
  Disclosure

  	
   

  
	
  3.22

  	
   

  	
  Minute Books

  	
   

  
	
  3.24

  	
   

  	
  Insurance

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES OF THE
  INVESTOR

  	
   

  
	
  4.1

  	
   

  	
  Requisite Power and Authority

  	
   

  
	
  4.2

  	
   

  	
  Investment Representations

  	
   

  
	
  4.3

  	
   

  	
  Transfer Restrictions

  	
   

  
	
  5.

  	
  CONDITIONS
  TO CLOSING

  	
   

  
	
  5.1

  	
   

  	
  Conditions
  to Investor’ Obligations at the Closing

  	
   

  
	
  5.2

  	
   

  	
  Conditions
  to Obligations of the Company

  	
   

  
	
  6.

  	
  MISCELLANEOUS

  	
   

  
	
  6.1

  	
   

  	
  Governing
  Law

  	
   

  
	
  6.2

  	
   

  	
  Survival

  	
   

  
	
  6.3

  	
   

  	
  Expenses

  	
   

  
	
  6.4

  	
   

  	
  Attorneys’
  Fees

  	
   

  
	
  6.5

  	
   

  	
  Successors
  and Assigns

  	
   

  
												

 

i

 

	
  6.6

  	
   

  	
  Entire
  Agreement

  	
   

  
	
  6.7

  	
   

  	
  Severability

  	
   

  
	
  6.8

  	
   

  	
  Amendment
  and Waiver

  	
   

  
	
  6.9

  	
   

  	
  Delays or
  Omissions

  	
   

  
	
  6.10

  	
   

  	
  Notices

  	
   

  
	
  6.11

  	
   

  	
  Titles and
  Subtitles

  	
   

  
	
  6.12

  	
   

  	
  Counterparts

  	
   

  
	
  6.13

  	
   

  	
  Broker’s
  Fees

  	
   

  
	
  6.15

  	
   

  	
  Public
  Announcements and Confidentiality

  	
   

  
	
  6.16

  	
   

  	
  Investors
  Business Activities

  	
   

  
	
  6.17

  	
   

  	
  Exculpation
  Among Investors

  	
   

  
	
  6.18

  	
   

  	
  Pronouns

  	
   

  

 

List of Exhibits

 

	
  Schedule
  of Purchasers

  	
   

  	
  Exhibit
  A

  
	
  Articles of Amendment

  	
   

  	
  Exhibit B

  
	
  Form of Warrant

  	
   

  	
  Exhibit C

  
	
  Registration
  Rights Agreement

  	
   

  	
  Exhibit D

  
	
  Form of Legal Opinion

  	
   

  	
  Exhibit E

  
	
  Second Amendment to Rights Agreement

  	
   

  	
  Exhibit F

  
	
   

  	
   

  	
   

  
	
  Schedule of Exceptions

  	
   

  	
   

  

 

ii

 

BIOJECT
MEDICAL TECHNOLOGIES INC.

 

SERIES
D CONVERTIBLE PREFERRED STOCK

 

WARRANTS
TO PURCHASE COMMON STOCK

 

PURCHASE
AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

AGREEMENT

 

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

 

1.                                      AGREEMENT TO SELL AND PURCHASE.

 

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

 

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

 

1

 

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

 

2.                                      CLOSINGS, DELIVERY AND PAYMENT.

 

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

 

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

 

3.                                      REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.

 

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

 

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

 

2

 

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

 

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

 

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

 

3.3                               Capitalization.

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

3.9                               Agreements; Action.

 

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

 

6

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

3.13                        Intellectual Property

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

4.                                      REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS.

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

5.                                      COVENANTS.

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

6.                                      CONDITIONS TO CLOSING.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

7.                                      MISCELLANEOUS.

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

7.8                               Amendment
and Waiver.

 

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

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

7.14                        Public
Announcements and Confidentiality.

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

23

 

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

 

	
  COMPANY:

  	
  INVESTORS:

  
	
   

  	
   

  
	
  Bioject Medical
  Technologies Inc.

  	
  LIFE SCIENCES OPPORTUNITIES FUND II, L.P.

  
	
   

  	
   

  
	
  By:

  	
  /s/John
  Gandolfo

  	
   

  	
  By:

  	
  LOF
  Partners, LLC,

  	
   

  
	
  Title:

  	
  CFO

  	
   

  	
   

  	
  General
  Partner

  	
   

  
	
   

  	
   

  
	
  211
  Somerville Road (Route 202 North)

  	
   

  
	
  Bedminster, New Jersey

  	
  By: 

  	
  /s/ James C.
  Gale

  	
   

  
	
   

  	
  Title: Manager

  
	
   

  	
   

  
	
   

  	
  LIFE SCIENCES OPPORTUNITIES FUND II

  
	
   

  	
  (INSTITUTIONAL), L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  LOF
  Partners, LLC,

  	
   

  
	
   

  	
   

  	
  General
  Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James C.
  Gale

  	
   

  
	
   

  	
  Title: Manager

  
										

 

 

	
  List Of Exhibits:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Schedule of
  Purchasers

  	
  Exhibit A

  
	
   

  	
   

  
	
  Articles of Amendment

  	
  Exhibit B

  
	
   

  	
   

  
	
  Form of
  Warrant

  	
  Exhibit C

  
	
   

  	
   

  
	
  Registration
  Rights Agreement

  	
  Exhibit D

  
	
   

  	
   

  
	
  Form of
  Legal Opinion

  	
  Exhibit E

  
	
   

  	
   

  
	
  Second
  Amendment to Rights Agreement

  	
  Exhibit F

  

 

24

 

EXHIBIT
A

 

Schedule
of Purchasers

 

	
  NAME AND ADDRESS

  	
   

  	
  SHARES

  	
   

  	
  WARRANTS

  	
   

  	
  AGGREGATE

  PURCHASE

  PRICE

  	
   

  
	
  LIFE SCIENCE OPPORTUNITIES FUND II, L.P.
c/o LOF Partners LLC

  126 East 56 Street

  New York, New York 10022

  Attention: James C. Gale

  	
   

  	
  316,884

  	
   

  	
  95,065

  	
   

  	
  $

  	
  364,416.08

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LIFE SCIENCE OPPORTUNITIES FUND II

  (INSTITUTIONAL),

  L.P.c/o LOF
  Partners LLC

  126 East 56 Street

  New York, New York 10022

  Attention: James C. Gale

  	
   

  	
  1,770,073

  	
   

  	
  531,022

  	
   

  	
  $

  	
  2,035,584.47

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  2,086,957

  	
   

  	
  626,087

  	
   

  	
  $

  	
  2,400,000.55

  	
   

  

 

25

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