Document:

<PAGE>
                                                                    Exhibit 10.4

                                                           DRAFT: March 11, 2000

            INTERNATIONAL BUSINESS MACHINES CORPORATION, a corporation existing
            under the laws of the State of Delaware ("IBM")

                                      -and-

            3040696 NOVA SCOTIA COMPANY, an unlimited company incorporated under
            the laws of the Province of Nova Scotia ("Holdco")

                                     - and -

            IBM ACQUISITION INC., a corporation existing under the laws of
            Canada ("Corporation")

                                     - and -

            CIBC MELLON TRUST COMPANY, a trust company existing under the laws
            of Canada (the "Trustee")

--------------------------------------------------------------------------------

                            EXCHANGE TRUST AGREEMENT

--------------------------------------------------------------------------------
<PAGE>

                                TABLE OF CONTENTS

                                                                           Page

ARTICLE 1
      DEFINITIONS AND INTERPRETATION.........................................2
      1.1   Definitions......................................................2
      1.2   Interpretation Not Affected by Headings, etc.....................5
      1.3   Number, Gender and Persons.......................................5
      1.4   Date for Any Action..............................................5
      1.5   Payments.........................................................5

ARTICLE 2
      TRUST..................................................................6
      2.1   Establishment of Trust...........................................6

ARTICLE 3
      STOCKHOLDER INFORMATION RIGHTS.........................................6
      3.1   Copies of Stockholder Information................................6
      3.2   Other Materials..................................................6
      3.3   Distribution of Written Materials................................7

ARTICLE 4
      EXCHANGE RIGHT.........................................................7
      4.1   Grant and Ownership of the Exchange Right........................7
      4.2   Legended Share Certificate.......................................8
      4.3   General Exercise of Exchange Right...............................8
      4.4   Purchase Price...................................................8
      4.5   Exercise Instructions............................................8
      4.6   Delivery of IBM Common Stock; Effect of Exercise.................9
      4.7   Exercise of Exchange Right Subsequent to Retraction.............10
      4.8   Stamp or other Transfer Taxes...................................10
      4.9   Notice of Insolvency Event......................................11
      4.10  IBM Common Stock................................................11
      4.11  Automatic Exchange on Liquidation of IBM........................11
      4.12  Call Rights.....................................................13
      4.13  Acknowledgement of Consideration................................13

ARTICLE 5
      CONCERNING THE TRUSTEE................................................13
      5.1   Powers and Duties of the Trustee................................13
      5.2   No Conflict of Interest.........................................14
      5.3   Dealings with Transfer Agents, Registrars, etc..................14
      5.4   Books and Records...............................................15
      5.5   Income Tax Returns and Reports..................................15
      5.6   Indemnification Prior to Certain Actions by Trustee.............15

                                      -i-
<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

                                                                           Page

      5.7   Actions by Non-Affiliated Holders...............................16
      5.8   Reliance upon Declarations......................................16
      5.9   Evidence and Authority to Trustee...............................16
      5.10  Experts, Advisors and Agents....................................17
      5.11  Investment of Money Held by Trustee.............................18
      5.12  Trustee Not Required to Give Security...........................18
      5.13  Trustee Not Bound to Act on the Corporation's Request...........18
      5.14  Authority to Carry on Business..................................18
      5.15  Conflicting Claims..............................................19
      5.16  Acceptance of Trust.............................................19

ARTICLE 6
      COMPENSATION..........................................................19
      6.1   Fees and Expenses of the Trustee................................19

ARTICLE 7
      INDEMNIFICATION AND LIMITATION OF LIABILITY...........................20
      7.1   Indemnification of the Trustee..................................20
      7.2   Limitation of Liability.........................................21

ARTICLE 8
      CHANGE OF TRUSTEE.....................................................21
      8.1   Resignation.....................................................21
      8.2   Removal.........................................................21
      8.3   Successor Trustee...............................................21
      8.4   Notice of Successor Trustee.....................................22

ARTICLE 9
      IBM SUCCESSORS........................................................22
      9.1   Certain Requirements in Respect of Combination, etc.............22
      9.2   Vesting of Powers in Successor..................................22
      9.3   Wholly-Owned Subsidiaries.......................................23

ARTICLE 10
      AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS..........................23
      10.1  Amendments, Modifications, etc..................................23
      10.2  Ministerial Amendments..........................................23
      10.3  Meeting to Consider Amendments..................................24
      10.4  Changes in Capital of IBM and the Corporation...................24
      10.5  Execution of Supplemental Trust Agreements......................24
      10.6  Wholly-Owned Subsidiaries.......................................25

ARTICLE 11
      TERMINATION...........................................................25

                                      -ii-
<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

                                                                           Page

      11.1  Term............................................................25
      11.2  Survival of Agreement...........................................25

ARTICLE 12
      GENERAL...............................................................25
      12.1  Severability....................................................25
      12.2  Enurement.......................................................26
      12.3  Notices to Parties..............................................26
      12.4  Notice of Non-Affiliated Holders................................26
      12.5  Risk of Payments by Post........................................27
      12.6  Counterparts....................................................27
      12.7  Jurisdiction....................................................27
      12.8  Attornment......................................................27

                                     -iii-
<PAGE>

                            EXCHANGE TRUST AGREEMENT

            AGREEMENT made as of the            day of           , 2000.

AMONG:

            INTERNATIONAL BUSINESS MACHINES CORPORATION, a corporation existing
            under the laws of the State of Delaware ("IBM")

                                      -and-

            3040696 NOVA SCOTIA COMPANY, an unlimited company incorporated under
            the laws of the Province of Nova Scotia ("Holdco")

                                      -and-

            IBM ACQUISITION INC., a corporation existing under the laws of
            Canada (the "Corporation")

                                      -and-

            CIBC MELLON TRUST COMPANY, a trust company existing under the laws
            of Canada (the "Trustee")

            WHEREAS pursuant to the terms of the offer by the Corporation and
IBM dated March o, 2000, to purchase all of the Class A Subordinate Voting
Shares and all of the Class B Multiple Voting Shares of LGS Group Inc., IBM,
Holdco and the Corporation agreed that IBM, Holdco, the Corporation, and a
Canadian trust company would execute and deliver an Exchange Trust Agreement;

            AND WHEREAS pursuant to that offer, certain Class A Subordinate
Voting Shares and Class B Multiple Voting Shares of LGS Group Inc. are to be
acquired by the Corporation in exchange for Exchangeable Shares of the
Corporation (the "Exchangeable Shares") and certain rights granted hereunder;

            AND WHEREAS the Corporation may issue additional Exchangeable Shares
following completion of the Offer, including pursuant to any compulsory
acquisition rights the Corporation may exercise;

            AND WHEREAS IBM is to grant to and in favour of Non-Affiliated
Holders (as hereinafter defined) of Exchangeable Shares the right, in the
circumstances set forth herein, to
<PAGE>
                                      -2-

require IBM (or, at the election of IBM, Holdco) to purchase from each
Non-Affiliated Holder all or any part of the Exchangeable Shares held by the
Non-Affiliated Holder;

            AND WHEREAS in certain circumstances the Exchangeable Shares are to
be automatically exchanged for shares of IBM Common Stock;

            AND WHEREAS the parties desire to make appropriate provision and to
establish a procedure whereby IBM and Holdco will be able to take certain
actions and make certain payments and to deliver or cause to be delivered shares
of Common Stock of IBM, par value US$0.20 per share (the "IBM Common Stock") in
satisfaction of the obligations of IBM and/or Holdco under the Exchangeable
Share Provisions (as hereinafter defined) and this trust agreement and IBM will
take certain actions such that if Holdco seeks to exercise its rights under the
Exchangeable Share Provisions, it will only do so if it will be able to make
certain payments and cause to be delivered shares of IBM Common Stock in
satisfaction of the obligations of Holdco under the Exchangeable Share
Provisions;

            AND WHEREAS these recitals and any statements of fact in this trust
agreement are made by IBM, Holdco and the Corporation and not by the Trustee;

            NOW THEREFORE, in consideration of the respective covenants and
agreements provided in this trust agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:

                                   ARTICLE 1
                         DEFINITIONS AND INTERPRETATION

1.1   Definitions

In this trust agreement, unless something in the subject matter or content is
inconsistent therewith:

      "Automatic Exchange Rights" means the benefit of the obligation of IBM to
      effect the automatic exchange of shares of IBM Common Stock for
      Exchangeable Shares pursuant to Section 4.11 hereof.

      "Board of Directors" means the board of directors of the Corporation.

      "Business Day" means a day, other than a Saturday, a Sunday or a statutory
      holiday, when banks are generally open in each of Montreal, Quebec and
      Toronto, Ontario for the transaction of banking business.

      "Canadian Dollar Equivalent" means in respect of an amount expressed in a
      foreign currency (the "Foreign Currency Amount") at any date the product
      obtained by multiplying (a) the Foreign Currency Amount by (b) the
      official noon spot exchange rate on such date for such foreign currency as
      reported by the Bank of Canada or, in the event
<PAGE>
                                      -3-

      such spot exchange rate is not available, such exchange rate on such date
      for such foreign currency as may be deemed by the Board of Directors to be
      appropriate for such purpose.

      "Current Market Price" means, in respect of a share of IBM Common Stock on
      any date, the Canadian Dollar Equivalent of the average closing sales
      price of shares of IBM Common Stock during a period of five consecutive
      trading days ending not more than five trading days before such date on
      the New York Stock Exchange or, if the shares of IBM Common Stock are not
      then listed on the New York Stock Exchange, on such other stock exchange
      or automated quotation system on which the shares of IBM Common Stock are
      listed or quoted, as the case may be, as may be selected by the Board of
      Directors for such purpose; provided, however, that if in the opinion of
      the Board of Directors the public distribution or trading activity of IBM
      Common Stock during such period is inadequate to create a market that
      reflects the fair market value of the IBM Common Stock, then the Current
      Market Price of a share of IBM Common Stock shall be determined by the
      Board of Directors based upon the advice of such qualified independent
      financial advisors as the Board of Directors may deem to be appropriate,
      and provided further that any such selection, opinion or determination by
      the Board of Directors shall be conclusive and binding.

      "Dividend Amount" has the meaning set out in Section 1.1 of the
      Exchangeable Share Provisions.

      "Exchange Right" has the meaning set out in Section 4.1 hereof.

      "Exchangeable Share Provisions" means the rights, privileges, restrictions
      and conditions attaching to the Exchangeable Shares.

      "Exchangeable Shares" has the meaning set out in the recitals hereto.

      "IBM Board of Directors" means the board of directors of IBM.

      "IBM Common Stock" means the shares of common stock of IBM, par value US
      $0.20 per share, having voting rights of one vote per share, and any other
      securities into which such shares may be changed or for which such shares
      may be exchanged (whether or not IBM shall be the issuer of such other
      securities) or any other consideration which may be received by the
      holders of such shares, pursuant to a recapitalization, reconstruction,
      reorganization or reclassification of, or amalgamation, merger,
      liquidation or similar transaction, affecting such shares.

      "IBM Liquidation Event" has the meaning set out in Section 4.11 hereof.

      "IBM Successor" has the meaning set out in Section 9.1 hereof.

      "Insolvency Event" means the institution by Corporation of any proceeding
      to be adjudicated a bankrupt or insolvent or to be dissolved or wound up,
      or the consent of the Corporation to the institution of bankruptcy,
      insolvency, dissolution or winding-up
<PAGE>
                                      -4-

      proceedings against it, or the filing of a petition, answer or consent
      seeking dissolution or winding up under any bankruptcy, insolvency or
      analogous laws, including without limitation the Companies Creditors'
      Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada),
      and the failure by the Corporation to contest in good faith any such
      proceedings commenced in respect of the Corporation within 15 days of
      becoming aware thereof, or the consent by the Corporation to the filing of
      any such petition or to the appointment of a receiver, or the making by
      the Corporation of a general assignment for the benefit of creditors, or
      the admission in writing by Corporation of its inability to pay its debts
      generally as they become due, or the Corporation not being permitted,
      pursuant to solvency requirements or other provisions of applicable law to
      redeem any Retracted Shares pursuant to Section 6.1 of the Exchangeable
      Share Provisions.

      "Liquidation Amount" has the meaning set out in Section 5.1(1) of the
      Exchangeable Share Provisions.

      "Liquidation Call Right" has the meaning set out in Section 5.2(1) of the
      Exchangeable Share Provisions.

      "Non-Affiliated Holders" means the registered holders of Exchangeable
      Shares other than IBM and its Subsidiaries.

      "Offer" has the meaning set out in Section 5.8 hereof.

      "Officer's Certificate" means, with respect to IBM or the Corporation, as
      the case may be, a certificate signed by any one of the Chairman of the
      Board, the Chief Executive Officer, the President, any Vice-President or
      any other senior officer of IBM or the Corporation, as the case may be.

      "Redemption Call Right" has the meaning set out in Section 7.2(1) of the
      Exchangeable Share Provisions.

      "Redemption Price" has the meaning set out in Section 7.1(1) of the
      Exchangeable Share Provisions.

      "Retracted Shares" has the meaning set out in Section 4.7 hereof.

      "Retraction Call Right" has the meaning set out in Section 6.2(1) of the
      Exchangeable Share Provisions.

      "Retraction Price" has the meaning set out in Section 6.1(1) of the
      Exchangeable Share Provisions.

      "Subsidiary" of IBM means any corporation more than 50% of the outstanding
      stock of which, by vote or value, is owned, directly or indirectly, by
      IBM, by one or more other Subsidiaries of IBM or by IBM and one or more
      other Subsidiaries of IBM.
<PAGE>
                                      -5-

      "Support Agreement" means the support agreement made as of o ,2000 among
      IBM, Holdco and the Corporation.

      "Transfer Agent" has the meaning set out in Section 1.1 of the
      Exchangeable Share Provisions.

      "Trust" means the trust created by this trust agreement.

      "Trust Estate" means any securities, the Exchange Right, the Automatic
      Exchange Rights and any money or other rights or assets that may be held
      by the Trustee from time to time pursuant to this trust agreement.

      "Trustee" means CIBC Mellon Trust Company and, subject to the provisions
      of Article 8 hereof, includes any successor trustee or permitted assigns.

1.2   Interpretation Not Affected by Headings, etc.

The division of this trust agreement into articles and Sections and the
insertion of headings are for reference purposes only and shall not affect the
interpretation of this trust agreement. Unless otherwise indicated, any
reference in this trust agreement to an article or Section refers to the
specified article or Section of this trust agreement.

1.3   Number, Gender and Persons

In this trust agreement, unless the context otherwise requires, words importing
the singular number include the plural and vice versa, words importing any
gender include all genders and words importing persons include individuals,
corporations, partnerships, companies, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business entitles of any
kind.

1.4   Date for Any Action

If any date on which any action is required to be taken under this trust
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.

1.5   Payments

All payments to be made hereunder shall be made without interest. Further, IBM,
Holdco, the Corporation and the Trustee shall be entitled to deduct and withhold
from any consideration otherwise payable under this trust agreement to any
holder of Exchangeable Shares such amounts as IBM, Holdco, the Corporation or
the Trustee is required or permitted to deduct and withhold with respect to such
payment under the Income Tax Act (Canada), the United States Internal Revenue
Code of 1986 or any provision of provincial, state, local or foreign tax law, in
each case as amended or succeeded. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes as having been paid to
the holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amounts
<PAGE>
                                      -6-

so required or permitted to be deducted or withheld from any payment to a holder
exceeds the cash portion of the consideration otherwise payable to the holder,
IBM, Holdco, the Corporation and the Trustee are hereby authorized to sell or
otherwise dispose of such portion of the consideration as is necessary to
provide sufficient funds to IBM, Holdco, the Corporation or the Trustee, as the
case may be, to enable it to comply with such deduction or withholding
requirements and IBM, Holdco, the Corporation or the Trustee shall notify the
holder thereof and remit to such holder any unapplied balance of the net
proceeds of such sale.

                                   ARTICLE 2
                                      TRUST

2.1   Establishment of Trust

One of the purposes of this trust agreement is to create the Trust for the
benefit of the Non-Affiliated Holders, as herein provided. The Trustee will hold
the Exchange Right and the Automatic Exchange Rights in order to enable the
Trustee to exercise such rights and will hold the other rights granted in or
resulting from the Trustee being a party to this trust agreement in order to
enable the Trustee to exercise or enforce such rights, in each case as trustee
for and on behalf of the Non-Affiliated Holders as provided in this trust
agreement.

                                   ARTICLE 3
                         STOCKHOLDER INFORMATION RIGHTS

3.1   Copies of Stockholder Information

IBM will deliver to the Trustee copies of all proxy materials (including notices
of IBM Meetings but excluding proxies to vote shares of IBM Common Stock),
information statements, reports (including without limitation all interim and
annual financial statements) and other written communications that are to be
distributed to holders of IBM Common Stock, in sufficient quantities and in
sufficient time so as to enable the Trustee to send those materials to each
Non-Affiliated Holder at the same time as such materials are first sent to
holders of IBM Common Stock. The Trustee will mail or otherwise send to each
Non-Affiliated Holder, at the expense of IBM, copies of all such materials (and
all materials specifically directed to the Non-Affiliated Holders or to the
Trustee for the benefit of the Non-Affiliated Holders by IBM) received by the
Trustee from IBM at the same time as such materials are first sent to holders of
IBM Common Stock. The Trustee will make copies of all such materials available
for inspection by any Non-Affiliated Holder at the Trustee's principal office in
the cities of Toronto and Montreal.

3.2   Other Materials

Promptly after receipt by IBM of any material to be sent or given generally to
the holders of IBM Common Stock by or on behalf of a third party, including
without limitation dissident proxy and information circulars (and related
information and material) and tender and exchange offer circulars (and related
information and material), IBM shall use reasonable efforts to obtain and
deliver to the Trustee copies thereof in sufficient quantities so as to enable
the Trustee to forward such material (unless the same has been provided to the
Trustee or sent directly to Non-Affiliated
<PAGE>
                                      -7-

Holders by such third party) to each Non-Affiliated Holder as soon as
practicable thereafter. As soon as practicable after receipt thereof, the
Trustee will mail or otherwise send to each Non-Affiliated Holder, at the
expense of IBM, copies of all such materials received by the Trustee from IBM.
The Trustee will also make copies of all such materials available for inspection
by any Non-Affiliated Holder at the Trustee's principal office in the cities of
Toronto and Montreal.

3.3   Distribution of Written Materials

Any written materials to be distributed by the Trustee to the Non-Affiliated
Holders pursuant to this trust agreement shall be delivered or sent by mail (or
otherwise communicated in the same manner as IBM utilizes in communications to
holders of IBM Common Stock, subject to the Trustee being advised in writing of
such method of communication and its ability to provide same) to each
Non-Affiliated Holder at its address as shown on the share register of the
Corporation. The Corporation shall provide or cause to be provided to the
Trustee for this purpose, on a timely basis and without charge or other expense:

      (a)   current lists of the Non-Affiliated Holders; and

      (b)   upon the request of the Trustee, mailing labels to enable the
            Trustee to carry out its duties under this trust agreement.

The materials referred to above are to be provided by IBM to the Trustee, but
shall be subject to review and comment by the Trustee.

                                   ARTICLE 4
                                 EXCHANGE RIGHT

4.1   Grant and Ownership of the Exchange Right

IBM hereby grants to the Trustee as trustee for and on behalf of, and for the
use and benefit of, the Non-Affiliated Holders the right (the "Exchange Right"),
upon the occurrence and during the continuance of an Insolvency Event, to
require IBM (or, at the election of IBM, Holdco) to purchase from each
Non-Affiliated Holder all or any part of the Exchangeable Shares held by the
Non-Affiliated Holders, all in accordance with the provisions of this trust
agreement. IBM hereby acknowledges receipt from the Trustee, as trustee for and
on behalf of the Non-Affiliated Holders, of good and valuable consideration (and
the adequacy thereof) for the grant of the Exchange Right by IBM to the Trustee.
During the term of the Trust and subject to the terms and conditions of this
trust agreement, the Trustee shall possess and be vested with full legal
ownership of the Exchange Right and shall be entitled to exercise all of the
rights and powers of an owner with respect to the Exchange Right, provided that
the Trustee shall:

      (a)   hold the Exchange Right and the legal title thereto as trustee
            solely for the use and benefit of the Non-Affiliated Holders in
            accordance with the provisions of this trust agreement; and
<PAGE>
                                      -8-

      (b)   except as specifically authorized by this trust agreement, have no
            power or authority to exercise or otherwise deal in or with the
            Exchange Right, and the Trustee shall not exercise such right for
            any purpose other than the purposes for which this Trust is created
            pursuant to this trust agreement.

4.2   Legended Share Certificate

The Corporation will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Non-Affiliated Holders of their right
to instruct the Trustee with respect to the exercise of the Exchange Right in
respect of the Exchangeable Shares held by a Non-Affiliated Holder.

4.3   General Exercise of Exchange Right

The Exchange Right shall be and remain vested in and exercisable by the Trustee.
Subject to Sections 5.7 and 5.15 hereof, the Trustee shall exercise the Exchange
Right only on the basis of instructions received pursuant to this Article 4 from
Non-Affiliated Holders entitled to instruct the Trustee as to the exercise
thereof. To the extent that no instructions are received from a Non-Affiliated
Holder with respect to the Exchange Right, the Trustee shall not exercise or
permit the exercise of the Exchange Right.

4.4   Purchase Price

The purchase price payable by IBM or Holdco for each Exchangeable Share to be
purchased by IBM or Holdco under the Exchange Right shall be an amount per share
equal to (a) the Current Market Price of a share of IBM Common Stock on the last
Business Day prior to the day of closing of the purchase and sale of such
Exchangeable Share under the Exchange Right, which shall be satisfied in full by
causing to be delivered to such holder one share of IBM Common Stock plus (b)
the Dividend Amount, if any. The purchase price for each such Exchangeable Share
so purchased may be satisfied only by IBM or Holdco delivering or causing to be
delivered to the Trustee, on behalf of the relevant Non-Affiliated Holder, one
share of IBM Common Stock and a cheque for the balance, if any, of the purchase
price.

4.5   Exercise Instructions

Subject to the terms and conditions herein set forth, a Non-Affiliated Holder
shall be entitled, upon the occurrence and during the continuance of an
Insolvency Event, to instruct the Trustee to exercise the Exchange Right with
respect to all or any part of the Exchangeable Shares registered in the name of
such Non-Affiliated Holder on the books of the Corporation. To cause the
exercise of the Exchange Right by the Trustee, the Non-Affiliated Holder shall
deliver to the Trustee, in person or by certified or registered mail, at its
principal office in Toronto, Ontario or at such other places in Canada as the
Trustee may from time to time designate by written notice to the Non-Affiliated
Holders, the certificates representing the Exchangeable Shares which such
Non-Affiliated Holder desires IBM (or, at the election of IBM, Holdco) to
purchase, duly endorsed in blank, and accompanied by such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the Canada Business Corporations
<PAGE>
                                      -9-

Act and the by-laws of the Corporation and such additional documents and
instruments as the Trustee and the Corporation may reasonably require together
with (a) a duly completed form of notice of exercise of the Exchange Right,
contained on the reverse of or attached to the Exchangeable Share certificates,
stating (i) that the Non-Affiliated Holder thereby instructs the Trustee to
exercise the Exchange Right so as to require IBM (or, at the election of IBM,
Holdco) to purchase from the Non-Affiliated Holder the number of Exchangeable
Shares specified therein, (ii) that such Non-Affiliated Holder has good title to
and owns all such Exchangeable Shares to be acquired by IBM or Holdco free and
clear of all liens, claims and encumbrances, (iii) the names in which the
certificates representing IBM Common Stock issuable in connection with the
exercise of the Exchange Right are to be issued and (iv) the names and addresses
of the persons to whom such new certificates should be delivered and (b) payment
(or evidence satisfactory to the Trustee, the Corporation and IBM of payment) of
the taxes (if any) payable as contemplated by Section 4.8 of this trust
agreement. If only a portion of the Exchangeable Shares represented by any
certificate delivered to the Trustee are to be purchased by IBM or Holdco under
the Exchange Right, a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of the Corporation.

4.6   Delivery of IBM Common Stock; Effect of Exercise

Promptly after receipt of the certificates representing the Exchangeable Shares
that a Non-Affiliated Holder desires IBM or Holdco to purchase under the
Exchange Right (together with such documents and instruments of transfer and a
duly completed form of notice of exercise of the Exchange Right and payment of
taxes payable as contemplated by Section 4.8, if any, or evidence thereof), duly
endorsed for transfer to IBM or Holdco, the Trustee shall notify IBM, Holdco and
the Corporation of its receipt of the same, which notice to IBM, Holdco and the
Corporation shall constitute exercise of the Exchange Right by the Trustee on
behalf of the holder of such Exchangeable Shares, and IBM or Holdco shall
immediately thereafter deliver or cause to be delivered to the Trustee, for
delivery to the Non-Affiliated Holder of such Exchangeable Shares (or to such
other persons, if any, properly designated by such Non-Affiliated Holder), a
certificate for the number of shares of IBM Common Stock deliverable in
connection with such exercise of the Exchange Right (which shares shall be duly
issued as fully paid and non-assessable and shall be free and clear of any lien,
claim or encumbrance, security interest or adverse claim) and a cheque for the
balance, if any, of the purchase price therefor; provided, however, that no such
delivery shall be made unless and until the Non-Affiliated Holder requesting the
same shall have paid (or provided evidence satisfactory to the Trustee, Holdco,
the Corporation and IBM of the payment of) the taxes (if any) payable as
contemplated by Section 4.8 of this trust agreement. Immediately upon the giving
of notice by the Trustee to IBM, Holdco and the Corporation of the exercise of
the Exchange Right, as provided in this Section 4.6, the closing of the
transaction of purchase and sale contemplated by the Exchange Right shall be
deemed to have occurred, and the Non-Affiliated Holder of such Exchangeable
Shares shall be deemed to have transferred to IBM or Holdco all of its right,
title and interest in and to such Exchangeable Shares and the related interest
in the Trust Estate and shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive its proportionate
part of the total purchase price therefor, unless the requisite number of shares
of IBM Common Stock (together with a cheque for the balance, if any, of the
total purchase price
<PAGE>
                                      -10-

therefor) is not delivered by IBM or Holdco to the Trustee, for delivery to such
Non-Affiliated Holder (or to such other persons, if any, properly designated by
such Non-Affiliated Holder), within five Business Days of the date of the giving
of such notice by the Trustee, in which case the rights of the Non-Affiliated
Holder shall remain unaffected until such shares of IBM Common Stock are so
delivered by IBM or Holdco and any such cheque is so delivered and paid.
Concurrently with the closing of the transaction of purchase and sale
contemplated by the Exchange Right, such Non-Affiliated Holder shall be
considered and deemed for all purposes to be the holder of the shares of IBM
Common Stock delivered to it pursuant to the Exchange Right.

4.7   Exercise of Exchange Right Subsequent to Retraction

In the event that a Non-Affiliated Holder has exercised its right under Article
5 of the Exchangeable Share Provisions to require the Corporation to redeem any
or all of the Exchangeable Shares held by the Non-Affiliated Holder (the
"Retracted Shares") and is notified by the Corporation pursuant to Section
6.1(4) of the Exchangeable Share Provisions that the Corporation will not be
permitted as a result of solvency requirements of applicable law to redeem all
such Retracted Shares, subject to receipt by the Trustee of written notice to
that effect from the Corporation and provided that neither IBM nor Holdco shall
have exercised its Retraction Call Right with respect to the Retracted Shares
and that the Non-Affiliated Holder shall not have revoked the retraction request
delivered by the Non-Affiliated Holder to the Corporation pursuant to Section
6.1(5) of the Exchangeable Share Provisions, the retraction request will
constitute and will be deemed to constitute notice from the Non-Affiliated
Holder to the Trustee instructing the Trustee to exercise the Exchange Right
with respect to those Retracted Shares that the Corporation is unable to redeem.
In any such event, the Corporation hereby agrees with the Trustee and in favour
of the Non-Affiliated Holder immediately to notify the Trustee of such
prohibition against the Corporation redeeming all of the Retracted Shares and
immediately to forward or cause to be forwarded to the Trustee all relevant
materials delivered by the Non-Affiliated Holder to the Corporation or to the
Transfer Agent (including without limitation a copy of the retraction request
delivered pursuant to Section 6.1(1) of the Exchangeable Shares Provisions) in
connection with such proposed redemption of the Retracted Shares and the Trustee
will thereupon exercise the Exchange Right with respect to the Retracted Shares
that the Corporation is not permitted to redeem and will require IBM to purchase
such shares in accordance with the provisions of this Article 4.

4.8   Stamp or other Transfer Taxes

Upon any sale of Exchangeable Shares to IBM or Holdco pursuant to the Exchange
Right, the share certificate or certificates representing the IBM Common Stock
to be delivered in connection with the payment of the total purchase price
therefor shall be issued in the name of the Non-Affiliated Holder of the
Exchangeable Shares so sold or in such names as such Non-Affiliated Holder may
otherwise direct in writing without charge to the holder of the Exchangeable
Shares so sold; provided, however, that such Non-Affiliated Holder (a) shall pay
(and neither IBM, Holdco, the Corporation nor the Trustee shall be required to
pay) any documentary, stamp, transfer or other similar taxes that may be payable
in respect of any transfer involved in the issuance or delivery of such shares
to a person other than such Non-Affiliated
<PAGE>
                                      -11-

Holder or (b) shall have established to the satisfaction of the Trustee, IBM,
Holdco and the Corporation that such taxes, if any, have been paid.

4.9   Notice of Insolvency Event

Promptly upon the occurrence of an Insolvency Event or any event that with the
giving of notice or the passage of time or both would be an Insolvency Event,
the Corporation and IBM shall give written notice thereof to the Trustee. As
soon as practicable after receiving notice from the Corporation or IBM or from
any other person of the occurrence of an Insolvency Event, the Trustee will mail
to each Non-Affiliated Holder, at the expense of IBM, a notice of such
Insolvency Event in the form provided by IBM, which notice shall contain a brief
statement of the right of the Non-Affiliated Holders with respect to the
Exchange Right.

4.10  IBM Common Stock

All shares of IBM Common Stock delivered to or to the order of a former holder
of surrendered Exchangeable Shares shall be duly issued as fully paid,
non-assessable, free of pre-emptive rights and shall be free and clear of any
lien, encumbrance, security interest or adverse claim.

4.11  Automatic Exchange on Liquidation of IBM

      (a)   IBM shall give the Trustee prompt written notice of each of the
            following events (each an "IBM Liquidation Event"):

            (i)   any determination by the board of directors of IBM to
                  institute voluntary liquidation, dissolution or winding-up
                  proceedings with respect to IBM (not including a
                  reorganization under applicable bankruptcy laws) or to effect
                  any other distribution of assets of IBM among its stockholders
                  for the purpose of winding-up its affairs; and

            (ii)  receipt by IBM of notice of, or IBM otherwise becoming aware
                  of, any instituted claim, suit, petition or other proceedings
                  with respect to the involuntary liquidation, dissolution or
                  winding-up of IBM (not including a reorganization under
                  applicable bankruptcy laws) or to effect any other
                  distribution of assets of IBM among its stockholders for the
                  purpose of winding-up its affairs.

      (b)   Immediately following receipt by the Trustee from IBM of notice of
            any IBM Liquidation Event contemplated by Section 4.11(a), the
            Trustee will give notice thereof to the holders of Exchangeable
            Shares. Such notice shall be provided by IBM to the Trustee and
            shall include a brief description of the automatic exchange of
            Exchangeable Shares for shares of IBM Common Stock provided for in
            Section 4.11(c).

      (c)   In order that the holders of Exchangeable Shares (other than IBM and
            any Subsidiary) will be able to participate on a pro rata basis with
            the holders of IBM
<PAGE>
                                      -12-

            Common Stock in the distribution of assets of IBM in connection with
            a IBM Liquidation Event, on the fifth Business Day prior to the
            effective date (the "IBM Liquidation Event Effective Date") of an
            IBM Liquidation Event all of the then outstanding Exchangeable
            Shares (other than Exchangeable Shares held by IBM and any
            Subsidiary) shall be automatically exchanged for shares of IBM
            Common Stock. To effect such automatic exchange, IBM (or, at the
            election of IBM, Holdco) shall purchase each Exchangeable Share
            outstanding on the fifth Business Day prior to the IBM Liquidation
            Event Effective Date and held by a holder of Exchangeable Shares
            (other than IBM and any of its Subsidiaries), and each such holder
            shall sell the Exchangeable Shares held by it at such time, for a
            purchase price per share equal to (i) the Current Market Price of a
            share of IBM Common Stock on the fifth Business Day prior to the IBM
            Liquidation Event Effective Date, which shall be satisfied in full
            by IBM or Holdco delivering to such holder one share of IBM Common
            Stock, plus (ii) the Dividend Amount, if any.

      (d)   On the fifth Business Day prior to the IBM Liquidation Event
            Effective Date, the closing of the transaction of purchase and sale
            contemplated by the automatic exchange of Exchangeable Shares for
            IBM Common Stock shall be deemed to have occurred, and each holder
            of Exchangeable Shares (other than IBM and any Subsidiary) shall be
            deemed to have transferred to IBM (or, at the election of IBM,
            Holdco) all of such holder's right, title and interest in and to
            such Exchangeable Shares and shall cease to be a holder of such
            Exchangeable Shares at such time as IBM or Holdco shall deliver or
            cause to be delivered to the Transfer Agent, for delivery to such
            holders, the certificates representing the number of shares of IBM
            Common Stock deliverable upon the automatic exchange of Exchangeable
            Shares for IBM Common Stock (which shares shall be duly issued as
            fully paid and non-assessable and shall be free and clear of any
            lien, claim or encumbrance, security interest or adverse claim) and
            a cheque for the balance, if any, of the total purchase price for
            such Exchangeable Shares; interest on such deposit shall belong to
            IBM. Concurrently with each such holder ceasing to be a holder of
            Exchangeable Shares, such holder shall be considered and deemed for
            all purposes to be the holder of the shares of IBM Common Stock
            delivered to it, or to the Transfer Agent on its behalf, pursuant to
            the automatic exchange of Exchangeable Shares for IBM Common Stock
            and the certificates held by such holder previously representing the
            Exchangeable Shares exchanged by such holder with IBM pursuant to
            such automatic exchange shall thereafter be deemed to represent the
            shares of IBM Common Stock delivered to such holder by IBM pursuant
            to such automatic exchange. Upon the request of any such former
            holder of Exchangeable Shares and the surrender by such holder of
            Exchangeable Share certificates deemed to represent shares of IBM
            Common Stock, duly endorsed in blank and accompanied by such
            instruments of transfer as IBM may reasonably require, IBM shall
            deliver or cause to be delivered to such holder certificates
            representing the shares of IBM Common Stock of which such
<PAGE>
                                      -13-

            holder is the holder and a cheque in payment of the remaining
            portion, if any, of the aggregate purchase price therefor.

4.12  Call Rights

The Liquidation Call Right, the Redemption Call Right and the Retraction Call
Right and the Automatic Exchange Right are hereby agreed, acknowledged and
confirmed. It is agreed and acknowledged that such rights are enforceable
against each holder of Exchangeable Shares by IBM or Holdco, as the case may be.

4.13  Acknowledgement of Consideration

It is expressly acknowledged that the Exchange Right and the Automatic Exchange
Right granted to the holders of the Exchangeable Shares hereunder are granted in
partial consideration for the transfer of shares of LGS Group Inc. to the
Corporation.

                                   ARTICLE 5
                             CONCERNING THE TRUSTEE

5.1   Powers and Duties of the Trustee

The rights, powers and authorities of the Trustee under this trust agreement, in
its capacity as trustee of the Trust, shall include:

      (a)   distributing materials to Non-Affiliated Holders as provided in this
            trust agreement;

      (b)   receiving the grant of the Exchange Right and the Automatic Exchange
            Rights from IBM as trustee for and on behalf of the Non-Affiliated
            Holders in accordance with the provisions of this trust agreement;

      (c)   exercising the Exchange Right in accordance with the provisions of
            this trust agreement, and in connection therewith receiving from
            Non-Affiliated Holders Exchangeable Shares and other requisite
            documents and distributing to such Non-Affiliated Holders the shares
            of IBM Common Stock and cheques, if any, to which such
            Non-Affiliated Holders are entitled upon the exercise of the
            Exchange Right;

      (d)   holding title to the Trust Estate;

      (e)   investing any money forming, from time to time, a part of the Trust
            Estate as provided in this trust agreement;

      (f)   taking action at the direction of a Non-Affiliated Holder to enforce
            the obligations of the Corporation and/or IBM under this trust
            agreement; and
<PAGE>
                                      -14-

      (g)   taking such other actions and doing such other things as are
            specifically provided in this trust agreement.

In the exercise of such rights, powers and authorities the Trustee shall have
(and is granted) such incidental and additional rights, powers and authority not
in conflict with any of the provisions of this trust agreement as the Trustee,
acting in good faith and in the reasonable exercise of its discretion, may deem
necessary, appropriate or desirable to effect the purpose of the Trust. Any
exercise of such discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all persons. For greater certainty,
the Trustee shall have only those duties as are set out specifically in this
trust agreement. The Trustee in exercising its rights, powers, duties and
authorities hereunder shall act honestly and in good faith with a view to the
best interests of the Non-Affiliated Holders and shall exercise the care,
diligence and skill that a reasonably prudent trustee would exercise in
comparable circumstances. The Trustee shall not be bound to give any notice or
do or take any act, action or proceeding by virtue of the powers conferred on it
hereby unless and until it shall be specifically required to do so under the
terms hereof; nor shall the Trustee be required to take any notice of, or to do
or to take any act, action or proceeding as a result of any default or breach of
any provision hereunder, unless and until notified in writing of such default or
breach, which notice shall distinctly specify the default or breach desired to
be brought to the attention of the Trustee and in the absence of such notice the
Trustee may for all purposes of this trust agreement conclusively assume that no
default or breach has been made in the observance or performance of any of the
representations, warranties, covenants, agreements or conditions contained
herein.

5.2   No Conflict of Interest

The Trustee represents to the Corporation and IBM that at the date of execution
and delivery of this trust agreement there exists no material conflict of
interest in the role of the Trustee as a fiduciary hereunder and the role of the
Trustee in any other capacity. The Trustee shall, within 90 days after it
becomes aware that such a material conflict of interest exists, either eliminate
such material conflict of interest or resign in the manner and with the effect
specified in Article 10 hereof. If, notwithstanding the foregoing provisions of
this Section 5.2, the Trustee has such a material conflict of interest, the
validity and enforceability of this trust agreement shall not be affected in any
manner whatsoever by reason only of the existence of such material conflict of
interest. If the Trustee contravenes the foregoing provisions of this Section
5.2, any interested party may apply to the Ontario Court (General Division) for
an order that the Trustee be replaced as trustee hereunder.

5.3   Dealings with Transfer Agents, Registrars, etc.

The Corporation and IBM irrevocably authorize the Trustee, from time to time,
to:

      (a)   consult, communicate and otherwise deal with the registrar and
            transfer agent, and with any such subsequent registrar or transfer
            agent, of the IBM Common Stock; and
<PAGE>
                                      -15-

      (b)   requisition, from time to time, from any such registrar or transfer
            agent any information readily available from the records maintained
            by it which the Trustee may reasonably require for the discharge of
            its duties and responsibilities under this trust agreement.

IBM covenants that it will supply, and will cause Holdco to supply, the Trustee,
or the Transfer Agent, as the case may be, in a timely manner with duly executed
share certificates for the purpose of completing the exercise from time to time
of all rights to acquire IBM Common Stock hereunder, under the Offer, under the
Exchangeable Share Provisions and under any other security or commitment given
to the Non-Affiliated Holders pursuant thereto, in each case pursuant to the
provisions hereof, the terms of the Offer or of the Exchangeable Share
Provisions or otherwise.

5.4   Books and Records

The Trustee shall keep available for inspection by IBM and the Corporation, at
the Trustee's principal office in Toronto, Ontario, correct and complete books
and records of account relating to the Trustee's actions under this trust
agreement, including without limitation all information relating to mailings and
instructions to and from Non-Affiliated Holders and all transactions pursuant to
the Exchange Right for the term of this Agreement. On or before March 31, 2001
and on or before March 31 in every year thereafter, so long as any Exchangeable
Shares are held by Non-Affiliated Holders, the Trustee shall transmit to IBM and
the Corporation a brief report, dated as of the preceding December 31, with
respect to: (a) the property and funds comprising the Trust Estate as of that
date; (b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee on behalf of
Non-Affiliated Holders in consideration of the issue and delivery by IBM of
shares of IBM Common Stock in connection with the Exchange Right, during the
calendar year ended on such date; and (c) all other actions taken by the Trustee
in the performance of its duties under this trust agreement which it had not
previously reported.

5.5   Income Tax Returns and Reports

The Trustee shall, to the extent necessary, prepare and file on behalf of the
Trust appropriate United States and Canadian income tax returns and any other
returns or reports as may be required by applicable law or pursuant to the rules
and regulations of any securities exchange or other trading system through which
the Exchangeable Shares are traded and, in connection therewith, may obtain the
advice and assistance of such experts as the Trustee may consider necessary or
advisable. If required by the Trustee, IBM shall retain such experts as may be
required for the purposes of providing such advice and assistance.

5.6   Indemnification Prior to Certain Actions by Trustee

The Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this trust agreement at the request, order or
direction of any Non-Affiliated Holder upon such Non-Affiliated Holder
furnishing to the Trustee reasonable funding, security and indemnity against the
costs, expenses and liabilities that may be incurred by the Trustee therein or
thereby,
<PAGE>
                                      -16-

provided that no Non-Affiliated Holder shall be obligated to furnish to the
Trustee any such funding, security or indemnity in connection with the exercise
by the Trustee of any of its rights, duties, powers and authorities with respect
to the Exchange Right pursuant to Article 4 hereof, subject to the provisions of
Section 5.15 hereof. None of the provisions contained in this trust agreement
shall require the Trustee to expend or risk its own funds or otherwise incur
financial liability in the exercise of any of its rights, powers, duties or
authorities unless funded, given funds, security and indemnified as aforesaid.

5.7   Actions by Non-Affiliated Holders

No Non-Affiliated Holder shall have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this trust agreement
for the purpose of enforcing any of its rights or for the execution of any trust
or power hereunder unless the Non-Affiliated Holder has requested the Trustee to
take or institute such action, suit or proceeding and furnished the Trustee with
the funding, security and indemnity referred to in Section 5.6 hereof and the
Trustee shall have failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Non-Affiliated Holder shall be entitled to take
proceedings in any court of competent jurisdiction such as the Trustee might
have taken; it being understood and intended that no one or more Non-Affiliated
Holders shall have any right in any manner whatsoever to affect, disturb or
prejudice the rights hereby created by any such action, or to enforce any right
hereunder or under the Voting Rights or the Exchange Right except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law be instituted, had and
maintained by the Trustee, except only as herein provided, and in any event for
the equal benefit of all Non-Affiliated Holders.

5.8   Reliance upon Declarations

The Trustee shall not be considered to be in contravention of any of its rights,
powers, duties and authorities hereunder if, when required, it acts and relies
in good faith upon lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents furnished pursuant
to the provisions hereof or required by the Trustee to be furnished to it in the
exercise of its rights, powers, duties and authorities hereunder and such lists,
mailing labels, notices, statutory declarations, certificates, opinions, reports
or other papers or documents comply with the provisions of Section 5.9 hereof,
if applicable, and with any other applicable provisions of this trust agreement.

5.9   Evidence and Authority to Trustee

The Corporation and/or IBM shall furnish to the Trustee evidence of compliance
with the conditions provided for in this trust agreement relating to any action
or step required or permitted to be taken by the Corporation and/or IBM or the
Trustee under this trust agreement or as a result of any obligation imposed
under this trust agreement, including, without limitation, in respect of the
Exchange Right and the taking of any other action to be taken by the Trustee at
the request of or on the application of the Corporation and/or IBM forthwith if
and when:
<PAGE>
                                      -17-

      (a)   such evidence is required by any other Section of this trust
            agreement to be furnished to the Trustee in accordance with the
            terms of this Section 5.9; or

      (b)   the Trustee, in the exercise of its rights, powers, duties and
            authorities under this trust agreement, gives the Corporation and/or
            IBM written notice requiring it to furnish such evidence in relation
            to any particular action or obligation specified in such notice.

Such evidence shall consist of an Officer's Certificate of the Corporation
and/or IBM or a statutory declaration or a certificate made by persons entitled
to sign an Officer's Certificate stating that any such condition has been
complied with in accordance with the terms of this trust agreement. Whenever
such evidence relates to a matter other than the Exchange Right and except as
otherwise specifically provided herein, such evidence may consist of a report or
opinion of any solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert or any other person whose qualifications give authority to a
statement made by such person, provided that if such report or opinion is
furnished by a director, officer or employee of the Corporation and/or IBM it
shall be in the form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report furnished to the
Trustee as evidence of compliance with a condition provided for in this trust
agreement shall include a statement by the person giving the evidence:

      (a)   declaring that such person has read and understands the provisions
            of this trust agreement relating to the condition in question; and

      (b)   declaring that such person has made such examination or
            investigation as such person believes is necessary to enable such
            person to make the statements or give the opinions contained or
            expressed therein.

5.10  Experts, Advisors and Agents

The Trustee may:

      (a)   in relation to these presents act and rely on the opinion or advice
            of or information obtained from or prepared by any solicitor,
            auditor, accountant, appraiser, valuer, engineer or other expert,
            whether retained by the Trustee or by the Corporation and/or IBM or
            otherwise, and may employ such assistants as may be necessary to the
            proper determination and discharge of its powers and duties and
            determination of its rights hereunder and may pay proper and
            reasonable compensation for all such legal and other advice or
            assistance as aforesaid; and

      (b)   employ such agents and other assistants as it may reasonably require
            for the proper determination and discharge of its powers and duties
            hereunder, and may pay reasonable remuneration for all services
            performed for it (and shall be entitled to receive reasonable
            remuneration for all services performed by it) in the discharge of
            the trusts hereof and compensation for all disbursements, costs and
<PAGE>
                                      -18-

            expenses made or incurred by it in the determination and discharge
            of its duties hereunder and in the management of the Trust.

5.11  Investment of Money Held by Trustee

Unless otherwise provided in this trust agreement, any money held by or on
behalf of the Trustee which under the terms of this trust agreement may or ought
to be invested or which may be on deposit with the Trustee or which may be in
the hands of the Trustee may be invested and reinvested in the name or under the
control of the Trustee in securities in which, under the laws of the Province of
Ontario, trustees are authorized to invest trust money, provided that such
securities are stated to mature within two years after their purchase by the
Trustee, and the Trustee shall so invest such money on the written direction of
the Corporation. Pending the investment of any money as hereinbefore provided,
such money may be deposited in the name of the Trustee in any chartered bank in
Canada or, with the consent of the Corporation, in the deposit department of the
Trustee or any other loan or trust company authorized to accept deposits under
the laws of Canada or any province thereof at the rate of interest then current
on similar deposits.

5.12  Trustee Not Required to Give Security

The Trustee shall not be required to give any bond or security in respect of the
execution of the trusts, rights, duties, powers and authorities of this trust
agreement or otherwise in respect of the premises.

5.13  Trustee Not Bound to Act on the Corporation's Request

Except as in this trust agreement otherwise specifically provided, the Trustee
shall not be bound to act in accordance with any direction or request of the
Corporation and/or IBM or of the directors thereof until a written copy of the
instrument or resolution containing such direction or request shall have been
delivered to the Trustee, and the Trustee shall be empowered to act and rely
upon any such copy believed by the Trustee to be genuine.

5.14  Authority to Carry on Business

The Trustee represents to the Corporation and IBM that at the date of execution
and delivery by it of this trust agreement it is authorized to carry on the
business of a trust company in the Province of Ontario but if, notwithstanding
the provisions of this Section 5.14, it ceases to be so authorized to carry on
business, the validity and enforceability of this trust agreement and the
Exchange Right and the other rights granted in or resulting from the Trustee
being a party to this trust agreement shall not be affected in any manner
whatsoever by reason only of such event but the Trustee shall, within 90 days
after ceasing to be authorized to carry on the business of a trust company in
the Province of Ontario, either become so authorized or resign in the manner and
with the effect specified in Article 8 hereof.
<PAGE>
                                      -19-

5.15  Conflicting Claims

If conflicting claims or demands are made or asserted with respect to any
interest of any Non-Affiliated Holder in any Exchangeable Shares, including any
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Non-Affiliated Holder in
any Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claim or demand.
In so refusing, the Trustee may elect not to exercise the Exchange Right or
other rights subject to such conflicting claims or demands and, in so doing, the
Trustee shall not be or become liable to any person on account of such election
or its failure or refusal to comply with any such conflicting claims or demands.
The Trustee shall be entitled to continue to refrain from acting and to refuse
to act until:

      (a)   the rights of all adverse claimants with respect to the Exchange
            Right or other rights subject to such conflicting claims or demands
            have been adjudicated by a final judgment of a court of competent
            jurisdiction; or

      (b)   all differences with respect to the Exchange Right or other rights
            subject to such conflicting claims or demands have been conclusively
            settled by a valid written agreement binding on all such adverse
            claimants, and the Trustee shall have been furnished with an
            executed copy of such agreement.

If the Trustee elects to recognize any claim or comply with any demand made by
any such adverse claimant, it may in its discretion require such claimant to
furnish such surety, bond or other security satisfactory to the Trustee as it
shall deem appropriate fully to indemnify it as between all conflicting claims
or demands.

5.16  Acceptance of Trust

The Trustee hereby accepts the Trust created and provided for by and in this
trust agreement and agrees to perform the same upon the terms and conditions
herein set forth and to hold all rights, privileges and benefits conferred
hereby and by law in trust for the various persons who shall from time to time
be Non-Affiliated Holders, subject to all the terms and conditions herein set
forth.

                                   ARTICLE 6
                                  COMPENSATION

6.1   Fees and Expenses of the Trustee

IBM and the Corporation jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it under this trust
agreement and will reimburse the Trustee for all reasonable expenses (including
but not limited to taxes (other than taxes based on income), compensation paid
to experts, agents and advisors and travel expenses) and disbursements,
including the cost and expense of any suit or litigation of any character and
any proceedings before any governmental agency reasonably incurred by the
Trustee in connection
<PAGE>
                                      -20-

with its rights and duties under this trust agreement; provided that IBM and the
Corporation shall have no obligation to reimburse the Trustee for any expenses
or disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or with
negligence or wilful misconduct or for any matter in respect of which the
provisions of Section 5.6 entitle the Trustee to funding, security and indemnity
from any Non-Affiliated Holder.

                                   ARTICLE 7
                   INDEMNIFICATION AND LIMITATION OF LIABILITY

7.1   Indemnification of the Trustee

IBM and the Corporation jointly and severally agree to indemnify and hold
harmless the Trustee and each of its directors, officers, employees and agents
appointed and acting in accordance with this trust agreement (collectively, the
"Indemnified Parties") against all claims, losses, damages, costs, penalties,
fines and reasonable expenses (including reasonable expenses of the Trustee's
legal counsel) which, without fraud, negligence, wilful misconduct or bad faith
on the part of such Indemnified Party, may be paid, incurred or suffered by the
Indemnified Party by reason of or as a result of the Trustee's acceptance or
administration of the Trust, its compliance with its duties set forth in this
trust agreement, or any written or oral instructions delivered to the Trustee by
IBM or the Corporation pursuant hereto. In no case shall IBM or the Corporation
be liable under this indemnity for any claim against any of the Indemnified
Parties if such claim is incurred or suffered by reason of or as a result of the
fraud, negligence, wilful misconduct or bad faith of an Indemnified Party and
unless IBM and the Corporation shall be notified by the Trustee of the written
assertion of a claim or of any action commenced against the Indemnified Parties,
promptly after any of the Indemnified Parties shall have received any such
written assertion of a claim or shall have been served with a summons or other
first legal process giving information as to the nature and basis of the claim.
Subject to (ii), below, IBM and the Corporation shall be entitled to participate
at their own expense in the defense and, if IBM or the Corporation so elect at
any time after receipt of such notice, any of them may assume the defense of any
suit brought to enforce any such claim. The Trustee shall have the right to
employ separate counsel in any such suit and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of the Trustee
unless: (i) the employment of such counsel has been authorized by IBM or the
Corporation, such authorization not to be unreasonably withheld; or (ii) the
named parties to any such suit include both the Trustee and IBM or the
Corporation and the Trustee shall have been advised by counsel acceptable to IBM
or the Corporation that there may one or more legal defenses available to the
Trustee that are different from or in addition to those available to IBM or the
Corporation and that an actual or potential conflict of interest exists (in
which case IBM and the Corporation shall not have the right to assume the
defense of such suit on behalf of the Trustee but shall be liable to pay the
reasonable fees and expenses of one counsel for the Trustee). Such
indemnification shall survive the resignation or removal of the Trustee and the
termination of this trust agreement.
<PAGE>
                                      -21-

7.2   Limitation of Liability

The Trustee shall not be held liable for any loss which may occur by reason of
depreciation of the value of any part of the Trust Estate or any loss incurred
on any investment of funds pursuant to this trust agreement, except to the
extent that such loss is attributable to the fraud, negligence, wilful
misconduct or bad faith on the part of the Trustee.

                                   ARTICLE 8
                                CHANGE OF TRUSTEE

8.1   Resignation

The Trustee, or any trustee hereafter appointed, may at any time resign by
giving written notice of such resignation to IBM and the Corporation specifying
the date on which it desires to resign, provided that such notice shall never be
given less than 60 days before such desired resignation date unless IBM and
Corporation otherwise agree and provided further that such resignation shall not
take effect until the date of the appointment of a successor trustee and the
acceptance of such appointment by the successor trustee. Upon receiving such
notice of resignation, IBM and the Corporation shall promptly appoint a
successor trustee by written instrument in duplicate, one copy of which shall be
delivered to the resigning trustee and one copy to the successor trustee.
Failing acceptance by a successor trustee, a successor trustee may be appointed
by an order of the Ontario Court (General Division) upon application of one or
more of the parties hereto.

8.2   Removal

The Trustee, or any trustee hereafter appointed, may be removed with or without
cause, at any time on 60 days' prior notice by written instrument executed by
IBM and the Corporation, in duplicate, one copy of which shall be delivered to
the trustee so removed and one copy to the successor trustee.

8.3   Successor Trustee

Any successor trustee appointed as provided under this trust agreement shall
execute, acknowledge and deliver to IBM and the Corporation and to its
predecessor trustee an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor under this trust agreement, with like effect as if originally named
as trustee in this trust agreement. However, on the written request of IBM and
the Corporation or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of this trust
agreement, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trustee, IBM and the Corporation and such
predecessor trustee shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers.
<PAGE>
                                      -22-

8.4   Notice of Successor Trustee

Upon acceptance of appointment by a successor trustee as provided herein, IBM
and the Corporation shall cause to be mailed notice of the succession of such
trustee hereunder to each Non-Affiliated Holder specified in a List. If IBM or
the Corporation shall fail to cause such notice to be mailed within 10 days
after acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be mailed at the expense of IBM and the Corporation.

                                   ARTICLE 9
                                 IBM SUCCESSORS

9.1   Certain Requirements in Respect of Combination, etc.

If IBM enters into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other person or, in the case of a merger, of the
continuing corporation resulting therefrom, then IBM will take all necessary
actions to ensure that:

      (a)   such other person or continuing corporation (the "IBM Successor"),
            by operation of law, becomes, without more, bound by the terms and
            provisions of this trust agreement or, if not so bound, executes,
            prior to or contemporaneously with the consummation of such
            transaction a trust agreement supplemental hereto and such other
            instruments (if any) as are satisfactory to the Trustee, acting
            reasonably, and in the opinion of legal counsel to the Trustee, are
            reasonably necessary or advisable to evidence the assumption by the
            IBM Successor of liability for all money payable and property
            deliverable hereunder and the covenant of such IBM Successor to pay
            and deliver or cause to be delivered the same and its agreement to
            observe and perform all the covenants and obligations of IBM under
            this trust agreement; and

      (b)   such transaction shall be upon such terms as substantially to
            preserve and not to impair in any material respect any of the
            rights, duties, powers and authorities of the Trustee or of the
            Non-Affiliated Holders hereunder.

9.2   Vesting of Powers in Successor

Whenever the covenants of Section 9.1 hereof have been duly observed and
performed, if required by Section 9.1 hereof, the Trustee, the IBM Successor and
the Corporation shall execute and deliver the supplemental trust agreement
provided for in Article 10 hereof and thereupon the IBM Successor shall possess
and from time to time may exercise each and every right and power of IBM under
this trust agreement in the name of IBM or otherwise and any act or proceeding
by any provision of this trust agreement required to be done or performed by the
IBM Board of Directors or any officers of IBM may be done and performed with
like force and effect by the directors or officers of such IBM Successor.
<PAGE>
                                      -23-

9.3   Wholly-Owned Subsidiaries

Nothing herein shall be construed as preventing the amalgamation or merger of
any Subsidiary of IBM with or into IBM or the winding up, liquidation or
dissolution of any Subsidiary of IBM. In addition, nothing herein shall be
construed as preventing the amalgamation or merger of LGS Group Inc. with, and
or into the Corporation and/or one or more other corporations, or the winding
up, liquidation or dissolution of LGS Group Inc.

                                   ARTICLE 10
                  AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS

10.1  Amendments, Modifications, etc.

This trust agreement may not be amended or modified except by an agreement in
writing executed by the Corporation, IBM and the Trustee and approved by the
Non-Affiliated Holders in accordance with Section 9.2 of the Exchangeable Share
Provisions. This trust agreement shall apply in respect of any issuance of
additional Exchangeable Shares in one or more transactions or financings which,
for greater certainty, may be unrelated to the Arrangement or the transactions
contemplated thereby.

10.2  Ministerial Amendments

Notwithstanding the provisions of Section 10.1 hereof, the parties to this trust
agreement may in writing, at any time and from time to time, without the
approval of the Non-Affiliated Holders, amend or modify this trust agreement for
the purposes of:

      (a)   adding to the covenants of any or all of the parties hereto for the
            protection of the Non-Affiliated Holders hereunder;

      (b)   making such amendments or modifications not inconsistent with this
            trust agreement as may be necessary or desirable with respect to
            matters or questions which, in the opinion of the Board of Directors
            and the Board of Directors of IBM and in the opinion of the Trustee,
            having in mind the best interests of the Non-Affiliated Holders as a
            whole, it may be expedient to make, provided that such boards of
            directors and the Trustee shall be of the opinion that such
            amendments and modifications will not be prejudicial to the
            interests of the Non-Affiliated Holders as a whole; or

      (c)   making such changes or corrections which are required for the
            purpose of curing or correcting any ambiguity or defect or
            inconsistent provision or clerical omission or mistake or manifest
            error, provided that each of the Trustee, the Board of Directors and
            the Board of Directors of IBM shall be of the opinion that such
            changes or corrections will not be prejudicial to the interests of
            the Non-Affiliated Holders as a whole.
<PAGE>
                                      -24-

10.3  Meeting to Consider Amendments

The Corporation, at the request of IBM, shall call a meeting or meetings of the
Non-Affiliated Holders for the purpose of considering any proposed amendment or
modification requiring approval pursuant hereto. Any such meeting or meetings
shall be called and held in accordance with the by-laws of the Corporation, the
Exchangeable Share Provisions and all applicable laws.

10.4  Changes in Capital of IBM and the Corporation

At all times after the occurrence of any event effected pursuant to Section 2.7
or Section 2.8 of the Support Agreement or Section 9.1 of this trust agreement,
as a result of which either IBM Common Stock or the Exchangeable Shares or both
are in any way changed, this trust agreement shall forthwith be amended and
modified as necessary in order that it shall apply with full force and effect,
mutatis mutandis, to all new securities into which IBM Common Stock or the
Exchangeable Shares or both are so changed and the parties hereto shall execute
and deliver a supplemental trust agreement giving effect to and evidencing such
necessary amendments and modifications.

10.5  Execution of Supplemental Trust Agreements

No amendment to or modification or waiver of any of the provisions of this trust
agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto. From time to time the
Corporation, IBM and the Trustee may, subject to the provisions of these
presents, and they shall, when so directed by these presents, execute and
deliver by their proper officers, trust agreements or other instruments
supplemental hereto, which thereafter shall form part hereof, for any one or
more of the following purposes:

      (a)   evidencing the succession of IBM Successors to IBM and the covenants
            of and obligations assumed by each such IBM Successor in accordance
            with the provisions of Article 9 and the successor of any successor
            trustee in accordance with the provisions of Article 8;

      (b)   taking any additions to, deletions from or alterations of the
            provisions of this trust agreement or the Exchange Right which, in
            the opinion of the Trustee, will not be prejudicial to the interests
            of the Non-Affiliated Holders as a whole or are, in the opinion of
            counsel to the Trustee, necessary or advisable in order to
            incorporate, reflect or comply with any legislation the provisions
            of which apply to IBM, the Corporation, the Trustee or this trust
            agreement; and

      (c)   for any other purposes not inconsistent with the provisions of this
            trust agreement, including without limitation to make or evidence
            any amendment or modification to this trust agreement as
            contemplated hereby, provided that, in the opinion of the Trustee,
            the rights of the Trustee and the Non-Affiliated Holders as a whole
            will not be prejudiced thereby.
<PAGE>
                                      -25-

10.6  Wholly-Owned Subsidiaries

Nothing herein shall be construed as preventing the amalgamation or merger of
any Subsidiary of IBM with or into IBM or the winding up, liquidation or
dissolution of any Subsidiary of IBM. In addition, nothing herein shall be
construed as preventing the amalgamation or merger of LGS Group Inc. and/or IBM
Canada Limited with, and or into Holdco or the Corporation and/or one or more
other corporations, or the winding up, liquidation or dissolution of LGS Group
Inc.

                                   ARTICLE 11
                                   TERMINATION

11.1  Term

The Trust created by this trust agreement shall continue until the earliest to
occur of the following events:

      (a)   no outstanding Exchangeable Shares are held by any Non-Affiliated
            Holder;

      (b)   each of the Corporation and IBM elects in writing to terminate the
            Trust and such termination is approved by the Non-Affiliated Holders
            of the Exchangeable Shares in accordance with Section 8.2 of the
            Exchangeable Share Provisions; and

      (c)   21 years after the death of the last survivor of the descendants of
            His Majesty King George VI of the United Kingdom of Great Britain
            and Northern Ireland living on the date of the creation of the
            Trust.

11.2  Survival of Agreement

This trust agreement shall survive any termination of the Trust and shall
continue until there are no Exchangeable Shares outstanding held by any
Non-Affiliated Holder; provided, however, that the provisions of Articles 6 and
7 hereof shall survive any such termination of this trust agreement.

                                   ARTICLE 12
                                     GENERAL

12.1  Severability

If any provision of this trust agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
trust agreement shall not in any way be affected or impaired thereby and this
trust agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
<PAGE>
                                      -26-

12.2  Enurement

This trust agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns and to the
benefit of the Non-Affiliated Holders.

12.3  Notices to Parties

All notices and other communications between the parties hereunder shall be in
writing and shall be deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses (or at such other
address for such party as shall be specified in like notice):

      (a)   if to IBM at:

                  o

      (b)   if to Holdco at:

                  o

      (c)   if to the Corporation at:

                  o

      (d)   if to the Trustee at:

                  o

Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the next Business Day after the date
of receipt thereof unless such day is not a Business Day in which case it shall
be deemed to have been given and received upon the immediately following
Business Day.

12.4  Notice of Non-Affiliated Holders

Any and all notices to be given and any documents to be sent to any
Non-Affiliated Holder may be given or sent to the address of such holder shown
on the register of holders of Exchangeable Shares in any manner permitted by the
Canada Business Corporations Act from time to time in force in respect of
notices to shareholders and shall be deemed to be received (if given or sent in
such manner) at the time specified in such Act, the provisions of which Act
shall apply mutatis mutandis to notices or documents as aforesaid sent to such
holders.
<PAGE>
                                      -27-

12.5  Risk of Payments by Post

Whenever payments are to be made or documents are to be sent to any
Non-Affiliated Holder by the Trustee or by the Corporation, IBM or by such
Non-Affiliated Holder to the Trustee or to IBM or the Corporation, the making of
such payment or sending of such document sent through the post or by courier
shall be at the risk of Corporation, in the case of payments made or documents
sent by the Trustee or the Corporation or IBM and the Non-Affiliated Holder, in
the case of payments made or documents sent by the Non-Affiliated Holder.

12.6  Counterparts

This trust agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.

12.7  Jurisdiction

This trust agreement shall be construed and enforced in accordance with the laws
of the Province of Ontario and the laws of Canada applicable therein.

12.8  Attornment

IBM agrees that any action or proceeding arising out of or relating to this
trust agreement may be instituted in the courts of Ontario, waives any objection
which it may have now or hereafter to the venue of any such action or
proceeding, irrevocably submits to the jurisdiction of the said courts in any
such action or proceeding, agrees to be bound by any final and unappealable
judgment of the said courts and hereby appoints the Corporation at its
registered office in the Province of Ontario as its attorney for service of
process.
<PAGE>
                                      -28-

            IN WITNESS WHEREOF, the parties hereto have caused this trust
agreement to be duly executed as of the date first above written.

INTERNATIONAL BUSINESS MACHINES          IBM ACQUISITION INC.
CORPORATION

    By:______________________________     By:___________________________________
        Name: o                               Name: o
        Title: o                              Title: o

    By:______________________________     By:___________________________________
        Name: o                               Name: o
        Title: o                              Title: o

3040696 NOVA SCOTIA COMPANY              CIBC MELLON TRUST COMPANY

    By:______________________________     By:___________________________________
        Name: o                               Name: o
        Title: o                              Title: o

    By:______________________________     By:___________________________________
        Name: o                               Name: o
        Title: o                              Title: oEXHIBIT 10.70

                       LICENSE AND DISTRIBUTION AGREEMENT

This License and  Distribution  Agreement (the  "Agreement") is entered into and
effective this 21st day of December, 1999 ("Effective Date"), by and between

         BIOJECT INC.
         7620 S.W. Bridgeport Rd.
         Portland, Oregon 97224
                                                                     ("Bioject")

AND:

         SERONO LABORATORIES, INC.
         100 Longwater Circle
         Norwell, MA 02061

                                                                      ("Serono")
RECITALS:

A.   Bioject designs, develops, manufactures and markets proprietary needle-free
     drug delivery injection devices and related supplies; and

B.   Serono has  developed a  proprietary  human  growth  hormone and  possesses
     certain  know-how and expertise in the marketing,  selling and distributing
     medical products and supplies, including drug delivery systems; and

C.   Bioject and Serono desire to establish a  relationship  for the license and
     distribution of the needle-free drug delivery injection devices and related
     supplies specified herein, on the terms specified herein.

AGREEMENT:

In consideration of the mutual covenants  contained  herein,  and for other good
and  valuable  consideration,  the  receipt and  sufficiency  of which is hereby
acknowledged, the parties hereto agree as follows:

1.   Grant of  License:  License  Fee;  Option.  Subject to all of the terms and
     conditions set forth in this Agreement:

     1.1  License Grant.  Bioject hereby grants to Serono an exclusive right (as
          to Bioject and all other parties) and exclusive license (as to Bioject
          and all other  parties)  under the patents  listed in Schedule 2.1 and
          related technology,  know-how and technical information (collectively,
          the "Licensed  Technology")  during the term of this Agreement to use,
          have used,  sell,  have sold,  import  and have  imported  needle-free
          devices,  syringes  and  supplies  listed  on  Schedule  1.1  of  this
          Agreement (the "Products") for use in the Field (defined below) in the
          United  States,  its  territories  and  possessions  and  Canada  (the
          "Territory").   The  term   Products   shall   include  all  upgrades,
          improvements,  modifications  and  enhancements  to the Products  made
          during the term of this Agreement. The term Products shall not include
          needle-free devices materially

<PAGE>

          different  from the existing  Products in  significant  respects.  The
          specifications  for each Product are set forth on Schedule 1.1 of this
          Agreement (the "Specifications").  The Specifications shall be amended
          from  time  to  time  by  the  parties  for  upgrades,   improvements,
          enhancements  and  other  changes  to the  Products.  New  needle-free
          devices of Bioject that do not constitute Products shall be subject to
          the right of first offer in favor of Serono set forth in Section 21 of
          this Agreement.

     1.2  Changes  to  Products.  Bioject  shall make  changes  to the  Products
          reasonably  requested  by Serono,  provided  that Serono shall pay the
          cost of  engineering  any change to Products  requested by it. Bioject
          shall  promptly  provide  Serono  with an  estimate  of such costs and
          receive  Serono's  approval of such estimate  before  undertaking  any
          change to the  Products.  Bioject  shall not make any other changes to
          the Products without Serono's prior written approval,  which shall not
          be unreasonably withheld or delayed.  Serono may withhold its approval
          in all cases where the  requested  change would impact its  regulatory
          commitments  or  approvals  with  respect to human  growth  hormone or
          delivery of human growth hormone using the Products.

     1.3  Sub-distributors.   Serono   shall   have   the   right   to   appoint
          sub-distributors to assist in the marketing,  sale and distribution of
          the  Products in the  Territory  for use in the Field,  provided  that
          Serono shall be  responsible  for ensuring that such  sub-distributors
          conduct  their  activities  with respect to the Products in compliance
          with Serono's obligations under this Agreement.

     1.4  Definition of Field. "Field" means the use of a needle-free  injection
          device and syringe to administer  human growth hormone to humans,  but
          specifically excluding treatment of AIDS-wasting.

     1.5  No Rights by  Implication.  No rights or licenses  with respect to the
          Products or the  Licensed  Technology  are  granted or deemed  granted
          hereunder  or in  connection  herewith,  other  than  those  rights or
          licenses expressly granted in this Agreement.

     1.6  Option for  Extended  Territory.  Bioject  hereby  grants to Serono an
          option to extend the  Territory to all  countries  of the world.  This
          option may be  exercised  by written  notice of exercise to Bioject at
          any time before ***.  Prior to  expiration of this option and in order
          to preserve  the benefit of this option to Serono,  Bioject  shall not
          market,  distribute  or sell or  permit  any other  person to  market,
          distribute  or sell the Products for use in the Field  anywhere in the
          ***.  Serono shall pay Bioject $*** for  extension of the Territory to
          ***. The first $*** of such payment shall be made upon exercise of the
          option.  The remaining  $*** shall be paid *** (***) days after Serono
          and Bioject shall have secured all regulatory  approvals necessary for
          Serono to market and sell human growth  hormone for delivery  with the
          Products in *** or ***. Such payment shall be in addition to any other
          amounts due

                                      -2-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.

<PAGE>

          to Bioject  under this  Agreement.  If this  option is  exercised  and
          payment is made as described in this Section 1.6,  after  exercise and
          payment the term "Territory" shall mean all countries of the world. If
          Serono for itself or one of its  Affiliates  exercises  this option to
          extend the  Territory,  the parties  will  negotiate in good faith any
          necessary  amendments to this Agreement to comply with  applicable law
          and regulatory requirements and, at the request of Serono, one or more
          separate  agreements  between  one or more  Affiliates  of Serono  and
          Bioject covering the extension  Territory which shall be substantially
          the same as this Agreement.

     1.7  Affiliates of Serono.  This Agreement shall be made for the benefit of
          Serono and its  Affiliates.  Serono may  designate  one or more of its
          Affiliates to exercise its rights, receive its benefits or perform its
          obligations  under this  Agreement in whole or in part,  provided that
          Serono shall remain responsible for all obligations  assigned by it to
          its Affiliates  under this Agreement.  For purposes of this Agreement,
          "Affiliate"  of a party shall mean any  corporation  or other business
          entity controlled by,  controlling,  or under common control with such
          party.

2.   Regulatory Matters.

     2.1  Product  Approvals in the United  States and Canada.  Bioject shall be
          responsible for obtaining and maintaining all approvals,  licenses and
          permits  necessary  for  manufacture  of the Products  and  marketing,
          selling and using the  Products to  administer  Serono's  human growth
          hormone product in the United States and Canada,  provided that Serono
          shall be responsible for all approvals that relate to its human growth
          hormone product generally. Bioject shall diligently pursue and provide
          Serono with copies of the approval of its 510K  application(s) for the
          Products and all other regulatory approvals for the Products issued by
          regulatory authorities in the United States and Canada.

     2.2  Foreign  Regulatory  Approvals.  After any  exercise  by Serono of its
          option  pursuant  to  Section  1.6  to  extend  the  Territory  to all
          countries of the world,  Bioject shall diligently  obtain and maintain
          all  approvals,   licenses  and  permits  necessary  for  the  import,
          marketing,  sale and use of  Products  to  administer  Serono's  human
          growth hormone product in *** of the *** and such *** as designated by
          *** from time to time,  provided that Serono shall be responsible  for
          all  approvals  that  relate  to  its  human  growth  hormone  product
          generally.

     2.3  Regulatory  Assistance  by Serono.  Serono  will use all  commercially
          reasonable  efforts to assist Bioject in obtaining and maintaining all
          necessary regulatory approvals with respect to marketing, sale and use
          of the Products to administer  Serono's human growth hormone  products
          in the Territory.

     2.4  Regulatory  Approvals for Serono's Human Growth Hormone.  Serono shall
          be responsible for obtaining and maintaining all necessary

                                      -3-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          regulatory approvals for the manufacture,  market, sale and use of its
          human growth hormone product,  including by means of delivery with the
          Products,  in the United States and Canada and, if the option pursuant
          to Section 1.6 is  exercised,  in ***, *** of the *** and *** in which
          Serono  requests  that  Bioject  pursue  regulatory  approval  for the
          Products.

     2.5  Regulatory  Assistance by Bioject.  Bioject will use all  commercially
          reasonable  efforts to assist Serono in obtaining and  maintaining all
          necessary regulatory approvals with respect to marketing, sale and use
          of human growth  hormone with the Products in the  Territory.  Without
          limiting  the  foregoing,  Bioject  will  provide  Serono  with  (a) a
          reasonable quantity of Products (but not less than ***) for use in any
          required clinical trials at no charge (other than shipping costs), and
          (b)  reasonable  access at no charge to Bioject's  (i) records,  study
          results,  research and other information and materials relating to the
          Products and (ii) personnel for consultation. Bioject will also assist
          Serono  in the  completion  of all  initial  and  periodic  regulatory
          filings  relating to  marketing,  sale or use of human growth  hormone
          with the Products and make its  facilities  and records  available for
          inspection by the United States Food and Drug  Administration  ("FDA")
          and international regulatory agencies.

     2.6  Facility Inspections. Serono shall, upon reasonable notice to Bioject,
          have the right to inspect the  facilities  in which the  Products  are
          manufactured,  tested or stored  at any time  during  the term of this
          Agreement  and to observe the  manufacture  of the  Products.  Bioject
          shall  consult  with Serono  prior to any response to the FDA or other
          regulatory  authority relating to the Products,  this Agreement or the
          manufacture  of the Products.  Bioject will promptly  notify Serono of
          any  FDA or  other  regulatory  inspection  related  to the  Products.
          Bioject  will  promptly  notify  Serono  of the  results  of any  such
          inspection  and furnish  Serono with a written  description of actions
          taken, if any, to remedy conditions cited in any such inspection.

     2.7  Adverse  Reactions  and  Reports.  Bioject  will  be  responsible  for
          completion  and  submission  to the FDA of any form with respect to an
          adverse  reaction or event  involving a Product sold  hereunder or any
          complaint that would require a field alert and all periodic and annual
          reports, as and when appropriate, unless Serono is under any statutory
          or  regulatory  obligation  to make such or similar  report or filing.
          Each party will forward to the other, simultaneously with filing such,
          a copy of each completed  form with respect to an adverse  reaction or
          event or  similar  report or filing  with  respect  to a Product  sold
          hereunder.

3.   Appointment  as Exclusive  Distributor.  Subject to the  provisions of this
     Agreement, Bioject hereby grants Serono the exclusive right to market, sell
     and distribute the Products in the Field within the Territory  directly and
     indirectly,  including through  wholesalers and  sub-distributors.  Bioject
     agrees that,

                                      -4-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

     during the term of this Agreement,  it will not market,  distribute or sell
     or permit any other  person to market,  sell or resell the Products for use
     in the Field in the Territory  and that Bioject will take all  commercially
     reasonable actions to give full effect to the intention of this Section.

4.   Purchase of Products by Serono.

     4.1  Purchase and Sale.  Subject to Section 4.2, Bioject agrees to sell the
          Products to Serono in  accordance  with purchase  orders  submitted by
          Serono,  and Serono  agrees to  purchase  the  Products  from  Bioject
          subject to the provisions of this Agreement.

     4.2  Forecasts; Orders. On or before the *** (***) day of the months of ***
          during the term of this Agreement,  Serono will provide Bioject with a
          written  good-faith,  non-binding  *** (***)  calendar  month  rolling
          forecast of the *** that  Serono  expects to *** of the next *** (***)
          calendar  months.  The first *** (***) calendar months of each rolling
          forecast  shall be binding.  Serono  will  provide  Bioject  with firm
          purchase  orders from time to time setting  forth the  quantities  and
          forms of Products  ordered and  required  delivery  dates (a "Purchase
          Order").  The  quantities  ordered in Purchase  Orders will be no more
          than *** (***) of the amount  covered in  Serono's  binding  forecast.
          Bioject will use its reasonable  commercial efforts to supply Products
          in excess of such amount.  Subject to the  provisions  of this Section
          with respect to orders in excess of *** of Serono's forecast,  Bioject
          shall meet fully the  requirements  of each  Purchase  Order placed by
          Serono  hereunder.  To the degree  that  either or both of the parties
          find it convenient to employ their standard forms of purchase order or
          acknowledgment  of order in administering the terms of this Agreement,
          it or they may do so but none of the terms and  conditions  printed or
          otherwise  appearing on such forms shall be  applicable  except to the
          extent that it specifies information,  such as quantities and delivery
          dates,   required  to  be  furnished   by  either   party   hereunder.
          Notwithstanding  the  foregoing  or anything in this  Agreement to the
          contrary, the parties agree that Serono shall submit its first rolling
          forecast after  approval by the FDA of Bioject's  510K  application(s)
          for the Products and that Bioject shall have a period of up to 90 days
          to fill the  first  order  for  Products  submitted  by  Serono  after
          approval by the FDA of Bioject's 510K application(s) for the Products.

          The terms and  conditions  set  forth in this  Agreement  shall be the
          exclusive  contract terms between the parties with respect to Serono's
          purchase of the Products.

     4.3  Return.  Serono  may not  return  any  Products  ordered by it without
          Bioject's express written consent.  Such consent shall not be withheld
          for return of  defective  Products or Products  being  returned  under
          Warranty  provisions  set forth in Section 12 (each,  a  "Pre-approved
          Return").  Provision by Bioject of a return goods authorization number
          ("RGA#") to Serono shall constitute express written consent to return

                                      -5-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          Products but only for the Products and in the quantities and serial or
          lot numbers specified by such RGA#.  Except for Pre-approved  Returns,
          Products  returned  for  credit are  subject  to a minimum  restocking
          charge of 20% of the original purchase price.  Except for Pre-approved
          Returns,  used,  opened or customer  damaged products are not eligible
          for credit.

     4.4  Not a Requirements Contract.  Serono has no obligation to purchase all
          of its requirements of needle-free drug delivery  injection devices or
          related supplies from Bioject. Without limiting the foregoing,  Serono
          may qualify  other  sources of supply for  needle-free  drug  delivery
          injection  devices and related  supplies,  purchase  such  devices and
          related  supplies from others and/or  produce such devices and related
          supplies for itself.

5.   License Fees and Quotas.  Serono  agrees to pay to Bioject the license fees
     set forth in  Schedule  5.  Serono  agrees to  purchase  from  Bioject  the
     quantities  of  Product  described  in  Schedule  5 in  order  to  maintain
     exclusivity for the Territory.  If Serono *** at the ***, Serono may *** by
     making *** to Bioject in accordance with the ***.

6.   Prices and Discounts.

     6.1  Prices. Serono shall purchase Products F.O.B. Bioject's factory at the
          prices set forth in Schedule  6.1, plus any  applicable  insurance and
          taxes.  Bioject shall ship and insure Products with transportation and
          insurance  carriers  selected  by  Serono.  Freight  costs,  handling,
          insurance,  sales or  other  taxes  and  export  or  import  fees,  as
          applicable,  will be prepaid by Bioject and added to the invoice to be
          paid by Serono.  Bioject's *** at the option of Bioject upon *** (***)
          days'  written  notice to Serono but not before the *** of the date of
          this  Agreement  or more often than *** in any *** (***) month  period
          thereafter. Any price increase shall not exceed ***.

     6.2  Most Favored Customer. The prices for Products charged to Serono under
          this Agreement shall at all times be equal to or lower than the prices
          for similar  products  charged to any other  customer who  purchases a
          similar or lesser volume of Products from Bioject  taking into account
          any price concessions reasonably resulting from such other purchaser's
          payment  of a  higher  license  fee  to  Bioject,  including,  without
          limitation,  any wholesaler or distributor.  If Bioject shall enter in
          arrangements with any other customer who purchases a similar or lesser
          volume of Products  from Bioject  providing  for a lower price for any
          similar products taking into account any price concessions  reasonably
          resulting from such other purchaser's  payment of a higher license fee
          to Bioject,  then this Agreement  shall thereupon be deemed amended to
          provide  the same price to Serono,  and notice  thereof and any credit
          due shall promptly be given to Serono by Bioject.  All other terms and
          conditions  of sale to  Serono,  including  warranty  provisions  with
          respect to the  Products,  shall at all times be at least as favorable
          to Serono as those terms offered to any other customer with respect to
          similar  products,  including any  wholesaler or  distributor.  In the
          event of any shortages or capacity  limitations,  Bioject shall supply
          Products  to Serono to the best of its ability and shall not favor any
          other customer over Serono.

     6.3  Customer Prices and Terms.  Serono shall be solely responsible for the
          prices  and other  terms  and  conditions  upon  which it  resells  or
          otherwise

                                      -6-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          disposes of the Products,  and Serono hereby acknowledges that Bioject
          has no control  whatsoever with respect to such resale prices or other
          terms and  conditions  of resale  but  Bioject  reserves  the right to
          advertise its list prices for similar products from time to time.

7.   Payment for Products.

     7.1  Product  Purchase  Price.  The full  price of all  Products  including
          applicable  shipping,  insurance  and taxes along with payment for any
          other items for which Serono owes payment to Bioject  shall be paid in
          U.S. Dollars no later than 45 days after Serono's receipt of Bioject's
          invoice or on such other terms  agreed to in writing by the parties in
          advance of the obligation  for such payments.  Bioject shall not issue
          any invoice  prior to  performing  the service  billed or shipping the
          Products billed.

     7.2  Late  Charge.  Any  amount  not paid when  within 45 days of  Serono's
          receipt of Bioject's invoice shall accrue a late payment charge at the
          rate of one percent (1%) per month  thereafter,  provided that the fee
          charged shall not exceed the highest rate permitted  under  applicable
          law.   The  late   payment   charge   shall  be   payable   by  Serono
          notwithstanding  any  other  remedy  elected  by  Bioject  under  this
          Agreement,  including without limitation  termination of the Agreement
          in accordance with Section 20.4, below.

8.   Delivery, Shipment and Inspection.

     8.1  Delivery; Shipment. Delivery of the Products purchased by Serono shall
          be made F.O.B. Bioject's factory in the continental United States, and
          Bioject  will give  Serono firm  shipment  dates of all  shipments  in
          accordance  with  Serono's  Purchase  Orders.  Products at the time of
          delivery  will be in good  condition  and  packaged  for  shipment  in
          accordance with standard commercial  practices and Serono's reasonable
          instructions.  Serono  shall  take  title to the  Products  upon  such
          delivery  and all risks of loss and  expenses in  connection  with the
          Product  shall   thereafter  rest  upon  Serono   including,   without
          limitation,  all risks and expenses  incurred in the storage,  cartage
          and  transportation of the Products,  as well as all insurance,  fees,
          charges, taxes, customs, duties and governmental charges or levies and
          all other  charges and expenses  whatsoever  thereafter  incurred with
          respect to the  Products.  At the  request of Serono,  but at the sole
          expense  of Serono,  Bioject  shall  procure  insurance  coverage  for
          shipments of the Products.

     8.2  Inspection.   Serono  shall  promptly   perform  an  external   visual
          inspection of shipping cartons containing  Products following receipt.
          Serono shall also perform quality assurance testing on a sample basis.
          Serono  shall notify  Bioject in writing  within sixty (60) days after
          arrival  of any  packing  shortages  or of any  other  failure  of the
          Products to conform to this  Agreement  based on its  external  visual
          inspection of the shipping

                                      -7-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          cartons  and  actual  sample  testing.  Subject  to Section 12 hereof,
          Serono  further shall notify  Bioject in writing of any other failures
          of the  Product  to conform to the  Agreement  within  sixty (60) days
          after the date of Serono's actual discovery thereof. All notifications
          shall be  accompanied  by packing  slips,  inspection  reports and all
          other documents supporting Serono claims.

     8.3  Partial  Shipments.  Bioject shall,  if requested by Serono,  have the
          right to make partial shipments; each partial shipment shall be deemed
          a separate sale and payment  therefore  shall become due in accordance
          with the provisions of this Agreement.

9.   Assistance and Training.  Bioject shall, as reasonably requested by Serono,
     render advice to Serono in  connection  with  Serono's  soliciting  orders,
     familiarize  Serono  with  the  operation  of  the  Products,   and  render
     assistance  to Serono in training  Serono's  employees in  connection  with
     soliciting orders for the Products.

     Any training and assistance  requested by Serono which necessitates  travel
     or other  additional  out-of-pocket  costs to Bioject  shall be at Serono's
     expense and shall be due and payable within 45 days of invoicing.

10.  Additional Obligations of Serono.

     10.1 Personnel.  Serono  shall  engage  qualified  representatives  who are
          familiar with the Products and their uses to sell the Products.

     10.2 Promotions.  Serono shall  refrain from false or  misleading  sales or
          promotions concerning the Products.

     10.3 Territory.  Serono shall refrain from  establishing or maintaining any
          branch, warehouse or distribution facility for the Products outside of
          the  Territory.   Serono  shall  not  engage  in  any  advertising  or
          promotional  activities relating to the Products directed primarily to
          customers  outside the  Territory.  Serono  shall not  solicit  orders
          directly from any  prospective  purchaser with its principal  place of
          business located outside the Territory.

          If  Serono  receives  any order  from a  prospective  purchaser  whose
          principal  place of business is known to Serono to be located  outside
          the  Territory,  Serono  shall  promptly  refer that order to Bioject.
          Serono  shall not  knowingly  accept any such  orders.  Serono may not
          deliver or tender (or cause to be delivered  or tendered)  any Product
          outside of the Territory.

     10.5 Compliance  With  Laws.   Serono  shall  comply  with  all  applicable
          requirements of law, including without limitation  requirements of the
          FDA and of any similar non-U.S. government agency; shall obtain at its
          own  expense  all  licenses,   permits,   certificates  or  regulatory
          clearances

                                      -8-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          which are required under applicable law to conduct its business and to
          resell the Products as contemplated  herein; and shall comply with all
          other laws, rules and regulations applicable to such business.

     10.6 Customer  Complaints.  Serono shall provide,  upon Bioject's  request,
          copies  of  customer  complaints  received  by Serono  concerning  the
          Products.  Serono shall  cooperate  fully with Bioject in dealing with
          customer  complaints  concerning the Products and shall,  at Bioject's
          cost and expense,  take such action as Bioject  reasonably may request
          to resolve such complaints.

     10.7 Training.  Serono also shall provide ongoing training  services to its
          customers who are medical professionals  administering  Serono's human
          growth  hormone  product with the Products to the extent  necessary to
          assure  that such  personnel  are  adequately  trained to utilize  the
          Products.

     10.8 Inventory.   Serono  shall  have  the  system  capabilities  to  trace
          shipments  of Products by customer  via product  code and lot.  Serono
          agrees to maintain  inventory levels of Bioject  Products  appropriate
          for the Field and the Territory.

11.  Advertising, Demonstration and Training Materials.

     11.1 Materials.  Bioject will furnish to Serono, at its own cost, copies of
          all  sales  and  promotional   materials  such  as  sales  literature,
          technical data,  instruction  manuals,  technical journal reprints and
          training videos, with respect to the Products as Serono may reasonably
          request from time to time. All such materials shall be in such formats
          as Serono may  reasonably  request to permit Serono to develop its own
          custom version of the materials for use in marketing the Products as a
          delivery  system for Serono's  human growth hormone  product.  Bioject
          shall cooperate with Serono to produce versions of Bioject's  standard
          materials  which are  appropriate  for use by Serono in marketing  the
          Products  as a  delivery  system for  Serono's  human  growth  hormone
          product.  Any  materials  loaned to Serono such as film or artwork for
          the purpose of Serono  preparing its own promotional  material must be
          promptly  returned  to  Bioject no later  than the date  specified  in
          writing  by Bioject  or, if not  specified,  30 days after  being made
          available by Bioject for such use.  Should  Serono fail to return such
          items to Bioject after written  request,  Bioject will invoice  Serono
          for the  replacement  cost of such items and  Serono  will pay for the
          cost of such items in accordance with Section 7.1 of this Agreement.

     11.2 Translation.  Serono shall translate, at its own expense, all user and
          technical manuals, and advertising and marketing information, into the
          languages  of its  customers  accurately.  Serono  agrees  to  provide
          Bioject  with  copies  of  such  materials   prior  to  their  use  or
          dissemination by

                                      -9-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          Serono.  Serono further agrees to provide  Bioject with advance copies
          of  any  other  promotional  and  technical  materials  regarding  the
          Products  prepared by Serono for review and approval by Bioject,  such
          approval not to be unreasonably withheld or delayed.

     11.3 Demonstration Units. Bioject agrees to furnish to Serono, at Bioject's
          own  cost,  a  reasonable  number of  Products  necessary  to  provide
          demonstrations  to interested,  potential  customers.  The quantity of
          Products  supplied  by Bioject to Serono  for  demonstration  purposes
          shall  be  not  less  than  ***  needle-free  devices  and  associated
          supplies. As of the date of this Agreement,  *** demonstration devices
          have been delivered by Bioject to Serono.

12.  Warranties,   Limitation   and  Disclaimer  of  Warranties  and  Limitation
     Remedies.

     12.1 Warranty.  Bioject  represents  and  warrants  to  Serono  (and to its
          distributors,  customers and users of the Products)  that the Products
          shall be free from defects in materials and  workmanship  for a period
          of  eighteen  (18)  months  from the date of delivery by Serono or its
          distributors  or  wholesalers  to  the  end  user.   Serono  shall  be
          responsible for providing  reasonable proof of the shipment date. This
          Warranty does not apply to Products which have been altered,  used for
          a purpose other than one for which they were manufactured,  or used in
          any manner inconsistent with Bioject's written instructions.

          This  Warranty  expires  absolutely at the end of eighteen (18) months
          following  sale of the  Products  by  Serono  or its  distributors  or
          wholesalers  to the end user. No defects  discovered  after the end of
          such period are covered by this Warranty.

          The Warranty set forth in Section 12.1 herein applies to demonstration
          Products only so long as they are used as  demonstration  Products and
          shall  terminate  upon the earlier of 18 months from the date of first
          use or the time of the first use for other than demonstration purpose.

     12.2 Claim for Breach of Warranty. Serono (or its distributor,  customer or
          any end user)  shall  notify  Bioject in writing of any defect  within
          sixty (60) days following the time  prescribed in Section 12.1 and, at
          Bioject's  request,  shall  send  the  part  or  item  believed  to be
          defective  to  Bioject,   F.O.B.  Bioject's  designated  facility  for
          examination and inspection.  Serono (or its  distributor,  customer or
          any end user) shall  furnish in writing the serial number of each such
          Product and a description of the alleged defect.  Bioject shall not be
          responsible  for any defect due to  alteration  or improper use of the
          Products.  Bioject  will return any repaired or  replacement  items to
          Serono  (or  its  distributor,  customer  or  any  end  user),  F.O.B.
          Bioject's facility.  Bioject will provide  reimbursement or credit for
          shipping costs with respect to Products found to have a defect covered
          by this Warranty. With respect to Products that are defective,  but do
          not cause personal injury, death or a

                                      -10-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          recall and  provided  that the defects are not so frequent or numerous
          so as to  constitute  a  substantial  failure  to supply  Products  in
          accordance with Serono's  forecasts and Purchase Orders, the exclusive
          remedy  for  breach  of  Bioject's  Warranty  hereunder  shall  be, at
          Bioject's option, repair or replacement of the units of Products which
          were not as  warranted  or refund of the  purchase  price with respect
          thereto.

     12.3 Product  Meets   Specifications  and  cGMPs.  Bioject  represents  and
          warrants that all Products  delivered to Serono  hereunder  shall: (i)
          have been manufactured in accordance with this Agreement, current Good
          Manufacturing  Practices  and all  applicable  laws,  regulations  and
          rules,  all as in  effect  from  time  to  time;  and  (ii)  meet  the
          Specifications for the Products and all commitments made in regulatory
          filings for the Products. Bioject further represents and warrants that
          no Product shall be  adulterated or misbranded as those terms are used
          under the Federal Food, Drug and Cosmetic Act, as amended,  due to any
          action or omission of Bioject.

     12.4 Product Approvals; Licensing. Bioject has secured (or will secure) and
          will maintain in effect all approvals,  licenses and permits necessary
          for  the  manufacture,  marketing,  sale  and use of the  Products  to
          administer  Serono's human growth hormone product in the United States
          and  Canada  and,  after and  exercise  of the  option  to extend  the
          Territory to all  countries of the world,  in *** and *** and such ***
          requested by ***. Bioject represents and warrants that it has obtained
          and  will  maintain  on a  current  basis  and  will  comply  with all
          licenses, permits and approvals of applicable governmental agencies as
          may be required for its facilities and the manufacture of the Products
          and to perform  its  obligations  hereunder.  Bioject  represents  and
          warrants  that it has not received  any notice of adverse  findings or
          similar  regulatory  letters from regulatory  agencies with respect to
          the  Products  or  similar  products  or the  facilities  in which the
          Products  will be  manufactured.  Bioject has  disclosed to Serono all
          information  relevant to the safety and  efficacy of the  Products and
          similar  products in its  possession  as of the date hereof,  and will
          disclose to Serono  promptly and on a continuous  basis all additional
          such information obtained in the future.

     12.5 Compliance  with Laws.  Bioject  represents and warrants that it shall
          comply in all  respects  with all  federal,  state,  and  local  laws,
          regulations and other requirements  applicable to the Products and the
          performance of Bioject's obligations under this Agreement.

     12.6 DISCLAIMER  OF  WARRANTY.  EXCEPT AS  EXPRESSLY  PROVIDED IN THE ABOVE
          WARRANTY,  BIOJECT  MAKES NO  REPRESENTATION  OR WARRANTY OF ANY KIND,
          EXPRESS  OR  IMPLIED,  WITH  RESPECT  TO THE  PRODUCTS,  WHETHER AS TO
          MERCHANTABILITY,  FITNESS  FOR A  PARTICULAR  PURPOSE,  OR  ANY  OTHER
          MATTER.  NO AGENT,  EMPLOYEE  OR  REPRESENTATIVE  OF  BIOJECT  HAS ANY
          AUTHORITY

                                      -11-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          TO BIND BIOJECT TO ANY AFFIRMATION, REPRESENTATION OR WARRANTY, EXCEPT
          AS STATED HEREIN.

     12.7 Maximum Liability. The maximum liability of one party to the other for
          economic losses under this Agreement, including with respect to claims
          under Section 13  (Indemnification),  shall be $***.  This  limitation
          shall not apply to  recalls  of a  Product,  claims,  costs and losses
          arising from personal injury or death caused by use of the Products or
          Serono's growth hormone  product,  or any breach of Sections 1.6, 3 or
          17.

     12.8 Warranties  of  Serono.  Any  warranties  or  representations,  or any
          remedies for breach thereof, which Serono may provide to its customers
          which are different from or in addition to the warranties and remedies
          provided  by  Bioject  under  this  Agreement   shall  be  solely  the
          responsibility  of Serono,  and Bioject  shall not be bound thereby in
          any manner whatsoever.

13.  Indemnification.

     13.1 Definition of Claims.  For purposes of this Agreement,  "Claims" shall
          mean  any and all  claims,  demands,  losses,  liabilities,  lawsuits,
          proceedings,  damages,  settlement  amounts  and costs  and  expenses,
          including, without limitation, attorneys' fees and costs.

     13.2 Indemnification by Bioject. Bioject shall indemnify,  defend, and hold
          Serono,  its wholesalers and distributors and their Affiliates and the
          officers,   directors,    employees,   agents,   representatives   and
          independent contractors of each of them, harmless from and against any
          and all Claims arising from or related to: (i) injury,  death or other
          loss  caused by use of the  Products;  or (ii)  Bioject's  negligence,
          willful  misconduct  or breach of this  Agreement or any  undertaking,
          covenant,  representation  or warrant  contained  herein.  The Parties
          acknowledge  and agree  that  acceptance  by Serono of any  Product or
          expiration  of any  warranty  set forth in Section 12 shall not affect
          its rights to indemnification hereunder.

     13.3 Indemnification  by Serono.  Except with respect to any matter covered
          by Section  13.1  above,  Serono  shall  indemnify,  defend,  and hold
          Bioject and its  Affiliates and the  directors,  officers,  employees,
          agents,  representatives and independent  contractors or each of them,
          harmless  from and against any and all Claims  arising from or related
          to: (i) injury,  death or other loss  caused by use of Serono's  human
          growth  hormone  product;   or  (ii)  Serono's   negligence,   willful
          misconduct or breach of this Agreement or any  undertaking,  covenant,
          representation or warranty contained herein.

     13.4 Procedures.   Any  party  seeking   indemnification   hereunder   (the
          "Indemnified  Party")  shall give the other  party (the  "Indemnifying
          Party") prompt written notice of the Claims for which  indemnification
          is sought.

                                      -12-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          Failure of an  Indemnified  Party to provide  notice of a Claim to the
          Indemnifying  Party  shall  affect the  Indemnified  Party's  right to
          indemnity  only to the  extent  such  failure  shall  have a  material
          adverse effect on the  Indemnifying  Party's  ability to defend or the
          nature  or  amount  of  liability.  Claims  shall be  defended  by the
          Indemnifying  Party with counsel selected by it. The Indemnified Party
          shall have the right to be represented  by advisory  counsel and other
          representatives, at its own expense. The Indemnifying Party shall keep
          the  Indemnified  Party  reasonably  informed  as to the status of the
          Claim.  The Parties shall render to each other such  assistance as may
          be reasonably required for the proper and adequate defense of a Claim.
          Except as otherwise  provided in Section 13.4, the Indemnifying  Party
          shall not make any settlement of any Claim without the written consent
          of the  Indemnified  Party,  which consent  shall not be  unreasonably
          withheld or delayed.  Notwithstanding the foregoing,  the Indemnifying
          Party may make any  settlement  which  solely  involves the payment of
          money and which the Indemnifying Party actually pays.

14.  Mandatory Insurance.

     14.1 By Bioject.

          (a) During  the term of this  Agreement,  Bioject  shall  procure  and
     maintain in full force and effect,  at its own cost and expense,  insurance
     against the risks  specified in this Agreement in amounts not less than the
     amounts specified in (b), below.

          (b) Bioject  shall  maintain  the  following  minimum  coverages  with
     respect to the matters covered by this Agreement:

               (1)  Worker's  Compensation  insurance  in  compliance  with  the
               Worker's  Compensation  laws of the  state  or  states  in  which
               Bioject has employees  performing work under this Agreement,  and
               employer's  liability  insurance  with respect to such  employees
               with a minimum limit of $100,000/occurrence.

               (2) Commercial general liability  insurance  including  premises,
               broad  form  property  damage,  contractual,   products/completed
               operations  coverage,  with a minimum  limit of  $5,000,000  each
               occurrence.

          (c) Terms of such  coverage  shall be  evidenced  by  certificates  of
     insurance  issued by a  recognized  insurer  rated by A.M.  Best  A-(XV) or
     better,  to be  furnished  by  Bioject to Serono at the  inception  of this
     Agreement and as may be reasonably requested thereafter.  Such certificates
     shall  name  Serono  and its  Affiliates  or  their  agents,  employees  or
     directors,  as  additional  insured,  as their  interests  may appear,  and
     provide  that thirty  (30) days'  written  notice  shall be given to Serono
     prior to  cancellation,  modification  or expiration of any of the terms of
     coverage of any policy.

                                      -13-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

     14.2 By Serono.

          (a)  During  the  Term of this  Agreement  Serono  shall  procure  and
     maintain in full force and effect,  at its own cost and expense,  insurance
     against the risks  specified in this Agreement in amounts not less than the
     amounts specified in (b), below.

          (b) Serono shall maintain the following minimum coverages with respect
     to the matters covered by this Agreement:

               (1)  Workers'  Compensation  insurance  in  compliance  with  the
               Worker's Compensation laws of the state or states in which Serono
               has  employees   performing  work  under  this   Agreement,   and
               employer's  liability  insurance  with respect to such  employees
               with a minimum limit $100,000/occurrence.

               (2) Commercial general liability  insurance  including  premises,
               broad  form  property  damage,  contractual,   products/completed
               operations  coverage,  with a minimum  limit of  $5,000,000  each
               occurrence.

          (c) Terms of such  coverage  shall be  evidenced  by  certificates  of
     insurance  issued by a  recognized  insurer  rated by A.M.  Best  A-(XV) or
     better,  to be  furnished  by Serono to  Bioject at the  inception  of this
     Agreement and as may be reasonably requested thereafter.  Such certificates
     shall name  Bioject  and its  Affiliates,  or their  agents,  employees  or
     directors as an additional  insured,  as their  interests  may appear,  and
     provide  that thirty (30) days'  written  notice  shall be given to Bioject
     prior to  cancellation,  modification  or expiration of any of the terms of
     coverage of any policy.

15.  Recall of Product.

     15.1 Notice.  In the event  either  party has  reason to  believe  that any
          Product should be recalled or withdrawn from  distribution  such party
          shall   immediately   inform  the  other  in  writing  in  a  factual,
          non-judgmental manner.

     15.2 Decision.  The  decision as to whether or not to initiate a recall may
          be made by  Serono  after  consultation  with  Bioject.  Serono  shall
          conduct any recall.

     15.3 Bioject's Liability.  If such recall is required because of failure of
          a Product  to conform  to the  warranties  in Section 12 or due to any
          other defect relating to the Products,  then the costs and expenses of
          such recall  shall be paid or  reimbursed  by Bioject and, at Serono's
          option, Bioject shall replace such recalled Products or issue a credit
          in favor of Serono  or  refund  the  purchase  price of such  recalled
          Products.

                                      -14-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

     15.4 Serono's Liability.  If such recall is required because of a negligent
          act or omission by Serono in the handling,  storage or distribution of
          a Product,  then such recall  shall be conducted by Serono at its sole
          cost and expense and Serono shall not be entitled to any such credits,
          replacements or refunds from Bioject.

16.  Independent  Contractor.  This Agreement does not designate either party as
     an  agent,  employee,   joint  venturer,   partner,   franchisee  or  legal
     representative of the other party for any purpose whatsoever. Neither party
     is  granted,  and at no time shall  imply or claim that it  possesses,  any
     right or authority to assume or create any obligation or  responsibility on
     behalf  or in the  name of the  other  party  or to  bind it in any  manner
     whatsoever.  The Products purchased by Serono shall be owned by Serono, and
     Serono  shall  handle  the  same at its own  risk,  assuming  directly  all
     responsibility for its costs and expenses related to this Agreement and all
     contingencies  of profit and loss with  respect to its  performance  of its
     responsibilities  and duties  under this  Agreement,  Serono shall have the
     sole right to control the manner in which it performs its  responsibilities
     and duties under this Agreement, subject to no control by Bioject except as
     otherwise expressly provided in this Agreement and shall not be entitled to
     any assistance  from Bioject with respect to the performance of such duties
     except as otherwise expressly provided in this Agreement.  Serono is solely
     responsible  for  making,   and  represents  that  it  has  made,  its  own
     determination  concerning the  availability of a market for the Product and
     acknowledges that Bioject has made no claims, representations or statements
     to the  effect  (a) that  there is a market  for the  Products;  (ii)  that
     Bioject will locate customers for Serono;  or (iii) that Serono will earn a
     profit in the business of  distributing  the  Products.  Serono and Bioject
     shall each  indemnify  and save each other  harmless  from and  against all
     claims,  damages,  losses,  liabilities,   expenses  and  costs  (including
     reasonable  attorneys'  fees)  related to or  arising  out of any action of
     conduct, or failure to act, of or by Serono and Bioject, their employees or
     agent,  including those purported but not actually authorized in writing by
     any authorized officer of Bioject or Serono.

17.  Protection of Confidential Information and Trademarks.

     17.1 Information. Serono and Bioject acknowledge that they may acquire from
          the other, certain trade secrets and confidential information relating
          to  know-how,  technical  data,  service,  promotion  and  sale of the
          Products or human growth  hormone,  and the identity of customers  and
          potential customers. Serono and Bioject agree that the foregoing is of
          substantial  value in their  respective  businesses and each agrees to
          keep the same confidential and not to disclose it to any person during
          or after  the term  hereof.  Notwithstanding  the  foregoing,  Bioject
          acknowledges that Serono possesses  substantial  information regarding
          the  market,   customers  and   potential   customers  for  and  other
          information  about  human  growth  hormone  and human  growth  hormone
          delivery  systems.  All  of  this  existing   information,   including
          additional  information  obtained or  developed  by Serono  during the
          course of this Agreement,

                                      -15-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          shall be the confidential  information of Serono and Bioject shall not
          acquire any interest therein.

     17.2 Exceptions to Mutual  Confidentiality  Obligations.  The obligation to
          maintain in confidence all confidential  information shall survive the
          termination of this Agreement, but shall not apply to any information:
          (a) which was known to the receiving  party at or prior to the time of
          its disclosure by the  disclosing  party as evidenced by the receiving
          party's  written  records;  (b) which  becomes  lawfully  known to the
          receiving party without any obligation of  confidentiality at any time
          through  a  third   party  not  in   breach   of  an   obligation   of
          confidentiality;  (c) which is or becomes known to the general  public
          through no fault of the receiving  party;  (d) which is  independently
          developed by the receiving  party;  (e) which the  receiving  party is
          required by law to disclose,  provided notice of such disclosure shall
          be  given  promptly  to the  disclosing  party  so  that  it may  take
          reasonable   actions  to  avoid  and   minimize  the  extent  of  such
          disclosure.

     17.3 Regulatory Exception of Serono. Serono shall be entitled to submit and
          disclose to any regulatory authority and in any regulatory application
          any  and  all  information,   including  confidential  information  of
          Bioject,  required by law or regulation or deemed  necessary by Serono
          to  obtain  approvals  for the  marketing,  sale and use of its  human
          growth hormone product with the Products in the Territory.

     17.4 Bioject's   Trademarks.   Bioject  hereby  authorizes  Serono  to  use
          Bioject's  trademarks  and  trade  names  for the  Products  solely in
          connection  with  advertising,  promoting,  selling,  or servicing the
          Products  during  the term of this  Agreement.  Serono may not use the
          name  "Bioject"  in its  corporate or business  name,  or in any other
          manner which Bioject deems adverse to its interest.

     17.5 Serono's  Trademarks.  The Products  shall be  "private-labeled"  with
          tradenames and trademarks  designated by Serono.  Serono shall own and
          have  the  exclusive  right,  title  and  interest  in and to all such
          tradenames and trademarks during and after the term of this Agreement.
          Bioject  shall  have no  right to use such  tradenames  or  trademarks
          except as directed by Serono during the term of this Agreement.

     17.6 Termination.  The  authorization  to use names,  trademarks  and trade
          names owned by Bioject shall terminate  effective upon  termination of
          this Agreement for any reason,  and Serono  thereupon  shall cease all
          use of names,  trademarks,  or trade  names  owned or used by Bioject,
          except for a Product already owned by Serono.

     17.7 Patent  Prosecution  and  Infringement.  Bioject  shall,  at its cost,
          prepare and  diligently  prosecute  patent  applications  covering the
          Products in the

                                      -16-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          Territory and continuations, divisions, renewals and reissues thereof.
          Bioject shall diligently enforce its patent rights.

18.  Inventions and Indemnitees.

     18.1 Inventions,   Modifications,   and  Improvements  in  the  Field.  New
          techniques,  inventions,  processes,  and know-how  (hereinafter  "New
          Developments")  relating to the Products or the Field may be developed
          by  Serono,  Bioject  or by Serono  and  Bioject  jointly  during  the
          performance of this Agreement.  Serono shall own any New  Developments
          which are developed solely by Serono.  To the extent that any such New
          Developments  are created by Bioject or jointly by Bioject and Serono,
          in either  case,  at the  direction  or expense of Serono  pursuant to
          Section 1.2, then Serono shall have ownership of such New Developments
          and   Bioject   shall   have   a   non-transferable,    non-exclusive,
          royalty-free,  worldwide,  perpetual  license  to make and use the New
          Developments  as long as Bioject's  use does not  compromise  Serono's
          proprietary or confidential information.  Notwithstanding the grant of
          such  license,  Bioject  shall  not use any  such New  Development  to
          compete,  or assist third parties to compete,  directly or indirectly,
          with Serono in the sale of human  growth  hormone for any  therapeutic
          use.  Bioject agrees to cooperate in the filing and prosecution of all
          New Development  patent  applications  owned by Serono and to take all
          other  actions  requested  by  Serono  to  vest  ownership  of all New
          Developments in Serono.

     18.2 Indemnity by Bioject. Bioject shall indemnify, defend and hold Serono,
          its Affiliates and their respective officers,  directors and employees
          from  and  against  any  damages,  liabilities,   costs  and  expenses
          (including  reasonable attorneys' fees and court costs) (collectively,
          "Damages")  arising out of claims  that proper use of the  Products in
          the  Field,  in  accordance  with  its  instructions  infringe  on the
          intellectual  property  rights of third  parties;  provided,  however,
          that:  (a) Serono shall have  promptly  provided  Bioject with written
          notice thereof and reasonable cooperation, information, and assistance
          in connection  therewith;  and (b) Bioject shall have sole control and
          authority  with  respect to the  defense,  settlement,  or  compromise
          thereof;  provided,  however,  that any settlement or compromise  that
          would impose  liability on Serono shall require Serono's prior written
          consent.

     18.3 Indemnity by Serono. Serono shall indemnify,  defend and hold Bioject,
          its Affiliates and their respective officers,  directors and employees
          from  and  against  any  damages,  liabilities,   costs  and  expenses
          (including  reasonable attorneys' fees and court costs) (collectively,
          "Damages")  arising out of claims that proper use of any human  growth
          hormone,   in  accordance  with  its  instructions   infringe  on  the
          intellectual  property  rights of third  parties;  provided,  however,
          that:  (a) Bioject  shall have promptly  provided  Serono with written
          notice thereof and reasonable cooperation, information, and assistance
          in  connection  therewith;  and

                                      -17-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          (b) Serono shall have sole control and  authority  with respect to the
          defense,  settlement, or compromise thereof;  provided,  however, that
          any  settlement or compromise  that would impose  liability on Bioject
          shall require Bioject's prior written consent.

     18.4 Notification   of  Suit.  Each   indemnified   party  shall  give  the
          indemnifying  party written notice of any suit or action  described in
          Section 18.2 or 18.3 wherein  indemnification is claimed.  Such notice
          shall be given  within 30 days after  acquiring  such  knowledge or at
          least  five days prior to the  expiration  of time in which a response
          must be filed with a court or other judicial body,  whichever is first
          to occur.

19.  Initial Term and Renewal. Unless sooner terminated as hereinafter provided,
     this  Agreement  shall continue in force for three years from the Effective
     Date.  Thereafter,  this Agreement may be renewed only by written agreement
     of the parties.

20.  Termination. This Agreement may be terminated as set forth below.

     20.1 Mutual Termination. This Agreement may be terminated by mutual written
          agreement executed by both parties.

     20.2 Termination by Serono.  Serono may terminate  this  Agreement  without
          cause or reason at any time upon 90 days notice to Bioject.

     20.3 Delay  in  Regulatory  Approval.   Either  party  may  terminate  this
          Agreement  at any time  after *** if  Bioject  shall not have  secured
          approval from the FDA of the  marketing,  sale and use of the Products
          as a delivery system for Serono's human growth hormone.

     20.4 Breach.   Either  Serono  or  Bioject  may  terminate  this  Agreement
          effective upon sending  written notice to the other,  if a party fails
          to pay the other any amount  when due or commits  any other  breach or
          default  hereunder or otherwise  fails to perform any of its duties or
          responsibilities hereunder;  provided that such failure to pay or such
          other breach,  default or  nonperformance  shall have  continued for a
          period of thirty (30) business days following  receipt by a party of a
          written notice from the other specifying the nature of such failure to
          pay or such other breach,  default or nonperformance.  Notwithstanding
          such termination,  Serono shall continue to be obligated to accept and
          pay for any of the Product  ordered by Serono  prior to the sending of
          such notice.  Similarly, any late payment charges accruing pursuant to
          Section 7.3 above, survive such termination.

     20.5 Insolvency.  If  (a) a  party  becomes  insolvent;  or a  petition  in
          bankruptcy  is  filed  by or  against  a  party;  or a party  makes an
          assignment for the benefit of its creditors;  or a receiver or trustee
          is appointed  for any of a party's  property;  or (b) a party fails to
          cure or  remedy  any  breach,  default  or  non-performance  for which
          written 30-day notice has been sent by a

                                      -18-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

          party,  then  the  other  party  may  (i)  terminate  this  Agreement,
          effective upon the sending of written notice of such termination; (ii)
          suspend its  performance  hereunder and stop any shipments in transit;
          (iii)  declare  all  amounts  unpaid  hereunder  to be due and payable
          immediately;  or (iv) exercise any and all other remedies  provided by
          applicable law.

21.  New Needle Free Devices.  Bioject shall inform Serono on a quarterly  basis
     of  each  needle-free  device  that  Bioject  or any of its  Affiliates  is
     developing or has acquired rights. If Serono *** to *** to the *** pursuant
     to Section *** then,  thereafter,  as Bioject *** in or to *** which is not
     *** and which could be ***, Bioject shall promptly provide Serono with ***.
     The *** shall propose terms on which Serono may *** to *** and *** for ***,
     and,  alternatively,  ***. Upon receipt of a ***,  Serono shall have *** to
     either  *** of *** in the *** for the *** or provide a *** to  Bioject.  If
     Serono *** of the *** for the ***, the parties shall prepare and execute an
     agreement  reflecting the terms of their arrangement.  If Serono provides a
     ***,  Bioject shall *** and *** for a *** to establish  ***. If Serono does
     not accept the terms of Bioject's *** and the parties do not agree on terms
     pursuant  to  which  Serono  could  ***,  then  Bioject  may,  at any  time
     thereafter,  grant *** with respect to *** to *** on ***. Bioject shall not
     discuss or negotiate for the *** with respect to a *** for *** until it has
     provided any *** to Serono and the applicable time periods have expired.

22.  Remedies Cumulative.  The remedies provided herein to Bioject and to Serono
     shall be  cumulative  and in  addition to all other  remedies  which it may
     exercise in equity or at law,  and its  exercise of any one or more of such
     remedies, or a waiver of its right to exercise any other remedy or remedies
     at the same time or at any other time shall not be deemed to be a waiver of
     any other remedy of Bioject or Serono.

23.  Duties  Upon  Termination.  Upon  termination,  at the  request  of Serono,
     Bioject shall fill all of Serono's  orders for the Products as set forth in
     the binding  portion of its rolling  forecast and Serono shall purchase and
     pay for all Products  subject to such  orders.  Serono may continue to sell
     Products until it has disposed of its inventory.

24.  Survival.   Termination  shall  not  affect  the  continued   operation  or
     enforcement of the following Sections of this Agreement:  12, 13, 15, 17.1,
     17.2, 17.5, 18, 22, 23, 25, 27, 29, 30 and 31.

25.  Nonliability  for  Termination.   If  either  party  shall  terminate  this
     Agreement in accordance with the terms hereof,  then such terminating party
     shall not be  liable  to the  terminated  party  for any  losses,  damages,
     expenditures,  investments or  commitments  made by such  terminated  party
     pursuant to or in connection with this  Agreement,  whether related to such
     terminated party's lost business, lost profits, lost goodwill or otherwise.

26.  Force  Majeure.  Neither  party  shall be deemed to be in breach  hereof or
     liable to other  party or any other  person in any manner on account of any
     delay in  delivery or other  performance  caused in whole or in part by, or
     otherwise

                                      -19-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

     materially related to the occurrence of any contingency beyond such party's
     reasonable  control,  including  without  limitation,  fire,  flood,  riot,
     hostilities,   strikes  or  other  labor  disputes,  freight  embargoes  or
     transportation delays; shortage of labor; inability to secure fuel, energy,
     materials,  supplies or power at reasonable  prices from regular sources or
     on account of shortages thereof;  delays or failures of any of such party's
     suppliers to deliver;  acts of God or of a public enemy; or any existing or
     future laws,  acts or  regulations  of the Federal or of any state or local
     government (including specifically but not exclusively any orders, rules or
     regulations issued by an official,  court or agency of any such government)
     affecting the conduct of such party's  business  with which such party,  in
     its  judgment  and  discretion,  deems it  advisable to comply as its legal
     duty.

27.  Entire Agreement;  Modification and Waiver.  This Agreement,  together with
     the Schedules  attached hereto,  constitute the complete  understanding and
     contract with respect to the subject  matter  hereof.  Neither  Bioject nor
     Serono shall be bound by any purported rescission,  addition, modification,
     or waiver of any provision  hereof,  or any purported waiver, or any breach
     hereof  unless such  rescission,  addition,  modification  or waiver is set
     forth in a writing  signed by an  authorized  agent of  either  Bioject  or
     Serono, respectively.

28.  Nonassignment. Except as provided in Section 1.7, neither party may assign,
     transfer  or sell  all or any part of its  right,  benefits  or  privileges
     hereunder  without the other party's prior written consent.  Any attempt to
     do so without such prior consent shall be wholly void.  This Agreement will
     be transferred  and assigned on all legal  successors of Bioject and Serono
     and (i) any successor to Serono's  business of selling human growth hormone
     for the treatment of growth deficiencies or (ii) any successor to Bioject's
     business of selling needle-free devices.

29.  Public  Announcements.  Neither  Serono  nor  Bioject  will  originate  any
     publicity, news release, or other public announcement or comments,  written
     or oral, whether to the press,  stockholders or otherwise,  related to this
     Agreement without the consent of the other party, except as may be required
     by law. The party making any announcement  which it reasonably  believes to
     be required by law will first give the other party an opportunity to review
     the form and content of any such announcement and comment upon it before it
     is made.

30.  Notices.  Any notice  required or  permitted to be made or given under this
     Agreement  shall be in writing and transmitted by hand,  prepaid  certified
     mail,  air courier or telecopier  addressed to the party to whom the notice
     is given at its address or  telecopier  number shown below or at such other
     address as the addressee shall have theretofore furnished in writing to the
     other party.

                                      -20-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

     Until changed, the address of Bioject shall be as follows:

              Bioject, Inc.
              7620 S.W. Bridgeport Road
              Portland, Oregon 97224
              Attention:  President
              Telecopier:  (503) 624-9002

         with a copy to:

              Michael Redmond
              Bioject Inc.
              7620 S.W. Bridgeport Road
              Portland, Oregon   97224
              Telecopier:  (503) 624-9002

         Until changed, the address of Serono shall be:

              Serono Laboratories, Inc.
              100 Longwater Circle
              Norwell, MA 02001
              Attention:  President
              Telecopier:  (781) 982-9478

         with a copy to:

              Serono Laboratories, Inc.
              100 Longwater Circle
              Norwell, MA 02001
              Attention:  General Counsel
              Telecopier:  (781) 878-6954

     Notices or written communications shall be deemed to have been sufficiently
made or  given  (i) if by  in-hand  delivery  or by  telecopier  with  confirmed
transmission,  when  performed,  (ii) if  mailed,  five  (5)  days  after  being
deposited in the mail, postage prepaid; or (iii) if by air courier,  one (1) day
after delivery to the air courier company.

31.  Construction of Agreement,  Controlling  Law. This  Agreement,  which is in
     English,  shall be interpreted in accordance  with the commonly  understood
     meaning of the words and  phrases  hereof in the United  States of America,
     and it and  performance  of the  parties  hereto  shall  be  construed  and
     governed  according  to the laws of the  State of New  York  applicable  to
     contracts made to be fully performed therein.

SCHEDULES  1.1  (Specifications)  2.1  (Patents),  5 (License  Fees and Purchase
Quotes) AND 6.1 (Product  Pricing)  ATTACHED  HERETO ARE A MATERIAL PART OF THIS
AGREEMENT AND ARE INCORPORATED HEREIN BY THIS REFERENCE.

                                      -21-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in the manner appropriate to each, effective as of the date entered on the first
page hereof.

BIOJECT, INC.                                 SERONO LABORATORIES, INC.

By: ----------------------------              By: ------------------------------

Title: -------------------------              Title: ---------------------------

                                      -22-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.

<PAGE>

                                  SCHEDULE 1.1

                                 SPECIFICATIONS

Description:                             ***.
Weight:                                  ***
Size:                                    ***
Dosage Range:                            ***
Dosage Scale Graduation:                 ***
Duration of Injection:                   ***
Jet Nozzle Sizes:                        ***
Jet Pressure Setting:                    ***

                                      -23-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.

<PAGE>

                                  SCHEDULE 2.1

                                LICENSED PATENTS

United States Patent No. 5,782,802

     Any other U.S. or foreign  patents  applicable  to the Products  held by or
     licensed to Bioject.

                                      -24-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.

<PAGE>

                                   SCHEDULE 5

                        LICENSE FEES AND PURCHASE QUOTAS

License Fees

o    Serono  shall pay Bioject a one-time  $***  license  fee for the  exclusive
     license and distribution  right of the Products for the Field in the United
     States,  its  territories and possessions and Canada upon execution of this
     agreement.

o    Serono  shall pay  Bioject a one-time  $***  additional  license fee in two
     installments  pursuant to Section 1.6 if it elects to extend the  exclusive
     license in the Field to all countries of the world.

Annual Purchase Quotes

o    For  each  twelve  month  period  after  FDA  approval  of  Bioject's  510K
     application  for  marketing,  sale and use of the  Products  as a  delivery
     system for Serono's human growth  hormone,  Serono shall make the following
     purchases of Products in order to maintain exclusivity in the United States
     and Canada:

           ***
           ***
           ***
           ***
           ***

     Notwithstanding the foregoing,  if Serono's purchase of Products during any
such twelve month period is less than the quota, Serono may make a payment equal
to one-half of the shortfall and maintain exclusivity.

     Serono shall purchase $*** of Products within *** after written notice from
Bioject that Bioject has received FDA approval of its 510K  application  for the
marketing,  sale and use of the Products as a delivery system for Serono's human
growth hormone product.

o    For each twelve month period after the first anniversary of any exercise by
     Serono of its option to extend the  Territory to all countries of the world
     and approval of Bioject's  application  for marketing,  sale and use of the
     Products as a delivery  system for Serono's  human  growth  hormone in ***,
     Serono shall make the following  purchases of Products in order to maintain
     exclusivity in all countries of the world  (including the United States and
     Canada):

           ***
           ***
           ***
           ***
           ***

                                      -25-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.
<PAGE>

     Notwithstanding  the  foregoing,  if  Serono's  ***  during any *** is ***,
Serono  may *** to ***.  The ***  shall be *** of the *** the *** and the *** by
Serono  during  the  applicable  period.  Bioject  shall  have  ***  to  ***  in
consideration of *** because the purpose of *** is to *** for *** to ***.

                                      -26-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.

<PAGE>

                                  SCHEDULE 6.1

                                 PRODUCT PRICING

           Product                   Price

             ***                     $***

          Supplies                   Price

***                           $***
***                           $***

                                                              Serono: ----------
                                                             Bioject: ----------
                                                                Date: ----------

                                      -27-

***Confidential  portions omitted and submitted separately to the Securities and
Exchange  Commission.   An  application  for  confidential  treatment  has  been
submitted  pursuant to Rule 24b-2 under the Securities  Exchange Act of 1934, as
amended.

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