SCHEDULE 14A
(Rule 14a-101)
AMENDMENT NO. 3
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ]Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule
240.14a-12
Bioject Medical Technologies Inc.
(Name of Registrant as Specified in Its Charter)
James C. O'Shea
Chief Executive Officer
Bioject Medical Technologies Inc.
7620 S.W. Bridgeport Road
Portland, Oregon 97224
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2), or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Bioject Medical Technologies Inc.
7620 SW Bridgeport Road
Portland, Oregon 97224
Telephone (503) 639-7221
Fax (503) 624-9002
January 28, 1998
Dear Shareholders:
You are cordially invited to attend a Special Meeting of
Shareholders at the Company's headquarters, 7620 S.W. Bridgeport Road,
Portland, Oregon, on February 20, 1998, at 1:00 p.m., Pacific Standard
Time.
The Special Meeting has been called for the purpose of voting on
three proposals relating to the Company's recent transactions with Elan
Corporation, plc ("Elan plc") and its wholly-owned subsidiary, Elan
International Services, Ltd. ("Elan"), and Raphael, LLC, a
management consulting firm, for services it rendered in connection
with the transactions with Elan and Elan plc. These transactions, as
more fully described in the accompanying Proxy Statement, present the
Company with an exciting opportunity in the field of glucose
monitoring for diabetics. The proposals are to approve (1) the exchange
of a promissory note in the original principal amount of $12.015
million issued by the Company to Elan for approximately 832,000 shares
of the Company's Series A and Series B Convertible Preferred Stock,
(2) the issuance of the Company's Series C Convertible Preferred
Stock or substantially similar convertible preferred stock in
connection with future funding of glucose monitoring research and
development and (3) the issuance to Raphael, LLC, of a warrant to
purchase 100,000 shares of the Company's Common Stock.
Your Board of Directors unanimously recommends that you vote FOR
each of the proposals.
Whether or not you are able to attend the meeting, it is
important that your shares be represented, no matter how many shares
you own. We urge you to mark, sign, date and mail your proxy promptly
in the envelope provided.
On behalf of the Board of Directors, thank you for your continued
support of the Company. We look forward to greeting you personally at
the meeting or receiving your proxy.
Sincerely,
/s/ James C. O'Shea
James C. O'Shea
Chairman of the Board,
President and
Chief Executive Officer
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON February 20, 1998
To the Shareholders of
BIOJECT MEDICAL TECHNOLOGIES INC.:
A Special Meeting of Shareholders of Bioject Medical Technologies
Inc., an Oregon corporation (the "Company"), will be held at the
Company's principal executive offices, 7620 S.W. Bridgeport Road,
Portland, Oregon, on February 20, 1998 at 1:00 p.m., Pacific Standard
Time, for the purpose of voting on three proposals.
The Company seeks approval of the following three proposals:
(1) the exchange of a promissory note in
the original principal amount of $12.015 million previously issued by
the Company to Elan International Services, Ltd., for approximately
698,000 shares of the Company's Series A Convertible Preferred Stock
and approximately 134,000 shares of the Company's Series B Convertible
Preferred Stock, (2) the issuance and sale of the Company's Series C
Convertible Preferred Stock or substantially similar convertible preferred
stock to fund future research in the field of glucose monitoring and (3) the
issuance of a warrant to purchase 100,000 shares of the Company's Common
Stock to Raphael, LLC, a management consulting firm, for services it rendered
in connection with the transactions.
The Board of Directors has fixed December 23, 1997, as the record
date for the determination of shareholders entitled to notice of and
to vote at the meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING.
YOU ARE URGED TO SIGN, DATE AND OTHERWISE COMPLETE THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE
YOUR SHARES IN PERSON EVEN IF YOU HAVE SIGNED AND RETURNED YOUR PROXY
CARD.
By Order of the Board of Directors,
/s/ Peggy J. Miller
Peggy Jarvis Miller
Vice President, Chief Financial
Officer and Secretary/Treasurer
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC.
TABLE OF CONTENTS
SPECIAL MEETING OF SHAREHOLDERS February 20, 1998
VOTING
SECURITY OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
THE ELAN TRANSACTIONS AND THEIR RELATIIONSHIP TO THE PROPOSAL
DESCRIPTION OF THE PROMISSORY NOTE
DESCRIPTION OF THE PREFERRED STOCK
PROPOSAL #1: APPROVAL OF THE EXCHANGE OF A PROMISSORY NOTE FOR SERIES A
AND SERIES B CONVERTIBLE PREFERRED STOCK
PROPOSAL #2: APPROVAL OF THE FUTURE ISSUANCE OF SERIES C CONVERTIBLE
PREFERRED STOCK OR OTHER SIMILAR CONVERTIBLE PREFERRED STOCK
TO ELAN
PROPOSAL #3: APPROVAL OF THE ISSUANCE OF A WARRANT TO PURCHASE 100,000 SHARES
OF COMMON STOCK
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
OTHER MATTERS
APPENDIX A
EXHIBITS: DOCUMENTS INCORPORATED BY REFERENCE
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC.
7620 S.W. BRIDGEPORT ROAD
PORTLAND, OREGON 97224
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 20, 1998
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Bioject Medical
Technologies Inc., an Oregon corporation (the "Company"), for use at
the Company's Special Meeting of Shareholders to be held on February
20, 1998, at 1:00 p.m. (the "Meeting") and at any and all adjournments
and postponements of the Meeting. The Meeting will be held at the
Company's principal executive offices at 7620 S.W. Bridgeport Road,
Portland, Oregon for the purpose of voting on the following three proposals:
(1) the exchange of a promissory note in the original principal amount
of $12.015 million previously issued by the Company to Elan
International Services, Ltd. ("Elan") for approximately 832,000 shares of
the Company's Series A and Series B Convertible Preferred Stock; (2) the
issuance of the Company's Series C Convertible Preferred Stock or
substantially similar convertible preferred stock to fund future
research and development of glucose monitoring technology and (3)
the issuance of a warrant to purchase 100,000 shares of the Company's Common
Stock to Raphael, LLC, all as more fully described in this Proxy
Statement (collectively, the "Proposals"). For a description of the
transactions with Elan and the effects of shareholder approval of the
Proposals, see "The Elan Transactions and their Relationship to the
Proposals" and "Effects of the Proposals and Board of Directors'
Recommendation."
This Proxy Statement and the accompanying form of proxy will be
first mailed to shareholders on or about February 2, 1998.
The cost of preparing, assembling and mailing the Notice of
Special Meeting of Shareholders, Proxy Statement and forms of proxy
and the cost of soliciting proxies will be paid by the Company.
Proxies may be solicited in person or by telephone, facsimile or other
means of communication by certain of the directors, officers and
regular employees of the Company who will not receive any additional
compensation for such solicitation. In addition, the Company has
retained the services of Allen Nelson & Co. to assist in the
solicitation of proxies. The Company estimates it will pay Allen
Nelson & Co. its customary and reasonable fees not expected to exceed
$3,500, plus reimbursement of certain out-of-pocket expenses, for its
services in soliciting proxies. The Company will reimburse brokers or
other persons holding stock in their names or the names of their
nominees for the expenses of forwarding soliciting material to their
principals.
VOTING
December 23, 1997 has been fixed as the record date for the
determination of shareholders entitled to notice of and to vote at the
Meeting. On that date there were 25,368,342 shares of
the Company's Common Stock outstanding. The Company has previously
authorized 10 million shares of Preferred Stock, none of which are
issued and outstanding. Each share of Common Stock is entitled to one vote on
any matter that may be presented for consideration and action by the
shareholders at the Meeting. The holders of a majority of the shares
of Common Stock outstanding on the record date and entitled to be
voted at the Meeting, present in person or by proxy, will constitute a
quorum for the transaction of business at the Meeting and any
adjournments and postponements thereof. Shares abstaining will be
counted as present at the Meeting for the purpose of determining the
presence or absence of a quorum for the transaction of business. The
affirmative vote of a majority of the shares of Common Stock present
in person or by proxy and entitled to vote is required to approve each
proposal. Abstentions and non-votes by those present in person or by
proxy and entitled to vote will have the same effect as votes against
a proposal.
Each proxy will be voted according to the shareholder's
directions specified in the proxy. Proxies granted without voting
instructions will be voted FOR the proposed exchange, FOR the issuance of
Series C Convertible Preferred Stock or substantially similar
convertible preferred stock and FOR the issuance of the warrant. Any
shareholder has the power to revoke his or her proxy at any time before
it is voted at the Meeting by submitting a written notice of revocation
to the Secretary of the Company or by filing a duly executed proxy
bearing a later date. A proxy will not be voted if the shareholder who
executed it is present at the Meeting and elects to vote the shares
represented thereby in person.
SECURITY OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The voting securities of the Company consist of common stock
without par value (the "Common Stock"). Each share issued at the time
of the Record Date of December 23, 1997 carries the right to one vote
at the Meeting. As of December 23, 1997, a total of 25,368,342 shares of
the Common Stock were issued and outstanding.
The following table sets forth certain information concerning the
beneficial ownership of the Common Stock at December 17, 1997, by: (i)
each person known by the Company to own beneficially more than 5
percent of the outstanding Common Stock; (ii) each of the directors and certain
executive officers; and (iii) all directors and officers as a group. Each
shareholder listed below has sole voting and investment power with respect to
the shares beneficially owned, except as indicated:
Name of Beneficial Owner Number of Percentage
Shares Beneficially
Beneficially Owned
Owned(1)
Elan International
Services, Ltd. (2)
Flatts Smiths SL04
Bermuda 4,477,273 16.6%
Hambrecht & Quist (3)
50 Rowes Wharf,
Boston, Massachusetts
02110
3,380,300 12.8
Paramount Capital (4)
787 Seventh Avenue,
New York, New York
10019
2,239,842 8.4
DeSpain & Coby, Inc (5) 1,812,791 6.8
1011 SW Emkay Dr, Ste.103
Bend, Oregon
97702
James C. O'Shea (6) 390,291 1.5
David H. de Weese (7) 18,750 *
Grace Keeney Fey (8) 27,250 *
William A. Gouveia (9) 43,750 *
Eric T. Herfindal (10) 37,500 *
Richard J. Plestina (11) 35,000 *
John Ruedy, MD (12) 118,200 *
Michael Sember (13) - -
Peggy J. Miller (14) 138,653 *
J. Michael Redmond (15) 50,000 *
All Directors and
Executive Officers as
a Group (11 persons) (16) 941,516 3.6
- -------------------------
* Less than one percent.
(1)Beneficial ownership is determined in accordance with the rules
word of the Securities and Exchange Commission and includes
shares over which the indicated beneficial owner exercises voting
and/or investment power. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days are
deemed outstanding for computing the percentage ownership of the
person holding the options but not deemed outstanding for
computing the percentage of ownership of any other person.
Except as indicated, and subject to community property laws where
applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock
as shown as beneficially owned by them.
(2)Includes warrants to purchase 1,750,000 shares of Common Stock
which are presently exercisable. The information regarding Elan
International Services, Ltd. is based on a Schedule 13D filed by
Elan International Services, Ltd. on October 15, 1997.
(3)Includes warrants to purchase 1,190,000 shares of Common Stock
which are presently exercisable.
(4)Includes warrants to purchase 1,428,571 shares of Common Stock
which are presently exercisable.
(5)Includes warrants to purchase 1,162,791 shares of Common Stock
which are presently exercisable.
(6)Includes 50,000 options which became exercisable
on October 3, 1997 and 318,750 options which are vested and
become exercisable on April 3, 1998. Does not include 575,000
options that become vested and exercisable after 60 days.
(7)Includes options to purchase 8,750 shares of Common Stock which are
presently exercisable. Does not include 17,500 option shares that become
exercisable after 60 days.
(8)Includes options to purchase 26,250 shares of Common Stock which
are vested amd become exercisable on September 11, 1998. Does not include
17,500 option shares which become exercisable after 60 days.
(9)Includes options to purchase 43,750 shares of Common Stock which
are vested and become exercisable on September 11, 1998. Does not include
17,500 option shares which become exercisable after 60 days.
(10)Includes options to purchase 17,500 shares of Common Stock which
are presently exercisable. Does not include 17,500 option shares
which become exercisable after 60 days.
(11)Includes options to purchase 8,750 shares of common stock which are
presently exercisable. Does not include 26,250 option shares which
are exercisable after 60 days.
(12)Includes options to purchase 52,500 shares of Common Stock which
are vested and become exercisable on September 11, 1998. Does not include
17,500 option shares which become exercisable after 60 days.
(13)Does not include 17,500 option shares that become exercisable after
60 days. Does not include shares beneficially owned by Elan, of which
Mr. Sember is an officer.
(14)Includes options to purchase 25,000 shares of Common Stock which
are vested and exercisable and options to purchase 105,000 shares
of Common Stock which are vested and become exercisable on
April 3, 1998. Does not include 25,000 option shares which become
exercisable after 60 days.
(15)Includes options to purchase 25,000 shares of Common Stock which
are vested and exercisable and options to purchase 25,000 shares
of Common Stock which are presently vested and become exercisable
on April 3, 1998. Does not include 75,000 option shares which
become exercisable after 60 days.
(16)Includes 150,000 options which are presently exercisable, 512,625
options which are vested and become exercisable on April 3, 1998
and 122,500 options which are vested and become exercisable
on September 11, 1998. Does not include 825,000 options which become
vested and exercisable after 60 days.
All of the outstanding capital stock of Bioject Inc. is owned by
the Company and 80.1 percent of the outstanding stock of Bioject JV
Subsidiary Inc. is owned by the Company.
THE ELAN TRANSACTIONS AND THEIR RELATIONSHIP TO THE PROPOSALS
On September 30, 1997, the Company executed a binding letter
agreement with Elan Corporation, plc ("Elan plc") and Elan
International Services, Ltd. ("Elan"), a wholly-owned subsidiary of
Elan plc covering various investments in the Company by Elan, the
formation of the Company's new subsidiary, Bioject JV Subsidiary Inc.
("JV Sub"), and a license (the "License") by Elan plc to JV Sub of
certain patents and know-how (the "Technology") related to systems for
the continuous monitoring of glucose levels in persons with diabetes.
The final documentation for the License and related transactions was
executed on October 15, 1997.
The parties anticipate that an ambulatory monitoring system will be
developed under the License. The system is expected to include a
patch-like sensor coupled with a wrist watch-type monitoring device to
measure glucose levels. Human clinical trials of the system are
presently expected to begin in early 1998. Elan plc is a worldwide drug
delivery and biopharmaceutical company with its principal research and
manufacturing facilities in Ireland, the United States and Israel.
Elan plc's shares trade on the New York, London and Dublin Stock Exchanges.
JV Sub is owned 80.1 percent by the Company and 19.9 percent by
The Company has invested $12.015 million in JV Sub's Common
Stock and Elan has invested $2.985 million in JV Sub's Common
Stock.
Elan loaned the Company the funds the Company has invested in JV
Sub. The loan is evidenced by a promissory note issued by the Company
(the "Note"). The Note bears interest from and after October 15, 1997
at the rate of 9% until December 31, 1997 and 12% thereafter. See
"Description of the Promissory Note". If Proposal Number 1 is approved,
the Note will be canceled and exchanged for the Company's Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock.
Under NASDAQ rules, the Company was barred from issuing this preferred
stock to Elan without receiving approval from the Company's shareholders.
Of the total outstanding principal and accrued interest on the Note at
the date of exchange, $10 million plus accrued interest on the Note
will be exchanged for Series A Convertible Preferred Stock at $15.00
per share. The Series A Convertible Preferred Stock will accrue
dividends at the rate of 9% per annum (compounded semi-annually). The
remaining $2.015 million outstanding under the Note will be exchanged
for Series B Convertible Preferred Stock at $15.00 per share, which will not
accrue dividends. Depending on the market value of the Company's Common
Stock, the Series A and Series B Convertible Preferred Stock may convert at
a 20% discount on October 15, 2004. The value of this beneficial
conversion feature, $3 million, will be accreted as incremental
preferred dividends over seven years on a straight-line basis.
See "Description of the Preferred Stock".
Elan plc has agreed to conduct at its expense certain research
and development efforts related to the Technology until the first to
occur of (i) commencement of human trials, (ii) April 1, 1998 or
(iii) the devotion by Elan plc to such further research and
development efforts of aggregate Elan plc resources equal to $2.5
million. Following the completion of such research efforts at Elan
plc, the responsibility for funding the project will shift to JV Sub. Elan
plc has agreed to make itself available to conduct other development
and commercialization efforts as may be described for it in one or more
development plans to be agreed in good faith by JV Sub and Elan plc.
JV Sub will be required to pay Elan plc for such further work, but if
the Proposal is approved by the Company's shareholders, JV Sub would
receive a discounted price for such further work by Elan plc.
JV Sub intends to obtain up to $5 million of the funds required
for the further development and commercialization of the Technology
through additional investment in JV Sub's capital stock of
approximately $4 million by the Company and approximately $1 million
by Elan. The Company and Elan have indicated their intention to make
these further investments in JV Sub, provided that JV Sub's Board of
Directors determines that such funds are required for development of
the Technology pursuant to a development plan which has been approved
by Elan. Each of the Company and Elan have reserved the right to
withhold its share of the additional funding, but each has agreed not
to do so unreasonably. Elan will in any event not be obligated to
fund any amount in excess of 25% of the amount of such additional
investments by the Company, nor to make any further investments
following the expiration of 30 months after the earlier of (i)
March 15, 1998 or (ii) the date the Company's shareholders
approve the Proposals. Provided that the Company's shareholders approve
Proposal Number 2, the Company intends to obtain up to $4 million for its
further investment in JV Sub's capital stock from the sale to Elan of Series
C Convertible Preferred Stock or similar convertible preferred stock in that
amount. Subject to certain conditions, including shareholder approval and
the use of the proceeds of the investment solely to fund such further
investments in JV Sub, the Company has the right to require Elan to purchase
such amount of the Series C Convertible Preferred Stock or similar convertible
preferred stock, at a price per share equal to ten times the average market
price of the Company's Common Stock for a ten day period prior to the date of
issuance of the Series C Convertible Preferred Stock or similar convertible
preferred stock. See "Description of the Preferred Stock". The agreement by
Elan to purchase such Series C Convertible Preferred Stock or similar
convertible preferred stock will expire 30 months after the date the Company's
shareholders approve the Proposals. The Company is seeking approval for the
issuance of both the Series C Convertible Preferred Stock or other similar
convertible preferred stock because if Elan purchases such preferred stock on
more than one date, the price of the preferred stock will vary requiring more
than one series of preferred stock to be issued.
The Company and JV Sub anticipate that significant levels of
funding will be required to develop the Technology in addition to the
funding that is described above. The Company anticipates that
additional funding will be raised through the future issuance of
debt or equity by either or both of the Company and JV Sub.
Elan has also agreed under certain conditions to loan JV Sub up to $5 million
to support the research, development and
commercialization of the Technology after JV Sub has expended $15 million
on research and development and provided that JV Sub
is not readily able to obtain such funds from other sources. Such
funding would constitute senior indebtedness of JV Sub and will bear interest
at prime rate plus 1% per annum. Elan's agreement to provide such loan is
subject to certain conditions, including the consent of Elan (which consent
shall not be unreasonably withheld or delayed), a requirement that JV Sub's
market capitalization not exceed $50 million, and the determination by
Elan that such funding is likely to result in the commercialization of the
Technology as set forth in JV Sub's business plan.
Under the License, Elan plc has granted JV Sub an exclusive
license to the Technology in North America for use in glucose
monitoring. If the Company's shareholders approve Proposals Number 1 and 2,
this will become an exclusive worldwide license to the Technology
for such use. The continued exclusivity of JV Sub's License is
contingent, on a country-by-country basis, on JV Sub's refraining from
commercializing products which would compete with the products covered
by the licensed Elan plc Technology. Further, the License itself is
contingent, on a country-by-country basis, on JV Sub's diligently
seeking and obtaining regulatory marketing approval for licensed
products and on JV Sub's timely commercial launch of the licensed
products in countries where such approval has been obtained.
The Licensed Technology will include any improvements or
modifications developed or acquired by Elan plc and useful in glucose
monitoring applications. JV Sub is required under the License to
grant back to Elan plc certain nonexclusive licenses to any
modifications or improvements made by or for JV Sub to the licensed
Technology, for use by Elan plc in applications other than the
monitoring of glucose levels. If JV Sub's License becomes
nonexclusive in certain countries, or if the License is terminated in
certain countries (due to failure(s) to satisfy the conditions
described above), the grant back of such licenses by JV Sub to Elan
plc will also extend to other technology that is necessary for the
commercialization of the licensed products by Elan plc in such
countries, and, for such purposes.
JV Sub will neither be permitted to assign the License nor to grant
sublicenses to the Technology without the prior written consent of
Elan plc. Elan plc has agreed not to withhold such consent
unreasonably, except where the proposed assignee or sublicensee is one
of a number of specified companies seen as actual or potential
competitors.
The term of the License is 15 years, or on a country by country basis for the
life of the last patent to expire, whichever is longer. In the event that
15% of JV Sub's equity is acquired by any one of a number
of specified companies identified by Elan plc as actual or potential
competitors, or any other entity to which Elan plc does not consent (which
consent shall not be unreasonably withheld in the case of such other,
unspecified companies), the License may be immediately terminated
at the option of Elan plc.
JV Sub has paid Elan plc an initial royalty of $15 million
under the License. In addition, JV Sub is required under the
License to pay Elan plc an aggregate of $15.5 million in further royalties
as the following milestones are acheived: $1 million within 10 days of the
commencement of pivotal clinical trials; $1.5 within 120 days of the
successful completion of the clinical trials; $3 million within 10 days of
the initial regulatory filing to obtain marketing approval; and $10 million
within 120 days of the grant of U.S. marketing approval for the first product.
If the Company's shareholders approve Proposals Number 1 and 2 described herein,
thereby extending the territory of the License to be worldwide, the royalty
payment called for upon the grant of US marketing approval will be
split into two payments of $5 million each, one to be paid upon the grant of
such US marketing approval and the other to be paid upon the grant of
marketing approval in any other of certain major nations listed.
Additionally, JV Sub will be required under the License to pay Elan plc a
continuing royalty equal to a percentage of the net revenues from sublicenses
of the Technology or from the sale by JV Sub or its sublicensees of products
covered by the licensed patents or that incorporate or apply the licensed
know-how. The percentage royalty will increase in stages as the aggregate
net revenues in a given fiscal year exceed stated levels. These
stated levels will be higher if the Company's shareholders approve
Proposals Number 1 and 2 described herein, reflecting the larger potential
market for such products under the License once its territory has been
expanded to be worldwide.
Elan has invested $3.0 million in the Company in exchange for
2,727,273 shares of the Company's Common Stock and a five-year warrant
to purchase an additional 1,750,000 shares of Common Stock at $2.50
per share. The purchase price of the Company's Common Stock and the exercise
price of the warrant were determined by arms-length negotiation with Elan. The
Company has agreed that it will use its best efforts to cause a nominee of
Elan to be elected to its Board of Directors for as long as Elan owns at
least a five percent equity position in the Company (this level will increase
to ten percent in seven years). The Company's Board of Directors added
Michael Sember, Elan's vice president of planning, investment and development,
as a director effective October 16, 1997, the day following the closing of
the transactions contemplated by the letter agreement.
Elan has agreed that for a period of three years it will not (i)
purchase shares or assets of the Company from third parties, (ii)
participate in a tender or exchange offer, merger or other business
acquisition involving the Company, (iii) participate in any
recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to the Company, (iv) solicit
proxies or consents to vote any voting securities of the Company, (v)
attempt to influence management or control of the Company or (vi)
change the composition of the Company's Board of Directors; provided
that such agreement will not apply if a tender offer or a proxy
solicitation with respect to an acquisition proposal is made by a
party which has been invited in writing by the Company or is
unaffiliated with Elan.
Elan has also agreed to fund $500,000 of development expenses for
the development of pre-filled ampules for the Company's
needle-free injection technology. The funding will commence
in the first quarter of 1998, upon written request from the
Company, in the form of grants to the Company in four, quarterly
(in arrears) payments of $125,000 each.
For its services in connection with the transactions described
above and the introduction of the Company to Elan, Raphael, LLC, a
management consulting company, has received a cash payment in the
amount of $150,000 and, subject to shareholder approval of
Proposal Number 3, will receive a five-year warrant to purchase 100,000
shares of the Company's Common Stock at an exercise price of $0.85 per share.
If shareholder approval is not received, Raphael, LLC, will receive an
additional cash payment totalling $75,000 payable immediately after the
shareholder vote.
As discussed above, Elan has recently purchased 2,727,273 shares
of the Company's Common Stock. These shares represent 10.8% of
all shares of Common Stock outstanding on the date of record and are
entitled to vote on the proposals. If the proposal to exchange
the Note plus accrued interest for convertible preferred stock is
approved and assuming immediate conversion of the preferred stock
by Elan at the stated conversion rate, Elan would hold
approximately 11 million shares of Common Stock or approximately
30% of total voting shares outstanding. If the Company's
shareholders do not approve the preferred stock transactions with
Elan, the Company would seek to sell equity securities in private
placements or public offerings to repay the debt due to Elan and
to finance future JV Sub research and development and other
expenses. The Company is not engaged in any discussions or
negotiations with third parties in connection with any such
financing and there can be no assurance that such financing could
be obtained in a timely manner, on favorable terms or at all.
A pro forma balance sheet at September 30, 1997, reflecting (i) the $3.0
million investment by Elan in the Company, (ii) the cancellation of the Note
in exchange for Series A and Series B Convertible Preferred Stock of the
Company, and (iii) the issuance of Series C Convertible Preferred Stock or
other similar convertible preferred stock of the Company to fund JV Sub
research and development, is attached hereto as Appendix A.
DESCRIPTION OF THE PROMISSORY NOTE
On October 15, 1997, Elan loaned the Company the sum of $12.015
million in exchange for a promissory note (the "Note") issued by the
Company, bearing interest at the rate of 9% per annum from October 15,
1997 through December 31, 1997, and at a rate of 12% per
annum thereafter, with interest payable on April 13, 1998; thereafter
interest is payable quarterly in arrears. All principal and accrued
interest owing on the Note shall become due and payable on October
15, 2001, unless prepaid at the Company's option at any time on or
after February 1, 1998.
The Note and the Securities Purchase Agreement, pursuant to which
the Note is issued, contain covenants restricting certain activities of the
Company. While the Promissory Note remains outstanding, the Company
may not without Elan's written consent (a) incur any indebtedness or
liens outside the ordinary course of business, which ordinary course
shall include equipment liens and working capital lines up to a maximum
of the lesser of $5 million and 50% of the Company's aggregate
consolidated accounts receivable and inventory, (b) acquire or dispose
of any material business or assets outside the ordinary course of
business, or (c) effect any merger, consolidation or acquire control
or any other corporation or business entity. Elan has agreed that
its consent, if sought, will not be unreasonably withheld or delayed.
DESCRIPTION OF THE PREFERRED STOCK
Series A Convertible Preferred Stock
Dividends. The Series A Convertible Preferred Stock ("Series A
Convertible Preferred Stock") accrues a mandatory dividend of 9% per
annum, compounded semi-annually, which shall be paid by issuance of
additional shares of Series A Convertible Preferred Stock.
Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Company and prior to any distributions to holders of
Common Stock, each holder of Series A Convertible
Preferred Stock shall be entitled to receive $15.00 (the original
issuance price) plus accrued and unpaid dividends thereon, per share.
Optional Conversion. Prior to October 15, 2004, each original issue share of
the Series A Convertible Preferred Stock is convertible at Elan's election
into ten shares of Common Stock. This conversion ratio is subject to
anti-dilution adjustments for (a) so-called mechanical adjustments in the case
of stock splits, recapitalizations or similar events or (b) for issuances (or
in the case of options, grants thereof) to affiliates of the
Company or the Company's or such affiliates' respective directors,
officers, employees or agents, at prices below the
then-market price other than shares (or options to acquire shares)
up to 3,650,000 shares of Common Stock issued to directors,
officers or employees of the Company or its affiliates (or
in the case of options, granted at an exercise price) at less
than market value under a duly-enacted stock option or
compensation plan (the anti-dilution adjustments
described above, the "Anti-dilution Adjustments"). In the event of such
Optional Conversion, Elan forfeits any accrued and unpaid dividends.
Optional Redemption. The Company has the right to redeem up to one-third
of the Series A Convertible Preferred Stock after three years, together
with one-third of the then-accrued and unpaid dividends, provided that the
market price of the Company's Common Stock reaches and remains at $2.25 per
share or greater during the 30-day period prior to the proposed redemption
date. Subject to the same condition as to the market
price of the Common Stock, an additional one-third of the originally issued
Series A Convertible Preferred Stock may be redeemed by the Company after
four years, together with one-half of then-accrued and unpaid dividends (if
the first third was previously redeemed, or else two-thirds of the
accrued and unpaid dividends if not). The balance of the Series
A Convertible Preferred Stock may be redeemed by the Company
after five years, together with the remaining accrued and unpaid
dividends, again, subject to the same condition that the Common
Stock reaches and remains at $2.25 per share or greater during
the 30-day period prior to the proposed redemption date. Any
such redemptions by the Company would be effected by the
Company's giving between 45 days' and 90 days' notice and
paying the original issuance price of $15.00 per share, plus such
portions of the accrued dividends. During such notice period,
Elan retains the right to convert the Series A Convertible
Preferred Stock (or the applicable portion thereof) in accordance
with its terms. The Series A Convertible Preferred Stock may be
redeemed by the Company prior to such three, four or five-year
periods, as applicable, only in the event that the Company shall
have reasonably determined, in good faith, after consultation with
Elan, to permanently abandon development of the Technology or products based on
the Technology. Any such redemption would require the payment
by the Company of the original issue price and all accrued dividends,
and a similar 45 to 90-day notice period would be required, during
which Elan similarly retains the right to convert the Series A
Convertible Preferred Stock (or the applicable portion thereof) in
accordance with its terms.
Mandatory Conversion. As of October 15, 2004, each share of
Series A Convertible Preferred Stock not previously converted or
redeemed shall automatically convert into that number of shares of Common Stock
determined by dividing the sum of the original issuance price of
$15.00 and accrued but unpaid dividends by a per share Common
Stock price equal to 80% of the average of the closing prices of
the Common Stock for the 10 trading days ending on October
13, 2004; provided, that if the average of such closing prices is
greater than or equal to $1.80, such per share price shall be $1.50.
Other Covenants. The Series A Convertible Preferred Stock contains
covenants restricting the Company's ability to take certain actions
affecting the Series C Convertible Preferred Stock without the
prior written consent or affirmative vote of a majority in interest
of the Series A Convertible Preferred Stock. Such covenants
specifically restrict the Company's ability to (i) amend or repeal
any provision of, or add any provision to, the Company's Articles of
Incorporation or Bylaws if such action would adversely alter the
preferences, rights, privileges or powers of, or the restrictions
provided by the terms of the Series A Convertible Preferred Stock
for the benefit of, the Series A Convertible Preferred Stock, (ii)
create a series of Preferred Stock with a liquidation preference senior
to the Series A Convertible Preferred Stock, (iii) effect
any merger, consolidation or similar transaction, or (iv) increase
or decrease the number of authorized shares of Series A Convertible
Preferred Stock, except as required by the terms of the Series
A Convertible Preferred Stock.
While the Series A or B Convertible Preferred Stock is issued and
outstanding, the Securities Purchase Agreement contains covenants
limiting the Company's ability (i) to acquire or dispose of any
material business or assets outside the ordinary course of business,
and (ii) to incur indebtedness in excess of $10 million aggregate
principal amount unless the Company can reasonably establish (based on
prudent and customary commercial practices and standards in the
capital markets) that the Company may incur such indebtedness from an
institutional lender, venture capital firm or reputable "hedge" fund
on a prudent and reasonable basis, based on the Company's then credit-
worthiness, prospects, solvency and business, in each case, without
the prior written consent of Elan which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the
Company may incur working capital lines and equipment leases from
unaffiliated third parties in bona fide financing transactions in
principal amounts up to the lesser of $5 million and 50% of the
Company's aggregate consolidated accounts receivable and inventory.
However, if Elan has reasonably withheld its consent to any
of the foregoing transactions, the Company may nevertheless
effect such a transaction if it redeems the Series A Convertible
Preferred Stock, effective at the closing of such transaction
by paying to Elan the entire original issuance price of $15.00
per share plus all then accrued and unpaid dividends, together
with the issuance to Elan of a warrant (which shall be
non-transferable, other than to Elan affiliates, or no more
than five non-affiliates) and which shall entitle Elan to
purchase that number of shares of the securities of the Company
into which the Series A Convertible Preferred Stock would
have been convertible had it not been redeemed under this
provision. Such warrant would be exercisable until October
15, 2004, at an exercise price equal to the sums paid in
redemption of the Series A Convertible Preferred Stock,
plus 9% per annum from the redemption date to the exercise date.
Series B Convertible Preferred Stock
Dividends. The Series B Convertible Preferred Stock ("Series B
Convertible Preferred Stock") participates with the Common Stock on any
declared or paid dividends or distributions, but has no mandatory dividend
provisions.
Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Company and prior to any distributions to holders of
Common Stock, each holder of Series B Convertible
Preferred Stock shall be entitled to receive $15.00 (the original issuance
price) per share plus any accrued and unpaid dividends thereon.
Optional Conversion. Prior to October 15, 2004, each original issue share of
the Series B Convertible Preferred Stock is convertible into ten shares of
Common Stock, subject to the Anti-dilution Adjustments, identical to those for
Series A Convertible Preferred Stock.
Optional Redemption. The Series B Convertible Preferred Stock is redeemable
upon the same terms as the Series A Convertible Preferred Stock.
Mandatory Conversion. As of October 15, 2004, each share of
Series B Convertible Preferred Stock not previously converted or
redeemed shall automatically convert into that number of shares of Common Stock
determined by dividing the sum of the original issuance price of
$15.00 and accrued but unpaid dividends by a price equal to 80% of the
average of the closing prices of the Common Stock for the 10 trading
days ending on the October 13, 2004; provided, that if the average of
such closing prices is greater than or equal to $1.80, such price
shall be equal to $1.50.
Series C Convertible Preferred Stock
Dividends. The Series C Convertible Preferred Stock ("Series C
Convertible Preferred Stock") participates with the Common Stock on any
declared or paid dividends or distributions, but has no mandatory dividends.
Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Company and prior to any distributions to holders of
Common Stock, each holder of Series C Convertible Preferred Stock shall be
entitled to receive the original issuance price of the Series C Convertible
Preferred Stock per share plus any accrued and unpaid dividends theron. The
original issuance price of the Series C Convertible Preferred Stock shall be
based on the market price of the Common Stock at the time of issuance.
Optional Conversion. Prior to October 15, 2004, each original issue share of
the Series C Convertible Preferred Stock is convertible into ten shares of
Common Stock, subject to the Anti-dilution Adjustments, identical to those for
Series A Convertible Preferred Stock.
Optional Redemption. The Series C Convertible Preferred Stock is redeemable
upon the same terms as the Series A Convertible Preferred Stock, except that
the redemption price per share shall be the original issuance price plus any
accrued and unpaid dividends.
Mandatory Conversion. As of October 15, 2004, each share of
Series C Convertible Preferred Stock not previously converted or
redeemed shall automatically convert into that number of shares of Common Stock
determined by dividing the sum of the original issuance price and
accrued but unpaid dividends by a price equal to one-tenth of the
original issuance price.
The proposed terms of the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, and Series C Convertible Preferred Stock, which
are subject to adjustment prior to issuance, have been filed as an exhibit
to the Company's current report on Form 8-K/A filed on November 14, 1997.
PROPOSAL NUMBER 1:
APPROVAL OF THE EXCHANGE OF A PROMISSORY NOTE FOR SERIES A AND
SERIES B CONVERTIBLE PREFERRED STOCK
DESCRIPTION OF AND REASON FOR THE PROPOSAL
As described in more detail above under the heading "The Elan
Transactions and Their Relationship to the Proposals," Proposal
Number 1 seeks approval of the exchange of an outstanding
promissory note to Elan in the amount of $12.015 million plus
accrued interest for approximately 698,000 shares of Series A
Convertible Preferred Stock and approximately 134,000 shares of Series B
Convertible Preferred Stock.
Under governing Oregon corporate law and the Company's Articles
of Incorporation and Bylaws, no action or authorization by the
Company's shareholders is necessary prior to the issuance of
additional securities of the Company of a class authorized in the
Company's Articles of Incorporation (including the Series A, B
and C Convertible Preferred Stock). However, because
transactions in the Company's Common Stock are reported on the
National Association of Securities Dealers Automated Quotation
("Nasdaq") National Market System, the Company is subject to
certain requirements of the National Association of Securities
Dealers. The sale to Elan of 2,727,273 shares of Common Stock
and a five year warrant to purchase an additional 1,750,000 shares of
Common Stock substantially exhausted the number of shares that
could be issued by the Company in the absence of shareholder
approval. Accordingly, Nasdaq rules require the Company to seek shareholder
approval of the issuance by the Company of the Convertible
Preferred Stock described above under the heading "Description of
the Proposals."
Approval of Proposal Number 1 would eliminate the Company's
obligation to make future cash interest payments or repayment of
the principal amount to Elan under the Note. If shareholder
approval of the Proposal is not obtained, the Company could be
subject to delisting from Nasdaq, due to Nasdaq's requirement
that a listed company maintain total net assets of at least $4
million. While the Note remains outstanding, the Company's net
assets will remain below this minimum. If shareholder approval of
the exchange is not obtained, the Company would seek to take
other actions to maintain listing eligibility, but there can be
no assurance that the Company would be successful in such efforts
or would otherwise be able to maintain the listing requirements.
Approval of the exchange also would lead to the likely issuance,
upon conversion of the preferred stock to Common Stock, of Common
Stock at a deemed conversion price less than the future market
price of the Common Stock, as it is presumed that Elan would not
convert its shares voluntarily if the deemed conversion price
were not less than the market price of the Common Stock. Also,
mandatory conversion occurs at a discount to market price of the
Common Stock on the date of conversion. See "Description of the
Preferred Stock - Mandatory Conversion."
Holders of the preferred stock will be entitled to receive
distributions on a liquidation in preference to the claims of the
holders of the Common Stock in amounts equal to the original
liquidation preference of Series A and Series B Convertible
Preferred Stock. The issuance of the Series A and B Convertible
Preferred Stock will dilute the interest of each shareholder in
the economic results of the Company pro rata based on the number
of shares owned by existing shareholders prior to any issuance.
Certain corporate actions will require approval of the holders of
preferred stock. See "Description of the Preferred Stock."
SUMMARY EFFECTS OF PROPOSAL NUMBER 1 AND BOARD OF DIRECTORS
RECOMMENDATION
As described in more detail above and under the heading "The
Elan Transactions and Their Relationship to the Proposals,"
approval of Proposal Number 1 will have several effects for the
Company and JV Sub. Approval of Proposal Number 1 will:
- -effect the automatic exchange of the Note for the Series A and
Series B Convertible Preferred Stock, thereby eliminating the
Company's requirement to make accrued or future cash interest payments to
Elan under the Note or to repay the Note with cash
- -permit holders of preferred stock to receive distributions upon
liquidation in preference to the holders of Common Stock
- -permit conversion of the preferred stock into Common Stock
at deemed conversion prices which are likely to be less than future market
prices of the Common Stock
- -allow issuance of the preferred stock which will dilute the interest of each
current shareholder in the economic results of the Company
- -eliminate the Note, which had reduced the Company's net assets below the
minimum requirements for listing on Nasdaq
- -expand the territory under the License from North America to
world-wide (if Proposal Number 2 is also approved)
- -reduce the cost to JV Sub of certain research and development
work that may be conducted by Elan plc at the request of JV Sub
(if Proposal Number 2 is also approved)
- -split the contingent royalty payment triggered by FDA approval
into two stages, one upon FDA regulatory approval and the other
upon regulatory approval outside the United States (if Proposal
Number 2 is also approved)
- -reduce the royalty payments for incrementally higher levels of
net sales, reflecting the larger potential market under a world-
wide license (if Proposal Number 2 is also approved)
The Board of Directors recommends that the shareholders vote FOR
Proposal Number 1 to approve the exchange of the Note to Elan for
Series A and Series B Convertible Preferred Stock.
PROPOSAL NUMBER 2:
APPROVAL OF THE FUTURE ISSUANCE OF SERIES C CONVERTIBLE
PREFERRED STOCK OR OTHER SIMILAR CONVERTIBLE
PREFERRED STOCK TO ELAN
DESCRIPTION OF AND REASON FOR THE PROPOSAL
As more fully detailed above under the heading "The Elan
Transactions and Their Relationship to the Proposals," Proposal
Number 2 seeks approval of the future issuance and sale of Series
C Convertible Preferred Stock or other similar convertible preferred stock
for an aggregate purchase price of up to $4 million, in order to fund the
Company's portion of certain research and development costs of JV Sub. As is
the case with Proposal No. 1, shareholder approval is necessary due to the
requirements of Nasdaq and not pursuant to either Oregon
corporate law or the Company's Articles of Incorporation and
Bylaws.
Approval of Proposal Number 2 would provide the Company with the
option to fulfill its financing commitments to JV Sub by selling
other Preferred Stock with similar terms to Elan. Approval also
would expand the territory under the License from North America
to be world-wide, and would reduce the cost to JV Sub of certain
research and development work that may be conducted by Elan plc
at the request of JV Sub, as detailed above under the heading
"Description of the Proposals." Under the License, JV Sub will
be obligated to pay certain royalties to Elan upon
obtaining FDA regulatory approval of an ambulatory glucose
monitoring system. If shareholders approve Proposal Number 2,
with the result that the territory under the License is world-
wide, such royalty payment will be split into two payments, one
upon FDA regulatory approval and the other upon regulatory
approval outside the United States. Should shareholder approval
not be obtained, an amount equal to the two combined royalty
payments will be payable to Elan in one payment when regulatory
approval in the United States is received. Shareholder approval
also would reduce the royalty payments for incrementally higher
levels of net sales, reflecting the larger potential market under
a world-wide License. Thus, if and when JV Sub markets a
product, having obtained for it all necessary regulatory
approval, the royalty payments due Elan will be lower at higher
levels of net sales, thereby allowing JV Sub to retain a larger
percentage of any sales proceeds.
As with Proposal Number 1, holders of the preferred stock will be
entitled to distributions upon liquidation in preference to the
claims of the holders of the Common Stock. The issuance of the
Series C Convertible Preferred Stock will dilute the interest of
each shareholder in the economic results of the Company pro rata
based on the number of shares owned by existing shareholders
prior to any issuance. Certain corporate actions will require
approval of the holders of preferred stock. See "Description of
the Preferred Stock." The Company does not have the right to
sell Series C Preferred Stock to Elan unless it issues Series A
and Series B Convertible Preferred Stock to Elan in exchange for
the Note. Accordingly, Proposal 2 will not be submitted for a
vote at the meeting if Proposal 1 is not approved.
SUMMARY EFFECTS OF PROPOSAL NUMBER 2 AND BOARD OF DIRECTORS
RECOMMENDATION
As described in more detail above and under the heading "The
Elan Transactions and Their Relationship to the Proposals,"
approval of Proposal Number 2 will have several effects for the
Company and JV Sub. Approval of Proposal Number 2 will:
- -provide the Company with the option to fulfill its financing
commitments to JV Sub by selling Series C Convertible Preferred
Stock or other similar convertible preferred stock to Elan
- -permit holders of preferred stock to receive distributions upon
liquidation in preference to the holders of Common Stock
- -permit conversion of the preferred stock into common stock at deemed
conversion prices which are likely to be less than future market prices of
the Common Stock
- -allow issuance of the preferred stock which will dilute the interest of each
current shareholder in the economic results of the Company
- -expand the territory under the License from North America to
world-wide (if Proposal Number 1 is also approved)
- -reduce the cost to JV Sub of certain research and development
work that may be conducted by Elan plc at the request of JV Sub
(if Proposal Number 1 is also approved)
- -split the contingent royalty payment triggered by FDA approval
into two stages, one upon FDA regulatory approval and the other
upon regulatory approval outside the United States (if Proposal
Number 1 is also approved)
- -reduce the royalty payments for incrementally higher levels of
net sales, reflecting the larger potential market under a world-
wide license (if Proposal Number 1 is also approved)
The Board of Directors recommends that the shareholders vote FOR
Proposal Number 2 to approve the issuance and sale of Series C
Convertible Preferred Stock to Elan.
PROPOSAL NUMBER 3:
APPROVAL OF THE ISSUANCE OF A WARRANT TO PURCHASE
100,000 SHARES OF COMMON STOCK
DESCRIPTION OF AND REASON FOR THE PROPOSAL
Proposal Number 3 seeks approval of the issuance of a five-year
warrant to purchase 100,000 shares of Common Stock at $0.85 per
share to Raphael, LLC, a management consulting company, as part of
its fee for introducing the Company to Elan. As with the other
proposals, Nasdaq rules require the Company to seek shareholder
approval of the issuance by the Company of the warrant. Approval
of the proposal would eliminate the additional cash payment in
the amount of $75,000 to Raphael, LLC, for consulting services,
which would be otherwise owed to Raphael, LLC, in lieu of the
warrant, and will be paid to Raphael, LLC, immediately after the
Special Meeting should Proposal Number 3 not obtain shareholder
approval. However, approval of Proposal Number 3 would afford
Raphael LLC the possibility of realizing significantly greater
value if the market price of the Common Stock increases in the
future.
SUMMARY EFFECTS OF PROPOSAL NUMBER 3 AND BOARD OF DIRECTORS
RECOMMENDATION
Approval of Proposal Number 3 will eliminate the additional cash
payment of $75,000 to Raphael, LLC, for consulting services,
which would be owed to Raphael, LLC, in lieu of the warrant.
The Board of Directors recommends that the shareholders vote FOR
Proposal Number 3 to approve the issuance of a warrant to
purchase Common Stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company
with the Commission, are incorporated herein by reference:
1. Comparative audited consolidated financial statements of
the Company, including the notes thereto, for the year ended March
31, 1997, together with the Auditors' Report thereon
(Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1997, as amended by Form 10-K/A
filed on July 29, 1997, August 20, 1997 and January 22, 1998).
2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations contained in the Company's Annual
Report on Form 10-K for the year ended March 31, 1997 (Incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended March 31, 1997 as amended by Form 10-K/A
filed on July 29, 1997, August 20, 1997 and January 22, 1998).
3. Comparative unaudited consolidated interim financial
statements of the Company for the six months ended September
30, 1997 (Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1997 as amended
by Form 10-Q/A filed on January 22, 1998).
4. Management's Discussion and Analysis of Financial
Conditions and Results of Operations contained in the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1997
(Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1997 as amended by Form 10-Q/A
filed on January 22, 1998).
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy Statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement.
Arthur Andersen, LLP, independent public accountants,
examined the financial statements of the Company for fiscal 1997.
The Company expects representatives of Arthur Andersen, LLP, to be present at
the Meeting and to be available to respond to appropriate questions from
shareholders. The accountants will have the opportunity to make a statement
at the Meeting if they desire to do so.
OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that are to be presented for action at the Meeting. Should
any other matters come before the Meeting or any adjournments and
postponements thereof, the persons named in the enclosed proxy will
have the authority to vote all proxies received with respect to such
matters in their discretion.
By Order of the Board
Of Directors,
/s/ Peggy J. Miller
Peggy J. Miller
Vice President,
Chief Financial Officer
and Secretary/Treasurer
Portland, Oregon
January 28, 1998
APPENDIX A
BIOJECT MEDICAL TECHNOLOGIES INC.
Pro forma Consolidated Condensed Balance Sheet
September 30, 1997
The following sets forth the pro forma effects of the
following transactions on the consolidated condensed balance sheet of the
Company as if the transactions had been completed as of September 30, 1997:
(a) sale of Common Stock and warrants by the Company to Elan completed on
October 15, 1997, (b) exchange of a $12.015 million promissory note held by
Elan for Series A and Series B Convertible Preferred Stock of the Company,
which will be effected if Proposal Number 1 is approved, and (c) sale of
$4.0 million of Series C Convertible Preferred Stock or other similar preferred
stock of the Company to Elan, which the Company will, subject to certain
conditions, have the right to cause Elan to purchase if Proposal Number 2 is
also approved. Pro forma income statements have not been presented as the
Company believes that such statements would not be material to a shareholder's
voting decision.
<TABLE>
<CAPTION>
Actual Adjustment (a) Pro forma Adjustment (b) Pro forma Adjustment (c) Pro forma
<S> <C> <C> <C> <C> <C> <C> <C>
(in thousands of $)
ASSETS
Current assets:
Cash and
Marketable
Securities $ 1,218 $ 2,800 $ 4,018 $ - $ 4,018 $ - $ 4,018
Accounts
Receivable 536 - 536 - 536 - 536
Inventories 1,359 - 1,359 - 1,359 - 1,359
Other current
Assets 64 - 64 - 64 - 64
----- ----- ----- ----- ----- ----- -----
3,177 2,800 5,977 - 5,977 - 5,977
----- ----- ----- ----- ----- ----- -----
Cash-restricted
Property &
equipment, net 2,648 - 2,648 - 2,648 - 2,648
Other assets, net 330 - 330 - 330 - 330
----- ----- ----- ---- ----- ----- ------
$ 6,155 $ 2,800 $ 8,955 $ _ $ 8,955 $ 4,000 $ 12,955
----- ----- ----- ---- ----- ----- ------
LIABILITIES
AND EQUITY
Current
liabilities:
Accounts
Payable $ 654 $ - $ 654 $ - $ 654 $ - $ 654
Other current
Liabilities 476 - 476 - 476 - 476
----- ----- ----- ---- ----- ---- -----
1,130 - 1,130 - 1,130 - 1,130
----- ----- ----- ---- ----- ---- -----
Long-term Debt 12,015 - 12,015 (12,015) - -
Shareholders'
equity:
Convertible
preferred stock-
Series A 7,500 7,500 7,500
Series B 1,515 1,515 1,515
Series C 4,000 4,000
Common stock 41,281 2,800 44,081 3,000 47,081 47,081
Accum deficit (48,271) - (48,271) - (48,271) - (48,271)
------ ----- ------ ------ ------ ----- ------
Net equity (6,990) 2,800 (4,190) 12,015 7,825 4,000 11,825
------- ----- ----- ------ ----- ----- ------
$ 6,155 $ 2,800 $ 8,955 $ - $ 8,955 $ 4,000 $ 12,955
----- ----- ----- ------ ----- ----- ------
</TABLE>
(a) Adjustment reflects receipt of net proceeds from the private placement with
Elan of approximately 2.7 million shares of common stock and a five year
warrant to purchase 1.75 million shares of common stock at $2.50 per share,
assuming no exercise of the warrants. This transaction was completed in
October 1997 and is not subject to shareholder approval.
(b) Reflects the conversion of a $12.015 million promissory note to Elan in
exchange for Series A and Series B Convertible Preferred Stock of the Company.
The allocation of $3.0 million to common stock reflects the inherent dividend
to Elan as a result of certain conversion terms which in some instances permit
a discount to market on conversion and will be accreted over the seven year
period the convertible preferred stock may be outstanding.
(c) Reflects receipt of $4.0 million from Elan as a result of the issuance of
Series C Convertible Preferred Stock or other similar convertible preferred
stock of the Company to fund research and development of JV Sub. Such
proceeds, if and when raised, must be invested in JV Sub and used to fund
further development and commercialization of the glucose monitoring technology
licensed from Elan.
The above unaudited pro forma consolidated condensed balance sheet is presented
to assist the reader in analyzing the effects of the proposed transactions
contained in the accompanying Proxy Statement. This unaudited pro forma
balance sheet does not include all information and footnote disclosures
normally included in audited financial statements. However, in the opinion of
management, all adjustments (which include only normal, recurring adjustments
except as described above) necessary to present fairly the financial position
have been made. It is suggested that this unaudited pro forma balance sheet
be read in conjunction with the financial statements included in the Company's
Annual Report on Form 10-K for the year ended March 31, 1997.
<PAGE>
NOTICE OF
SPECIAL SHAREHOLDERS' MEETING
AND
PROXY STATEMENT
___________________________
FEBRUARY 20, 1998
PORTLAND, OREGON
BIOJECT
<PAGE>
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES ON, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE
IS HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
BIOJECT MEDICAL TECHNOLOGIES INC.
THE SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 20, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James C. O'Shea and Peggy J.
Miller, and each of them, as proxies, with full power of substitution
in each of them, to vote for and on behalf of the undersigned at the
Special Meeting of Shareholders of the Company to be held on February
20, 1998 and at any adjournment thereof, upon matters properly coming
before the meeting, as set forth in the related Notice of Meeting and Proxy
Statement, both of which have been received by the undersigned.
Without otherwise limiting the general authorization given hereby,
said proxies are instructed to vote as indicated on the reverse side.
1. Approve the exchange of a promissory note in the original
principal amount of $12.015 million issued by the Company to Elan for
approximately 832,000 shares of the Company's Series A and Series B
Convertible Preferred Stock,
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approve the issuance of the Company's Series C Convertible Preferred Stock
or other similar convertible preferred stock to Elan in connection with
future funding of glucose monitoring research and development
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approve the issuance to Raphael, LLC, of a warrant to purchase 100,000
shares of the Company's Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To take action upon any other business as may properly come
before the meeting.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL
AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING.
Please sign, date and mail your proxy today.
Signature:____________________________ Date:___________________
Signature:____________________________ Date:___________________
(if held jointly)
Capacity:___________________________________________
(Title or Authority eg. Executor, Trustee)
