SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the quarterly period ended December 31, 1997
Commission File No. 0-15360
BIOJECT MEDICAL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1099680
(State of other jurisdiction of (I.R.S. identification no.)
employer incorporation or organization)
7620 SW Bridgeport Road
Portland, Oregon 97224
(Address of principal executive offices) (Zip code)
(503) 639-7221
(Registrant's telephone number, including areas code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
At December 31, 1997 there were 25,368,342 outstanding shares of common
stock of the registrant.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited consolidated financial statements of Bioject
Medical Technologies Inc. (BMT), an Oregon Corporation, and its subsidiaries,
(together, unless the context otherwise requires, the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. The Company's needle-free injector operations are conducted by
Bioject Inc. (BI), an Oregon corporation formed in February 1985, which is a
wholly owned subsidiary of BMT, and its blood glucose monitoring systems
operations are conducted by Bioject JV Subsidiary Inc. ("JV"), an Oregon
corporation formed in October 1997, which is owned 80.1% by BMT.
The following 10-Q report reflects the consolidated results of operations,
cash flows and financial position for the second quarter of the year ending
March 31, 1998. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the year.
- Consolidated Statements of Operations for the quarters ended
December 31, 1997 and December 31, 1996
- Consolidated Statements of Operations for the nine months ended
December 31, 1997 and December 31, 1996
- Consolidated Balance Sheets dated December 31, 1997 and
March 31, 1997
- Consolidated Statements of Cash Flows for the quarters ended
December 31, 1997 and December 31, 1996
- Consolidated Statements of Cash Flows for the nine months ended
December 31, 1997 and December 31, 1996
Page 1
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three-Month Period Ended
December 31,
1997 1996
-------------------------
[S] [C] [C]
REVENUES:
Net sales of products $ 313,153 $ 325,791
Licensing/technology fees 125,000 80,000
----------- ---------
438,153 405,791
----------- -----------
EXPENSES:
Manufacturing 401,050 325,071
Research and development 193,144 410,195
Selling, general and administrative 901,270 767,992
Acquired in-process R&D - -
Interest expense 225,281 -
Other (income) expense, net (32,061) (14,717)
------------ -----------
1,688,684 1,488,541
------------ -----------
(LOSS) BEFORE MINORITY INTERST (1,250,531) (1,082,750)
MINORITY INTEREST ALLOCATION - -
----------- -----------
NET INCOME (LOSS) $ (1,250,531) $(1,082,750)
=========== ===========
EARNINGS (LOSS) PER SHARE $ (.05) $ (.07)
=========== ===========
SHARES USED IN PER SHARE CALCULATION 24,903,892 16,189,127
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 2
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine-Month Period Ended
December 31,
1997 1996
-------------------------
[S] [C] [C]
REVENUES:
Net sales of products $ 1,300,620 $ 845,422
Licensing/technology fees 375,000 665,500
----------- -----------
1,675,620 1,510,922
----------- -----------
EXPENSES:
Manufacturing 1,452,684 1,369,321
Research and development 665,127 1,242,968
Selling, general and administrative 2,633,934 2,340,058
Acquired in-process R&D 15,000,000 -
Interest expense 225,281 -
Other (income) expense, net (64,392) (64,829)
----------- -----------
19,912,634 4,887,518
----------- -----------
LOSS BEFORE MINORITY INTEREST (18,237,014) (3,376,596)
MINORITY INTEREST ALLOCATION 2,985,000 -
----------- -----------
NET INCOME (LOSS) $(15,252,014) $ (3,376,596)
=========== ===========
EARNINGS (LOSS) PER SHARE $ (.68) $ (.22)
=========== ===========
SHARES USED IN PER SHARE CALCULATION 22,356,973 15,807,517
============ ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 3
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1997 1997
--------------------------
ASSETS (unaudited)
- ------------------------------------------
[S] [C] [C]
CURRENT ASSETS:
Cash and cash equivalents $ 1,001,990 $ 2,116,478
Securities available for sale 1,967,749 -
Accounts receivable 513,163 311,856
Inventories 1,571,394 1,706,456
Prepaid and other current assets 54,531 45,222
----------- -----------
Total current assets 5,108,827 4,180,012
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 2,234,433 1,923,174
Production molds 1,939,754 1,878,858
Furniture and fixtures 160,392 176,897
Leasehold improvements 94,115 80,447
----------- -----------
4,428,694 4,059,376
Less - Accumulated depreciation (1,830,090) (1,462,338)
----------- -----------
2,598,604 2,597,038
OTHER ASSETS 332,059 310,981
----------- -----------
$ 8,039,490 $ 7,088,031
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 579,139 $ 659,973
Accrued payroll 199,671 213,130
Other accrued liabilities 256,100 199,384
Accrued interest 225,281 -
Deferred revenue - 250,000
----------- -----------
Total current liabilities 1,260,191 1,322,487
LONG-TERM DEBT 12,015,000 -
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred stock, no par, 10,000,000
shares authorized; no shares issued
and outstanding - -
Common stock, no par, 100,000,000 shares
authorized; issued and outstanding
25,368,342 shares at December 31, 1996
and 19,540,413 at March 31, 1997 44,286,505 40,035,736
Accumulated deficit (49,522,206) (34,270,192)
----------- -----------
Total shareholders' equity (5,235,701) 5,765,544
----------- ------------
$ 8,039,490 $ 7,088,031
=========== ============
The accompanying notes are an integral part
of these consolidated financial statements.
Page 4
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three-Month Period Ended
December 31,
1997 1996
--------------------------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,250,531) $(1,082,750)
Adjustments to net loss:
Depreciation and amortization 128,332 49,000
Common stock and warrants issued
for services 62,236 -
Acquired in-process R&D, net of
minority interest allocation - -
Net changes in assets and liabilities:
Accounts receivable 22,943 10,198
Inventories (212,224) (147,490)
Prepaid and other current assets 8,836 (345)
Accounts payable (74,365) 203,609
Accrued payroll (40,338) 3,430
Other accrued liabilities 19,620 (44,664)
Interest payable 225,281 -
Deferred revenue - (30,000)
------------ -----------
Net Cash Used in Operating Activities (1,110,210) (1,039,012)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfers to restricted cash - (206,000)
Transfers from restricted cash - 693,278
Purchase of securities available for sale (1,967,749) -
Sale of securities available for sale - -
Capital expenditures (71,470) (814,929)
Other assets (9,095) (167)
------------ -----------
Net Cash Used in Investing Activities (2,048,314) (327,818)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 206,000
Cash proceeds from common stock 2,942,828 2,163,000
------------ -----------
Net Cash Provided by Financing Activities 2,942,828 2,369,000
------------ -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and
cash equivalents (215,696) 1,002,170
Cash and cash equivalents at beginning
of period 1,217,686 1,501,373
------------ -----------
Cash and cash equivalents at end
of period $ 1,001,990 $ 2,503,543
============ ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 5
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine-Month Period Ended
December 31,
1997 1996
--------------------------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,252,014) $(3,376,596)
Adjustments to net loss:
Depreciation and amortization 390,252 353,200
Common stock and warrants issued
for services 82,941 159,350
Acquired in-process R&D, net of
minority interest allocation 12,015,000 -
Net changes in assets and liabilities:
Accounts receivable (201,307) 165,471
Inventories 135,062 (467,529)
Prepaid and other current assets (9,309) 1,519
Accounts payable (80,834) 95,734
Accrued payroll (13,459) 30,137
Other accrued liabilities 56,716 24,578
Accrued interest 225,281 -
Deferred revenue (250,002) (566,000)
------------ ----------
Net Cash Used in Operating Activities (2,901,671) (3,580,136)
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfers to restricted cash - (1,606,000)
Transfers from restricted cash - 1,297,442
Purchase of securities available for sale (1,967,749) -
Sale of securities available for sale - 993,056
Investment in glucose monitoring technology (15,000,000) -
Capital expenditures (369,318) (1,462,081)
Other assets (43,578) (5,989)
------------- -----------
Net Cash Used in Investing Activities (17,380,645) (783,572)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 12,015,000 1,606,000
Cash proceeds from common stock 4,167,828 2,163,000
Proceeds from minority interest
capital investment in joint venture
subsidiary 2,985,000 -
------------ -----------
Net Cash Provided by Financing Activities 19,167,828 3,769,000
------------ -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and
cash equivalents (1,114,488) (594,708)
Cash and cash equivalents at beginning
of period 2,116,478 3,098,251
------------ -----------
Cash and cash equivalents at end
of period $ 1,001,990 $ 2,503,543
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
Page 6
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY:
The consolidated financial statements of Bioject Medical Technologies Inc.
(the "Company"), include the accounts of Bioject Medical Technologies Inc.
("BMT"), an Oregon Corporation, and its wholly owned subsidiary, Bioject
Inc., an Oregon Corporation ("BI"), and its 80.1% owned subsidiary, Bioject
JV Subsidiary Inc. ("JV"), an Oregon corporation. All significant
intercompany transactions have been eliminated. Although Bioject Inc.
commenced operations in 1985, the Company was formed in December 1992 for the
purpose of acquiring all of the capital stock of Bioject Medical Systems Ltd.,
a Company organized under the laws of British Columbia, Canada, in a
stock-for-stock exchange in order to establish a U.S. domestic corporation as
the publicly traded parent company for Bioject Inc. and Bioject Medical
Systems Ltd. Bioject Medical Systems Ltd. was terminated in fiscal 1997.
Bioject JV Subsidiary Inc. was formed in October 1997 in connection with a
joint venture arrangement with Elan Corporation, plc ("Elan"). All references
to the Company include Bioject Medical Technologies Inc. and its subsidiaries,
unless the context requires otherwise.
The Company commenced operations in 1985 for the purpose of developing,
manufacturing and distributing a new drug delivery system. Since its formation,
the Company has been engaged principally in organizational, financing, research
and development, and marketing activities. In the last quarter of fiscal 1993,
the Company launched U.S. distribution of its Biojector 2000 system primarily
to the hospital and large clinic market. The Company's products and
manufacturing operations are subject to extensive government regulation, both
in the U.S. and abroad. In the U.S., the development, manufacture, marketing
and promotion of medical devices is regulated by the Food and Drug
Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act
("FFDCA"). In 1987, the Company received clearance from the FDA under Section
510(k) of the FFDCA to market a hand-held CO2-powered jet injection system.
In June 1994, the Company received clearance from the FDA under 510(k) to
market a version of its Biojector 2000 system in a configuration targeted at
high volume injection applications. In October 1996, the Company received
510(k) clearance for a non-needle disposable vial access device. In March
1997, the Company received additional 510(k) clearance for certain
enhancements to its Biojector 2000 system. On September 30, 1997, the Company
entered into a joint venture agreement with Elan for the development and
commercialization of certain blood glucose monitoring technology which the
Company licensed from Elan (see Note 2 regarding "Accounting Policies-Long-
term Debt and Development Agreement"). Such technology is also subject to
government regulation in the U.S. by the FDA and abroad by various agencies.
The Company's revenues to date have been derived primarily from licensing
and technology fees for the jet injection technology and more recently from
sales of the Biojector 2000 system and Biojector syringes to public health
clinics, flu immunization clinics and physicians offices. Future revenues
will depend upon acceptance and use by healthcare providers of the Company's
jet injection technology and successful development, regulatory approval and
market acceptance of its blood glucose monitoring technology. Uncertainties
over government regulation and competition in the healthcare industry may
impact healthcare provider expenditures and third party payer reimbursements
and, accordingly, the Company cannot predict what impact, if any, subsequent
healthcare reforms and industry trends might have on its business. In the
future the Company is likely to require substantial additional financing.
Failure to obtain such financing on favorable terms could adversely affect
the Company's business.
2. ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined in a
manner which approximates the first-in, first-out (FIFO) method. Costs
utilized for inventory valuation purposes include labor, materials and
manufacturing overhead. Net inventories consist of the following:
December 31, March 31,
1997 1997
---------- ----------
Raw Materials $ 505,531 $ 815,868
Work in Process 9,763 9,763
Finished Goods 1,056,100 880,825
---------- ----------
$1,571,394 $1,706,456
========== ==========
Page 7
LONG-TERM DEBT AND DEVELOPMENT AGREEMENT
On September 30, 1997, the Company signed a binding letter agreement
(the "Agreement") with Elan Corporation, plc ("Elan") the goals of which
included the development and commercialization of Elan's blood glucose
monitoring technology and a collaborative arrangement to further develop the
Company's needle-free technology. Among various terms, all of which were
determined based on arms-length negotiation, the Agreement provides for:
- - Investment by Elan of $3 million in Bioject in exchange for 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.
- - Formation of JV which is owned 80.1% by Bioject and 19.9% by Elan to further
develop and commercialize the blood glucose monitoring technology.
- - Payment of a $15 million up front fee and substantial future milestone
payments and royalties on net sales in exchange for North American rights to
Elan's glucose monitoring technology.
- - The loan of $12.015 million to Bioject on a long-term promissory note bearing
interest at 9% per annum through December 31, 1997 and 12% thereafter for the
purpose of Bioject's investment in the new subsidiary's common stock. The
interest is payable quarterly commencing April 1998, and if not exchanged
for preferred stock the Company or otherwise prepaid, the note is due
October 15, 2001.
- - The investment by Elan of $2.985 million in JV's common stock.
- - The commitment by Elan to further develop the blood glucose monitoring
technology until the earlier of human clinical trials, April 1, 1998 or
$2.5 million is expended by Elan.
- - The submission to Bioject's shareholders of a proposal to approve the
exchange of the long-term promissory note for $10 million plus accrued
interest of the Company's Series A Convertible Preferred Stock and $2.105
million of Series B Convertible Preferred Stock, with Series the A
Convertible Preferred Stock accruing dividends at the rate of 9% per annum
(compounded semi-annually) and the Series B Convertible Preferred Stock
accruing no mandatory dividends.
- - The submission to Bioject's shareholders of a proposal to approve the
issuance of up to $4 million of Bioject's Series C Convertible Preferred
Stock to Elan to provide Bioject with funds to contribute toward JV's
additional development funding needs.
- - The agreement by Elan to extend the license on a worldwide basis if the
shareholders approve the exchange of the $12.015 million promissory note
for convertible preferred stock.
- - The agreement by Elan to provide a grant of $500,000 toward development of
Bioject's needle-free technology in a pre-filled application.
Final closing agreements were signed among the Company, Elan and the Company's
new subsidiary on October 15, 1997. On that date the $3 million investment
in the Company was made by Elan and approximately 2.7 million shares of common
stock and a warrant to purchase 1.75 million shares at $2.50 per share were
issued. Elan loaned Bioject $12.015 million which Bioject transferred to the
new subsidiary in exchange for 801,000 shares of the subsidiary's common
stock. Elan invested $2.985 million in the new subsidiary in exchange
for 199,000 shares of the subsidiary's common stock. The new subsidiary
paid $15 million to Elan as its initial payment on the licensing agreement.
The Company believes that the license is likely to run for most of the useful
life of the products that may be commercialized under it. The license itself
is contingent, on a country-by-country basis, on JV's diligently seeking and
obtaining regulatory marketing approval for licensed products and on JV's
timely commercial launch of the licensed products in countries where such
approval has been obtained. In addition, in the event that a significant
percentage of JV's equity is acquired by any one of a number of specified
companies identified by Elan as actual or potential competitors, or any other
entity to which Elan 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.
As of September 30, 1997, the Company recorded an expense of $15 million
related to acquired in-process research and development expenditures. Such
expense relates to the blood glucose monitoring technology that has not yet
established technological feasibility and at present has no alternate future
uses. Accounting rules require that such costs be charged to expense as
incurred. The Company believes that these research and development efforts
will result in commercially viable products within the next three to four
years at an additional cost to the Company of at least $10 million, exclusive
of additional milestone payments due to Elan.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's expenses to
conform to the current year's presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. SEGMENT INFORMATION
The Company has adopted the new segment reporting requirements of SFAS No.131,
Disclosures about Segments of an Enterprise and Related Information. At
present, the Company has two reportable segments which offer different products
and are managed separately because each business requires different technology
and marketing strategies. The following sets forth the unaudited results of
operations of the Company for its two segments of operations - needle-free
injection technology and blood glucose monitoring technology (in thousands of
$):
Qtr. Ended Nine Months Ended
December 31, December 31,
------------- ----------------
1997 1996 1997 1996
----- ----- ----- -----
[S] [C] [C] [C] [C]
NEEDLE-FREE INJECTION
RESULTS OF OPERATIONS:
REVENUES $438 $406 $1,676 $1,511
---- ---- ------ ------
EXPENSES:
Manufacturing 401 325 1,453 1,369
R&D 193 410 665 1,243
Selling, general
& administrative 873 768 2,605 2,340
Acquired R&D - - - -
Interest expense 225 - 225 -
Other (income) (32) (14) (64) (64)
---- ----- ------ ------
(1,222) (1,083) (3,208) (3,377)
MINORITY
INTEREST ALLOCATION - - - -
------ ------- ------- ------
NET LOSS $(1,222) $(1,082) $(3,208) $(3,377)
====== ====== ======= =======
Qtr. Ended Nine Months Ended
December 31, December 31,
------------------- -------------------
1997 1996 1997 1996
----- ------ ----- -----
[S] [C] [C] [C] [C]
GLUCOSE MONITORING
RESULTS OF OPERATIONS:
REVENUES $ - $ - $ - $ -
------- ------- ------ ------
EXPENSES:
Manufacturing - - - -
R&D - - - -
Selling, general
& administrative 28 - 28 -
Acquired R&D - - 15,000 -
Interest expense
Other (income) - - - -
------- ------ -------- -------
(28) - (15,028) -
MINORITY
INTEREST ALLOCATION - - 2,985 -
------- ------- -------- --------
NET LOSS $ (28) $ - $(12,043) $ -
======== ======= ======== ========
At December 31, 1997, no significant assets exist related to the blood glucose
monitoring technology other than the acquired in-process research and
development which, as discussed in Note 2 above, was required to be written
off upon acquisition. Accordingly, the accompanying consolidated financial
statements effectively represent the assets of the needle-free injection
business segment. In the future, certain proceeds from the sale of equity or
issuance of debt by JV may be restricted to JV operations only. To the extent
that they meet certain reporting requirements, the separate assets, liabilities
and equity of the parent and its subsidiary will be appropriately disclosed.
4. PRIVATE PLACEMENTS:
In June and July 1997, the Company received net proceeds of $1.225 million in
a private placement of 2.9 million shares of common stock and five year
warrants to purchase 1.45 million shares of common stock at $0.71 per share.
Of the total net proceeds, $750,000 was received and recorded in the financial
statements as of June 30, 1997. The balance of $475,000 was received in July
1997 and was recorded in the financial statements for the quarter ended
September 30, 1997.
During the quarter ended December 31, 1997, the Company received net proceeds
of $2.8 million from Elan in a private placement in exchange for 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.
Common Stock activity for the nine months ended December 31, 1997 is
summarized as follows:
Shares Amount
------ ------
[S] [C] [C]
Balances,
March 31, 1997 19,540,413 $40,035,736
Private Placement
of common stock in
June/July 1997 2,906,977 1,225,000
Common stock issued for
services 30,116 20,705
Common stock issued upon
exercise of stock options 120,932 142,828
Common stock issued in private
placement in October 1997 2,727,273 2,800,000
Common stock issued pursuant
to 401(k) matching program 42,631 31,006
Recognition of warrant expense
for services - 31,230
---------- -----------
Balances, December 31, 1997 25,368,342 $44,286,505
========== ===========
Warrant activity for the nine months ended December 31, 1997 is
summarized as follows:
Shares Exercise Amount
Price
--------- ---------- ---------
[S] [C] [C] [C]
Balances,
March 31, 1997,
expiring February 1998
To December 2001 6,030,585 $.82-2.00 $8,438,319
Issued in private
placement in June/July
1997 expiring June 2002 1,453,488 .71 1,031,976
Issued to placement agent,
expiring June 2002 25,000 .50 12,500
Issued for private placement
guarantee, expiring
September 2002 350,000 1.00-1.10 365,000
Issued for fiscal 1998
investor relations
consulting services,
expiring September 2002 50,000 1.10 55,000
Placement agent warrant,
subject to shareholder
approval, expiring October
2002 100,000 .85 85,000
Issued in private placement
in October 1997, expiring
October 2002 1,750,000 2.50 4,375,000
--------- --------- -----------
Balances, December 31, 1997 9,759,073 $.50-2.50 $14,362,795
========= ========= ===========
All of the warrants are currently exercisable except for the placement
agent warrants which are subject to shareholder approval and the investor
relations consulting warrants which are not exercisable until April 1, 1998.
In addition to the above warrants, the Company has committed to issue
certain warrants for services (see Note 5).
5. CONSULTING CONTRACT
During the quarter ended September 30, 1997, the Company engaged the
consulting services of Mr. Robert Gonnelli for the purposes of overseeing the
Company's investor relations functions, providing input to sales and
marketing, advising Bioject's Board of Directors on various matters,
identifying new manufacturing software and providing strategic and financial
advice. For his services, Mr. Gonnelli will receive compensation as follows:
a. Five year warrants to purchase 50,000 shares of Bioject common stock at
$1.10 per share granted at the end of each of two fiscal years for his
investor relations consulting services.
b. At the end of fiscal 1998 and 1999, a five year warrant to purchase 100,000
and 50,000 shares, respectively, of common stock at $1.10 per share
prorated based on product sales achieved to the applicable fiscal year's
sales budget, for his sales and marketing advice.
c. Effective August 1, 1997, the amount of $5,000 per month plus expenses for
all other consulting services. This amount was increased to $8,500
per month plus expenses beginning January 1, 1998.
Commencing October 1997, the Company is recording a non-cash charge to
operating results as the result of the issuance of the warrants to Mr.
Gonnelli. The warrants have been valued using the Black-Scholes model
and resulted in a non-cash charge to selling, general and administrative
expense for the quarter ended December 31, 1997 of $31,000. The consulting
fees are charged to expense as due. The agreement is cancelable at either
party's option upon 30 days written notice. If Bioject terminates the
agreement without cause, all accrued and unpaid fees and
expenses are due and all unearned warrants are immediately issuable.
The Company also granted to Mr. Gonnelli a five year warrant to
purchase 200,000 shares of common stock at $1.00 per share and 150,000 shares
of common stock at $1.10 per share for his guarantee of back-up financing
should Elan not have completed its $3 million equity investment. The effect
of this guarantee has been reflected as an offset of proceeds from the Elan
investment in the Company's common stock.
On October 22, 1997, Mr. Gonnelli was elected Chairman of Bioject's joint
venture subsidiary Board of Directors. Presently, he receives no fees
for such services but will participate in any future subsidiary director
compensation programs including any subsidiary stock incentive plans.
6. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying, unaudited consolidated financial statements do not
include all information and footnote disclosures normally included in an
audited financial statement. However, in the opinion of management, all
adjustments (which include only normal, recurring adjustments) necessary to
present fairly the financial position, cash flows, and results of operations
have been made. It is suggested that these statements 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company has been focused on expanding sales of its Biojector 2000
needle-free injection management system to the public health and flu
immunization markets. It has also been focusing on raising additional capital
and on expanding its business opportunities with large pharmaceutical company
strategic partners.
On September 30, 1997, the Company signed a binding letter agreement (the
"Agreement") with Elan Corporation, plc ("Elan") the goals of which
included commercialization of Elan's blood glucose monitoring technology and
a collaborative arrangement to further develop the Company's needle-free
technology and the development. Among various terms, the Agreement provides
for:
- - Investment by Elan of $3 million in Bioject in exchange for approximately
2.7 million shares of common stock and a five year warrant to purchase 1.75
million common shares at $2.50 per share.
- - Formation of JV which is owned 80.1% by Bioject and 19.9% by
Elan to further develop and commercialize the blood glucose monitoring
technology.
- - Payment by JV of a $15 million up front fee and substantial future
milestone payments and royalties on net sales in exchange for North American
rights to Elan's glucose monitoring technology.
- - The loan of $12.015 million to Bioject on a long-term promissory note bearing
interest at 9% per annum through December 31, 1997 and 12% thereafter for the
purpose of Bioject's investment in the new subsidiary's common stock. The
interest is payable quarterly commencing April 1998, and if not exchanged
for preferred stock in the Company or otherwise prepaid, the note is due
October 15, 2001.
- - The investment by Elan of $2.985 million in JV's common stock.
- - The commitment by Elan to further develop the blood glucose monitoring
technology until the earlier of human clinical trials, April 1, 1998 or
$2.5 million is expended by Elan.
- - The submission to Bioject's shareholders of a proposal to approve the
exchange of the long-term promissory note for $10 million plus accrued
interest of the Company's Series A Convertible Preferred Stock and $2.105
million of Series B Convertible Preferred Stock, with the Series A
Convertible Preferred Stock accruing dividends at the rate of 9% per
annum (compounded semi-annually) and the Series B Convertible Preferred
Stock accruing no mandatory dividends.
- - The submission to Bioject's shareholders of a proposal to approve the
issuance of up to $4 million of Bioject's Series C Convertible Preferred
Stock or other similar convertible preferred stock to Elan to provide
Bioject with funds to contribute toward JV's additional development funding
needs.
- - The agreement by Elan to extend the license on a worldwide basis if the
shareholders approve the exchange of the $12.015 million promissory note
for convertible preferred stock.
- - The agreement by Elan to provide a grant of $500,000 toward development of
Bioject's needle-free technology in a pre-filled application.
Final closing agreements were signed among the Company, Elan and the Company's
new subsidiary on October 15, 1997. On that date the $3 million investment in
the Company was made by Elan and approximately 2.7 million shares of common
stock and a warrant to purchase 1.75 million shares at $2.50 per share were
issued. Elan loaned Bioject $12.015 million which Bioject transferred to the
new subsidiary in exchange for 801,000 shares of the subsidiary's common
stock. Elan invested $2.985 million in the new subsidiary in exchange for
199,000 shares of the subsidiary's common stock. The new subsidiary paid
$15 million to Elan as its initial payment on the licensing agreement.
In addition, JV is required under the license to pay Elan an
aggregate of $15.5 million in further royalties as the following
milestones are achieved: $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 the two proposals described above
at an upcoming special meeting of shareholders scheduled February 20, 1998,
the territory of the license would be expanded to be worldwide, and 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. Additionally, JV will be required under the
license to pay Elan a continuing royalty equal to a percentage of
the net revenues from sublicenses of the licensed technology or
from the sale by JV or its sublicensees of products covered by
the licensed patents or that incorporate or apply the licensed
know-how.
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. The license itself
is contingent, on a country-by-country basis, on JV's diligently seeking and
obtaining regulatory marketing approval for licensed products and on JV's
timely commercial launch of the licensed products in countries where such
approval has been obtained. In addition, in the event that 15%
of JV's equity is acquired by any one of a number of specified
companies identified by Elan as actual or potential competitors, or any other
entity to which Elan 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.
As of September 30, 1997, the Company recorded an expense of $15 million
related to acquired in-process research and development expenditures. Such
expense relates to the blood glucose monitoring technology that has not yet
established technological feasibility and at present has no alternative
future uses. Accounting rules require that such costs be charged to expense
as incurred. The Company believes that these research and development efforts
will result in commercially viable products within the next three to four
years at an additional cost to the Company of at least $10 million, exclusive
of additional milestone payments due to Elan. See "Forward-looking
Statements". Such technology is also subject to government regulation in the
U.S. by the FDA and abroad by various agencies.
In connection with the Elan investment, the Company engaged the consulting
services of Raphael, LLC, to provide the initial introduction to Elan and
advice regarding the transaction. For its services, Raphael, LLC, will
receive a fee of $150,000 on January 2, 1998 and, if shareholders approve at
a special meeting, a five year warrant to purchase 100,000 shares of the
Company's common stock at $.85 per share. If shareholders do not approve
the issuance of the warrant, Raphael, LLC, will receive an additional cash
payment totaling $75,000, payable immediately following a special
shareholders meeting scheduled February 20, 1998.
During the quarter ended September 30, 1997, the Company engaged the
consulting services of Mr. Robert Gonnelli for the purposes of overseeing the
Company's investor relations functions, providing input to sales and
marketing, advising Bioject's Board of Directors on various matters,
identifying new manufacturing software and providing strategic and financial
advice. For his services, Mr. Gonnelli will receive compensation as follows:
a. Five year warrants to purchase 50,000 shares of Bioject common stock at
$1.10 per share granted at the end of each of two fiscal years for his
investor relations consulting services.
b. At the end of fiscal 1998 and 1999, a five year warrant to purchase 100,000
and 50,000 shares, respectively, of common stock at $1.10 per share
prorated based on product sales achieved to the applicable fiscal year's
sales budget, for his sales and marketing advice.
c. Effective August 1, 1997, the amount of $5,000 per month plus expenses for
all other consulting services. This amount was increased to $8,500
per month plus expenses beginning January 1, 1998.
Commencing October 1997, the Company is recording a non-cash charge to
operating results as the result of the issuance of the warrants to Mr.
Gonnelli. The warrants have been valued using the Black-Scholes model based
on an estimated life of 2.5 years and resulted in a charge to selling,
general and administrative expense for the quarter ended December 31, 1997 of
$31,000. The consulting fees are charged to expense as due. The agreement
is cancelable at either party's option upon 30 days written notice. If
Bioject terminates the agreement without cause, all accrued and unpaid fees
and expenses are due and all unearned warrants are immediately issuable.
The Company also granted to Mr. Gonnelli a five year warrant to
purchase 200,000 shares of common stock at $1.00 per share and 150,000 shares
of common stock at $1.10 per share for his guarantee of back-up financing
should Elan not have completed its $3 million equity investment. The effect
of this guarantee has been reflected as an offset of proceeds from the Elan
investment in the Company's common stock.
On October 22, 1997, Mr. Gonnelli was elected Chairman of Bioject's joint
venture subsidiary Board of Directors. Presently, he receives no fees
for such services but will participate in any future subsidiary director
compensation programs including any subsidiary stock incentive plans.
Commencing September 1, 1997, the Company also engaged the services of Mr.
Jim Weersing for his financial and operating advice. Mr. Weersing was paid
fees of $10,000 per month plus expenses. The agreement was cancelled effective
December 31, 1997.
The Company's revenues to date have not been sufficient to cover
operating expenses. The Company believes that as its jet injection
products achieve market acceptance and the volume of sales increases and if
its product costs are further reduced, its costs of goods with respect to the
jet injection products as a percentage of sales will decrease and the
Company will realize positive margins; however the Company
now faces substantial research and development costs of the glucose monitoring
technology. Since no revenue from glucose monitoring products is expected
for a number of years, the Company expects larger losses unless sales of the
Biojector 2000 increase substantially. (See "Forward Looking Statements")
The level of sales required to generate net income will be affected by a
number of factors including the pricing of the Company's products, its
ability to attain efficiencies that can be attained through volume and
automated manufacturing, and the impact of inflation on the Company's
manufacturing and other operating costs. There can be no assurance that
the Company will be able to successfully implement additional manufacturing
cost reductions or sell its jet injection products at prices or in volumes
sufficient to achieve profitability or offset increases in the Company's
research and development expenses or other costs should they occur.
Revenues and results of operations have fluctuated and can be expected to
continue to fluctuate significantly from quarter to quarter and from year to
year. Various factors may affect quarterly and yearly operating results
including (i) timing of new product introductions by the Company and its
competition, (ii) the costs of blood glucose monitoring development and
commercialization, (iii) length of time to close product sales, (iv) customer
budget cycles, (v) implementation of cost reduction measures,
(vi) uncertainties and changes in purchasing due to third party payor policies
and proposals relating to national healthcare reform, and (vii) the timing and
amount of payments under technology development agreements.
During fiscal 1998, the Company will continue to focus its efforts on
expanding sales, reducing the cost of its products, developing an injector
for Hoffmann-La Roche, pursuing additional alliances with
pharmaceutical companies, developing the blood glucose monitoring technology
and conserving its fiscal resources. The Company does not expect to report
net income from operations in fiscal 1998. (See Forward Looking Statements).
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 31,1997 COMPARED TO QUARTER ENDED DECEMBER 31,1996.
Product sales decreased from $326,000 in the third quarter of fiscal 1997 to
$313,000 in the third quarter of fiscal 1998 due to smaller flu season
reorders. License and technology fees increased from $80,000 in the
third quarter of fiscal 1997 to $125,000 in the third quarter of fiscal 1998
due to the fluctuation in timing of strategic partner development payments
and expenses.
Manufacturing expense increased from the third quarter of fiscal 1997 to
the third quarter of fiscal 1998 by $76,000 due to lower production and,
therefore, lower overhead absorption. Research and development expenses
declined from $410,000 in the third quarter of fiscal 1997 to $193,000 in the
third quarter of fiscal 1998 due to completion of the self-injector project.
Selling, general and administrative expense increased from $768,000 in the
third quarter of fiscal 1997 compared to $901,000 in the third quarter of
fiscal 1998 due primarily to increases in consulting fees and new joint
venture administrative expenses.
Interest expense increased to $225,000 in the third quarter of the
current year due to the debt due to Elan of $12.015 million. There was no
corresponding interest expense in the third quarter of the prior year.
Other income consists of earnings on available cash balances and
fluctuates based on available cash balances.
NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1996. Product revenues for the nine months ended December 31, 1997 increased
to $1.3 million from $845,000 in the comparable period in the prior year
due to greater flu season and public health clinic sales. Licensing and
technology fees decreased due to completion of the self-injector project.
Manufacturing costs increased from $1.4 million in the first nine months of
the prior year to $1.5 million in the comparable period in the current year.
This increase was due to greater product sales offset by decreases in
manufacturing overhead and direct labor and materials costs. Research and
product development expenses decreased approximately $578,000 due to completion
of the self-injector project. Selling, general and administrative costs
increased approximately $294,000 due to increases in consulting and travel
expenses and greater total commissions on higher product sales.
Interest expense increased to $225,000 in the first nine months of the
current year due to the debt due to Elan of $12.015 million. There was no
corresponding interest expense in the first nine months of the prior year.
Other income consists of earnings on available cash balances and fluctuates
based on available cash balances.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in 1985, the Company has financed its operations,
working capital needs and capital expenditures primarily from private
placements of securities, exercises of stock options, proceeds received from
its initial public offering in 1986, proceeds received from a public offering
of Common Stock in November 1993, licensing and technology revenues and more
recently from sales of products and private placements of common stock
completed in fiscal 1996, 1997 and 1998. Net proceeds received upon
issuance of securities from inception through December 31, 1997 totaled
approximately $44.0 million.
Cash, cash equivalents and marketable securities totaled, $3.0 million
at December 31, 1997 and $2.1 million at March 31, 1997. The increase
resulted primarily from net of proceeds received in the private placements in
June and July 1997 and October 1997, offset by operating losses and reductions
in certain short term liabilities.
Inventories decreased from $1.7 million at March 31, 1997 to $1.6 million
at December 31, 1997, due to sales of the Company's syringe products exceeding
manufacturing production.
In connection with the Elan transaction, the Company incurred long-term
debt of $12.015 million. This debt bears interest at 9% per annum until
December 31, 1997 and 12% per annum thereafter, with interest payable
quarterly commencing April 1998 and unpaid principal and interest due October
15, 2001. The debt was incurred to permit the Company to fund its share of
the license payment to Elan. Under terms of the agreement with Elan, if the
Company's shareholders approve, the debt plus accrued interest will be
exchanged for Series A and Series B convertible preferred stock of Bioject.
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.
JV will incur significant expenses in connection with the research and
development of the glucose monitoring technology as well as substantial
milestone payments to Elan upon the occurrence of certain events.
In addition, JV is required under the license to pay Elan an
aggregate of $15.5 million in further royalties as the following
milestones are achieved: $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 the two proposals described above
at an upcoming Special Meeting of Shareholders, the territory of
the license would be expanded to be worldwide, and 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. Additionally, JV will be required under the
license to pay Elan a continuing royalty equal to a percentage of
the net revenues from sublicenses of the licensed technology or
from the sale by JV or its sublicensees of products covered by
the licensed patents or that incorporate or apply the licensed
know-how. Elan has committed resources of up to $2.5 million of
certain research and development expenses. If the shareholders
approve, the Company may issue to Elan up to $4 million of Series C
convertible preferred stock or other similar convertible preferred
stock to assist Bioject in funding a portion of the development costs
of the glucose monitoring technology. Unless further financing is provided
by Bioject or Elan, additional financing will be the responsibility of JV
which may be required to raise such financing through debt or equity
issuances. There can be no assurance that Elan or Bioject will provide such
financing to JV or that JV will be able to raise additional financing on
favorable terms or at all. A special meeting of the Company's shareholders
has been scheduled for February 20, 1998 to approve the exchange of the
long-term debt for the Series A and Series B Convertible Preferred Stock
and to approve the issuance of the Series C Convertible Preferred Stock or
other similar convertible preferred stock in connection with these
transactions.
The effect of the transactions with Elan has resulted in the Company being
in a deficit equity position at December 31, 1997. Although the Company
believes that it has sufficient cash and other resources for current
operations through fiscal year end and the second quarter of fiscal 1999,
under rules of the National Association of Security Dealers Automatic
Quotation System (NASDAQ), the Company must maintain, in addition to other
requirements, a net tangible assets position of $4.0 million or more in
order to continue to be listed on the exchange. If the Company's
shareholders approve the exchange of the $12 million debt for preferred
stock, the Company will then be in compliance with the NASDAQ's tangible
assets requirement.
The Company believes that its current cash position and expected advances
from Elan for JV operations combined with revenues and other cash receipts
will be adequate to fund the Company's operations through fiscal 1998 and the
second quarter of fiscal 1999. (See "Forward Looking
Statements"). Thereafter, the Company will require additional financing.
However, unforeseen costs and expenses or lower than anticipated cash
receipts from product sales or research and development activities could
accelerate the financing requirement. The Company has been successful in
raising additional financing in the past and believes that sufficient funds
will be available to fund future operations. (See "Forward Looking
Statements"). However, there can be no assurance that such financing will be
available on favorable terms or at all. Failure to obtain additional financing
when required would significantly restrict the Company's operations and
ability to continue product development, and materially adversely affect the
Company's business. The Company has no banking line of credit or other
established source of borrowing.
FORWARD LOOKING STATEMENTS
Certain statements in this report constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such risks, uncertainties and factors
include: the uncertainty market acceptance of the Company's jet injection
products, the Company's ability to develop the glucose monitoring products
presently contemplated, the possibility of delays or unanticipated costs and
expenses in the development of the glucose monitoring technology, the
availability of adequate additional financing, the ownership and protection of
proprietary technology relating to the glucose monitoring technology, the
possibilities that competing monitoring technology could be developed by others
and other risks are described in more detail in the Company's Annual Report
on Form 10-K and other S.E.C. filings. The Company assumes no obligation to
update forward-looking statements if circumstances change.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None during the quarter ended December 31, 1997.
Item 2. Changes in Securities
On October 15, 1997, the Company completed a private placement to
Elan International Services, Ltd. of 2,727,273 shares of the
Company's Common Stock and a warrant to purchase an additional
1,750,000 shares of the Company's Common Stock. The warrant,
which is exercisable in whole or from time to time in part,
expires five years from the date of issuance, and has an exercise
price of $2.50 per share. Aggregate proceeds to the Company before
expenses totaled $3 million. The securities have been issued
pursuant to an exemption from registration under Section 4(2) of
the Securities Act. In relying upon such exemption (i) the Company
did not engage in any "general solicitation", (ii) the purchaser
represented and the Company reasonably believed that the
purchaser had such knowledge and experience in financial and
business matters such that it was capable of evaluating the
merits and risks of the prospective investment and was able to
bear the economic risk of such investment, (iii) the purchaser
was provided access to all necessary and adequate information to
enable the purchaser to evaluate the financial risk inherent in
making an investment, (iv) the offer was part of an agreement to
establish a joint venture with the purchaser and as such was made
only to the purchaser and (v) the purchaser represented that it
was acquiring the shares for itself and not for distribution.
Item 3. Defaults Upon Senior Securities
None during the quarter ended December 31, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended December 31, 1997.
Item 5. Other Information
None during the quarter ended December 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS: 27.1 Financial Data Schedule
4.3 Bioject Medical Technologies Inc. 1992 Stock
Incentive Plan, as amended through April 3, 1997
REPORTS ON FORM 8-K:
Form 8-K filed on October 1, 1997 for the purpose of filing as
an exhibit the press release announcing the agreement between
Elan and the Company.
Form 8-K filed on October 3, 1997 regarding a description of the
agreement between Elan and Bioject and filing the agreement as
Exhibit 10.39, for which confidential treatment was granted.
Form 8-K filed on October 21, 1997 regarding the closing of the
transactions contemplated by the agreement between Elan and
Bioject.
Form 8-K filed on October 31, 1997 filing Exhibits 10.41
(Securities Purchase Agreement), 10.42 (Registration Rights
Agreement) and 10.43 (Series K Common Stock Purchase Warrant).
Form 8-K filed on November 3, 1997 regarding the transactions
contemplated by the agreement between Elan and Bioject and
filing Exhibit 10.40 (License Agreement with Elan), Exhibit 10.44
(Promissory Note), Exhibit 10.45 (JV Subscription and Stockholders
Agreement) and Exhibit 10.46 (JV Registration Rights Agreement).
Confidential Treatment was requested with regard to portions of
Exhibits 10.40 and 10.45. This Form 8-K was amended on Form 8-K/A
filed on November 14, 1997 which filed Exhibit 10.47 (Proposed Terms
of Series A, B and C Preferred Stock). This Form 8-K was amended
on Form 8-K/A (Amendment No. 2) filed on January 22, 1998 which
refiled Exhibit 10.40 and Exhibit 10.45. Confidential Treatment
was granted with regard to portions of Exhibit 10.40.
Form 8-K/A (Amendment No. 1) filed on January 22, 1998 amending
Form 8-K originally filed on January 14, 1997 regarding a private
placement in December 1996.
Form 8-K filed on January 22, 1998 regarding amendments to
Exhibit 10.40, Exhibit 10.41 and Exhibit 10.45 and filing such
amendments as Exhibit 10.40.1, Exhibit 10.41.1 and Exhibit
10.45.1.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOJECT MEDICAL TECHNOLOGIES INC.
(Registrant)
Date: February 13, 1998 /S/ James C. O'Shea
---------------------------------
James C. O'Shea
Chairman, Chief Executive Officer
and President
/S/ Peggy J. Miller
---------------------------------
Peggy J. Miller
Vice President and Chief Financial Officer
[ARTICLE] 5
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] MAR-31-1998
[PERIOD-END] DEC-31-1997
[CASH] 1,001,990
[SECURITIES] 1,967,749
[RECEIVABLES] 513,163
[ALLOWANCES] 0
[INVENTORY] 1,571,394
[CURRENT-ASSETS] 5,108,827
[PP&E] 4,428,694
[DEPRECIATION] 1,830,090
[TOTAL-ASSETS] 8,039,490
[CURRENT-LIABILITIES] 1,260,191
[BONDS] 12,015,000
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 44,286,505
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 8,039,490
[SALES] 1,300,620
[TOTAL-REVENUES] 1,675,620
[CGS] 1,452,684
[TOTAL-COSTS] 1,452,684
[OTHER-EXPENSES] 15,474,950
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (15,252,014)
[INCOME-TAX] 0
[INCOME-CONTINUING] (15,252,014)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (15,252,014)
[EPS-PRIMARY] (.68)
[EPS-DILUTED] (.68)
</TABLE>
Exhibit 4.3
BIOJECT MEDICAL TECHNOLOGIES INC.
1992 STOCK INCENTIVE PLAN
(as amended through April 3, 1997)
1. Purpose. The purpose of this 1992 Stock Incentive Plan
(the "Plan") is to enable Bioject Medical Technologies Inc., an
Oregon corporation (the "Company"), to attract and retain the
services of (a) selected employees, officers and directors of the
Company or of any parent or subsidiary corporation of the
Company, and (b) selected nonemployee agents, consultants,
advisers and independent contractors of the Company or any parent
or subsidiary.
2. Shares Subject to the Plan. Subject to adjustment as
provided below and in paragraph 11, up to 3,000,000 shares of
Common Stock of the Company (the "Shares") shall be offered and
issued under the Plan. If an option or a stock appreciation
right granted under the Plan expires, terminates or is cancelled,
the unissued Shares subject to such option or stock appreciation
right shall again be available under the Plan. If Shares sold or
awarded as a bonus under the Plan are forfeited to the Company or
repurchased by the Company, the number of Shares forfeited or
repurchased shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective when
adopted by the Board of Directors of the Company (the "Board").
However, no option granted under the Plan shall become
exercisable until the Plan is approved by the affirmative vote of
the holders of a majority of the Common Stock of the Company
represented at a shareholder meeting at which a quorum is
present, and any such awards under the Plan prior to such
approval shall be conditioned on and subject to such approval.
Subject to this limitation, options and stock appreciation rights
may be granted and Shares may be awarded as bonuses or sold under
the Plan at any time after the effective date and before
termination of the Plan.
(b) Duration. No options or stock appreciation rights may
be granted under the Plan, no stock bonuses may be awarded under
the Plan, and no Shares may be sold pursuant to paragraph 8 of
the Plan on or after July 29, 2002. However, the Plan shall
continue in effect until all Shares available for issuance under
the Plan have been issued and all restrictions on such Shares
have lapsed. The Board may suspend or terminate the Plan at any
time, except with respect to options, stock appreciation rights
and Shares subject to restrictions then outstanding under the
Plan. Termination shall not affect any outstanding options,
stock appreciation rights, any right of the Company to repurchase
Shares or the forfeitability of Shares issued under the Plan.
4. Administration.
(a) The Plan shall be administered by a committee
appointed by the Board consisting of not less than two directors
(the "Committee"). The Committee shall determine and designate
from time to time the individuals to whom awards shall be made,
the amount of the awards, and the other terms and conditions of
the awards; provided, however, that only the Board may amend or
terminate the Plan as provided in paragraphs 3 and 14. At any
time when the officers and directors of the Company are subject
to Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Committee shall consist solely of
"disinterested" directors as such term is defined from time to
time in Rule 16b-3 under the Exchange Act. No member of the
Committee shall be eligible to receive any award under the Plan
while such person serves as a Committee member, except pursuant
to paragraph 10.
(b) Subject to the provisions of the Plan, the Committee
may from time to time adopt and amend rules and regulations
relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any
restriction applicable to Shares (except those restrictions
imposed by law) and make all other determinations in the judgment
of the Committee necessary or desirable for the administration of
the Plan. The interpretation and construction of the provisions
of the Plan and related agreements by the Committee shall be
final and conclusive. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall
deem expedient to carry the Plan into effect, and it shall be the
sole and final judge of such expediency.
5. Types of Awards; Eligibility. The Committee may, from time
to time, take the following actions under the Plan: (i) grant
Incentive Stock Options, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as
provided in paragraph 6(b); (ii) grant options other than
Incentive Stock Options ("Nonstatutory Stock Options") as
provided in paragraph 6(c); (iii) award stock bonuses as provided
in paragraph 7; (iv) sell Shares as provided in paragraph 8; and
(v) grant stock appreciation rights as provided in paragraph 9.
Any such awards may be made to employees (including employees who
are officers or directors) of the Company or of any parent or
subsidiary corporation of the Company, and to other individuals
described in paragraph 1 who the Committee believes have made or
will make an important contribution to the Company or its parent
or subsidiaries; provided, however, that only employees of the
Company or a parent or subsidiary shall be eligible to receive
Incentive Stock Options under the Plan, and, provided further,
that directors who are not employees shall receive awards only
pursuant to paragraph 10. The Committee shall select the
individuals to whom awards shall be made and shall specify the
action taken with respect to each individual to whom an award is
made under the Plan. At the discretion of the Committee, an
individual may be given an election to surrender an award in
exchange for the grant of a new award.
6. Option Grants
(a) Grant. Each option granted under the Plan shall be
evidenced by a stock option agreement in such form as the
Committee shall prescribe from time to time in accordance with
the Plan. With respect to each option grant, the Committee shall
determine the number of Shares subject to the option, the option
price, the period of the option, and the time or times at which
the option may be exercised and whether the option is an
Incentive Stock Option or a Nonstatutory Stock Option.
(b) Incentive Stock Options. Incentive Stock Options
granted under the Plan shall be subject to the following terms
and conditions:
(i) No employee may be granted Incentive Stock Options
under the Plan such that the aggregate fair market value, on the
date of grant, of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by that employee
during any calendar year under the Plan and under any other
incentive stock option plan (within the meaning of Section 422 of
the Code) of the Company or of any parent or subsidiary
corporation of the Company exceeds $100,000.
(ii) An Incentive Stock Option may be granted under the
Plan to an employee possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or
of any parent or subsidiary corporation of the Company only if
the option price is at least 110 percent of the fair market
value, as described in paragraph 6(b)(iv), of the Shares subject
to the option on the date it is granted, and the option by its
terms is not exercisable more than five years from the date of
grant.
(iii) Subject to paragraphs 6(b)(ii) and 6(d), Incentive
Stock Options granted under the Plan shall continue in effect for
the period fixed by the Committee, except that no Incentive Stock
Option shall be exercisable more than 10 years from the date of
grant.
(iv) The option price per Share shall be determined by
the Committee at the time of grant. Subject to paragraph
6(b)(ii), the option price shall not be less than 100 percent of
the fair market value of the Shares covered by the Incentive
Stock Option at the date the option is granted. The fair market
value shall be deemed to be the average of the closing bid and
asked prices for the Common Stock of the Company as reported on
the National Association of Securities Dealers, Inc. Automated
Quotation System on the day preceding the day the option is
granted, or if there has been no sale on that date, on the last
preceding date on which a sale occurred, or such other reported
value of the Common Stock of the Company as shall be specified by
the Committee.
(v) The Committee may at any time without the consent of
the optionee convert an Incentive Stock Option into a
Nonstatutory Stock Option.
(c) Nonstatutory Stock Options. Nonstatutory Stock
Options shall be subject to the following additional terms and
conditions:
(i) The option price for Nonstatutory Stock Options shall
be determined by the Committee at the time of grant. The option
price may not be less than 75 percent of the fair market value of
the Shares covered by the Nonstatutory Stock Option on the date
of grant. The fair market value of the Shares covered by a
Nonstatutory Stock Option shall be determined pursuant to
paragraph 6(b)(iv).
(ii) Nonstatutory Stock Options granted under the Plan
shall continue in effect for the period fixed by the Committee.
(d) Exercise of Options. Except as provided in paragraph
6(f) or as determined by the Committee, no option granted under
the Plan may be exercised unless at the time of such exercise the
optionee is employed by or in the service of the Company or any
parent or subsidiary corporation of the Company and shall have
been so employed or have provided such service continuously since
the date such option was granted. Absence on leave or on account
of illness or disability under rules established by the Committee
shall not, however, be deemed an interruption of employment for
purposes of the Plan. Unless otherwise determined by the
Committee, vesting of options shall not continue during an
absence on leave (including an extended illness) or on account of
disability. No option may be exercised by an officer or director
of the Company within six months of the date of grant. Except as
provided in paragraphs 6(f), 11 and 12, options granted under the
Plan may be exercised from time to time over the period stated in
each option in such amounts and at such times as shall be
prescribed by the Committee, provided that options shall not be
exercised for fractional shares. Unless otherwise determined by
the Committee, if the optionee does not exercise an option in any
one year with respect to the full number of Shares to which the
optionee is entitled in that year, the optionee's rights shall be
cumulative and the optionee may purchase those Shares in any
subsequent year during the term of the option.
(e) Nontransferability. Each option granted under the
Plan by its terms shall be nonassignable and nontransferable by
the optionee, either voluntarily or by operation of law, except
by will or by the laws of descent and distribution of the state
or country of the optionee's domicile at the time of death, and
each option by its terms shall be exercisable during the
optionee's lifetime only by the optionee.
(f) Termination of Employment or Service.
(i) In the event the employment or service of the
optionee by the Company or a parent or subsidiary corporation of
the Company terminates for any reason other than because of death
or physical disability, the option may be exercised at any time
prior to the expiration date of the option or the expiration of
three months(one year in the case of officers and two years in
the case of directors) after the date of such termination,
whichever is the shorter period, but only if and to the extent
the optionee was entitled to exercise the option at the date of
such termination.
(ii) In the event of the termination of the optionee's
employment or service with the Company or a parent or subsidiary
corporation of the Company because the optionee becomes disabled
(within the meaning of Section 22(e)(3) of the Code), the option
may be exercised at any time prior to the expiration date of the
option or the expiration of one year after the date of such
termination, whichever is the shorter period, but only if and to
the extent the optionee was entitled to exercise the option at
the date of such termination.
(iii) In the event of the death of an optionee while
employed by or providing service to the Company or a parent or
subsidiary corporation of the Company, the option may be
exercised at any time prior to the expiration date of the option
or the expiration of one year after the date of such death,
whichever is the shorter period, but only if and to the extent
the optionee was entitled to exercise the option on the date of
death, and only by the person or persons to whom such optionee's
rights under the option shall pass by the optionee's will or by
the laws of descent and distribution of the state or country of
domicile at the time of death.
(iv) The Committee, at the time of grant or at any time
thereafter, may extend the three-month and one-year expiration
periods any length of time not later than the original expiration
date of the option, and may increase the portion of an option
that is exercisable, subject to such terms and conditions as the
Committee may determine.
(v) To the extent that the option of any deceased
optionee or of any optionee whose employment or service
terminates is not exercised within the applicable period, all
further rights to purchase Shares pursuant to such option shall
cease and terminate.
(g) Purchase of Shares. Unless the Committee
determines otherwise, Shares may be acquired pursuant to an
option only upon receipt by the Company of notice in writing from
the optionee of the optionee's intention to exercise, specifying
the number of Shares as to which the optionee desires to exercise
the option and the date on which the optionee desires to complete
the transaction, and, if required to comply with the Securities
Act of 1933, as amended, or state securities laws, the notice
shall include a representation that it is the optionee's present
intention to acquire the Shares for investment and not with a
view to distribution. The certificates representing the Shares
shall bear any legends required by the Committee. Unless the
Committee determines otherwise, on or before the date specified
for completion of the purchase of Shares pursuant to an option,
the optionee must have paid the Company the full purchase price
of such Shares in cash (including, with the consent of the
Committee, cash that may be the proceeds of a loan from the
Company), or, with the consent of the Committee, in whole or in
part, in Shares valued at fair market value, as determined
pursuant to paragraph 6(b)(iv). Unless the Committee determines
otherwise, all payments made to the Company in connection with
the exercise of an option must be made by a certified or
cashier's bank check or by the transfer of immediately available
federal funds. No Shares shall be issued until full payment
therefor has been made. With the consent of the Committee, an
optionee may request the Company to apply automatically the
Shares to be received upon the exercise of a portion of a stock
option (even though stock certificates have not yet been issued)
to satisfy the purchase price for additional portions of the
option. Each optionee who has exercised an option shall
immediately upon notification of the amount due, if any, pay to
the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If
additional withholding is or becomes required beyond any amount
deposited before delivery of the certificates, the optionee shall
pay such amount to the Company on demand. If the optionee fails
to pay the amount demanded, the Company or any parent or
subsidiary corporation of the Company may withhold that amount
from other amounts payable to the optionee by the Company or the
parent or subsidiary corporation, including salary, subject to
applicable law. With the consent of the Committee, an optionee
may deliver Shares to the Company to satisfy the withholding
obligation.
7. Stock Bonuses. The Committee may award Shares under the
Plan as stock bonuses. Shares awarded as a stock bonus shall be
subject to such terms, conditions, and restrictions as shall be
determined by the Committee, all of which shall be evidenced in a
writing signed by the recipient prior to receiving the bonus
Shares. The Committee may not require the recipient to pay any
monetary consideration other than amounts necessary to satisfy
tax withholding requirements. The certificates representing the
Shares awarded shall bear any legends required by the Committee.
The Company may require any recipient of a stock bonus to pay to
the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements.
If the recipient fails to pay the amount demanded, the Company
or any parent or subsidiary corporation of the Company may
withhold that amount from other amounts payable to the recipient
by the Company or the parent or subsidiary corporation, including
salary, subject to applicable law. With the consent of the
Committee, a recipient may deliver Shares to the Company to
satisfy the withholding obligation.
8. Stock Sales. The Committee may issue Shares under the Plan
for such consideration (including promissory notes and services)
as determined by the Committee, provided that in no event shall
the consideration be less than 75 percent of the fair market
value of the Shares at the time of issuance, determined pursuant
to paragraph 6(b)(iv). Shares issued under this paragraph 8
shall be subject to the terms, conditions and restrictions
determined by the Committee. The restrictions may include
restrictions concerning transferability, repurchase by the
Company and forfeiture of the Shares issued, together with such
other restrictions as may be determined by the Committee. The
certificates representing the Shares shall bear any legends
required by the Committee. The Company may require any purchaser
of stock issued under this paragraph 8 to pay to the Company in
cash upon demand amounts necessary to satisfy any applicable
federal, state or local tax withholding requirements. If the
purchaser fails to pay the amount demanded, the Company or any
parent or subsidiary corporation of the Company may withhold that
amount from other amounts payable to the purchaser by the Company
or any parent or subsidiary corporation, including salary,
subject to applicable law. With the consent of the Committee, a
purchaser may deliver Shares to the Company to satisfy the
withholding obligation.
9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted
under the Plan by the Committee, subject to such rules, terms,
and conditions as the Committee prescribes.
(b) Exercise.
(i) A stock appreciation right shall be exercisable
only at the time or times established by the Committee. If a
stock appreciation right is granted in connection with an option,
the stock appreciation right shall be exercisable only to the
extent and on the same conditions that the related option could
be exercised. Upon exercise of a stock appreciation right, any
option or portion thereof to which the stock appreciation right
relates terminates. If a stock appreciation right is granted in
connection with an option, upon exercise of the option, the stock
appreciation right or portion thereof to which the option relates
terminates. No stock appreciation right granted to an officer or
director may be exercised during the first six months following
the date of grant.
(ii) The Committee may withdraw any stock
appreciation right granted under the Plan at any time and may
impose any conditions upon the exercise of a stock appreciation
right or adopt rules and regulations from time to time affecting
the rights of holders of stock appreciation rights. Such rules
and regulations may govern the right to exercise stock
appreciation rights granted before adoption or amendment of such
rules and regulations as well as stock appreciation rights
granted thereafter.
(iii) Each stock appreciation right shall entitle the
holder, upon exercise, to receive from the Company in exchange
therefor an amount equal in value to the excess of the fair
market value on the date of exercise of one Share over its fair
market value on the date of grant (or, in the case of a stock
appreciation right granted in connection with an option, the
option price per Share under the option to which the stock
appreciation right relates), multiplied by the number of Shares
covered by the stock appreciation right or the option, or portion
thereof, that is surrendered. No stock appreciation right shall
be exercisable at a time that the amount determined under this
subparagraph is negative. Payment by the Company upon exercise
of a stock appreciation right may be made in Shares valued at
fair market value, in cash, or partly in Shares and partly in
cash, all as determined by the Committee.
(iv) For purposes of this paragraph 9, the fair
market value of the Shares shall be determined pursuant to
paragraph 6(b)(iv), on the trading day preceding the date the
stock appreciation right is exercised.
(v) No fractional Shares shall be issued upon
exercise of a stock appreciation right. In lieu thereof, cash
may be paid in an amount equal to the value of the fraction or,
if the Committee shall determine, the number of Shares may be
rounded downward to the next whole Share.
(vi) Each participant who has exercised a stock
appreciation right shall, upon notification of the amount due,
pay to the Company in cash amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements.
If the participant fails to pay the amount demanded, the Company
or any parent or subsidiary corporation of the Company may
withhold that amount from other amounts payable to the
participant by the Company or any parent or subsidiary
corporation, including salary, subject to applicable law. With
the consent of the Committee, a participant may satisfy this
obligation, in whole or in part, by having the Company withhold
from any Shares to be issued upon the exercise that number of
Shares that would satisfy the withholding amount due or by
delivering Shares to the Company to satisfy the withholding
amount.
(vii) Upon the exercise of a stock appreciation right
for Shares, the number of Shares reserved for issuance under the
Plan shall be reduced by the number of Shares issued. Cash
payments of stock appreciation rights shall not reduce the number
of Shares reserved for issuance under the Plan.
10. Option Grants to Non-Employee Directors.
(a) Automatic Grants. Immediately after the close of
each annual shareholder meeting (commencing with the 1993 annual
meeting), each person then serving as a Non-Employee Director,
including any such person who is elected at such meeting, shall
automatically be granted a Nonstatutory Stock Option to purchase
17,500 Shares. A "Non-Employee Director" is a director of the
Company who is not an employee of the Company or of any parent or
subsidiary corporation of the Company on the date the option is
granted.
(b) Terms of Options. The exercise price for options
granted under this paragraph 10 shall be the fair market value of
the Shares on the date of grant, determined pursuant to
paragraph 6(b)(iv). Each such option shall have an eight-year
term from the date of grant, unless earlier terminated as
provided in paragraph 6(f), and shall become exercisable with
respect to 8,750 shares six months after the date of grant, with
the remaining 8,750 shares becoming exercisable on the first
anniversary of the date of grant.
11. Changes in Capital Structure. If the outstanding shares of
Common Stock of the Company are hereafter increased or decreased
or changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another
corporation by reason of any recapitalization, reclassification,
stock split, combination of shares or dividend payable in shares,
the Committee shall make appropriate adjustments (i) in the
number and kind of shares available for awards under the Plan;
and (ii) in the number and kind of shares as to which outstanding
options and stock appreciation rights, or portions thereof then
unexercised, shall be exercisable, so that the participant's
proportionate interest before and after the occurrence of the
event is maintained, provided that this paragraph 11 shall not
apply with respect to transactions referred to in paragraph 12.
The Committee may also require that any securities issued in
respect of or exchanged for Shares issued hereunder that are
subject to restrictions be subject to similar restrictions.
Notwithstanding the foregoing, the Committee shall have no
obligation to effect any adjustment that would or might result in
the issuance of fractional shares, and any fractional shares
resulting from any adjustment may be disregarded or provided for
in any manner determined by the Committee. Any such adjustment
made by the Committee shall be conclusive.
12. Effect of Reorganization or Liquidation.
(a) Cash, Stock or Other Property for Stock. Except as
provided in paragraph 12(b), upon a merger, consolidation,
reorganization, plan of exchange or liquidation involving the
Company, as a result of which the shareholders of the Company
receive cash, stock or other property in exchange for or in
connection with their Common Stock (any such transaction to be
referred to in this paragraph 12 as an "Accelerating Event"), any
option or stock appreciation right granted hereunder shall
terminate, except as specified in the following sentence, but the
optionee shall have the right during a 30-day period immediately
prior to any such Accelerating Event to exercise his or her
option or stock appreciation right, in whole or in part, without
any limitation on exercisability. With respect to an option or
stock appreciation right granted to an officer or director less
than six months prior to any Accelerating Event, such officer or
director shall have the right to require the Company to purchase
such option or stock appreciation right at a purchase price
computed pursuant to paragraph 12(c) during the 30-day period
following the expiration of six months following the date of such
grant, and this right shall apply even if the option or stock
appreciation right has otherwise terminated pursuant to
paragraph 6(f) following such Accelerating Event.
(b) Stock for Stock. If the shareholders of the Company
receive capital stock of another corporation ("Exchange Stock")
in exchange for their Common Stock in any transaction involving a
merger, consolidation, reorganization, or plan of exchange, all
options granted hereunder shall be converted into options to
purchase shares of Exchange Stock and all stock appreciation
rights granted hereunder shall be converted into stock
appreciation rights measured by the Exchange Stock, unless the
Committee, in its sole discretion, determines that any or all
such options or stock appreciation rights granted hereunder shall
not be converted, but instead shall terminate in accordance with
the provisions of paragraph 12(a). The amount and price of
converted options and stock appreciation rights shall be
determined by adjusting the amount and price of the options or
stock appreciation rights granted hereunder to take into account
the relative values of the Exchange Stock and the Common Stock in
the transaction.
(c) Purchase Price. With respect to an option granted
to an officer or director less than six months prior to an
Accelerating Event, the purchase price payable pursuant to
paragraph 12(a) shall be computed as follows:
(i) With respect to a Nonstatutory Stock Option and a
stock appreciation right as to which no Incentive Stock Option
has been granted, the purchase price shall be the product of
(A) the excess, if any, of the higher of (1) the purchase price
paid for each Share in the Accelerating Event, or (2) the highest
fair market value of a Share (determined pursuant to
paragraph 6(b)(iv)) during the 30-day period ending on the day
the Accelerating Event occurs, over the option price, and (B) the
number of Shares covered by the option or stock appreciation
right.
(ii) With respect to an Incentive Stock Option and a
stock appreciation right as to which an Incentive Stock Option
has been granted, the purchase price shall be the product of
(A) the excess, if any, of the fair market value of each Share on
the date of exercise over the option price, and (B) the number of
Shares covered by the option or stock appreciation right.
(iii) No option or stock appreciation right may be
exercised in connection with an Accelerating Event if the
purchase price determined under this paragraph 12(c) is negative.
(d) The rights set forth in this paragraph 12 shall be
transferable only to the extent the related option or stock
appreciation right is transferable.
13. Corporate Mergers, Acquisitions, Etc. The Committee may
also grant options, grant stock appreciation rights, award stock
bonuses and sell stock under the Plan having terms, conditions
and provisions that vary from those specified in the Plan;
provided that any such awards are granted in substitution for, or
in connection with the assumption of, existing options, stock
appreciation rights, stock bonuses and stock sold or awarded by
another corporation and assumed or otherwise agreed to be
provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a parent or subsidiary
corporation of the Company is a party.
14. Amendment of Plan.
(a) The Board may at any time, and from time to time,
modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in
effect or for any other reason. Except as provided in paragraphs
6(b)(v), 11, 12 and 13, however, no change in an award already
granted shall be made without the written consent of the holder
of such award.
(b) Notwithstanding any other provision in the Plan,
paragraph 10 may be amended or modified by the Board or the
shareholders of the Company only once in any six-month period,
except as may be required to comport with changes in the Code, or
the Employee Retirement Income Security Act, or the rules
promulgated thereunder.
15. Approvals. The obligations of the Company under the Plan
are subject to the approval of state and federal authorities or
agencies with jurisdiction in the matter. The Company shall not
be obligated to issue or deliver Shares under the Plan if such
issuance or delivery would violate applicable state or federal
securities laws, or if compliance with such laws would, in the
opinion of the Company, be unduly burdensome or
require the disclosure of information which would not be in the
Company's best interests.
16. Employment and Service Rights. Nothing in the Plan or any
award pursuant to the Plan shall (i) confer upon any employee any
right to be continued in the employment of the Company or any
parent or subsidiary corporation of the Company or shall
interfere in any way with the right of the Company or any parent
or subsidiary corporation of the Company by whom such employee is
employed to terminate such employee's employment at any time, for
any reason, with or without cause, or to increase or decrease
such employee's compensation or benefits; or (ii) confer upon any
person engaged by the Company or any parent or subsidiary
corporation of the Company any right to be retained or employed
by the Company or the parent or subsidiary or to the
continuation, extension, renewal, or modification of any
compensation, contract, or arrangement with or by the Company or
the parent or subsidiary.
17. Rights as a Shareholder. The recipient of any award under
the Plan shall have no rights as a shareholder with respect to
any Shares until the date of issue to the recipient of a stock
certificate for such Shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends
or other rights for which the record date is prior to the date
such stock certificate is issued.
