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
For the quarterly period ended June 30, 1999
Commission File No. 0-15360
BIOJECT MEDICAL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1099680
- -------------------------------------- -----------------------------
(Jurisdiction of incorporation) (I.R.S. identification no.)
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 filed 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 June 30, 1999 there were 29,011,236 outstanding shares of common stock
of the registrant.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited consolidated financial statements of Bioject Medical
Technologies Inc. (BMTI), 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 operations are conducted by Bioject Inc.,
an Oregon corporation, which is a wholly owned subsidiary of BMTI. The Company's
blood glucose monitoring development operations, shown as Discontinued
Operations in the following financial statements, have been conducted by
Marathon Medical Technologies Inc. ("Marathon") (formerly Bioject JV Subsidiary
Inc.), an Oregon corporation and an 80.1% owned (wholly-owned as of June 30,
1999) subsidiary of BMTI.
The following 10-Q report reflects the consolidated results of operations, cash
flows and financial position for the first quarter of the year ending March 31,
2000. 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
June 30, 1999 and June 30, 1998
- Consolidated Balance Sheets dated June 30, 1999 and March 31, 1999
- Consolidated Statements of Cash Flows for the quarters ended
June 30, 1999 and June 30, 1998
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
1999 1998
(Unaudited)
-------------------------
REVENUES:
Net sales of products $ 112,682 $ 142,411
Licensing/technology fees 100,000 138,001
----------- ---------
212,682 280,412
----------- -----------
OPERATING EXPENSES:
Manufacturing 361,445 271,014
Research and development 253,784 244,586
Selling, general and administrative 601,600 608,630
----------- -----------
Total operating expenses 1,216,829 1,124,230
----------- -----------
Operating loss (1,004,147) (843,818)
Other income 16,967 22,712
----------- ----------
Loss from continuing operations
before taxes (987,180) (821,106)
Provision for income taxes -- --
----------- -----------
Loss from continuing operations
before preferred stock dividend (987,180) (821,106)
Preferred stock dividend (374,836) (346,350)
----------- -----------
Loss from continuing operations
allocable to common shareholders (1,362,016) (1,167,456)
Loss from discontinued operations
allocable to common shareholders (449,786) (985,649)
Gain on sale of discontinued operations 2,852,666 --
----------- -----------
Net income/(loss) allocable to
common shareholders $1,040,864 ($2,153,105)
=========== ===========
Net income/(loss) per common share
Basic 0.04 ($0.08)
=========== ===========
Diluted 0.04 ($0.08)
=========== ===========
Shares used in per share calculation 29,011,236 26,912,231
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
1999 1999
(Unaudited)
--------------------------
ASSETS
- ------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,368,900 $ 1,274,311
Accounts receivable, net 127,619 305,064
Stock subscription receivable -- 2,400,000
Inventories 1,212,941 1,251,186
Other current assets 61,726 53,599
Current assets of discontinued operations 4,018,000 597,000
--------- -----------
Total current assets 6,789,186 5,881,160
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 2,187,774 2,235,733
Production molds 2,154,446 2,051,697
Furniture and fixtures 179,376 170,436
Leasehold improvements 94,115 94,115
----------- -----------
4,615,711 4,551,981
Less - Accumulated depreciation (2,791,405) (2,615,536)
----------- -----------
1,824,306 1,936,445
OTHER ASSETS 539,769 535,092
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS -- 238,583
----------- -----------
$ 9,153,261 $ 8,591,280
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 257,109 $ 190,676
Accrued payroll 135,507 135,445
Other accrued liabilities 44,524 54,388
Current liabilities of
discontinued operations 1,552,553 2,462,906
----------- -----------
Total current liabilities 1,989,693 2,843,415
SHAREHOLDERS' EQUITY:
Preferred stock, no par, 10,000,000 shares
authorized; issued and outstanding
Series A Convertible - 692,694 shares,
$15 stated value 11,515,852 9,163,025
Series B Convertible - 134,333 shares,
$15 stated value -- 1,566,762
Series C Convertible - 391,830 shares,
No stated value 2,400,000 2,400,000
Common stock, no par, 100,000,000
shares authorized; issued and
outstanding 29 011,236 shares at
June 30, 1999 and 29,011,236 at
March 31, 1999 50,182,885 50,594,111
Accumulated deficit (56,935,169) (57,976,033)
----------- -----------
Total shareholders' equity 7,163,568 5,747,865
----------- -----------
$ 9,153,261 $ 8,591,280
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
June 30,
1999 1998
(Unaudited)
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) applicable to common to
shareholders $1,040,864 ($2,153,105)
Adjustments to reconcile net income (loss)
to net cash used in operating
activities from continuing operations:
Net loss from discontinued operations 449,786 985,649
Gain on sale of discontinued operations (2,852,666) --
Depreciation and amortization 185,610 167,732
Contributed capital for services -- 13,818
Preferred stock dividends 374,836 346,350
Net changes in assets and liabilities:
Accounts receivable 177,445 59,815
Inventories 38,245 (177,864)
Other current assets (8,127) (7,747)
Accounts payable 66,434 (73,173)
Accrued payroll 62 (16,661)
Other accrued liabilities (9,862) (56,080)
Deferred revenue -- 114,999
------------ -----------
Net cash used in operating activities
of continuing operations (537,373) (796,260)
Net cash used in operating activities
of discontinued operations (1,415,177) (206,536)
------------ -----------
Net cash used in operating activities (1,952,550) (1,002,796)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Marathon Stock (331,456) --
Capital expenditures of
continuing operations (6,987) (18,591)
Capital expenditures of
discontinued operations -- (128,353)
Other assets (14,418) ( 22,175)
------------ -----------
Net cash used in investing activities (352,861) (169,119)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from common stock -- 1,849,865
Cash proceeds from the sale of Series C
preferred stock 2,400,000 --
------------ -----------
Net cash provided by financing activities: 2,400,000 1,849,865
------------ -----------
CASH AND CASH EQUIVALENTS:
Net increase in cash and
cash equivalents 94,589 677,950
Cash and cash equivalents at beginning
of period 1,274,311 1,900,839
------------ -----------
Cash and cash equivalents at end
of period $ 1,368,900 $ 2,578,789
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
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. ("BMTI"),
an Oregon Corporation, and its wholly owned subsidiary, Bioject Inc., an Oregon
Corporation ("Bioject"), and its wholly owned subsidiary, Marathon Medical
Technologies, ("Marathon") (formerly Bioject JV Subsidiary Inc.), an Oregon
corporation. All significant intercompany transactions have been eliminated.
Although Bioject Inc. commenced operations in 1985, BMTI 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. Marathon
Medical Technologies Inc. was formed in October 1997. At that time, Marathon
acquired the license to certain continuous blood glucose monitoring technology
from Elan Corporation, plc. ("Elan") and entered into a joint venture
arrangement with Elan to develop and commercialize the blood glucose monitoring
technology. On June 30, 1999, Marathon completed the sale of its license to the
blood glucose monitoring technology. In connection with the sale of the license,
BMTI acquired Elan's 19.9% ownership of the stock of Marathon. BMTI now owns
100% of Marathon's stock. Marathon's operations are reported as "Discontinued
Operations" in the financial statements and other financial information included
as a part of this report. 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 needle-free injection system. In June 1994, the Company
received clearance from the FDA under Section 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
needle-free disposable vial access device. In March 1997, the Company received
additional 510(k) clearance for certain enhancements to its Biojector 2000
system. On March 23,1998, the Company entered into a transaction with Vitajet
Corporation ("Vitajet") whereby the Company acquired, along with certain other
assets, the rights to the Vitajet(R), a spring-powered, needle-free
self-injection device which currently has regulatory clearance for administering
injections of insulin. 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. On
June 30, 1999, Marathon completed a sale of the license to the blood glucose
monitoring technology, along with certain fixed assets related to the
development of that technology.
<PAGE>
Since its inception the Company has incurred operating losses and at June 30,
1999, has an accumulated deficit of approximately $57 million. The Company's
revenues to date have been derived primarily from licensing and technology fees
for the jet injection technology and from limited product sales of the Biojector
2000 system and Biojector syringes. The product sales were principally sales to
dealers to stock their inventories. More recently, the Company has sold its
products to end-users, primarily public health clinics for vaccinations and to
nursing organizations for flu immunization. Future revenues will depend upon
acceptance and use by healthcare providers and on the Company successfully
entering into license and supply agreements with major pharmaceutical and
biotechnology companies. 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:
June 30, March 31,
1999 1999
---------- ----------
Raw Materials $ 303,233 $ 289,214
Work in Process 2,866 --
Finished Goods 906,842 961,972
---------- ----------
$1,212,941 $1,251,186
========== ==========
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.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's expenses to conform
to the current year's presentation.
<PAGE>
NET LOSS PER SHARE
The following common stock equivalents are excluded from diluted income (loss)
per share calculations as their effect would have been antidilutive:
Three Months Ended June 30, 1999 1998
---------- ---------
Warrants and stock options 12,669,997 9,594,642
Convertible preferred stock 11,708,931 8,270,270
---------- ----------
24,378,928 17,864,912
========== ==========
3. DISCONTINUED OPERATIONS
In May 1999, rather than continue to fund the cost of its development, the
Company entered into negotiations to sell Marathon's blood glucose monitoring
technology, and certain fixed assets related to developing the technology, to a
third party. The sale was completed on June 30, 1999. The gross proceeds of the
sale was $4 million. The gain realized on the sale was approximately $2.9
million, net of associated expenses of the transaction and a $500,000 provision
for expenses to wind-up Marathon's operations. Accordingly Marathon's assets,
liabilities, loss from operations, gain on sale and cash flows are reported as
Discontinued Operations in the accompanying financial statements.
The terms of the sale of the blood glucose monitoring technology also provide
for the Company to receive a royalty on net sales of future products, if any,
which may be developed in the future from the licensed technology. The agreement
calls for a royalty of three percent of net sales until the Company has received
total royalty payments of $10 million. The agreement then calls for a royalty of
one percent of net sales thereafter. There can be no assurance that future
products will be successfully developed from the blood glucose monitoring
technology or that such products, if developed, will be commercially successful.
4. RELATED PARTY TRANSACTIONS
In connection with the sale of the blood glucose monitoring technology, the
company entered into an agreement with Elan to purchase its 19.9% common stock
interest in Marathon. The purchase price of Elan's minority interest was
$331,456 and has been accounted for by the purchase method of accounting. The
fair market value of the minority interest at June 30, 1999, was zero and
accordingly, the full amount of the purchase price has been expensed in the
current period.
5. CHANGES IN SHAREHOLDERS' EQUITY
In connection with the Company's purchase of Elan's interest in Marathon, the
Company and Elan agreed to certain changes in Elan's equity holdings in the
Company. Elan exchanged its Series B Convertible Preferred Stock ("Series B
Stock"), which would have been convertible into a minimum of 1.34 million shares
of the Company's common stock without additional cash payments, for a Warrant
that expires June 30, 2006 (the "Warrant"), to purchase 3.79 million shares of
Bioject's common stock for $1.50 per share. The Company has the right to redeem
the Warrant if it is exercised prior to June 30, 2004. Under the redemption
provisions, if Elan notifies the Company that it intends to exercise all or any
part of the Warrant to acquire stock in the Company, the Company has the right
to redeem the Warrant by paying Elan cash of $2.015 million, the original
issuance price of the Series B Stock, plus accrued interest at fifteen per cent,
compounded semi-annually from June 30, 1999. If Elan chooses to exercise less
than all of the shares covered by the Warrant, Bioject may exercise its
redemption right either for all of the shares covered by the warrant or for only
that portion being exercised, in which case the payment is prorated in
proportion to the portion of the warrant being exercised.
<PAGE>
Also in connection with the Company's purchase of Elan's interest in Marathon,
the Company and Elan agreed to certain changes in the terms of Elan's Series A
Convertible Preferred Stock ("Series A Stock"). The modified terms fixed the
conversion price of the Series A Stock at $1.50, eliminating a prior provision
that, in certain circumstances, allowed the Series A Stock to be converted at
80% of the then current fair market value of the Company's stock, if such value
was less than $1.50. The terms were also modified to give the Company the right
to redeem the Series A Stock for cash within ninety days of receiving notice of
the intent to redeem all or part of the Series A Stock into common stock of the
Company. The redemption price is the original issuance price of the Series A
Stock being converted plus accumulated preferred stock dividends thereon from
the date of issuance of the Series A Stock.
As described above, under certain conditions the original terms of issuance of
the Series A Stock would have allowed the stock to be converted into common
stock of the Company at a price which would be at a 20% discount to the par
value of the Series A Stock. The same provisions applied to conversion of the
Series B Stock. The value of this inherent dividend was recorded as a discount
to preferred stock and an increase to common stock, originally totaling $3
million, and was to be accreted as additional preferred stock dividends on a
straight-line basis from March 2, 1998, until mandatory conversion on October
15, 2004. The combination of exchanging the Series B Stock for the Warrant and
fixing the conversion price of the Series A Stock at $1.50 has eliminated the
opportunity for either class of preferred stock to be converted into common
stock of the Company at a discount to its par value. Accordingly, the unaccreted
portion of the inherent dividend at June 30, 1999, in the amount of $2,396,225,
has been recorded as a decrease to common stock and an increase in the carrying
values of the Series A and B Stock. Modifying the terms of the Series A Stock
requires shareholder approval of an amendment to the Company's Articles of
Incorporation. Amended Articles of Incorporation, reflecting the modified terms,
are being referred to the Company's shareholders at the Company's annual meeting
in September, 1999. The accompanying consolidated financial statements reflect
the amended Series A Stock terms as if the amended Articles of Incorporation had
already been adopted.
After increasing the carrying value of the Series B Stock for the unaccreted
inherent dividend attributable to that stock, its carrying value was $1,985,000,
the original issuance price of the Series B Stock, net of costs of issuance. In
connection with the exchange of the Series B Stock for the Warrant, the carrying
value of the Series B stock was reduced to zero and common stock was increased
by $1,985,000.
6. NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
standards for reporting and displaying comprehensive income and its components
in a full set of general purpose financial statements. The objective of SFAS 130
is to report a measure of all changes in the equity of an enterprise that result
from transactions and other economic events of the period other than
transactions with owners. The Company adopted SFAS 130 during the first quarter
of fiscal 1998. Comprehensive loss did not differ from currently reported net
loss in the periods presented.
<PAGE>
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for all
derivative instruments. SFAS 133 is effective for fiscal years beginning after
June 15, 1999. The Company does not have any derivative instruments and,
accordingly, the adoption of SFAS 133 will have no impact on the Company's
financial position or results of operations.
7. 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, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is targeting its direct sales efforts toward: i) sales to existing
markets, specifically flu immunization providers, public health agencies and
public school systems; ii) sales in states such as California, where the Company
believes that needle-syringe safety legislation makes the Company's products
more price competitive; and iii) sales to the U.S. military. Sales through
distributors will target the home self-injection market. The Company will also
focus sales and marketing efforts on entering into licensing and supply
arrangements with leading pharmaceutical and biotechnology companies for whose
products the Biojector technology provides either increased medical
effectiveness or a higher degree of market acceptance. See "Forward-Looking
Statements."
The Company's revenues to date have not been sufficient to cover manufacturing
and operating expenses. However, the Company believes that if its products
attain significantly greater general market acceptance and if the Company is
able to enter into large volume supply agreements with major pharmaceutical and
biotechnology companies, the Company's product sales volume would increase.
Significantly higher product sales volume should allow the Company to realize
volume-related manufacturing cost efficiencies. This, in turn, should result in
a reduced costs of goods as a percentage of sales, which could eventually allow
the Company to achieve positive gross profit. The Company believes that positive
gross profit from product sales, together with licensing and technology revenues
from agreements entered into with large pharmaceutical and biotechnology
companies would eventually allow the Company to operate profitably. The level of
revenues required to generate net income will be affected by a number of factors
including the mix of revenues between product sales and licensing and technology
fees, pricing of the Company's products, its ability to attain volume-related
<PAGE>
and automation-related manufacturing efficiencies, and the impact of inflation
on the Company's manufacturing and other operating costs. There can be no
assurance that the Company will achieve sufficient cost reductions or sell its
products at prices or in volumes sufficient to achieve profitability or offset
increases in its costs should they occur. Further, there can be no assurance
that, in the future, the Company will be able to interest major pharmaceutical
or biotechnology companies in entering licensing or supply agreements. See
"Forward-Looking Statements."
The Company's clinical research efforts are aimed primarily at clinical research
collaborations in the area of DNA-based vaccines and medications. Product
development efforts are focused primarily in three areas: i) developing
self-injectors targeted for the home use market; ii) developing pre-filled
syringes for use with the B-2000 and with other needle-free injectors presently
being developed; and iii) further developing the intradermal adapter for the
B-2000.
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) length of time to close product sales; ii) customer budget cycles;
iii) implementing cost reduction measures; iv) uncertainties and changes in
product sales due to third party payer policies and proposals relating to
healthcare cost containment; v) timing and amount of payments under licensing
and technology development agreements; and vii) timing of new product
introductions by the Company and its competition. The Company does not expect to
report net income from operations in fiscal 2000. See "Forward-Looking
Statements."
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30, 1998
Product sales decreased from $142,000 in the first quarter of fiscal 1999 to
$113,000 in the first quarter of fiscal 2000 due to decreases in the unit sales
volumes of both B-2000 devices and syringes. License and technology revenues
decreased to $100,000 in the current quarter compared to $138,000 in the same
quarter a year ago. This is due to that fact that licensing and technology
revenues in the first quarter of fiscal 2000 result from different agreements,
containing different terms, with different parties than licensing and technology
revenues in the same quarter a year ago.
Manufacturing expense increased by $90,000 from the first quarter of fiscal 1999
to the first quarter of fiscal 2000. On account of excess inventories of B-2000
devices and Biojector syringes the Company did not manufacture material
quantities of new products in the quarter ended June 30, 1999. This resulted in
approximately $91,000 less manufacturing overhead being absorbed and accounted
for the increase in manufacturing cost for the first quarter of fiscal 2000
compared to the same quarter a year ago. The Company believes that inventory
on-hand of B-2000 devices and syringes will, in most product categories, be
sufficient to meet product demand through fiscal 2000. Accordingly, the Company
does not foresee a return to high manufacturing volumes of either the B-2000 or
related syringes during the current fiscal year. See "Forward-Looking
Statements."
Research and development expense increased from $245,000 in the first quarter of
fiscal 1999 to $254,000 in the first quarter of fiscal 2000. The increase
resulted from higher consulting expenses and increased costs related to
prototype development.
<PAGE>
Selling, general and administrative expenses remained relatively constant,
decreasing slightly from $609,000 in the first quarter of fiscal 1999 to
$602,000 in the first quarter of fiscal 2000. Selling expense for the quarter
ended June 30, 1999 increased by $23,000 when compared with the same quarter a
year ago, primarily as a result of increased compensation and travel expenses.
General and administrative spending decreased by $30,000, primarily due to
decreased recruiting and investor relations expenses.
Other income consists of earnings on available cash balances and fluctuates
based on available cash balances.
Loss from discontinued operations is the operating loss from the Company's
former operations to develop and commercialize blood glucose monitoring
technology, the license to which was sold in June 1999. Expenses related to
discontinued operations declined from $986,000 in the quarter ended June 30,
1998 to $450,000 in the quarter ended June 30, 1999. The decline is a result of
decreased spending on research and development as the Company contemplated the
sale of the license.
Gain on sale of discontinued operations is the gain recognized from the sale of
the Company's blood glucose monitoring technology, and certain fixed assets
related to developing the technology, to a third party. The sale was completed
on June 30, 1999. The gross proceeds of the sale was $4 million. The gain
realized on the sale was approximately $2.9 million, net of associated expenses
of the transaction and a $500,000 provision for expenses to wind-up Marathon's
operations.
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 and warrants, 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 revenues
from sales of products. Net proceeds received from issuance of securities from
inception through June 30, 1999 totaled approximately $62.1 million.
Cash, cash equivalents and marketable securities totaled $1.4 million at June
30, 1999 compared to $1.3 million at March 31, 1999. The increase resulted
primarily from cash proceeds received from issuance of the Company's Series C
Preferred Stock and a minority interest capital contribution to Marathon
Medical, offset by operating cash requirements, capital asset purchases,
increases in product inventories and reduction in certain short term
liabilities.
The Company had stock subscriptions receivable totaling approximately $3 million
at March 31, 1999. In April 1999, the Company received $2.4 million in payment
of a subscription to the Company's Series C Preferred Stock and $597,000 in
payment of a subscription to a minority interest in the common stock of Marathon
Medical. Both stock subscriptions were from Elan pursuant to the provisions of
the 1997 securities purchase agreement between the Company and Elan. The use of
the proceeds from both stock purchases was restricted to paying Marathon
Medical's obligations and operating expenses.
<PAGE>
The Company believes that its current cash position, combined with revenues,
other cash receipts, and net proceeds from the sale of the glucose monitoring
technology will be sufficient to fund the Company's operations through the first
quarter of fiscal 2001. In addition, the Company is considering other potential
financing alternatives. Even if the Company is successful in obtaining
additional financing, unforeseen costs and expenses or lower than anticipated
cash receipts from product sales or research and development activities could
accelerate or increase the financing requirements. The Company has been
successful in raising required financing in the past and believes that
sufficient funds will be available to fund future operations. However, there can
be no assurance that the Company's efforts will be successful and there can be
no assurance that such financing will be available on terms which are not
significantly dilutive to existing shareholders. Failure to obtain needed
additional capital on terms acceptable to the Company, or at all, would
significantly restrict the Company's operations and ability to continue product
development and growth and materially adversely affect the Company's business.
The Company has no banking line of credit or other established source of
borrowing. See "Forward Looking Statements."
YEAR 2000 ISSUES The Company is in the process of assessing and implementing
remedial action with regard to potential Year 2000 ("Y2K") issues. The
assessment includes steps to review and obtain vendor certification of Y2K
compliance of current systems, testing system compliance and implementing
corrective action where necessary. A Y2K team composed of manager-level members
from Manufacturing, Purchasing, Information Services and Finance is continuing
to conduct the assessment. Assessment of the compliance of all critical systems,
plans for remedial action, if any, and estimates of the cost of such remedial
action have been completed. The cost to address the Company's Y2K issues have
been estimated to be immaterial and funds expended are expected to be derived
from normal maintenance and upgrade operating budgets. See "Forward-Looking
Statements."
Products
The Company's products do not incorporate either application or embedded
software and are therefore not subject to Y2K issues.
Information Systems The Company utilizes packaged application software for all
critical information systems functions, which have been certified by the vendors
as being Y2K compliant. This includes financial software, operating and
networking systems, application and data servers, PC and communications hardware
and core office automation software. The company is in the process of testing
the reliability of the application software and expects this to be complete by
mid August. See "Forward-Looking Statements."
Manufacturing Systems
The Company has received manufacturer certification of Y2K compliance for all
critical automated components used in manufacturing the Company's products.
<PAGE>
Supplier Base
The Company has implemented a Y2K audit program of suppliers critical to the
Company's operations. These suppliers have certified Y2K compliance of systems
critical to maintaining a continuing source of supply to the Company.
Risk
The Company will be at risk from external infrastructure failures that could
arise from Y2K failures, including failure of electrical power and
telecommunications. Investigation and assessment of the risk of failure of such
infrastructure is beyond the scope and resources of the Company. The Company
intends to rely on vendor certification of Y2K compliance and does not plan to
audit vendor systems to test their compliance. The Company will be at risk with
respect to vendors who certify their systems as being Y2K compliant but who are
unable to deliver potentially critical supplies and services to the Company on
account of Y2K noncompliance.
Business risks to the Company of not successfully identifying Y2K issues and
undertaking effective remedial action include the inability to ship product,
delay or loss of revenue and delay in manufacturing operations. The Company
believes that it has successfully identified critical Y2K issues and has
substantially completed required remedial action. Other than risks created by
infrastructure failures or by the Company's dealings with third parties, where
the actions of such third parties are beyond the Company's control, the Company
believes that it will have no material business risk from Y2K issues. There can
be no assurance that infrastructure failures will not occur or that third
parties, over which the Company has no control will successfully address their
own Y2K issues. See "Forward-Looking Statements."
FORWARD LOOKING STATEMENTS This report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements concern, among other things, anticipated
revenues from product sales and licensing and technology fees, expected
sufficiency of capital resources to meet the Company's future requirements,
future sources of working capital, and Year 2000 issues. Paragraphs of this
Report that include forward-looking statements are often identified with a
cross-reference to this section. Forward-looking statements are based on
expectations, assumptions, estimates and projections about the Company and the
industry in which the Company operates that involve risks and uncertainties.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the Company's actual results or industry
results to be materially different from the results, performance, or
achievements discussed or implied in the forward-looking statements. These risks
and uncertainties include the uncertainty of market acceptance of the Company's
jet injection products, uncertain successful completion of research and
development projects, the Company's need to enter into additional strategic
corporate licensing arrangements, the Company's history of losses and its
accumulated deficit and need for additional financing, the Company's limited
manufacturing experience, the Company's dependence on the performance of
existing and future corporate partners and other third parties, uncertainties
related to regulation by the FDA and the need to obtain approval of new products
and their application to additional drugs, the possibility of product liability
claims, dependence on key employees and the risks related to competition.
Forward-looking statements are based on the estimates and opinions of management
on the date the statements are made. The Company assumes no obligation to update
forward-looking statements if conditions or management's estimates or opinions
should change, even if new information becomes available or other events occur
in the future. For a more detailed description and discussion of such risks,
uncertainties and other factors, readers of this report are referred to the
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended March 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None during the quarter ended June 30, 1999.
Item 2. Changes in Securities
In May 1999, the Company issued to Petkevich & Partners L.L.C. a warrant to
purchase a total of 80,000 shares of Common Stock of the company at a price of
$0.625.
The warrants and the shares issued upon exercise of the warrants have been
issued pursuant to an exemption from registration under Rule 506 of Regulation D
and Section 4(2) of the Securities Act. In relying upon such exemption (1) the
Company did not engage in any "general solicitation," (ii) Petkevich & Partners
represented and the Company reasonably believed that it was an accredited
investor and 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, and was
provided access to all necessary and adequate information to enable the
purchaser to evaluate the financial risk inherent in making an investments, and
(iii) Petkevich & Partners represented that it was acquiring the shares for
itself and not for distribution.
In June 1999 in connection with the Company's purchase of Elan's interest
in Marathon, the Company and Elan agreed to certain changes in Elan's equity
holdings in the Company. Elan exchanged its Series B preferred stock, which
would have been convertible into a minimum of 1.34 million shares of the
Company's common stock without any more cash payments, for a warrant that
expires June 30, 2006 (the "Warrant"), to purchase 3.79 million shares of
Bioject's common stock for $1.50 per share. The Company has the right to redeem
the Warrant if it is exercised prior to June 30, 2004. Under the redemption
provisions, if Elan notifies the Company that it intends to exercise all or any
part of the Warrant to acquire stock in the Company, the Company has the right
to redeem the Warrant by paying Elan cash of $2.015 million, the original
issuance price of the Series B preferred stock, plus accrued interest at fifteen
per cent, compounded semi-annually from June 30, 1999. If Elan chooses to
exercise less than all of the shares covered by the Warrant, Bioject may
exercise its redemption right either for all of the shares covered by the
warrant or for only that portion being exercised, in which case the payment is
prorated in proportion to the portion of the warrant being exercised.
Also in June 1999 the terms of Elan's Series A convertible preferred stock
("Series A Stock") were modified. The modified terms fixed the conversion price
of the Series A Stock at $1.50, eliminating a prior provision that, in certain
circumstances, allowed the Series A Stock to be converted at 80% of the then
current fair market value of the Company's stock, if such value was less than
$1.50. The terms were also modified to give the Company the right to redeem the
Series A Stock for cash within ninety days of receiving notice of the intent to
convert all or part of the Series A Stock into common stock of the Company. The
redemption price is the original issuance price of the Series A Stock being
converted plus accumulated preferred stock dividends thereon from the date of
issuance of the Series A Stock. Modifying the terms of the Series A Stock
requires shareholder approval of an amendment to the Company's Articles of
Incorporation. Amended Articles of Incorporation, reflecting the modified terms,
are being presented for approval to the Company's shareholders at the Company's
annual meeting in September, 1999. The accompanying consolidated financial
statements reflect the amended Series A Stock terms as if the amended Articles
of Incorporation had already been adopted.
Item 3. Defaults Upon Senior Securities
None during the quarter ended June 30, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended June 30, 1999.
<PAGE>
Item 5. Other Information
TIMELY SUBMISSION OF SHAREHOLDER PROPOSALS
The Securities and Exchange Commission ("SEC") requires a registrant to
give shareholders notice of deadlines for timely submission of certain types of
shareholder proposals that shareholders wish to present for a vote on certain
SEC rules as they relate to the registrant's annual meeting date and relevant
provisions of its articles and by-laws. Set forth below are the deadlines
applicable to the Company's shareholders. The Company's Board has not yet acted
to set the annual meeting date; the following dates are based on an assumed
meeting date of September 14, 2000 for the Company's 2000 Annual Meeting.
In the event a shareholder does not notify the Company by April 14, 2000 of
an intent to be present at the 2000 Annual Meeting in order to present a
proposal for a vote (other than a proposal for the nomination of a director),
the Company will have the right to exercise its discretionary authority to vote
against the proposal, if presented, without including any information about the
proposal in its proxy materials.
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS:
10.64 Agreement to Amend Securities Purchase Agreement and Certain Related
Securities among Bioject Medical Technologies Inc., Elan International
Services Ltd. and Marathon Medical Technologies Inc.
10.65 Assignment among Bioject Medical Technologies Inc., Elan
Corporation plc. and JV Co.
10.66 Form of Series "P" Common Stock Purchase Warrant.
27.1 Financial Data Schedule
REPORTS ON FORM 8-K:
Form 8-K filed on April 20, 1999, private placement with Elan
International Services, Ltd. with exhibits 3.1.2 and 3.1.3.
Form 8-K filed on June 25, 1999, press release announcing Hoffman-La
Roche withdrawal from joint marketing plan.
Form 8-K filed on July 12, 1999, press release announcing the sale of
Marathon's Medical's blood glucose monitoring technology to Medisys, plc.
<PAGE>
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: August 12, 1999 /s/ James O'Shea
---------------------------------
James O'Shea
Chairman, Chief Executive Officer
and President
/s/ Michael A. Temple
---------------------------------
Michael A. Temple
Vice President and Chief Financial Officer
EXHIBIT 10.64
AGREEMENT TO AMEND
SECURITIES PURCHASE AGREEMENT
AND CERTAIN RELATED SECURITIES
This Agreement (the "Agreement") is made as of June 30, 1999 by and among
(a) Bioject Medical Technologies Inc., an Oregon corporation ("Bioject"), (b)
Elan International Services, Ltd., a Bermuda corporation ("EIS"), and (c)
Marathon Medical Technologies, Inc., an Oregon corporation ("Marathon"); and
amends that certain Securities Purchase Agreement dated as of October 15, 1997
(as amended at any time, the "Securities Purchase Agreement") and certain
related securities.
RECITALS
A. Bioject and EIS are parties to the Securities Purchase Agreement and
related documents with respect to the creation and funding of Marathon, which is
a joint venture company established to develop, manufacture and market products
relating to certain glucose monitoring technologies developed by Elan
Corporation, plc, an Irish public limited company and an affiliate of EIS
("Elan"; such technologies, collectively, the "Technology"). After the date
hereof, the parties intend that Marathon license the Technology to a certain
unaffiliated company or companies.
B. Bioject and EIS desire to set forth herein certain provisions relating
to Marathon, and, in connection therewith, to amend the terms of certain
existing arrangements between EIS and Bioject.
C. All terms used but not defined herein shall have the meanings ascribed
to them in the Securities Purchase Agreement.
AGREEMENT
NOW, THEREFORE, Bioject and EIS hereby agree as follows:
1. Series A Preferred Stock. The Securities Purchase Agreement and
Bioject's Articles of Amendment to the Articles of Incorporation (including
Section 6(a)(1) thereof) shall be amended, from and after the date hereof, to
provide that the conversion price of the Series A Preferred Stock shall be
$1.50, subject to adjustment as provided therein, rather than the conversion
price originally set forth therein.
In addition, a new sentence shall be added to the end of such section, as
follows: "In the event that any holder shall provide notice to the Corporation
of its intention to convert such holder's shares of Series A Preferred Stock, as
provided above, the Corporation shall have the right, within 90 days of receipt
of such notice and upon
<PAGE>
five business days' notice to the holders, to cause to be redeemed for cash the
shares of Series A Preferred Stock subject to such notice, at a price equal to
aggregate purchase price for such shares of Series A Preferred Stock plus
mandatory dividends thereon at a rate equal to 9% per annum, from the date of
issuance until the date redeemed in full. In the event that such cash amount is
not paid within such 90-day period, such redemption right shall lapse and be of
no further force and effect, and the holders shall thereupon have the right once
again to convert such shares of Series A Preferred Stock into shares of the
Corporation's Common Stock. During such 90-day (or shorter, if redeemed, as set
forth above) period, the holders of Series A Preferred Stock shall not convert
such stock into the Corporation's Common Stock, whether or not the Corporation
exercises its right of redemption."
Bioject covenants that it shall request and use its best efforts to obtain
shareholder approval of the amendment to its Articles of Incorporation in
accordance with this Section 1 at its next annual meeting of shareholders in
September 1999. Bioject represents to EIS that the board of directors of Bioject
has recommended or will recommend to the shareholders of Bioject that they vote
in favor of such amendment. EIS agrees that it shall vote all of its shares of
Bioject's capital stock, to the extent such shares are entitled to vote, for
such amendment.
2. Series B Preferred Stock. (a) EIS shall on the date hereof exchange all
of its shares of Series B Preferred Stock for a warrant to purchase up to
3,790,000 shares of Common Stock of Bioject; such warrant is in the form
attached hereto as Exhibit A, and it shall be executed and delivered by Bioject
to EIS on the date hereof. From and after the date hereof, all of such shares of
Series B Preferred Stock shall be canceled and of no further force and effect.
3. Termination of Rights and Obligations. As of the date hereof, the rights
and obligations of EIS with respect to Recital D, Section 1(d) and Section 5(d)
of the Securities Purchase Agreement shall terminate and be of no further force
and effect.
4. Certain Provisions Relating to Marathon. (a) EIS hereby sells and
delivers to Bioject all of EIS's right, title and interest in and to all of
EIS's shares of common stock of Marathon, consisting of 238,800 shares of common
stock, for the Purchase Price (as defined in Section 4(d)). In that regard, EIS
shall expeditiously cause to be delivered to Bioject share certificates and/or
stock powers in blank and duly endorsed, to effect such transfer. Each of EIS
and Marathon agrees that, as between themselves, from and after the date hereof,
the Newco Subscription and Stockholders Agreement dated as of October 15, 1997,
as amended, is terminated and of no further force and effect.
(b) Each of EIS and Bioject represents and warrants to the other party
that, other than as previously disclosed to the other party, it is not aware of
any liability or obligation of Marathon.
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<PAGE>
(c) Each of Bioject and Marathon agrees, jointly and severally, to assume
and be liable for all of the obligations and liabilities of Marathon and its
business, from and after the date hereof, and each of Bioject and Marathon
hereby releases and holds harmless EIS, Elan and their respective affiliates
from and against any and all liabilities or obligations, including without
limitation, any and all liabilities and obligations relating to Marathon and the
business of Marathon, from the commencement of its business through and
including the date hereof.
(d) As soon as practical after the date hereof, Marathon shall cause to be
paid out of the License Fee (as defined below), all unpaid accounts payable of
Marathon arising on or before the date hereof, excluding any employment-related
accounts payable (the "Payables"). Such amount shall include accrued and unpaid
inter-company accounts payable owing to Bioject and Elan in respect of certain
goods and/or services previously provided by Bioject and Elan to Marathon,
except that such amounts owing to Elan shall be reduced by the sum of all
markups on research and development costs invoiced to Bioject for the months
since March 1999 and by an additional $100,000. The final cash payment (the
"Purchase Price") to EIS for its shares of Marathon's common stock shall be the
product of (a) the License Fee less (i) the Payables and (ii) $100,000, and (b)
19.9%, less $200,000, as set forth below:
The Purchase Price = ((License Fee - the (a) Payables and (b) $100,000) *
19.9%) - $200,000
An illustration of the calculation of the Purchase Price and other payments is
set forth on Schedule 1 hereto; such schedule also sets forth an illustration of
the reconciliation of the outstanding liabilities and obligations of Marathon
and the payment of funds to be received by Marathon, to each of Bioject and EIS,
respectively. The parties acknowledge that the amounts described above shall be
disbursed from the proceeds to Marathon of a license of the Technology to an
unaffiliated third party on the date hereof.
(e) Marathon and Bioject shall, prior to Marathon's liquidation as provided
in Section 4(f) below, cause to be licensed, on customary terms and conditions
that are reasonably satisfactory to EIS, the Technologies, to an unaffiliated
third party previously disclosed to EIS and Marathon; in that regard, the
parties acknowledge that Marathon shall receive, among other things, an up-front
license fee of $4 million (the "License Fee").
(f) It is the intention of the parties to liquidate and to wind up the
business of Marathon, and to cause Marathon's assets to be distributed to
Bioject and cause Bioject to assume Marathon's liabilities. Each of Bioject and
Marathon covenants (x) to effect such actions as soon as practicable after the
date hereof (after giving effect to the other actions described above in this
Section 4) and (y) to ensure, to the greatest extent practicable, that neither
EIS nor any of its affiliates shall have any liabilities or obligations
(including tax or regulatory filing obligations relating only to the operations
of Marathon) in connection therewith. In connection with the foregoing, Bioject
agrees that it shall indemnify and hold harmless EIS, Elan and their respective
affiliates from
3
<PAGE>
and against any and all liabilities of, incurred by or related in any way to
Marathon or the business of Marathon from and after the date hereof (excluding
all taxes, including withholding obligations, imposed with respect to EIS or
Elan in connection with the transactions contemplated hereby).
5. Further Assurances. Each party covenants that from and after the date
hereof it shall take all reasonable actions (including any and all actions
necessary to cause the prompt resignation of the directors of Marathon from its
board of directors) and execute and deliver any appropriate documents and
instruments to implement or better assure to the other parties the transactions
described herein and/or the benefits intended to afforded hereby.
6. Disclosure. The parties agree that prior to issuing any press release or
making any public disclosure of the transactions contemplated hereby, each party
shall obtain the approval of the others to the text and contents thereof, which
approval shall not be unreasonably withheld or delayed; it being understood,
that since each party may be obligated to make such disclosures as it determines
in good faith are required by applicable law, including applicable securities
laws, the other party shall respond to any such request by the requesting party
within one business day of any such request.
7. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of laws, and shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Any dispute arising hereunder shall be adjudicated in any federal or
state court sitting in the county, city and state of New York. Except as set
forth above, the Securities Purchase Agreement and the other documents executed
in connection therewith shall remain in full force and effect as originally
stated therein or as amended at any time. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute one
agreement. This Agreement shall be binding upon and inure to the benefit of the
parties' respective successors and assigns.
4
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement as of the date first written above.
BIOJECT MEDICAL TECHNOLOGIES INC.
By: ------------------------------------------
Name:
Title:
MARATHON MEDICAL TECHNOLOGIES, INC.
By: ------------------------------------------
Name:
Title:
ELAN INTERNATIONAL SERVICES, LTD.
By: ------------------------------------------
Name:
Title:
ASSIGNMENT
DATE: 30th June 1999
PARTIES:
(1) MARATHON MEDICAL TECHNOLOGIES, INC., an Oregon corporation, having an
office at 7620 S.W. Bridgeport Road, Portland, Oregon 97224, United States
of America ("Marathon")
(2) HYPOGUARD DEVELOPMENT CO. LIMITED an exempted company incorporated under
the laws of Bermuda, and having its registered office at Clarendon House, 2
Church St., Hamilton, Bermuda ("JV Co").
(3) ELAN CORPORATION, PLC, an Irish company, with a registered office at
Lincoln House, Lincoln Place, Dublin 2, Ireland ("Elan");
RECITALS:
A. Marathon and Elan entered into a license agreement dated 15th October 1997
("Marathon Licence") for the development of a glucose monitoring device.
B. Marathon has agreed with the JV Co to assign the benefit of the Marathon
License, the goodwill and custom associated with such Marathon Licence, and
all other intellectual property owned or licensed by Marathon, to JV Co in
accordance with the terms set forth in this Agreement.
1. ASSIGNMENT
Subject to the terms and conditions hereof, Marathon as beneficial owner hereby
assigns to the JV Co all the following property, rights, claims and liberties:
1.1 the full benefit of the Marathon Licence;
1.2 the goodwill and custom associated with the Marathon Licence; and
1
<PAGE>
1.3 all JV SUB KNOW-HOW, JV SUB PATENT RIGHTS and all its rights in and to the
JOINT IMPROVEMENTS (such words in capitals to have the meaning defined in
the Marathon Licence) and all other intellectual property owned or licensed
by Marathon including but not limited to:
a) in vitro data on sensor improvements/expirimentation,
b) in vivo data from human trials,
c) design analysis,
d) chemical analysis including toxicology data,
e) sensor membrane analysis and experimentation: membrane
thickness, solvents,
f) active layer composition data,
g) variability and drift studies,
h) electronic and software designs,
i) electronic pulsing variations and associated data,
j) electronic sampling variations and associated data, and
k) monitor housing and design.
TO HOLD the same unto JV Co absolutely.
2. CONSIDERATION
2.1 In consideration of the assignment set forth in Clause 1 above, JV Co shall
pay the following amounts to Marathon:
(i) $4,000,000 in cash upon the execution of this Assignment, and
(ii) the royalty payments described in Clause 2.2 below.
2.2 Subject to the following sentence, JV Co shall pay Marathon royalty
payments equal to 3% of (i) all In Market Net Sales of Products and (ii)
all Licence Fees following the date hereof in the Territory. After Marathon
has received $10 million in cumulative royalty payments on the Products
from JV Co, the royalty payable by JV Co to Marathon pursuant to the
preceding sentence shall be reduced from 3% to 1%.
"Affiliate" of any entity means any other entity controlling, controlled by
or under common control with such first entity, as the case may be, where
"control" means (a) in the context of a company limited by shares, the
direct or indirect ownership of at least 50% of the voting rights attaching
to the shares thereof, or (b) the ability to control or direct the affairs
of the other entity or (c) if not meeting the preceding criteria, the
maximum control or ownership right permitted in the country where such
entity exists, and "controlling" and "controlled" shall be construed
accordingly.
2
<PAGE>
"In Market" shall mean the sale of the Products by JV Co or JV Co's
sublicensee or any of their Affiliates to a third party (other than an
Affiliate of JV Co) such as (i) an end-user consumer of the Product or (ii)
a wholesaler, distributor, managed care organisation, hospital or pharmacy
or other third party payor for final commercial sale by such party to the
consumer, and shall exclude in any event the transfer pricing of the
Products by JV Co to an Affiliate or any permitted sub-licensee.
"Licence Fees" shall mean consideration paid by a third party (other than
an Affiliate of JV CO) to JV Co or its Affiliates for the granting of
rights, whether by license, sublicense or otherwise of any rights relating
to the development or commercialisation of one or more Products, including
licence fees, advance royalties on sales and other ongoing fees, but
excluding bona fide research or development fees or payments.
"Net Sales" shall mean the gross amount invoiced for sales of the Products
reduced by the following to the extent that they are properly allocable to
the quantity of Products so sold: all trade, quantity and cash discounts
allowed; credits or allowances actually granted on account of rejections;
returns, billing errors and retroactive price reductions (including,
without limitation, shelf stock adjustments); credits, rebates, chargeback
rebates, fees, reimbursements or similar payments granted or given to
wholesalers and other distributors, buying groups, health care insurance
carriers, governmental agencies and other institutions in respect of the
purchase price; freight, transportation, insurance or other delivery
charges; and all taxes (except income taxes), tariffs, duties and other
similar governmental charges paid by the seller on sale of the Products and
not reimbursed by the purchaser.
"Products" shall have the meaning assigned in the Amended Marathon Licence.
For the avoidance of doubt, this definition of "Products" is not in any
material respect different from the definition of "Products" in the
Marathon Licence.
"Territory" shall have the meaning assigned in the Amended Marathon
Licence.
2.3 Royalty payments due to Marathon pursuant to Clause 2.2 above shall be
payable semi-annually on the 45th day following the end of each six month
period ending 30th June or 31st December. JV Co reserves the right to
deduct before effecting payment to Marathon the amount of any taxation it
is required by law to withhold from Marathon in respect of the payment of
royalties due hereunder to Marathon. In the event of any such deduction, JV
Co shall secure and furnish promptly to Marathon official tax receipts
evidencing the
3
<PAGE>
payment of such taxation.
2.4 JV Co shall deliver to Marathon semi-annually, on the 45th day following
the end of each six month period referred to in Clause 2.3 above, a sales
summary showing all In Market sales of Products during the immediately
preceding six month period, a statement certifying its calculation of the
In Market Net Sales from gross revenues during such six month period, the
units of Products so sold, and a computation of the amounts due to
Marathon.
2.5 For the 90 day period following the close of each calendar year, JV Co
will, upon request, provide Marathon's independent certified accountants
(reasonably acceptable to JV Co) with access, during regular business hours
and subject to customary confidentiality provisions which are reasonably
acceptable to JV Co, to JV Co's books and records relating to the Products,
solely for the purpose of verifying the accuracy and reasonable composition
of the calculations hereunder (including the half yearly royalty
calculation) for the calendar year then ended.
2.6 In the event of a discovery of a discrepancy which exceeds 5% or $5,000,
whichever is the lesser, of the amount due to Marathon for any six month
period referred to in Clause 2.3, the cost of such accountant shall be
borne by JV Co; otherwise, such cost shall be borne by Marathon.
3. MARATHON REPRESENTATIONS
3.1 Marathon represents and warrants to JV Co that:
(i) all development work in the ELAN GLUCOSE MONITOR TECHNOLOGY (as
defined in the Marathon Licence) has been performed by Marathon, or by
a third party on behalf of Marathon so that Marathon is the owner of
all intellectual property rights arising or developed during such work
relating to the ELAN GLUCOSE MONITOR TECHNOLOGY; and
(ii) Marathon has the sole, unrestricted and unencumbered right to assign
the Marathon Licence, the goodwill and custom associated with the
Marathon License, and all other intellectual property owned or
licensed by Marathon as more fully described in Clause 1.3 above, to
JV Co.
3.2 As soon as is reasonably possible following the execution of this
Assignment, Marathon shall furnish a legal opinion with respect to Marathon
in a form which is reasonably accepted to JV Co.
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<PAGE>
4. AMENDMENT TO MARATHON LICENCE
4.1 Immediately after the assignment of the Marathon Licence to JV Co, the
Marathon Licence shall be amended and restated as set forth in the Amended
Marathon Licence Agreement, of even date herewith, by and among Elan and JV
Co, in the form attached as Exhibit A hereto (the "Amended Marathon
Licence"). The Amended Marathon Licence shall replace and supersede the
Marathon Licence in its entirety.
4.2 The parties to this Assignment here intend to clarify their mutual
understanding of the Marathon Licence (as replaced herein by the Amended
Marathon Licence). It is the understanding of all of the parties that the
technology licensed from Elan to JV Co does not include any infusion device
as part of the combination infusor/monitor incorporating a ratchet
mechanism. Such infusion devices contemplated by the Marathon Licence (as
replaced herein by the Amended Marathon Licence) only include those having
a flexible diaphragm drug reservoir capable of deformation upon the
introduction of pressurized gas and only for use in combination with a
monitor device as disclosed and described in the Elan Glucose Monitor
Technology (as defined in the Amended Marathon Licence). Furthermore, it is
the understanding of the parties to this Assignment that the Field (as
defined in the Amended Marathon Licence) does not contemplate the use of
any cleaning fluid or compound in connection with the Elan Glucose Monitor
Technology.
5. FURTHER ASSURANCE
At the request and cost of JV Co, Marathon, at all times after the date of this
Assignment, shall do all acts and execute all documents as may be reasonably
necessary or desirable to secure the vesting in the JV Co of the Marathon
Licence, the goodwill and custom associated with the Marathon Licence, and all
other intellectual property owned or licensed by Marathon, free from all liens,
charges, options or encumbrances or adverse interests of any kind.
6. NOTICES
Any notice required or permitted to be given under this Assignment shall be
sufficiently given if in writing and delivered by registered or certified mail
(return receipt requested), facsimile (with confirmation of transmittal),
overnight courier (with confirmation of delivery), or hand delivery to the
appropriate party at the address set forth below, or to such other address as
such party may from time to time specify for that purpose in a notice similarly
given:
5
<PAGE>
If to Marathon:
Marathon Medical Technologies, Inc.
7620 S.W. Bridgeport Road,
Portland
Oregon 97224
United States of America
Attn: President & Chief Executive Officer
Fax: 503 620 6431
If to JV Co:
Hypoguard Development Co. Limited
Clarendon House
2 Church Street
Hamilton
Bermuda HM11
Attn: David Doyle
Fax: 441 292 4720
If to Elan:
Elan Corporation, plc
Lincoln House
Lincoln Place
Dublin 2
Ireland
Attn: Vice President & General Counsel
Elan Pharmaceutical Technologies
A division of Elan Corporation, plc
Fax: 353 1 709 4124
Any such notice shall be effective (i) if sent by mail, as aforesaid, five
business days after mailing, (ii) if sent by facsimile, as aforesaid, when sent,
and (iii) if sent by courier or hand delivered, as aforesaid, when received.
Provided that if any such notice shall have been sent by mail and if on the date
of mailing thereof or during the period prior to the expiry of the third
business day following the date of mailing there shall be a general postal
disruption (whether as a result of rotating strikes or otherwise) then such
notice shall not become effective until the fifth business day following the
date of resumption of normal mail service.
6
<PAGE>
7. DISPUTE PROCEDURE
7.1 If a dispute arises between any of the parties to this Assignment and which
cannot be resolved in the normal course of events, any party to the dispute
may give notice in writing to the other party or parties as applicable,
specifying the subject matter of the dispute and its proposal for its
resolution. Each party must procure that the dispute is considered by their
respective authorised representatives and that such parties use all
reasonable endeavours, in good faith, to resolve the dispute within 14 days
of the date of the notice specifying the dispute. If the authorised
representatives reach agreement on the matter in dispute in the period
specified in this Clause 7.1, the parties shall procure that their
respective representatives sign a joint memorandum to that effect recording
the resolution and procure that such agreement is fully and promptly
carried into effect.
7.2 If the authorised representatives fail to reach agreement, any party to
this Assignment may refer the matter to, in the case of Marathon, the
President & Chief Operating Officer, in the case of Elan, the President of
Elan Pharmaceutical Technologies and, in the case of JV Co, the JV Co's
management committee (together the "Senior Officers"). The Parties shall
respectively procure that the Senior Officers attempt in good faith to
resolve the dispute. If the Senior Officers reach agreement on the matter
in dispute within 14 days of the dispute being referred to them (or such
other period as the parties may mutually agree in writing) the parties
shall procure that their respective Senior Officers shall sign a joint
memorandum to that effect recording the resolution and procure that such
agreement is promptly and fully carried in to effect.
7.3 The dispute resolution procedure shall have been exhausted if the matter in
dispute:
7.3.1 has not been resolved in accordance with Clause 7.1 within the
relevant period and is not referred to the Senior Officers within
the relevant period; or
7.3.2 where it is so referred, has not been resolved in accordance with
Clause 7.2 within the relevant period.
7.4 For the avoidance of doubt, the fact that the dispute resolution procedure
has been exhausted without resolution shall not prevent the parties from
agreeing that the dispute be referred to an independent alternative form of
dispute resolution and/or to arbitration.
7.5 The forgoing provisions shall not prevent any party from commencing legal
proceedings or applying to the court for injunctive or other interim relief
at any time.
7
<PAGE>
8. APPLICABLE LAW
This Assignment shall be governed by the laws of the State of New York, without
regard to principles of conflicts of law. Subject to the provisions of Clause 7,
each of the parties hereby irrevocably submits to the jurisdiction of any New
York State or United States Federal court sitting in the County, City and State
of New York over any disputes arising out of or related to this Assignment which
are not resolved after the dispute resolution procedure set out in Clause 7 has
been exhausted, and each party hereby waives the defence of any inconvenient
forum for the maintenance of such action.
8
<PAGE>
IN WITNESS whereof the parties have executed and delivered this document the day
and year first above written.
SIGNED BY: /s/ Illegible
----------------------------------
for and on behalf of
MARATHON MEDICAL TECHNOLOGIES, INC.
in the presence of: /s/ Illegible
------------------------
SIGNED BY:
----------------------------------
for and on behalf of
HYPOGUARD DEVELOPMENT CO LIMITED
in the presence of: ------------------------
SIGNED BY:
----------------------------------
for and on behalf of
ELAN CORPORATION, PLC
in the presence of: ------------------------
EXHIBIT 10.66
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE
EVIDENCED BY AN OPINION OF WARRANTHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM
ANY PROPOSED TRANSFER OR ASSIGNMENT.
SERIES "P" COMMON STOCK PURCHASE WARRANT
Bioject Medical Technologies Inc.
THIS CERTIFIES that for good and valuable consideration received, Elan
International Services, Ltd., or registered assigns, is entitled, upon the terms
and subject to the conditions hereinafter set forth, to acquire from Bioject
Medical Technologies Inc., an Oregon corporation (the "Corporation") up to
3,790,000 fully paid and nonassessable shares of common stock, without par
value, of the Corporation ("Warrant Stock") at a purchase price per share (the
"Exercise Price") of $1.50.
1. Term of Warrant
Subject to the terms and conditions set forth herein, this Warrant shall be
exercisable, in whole or from time to time part, at any time on or after the
date hereof and at or prior to 11:59 p.m., Pacific Standard Time, on June 30,
2006 (the "Expiration Time").
2. Exercise of Warrant
The purchase rights represented by this Warrant are exercisable by the
registered holder hereof, in whole or in part, at any time and from time to time
at or prior to the Expiration Time by the surrender of this Warrant and the
Notice of Exercise form attached hereto duly executed to the office of the
Corporation at 7620 S.W. Bridgeport Road, Portland, Oregon 97224 (or such other
office or agency of the Corporation as it may designate by notice in writing to
the registered holder hereof at the address of such holder appearing on the
books of the Corporation), and upon payment of the Exercise Price for the shares
thereby purchased (by cash or by check or bank draft payable to the order of the
Corporation or by cancellation of indebtedness of the Corporation to the holder
hereof, if any, at the time of exercise in an amount equal to the purchase price
of the shares thereby purchased); whereupon the holder of this Warrant shall be
entitled to receive from the Corporation a stock certificate in proper form
representing the number of shares of Warrant Stock so purchased.
3. Issuance of Shares; No Fractional Shares of Scrip
Certificates for shares purchased hereunder shall be delivered to the
holder hereof by the Corporation's transfer agent at the Corporation's expense
within a reasonable time after the date on which this Warrant shall have been
exercised in accordance with the terms hereof. Each certificate so delivered
shall be in such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or, subject to applicable laws,
other name as shall be requested by such holder. If, upon exercise of this
Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant
are purchased prior to the Expiration Time, one or more new warrants
substantially in the form of, and on the terms in, this Warrant will be issued
for the remaining number of shares of Warrant Stock not purchased upon exercise
of this Warrant. The Corporation hereby represents and warrants that all shares
of Warrant Stock which may be issued upon the exercise of this Warrant will,
upon such exercise, be duly
-1-
<PAGE>
and validly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issuance thereof (other than
liens or charges created by or imposed upon the holder of the Warrant Stock).
The Corporation agrees that the shares so issued shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered for
exercise in accordance with the terms hereof. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.
4. Charges, Taxes and Expenses
Issuance of certificates for shares of Warrant Stock upon the exercise of
this Warrant shall be made without charge to the holder hereof for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Corporation,
and such certificates shall be issued in the name of the holder of this Warrant
or in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of Warrant Stock
are to be issued in a name other than the name of the holder of this Warrant,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the holder hereof.
5. No Rights as Shareholders
This Warrant does not entitle the holder hereof to any voting rights or
other rights as a shareholder of the Corporation prior to the exercise hereof.
6. Redemption Right
In the event that the holder provides notice to the Corporation of its
intention to exercise all or any part of this Warrant pursuant to the provisions
of Section 2, the Corporation shall have the right, within 90 days of receipt of
such notice and upon five business days' notice to the holder, to cause to be
redeemed for cash this Warrant, subject to such notice, at a price equal to
$2.015 million plus accrued interest at a rate equal to 15% per annum,
compounded semi-annually, from June 30, 1999 until the date redeemed (the
"Redemption Price"). In the event that such cash amount is not paid within such
90-day period, such redemption right shall lapse and be of no further force and
effect, and the holder shall thereupon have the right once again to exercise
this Warrant. During such 90-day (or shorter, if redeemed, as set forth above)
period, the holder shall not exercise all or part of this Warrant into the
Corporation's Common Stock, whether or not the Corporation exercises its right
of redemption. The corporation's right to redeem expires at 11:59 p.m., Pacific
Standard Time, on June 30, 2004 unless a notice of exercise has been delivered
to the corporation within the prior 90 days, in which case the redemption right
expires immediately following the end of the 90-day period to the extent not
utilized. If the holder provides notice that it intends to exercise only a part
of this Warrant, the Corporation has the right to redeem the entire Warrant for
the Redemption Price, or only that portion of the Warrant which the holder
intends to exercise. In the case of a partial redemption, the corporation shall
pay that percentage of the Redemption Price that equals the percentage of the
Warrant to the exercised by the holder. A partial redemption shall not effect
the right of the corporation to redeem the remainder of this Warrant in the
future, subject to this Section 6.
7. Exchange and Registry of Warrant
This Warrant is exchangeable, upon the surrender hereof by the registered
holder at the above-mentioned office or agency of the Corporation, for a new
Warrant of like tenor and dated as of such exchange. The Corporation shall
maintain at the above-mentioned office or agency a registry showing the name and
address of the registered holder of this Warrant. This Warrant may be
surrendered for exchange, transfer or exercise, in accordance with its terms, at
such office or agency of the Corporation, and the Corporation shall be entitled
to rely in all respects, prior to written notice to the contrary, upon such
registry.
-2-
<PAGE>
8. Loss, Theft, Destruction or Mutilation of Warrant
Upon receipt by the Corporation of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and in case of
loss, theft or destruction of indemnity or security reasonably satisfactory to
it, and upon reimbursement to the Corporation of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if
mutilated, the Corporation will make and deliver a new Warrant of like tenor and
dated as of such cancellation, in lieu of this Warrant.
9. Saturdays, Sundays and Holidays
If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or a Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
10. Merger, Sale of Assets, Etc.
If at any time the Corporation proposes to merge or consolidate with or
into any other corporation, effect any reorganization, or sell or convey all or
substantially all of its assets to any other entity, then, as a condition of
such reorganization, consolidation, merger, sale or conveyance, the Corporation
or its successor, as the case may be, shall enter into a supplemental agreement
to make lawful and adequate provision whereby the holder shall have the right to
receive, upon exercise of the Warrant, the kind and amount of equity securities
which would have been received upon such reorganization, consolidation, merger,
sale or conveyance by a holder of a number of shares of common stock equal to
the number of shares issuable upon exercise of the Warrant immediately prior to
such reorganization, consolidation, merger, sale or conveyance. If the property
to be received upon such reorganization, consolidation, merger, sale or
conveyance is not equity securities, the Corporation shall give the holder of
this Warrant ten (10) business days prior written notice of the proposed
effective date of such transaction, and if this Warrant has not been exercised
by or on the effective date of such transaction, it shall terminate.
11. Subdivision, Combination, Reclassification, Conversion, Etc.
If the Corporation at any time shall, by subdivision, combination,
reclassification of securities or otherwise, change the Warrant Stock into the
same or a different number of securities of any class or classes, this Warrant
shall thereafter entitle the holder to acquire such number and kind of
securities as would have been issuable in respect of the Warrant Stock (or other
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change) as the result of such change if this Warrant had been exercised in full
for cash immediately prior to such change. The Exercise Price hereunder shall be
adjusted if and to the extent necessary to reflect such change. If the Warrant
Stock or other securities issuable upon exercise hereof are subdivided or
combined into a greater or smaller number of shares of such security, the number
of shares issuable hereunder shall be proportionately increased or decreased, as
the case may be, and the Exercise Price shall be proportionately reduced or
increased, as the case may be, in both cases according to the ratio which the
total number of shares of such security to be outstanding immediately after such
even bears to the total number of shares of such security outstanding
immediately prior to such event. The Corporation shall give the holder prompt
written notice of any change in the type of securities issuable hereunder, any
adjustment of the Exercise Price for the securities issuable hereunder, and any
increase or decrease in the number of shares issuable hereunder.
-3-
<PAGE>
12. Transferability; Compliance with Securities Laws
(a) This Warrant may not be transferred or assigned in whole or in part
without compliance with all applicable federal and state securities laws by the
transferor and transferee (including the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Corporation, if
requested by the Corporation). Subject such restrictions, prior to the
Expiration Time, this Warrant and all rights hereunder are transferable by the
holder hereof, in whole or in part, at the office or agency of the Corporation
referred to in Section 1 hereof. Any such transfer shall be made in person or by
the holder's duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form attached hereto properly endorsed.
(b) The Holder of this Warrant, by acceptance hereof, acknowledges that
this Warrant and the Warrant Stock issuable upon exercise hereof are being
acquired solely for the holder's own account and not as a nominee for any other
party, and for investment, and that the holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except under circumstances that will not result in a violation
of the Securities Act of 1933, as amended, or any state securities laws. Upon
exercise of this Warrant, the holder shall, if requested by the Corporation,
confirm in writing, in a form satisfactory to the Corporation, that the shares
of Warrant Stock so purchased are being acquired solely for holder's own account
and not as a nominee for any other party, for investment, and not with a view
toward distribution or resale.
(c) The Warrant Stock has not been and will not be registered under the
Securities Act of 1933, as amended, and this Warrant may not be exercised except
by (i) the original purchaser of this Warrant from the Corporation or (ii) an
"accredited investor" as defined in Rule 501(a) under the Securities Act of
1933, as amended. Each certificate representing the Warrant Stock or other
securities issued in respect of the Warrant Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION
OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION
OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
13. Representations and Warranties
The Corporation hereby represents and warrants to the holder hereof that:
(a) during the period this Warrant is outstanding, the Corporation will
reserve from its authorized and unissued common stock a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise of this
Warrant;
(b) the issuance of this Warrant shall constitute full authority to the
Corporation's officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the shares of
Warrant Stock issuable upon exercise of this Warrant;
(c) the Corporation has all requisite legal and corporate power to execute
and deliver this Warrant, to sell and issue the Warrant Stock hereunder, to
issue the common stock issuable upon exercise of the Warrant Stock
-4-
<PAGE>
and to carry out and perform its obligations under the terms of this Warrant;
(d) all corporate action on the part of the Corporation, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Warrant by the Corporation, the authorization, sale,
issuance and delivery of the Warrant Stock, the grant of registration rights as
provided herein and the performance of the Corporation's obligations hereunder
has been taken;
(e) the Warrant Stock, when issued in compliance with the provisions of
this Warrant and the Corporation's Articles of Incorporation (as they may be
amended from time to time (the "Articles")), will be validly issued, fully paid
and nonassessable, and free of all taxes, liens or encumbrances with respect to
the issue thereof, and will be issued in compliance with all applicable federal
and state securities laws; and
(f) the issuance of the Warrant Stock will not be subject to any preemptive
rights, rights of first refusal or similar rights.
14. Corporation
The Corporation will not, by amendment of its Articles or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of the Warrant against impairment.
15. Governing Law
This Warrant shall be governed by and construed in accordance with the laws
of the State of Oregon.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officers.
Dated: ---------------------, 1999
BIOJECT MEDICAL TECHNOLOGIES INC.
By: ----------------------------------
Name: Michael Temple
Title: Vice President, Chief Financial Officer & Secretary
-5-
<PAGE>
NOTICE OF EXERCISE
To: Bioject Medical Technologies Inc.
(1) The undersigned hereby elects to purchase ________ shares of common
stock of Bioject Medical Technologies Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full, together
with all applicable transfer taxes, if any.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of common stock to be issued upon exercise hereof
are being acquired solely for the account of the undersigned and not as a
nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of common stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares of
common stock in the name of the undersigned or in such other name as is
specified below:
------------------------------
(Name)
------------------------------
(Address)
(3) The undersigned represents that (a) he, she or it is the original
purchaser from the Corporation of the attached Warrant or an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act of 1933, as
amended and (b) the aforesaid shares of common stock are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares.
- --------------------------- ----------------------------------------
(Date) (Signature)
-6-
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required
information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of common stock of Bioject Medical Technologies Inc. set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint Attorney -------------------
to make such transfer on the books of Bioject Medical Technologies Inc.,
maintained for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof are being acquired for investment and that the Assignee will not
offer, sell or otherwise dispose of this Warrant or any shares of stock to be
issued upon exercise hereof except under circumstances which will not result in
a violation of the Securities Act of 1933, as amended, or any state securities
laws. Further, the Assignee shall, if requested by the Corporation, confirm in
writing, in a form satisfactory to the Corporation, that the shares of stock so
purchased are being acquired for investment and not with a view toward
distribution or resale.
Dated: ----------------------------------------
Holder's Signature: ---------------------------
Holder's Address:
-----------------------------------------------
-----------------------------------------------
Guaranteed Signature:
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those action in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 1,368,900
<SECURITIES> 0
<RECEIVABLES> 127,619
<ALLOWANCES> 0
<INVENTORY> 1,212,941
<CURRENT-ASSETS> 6,789,186
<PP&E> 4,615,711
<DEPRECIATION> 2,791,405
<TOTAL-ASSETS> 9,153,261
<CURRENT-LIABILITIES> 1,989,683
<BONDS> 0
0
13,915,852
<COMMON> 50,182,885
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,153,261
<SALES> 112,682
<TOTAL-REVENUES> 212,682
<CGS> 62,507
<TOTAL-COSTS> 361,445
<OTHER-EXPENSES> 1,216,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (987,180)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,362,016)
<DISCONTINUED> 2,402,880
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,040,864
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
