10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2001
OR
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____

Commission file number 0-15360

BIOJECT MEDICAL TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Oregon	93-1099680
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7620 SW Bridgeport Road Portland, Oregon	97224
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 503-639-7221

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 [   ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock without par value	10,528,433
(Class)	(Outstanding at February 6, 2002)

TABLE OF CONTENTS

PART 1 — FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
Exhibit 10.1
Exhibit 10.2

BIOJECT MEDICAL TECHNOLOGIES INC.
FORM 10-Q
INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — December 31, 2001 and March 31, 2001	2
	Consolidated Statements of Operations — Three and Nine Months Ended December 31, 2001 and 2000	3
	Consolidated Statements of Cash Flows — Nine Months Ended December 31, 2001 and 2000	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
PART II - OTHER INFORMATION
Item 2.	Changes in Securities and Use of Proceeds	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
Item 6.	Exhibits and Reports on Form 8-K	12
Signatures		13

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PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

				December 31,			March 31,
				2001			2001
ASSETS
Current assets:
	Cash and cash equivalents			$	12,541,432		$	6,254,544
	Short-term marketable securities				3,987,050			5,933,664
	Accounts receivable, net of allowance for doubtful accounts of $36,000 and $41,000				539,860			439,809
	Inventories				1,844,521			1,019,601
	Other current assets				431,560			155,174
			Total current assets		19,344,423			13,802,792
Long-term marketable securities					13,725,007			2,869,031
Noncurrent receivable					6,770			11,540
Property and equipment, at cost:
	Machinery and equipment				2,371,799			2,225,427
	Production molds				1,186,340			1,159,103
	Furniture and fixtures				193,481			179,312
	Leasehold improvements				95,604			98,450
	Assets in process				1,776,797			95,604
					5,624,021			3,757,896
	Less - accumulated depreciation				(3,321,498	)		(3,075,098	)
					2,302,523			682,798
Other assets					679,002			622,850
			Total assets	$	36,057,725		$	17,989,011
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	492,976		$	323,356
	Accrued payroll				312,119			271,146
	Other accrued liabilities				313,969			235,263
	Deferred revenue				972,361			101,640
			Total current liabilities		2,091,425			931,405
Long-term liabilities:
	Long-term lease payable				10,887			16,114
	Deferred revenue				410,019			367,289
Commitments
Shareholders’ equity:
	Preferred stock, no par value, 10,000,000 shares authorized; issued and outstanding:
	Series A Convertible - 952,738 shares, $15 stated value				17,149,000			13,453,593
	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 10,527,533 and 8,144,973 shares at December 31, 2001 and March 31, 2001, respectively				87,805,336			67,902,703
	Accumulated deficit				(73,808,942	)		(67,082,093	)
		Total shareholders’ equity			33,545,394			16,674,203
		Total liabilities and shareholders’ equity		$	36,057,725		$	17,989,011

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended December 31,						Nine Months Ended December 31,
			2001			2000			2001			2000
Revenue:
	Net sales of products		$	560,516		$	267,098		$	2,112,779		$	925,417
	Licensing and technology fees			434,729			210,562			597,675			587,552
				995,245			477,660			2,710,454			1,512,969
Operating expenses:
	Manufacturing			1,272,129			552,643			2,957,686			1,730,371
	Research and development			633,343			643,029			1,807,035			1,422,547
	Selling, general and administrative			1,265,189			724,032			3,197,331			2,168,182
		Total operating expenses		3,170,661			1,919,704			7,962,052			5,321,100
Operating loss				(2,175,416	)		(1,442,044	)		(5,251,598	)		(3,808,131	)
Interest income				317,630			230,174			1,044,156			638,218
Other loss				—			—			—			(4,947	)
				317,630			230,174			1,044,156			633,271
Loss before income taxes				(1,857,786	)		(1,211,870	)		(4,207,442	)		(3,174,860	)
Provision for income taxes				—			—			—			—
Loss from operations before preferred stock dividend				(1,857,786	)		(1,211,870	)		(4,207,442	)		(3,174,860	)
Preferred stock dividend				(1,904,668	)		(295,777	)		(2,519,407	)		(858,713	)
Net loss allocable to common shareholders			$	(3,762,454	)	$	(1,507,647	)	$	(6,726,849	)	$	(4,033,573	)
Basic and diluted net loss per common share			$	(0.38	)	$	(0.19	)	$	(0.71	)	$	(0.56	)
Shares used in per share calculations				9,961,320			7,867,246			9,532,913			7,217,201

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Nine Months Ended December 31,
				2001			2000
Cash flows from operating activities:
	Net loss allocable to common shareholders			$	(6,726,849	)	$	(4,033,573	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Compensation expense related to stock options			16,587			16,020
		Contributed capital for services			284,645			148,059
		Loss on sale of assets			—			4,947
		Depreciation and amortization			288,267			476,348
		Preferred stock dividends			2,519,407			858,713
	Changes in operating assets and liabilities:
		Accounts receivable			(100,051	)		(194,320	)
		Inventories			(824,920	)		7,949
		Other current assets			(273,007	)		(103,233	)
		Accounts payable			171,853			279,641
		Accrued payroll			40,973			(131,924	)
		Other accrued liabilities			78,706			(42,146	)
		Deferred revenue			913,451			356,548
			Net cash used in operating activities		(3,610,938	)		(2,356,971	)
Cash flows from investing activities:
	Purchase of marketable securities				(11,741,070	)		(14,453,184	)
	Sale of marketable securities				2,831,708			2,088,328
	Capital expenditures				(1,866,125	)		(166,823	)
	Proceeds from sale of capital equipment				1,391			6,024
	Other assets and noncurrent receivables				(98,019	)		(50,566	)
			Net cash used in investing activities		(10,872,115	)		(12,576,221	)
Cash flows from financing activities:
	Payments made on capital lease obligations				(7,460	)		—
	Cash proceeds from the sale common stock				20,777,401			11,159,320
			Net cash provided by financing activities		20,769,941			11,159,320
Increase (decrease) in cash and cash equivalents					6,286,888			(3,773,872	)
Cash and cash equivalents:
	Beginning of period				6,254,544			6,883,524
	End of period			$	12,541,432		$	3,109,652

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The financial information included herein for the three and nine-month periods ended December 31, 2001 and 2000 is unaudited; however, such information reflects all adjustments consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of March 31, 2001 is derived from Bioject Medical Technologies Inc.’s (“Bioject’s”) 2001 Annual Report on Form 10-K. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject’s 2001 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Note 2. Inventories

Inventories are stated at the lower of cost or market. Cost is determined in a manner, which approximates the first-in, first out (FIFO) method. Costs utilized for inventory valuation purposes include labor, materials and manufacturing overhead. Net inventories consist of the following:

	December 31, 2001		March 31, 2001
Raw materials and components		1,297,848	$	579,476
Work-in-process		32,980		0
Finished goods		513,693		440,125
	$	1,844,521	$	1,019,601

Note 3. Net Loss Per Share

The following common stock equivalents are excluded from diluted loss per share calculations, as their effect would have been antidilutive:

		Three and Nine Months Ended
		December 31,
		2001		2000
Stock options and warrants			2,724,499		2,484,636
Convertible preferred stock			2,689,136		2,561,572
	Total		5,413,635		5,046,208

Note 4. Private Placements

In May and June 2001, Bioject sold a total of 1.63 million shares of its common stock in two private placements for $10.00 per share. Total proceeds, net of offering costs, were $14.6 million. In connection with these sales of stock, Bioject issued warrants exercisable for 453,140 shares of its common stock at an average price of $11.34 per share. The warrants are immediately exercisable and expire in May and June 2006.

In December 2001, Bioject sold a total of 350,000 shares of its common stock in a private placement for $11.00 per share. Total proceeds, net of offering costs, were $3.4 million. In connection with the sale of stock, Bioject issued warrants for 17,500 shares of its common stock at an exercise price of $12.10. The warrants are immediately exercisable and expire in December 2006.

Note 5. HC Wainwright Claim

In June 2001, the Company received a demand for compensation from H.C. Wainwright & Co. (“Wainwright”) relating to the private equity financing completed in May and June 2001 in which the Company raised proceeds of $15.1 million, net of offering costs. In September 2001, Bioject agreed to pay Wainwright $500,000. The $500,000 was netted against equity in the second quarter of fiscal

5

2002 as additional offering costs, lowering the net proceeds from this sale of stock to $14.6 million. In addition, Bioject issued warrants to Wainwright exercisable for 78,240 shares of the Company’s common stock at $11.99 per share. The warrants are immediately exercisable and expire in May 2006.

Note 6. Agreement with Elan Corporation plc

In October 2001, the Company announced its intention to redeem 24% of the outstanding shares of its Series A Preferred Stock, which is held by Elan Pharmaceuticals Investments, Ltd. (“Elan”). Elan disputed the Company’s right to redeem such shares at that time. To enforce its redemption rights, Bioject filed a lawsuit in U.S. District Court in Oregon seeking an injunction and declaratory judgment to compel Elan to abide by the redemption provisions in Bioject’s Articles of Incorporation. Subsequently, Bioject received notice from Elan of its intention to convert all of its shares of Series A Preferred Stock into shares of the Company’s common stock. As a result of Elan’s notice of intent to convert the Series A Preferred Stock, Bioject had the right under its Articles of Incorporation and agreements with Elan to redeem all of the Series A Preferred Stock for an aggregate redemption price of $14.5 million. Bioject had until January 8, 2002 to exercise this right.

In order to fund the potential redemption of the Series A Preferred Stock as discussed above, the Company’s Board of Directors authorized the issuance of up to 2.0 million shares of the Company’s common stock, and the issuance of common stock for that purpose was approved by the shareholders on November 20, 2001.

However, on December 12, 2001, Bioject and Elan came to an agreement wherein Elan agreed to the following:

• to eliminate, on a prospective basis from October 15, 2001, the 9% cumulative annual dividend payable on the Series A Preferred Stock;

• to terminate its Series K warrants which gave Elan the right to purchase 350,000 shares of Bioject common stock at $12.50 per share;

• to partially exercise its Series P warrant to purchase 252,666 shares of Bioject common stock for $7.50 per share or a total of $1.9 million; and

• to exercise the remaining Series P warrants to purchase 252,666 shares of common stock within 30 days after December 12, 2002 if the average closing market price over the ten trading days prior to that date is at least $12.50 per share, and to purchase 252,667 shares of common stock within 30 days after December 12, 2003 if the average closing market price over the ten trading days prior to that date is at least $15.00 per share.

In exchange, Bioject agreed to the following:

• to issue to Elan an additional 260,044 shares of Series A Preferred Stock in full satisfaction of Bioject’s obligations with respect to dividends accrued on the Series A Preferred Stock through October 15, 2001;

• to eliminate all rights of Bioject to redeem shares of Series A Preferred Stock or Series P warrants, particularly including the right that Bioject had proposed to exercise to override Elan’s Series A conversion rights by redeeming shares of Series A Preferred Stock as to which Elan had given notice of intent to convert;

• to eliminate provisions that required the mandatory conversion of all outstanding shares of Series A Preferred Stock on October 15, 2004;

• to dismiss the lawsuit Bioject had filed to enforce its Series A redemption rights; and

• to eliminate provisions for redemption and mandatory conversion of the Series C Preferred Stock, which were less significant because these provisions did not include an override right to redeem shares following a notice of intent to convert.

6

Although both Bioject and Elan believe and intend that the foregoing agreements changing the rights of the Series A Preferred Stock and the Series C Preferred Stock were effective immediately, Bioject agreed to submit to its shareholders for approval at the next annual meeting in September 2002 amendments to its Articles of Incorporation to reflect all of the agreed upon changes.

In addition, pursuant to the agreement, Elan sold 545,455 shares of Bioject common stock it previously held along with the 252,666 shares it received upon exercise of a portion of the Series P warrant. After such sales, Elan does not hold any Bioject common stock. However, Elan holds 952,738 shares of nonvoting Series A Preferred Stock and 391,830 shares of nonvoting Series C Preferred Stock, each of which is convertible at any time into 2 shares of common stock or a total of 2.7 million shares.

In connection with the termination of the Series K warrant and the changes to the Series A Preferred Stock, Bioject recorded an additional preferred dividend charge of $1.7 million in the third quarter of 2002, which resulted in total preferred dividends in the third quarter of $1.9 million. The preferred dividend charge reflects a non-cash, accounting adjustment required under generally accepted accounting principles to record the fair market value of the Series A Preferred Stock after giving effect to modifications of the terms under the Elan agreement.

Note 7. License Agreement with Alkermes, Inc.

In October 2001, the Company signed a license and development agreement (the “Agreement”) with Alkermes, Inc. to develop up to three undisclosed drug compounds as proprietary products using the Iject™ needle-free drug delivery system. The Agreement provides for $3.5 million in development and license fees to be paid beginning in the third quarter of fiscal 2002, which will be recognized as revenue over the development period. Revenue recognized is limited to cash payments received to date and receivable for milestones achieved. Any additional drugs will have separate negotiated terms.

Note 8. License Agreements with Amgen, Inc.

In October 2001, the Company amended its agreement to develop the Iject device with Amgen, Inc. to include scope changes to the project. The development agreement provides for approximately $800,000 in development fees, which will be recognized as revenue over the development period. Revenue recognized will be limited to cash payments received to date and receivable for milestones achieved. Bioject is also providing Amgen with prototype devices, which will be paid for by Amgen as they are shipped.

In December 2001, the Company signed a new agreement with Amgen, Inc. to provide for the exclusive worldwide license of certain patents and intellectual property related to the B2000 System for certain drug indications (the “Agreement”). Unless extended pursuant to the Agreement terms, this license expires January 15, 2003. In exchange for this exclusive license, Amgen paid Bioject a development fee of $1.0 million in December 2001, which will be recognized as revenue over the development period. Revenue recognized is limited to cash payments received to date and receivable for milestones achieved. If Amgen elects to extend the term of the license in January 2003, additional license fees will become due.

Note 9. Purchase of Facility

In December 2001, Bioject purchased a new facility in New Jersey, which will house the Company’s executive and certain other offices. The facility is scheduled to be completed in March, 2002. The purchase price of the facility was $1.375 million and was paid for with existing cash.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning prospects for future strategic corporate relationships, current corporate partners, prospects for sales of the Company’s products into new, high leverage markets, and generally heightened prospects for the adoption and use of needle-free technology. Such forward looking statements (often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,” “anticipates” or “does not anticipate,” “plans,” “estimates” or “intends,” or stating that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved) involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, without limitation, the risk that the Company’s products, including the cool.click™ or the Serojet™, will not be accepted by the market, the risk that the Company will be unable to enter into additional strategic corporate licensing and supply agreements or maintain existing agreements, the fact that the Company’s business has never been profitable and may never be profitable, uncertainties related to the time required to complete research and development, obtaining necessary clinical data and government clearances, the risk that the Company may be unable to produce its products at a unit cost necessary for the products to be competitive in the market and the risk that the Company may be unable to comply with the extensive government regulations applicable to its business. Readers of this Form 10-Q 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, 2001, and the Company’s Registration Statement on Form S-3 dated January 30, 2002 for further discussions of factors which could affect future results.

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.

Overview

Bioject develops needle-free injection systems that improve the way patients take important medications and vaccines.

The Company’s long-term goal is to become the leading supplier of needle-free injection systems to the pharmaceutical industry. In fiscal 2002, the Company is focusing its business development efforts on new and existing licensing and supply agreements with leading pharmaceutical and biotechnology companies. By bundling customized needle-free delivery systems with partners’ injectable medications and vaccines, Bioject can enhance demand for these products in the healthcare provider and end user markets.

In fiscal 2002, the Company’s clinical research efforts have been aimed primarily at clinical research collaborations in the area of vaccines and delivery. Currently, the Company is involved in collaborations with approximately 30 institutions.

In fiscal 2002, the Company’s other research and development efforts have been primarily focused on the development of the smaller, lighter Iject II, and the pre-filled, disposable intradermal injector. The Iject II has been modeled using a more streamlined design, thus making it more cost effective to manufacture while retaining the same flexibility and performance characteristics of the original Iject.

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The Iject II will be more economical for mid-priced injectable drugs. For vaccine delivery, the Company is developing a pre-filled, disposable intradermal injector containing a very small power source and drug container, making it ideal for intradermal injections, which are typically 0.1 ml in volume.

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) the length of time to close product sales; ii) customer budget cycles; iii) the implementation of cost reduction measures; iv) uncertainties and changes in product sales due to third party payer policies and proposals relating to healthcare cost containment; v) the timing and amount of payments under licensing and technology development agreements; and vi) the timing of new product introductions by the Company and its competitors. The Company does not expect to report net income from operations in fiscal 2002.

Results of Operations

Product sales increased to $561,000 and $2.1 million for the three and nine month periods ended December 31, 2001, respectively, compared to $267,000 and $925,000, respectively, for the same periods of 2000, primarily due to increases in the unit sales volumes of Serono related products. Product sales were lower in the third quarter of fiscal 2002 compared to the second quarter of 2002 due to the timing of purchases by Serono. Serono purchased small quantities of the Serojet™ in the third quarter of fiscal 2002 and we expect them to purchase larger quantities in the fourth quarter of 2002 as they ramp up their launch schedule. Serono uses the Serojet™ for AIDS wasting applications.

License and technology revenues increased to $435,000 and $598,000, respectively, for the three and nine month periods ended December 31, 2001, compared to $211,000 and $588,000, respectively, for the same periods in 2000. Bioject signed several license and technology agreements in the first nine months of fiscal 2002. Bioject has received licensing fees from Serono during each quarter of fiscal 2002 and, beginning in the third quarter of fiscal 2002, has also received license fees and/or technology development fees from Alkermes, Elan and Amgen.

Manufacturing expense increased to $1.3 million and $3.0 million for the three and nine month periods ended December 31, 2001, respectively, compared to $553,000 and $1.7 million, respectively, for the comparable periods of 2000. The Company experienced increased costs in fiscal 2002 due to an increase in unit sales volumes, offset in part by decreased depreciation expense as a result of asset write-offs during the fourth quarter of fiscal 2001. Manufacturing expense increased in the third quarter of fiscal 2002 compared to the second quarter of fiscal 2002 due to one-time costs associated with the start-up of production of the Serojet™, which will be used by Serono for AIDS wasting applications.

Research and development expense was $633,000 and $1.8 million for the three and nine month periods ended December 31, 2001, respectively, compared to $643,000 and $1.4 million, respectively, for the comparable periods of 2000. The increase for the year to date period is primarily due to increased payroll and related expenses and travel expenses associated with the development of the Iject™ disposable and the Iject™ II disposable, the intradermal Iject™ II and various other new product developments and improvements.

Selling, general and administrative expenses increased to $1.3 million and $3.2 million for the three and nine month periods ended December 31, 2001, respectively, compared to $724,000 and $2.2 million, respectively, for the comparable periods of 2000. Approximately $301,000 of the increase for the nine month period resulted from non-cash charges related primarily to the issuance of stock options and warrants for consulting services and the issuance of restricted stock to each current non-

9

employee director in lieu of cash compensation. The remaining increases were primarily attributable to increases in payroll and related expenses, travel, recruiting and professional fees. Bioject hired two new executive officers, an Executive Vice President, General Manager and a Chief Financial Officer in the second and third quarters of fiscal 2002, respectively, which contributed to the overall increase in the third quarter of fiscal 2002.

Interest income increased to $318,000 and $1.0 million for the three and nine month periods ended December 31, 2001, respectively, compared to $230,000 and $638,000, respectively, for the comparable periods of 2000, as a result of increased cash and cash and cash equivalent balances, offset in part by lower interest rates. The increase in cash and cash equivalent balances resulted from net proceeds of $10.3 million from the private placement of 1.43 million shares of common stock in July and August 2000, net proceeds of $14.6 million from the sale of 1.63 million shares in private placements during May and June 2001, net proceeds of $3.4 million from the private placement of 350,000 shares of common stock in a private placement in December 2001, net proceeds of $1.9 million from Elan’s exercise of warrants during December 2001 and a $1.0 million license fee received from Amgen in December 2001, offset in part by $1.375 million used for the purchase of a new facility, $500,000 used for other capital expenditures and $3.6 million used in operations during the first nine months of fiscal 2002.

Preferred dividends in the third quarter of fiscal 2002 of $1.9 million include $1.7 million related to the changes made to the rights of the outstanding Series A Preferred Stock held by Elan. See Note 6.

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, the exercise 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 December 31, 2001 totaled approximately $100 million. The Company completed a round of financing in May and June 2001, selling 1.63 million shares of its common stock for $10.00 per share for net proceeds to the Company of $14.6 million. In addition, in December 2001, Elan exercised a warrant for 252,666 shares of the Company’s common stock for net proceeds to the Company of $1.9 million and the Company completed its latest round of financing, selling 350,000 shares of its common stock for $11.00 per share for net proceeds to the Company of $3.4 million.

Cash and cash equivalents increased to $12.5 million at December 31, 2001 from $6.3 million at March 31, 2001. The increase is primarily due to net proceeds from the sale of common stock of $20.8 million, offset by the net purchase of $8.9 million of marketable securities and $3.6 million used in operations.

Net accounts receivable increased to $540,000 at December 31, 2001 from $440,000 at March 31, 2001. Included in the balance at December 31, 2001, was $212,000 due from one customer, none of which is currently past due.

Inventories increased to $1.8 million at December 31, 2001 from $1.0 million at March 31, 2001 due to increases in raw materials and finished goods related to the production of the cool.click and SeroJet.

Other current assets increased to $432,000 at December 31, 2001 from $155,000 at March 31, 2001, primarily due to an increase in prepaid professional fees, which are being expensed over the next two quarters.

Other accrued liabilities include $200,000 payable to Wainwright in connection with the Company’s sales of stock in May and June 2001. The $200,000 was paid to Wainwright in January 2002.

10

Deferred revenue increased to $1.4 million at December 31, 2001 from $469,000 at March 31, 2001 primarily due to a $1.0 million license fee received from Amgen, Inc. in December 2001, which is being recognized over the term of the license period, which expires January 15, 2003.

Capital expenditures totaled $1.9 million in the first nine months of fiscal 2002, primarily for the purchase of an ERP computer system and a new office building. Bioject anticipates spending $500,000 in the fourth quarter of fiscal 2002 primarily for manufacturing automation and molds.

New Accounting Pronouncements

Hedging Activities

The Financial Accounting Standards Board issued SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133), in June 1998. SFAS No. 133, as amended by SFAS No. 138, is effective for fiscal years beginning after June 15, 2000. The standard requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The change in the derivative’s fair value related to the ineffective portion of a hedge, if any, will be immediately recognized in earnings. The Company adopted this Standard on April 1, 2001. Since the Company does not currently utilize hedging or other derivative instruments, the effect of adopting this standard did not have an effect on the Company’s financial position or its results of operations.

Business Combinations and Goodwill and Other Intangible Assets

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interest method will be prohibited on a prospective basis only. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this Statement. SFAS No. 142 becomes effective for fiscal years beginning after December 15, 2001, with early adoption permitted for entities with fiscal years beginning after March 15, 2001. The Company expects to adopt SFAS 142 for its fiscal year beginning April 1, 2002. The adoption of SFAS No. 141 did not have a significant impact on Bioject’s financial condition or results of operations. Bioject does not expect the adoption of SFAS No. 142 to have a significant impact on its financial condition or results of operations.

Asset Retirements and Impairment or Disposal of Long Lived Assets

In August 2001, the FASB approved SFAS No. 143, “Accounting for Asset Retirement Obligations,” which will be effective beginning fiscal year 2003. SFAS No. 143 addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. In October 2001, the FASB approved SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of” (“SFAS 121”) and the accounting and reporting provisions of APB No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” for the disposal of a segment of a business. SFAS No. 144 retains many of the fundamental provisions of SFAS No. 121, but resolves certain implementation issues associated with that Statement. SFAS Nos. 143 and 144 will be effective beginning in fiscal 2003. We do not expect the adoption of SFAS Nos. 143 and 144 to have a significant impact on our financial position or results of operations.

11

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

PART II

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

See Note 6. of Notes to Consolidated Financial Statements for a description of changes to the rights of the outstanding Series A Preferred Stock and Series C Preferred Stock of the Company.

In December 2001, Bioject sold a total of 350,000 shares of its common stock in a private placement for $11.00 per share. Total proceeds, net of offering costs, were $3.4 million. In connection with the sale of stock, Bioject issued warrants for 17,500 shares of its common stock at an exercise price of $12.10. The warrants are immediately exercisable and expire in December 2006. Also in December 2001, Elan exercised warrants to purchase 252,666 shares of common stock at an exercise price of $7.50 per share. These issuances were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A special meeting of the shareholders of the Company was held on November 20, 2001, at which the following actions were taken:

1. The shareholders approved the issuance of common stock of the Company to fund the possible redemption of the Company’s outstanding Series A Preferred Stock as follows:

	No. of Shares	No. of Shares	No. of Broker
No. of Shares Voting For:	Voting Against:	Abstaining:	Non-Votes:
5,735,245	551,433	2,240	—

	Subsequent to this approval, the Company came to a separate agreement with Elan and did not redeem the Series A Preferred Stock (see Note 6).
2.	The shareholders ratified the provisions of Article IV, Section 2.6(a)(3) of the Company’s Amended and Restated Articles of Incorporation as follows:

	No. of Shares	No. of Shares	No. of Broker
No. of Shares Voting For:	Voting Against:	Abstaining:	Non-Votes:
5,736,765	548,933	3,220	—

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The exhibits filed as a part of this report are listed below and this list is intended to constitute the exhibit index.

Exhibit Number and Description
10.1	Agreement dated December 12, 2001 between the Company, Elan Pharmaceutical Investments, Ltd., and Elan International Services, Ltd.
10.2	Form of Series “P” Common Stock Purchase Warrant, as amended on December 12, 2001.

(b) Reports on Form 8-K

On December 14, 2001, the Company filed a report on Form 8-K to report under Item 5. Other Events that the Company had entered into the settlement agreement with Elan Pharmaceutical Investments, Ltd.

12

SIGNATURES

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.

Date: February 5, 2002 BIOJECT MEDICAL TECHNOLOGIES INC.
(Registrant)

 

/s/ JAMES O’SHEA
James O’Shea
Chairman, Chief Executive Officer
And President
(Principal Executive Officer)

 

/s/ JOHN GANDOLFO
John Gandolfo
Chief Financial Officer
(Principal Financial and Accounting Officer)

13 EX-10.1 3 v78997ex10-1.txt EXHIBIT 10.1 Exhibit 10.1 AGREEMENT This Agreement (this "Agreement") is made as of December 12, 2001, among Bioject Medical Technologies Inc., an Oregon corporation (the "Company"), Elan Pharmaceutical Investments, Ltd. ("EPIL") and Elan International Services, Ltd. ("EIS" and together with EPIL, "Elan"). WHEREAS, the Company and Elan are parties to that certain Securities Purchase Agreement dated as of October 15, 1997 (as amended by the Amendment to Securities Purchase Agreement dated January 15, 1998 by the Company and EIS, the Agreement to Amend Securities Purchase Agreement and Certain Related Securities dated June 30, 1999 among the Company, EIS and Marathon Medical Technologies, Inc. (the "1999 Amendment") and the Agreement by the Company and EIS dated May, 2000, all of which are attached as Annex I and referred to collectively in this Agreement as the "Purchase Agreement"), relating to the issuance and sale to Elan of the Securities subject to the terms of the relevant Transaction Documents (as modified, amended or supplemented to the date hereof, the "Existing Transaction Documents"). Capitalized terms used in this Agreement without definition shall have the meanings given such terms in the Purchase Agreement. WHEREAS, EIS has previously assigned to EPIL all of its interests in the Securities after the date of issuance thereof; and WHEREAS, the Company and Elan have agreed to amend certain of the Existing Transaction Documents and make certain agreements with respect to the Securities held by Elan from time to time. NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the undersigned hereby agrees as follows: 1. Amendments to Transaction Documents. (a) Article IV, Section 2.3(a)(1) of the Amended and Restated Articles of Incorporation of Bioject Medical Technologies Inc., as in effect on the date hereof (the "Articles of Incorporation" (attached hereto as Annex II)) shall be deemed by the parties hereto to be deleted in its entirety as of the Effective Date (as defined in Section 4 below) and replaced with the following language: "Each outstanding share of Series A Preferred Stock shall accrue from the date of issuance through October 15, 2001 a dividend equal to 9% -2- per annum of the Preferred Issuance Price of Series A Preferred Stock, compounded semiannually beginning on September 2, 1998; such dividend shall be paid by the issuance of additional shares of Series A Preferred Stock, based upon a value equal to the Preferred Issuance Price." (b) Article IV, Sections 2.6(a)(1) and (3) of the Articles of Incorporation shall be deemed by the parties hereto to be deleted in their entirety and of no further force or effect whatsoever as of the Effective Date. (c) Article IV, Section 2.6(a)(2) of the Articles of Incorporation shall be deemed by the parties hereto to be deleted in its entirety as of the Effective Date and renumbered as Section 2.6(a) and replaced with the following language: "Series A Preferred Stock. All holders of Series A Preferred Stock issued as of December 12, 2001, shall have the right to convert at any time each share of Series A Preferred Stock into two shares of Common Stock as of such date (which amount gives effect to the Reverse Stock Split described in Section 1.1), subject to Section 2.6(e) below (the "Antidilution Adjustments")." (d) Article IV, Section 2.6(c)(1) of the Articles of Incorporation shall be deemed by the parties hereto to be deleted in its entirety and of no further force or effect whatsoever as of the Effective Date. (e) Article IV, Section 2.6(c)(2) of the Articles of Incorporation shall be deemed by the parties hereto to be deleted in its entirety as of the Effective Date and renumbered as Section 2.6(c) and replaced with the following language: "Series C Preferred Stock. All holders of Series C Preferred Stock issued as of December 12, 2001 shall have the right to convert at any time each share of Series C Preferred Stock into two shares of Common Stock as of such date (which amount gives effect to the Reverse Stock Split described in Section 1.1), subject to the Antidilution Adjustments." (f) Article IV, Sections 2.7(a) and (c) of the Articles of Incorporation shall be deemed by the parties hereto to be deleted in their entirety and of no further force or effect whatsoever as of the Effective Date. -3- (g) Section 5(c) of the Purchase Agreement is hereby deleted in its entirety and of no further force or effect whatsoever as of the Effective Date. (h) Pursuant to Section 8(a) of the Series "K" Warrant to Purchase Shares of Common Stock originally issued by the Company to Elan International Services, Ltd. in connection with the Purchase Agreement (the "Series K Warrant"), a copy of which is attached as Annex III, the Series K Warrant is hereby terminated and is of no further force or effect whatsoever. (i) Section 1 of the Series "P" Common Stock Purchase Warrant of the Company originally issued by the Company to EIS, pursuant to the 1999 Amendment (the "Series P Warrant"), a copy of which is attached as Annex IV, is hereby amended as of the Effective Date by adding the following language after the first sentence thereof: "Notwithstanding the foregoing, the holder hereof shall exercise this Warrant (by payment of the applicable Exercise Price (in cash or by cancellation of indebtedness of the Corporation to the holder hereof as provided in Section 2 of this Warrant)), (i) on the Effective Date (as defined in the Agreement among the Company and Elan Pharmaceutical Investments, Ltd. and Elan International Services, Ltd. dated December 12, 2001 (the "Agreement")) for 252,666 shares of the Warrant Stock, (ii) within 30 days of the holder's receipt of written notice from the Corporation that on the first anniversary of the Effective Date the Market Price (as defined below) of common stock of the Corporation (the "Common Stock") was at least $12.50 per share (such notice to include evidence reasonably satisfactory to the holder hereof as to the basis for the calculation of such price and to be given no later than the fifth business day following such anniversary and in such manner as is specified in Section 9 of the Agreement), for 252,667 shares of the Warrant Stock and (iii) within 30 days of the holder's receipt of written notice from the Corporation that on the second anniversary of the Effective Date the Market Price of the Common Stock was at least $15.00 per share (such notice to include evidence reasonably satisfactory to the holder hereof as to the basis for the calculation of such price and to be given no later than the fifth business day following such anniversary and in such manner as is specified in Section 9 of the Agreement), for the remaining Warrant Stock not previously purchased pursuant to an exercise of this Warrant; provided, however, the holder hereof is not obligated to make any such exercise unless at such time at least one or more registration statements is then effective pursuant to which all the -4- Warrant Stock issued or issuable upon exercise hereof may be publicly sold by such holder under the Securities Act of 1933, as amended; provided, further, however, that notwithstanding the foregoing provisions of this sentence, the holder of this Warrant retains the right to exercise this Warrant at any time pursuant to the first sentence of this Section 1. In the event that the holder hereof has not exercised this Warrant for all Warrant Stock as of the close of business on the later of (x) the fifth business day after the second anniversary of the Effective Date if no notice pursuant to clause (iii) above has been delivered to the holder hereof on or before such date or (y) the 30th day following receipt by the holder hereof of any notice pursuant to clause (iii) above, as a result of the failure of the conditions set forth in the immediately preceding sentence, then thereafter the provisions of such sentence shall terminate and have no further force or effect. All share amounts and prices per share in this Section 1 shall be subject to appropriate adjustment from time to time pursuant to Section 11 of this Warrant. "Market Price" means, with respect to each anniversary of the Effective Date requiring a calculation thereof as provided above, the average of the daily Closing Prices (as defined below) per share of the Common Stock for the 10 consecutive trading days ending on the trading day immediately preceding such anniversary; provided, however, that in the event that the Market Price is determined during a period following the announcement by the Corporation of (A) a dividend or distribution of Common Stock, or (B) any subdivision, combination or reclassification of Common Stock and prior to the expiration of 20 business days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Market Price shall be appropriately adjusted to reflect the current market price per share equivalent of the Common Stock. "Closing Price" means the reported last sales price regular way or, if no such reported sale occurs on such day, the average of the closing bid and asked prices regular way on such day, in each case as reported by NASDAQ or such other principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or any comparable system then in use or, if not so reported, as reported by any New York Stock Exchange member firm reasonably selected by the holder of this Warrant for purposes of estab- -5- lishing whether this Warrant must be exercised pursuant to the second sentence of this Section 1." (j) Section 6 of the Series P Warrant is hereby deleted in its entirety and of no further force or effect as of the Effective Date. 2. Resale of Common Stock; Etc. (a) Elan hereby agrees to sell, in one transaction or a series of related or unrelated transactions, the 545,455 shares of Common Stock originally acquired under the Purchase Agreement and the 252,666 shares of Common Stock to be acquired by Elan on the Effective Date upon the exercise of the Series P Warrant pursuant to Section 1(i) of this Agreement (the "Original Shares") to one or more individuals, partnerships, corporations, limited liability companies or other entities not affiliates of Elan (any such entity, a "Non-Affiliate") on or before March 31, 2002; provided, (A)(i) on or before January 8, 2002, Elan may contract to sell such shares in any such transaction (for any or all of the Original Shares) in a manner and at such time as Elan may determine and (ii) on and after January 9, 2002 through and including March 31, 2002, Elan shall contract to sell such shares in any such transaction with respect to such Original Shares not sold pursuant to the foregoing clause (i) exclusively through Leerink Swann & Company under the same terms and conditions as sales of Common Stock by the Company, on a pro rata basis (determined by reference to the number of Original Shares not sold (or contracted to be sold) pursuant to the foregoing clause (i) and the number of shares of Common Stock the Company identifies to Leerink Swann & Company for sale during such period) and (B) in any one such transaction the consideration Elan receives per Original Share (subject to adjustment to reflect any subdivision or combination of the Common Stock on or before the date of any such transaction, including the Reverse Stock Split (as defined in the Articles of Incorporation) shall be no less than $10.25 per share, net of any commissions, fees or discounts charged in connection with such transaction; provided, that, except with respect to any transaction contemplated by clause (A)(ii) of the first proviso of this Section 2(a), Elan shall not be obligated to make any such sale pursuant to this Section 2(a) unless at such time at least one or more registration statements is then effective pursuant to which the Original Shares may be publicly sold by Elan under the Securities Act of 1933, as amended (the "Securities Act"); provided, further, if on or before March 31, 2002 Elan has not disposed of all of its Original Shares pursuant to this Section 2(a) as a result of the failure of the conditions hereof to be satisfied, then the provisions of this Section 2(a) shall terminate as of the close of business on such date and Elan shall have no further obligations under this Section 2(a). -6- (b) The parties hereto hereby agree that, after the earlier of March 31, 2002 or the sale of all of the Original Shares as contemplated by Section 2(a) of this Agreement, Elan may sell any shares of Common Stock, including shares of Common Stock acquired upon conversion of the Series A Preferred Stock or the Series C Preferred Stock or upon exercise of the Series P Warrant after the Effective Date, and any shares of the Series A Preferred Stock or Series C Preferred Stock, and any Series P Warrants, in each case in a manner and at such time as Elan may determine, subject to any holdback agreements contemplated by the Registration Rights Agreement and any applicable securities law restrictions. (c) The parties hereto agree that notwithstanding the provisions of any Existing Transaction Document, Elan is not subject to any provisions of any Existing Transaction Document limiting or restricting its ability to sell any of the Securities (other than any holdback agreements contemplated by the Registration Rights Agreement), including the Original Shares and any Common Stock acquired upon exercise of the Series P Warrant or conversion of the Series A Preferred Stock or Series C Preferred Stock, at any time or in any manner, other than any applicable restrictions under the Securities Act. 3. Waivers. (a) The Company hereby waives as of the Effective Date any rights it had prior to the date hereof solely with respect to those provisions of the Articles of Incorporation deemed to be amended or deleted pursuant to Sections 1(a) through (f) hereof (the "Amendments to the Articles"), including any right to redeem the Series A Preferred Stock and hereby rescinds any action heretofore undertaken in any manner or to any extent to exercise any such right, and waives any right it would have hereafter under such provisions whether or not the Amendments to the Articles are approved by the Company's shareholders. (b) Elan hereby waives any rights as a holder of the Series A Preferred Stock or Series C Preferred Stock it had prior to the date hereof solely with respect to those provisions deemed to be amended or deleted by the Amendments to the Articles and waives any right it would have hereafter under such provisions whether or not the Amendments to the Articles are approved by the Company's shareholders. 4. Conditions. This Agreement shall become effective upon the date (the "Effective Date") that -7- (a) all of the following, duly executed, have been delivered to Elan: (i) this Agreement; (ii) Certificates for 260,044 shares of Series A Preferred Stock, which the parties agree represents all dividends accrued on the Series A Preferred Stock from the date of first issuance thereof through and including October 15, 2001; (iii) Certificates for the shares of Common Stock being acquired by Elan pursuant to the exercise of the Series P Warrant as contemplated by Section 1(i) of this Agreement; and (iv) An opinion of counsel of the Company, in the form attached to this Agreement as Annex V, as to the matters set forth in Section 6(a) hereof; (v) Supplements to the currently effective prospectuses to cover the sale by EPIL of the Original Shares. (b) all of the following, duly executed, have been delivered to Bioject: (i) this Agreement; (ii) the cash amount of $1,894,995, representing the exercise price for the shares to be purchased by Elan pursuant to the exercise of the Series P Warrant as contemplated by Section 1(i) of this Agreement; (iii) the original Series K Warrant for cancellation; and (iv) the cash amount of $100,000 in consideration for the option granted pursuant to Section 8 of this Agreement. The parties agree to take all actions required as conditions so that the Effective Date shall occur no later than December 14, 2001. 5. Covenants. -8- (a) The Company hereby covenants that at its next regularly scheduled annual meeting of its shareholders it shall request and use its best efforts to obtain shareholder approval of the Amendments to the Articles; provided, Elan shall have the right to review and comment on the proxy material to be distributed in connection with any such annual meeting; provided, further, in the event that the shareholders do not approve the Amendments to the Articles as contemplated by this Section 5(a) on or before the first anniversary of the Effective Date, the Company covenants that it will issue to Elan a warrant exercisable at a nominal exercise price for a number of shares of Common Stock equal in value (based on the Market Price thereof on such anniversary as defined in the Series P Warrant) on such first anniversary to the sum of (x) the valuation of all of the shares of Series A Preferred Stock held by Elan on such date (including the valuation of the conversion feature of such shares based on the Black-Scholes method of valuation of securities with option features, giving effect to the adoption of the Amendments to the Articles) minus the valuation of all of such shares (including the valuation of the conversion feature of such shares based on the Black-Scholes method of valuation of securities with option features, without giving effect to the adoption of the Amendments to the Articles) plus (y) 10% of the difference in valuations specified in clause (x); provided, the parties hereto agree that the valuation and methods contemplated hereby will be pursuant to such further agreements as to the procedures for such valuation as the parties shall mutually agree to. (b) In addition to the rights and obligations of the parties hereto under the Registration Rights Agreement, including the provisions of Section 6 thereof, the Company hereby covenants that the Company shall use its best efforts to keep the currently effective registration statements of the Company effective until all shares of Common Stock held by Elan as of the Effective Date and all shares of Common Stock issuable upon conversion of the Series A Preferred Stock or the Series C Preferred Stock and the exercise of the Series P Warrant are (A) sold pursuant to an effective registration statement under the Securities Act, (B) eligible to be sold into the public market without regard to volume limitations under Rule 144(k) promulgated under the Securities Act (or any successor rule), or (C) sold pursuant to Rule 144. (c) The Company covenants not to sue EIS, EPIL or Elan Corporation, plc including, as applicable, all of the direct or indirect stockholders, members and affiliates thereof (including, but not limited to, parent, subsidiary and affiliated corporations or other entities) and each of their respective past and present officers, directors, members, agents, employees, representatives, lawyers, administrators, spouses, and all persons acting by, through, under, or in concert -9- with them (collectively, the "Elan Entities") with respect to any and all claims for damages or other sums, including attorneys' fees and costs, or for any other relief or remedy, which the Company may have against them, or any of them, which could have arisen out of any act or omission with respect to the Company's redemption rights that were the basis for the Complaint (as defined in Section 7 hereof) (each a "Complaint Related Claim") and covenants to indemnify and hold harmless each Elan Entity from and against any losses, claims, damages or liabilities (including actions or proceedings in respect thereof) arising out of any Complaint Related Claim that may be alleged by any other party. (d) Elan hereby covenants to (i) use its best efforts to cooperate with the Company in causing the Amendments to the Articles to be approved, including, without limitation, voting all of its shares of the Company's stock in favor of the proposals relating to the Amendments to the Articles and (ii) notify the Company promptly after the consummation of each transaction contemplated by Section 2(a) of this Agreement. 6. Representations and Warranties. (a) The Company represents and warrants to Elan that (i) attached hereto as Annex II is a true and complete copy of the Articles of Incorporation; (ii) the Company is a corporation duly organized and validly existing under the laws of Oregon, with all corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement; (iii) the execution, delivery and performance by the Company of this Agreement has been duly authorized by all necessary action and this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; and (iv) as of the Effective Date the registration statements covering the sale of the shares of Common Stock held by Elan have been declared effective under the Securities Act by the Securities and Exchange Commission and have not been withdrawn by the Company and to the Company's knowledge no stop order proceedings with respect thereto are pending or threatened under the Securities Act. (b) Elan represents and warrants to the Company that (i) Elan now has good and marketable title to all of the shares of Preferred Stock and Common Stock of the Company issued to Elan pursuant to the Purchase Agreement, the Series K Warrant and the Series P Warrant, free and clear of any liens, encumbrances and claims, and full right, power and authority to effect the sale and delivery of such securities; (ii) each of the Elan entities is a corporation duly organized and validly existing under the laws of its incorporation, with all corpo- -10- rate power and authority necessary to execute, deliver and perform its obligations under this Agreement; (iii) the execution, delivery and performance by Elan of this Agreement has been duly authorized by all necessary action and this Agreement constitutes the legal, valid and binding obligation of Elan, enforceable against Elan in accordance with its terms. 7. Dismissal of the Complaint. Within 2 business days after the Effective Date, the Company and all those under its control shall, in the form attached hereto as Annex VI, arrange for the dismissal of the lawsuit entitled Bioject Medical Technologies Inc. v. Elan Corporation, plc, et. al, Case No.01-CV-1438-AS, filed in the United States District Court for the Federal District of Oregon (the "Complaint"). The Company shall promptly provide evidence of such dismissal to Elan. By entering into this Agreement no party is making any admission of liability, nor admitting the sufficiency of any other party's allegations in the Complaint. Instead, the parties hereto have entered into this Agreement to compromise disputed claims and to avoid the further expense and burden of litigation. No party admits liability, wrongdoing, or any sort of malfeasance. 8. License Agreement Option. In separate consideration of the payment of the sum of $100,000 simultaneously with the execution of this Agreement, the Company grants to EIS an option, but not the obligation, exercisable on or prior to the six-month anniversary of the Effective Date to obtain a license of the Company's Iject product for any one drug of Elan or of a joint venture partner of Elan, the form and substance of which license agreement shall be negotiated in good faith by the parties hereto. 9. Notice. All notices, demands and requests of any kind to be delivered to any party in connection with this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered or when sent if sent by nationally-recognized overnight courier or by registered or certified airmail, return receipt and postage prepaid, or by facsimile transmission, addressed as follows: If to the Company: Bioject Medical Technologies, Inc. 7620 S.W. Bridgeport Road Portland, Oregon 97224 Fax: (503) 620-6431 Attention: James C. O'Shea -11- With a copy to: Stoel Rives LLP 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204 Fax: 503-220-2480 Attention: Todd Bauman If to EPIL or EIS: c/o Elan Pharmaceutical Investments, Ltd. 102 St. James Court Flatts Smiths FL04, Bermuda Fax: (441)292-2224 Attention: Kevin Insley With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Fax: (212)269-5420 Attention: William Hartnett 10. Specific Performance, Etc. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. 11. Expenses. Each party hereto shall be responsible for payment of its own attorneys' fees, costs, and other legal expenses incurred through the date of this Agreement. 12. Confidentiality; Non-Disclosure. (a) Subject to clause (b) below, from and after the date hereof, neither the Company, EIS nor EPIL (nor their respective affiliates) shall disclose to any person or entity this Agreement or the other Transaction Documents or the contents thereof or the parties thereto, except that such parties may make such disclosure (x) to their directors, officers, employees and advisors, and potential bank creditors and investors, so long as they shall have advised such persons of the obligation of confidentiality herein and for whose breach or default the disclosing party shall be responsible or (y) as required by applicable law, rule, regu- -12- lation or judicial or administrative process (it being expressly understood by the parties hereto that the Company will file this Agreement with the first report on Form 10-Q filed after the Effective Date), provided, that the disclosing party uses commercially reasonable efforts to obtain an order or ruling protecting the confidentiality of confidential information identified as such by the other party contained herein or therein and notifies the other party five business days prior to such disclosure so that such other party may, if it chooses, request that the Company seek such relief (any such relief, "Confidential Treatment"). The parties shall be entitled to seek injunctive or other equitable relief in respect of any breach or threatened breach of the foregoing covenant without the requirement of posting a bond or other collateral. (b) Attached hereto as Annex VII is a press release to be issued by the Company in respect of this Agreement and the transactions contemplated hereby (the "Initial Press Release"). After the Effective Date, the Company will not issue any press release containing, or otherwise publicly disclose, any confidential information that is the subject of a request for Confidential Treatment (whether or not such request has been approved), without obtaining the consent of Elan to the contents thereof, which consent shall not be unreasonably withheld or delayed; it being understood that if Elan shall not have responded to such consent request within three business days, such consent shall be deemed given. 13. Successors and Assigns. This Agreement shall be binding upon each of the parties hereto and their respective successors and assigns. The successors and assigns of such persons shall include, without limitation, their respective receivers, trustees or debtors-in-possession and the successors and assigns of Elan shall include any transferee of any shares of Series A Preferred Stock. 14. Further Assurances. Each of the parties hereto agrees to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements and to take or cause to be taken such further or other action as may reasonably be deemed necessary or desirable in order to carry out the intent and purposes of this Agreement. 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF. 16. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provi- -13- sion shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 17. Integration, Etc. This Agreement (together with the Annexes hereto) is intended to be and constitutes the final, complete and exclusive Agreement between the parties regarding the subject matter of this Agreement and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged into and superseded by this Agreement. No parol or extrinsic evidence of any kind and no course of dealing or usage of trade or course of performance shall be used to vary, contradict, supplement or add to the terms of this Agreement. No amendment or waiver hereof shall be effective unless in writing and signed by the parties hereto and then only in the specific instance and for the specific purpose for which given; provided, except as amended hereby, the Existing Transaction Documents remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective representatives hereunto duly authorized as of the date first above written. BIOJECT MEDICAL TECHNOLOGIES, INC. ELAN INTERNATIONAL SERVICES, LTD. By: By: ----------------------------------- ------------------------------------- ELAN PHARMACEUTICAL INVESTMENTS, LTD. By: ----------------------------------- EX-10.2 4 v78997ex10-2.txt EXHIBIT 10.2 EXHIBIT 10.2 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"). Notwithstanding the foregoing, the holder hereof shall exercise this Warrant (by payment of the applicable Exercise Price (in cash or by cancellation of indebtedness of the Corporation to the holder hereof as provided in Section 2 of this Warrant)), (i) on the Effective Date (as defined in the Agreement among the Company and Elan Pharmaceutical Investments, Ltd. and Elan International Services, Ltd. dated December 12, 2001 (the "Agreement")) for 252,666 shares of the Warrant Stock, (ii) within 30 days of the holder's receipt of written notice from the Corporation that on the first anniversary of the Effective Date the Market Price (as defined below) of common stock of the Corporation (the "Common Stock") was at least $12.50 per share (such notice to include evidence reasonably satisfactory to the holder hereof as to the basis for the calculation of such price and to be given no later than the fifth business day following such anniversary and in such manner as is specified in Section 9 of the Agreement), for 252,667 shares of the Warrant Stock and (iii) within 30 days of the holder's receipt of written notice from the Corporation that on the second anniversary of the Effective Date the Market Price of the Common Stock was at least $15.00 per share (such notice to include evidence reasonably satisfactory to the holder hereof as to the basis for the calculation of such price and to be given no later than the fifth business day following such anniversary and in such manner as is specified in Section 9 of the Agreement), for the remaining Warrant Stock not previously purchased pursuant to an exercise of this Warrant; provided, however, the holder hereof is not obligated to make any such exercise unless at such time at least one or more registration statements is then effective pursuant to which all the Warrant Stock issued or issuable upon exercise hereof may be publicly sold by such holder under the Securities Act of 1933, as amended; provided, further, however, that notwithstanding the foregoing provisions of this sentence, the holder of this Warrant retains the right to exercise this Warrant at any time pursuant to the first sentence of this Section 1. In the event that the holder hereof has not exercised this Warrant for all Warrant Stock as of the close of business on the later of (x) the fifth business day after the second anniversary of the Effective Date if no notice pursuant to clause (iii) above has been delivered to the holder hereof on or before such date or (y) the 30th day following receipt by the holder hereof of any notice pursuant to clause (iii) above, as a result of the failure of the conditions set forth in the immediately preceding sentence, then thereafter the provisions of such sentence shall terminate and have no further force or effect. All share amounts and prices per share in this Section 1 shall be subject to appropriate adjustment from time to time pursuant to Section 11 of this Warrant. -1- "Market Price" means, with respect to each anniversary of the Effective Date requiring a calculation thereof as provided above, the average of the daily Closing Prices (as defined below) per share of the Common Stock for the 10 consecutive trading days ending on the trading day immediately preceding such anniversary; provided, however, that in the event that the Market Price is determined during a period following the announcement by the Corporation of (A) a dividend or distribution of Common Stock, or (B) any subdivision, combination or reclassification of Common Stock and prior to the expiration of 20 business days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Market Price shall be appropriately adjusted to reflect the current market price per share equivalent of the Common Stock. "Closing Price" means the reported last sales price regular way or, if no such reported sale occurs on such day, the average of the closing bid and asked prices regular way on such day, in each case as re-ported by NASDAQ or such other principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or any comparable system then in use or, if not so re-ported, as reported by any New York Stock Exchange member firm reasonably selected by the holder of this Warrant for purposes of establishing whether this Warrant must be exercised pursuant to the second sentence of this Section 1. 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 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 -2- 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. 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. 7. 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. 8. 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. 9. 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. 10. 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 -3- 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. 11. 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. 12. 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; -4- (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 and to carry out and perform its obligations under the teens 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. 13. 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. 14. 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: _________________________, 2002 BIOJECT MEDICAL TECHNOLOGIES INC. By: ----------------------------------------- Name: Title: -5- -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    Exhibit 10.1

                                    AGREEMENT

              This Agreement (this "Agreement") is made as of December 12, 2001,
among Bioject Medical Technologies Inc., an Oregon corporation (the "Company"),
Elan Pharmaceutical Investments, Ltd. ("EPIL") and Elan International Services,
Ltd. ("EIS" and together with EPIL, "Elan").

              WHEREAS, the Company and Elan are parties to that certain
Securities Purchase Agreement dated as of October 15, 1997 (as amended by the
Amendment to Securities Purchase Agreement dated January 15, 1998 by the Company
and EIS, the Agreement to Amend Securities Purchase Agreement and Certain
Related Securities dated June 30, 1999 among the Company, EIS and Marathon
Medical Technologies, Inc. (the "1999 Amendment") and the Agreement by the
Company and EIS dated May, 2000, all of which are attached as Annex I and
referred to collectively in this Agreement as the "Purchase Agreement"),
relating to the issuance and sale to Elan of the Securities subject to the terms
of the relevant Transaction Documents (as modified, amended or supplemented to
the date hereof, the "Existing Transaction Documents"). Capitalized terms used
in this Agreement without definition shall have the meanings given such terms in
the Purchase Agreement.

              WHEREAS, EIS has previously assigned to EPIL all of its interests
in the Securities after the date of issuance thereof; and

              WHEREAS, the Company and Elan have agreed to amend certain of the
Existing Transaction Documents and make certain agreements with respect to the
Securities held by Elan from time to time.

              NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each of the undersigned hereby agrees as follows:

              1. Amendments to Transaction Documents.

                     (a) Article IV, Section 2.3(a)(1) of the Amended and
       Restated Articles of Incorporation of Bioject Medical Technologies Inc.,
       as in effect on the date hereof (the "Articles of Incorporation"
       (attached hereto as Annex II)) shall be deemed by the parties hereto to
       be deleted in its entirety as of the Effective Date (as defined in
       Section 4 below) and replaced with the following language:

              "Each outstanding share of Series A Preferred Stock shall accrue
              from the date of issuance through October 15, 2001 a dividend
              equal to 9%




                                      -2-

              per annum of the Preferred Issuance Price of Series A Preferred
              Stock, compounded semiannually beginning on September 2, 1998;
              such dividend shall be paid by the issuance of additional shares
              of Series A Preferred Stock, based upon a value equal to the
              Preferred Issuance Price."

                     (b) Article IV, Sections 2.6(a)(1) and (3) of the Articles
       of Incorporation shall be deemed by the parties hereto to be deleted in
       their entirety and of no further force or effect whatsoever as of the
       Effective Date.

                     (c) Article IV, Section 2.6(a)(2) of the Articles of
       Incorporation shall be deemed by the parties hereto to be deleted in its
       entirety as of the Effective Date and renumbered as Section 2.6(a) and
       replaced with the following language:

              "Series A Preferred Stock. All holders of Series A Preferred Stock
              issued as of December 12, 2001, shall have the right to convert at
              any time each share of Series A Preferred Stock into two shares of
              Common Stock as of such date (which amount gives effect to the
              Reverse Stock Split described in Section 1.1), subject to Section
              2.6(e) below (the "Antidilution Adjustments")."

                     (d) Article IV, Section 2.6(c)(1) of the Articles of
       Incorporation shall be deemed by the parties hereto to be deleted in its
       entirety and of no further force or effect whatsoever as of the Effective
       Date.

                     (e) Article IV, Section 2.6(c)(2) of the Articles of
       Incorporation shall be deemed by the parties hereto to be deleted in its
       entirety as of the Effective Date and renumbered as Section 2.6(c) and
       replaced with the following language:

              "Series C Preferred Stock. All holders of Series C Preferred Stock
              issued as of December 12, 2001 shall have the right to convert at
              any time each share of Series C Preferred Stock into two shares of
              Common Stock as of such date (which amount gives effect to the
              Reverse Stock Split described in Section 1.1), subject to the
              Antidilution Adjustments."

                     (f) Article IV, Sections 2.7(a) and (c) of the Articles of
       Incorporation shall be deemed by the parties hereto to be deleted in
       their entirety and of no further force or effect whatsoever as of the
       Effective Date.




                                      -3-

                     (g) Section 5(c) of the Purchase Agreement is hereby
       deleted in its entirety and of no further force or effect whatsoever as
       of the Effective Date.

                     (h) Pursuant to Section 8(a) of the Series "K" Warrant to
       Purchase Shares of Common Stock originally issued by the Company to Elan
       International Services, Ltd. in connection with the Purchase Agreement
       (the "Series K Warrant"), a copy of which is attached as Annex III, the
       Series K Warrant is hereby terminated and is of no further force or
       effect whatsoever.

                     (i) Section 1 of the Series "P" Common Stock Purchase
       Warrant of the Company originally issued by the Company to EIS, pursuant
       to the 1999 Amendment (the "Series P Warrant"), a copy of which is
       attached as Annex IV, is hereby amended as of the Effective Date by
       adding the following language after the first sentence thereof:

              "Notwithstanding the foregoing, the holder hereof shall exercise
              this Warrant (by payment of the applicable Exercise Price (in cash
              or by cancellation of indebtedness of the Corporation to the
              holder hereof as provided in Section 2 of this Warrant)), (i) on
              the Effective Date (as defined in the Agreement among the Company
              and Elan Pharmaceutical Investments, Ltd. and Elan International
              Services, Ltd. dated December 12, 2001 (the "Agreement")) for
              252,666 shares of the Warrant Stock, (ii) within 30 days of the
              holder's receipt of written notice from the Corporation that on
              the first anniversary of the Effective Date the Market Price (as
              defined below) of common stock of the Corporation (the "Common
              Stock") was at least $12.50 per share (such notice to include
              evidence reasonably satisfactory to the holder hereof as to the
              basis for the calculation of such price and to be given no later
              than the fifth business day following such anniversary and in such
              manner as is specified in Section 9 of the Agreement), for 252,667
              shares of the Warrant Stock and (iii) within 30 days of the
              holder's receipt of written notice from the Corporation that on
              the second anniversary of the Effective Date the Market Price of
              the Common Stock was at least $15.00 per share (such notice to
              include evidence reasonably satisfactory to the holder hereof as
              to the basis for the calculation of such price and to be given no
              later than the fifth business day following such anniversary and
              in such manner as is specified in Section 9 of the Agreement), for
              the remaining Warrant Stock not previously purchased pursuant to
              an exercise of this Warrant; provided, however, the holder hereof
              is not obligated to make any such exercise unless at such time at
              least one or more registration statements is then effective
              pursuant to which all the




                                      -4-

              Warrant Stock issued or issuable upon exercise hereof may be
              publicly sold by such holder under the Securities Act of 1933, as
              amended; provided, further, however, that notwithstanding the
              foregoing provisions of this sentence, the holder of this Warrant
              retains the right to exercise this Warrant at any time pursuant to
              the first sentence of this Section 1. In the event that the holder
              hereof has not exercised this Warrant for all Warrant Stock as of
              the close of business on the later of (x) the fifth business day
              after the second anniversary of the Effective Date if no notice
              pursuant to clause (iii) above has been delivered to the holder
              hereof on or before such date or (y) the 30th day following
              receipt by the holder hereof of any notice pursuant to clause
              (iii) above, as a result of the failure of the conditions set
              forth in the immediately preceding sentence, then thereafter the
              provisions of such sentence shall terminate and have no further
              force or effect. All share amounts and prices per share in this
              Section 1 shall be subject to appropriate adjustment from time to
              time pursuant to Section 11 of this Warrant.

              "Market Price" means, with respect to each anniversary of the
              Effective Date requiring a calculation thereof as provided above,
              the average of the daily Closing Prices (as defined below) per
              share of the Common Stock for the 10 consecutive trading days
              ending on the trading day immediately preceding such anniversary;
              provided, however, that in the event that the Market Price is
              determined during a period following the announcement by the
              Corporation of (A) a dividend or distribution of Common Stock, or
              (B) any subdivision, combination or reclassification of Common
              Stock and prior to the expiration of 20 business days after the
              ex-dividend date for such dividend or distribution, or the record
              date for such subdivision, combination or reclassification, then,
              and in each such case, the Market Price shall be appropriately
              adjusted to reflect the current market price per share equivalent
              of the Common Stock. "Closing Price" means the reported last sales
              price regular way or, if no such reported sale occurs on such day,
              the average of the closing bid and asked prices regular way on
              such day, in each case as reported by NASDAQ or such other
              principal consolidated transaction reporting system with respect
              to securities listed on the principal national securities exchange
              on which the Common Stock is listed or admitted to trading, or any
              comparable system then in use or, if not so reported, as reported
              by any New York Stock Exchange member firm reasonably selected by
              the holder of this Warrant for purposes of estab-




                                      -5-

              lishing whether this Warrant must be exercised pursuant to the
              second sentence of this Section 1."

                     (j) Section 6 of the Series P Warrant is hereby deleted in
       its entirety and of no further force or effect as of the Effective Date.

              2. Resale of Common Stock; Etc.

                     (a) Elan hereby agrees to sell, in one transaction or a
       series of related or unrelated transactions, the 545,455 shares of Common
       Stock originally acquired under the Purchase Agreement and the 252,666
       shares of Common Stock to be acquired by Elan on the Effective Date upon
       the exercise of the Series P Warrant pursuant to Section 1(i) of this
       Agreement (the "Original Shares") to one or more individuals,
       partnerships, corporations, limited liability companies or other entities
       not affiliates of Elan (any such entity, a "Non-Affiliate") on or before
       March 31, 2002; provided, (A)(i) on or before January 8, 2002, Elan may
       contract to sell such shares in any such transaction (for any or all of
       the Original Shares) in a manner and at such time as Elan may determine
       and (ii) on and after January 9, 2002 through and including March 31,
       2002, Elan shall contract to sell such shares in any such transaction
       with respect to such Original Shares not sold pursuant to the foregoing
       clause (i) exclusively through Leerink Swann & Company under the same
       terms and conditions as sales of Common Stock by the Company, on a pro
       rata basis (determined by reference to the number of Original Shares not
       sold (or contracted to be sold) pursuant to the foregoing clause (i) and
       the number of shares of Common Stock the Company identifies to Leerink
       Swann & Company for sale during such period) and (B) in any one such
       transaction the consideration Elan receives per Original Share (subject
       to adjustment to reflect any subdivision or combination of the Common
       Stock on or before the date of any such transaction, including the
       Reverse Stock Split (as defined in the Articles of Incorporation) shall
       be no less than $10.25 per share, net of any commissions, fees or
       discounts charged in connection with such transaction; provided, that,
       except with respect to any transaction contemplated by clause (A)(ii) of
       the first proviso of this Section 2(a), Elan shall not be obligated to
       make any such sale pursuant to this Section 2(a) unless at such time at
       least one or more registration statements is then effective pursuant to
       which the Original Shares may be publicly sold by Elan under the
       Securities Act of 1933, as amended (the "Securities Act"); provided,
       further, if on or before March 31, 2002 Elan has not disposed of all of
       its Original Shares pursuant to this Section 2(a) as a result of the
       failure of the conditions hereof to be satisfied, then the provisions of
       this Section 2(a) shall terminate as of the close of business on such
       date and Elan shall have no further obligations under this Section 2(a).




                                      -6-

                     (b) The parties hereto hereby agree that, after the earlier
       of March 31, 2002 or the sale of all of the Original Shares as
       contemplated by Section 2(a) of this Agreement, Elan may sell any shares
       of Common Stock, including shares of Common Stock acquired upon
       conversion of the Series A Preferred Stock or the Series C Preferred
       Stock or upon exercise of the Series P Warrant after the Effective Date,
       and any shares of the Series A Preferred Stock or Series C Preferred
       Stock, and any Series P Warrants, in each case in a manner and at such
       time as Elan may determine, subject to any holdback agreements
       contemplated by the Registration Rights Agreement and any applicable
       securities law restrictions.

                     (c) The parties hereto agree that notwithstanding the
       provisions of any Existing Transaction Document, Elan is not subject to
       any provisions of any Existing Transaction Document limiting or
       restricting its ability to sell any of the Securities (other than any
       holdback agreements contemplated by the Registration Rights Agreement),
       including the Original Shares and any Common Stock acquired upon exercise
       of the Series P Warrant or conversion of the Series A Preferred Stock or
       Series C Preferred Stock, at any time or in any manner, other than any
       applicable restrictions under the Securities Act.

              3. Waivers.

                     (a) The Company hereby waives as of the Effective Date any
       rights it had prior to the date hereof solely with respect to those
       provisions of the Articles of Incorporation deemed to be amended or
       deleted pursuant to Sections 1(a) through (f) hereof (the "Amendments to
       the Articles"), including any right to redeem the Series A Preferred
       Stock and hereby rescinds any action heretofore undertaken in any manner
       or to any extent to exercise any such right, and waives any right it
       would have hereafter under such provisions whether or not the Amendments
       to the Articles are approved by the Company's shareholders.

                     (b) Elan hereby waives any rights as a holder of the Series
       A Preferred Stock or Series C Preferred Stock it had prior to the date
       hereof solely with respect to those provisions deemed to be amended or
       deleted by the Amendments to the Articles and waives any right it would
       have hereafter under such provisions whether or not the Amendments to the
       Articles are approved by the Company's shareholders.

              4. Conditions. This Agreement shall become effective upon the date
       (the "Effective Date") that




                                      -7-

                     (a) all of the following, duly executed, have been
       delivered to Elan:

                            (i) this Agreement;

                            (ii) Certificates for 260,044 shares of Series A
              Preferred Stock, which the parties agree represents all dividends
              accrued on the Series A Preferred Stock from the date of first
              issuance thereof through and including October 15, 2001;

                            (iii) Certificates for the shares of Common Stock
              being acquired by Elan pursuant to the exercise of the Series P
              Warrant as contemplated by Section 1(i) of this Agreement; and

                            (iv) An opinion of counsel of the Company, in the
              form attached to this Agreement as Annex V, as to the matters set
              forth in Section 6(a) hereof;

                            (v) Supplements to the currently effective
              prospectuses to cover the sale by EPIL of the Original Shares.

                     (b) all of the following, duly executed, have been
       delivered to Bioject:

                            (i) this Agreement;

                            (ii) the cash amount of $1,894,995, representing the
              exercise price for the shares to be purchased by Elan pursuant to
              the exercise of the Series P Warrant as contemplated by Section
              1(i) of this Agreement;

                            (iii) the original Series K Warrant for
              cancellation; and

                            (iv) the cash amount of $100,000 in consideration
              for the option granted pursuant to Section 8 of this Agreement.

The parties agree to take all actions required as conditions so that the
Effective Date shall occur no later than December 14, 2001.

              5. Covenants.




                                      -8-

                     (a) The Company hereby covenants that at its next regularly
       scheduled annual meeting of its shareholders it shall request and use its
       best efforts to obtain shareholder approval of the Amendments to the
       Articles; provided, Elan shall have the right to review and comment on
       the proxy material to be distributed in connection with any such annual
       meeting; provided, further, in the event that the shareholders do not
       approve the Amendments to the Articles as contemplated by this Section
       5(a) on or before the first anniversary of the Effective Date, the
       Company covenants that it will issue to Elan a warrant exercisable at a
       nominal exercise price for a number of shares of Common Stock equal in
       value (based on the Market Price thereof on such anniversary as defined
       in the Series P Warrant) on such first anniversary to the sum of (x) the
       valuation of all of the shares of Series A Preferred Stock held by Elan
       on such date (including the valuation of the conversion feature of such
       shares based on the Black-Scholes method of valuation of securities with
       option features, giving effect to the adoption of the Amendments to the
       Articles) minus the valuation of all of such shares (including the
       valuation of the conversion feature of such shares based on the
       Black-Scholes method of valuation of securities with option features,
       without giving effect to the adoption of the Amendments to the Articles)
       plus (y) 10% of the difference in valuations specified in clause (x);
       provided, the parties hereto agree that the valuation and methods
       contemplated hereby will be pursuant to such further agreements as to the
       procedures for such valuation as the parties shall mutually agree to.

                     (b) In addition to the rights and obligations of the
       parties hereto under the Registration Rights Agreement, including the
       provisions of Section 6 thereof, the Company hereby covenants that the
       Company shall use its best efforts to keep the currently effective
       registration statements of the Company effective until all shares of
       Common Stock held by Elan as of the Effective Date and all shares of
       Common Stock issuable upon conversion of the Series A Preferred Stock or
       the Series C Preferred Stock and the exercise of the Series P Warrant are
       (A) sold pursuant to an effective registration statement under the
       Securities Act, (B) eligible to be sold into the public market without
       regard to volume limitations under Rule 144(k) promulgated under the
       Securities Act (or any successor rule), or (C) sold pursuant to Rule 144.

                     (c) The Company covenants not to sue EIS, EPIL or Elan
       Corporation, plc including, as applicable, all of the direct or indirect
       stockholders, members and affiliates thereof (including, but not limited
       to, parent, subsidiary and affiliated corporations or other entities) and
       each of their respective past and present officers, directors, members,
       agents, employees, representatives, lawyers, administrators, spouses, and
       all persons acting by, through, under, or in concert




                                      -9-

       with them (collectively, the "Elan Entities") with respect to any and all
       claims for damages or other sums, including attorneys' fees and costs, or
       for any other relief or remedy, which the Company may have against them,
       or any of them, which could have arisen out of any act or omission with
       respect to the Company's redemption rights that were the basis for the
       Complaint (as defined in Section 7 hereof) (each a "Complaint Related
       Claim") and covenants to indemnify and hold harmless each Elan Entity
       from and against any losses, claims, damages or liabilities (including
       actions or proceedings in respect thereof) arising out of any Complaint
       Related Claim that may be alleged by any other party.

                     (d) Elan hereby covenants to (i) use its best efforts to
       cooperate with the Company in causing the Amendments to the Articles to
       be approved, including, without limitation, voting all of its shares of
       the Company's stock in favor of the proposals relating to the Amendments
       to the Articles and (ii) notify the Company promptly after the
       consummation of each transaction contemplated by Section 2(a) of this
       Agreement.

              6. Representations and Warranties.

                     (a) The Company represents and warrants to Elan that (i)
       attached hereto as Annex II is a true and complete copy of the Articles
       of Incorporation; (ii) the Company is a corporation duly organized and
       validly existing under the laws of Oregon, with all corporate power and
       authority necessary to execute, deliver and perform its obligations under
       this Agreement; (iii) the execution, delivery and performance by the
       Company of this Agreement has been duly authorized by all necessary
       action and this Agreement constitutes the legal, valid and binding
       obligation of the Company, enforceable against the Company in accordance
       with its terms; and (iv) as of the Effective Date the registration
       statements covering the sale of the shares of Common Stock held by Elan
       have been declared effective under the Securities Act by the Securities
       and Exchange Commission and have not been withdrawn by the Company and to
       the Company's knowledge no stop order proceedings with respect thereto
       are pending or threatened under the Securities Act.

                     (b) Elan represents and warrants to the Company that (i)
       Elan now has good and marketable title to all of the shares of Preferred
       Stock and Common Stock of the Company issued to Elan pursuant to the
       Purchase Agreement, the Series K Warrant and the Series P Warrant, free
       and clear of any liens, encumbrances and claims, and full right, power
       and authority to effect the sale and delivery of such securities; (ii)
       each of the Elan entities is a corporation duly organized and validly
       existing under the laws of its incorporation, with all corpo-




                                      -10-

       rate power and authority necessary to execute, deliver and perform its
       obligations under this Agreement; (iii) the execution, delivery and
       performance by Elan of this Agreement has been duly authorized by all
       necessary action and this Agreement constitutes the legal, valid and
       binding obligation of Elan, enforceable against Elan in accordance with
       its terms.

              7. Dismissal of the Complaint. Within 2 business days after the
Effective Date, the Company and all those under its control shall, in the form
attached hereto as Annex VI, arrange for the dismissal of the lawsuit entitled
Bioject Medical Technologies Inc. v. Elan Corporation, plc, et. al, Case
No.01-CV-1438-AS, filed in the United States District Court for the Federal
District of Oregon (the "Complaint"). The Company shall promptly provide
evidence of such dismissal to Elan. By entering into this Agreement no party is
making any admission of liability, nor admitting the sufficiency of any other
party's allegations in the Complaint. Instead, the parties hereto have entered
into this Agreement to compromise disputed claims and to avoid the further
expense and burden of litigation. No party admits liability, wrongdoing, or any
sort of malfeasance.

              8. License Agreement Option. In separate consideration of the
payment of the sum of $100,000 simultaneously with the execution of this
Agreement, the Company grants to EIS an option, but not the obligation,
exercisable on or prior to the six-month anniversary of the Effective Date to
obtain a license of the Company's Iject product for any one drug of Elan or of a
joint venture partner of Elan, the form and substance of which license agreement
shall be negotiated in good faith by the parties hereto.

              9. Notice. All notices, demands and requests of any kind to be
delivered to any party in connection with this Agreement shall be in writing and
shall be deemed to have been duly given if personally delivered or when sent if
sent by nationally-recognized overnight courier or by registered or certified
airmail, return receipt and postage prepaid, or by facsimile transmission,
addressed as follows:

              If to the Company:

              Bioject Medical Technologies, Inc.
              7620 S.W. Bridgeport Road
              Portland, Oregon 97224
              Fax: (503) 620-6431
              Attention: James C. O'Shea




                                      -11-

              With a copy to:

              Stoel Rives LLP
              900 SW Fifth Avenue, Suite 2600
              Portland, Oregon  97204
              Fax: 503-220-2480
              Attention: Todd Bauman

              If to EPIL or EIS:

              c/o Elan Pharmaceutical Investments, Ltd.
              102 St. James Court
              Flatts Smiths FL04, Bermuda
              Fax: (441)292-2224
              Attention: Kevin Insley

              With a copy to:

              Cahill Gordon & Reindel
              80 Pine Street
              New York, NY 10005
              Fax: (212)269-5420
              Attention: William Hartnett

              10. Specific Performance, Etc. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.

              11. Expenses. Each party hereto shall be responsible for payment
of its own attorneys' fees, costs, and other legal expenses incurred through the
date of this Agreement.

              12. Confidentiality; Non-Disclosure.

                     (a) Subject to clause (b) below, from and after the date
       hereof, neither the Company, EIS nor EPIL (nor their respective
       affiliates) shall disclose to any person or entity this Agreement or the
       other Transaction Documents or the contents thereof or the parties
       thereto, except that such parties may make such disclosure (x) to their
       directors, officers, employees and advisors, and potential bank creditors
       and investors, so long as they shall have advised such persons of the
       obligation of confidentiality herein and for whose breach or default the
       disclosing party shall be responsible or (y) as required by applicable
       law, rule, regu-




                                      -12-

       lation or judicial or administrative process (it being expressly
       understood by the parties hereto that the Company will file this
       Agreement with the first report on Form 10-Q filed after the Effective
       Date), provided, that the disclosing party uses commercially reasonable
       efforts to obtain an order or ruling protecting the confidentiality of
       confidential information identified as such by the other party contained
       herein or therein and notifies the other party five business days prior
       to such disclosure so that such other party may, if it chooses, request
       that the Company seek such relief (any such relief, "Confidential
       Treatment"). The parties shall be entitled to seek injunctive or other
       equitable relief in respect of any breach or threatened breach of the
       foregoing covenant without the requirement of posting a bond or other
       collateral.

                     (b) Attached hereto as Annex VII is a press release to be
       issued by the Company in respect of this Agreement and the transactions
       contemplated hereby (the "Initial Press Release"). After the Effective
       Date, the Company will not issue any press release containing, or
       otherwise publicly disclose, any confidential information that is the
       subject of a request for Confidential Treatment (whether or not such
       request has been approved), without obtaining the consent of Elan to the
       contents thereof, which consent shall not be unreasonably withheld or
       delayed; it being understood that if Elan shall not have responded to
       such consent request within three business days, such consent shall be
       deemed given.

              13. Successors and Assigns. This Agreement shall be binding upon
each of the parties hereto and their respective successors and assigns. The
successors and assigns of such persons shall include, without limitation, their
respective receivers, trustees or debtors-in-possession and the successors and
assigns of Elan shall include any transferee of any shares of Series A Preferred
Stock.

              14. Further Assurances. Each of the parties hereto agrees to
execute and deliver or cause to be executed and delivered, all such documents,
instruments and agreements and to take or cause to be taken such further or
other action as may reasonably be deemed necessary or desirable in order to
carry out the intent and purposes of this Agreement.

              15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF NEW YORK WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF.

              16. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provi-




                                      -13-

sion shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.

              17. Integration, Etc. This Agreement (together with the Annexes
hereto) is intended to be and constitutes the final, complete and exclusive
Agreement between the parties regarding the subject matter of this Agreement and
all prior or contemporaneous agreements, understandings, representations and
statements, oral or written, are merged into and superseded by this Agreement.
No parol or extrinsic evidence of any kind and no course of dealing or usage of
trade or course of performance shall be used to vary, contradict, supplement or
add to the terms of this Agreement. No amendment or waiver hereof shall be
effective unless in writing and signed by the parties hereto and then only in
the specific instance and for the specific purpose for which given; provided,
except as amended hereby, the Existing Transaction Documents remain unmodified
and in full force and effect.

              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.


BIOJECT MEDICAL TECHNOLOGIES, INC.      ELAN INTERNATIONAL SERVICES, LTD.


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

ELAN PHARMACEUTICAL
INVESTMENTS, LTD.


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

EX-10.2

                                                                    EXHIBIT 10.2

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"). Notwithstanding the foregoing, the holder hereof
shall exercise this Warrant (by payment of the applicable Exercise Price (in
cash or by cancellation of indebtedness of the Corporation to the holder hereof
as provided in Section 2 of this Warrant)), (i) on the Effective Date (as
defined in the Agreement among the Company and Elan Pharmaceutical Investments,
Ltd. and Elan International Services, Ltd. dated December 12, 2001 (the
"Agreement")) for 252,666 shares of the Warrant Stock, (ii) within 30 days of
the holder's receipt of written notice from the Corporation that on the first
anniversary of the Effective Date the Market Price (as defined below) of common
stock of the Corporation (the "Common Stock") was at least $12.50 per share
(such notice to include evidence reasonably satisfactory to the holder hereof as
to the basis for the calculation of such price and to be given no later than the
fifth business day following such anniversary and in such manner as is specified
in Section 9 of the Agreement), for 252,667 shares of the Warrant Stock and
(iii) within 30 days of the holder's receipt of written notice from the
Corporation that on the second anniversary of the Effective Date the Market
Price of the Common Stock was at least $15.00 per share (such notice to include
evidence reasonably satisfactory to the holder hereof as to the basis for the
calculation of such price and to be given no later than the fifth business day
following such anniversary and in such manner as is specified in Section 9 of
the Agreement), for the remaining Warrant Stock not previously purchased
pursuant to an exercise of this Warrant; provided, however, the holder hereof is
not obligated to make any such exercise unless at such time at least one or more
registration statements is then effective pursuant to which all the Warrant
Stock issued or issuable upon exercise hereof may be publicly sold by such
holder under the Securities Act of 1933, as amended; provided, further, however,
that notwithstanding the foregoing provisions of this sentence, the holder of
this Warrant retains the right to exercise this Warrant at any time pursuant to
the first sentence of this Section 1. In the event that the holder hereof has
not exercised this Warrant for all Warrant Stock as of the close of business on
the later of (x) the fifth business day after the second anniversary of the
Effective Date if no notice pursuant to clause (iii) above has been delivered to
the holder hereof on or before such date or (y) the 30th day following receipt
by the holder hereof of any notice pursuant to clause (iii) above, as a result
of the failure of the conditions set forth in the immediately preceding
sentence, then thereafter the provisions of such sentence shall terminate and
have no further force or effect. All share amounts and prices per share in this
Section 1 shall be subject to appropriate adjustment from time to time pursuant
to Section 11 of this Warrant.


                                      -1-


       "Market Price" means, with respect to each anniversary of the Effective
Date requiring a calculation thereof as provided above, the average of the daily
Closing Prices (as defined below) per share of the Common Stock for the 10
consecutive trading days ending on the trading day immediately preceding such
anniversary; provided, however, that in the event that the Market Price is
determined during a period following the announcement by the Corporation of (A)
a dividend or distribution of Common Stock, or (B) any subdivision, combination
or reclassification of Common Stock and prior to the expiration of 20 business
days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the Market Price shall be appropriately adjusted to reflect the
current market price per share equivalent of the Common Stock. "Closing Price"
means the reported last sales price regular way or, if no such reported sale
occurs on such day, the average of the closing bid and asked prices regular way
on such day, in each case as re-ported by NASDAQ or such other principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, or any comparable system then in use or, if not so
re-ported, as reported by any New York Stock Exchange member firm reasonably
selected by the holder of this Warrant for purposes of establishing whether this
Warrant must be exercised pursuant to the second sentence of this Section 1.

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 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


                                      -2-


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.     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.

7.     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.

8.     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.

9.     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.

10.    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


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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.

11.    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.

12.    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;


                                      -4-


       (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 and to
carry out and perform its obligations under the teens 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.

13.    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.

14.    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: _________________________,  2002



BIOJECT MEDICAL TECHNOLOGIES INC.



By:
   -----------------------------------------
Name:
Title:


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