-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GtB+jjgIn3CtYXaa/vlfn+RUgPuv2dc8h94AOF8AbDFJCJYDoG/YWG7aSIBskrS6 lZ14D46jl8ELJRdhVHRoow== 0001061778-98-000020.txt : 19980720 0001061778-98-000020.hdr.sgml : 19980720 ACCESSION NUMBER: 0001061778-98-000020 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980910 FILED AS OF DATE: 19980717 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOJECT MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000810084 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 931099680 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 000-15360 FILM NUMBER: 98668253 BUSINESS ADDRESS: STREET 1: 7620 S W BRIDGEPORT RD CITY: PORTLAND STATE: OR ZIP: 97224 BUSINESS PHONE: 5036397221 MAIL ADDRESS: STREET 1: 7620 S W BRIDGEPORT ROAD CITY: PORTLAND STATE: OR ZIP: 97224 FORMER COMPANY: FORMER CONFORMED NAME: BIOJECT MEDICAL SYSTEMS LTD DATE OF NAME CHANGE: 19920703 PRE 14A 1 PRELIMINARY PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [x] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 BIOJECT MEDICAL TECHNOLOGIES INC. - --------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - --------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No Fee Required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: _________________________________________________________________________ 2) Aggregate number of securities to which transaction applies: _________________________________________________________________________ 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): _________________________________________________________________________ 4) Proposed maximum aggregate value of transaction: _________________________________________________________________________ 5) Total fee paid: _________________________________________________________________________ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ___________________________________________________________________________ 2) Form, Schedule or Registration Statement No.: ___________________________________________________________________________ 3) Filing Party: ___________________________________________________________________________ 4) Date Filed: ___________________________________________________________________________ Bioject Medical Technologies Inc. 7620 SW Bridgeport Road Portland OR 97224 August 6, 1998 Dear Shareholders: You are cordially invited to attend the 1998 annual meeting of the shareholders of BIOJECT MEDICAL TECHNOLOGIES INC., to be held at the Oregon Convention Center, 777 NE Martin Luther King Jr. Blvd., Room C120-122, Portland, Oregon, on Thursday, September 10, 1998 at 9:00 a.m., Pacific Daylight Time. The matters to be acted upon at the meeting -- to elect the Board of Directors; to amend the Articles of Incorporation to provide for a classified Board of Directors; to amend the 1992 Stock Incentive Plan to increase the number of shares available for issuance under the plan; and to transact such other business as may properly come before the meeting -- are described in the attached Notice of Meeting and Proxy Statement. We believe the annual meeting provides an excellent opportunity for shareholders to become better acquainted with BIOJECT and its board members and officers. Although we would like very much to have each shareholder attend the 1998 meeting, we realize this is not possible. Whether or not you plan to be present at the meeting, it is important that your shares be represented. Therefore, we urge you to complete, sign and return the enclosed proxy as soon as possible. If you return your proxy promptly, you can help BIOJECT avoid the expense of follow-up mailings to ensure a quorum so that the meeting can be held. If you decide between now and September that you can attend the meeting in person, you may revoke your proxy at that time and vote your shares at the meeting. We appreciate your continued support of Bioject and look forward to either greeting you personally at the meeting or receiving your proxy. Sincerely, /S/ JAMES C. O'SHEA _________________________________ James C. O'Shea Chairman of the Board, President and Chief Executive Officer BIOJECT MEDICAL TECHNOLOGIES INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS NOTICE IS HEREBY GIVEN that the annual meeting (the "Meeting") of the shareholders of BIOJECT MEDICAL TECHNOLOGIES INC. (the "Company") will be held on Thursday, September 10, 1998, at 9:00 a.m., Pacific Daylight Time, at the Oregon Convention Center, 777 NE Martin Luther King Jr. Blvd., Room C120-122, Portland, Oregon, for the following purposes: 1. To elect eight directors for the ensuing year; 2. To amend the Articles of Incorporation to provide for a classified Board of Directors; 3. To amend the 1992 Stock Incentive Plan to increase the number of shares available for issuance under the plan; and 4. To transact such other business as may properly come before the Meeting or any adjournment thereof. These matters are more fully described in the proxy statement accompanying this Notice. Accompanying this Notice of Meeting is a proxy statement and a form of proxy, together with the annual report of the Company. A copy of the Company's 10-K containing the consolidated financial statements for the year ended March 31, 1998, and the auditors' report on the financial statements is also included. Only holders of common stock of record at the close of business on July 24, 1998 will be entitled to vote at the Annual Meeting of Shareholders and any adjournments thereof. Shareholders who are unable to attend the Meeting in person are requested to complete, sign, date and return the enclosed form of proxy directly to American Stock Transfer and Trust Co., postage prepaid. A proxy will not be valid unless it is received at the office of American Stock Transfer and Trust Co., 40 Wall Street, 46th Floor, New York, New York 10005 before the time fixed for the Meeting. DATED at Portland, Oregon, this 6th day of August, 1998. BY ORDER OF THE BOARD /S/ MICHAEL A. TEMPLE _______________________________ Michael A. Temple Vice President, Chief Financial Officer and Secretary/Treasurer BIOJECT MEDICAL TECHNOLOGIES INC. TABLE OF CONTENTS MANAGEMENT SOLICITATION APPOINTMENT AND REVOCABILITY OF PROXIES VOTING OF PROXIES VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF PROPOSAL #1: ELECTION OF DIRECTORS Board of Directors Composition, Compensation and Committees EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS Biographical Information Executive Compensation Grant of Stock Options Option Exercises and Fiscal Year End Values Ten-Year Option/SAR Repricings Employment Contracts Escrowed Shares SEC Filings REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES ON EXECUTIVE COMPENSATION CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS STOCK PERFORMANCE CHART PROPOSAL #2 AMENDMENT OF ARTICLES OF INCORPORATION PROPOSAL #3 AMENDMENT TO 1992 STOCK INCENTIVE PLAN OTHER MATTERS TO BE ACTED UPON SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES FOR THE MEETING ANNUAL REPORT INDEPENDENT ACCOUNTANTS PROPOSALS OF SHAREHOLDERS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS BIOJECT MEDICAL TECHNOLOGIES INC. PROXY STATEMENT as of August 6, 1998 MANAGEMENT SOLICITATION This proxy statement and accompanying form of proxy are furnished in connection with the solicitation of proxies by the Board of Directors of BIOJECT MEDICAL TECHNOLOGIES INC. (the "Company"), for use at the annual general meeting (the "Meeting") of shareholders of the Company to be held on September 10, 1998, at the time and place and for the purposes set forth in the Notice of Meeting. The form of proxy accompanying this information circular is solicited by the Board of Directors of the Company. Proxies may be solicited by officers, directors and regular supervisory and executive employees of the Company, none of whom will receive any additional compensation for their services. In addition, the Company has retained the services of Allen Nelson & Co. to assist in the solicitation of proxies. Proxies may be solicited personally or by mail, telephone, telex, facsimile, telegraph or messenger. The Company estimates it will pay Allen Nelson & Co. its customary and reasonable fees not expected to exceed $3,500, plus reimbursement of certain out-of-pocket expenses, for its services in soliciting proxies. The Company will also pay persons holding shares of the common stock in their names or in the names of nominees, but not owning such shares beneficially, such as brokerage houses, banks and other fiduciaries, for the expense of forwarding soliciting materials to their principals. The cost of this solicitation will be borne directly by the Company. The approximate mailing date of the Notice of Meeting, proxy statement and form of proxy is August 6, 1998. APPOINTMENT AND REVOCABILITY OF PROXIES The persons named in the accompanying form of proxy are officers of the Company. In addition to revocation in any other manner permitted by law, a proxy may be revoked by: (i) signing another proxy bearing a later date and depositing it in the manner set forth in the Notice of Meeting; (ii) signing and dating a written notice of revocation (in the same manner as a proxy is required to be executed) and either depositing it in the manner set forth in the Notice of Meeting at any time before the time fixed for the Meeting or an adjournment thereof or with the chairman of the Meeting on the day of the Meeting or an adjournment thereof; or (iii) attending the Meeting or an adjournment thereof, and casting a ballot in person. Such revocation will have effect only in respect of those matters which have not already been acted upon. Additional proxy forms may be obtained by calling or writing to American Stock Transfer & Trust Co., Shareholder Services, 40 Wall Street, 46th Floor, New York, NY 10005. Telephone: (718) 921-8200. VOTING OF PROXIES The securities represented by the proxy will be voted or withheld from voting in accordance with the instructions of the shareholder on any ballot that may be called for, and if the shareholder specifies a choice with respect to any matter to be acted upon, the securities shall be voted accordingly. The form of proxy confers authority upon the named proxyholder with respect to matters identified in the accompanying Notice of Meeting. If a choice with respect to such matters is not specified, it is intended that the person designated by management in the form of proxy will vote the securities represented by the proxy in favor of each matter identified in the proxy statement and for election to the Board of Directors the nominees named in this proxy statement. The proxy confers discretionary authority upon the named proxyholder with respect to amendments to or variations in matters identified in the accompanying Notice of Meeting and other matters which may properly come before the Meeting. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF The voting securities of the Company consist of common stock, without par value (the "Common Shares"). The Record Date has been fixed in advance by the directors as July 24, 1998, for the purpose of determining shareholders entitled to a notice of and to vote at the Meeting. Each share issued at the time of the Record Date carries the right to one vote at the Meeting. As of July 24, 1998, a total of _______ shares of the Company's common stock were issued and outstanding. The presence in person or by proxy of holders of record of a majority of the outstanding Common Shares is required to constitute a quorum for the transaction of business at the Meeting. If a quorum is present, the eight nominees for election to the Board of Directors who receive the greatest number of votes cast at the Meeting shall be elected directors. For all other matters to come before the Meeting, a proposal will be approved only upon the affirmative vote of shareholders owning in the aggregate at least a majority of the Company's Common Shares represented at the Meeting in person or by proxy and entitled to vote. With regard to the election of directors, votes may be cast for or withheld from each nominee. Votes that are withheld will have no effect on the outcome of the election because directors will be elected by a plurality of the votes cast. An abstention may be specified in the proposals to approve the amendments to the Articles of Incorporation and the increase of shares available under the Company's 1992 Stock Incentive Plan. An abstention will be counted as present for purposes of determining the existence of a quorom on such proposal and, therefore, have the effect of a negative vote. Shares represented by duly executed and returned proxies of brokers or other nominees which are expressly not-voted upon the proposal ("broker non-votes") will have no effect on the required vote. The following tables set forth certain information concerning the beneficial ownership of the Company's common stock at June 30, 1998, by: (i) each person known by the Company to own beneficially more than 5 percent of the outstanding capital stock of the Company; (ii) each of the directors and named executive officers; and (iii) all directors and officers as a group. Each shareholder listed below has sole voting and investment power with respect to the shares beneficially owned, except as indicated: NUMBER OF SHARES PERCENTAGE BENEFICIALLY BENEFICIALLY NAME OF BENEFICIAL OWNER OWNED (1) OWNED ________________________________ ________________ ___________ Elan International Service, Ltd. (2) 4,477,273 15.15% Flatt Smiths SL04 Bermuda Hambrecht & Quist (3) 2,380,000 8.21 50 Rowes Wharf, Boston, Massachusetts 02110 Paramount Capital (4) 2,019,742 7.03 787 Seventh Avenue, New York, New York 10019 DeSpain & Coby, Inc. (5) 1,416,364 5.07 1011 SW Emkay Dr., Suite 103 Bend, Oregon 97702 James C. O'Shea (6) 500,086 1.77 David H. de Weese (7) 36,250 * Grace Keeney Fey (8) 36,000 * William A. Gouveia (9) 52,500 * Eric T. Herfindal (10) 66,250 * Richard J. Plestina (11) 170,500 * John Ruedy, MD (12) 126,950 * Michael T. Sember (13) 8,750 * J. Michael Redmond (14) 93,234 * Peggy J. Miller (15) 38,723 * All Directors, Executive and Officers as a Group (13 persons) (16) 1,761,503 6.03% _________________________________________ * Less than one percent. (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes shares over which the indicated beneficial owner exercises voting and/or investment power. Shares of common stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but not deemed outstanding for computing the percentage of ownership of any other person. Except as indicated, and subject to community property laws where applicable, the persons names in the table above have sole voting and investment power with respect to all shares of common stock as shown as beneficially owned by them. (2) Includes warrants to purchase 1,750,000 shares of common stock which are presently exercisable. Does not include 692,694 shares of Series A Convertible Preferred Stock and 134,333 shares Series B Convertible Preferred Stock. (3) Includes warrants to purchase 1,190,00 shares of common stock which are presently exercisable. (4) Includes warrants to purchase 928,571 shares of common stock which are presently exercisable. (5) Includes warrants to purchase 116,280 shares of common stock which are presently exercisable. (6) Includes options to purchase 456,250 shares of common stock which are presently exercisable and 12,500 which are vested and become exercisable on October 1, 1998. Does not include 500,000 option shares which become exercisable after 60 days. (7) Includes options to purchase 26,250 shares of common stock which are presently exercisable. Does not include 8,750 option shares that become exercisable after 60 days. (8) Includes options to purchase 8,750 shares of common stock which are presently exercisable and 26,250 shares of common stock which are vested and become exercisable on September 11, 1998. Does not include 8,750 option shares that become exercisable after 60 days. (9) Includes options to purchase 8,750 shares of common stock which are presently exercisable and 43,750 shares of common stock which are vested and become exercisable on September 11, 1998. Does not include 8,750 option shares that become exercisable after 60 days. (10) Includes options to purchase 26,250 shares of common stock which are presently exercisable. Does not include 8,750 option shares that become exercisable after 60 days. (11) Includes options to purchase 26,250 shares of common stock which are presently exercisable. Does not include 8,750 option shares that become exercisable after 60 days. (12) Includes options to purchase 8,750 shares of common stock which are presently exercisable and 52,500 shares of common stock which are vested and become exercisable on September 11, 1998. Does not include 8,750 option shares that become exercisable after 60 days. (13) Does not include 8,750 option shares that become exercisable after 60 days. (14) Includes options to purchase 81,250 shares of common stock which are presently exercisable and 6,250 shares of common stock which are vested and become exercisable on October 1, 1998. Does not include 50,000 option shares which become exercisable after 60 days. (15) Includes options to purchase 10,000 shares of common stock exercisable immediately and 21,250 shares of common stock which will vest and are exercisable on September 1, 1998. (16) Includes 714,875 options and 480,243 warrants, which are presently exercisable, 122,500 options which are vested and become exercisable on September 11, 1998 and 43,750 options which are vested and become exercisable by October 1, 1998. Does not include 771,250 options which become vested and exercisable after 60 days. All of the outstanding capital stock of Bioject Inc. is owned by the Company and 80.1 percent of the outstanding stock of Bioject JV Subsidiary Inc. is owned by the Company. PROPOSAL #1: ELECTION OF DIRECTORS The Articles of Incorporation of the Company provide for the holders of Common Shares to elect a Board of Directors at the 1998 Meeting. If Proposal #2, which provides for a classified Board, is not approved, each director elected will hold office until the next annual general meeting or until his successor is duly elected or appointed, unless his office is earlier vacated in accordance with the articles of the Company or he becomes disqualified to act as a director. If Proposal #2 is approved, the directors will be elected to the class indicated below. See Proposal #2 for a description of their terms. The following table sets forth the names and ages of the Company's current directors, each of whom is nominated for election. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW. YEAR ELECTED NAME Class AGE POSITION DIRECTOR - ------------------ ----- ----- ------------------------ ------------ James C. O'Shea 3 53 Chairman, Chief Executive Officer and President 1995 John Ruedy, M.D. 3 66 Director(b)(c) 1987 William Gouveia 1 56 Director(c)(d) 1994 Grace Keeney Fey 2 52 Director(a)(b)(e) 1995 Eric T. Herfindal 2 57 Director(b)(d) 1996 Richard J. Plestina 2 52 Director(a)(c)(e) 1997 David de Weese 1 56 Director(d)(e) 1997 Michael Sember 3 48 Director(e) 1997 _____________ (a) Member of Stock Option Committee (b) Member of Compensation Committee (c) Member of Nominating Committee (d) Member of Audit Committee (e) Member of Ad Hoc-Financing Committee JAMES C. O'SHEA has served as Chairman and Chief Executive Officer of the Company since March 1995. Prior to joining Bioject, he was President and Chief Operating Officer of Biopure Corporation, a developer of red blood cell substitutes. Prior to 1989, Mr. O'Shea was Executive Vice President of Marketing and Scientific Affairs at Delmed Inc., a manufacturer of peritoneal dialysis solutions and parenteral products. He is a member of the Board of Directors of PSC, Inc., serving as Chairman of the Compensation Committee and previously serving as Chairman of the Executive Committee. JOHN RUEDY, M.D. has served as a director of the Company since 1987. Since July 1992, he has served as Dean of the Faculty of Medicine at Dalhousie University in Halifax, Nova Scotia. From 1978 through June 1992, Dr. Ruedy served as Professor of Medicine at the University of British Columbia and Head of the Department of Medicine at St. Paul's Hospital, Vancouver, British Columbia. Since 1966, he has held an appointment to the Department of Medicine and Pharmacology at McGill University and was Chairman of the Department of Pharmacology and Therapeutics from 1975 through 1978. Dr. Ruedy is also serving as a director for the Canadian AIDS Clinical Trials Network. WILLIAM A. GOUVEIA was elected a director of the Company in January 1994. Mr. Gouveia serves in two capacities at Boston's New England Medical Center: Director of Pharmacy (1972 to present) and Special Assistant for Pharmaceutical Research and Development (1989 to present). He has the following faculty appointments: Associate Professor of Medicine at Tufts University School of Medicine (1995), Adjunct Clinical Professor of Pharmacy at Massachusetts College of Pharmacy and Allied Health Professions, and Adjunct Professor at Northeastern University Bouve College of Pharmacy and Health Sciences. He holds an M.S. in Hospital Pharmacy from Northeastern University (1966). He has published over 75 articles in leading healthcare journals, as well as numerous book chapters, and has delivered presentations in the U.S. and international health care organizations and colleges. In 1984, he founded the Massachusetts-based Chartwell Home Therapies. He is a Fellow of the American Society of Health-System Pharmacists (ASHP) and has served as chair and member of various committees of the ASHP. GRACE K. FEY, CFA, was elected a director of the Company in October 1995. Ms. Fey is Executive Vice President and Director of Frontier Capital Management Company, a Boston-based investment management firm, since 1988. From 1986 to 1988, she was a Senior Vice President of Investment Management Associates, an investment management firm. From 1980 to 1986, Ms. Fey was Vice President of Winchester Capital Management, also an investment management firm. ERIC T. HERFINDAL has served as a director of the Company since September 1996. He was Senior Vice President of Axion Healthcare, Inc., a disease management company, from 1993 to 1996 and continues as a director of that company, and has also served as Executive Vice President of OnCare Inc., an oncology physician practice management company and subsidiary of Axion, since 1993. Prior to joining Axion, he served for over 20 years as a Professor of Clinical Pharmacy, School of Pharmacy, at the University of California Medical Center in San Francisco, where he is currently a Professor Emeritus. He holds a Doctorate in Pharmacy from the University of California, San Francisco, and a Masters in Public Health from the University of California, Berkeley. He is the author of twenty-five articles and the editor or co-editor of ten books in the field of pharmacy, including the TEXTBOOK OF THERAPEUTICS: DRUG AND DISEASE MANAGEMENT, currently in its sixth edition. Dr. Herfindal has been active in various professional organizations, serves on a number of editorial and advisory boards, and is a frequent lecturer at national and international healthcare meetings. RICHARD J. PLESTINA was elected a director of the Company in April 1997. Mr. Plestina is President of Quelah Corporation, NW, a family owned investment firm, since 1986. In 1988, he was a consultant for Cologon, Inc. DBA Alpine Glass Company, a large commercial and residential glass company. From 1979 to 1986, he was an Executive Vice President of Orion Capital Corporation, a multiline insurance company and President of EBI Companies, which was later acquired by Orion Corporation in 1979. From 1974 to 1979 he served as the Vice President and Marketing Manager of EBIC. Mr. Plestina has served previous directorships for Orion Capital Corporation, EBI Companies, Associated Oregon Industries and Northwest Employer's Council. DAVID H. DE WEESE was elected a director of the Company in June 1997. Mr. de Weese is currently a general partner of Paul Capital Partners, a private equity investment firm. He served as Chairman of the Board of Directors, President and Chief Executive Officer of the SIGA Pharmaceuticals, Inc., a developer of vaccines and antibiotics from November 1996 to April 1998. Prior to joining the SIGA, Mr. de Weese served as a director and a consultant to Biovector Therapeutics, S.A., a developer of drug delivery technology based in France, and as an advisor to Paul Capital Partners. From 1993 to 1995, Mr. de Weese was President, Chief Executive Officer and a Director of M6 Pharmaceuticals, Inc., a biopharmaceutical company. From 1986 to 1992, Mr. de Weese was the President, Chief Executive Officer, a Director and a founder of Cygnus Therapeutic Systems (now Cygnus, Inc.), a developer and manufacturer of transdermal drug delivery systems. Prior to that, Mr. de Weese co-founded Medical Innovations Corporation, a medical device business currently a division of Ballard Medical Products, Inc., and was Chairman of the Board, President and Chief Executive Officer of Machine Intelligence Corporation, a developer of computer software and hardware. MICHAEL T. SEMBER has served as a director of the Company since October 1997. Mr. Sember is Executive Vice President, Business Development for Elan Corporation, plc. Mr. Sember was with Marion Laboratories, then Marion Merrell Dow from 1973 to 1991. Mr. Sember also serves as a director of Elan Pharmaceutical Research Corporation, Acorda Therapeutics, Inc., Iomed, Inc., and as Chairman and CEO of Targon Corporation, a joint venture company of Elan and Cytogen Corporation. BIOJECT JOINT VENTURE SUBSIDIARY LIST OF DIRECTORS AND OFFICERS BOB GONNELLI was elected Chairman of the Bioject Joint Venture Subsidiary in October 1997. He is currently the acting president of the new entity. Mr. Gonnelli has served as President and CEO of PDN Investments since 1995 which was established to fund and manage startup companies, many of which are in the medical technology industry. Some of these include US Medical Labs, a clinical blood laboratory, MCS, a neurological device company, ProKool, an orthopedic company specializing in sports injury products based on MCS's technology and DAC, a dental practice management company. Previously Mr. Gonnelli was founder, CEO and President of TSM, Inc., a leading manufacturer of broadcast and videoconferencing automation systems prior to its sale in 1993. He has also been National Sales Manager of Canon Broadcast, a Systems Engineer at the National Broadcasting Company and has authored three patents. TODD DAVIS was elected the Secretary/Treasurer of Bioject Joint Venture Subsidiary in October 1997. He is the Director of Investments and Planning at Elan Pharmaceutical Research Corporation, a diversified pharmaceutical company headquartered in Dublin, Ireland. Prior to joining Elan, Mr. Davis held various sales and marketing positions at Abbott Laboratories from 1990 to 1995. JAMES C. O'SHEA, Director of the Joint Venture. Please see biography information in section "ELECTION OF DIRECTORS." BOARD OF DIRECTORS COMPOSITION, COMPENSATION AND COMMITTEES. The Board of Directors is currently composed of eight members, one of whom is an employee of the Company. Following the shareholder vote, the Board will be composed of eight members, one of whom is an employee of the Company. All directors hold office for one year or until their successors have been elected and qualified. See Proposal #2 seeking shareholder approval to implement a classified Board. There are no family relationships between any of the directors or executive officers of the Company. The Company pays its directors no annual cash or per meeting compensation for services. Under the terms of the 1992 Stock Incentive Plan, each non-employee director is automatically awarded an option to purchase 17,500 shares of the Company's common stock immediately following the close of each annual shareholders' meeting, at an exercise price equal to the fair market value on the date of the grant. Such options are vested and exercisable with respect to one-half of the shares at six months from the date of grant with the remaining shares vested and exercisable six months thereafter. The options expire eight years after grant unless previously exercised or terminated due to termination of service. There were nine meetings of the Board of Directors during the last fiscal year. Except for Ms. Fey and Mr. Gouveia, each of the incumbent directors being nominated for re-election attended at least 75% of all of the meetings of the Board of Directors and committees on which they served. There are five standing committees of the Board of Directors: the Audit Committee, Stock Option Committee, Compensation Committee, Nominating Committee and the Ad Hoc-Financing Committee. The Audit Committee meets with the Company's independent accountants to review the scope and findings of the annual audit and accounting policies and procedures of the Company which are then reported by the committee to the directors of the Company. The Stock Option Committee administers the 1992 Stock Incentive Plan. The Compensation Committee administers cash compensation for the executive officers. The Nominating Committee reviews and recommends to the full Board nominees for directors of the Company to be submitted for election at the next annual shareholders' meeting. The Ad Hoc-Financing Committee monitors the Company's cash reserves and develops strategies for procuring additional capital. The Audit Committee met one time during fiscal 1998. The Stock Option Committee took action by written consent resolution four times. The Nominating Committee and Compensation Committee met one time during fiscal 1998. The Ad Hoc-Financing Committee met two times during fiscal 1998. EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS The following individuals comprise the executive officers of the Company: Year Elected Name Age Position Officer - --------------------- --- -------------------------------- ---------- James C. O'Shea 53 Chairman, Chief Executive Officer and President 1995 Michael A. Temple 48 Vice President, Chief Financial Officer and Secretary/Treasurer 1998 Peggy J. Miller 51 Former Vice President, Chief Financial Officer and Secretary/Treasurer 1993 Richard R. Stout, M.D. 45 Vice President of Clinical Affairs of Bioject Inc. 1994 J. Michael Redmond 38 Vice President, Business Development of Bioject Inc. 1996 BIOGRAPHICAL INFORMATION. JAMES C. O'SHEA. Please see biography information in section "ELECTION OF DIRECTORS." MICHAEL A. TEMPLE joined Bioject as Vice President, Chief Financial Officer and Secretary/Treasurer in April 1998. From December 1996 until January 1998 Mr. Temple was Chief Financial Officer for Graziano Produce Co., Inc. a northwest regional processor of fresh-cut produce products. From October 1993 until November 1996 he was Vice President of Finance and Chief Financial Officer for Instromedix, Inc., an Oregon-based medical technology company that designs and manufactures transtelephonic cardiac event monitors. From April 1989 until September 1993 he was Vice President of Finance and Chief Financial Officer for the Yoshida Group, a Portland-based conglomerate with business activities in manufacturing, services and real estate development. Prior to joining the Yoshida Group, Mr. Temple was a principal in the accounting and business advisory services practice of Laventhol & Horvath, a national public accounting firm. PEGGY J. MILLER formerly served Bioject as Chief Financial Officer, Vice President and Secretary/Treasurer, from February 1993 to April 1998. RICHARD R. STOUT, M.D. joined the Company in April 1994 as Director of Clinical and Regulatory Affairs. He was promoted to Vice President of Clinical Affairs in December 1994. From 1992-1993 he was the Director of Clinical and Regulatory Affairs at EndoVascular Instruments, Inc., a developer of surgical devices and methods for endarterectomy and intraluminal graft placement. Dr. Stout acted as the Manager of Tachycardia Clinical Studies at Telectronics Pacing Systems from 1990-1992, an international medical device company involved in manufacturing and distributing cardiac pacemakers and implantable defibrillators. From 1987 to 1989, Dr. Stout was Director of Medical Programs at Biotronic Inc., also a manufacturer and distributor of implantable cardiac pacemakers. J. MICHAEL REDMOND joined Bioject in February 1996 as Vice President of Sales and Marketing. He was appointed Vice President of Business Development in February 1998. Mr. Redmond has fifteen years of experience in medical marketing and product sales. Prior to joining Bioject he was Director of Business Development and Director of Sales and Marketing for Kollsman Manufacturing Company. Kollsman is a private label developer and manufacturer of medical instrumentation. He also held various sales and marketing positions with Abbott Laboratories Diagnostic division. EXECUTIVE COMPENSATION. The following table sets forth the cash compensation paid by the Company to its Chief Executive Officer and to the other executive officers having salary and bonus compensation greater than $100,000 (collectively the "named executive officers"), for services rendered to the Company during the fiscal years ended March 31, 1998, 1997 and 1996. Summary Compensation Table
Long-Term Annual Compensation Compensation Awards ___________________ ___________________ __________________________________ Fiscal Options Other Name and Principal Position(1) Year Salary Bonus Other Shares(2) Other(3) Compensation _________________________ _______ _______ ______ _____ ________ _______ ____________ James C. O'Shea 1998 $195,000 - $5,930(5) 575,000(6) $3,565 $ - Chairman, Chief Executive 1997 195,000 - 5,225(5) 18,750(7) 3,017 - Officer and President 1996 192,737(4) - 4,117(5) 375,000(8) - 146,996(9) Peggy J. Miller 1998 105,000 - 62,500(10) 2,404 - Former Vice President, 1997 105,000 - 9,375(11) 1,983 - Chief Financial Officer 1996 105,000 - 95,625(12) - - and Secretary / Treasurer J. Michael Redmond 1998 100,000 - 6,000(14) 62,500(15) 2,409 - Vice President of 1997 100,000 6,000(14) 75,000(16) 1,616 - Business Development 1996 14,231(13) 1,000(14) - - -
________________________ (1) No other executive officers had salary and bonus compensation greater than $100,000 in fiscal 1998. (2) The Company has in effect one major long-term compensation plan, the 1992 Stock Incentive Plan, through which all employees, officers and non-employee consultants of the Company may be awarded incentive and non-statutory stock options, stock bonuses, stock appreciation rights and restricted stock under terms and performance criteria as determined by a committee of the Board of Directors. Non-employee directors are also awarded options to purchase a fixed number of shares on an annual basis. The 1992 Stock Incentive Plan was approved by the Company's shareholders on November 20, 1992. Amounts listed reflect the number of options granted in the respective fiscal years, the exercise prices for which were greater than or equal to the fair market value of the Company's common stock on the date of grant. (3) The Company has a 401(k) Retirement Benefit Plan for its employees including its executive officers which provides for voluntary employer matches of employee contributions up to 6% of salary and for discretionary profit sharing contributions to all employees. Such employer contributions may be made in cash or common stock. In fiscal 1998, the Company made all employer matching contributions in shares of the Company's common stock based on fair market value in the period of match. (4) Mr. O'Shea was appointed Chairman and Chief Executive Officer on March 28, 1995 and commenced his salaried employment with the Company on April 10, 1995. (5) Represents supplemental life and disability insurance premiums paid pursuant to an employment agreement with Mr. O'Shea. No other executive officers are entitled to this benefit. (6) In fiscal 1998, Mr. O'Shea was granted 575,000 option shares, 50,000 options granted on April 3, 1997 and vested immediately and exercisable October 3,1997. 25,000 options granted on June 11, 1997 vesting on March 31, 1998 with 12,500 options immediately exercisable and 12,500 options exercisable on October 1, 1998. 500,000 options granted on September 19, 1997, one-third vesting and exercisable on September 19, 1998, one-third on September 19, 1999, and one-third on September 19, 2000. (7) In fiscal 1997, Mr. O'Shea was granted 18,750 options vesting immediately and exercisable on April 3, 1998. These options replaced 25,000 options granted in fiscal 1997 and were repriced in fiscal 1998 with a 25% forfeiture of options. (8) In connection with his employment, Mr. O'Shea was granted options to purchase 375,000 shares of common stock of which 112,500 option shares vested immediately, 112,500 option shares vested one-half on April 10, 1996 and one-half on April 10, 1997, and 150,000 option shares vesting one-half on April 10, 1997 and one-half on April 10, 1998. These options replaced 500,000 options granted in fiscal 1996 and were repriced in fiscal 1998 with a 25% forfeiture of options. (9) In connection with the commencement of Mr. O'Shea's employment with the Company, he was reimbursed his moving expenses including the costs of selling his former residence, transportation and storage of household goods, certain other incidental moving expenses and a gross-up for federal and state income taxes incurred on these reimbursements. (10) In fiscal 1998, Ms. Miller was granted 62,500 options: 25,000 granted on April 3, 1997 and vesting immediately and exercisable October 3,1997. 12,500 options granted on June 11, 1997 vesting on March 31, 1998 with 6,250 options immediately exercisable and 6,250 options exercisable on October 1, 1998. 25,000 options granted on September 19, 1997, one-fifth vesting and exercisable each month beginning May 1, 1998 and ending September 1, 1998. (11) In fiscal 1997, Ms. Miller was granted 9,375 options vesting immediately and becoming exercisable April 3, 1998. These options replaced 500 options granted in fiscal 1997 and were repriced in fiscal 1998 with a 25% forfeiture of options. (12) On January 26, 1996, Ms. Miller was granted 95,625 options with 75,938 vesting immediately and become exercisable on April 3, 1998, 9,375 vesting on February 1, 1996 and becoming exercisable on April 3, 1998, 938 vesting on July 31, 1996 and becoming exercisable on April 3, 1998, and 9,375 vesting and becoming exercisable on April 3, 1998. These options replaced 75,000 options granted in fiscal 1995, 5,000 options granted in fiscal 1994 and 90,000 options granted in fiscal 1993 and repriced in fiscals 1996 and 1998 with a 25% forfeiture of options. (13) Mr. Redmond commenced employment with the Company on February 8, 1996. (14) Mr. Redmond receives an automobile allowance of $500 per month. (15) In fiscal 1998, Mr. Redmond was granted 62,500 options: 25,000 granted on April 3, 1997 and vesting immediately and exercisable October 3,1997. 12,500 options granted on June 11, 1997 vesting on March 31, 1998 with 6,250 options immediately exercisable and 6,250 options exercisable on October 1, 1998. 25,000 options granted on September 19, 1997, one-third vesting and exercisable on September 19, 1998, one-third on September 19, 1999, and one-third on September 19, 2000. (16) In connection with his employment, Mr. Redmond was granted 75,000 options with one-third vesting on each anniversary of his employment with the Company, with two-thirds exercisable April 3, 1998 and one-third exercisable February 8, 1999. These options replaced 100,000 options granted in fiscal 1997 and were repriced in fiscal 1998 with a 25% forfeiture of options. GRANT OF STOCK OPTIONS. Shown below is information on grants of stock options pursuant to the Company's 1992 Stock Incentive Plan during the fiscal year ended March 31, 1998 to the named executive officers. No stock appreciation rights were granted during fiscal 1998. OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS _________________________________________________
Potential Realizable Percentage of Values at Assumed Total Options Annual Rates of Stock Granted to Exercise or Price Appreciation Options Employees Base Price Expiration for Option Term (10) Name Granted in Fiscal 1997 (per share) Date 5% 10% _______________ _______ ______________ ___________ __________ ________ ________ James C. O'Shea 50,000(1) 5 .75 04/02/04 11,045 29,731 25,000(2) 2 .625 03/31/05 6,361 14,824 500,000(3) 48 .6875 09/18/04 162,806 357,788 Peggy J. Miller 25,000(4) 2 .75 04/02/04 5,522 14,865 12,500(5) 1 .625 03/31/05 3,180 7,412 25,000(6) 2 .6875 09/18/04 8,140 17,889 J. Michael Redmond 25,000(7) 2 .75 04/02/04 5,522 14,865 12,500(8) 1 .625 03/31/05 3,180 7,412 25,000(9) 2 .6875 09/18/04 8,140 17,889
_____________________ (1) These options vested immediately upon grant and became exercisable on October 3, 1997. The fair market value of the Company's common stock on the date of grant was $0.69 per share. (2) 12,500 became vested and exercisable immediately and 12,500 become exercisable on October 1, 1998. The fair market value of the Company's common stock on the date of grant was $0.625. (3) Of this total, 166,666 become vested and exercisable on September 19, 1998, 166,667 become vested and exercisable on September 19, 1999, and the remaining balance of 166,667 become vested and exercisable on September 19, 2000. The fair market value of the Company's common stock on the date of grant was $0.72. (4) These options vested immediately upon grant. The fair market value of the Company's common stock on the date of grant was $0.69 per share. (5) 6,250 became exercisable immediately and 6,250 become exercisable on October 1, 1998. The fair market value of the Company's common stock on the date of grant was $0.625. (6) Of this total, one-fifth vest and are exercisable each month beginning May 1, 1998 and ending September 1, 1998. The fair market value of the Company's common stock on the date of grant was $0.72. (7) These options vested immediately upon grant and became exercisable on October 3, 1997. The fair market value of the Company's common stock on the date of grant was $0.69 per share. (8) These options vested on March 31, 1998, 6,250 became exercisable immediately and 6,250 become exercisable on October 1, 1998. The fair market value of the Company's common stock on the date of grant was $0.625. (9) Of this total, 8,333 become vested and exercisable on September 19, 1998, 8,333 become vested and exercisable on September 19, 1999, and the remaining balance of 8,334 become vested and exercisable on September 19, 2000. The fair market value of the Company's common stock on the date of grant was $0.72. (10) Potential realizable value is based on the assumption that the stock price of the common stock appreciates at the annual rate shown (compounded annually) from the date of grant until the end of the applicable option term. These numbers are calculated based on the requirements promulgated by the Securities and Exchange Commission and do not reflect the Company's estimate of future stock price performance. The actual value, if any, which may be realized by any officer will vary based on exercise date and the market price of the related common stock when sold. OPTION EXERCISES AND FISCAL YEAR END VALUES. Shown below is information with respect to exercised options and unexercised options to purchase the company's common stock granted in fiscal 1998 and prior years to the named executive officers and held by them at March 31, 1998. None of the named executive officers exercised any stock options during fiscal 1998. No stock appreciation rights were outstanding or exercised during fiscal 1998. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values Number of Unexercised Value of Unexercised Options held at In-the-Money Options March 31, 1998 March 31, 1998(1) ____________________________ __________________________ Name Exercisable Unexercisable Exercisable Unexercisable _____________ ___________ _____________ ____________ _____________ James C. O'Shea 62,500 906,250 $ 48,438 $ 712,500 Peggy J. Miller 31,250 136,250 24,219 104,531 J. Michael Redmond 31,250 106,250 24,219 82,031 _______________ (1) Based on the difference between the exercise price and the average of the bid and ask price on NASDAQ of the Company's common stock on that date ($1.50). The actual value, if any, which may be realized by any officer will vary based on exercise date and the market price of the related common stock when sold. REPORT ON REPRICING OF OPTIONS/SAR'S. Shown below is information with respect to the Company's ten-year history on the repricing of stock options and stock appreciation rights (SAR's) held by executive officers.
Ten-Year Option/SAR Repricings Length of Market Price Exercise Original Number of of Stock Price Option Term Options/SAR's at Time of at Time of New Date of Repriced or Repricing or Repricing or Exercise Repricing or Name Date Amended Amendment Amendment Price Amendment ___________________ ________ _____________ ____________ ____________ ________ ____________ James C. O'Shea 04/03/97(a) 112,500(1) $ .6875 $2.69 $ .75 5 years President and 04/03/97(a) 112,500(1) .6875 3.50 .75 5 years Chief Operating 04/03/97(a) 150,000(1) .6875 4.50 .75 5 years Officer 04/03/97(a) 18,750(1) .6875 1.313 .75 6 years Peggy J. Miller 04/03/97(a) 50,625(2) .6875 1.25 .75 4 years Former Vice President 04/03/97(a) 2,813(2) .6875 1.25 .75 3.5 years and Chief Financial 04/03/97(a) 42,188(2) .6875 1.25 .75 5 years Officer 04/03/97(a) 9,375(2) .6875 1.313 .75 6 years 01/26/96(a) 67,500(2) 1.25 4.00 1.25 5 years 01/26/96(a) 3,750(2) 1.25 4.00 1.25 4.5 years 01/26/96(a) 56,250(2) 1.25 4.00 1.25 6 years Michael Redmond 04/03/97(a) 75,000(3) .6875 1.00 .75 6 years Vice President of Business Development
________________ (1) Replaces 150,000, 150,000, 200,000 and 25,000 options, respectively. (2) Replaces 67,500, 3,750 56,250, 90,000, 5,000 and 75,000 options, respectively. (3) Replaces 100,000 options. (a) These options were repriced based on the Compensation and Stock Option Committees' belief that the difference between the current fair market value of the Company's common stock and the option exercise prices before repricing did not meaningfully align employees' and shareholders' interests and, therefore, did not serve the long-term interests of the Company. In order to be eligible for this repricing, the named executive officers were required to forfeit 25% of option shares previously granted. The foregoing report has been furnished by the Compensation and Stock Option Committees consisting of Ms. Fey and Messrs. Herfindal, Plestina and Ruedy. EMPLOYMENT CONTRACTS. The Company entered into an employment agreement with Mr. O'Shea to serve as Chairman and Chief Executive Officer. His salary, at March 31, 1998 was $195,000 per annum, is subject to annual adjustment by the Board of Directors. His agreement continues until terminated. In addition to his base salary, Mr. O'Shea was granted a total of 500,000 incentive stock options at prices ranging from $2.69 to $4.50 per share which vest variously over a three year period. These options were replaced in April 1997 by 375,000 options at an exercise price of $0.75 per share. He will receive 100,000 shares of common stock when the Company first achieves two consecutive quarters of positive earnings per share. He received relocation expense reimbursements grossed-up for withholding taxes and will receive annual payment of certain disability and life insurance policy premiums. In the event he is terminated, he will receive his base salary for up to two years. If he becomes disabled, he will continue at 75% of his then current salary for not less than six months and at 50% of such salary for the successive six months. In the event of his death, his salary will continue for 60 days following the end of the month of his death. Under the agreement, he is permitted to participate in any net profit sharing, deferred compensation or other programs. In addition, he is prohibited from competing with the Company for three years following termination of the agreement. Ms. Miller resigned her position at the Company effective April 30, 1998. In connection with that termination, the Company agreed to continue to pay Ms. Miller's base salary for a period of two months beyond the date of her termination; to make her a lump-sum payment equal to four months base salary and to pay Ms. Miller's health and dental insurance premiums through October 31, 1998. In addition the Company extended the expiration date of 130,000 vested stock options held by Ms. Miller from April 30, 1999 to April 30, 2000 In consideration of Ms. Miller's assistance in the transition of responsibilities to a new chief financial officer, the Company exchanged 25,000 unvested stock options held by Ms. Miller for 25,000 identically priced stock options which vest and are exercisable at the rate of 5,000 per month, beginning May 1, 1998. The Company has entered into an employment agreement with Mr. Redmond to serve as Vice President of Sales and Marketing. In the event he is terminated, he will receive his base salary for up to four months. His salary, currently $100,000 per annum, plus $500 per month car allowance, is subject to annual adjustment by the Board of Directors. His agreement continues until terminated. In the event he is disabled, he will continue at 75% of his then current salary for not less than six months and then at 50% of such salary through the end of the current term. In the event of his death, his salary will continue for 60 days following the end of the month of his death. Under the agreement, he is permitted to participate in any net profit sharing, deferred compensation or other programs. In addition, he is prohibited from competing with the Company for three years following termination of the agreement. SEC FILINGS. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers, directors and 10 percent shareholders to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "Commission"). Officers, directors and 10 percent shareholders are required by Commission regulations to furnish the Company with all Section 16(a) reports they file. Based solely on the Company's review of the copies of such reports the Company received and written representations from the Company's officers and directors, the Company believes that all required reports were timely filed in fiscal 1998. REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES ON EXECUTIVE COMPENSATION The Company has maintained a philosophy of seeking to attract and retain a key group of experienced executives capable of successfully completing product development, ramping up manufacturing, launching marketing and sales, and providing strong financial management. Mindful of conserving cash resources, the Company has provided a combination of annual cash compensation and stock option grants which emphasizes lower cash compensation in exchange for potential long-term gains through stock option appreciation. The Company believes such a strategy is in the best interests of the shareholders and provides proper incentives to increase long-term shareholder value. The Company's Compensation Committee is responsible for reviewing cash compensation paid to the Company's executive officers and makes recommendations to the Stock Option Committee for stock option and common stock grants. The Stock Option Committee is responsible for administering all stock option and common stock grants including awards to the Company's executive officers. Overall, the Company's executive compensation is composed of the following key elements: Base Salary. This is an amount of annual cash compensation which the Company believes is the minimum necessary to attract and retain qualified executives and is administered on behalf of the Board of Directors by the Chief Executive Officer for all executive officers other than the C.E.O. As can be determined from the Summary Compensation Table preceding, under this policy only three of the Company's four executive officers have cash compensation exceeding $100,000 per year. Until the Company achieves significant revenues, it has been the Board's policy to hold base salaries to at or below market, determined based on the Company's experience in recruiting key executives, relying instead on stock option incentives to attract and retain qualified executive officers. In fiscal 1998, the Company's Chief Executive Officer, Mr. O'Shea, was paid an annual salary of $195,000. This remained unchanged until June 12, 1998, when Mr. O'Shea's salary was increased to $220,000 per year by the Board. Mr. O'Shea's salary increase was determined based on a review of competitive salaries by the recruitment consultants engaged by the Company to assist it in identifying and screening candidates for the position of President of Bioject JV Subsidiary, Inc. and is considered, as being at or below market for the position. As part of Mr. O'Shea's compensation package, the Board agreed to pay premiums on certain life and disability policies owned by Mr. O'Shea. Payment of these premiums is similar to supplemental policy premiums paid by the Company on behalf of its former chief executive officer. Annual Incentives. As circumstances are appropriate, the Company has annual incentive programs for individual executives or for the executive officer group as a whole. These programs have specific performance criteria and awards determined based on Company business goals for the period. In fiscal 1998, the Company had an incentive program under the 1992 Stock Incentive Plan with respect to certain executive officers whereby (i) up to a specified number of stock options would be automatically granted based on attainment of certain sales and operating performance targets and (ii) a specified number of stock options were available for award at the discretion of the Compensation Committee. After taking in to account, the Company's performance in a variety of areas, no options were granted relative to achieving sales and operating performance targets. Based on non-financial performance and the attainment of the Elan Pharmaceuticals joint venture, the Stock Option Committee granted one- half of the specified discretionary stock options. The Company may also award cash, stock and option grants on a discretionary basis to its executive officers where, in the opinion of the Company's Stock Option Committee, performance merited such compensation. With respect to fiscal 1998, Mr. O'Shea received a discretionary stock option award which entitles him to purchase 500,000 shares of the Company's common stock at $0.6875. Such award was made to Mr. O'Shea for his leadership in improving financial community relations, increasing potential strategic partnership opportunities and completing the joint venture with Elan Pharmaceuticals for developing and marketing the blood glucose monitor device. Long-Term Incentives. At present the Company's primary long-term incentive program is the 1992 Stock Incentive Plan which is available to all employees, executive officers and non-employee consultants of the Company. The Board of Directors' Stock Option Committee grants all options pursuant to this plan. Generally, executive officers upon joining the Company are granted options vesting over a three to four year period at current fair market value in amounts which, in the Stock Option Committee's opinion, are consistent with their positions and responsibilities with the Company. In addition, based on individual annual performance and contribution to the long-term goals of the Company, executive officers and other company employees may receive additional stock option grants. The amount and terms of such options are discretionary and are determined subjectively by the Stock Option Committee taking into account Company and individual performance. These options vest over varying periods and are intended to focus executive officers on achieving the long-term goals of the Company and to directly reward them for corresponding increases in shareholder value. The Company also has a 401(k) Retirement Benefit Plan for its employees including its executive officers which provides for voluntary employer matches of employee contributions up to 6% of salary and for discretionary profit sharing contributions to all employees. In fiscal 1998, Mr. O'Shea received $3,565 (or 6,779 shares) of Company common stock under the matching provisions of the 401(k) Plan. Due to the availability of operating loss carryforwards, the Compensation and Stock Option Committees determined Mr. O'Shea's compensation package without regard to the limitations of deductibility imposed by Internal Revenue Code Section 162(m). The Company is engaged in a highly competitive industry. In order to succeed, the Company believes that it must be able to attract and retain qualified executives. The Board of Directors believes that the above described compensation structure will help the Company to achieve these objectives. The foregoing report has been furnished by the following directors: for the Compensation Committee, John Ruedy, Grace K. Fey, and Eric T. Herfindal, and for the Stock Option Committee, Grace K. Fey and Richard J. Plestina. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Executive compensation is administered by two committees of the Board: the Compensation Committee and the Stock Option Committee. Jim O'Shea, the Company's Chairman, President, Chief Executive Officer and a Director, participated in deliberations concerning executive officer compensation, but abstained from deliberations concerning his own compensation. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On January 12, 1995, the Board of Directors announced the resignation of the Company's Chairman and Chief Executive Officer, Carl E. Wilcox. In consideration for Mr. Wilcox's long service to the Company, the Board granted Mr. Wilcox 100,000 shares of common stock valued at $241,000 and cash compensation totaling $247,000. The Board also vested 200,000 previously granted option shares at $4.00 per share and extended the expiration date to January 14, 1998. The Board granted Mr. Wilcox a special power of attorney to exclusively perform all acts necessary to obtain extension and/or release of the WAM Partnership escrow shares. In addition, the Board agreed to pay up to $10,000 of costs associated with such extension and/or release. On June 3, 1996, the British Columbia Securities Commission informed the Company that release of the escrow shares had been granted. The Board also agreed to pay Mr. Wilcox $20,000 per year for two years under a covenant not-to-compete. Mr. Wilcox continued to serve as a Director of the Company until October 25, 1995. STOCK PERFORMANCE CHART The following chart compares the yearly stock market (U.S.) percentage change in the cumulative total stockholder return on the Company's common stock during the five fiscal years ended March 31, 1998 with the cumulative total return on the NASDAQ Stock Market (U.S.) Index and the Hambrecht and Quist Healthcare Index (exclusive of biotechnology companies). The comparison assumes $100 was invested on March 31, 1993, in the Company's common stock and in each of the foregoing indices and assumes reinvestment of dividends. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG BIOJECT MEDICAL TECHNOLOGIES INC., NASDAQ STOCK INDEX AND HAMBRECHT AND QUIST HEALTH CARE FUND EXCLUDING BIOTECH INDEX BIOJECT MEDICAL TECHNOLOGIES, INC. H&Q HEALTHCARE EXCLUDING BIOTECH INDEX NASDAQ STOCK MARKET-U.S. INDEX [THE FOLLOWING DATA REPRESENTS PICTORIAL INFORMATION] H&Q Bioject Medical Nasdaq Stock Healtcare DATES Technologies, Inc. Market-U.S. Excluding ----- ------------------ ----------- --------- Mar-93 100.00 100.00 100.00 Apr-93 102.94 95.73 85.96 May-93 105.88 101.45 92.86 Jun-93 141.18 101.92 90.27 Jul-93 129.41 102.04 85.49 Aug-93 114.71 107.31 84.95 Sep-93 114.71 110.51 85.99 Oct-93 117.65 112.99 93.87 Nov-93 117.65 109.62 92.89 Dec-93 117.65 112.68 96.14 Jan-94 108.82 116.10 105.05 Feb-94 102.94 115.01 96.87 Mar-94 91.18 107.94 88.72 Apr-94 70.59 106.54 86.66 May-94 64.71 106.80 89.55 Jun-94 54.40 102.89 85.92 Jul-94 85.29 105.00 89.23 Aug-94 88.24 111.70 101.61 Sep-94 92.64 111.41 102.67 Oct-94 72.05 113.60 100.00 Nov-94 82.35 109.83 99.70 Dec-94 70.59 110.14 102.16 Jan-95 52.94 110.76 108.67 Feb-95 54.40 116.62 111.18 Mar-95 47.06 120.07 119.33 Apr-95 47.06 123.86 117.81 May-95 41.18 127.05 118.38 Jun-95 35.29 137.35 122.58 Jul-95 32.35 147.44 133.07 Aug-95 50.00 150.43 141.18 Sep-95 66.92 153.89 153.35 Oct-95 50.00 153.01 156.04 Nov-95 47.06 156.60 159.54 Dec-95 44.12 155.77 170.09 Jan-96 43.39 156.54 181.94 Feb-96 38.24 162.49 181.94 Mar-96 30.87 163.03 181.96 Apr-96 30.87 176.56 178.47 May-96 30.87 184.67 178.56 Jun-96 33.08 176.34 171.02 Jul-96 30.14 160.64 156.64 Aug-96 25.74 169.64 166.87 Sep-96 23.53 182.61 187.68 Oct-96 16.16 180.60 177.91 Nov-96 20.59 191.76 183.40 Dec-96 16.16 191.59 188.84 Jan-97 17.65 205.21 199.14 Feb-97 18.38 193.86 195.87 Mar-97 18.38 181.21 179.38 Apr-97 12.49 186.87 183.36 May-97 21.32 208.06 201.51 Jun-97 16.16 214.42 214.75 Jul-97 17.65 237.05 226.57 Aug-97 16.16 236.69 215.22 Sep-97 23.53 250.70 225.08 Oct-97 33.08 237.71 213.96 Nov-97 36.02 238.90 217.95 Dec-97 30.14 235.15 225.05 Jan-98 28.68 242.55 225.49 Feb-98 30.87 265.26 246.34 Mar-98 35.29 275.03 255.90 Proposal for Inclusion in Proxy Statement PROPOSAL #2 PROPOSAL #2 -- APPROVAL OF PROVISIONS OF ARTICLES OF AMENDMENT OF ARTICLES OF INCORPORATION The Board of Directors unanimously proposes and recommends the approval of Articles of Amendment to the Company's Articles of Incorporation (the "Amendment"), which would amend two Articles of the Company's current Articles of Incorporation. Each amended provision is being voted on separately. If the shareholders approve all the proposed changes, the Amendment would: (a) fix the size of the Board of Directors, with changes in the number of directors to be made only by the Board of Directors, provide for a classified (i.e., staggered) Board of Directors, and allow for the removal of directors only for cause; (b) require a vote of 75 percent of the outstanding shares to change or repeal provision (a) listed above. The Company's current Articles of Incorporation do not include the above director provisions, and do not include any super-majority voting requirements. If approved by shareholders, the provisions listed above may make certain acquisitions of the Company and the removal of directors more difficult. The classified Board of Directors will provide for a longer commitment to service by each director. The Board of Directors has approved changes to the Bylaws to conform them to the provisions contained in the Amendment. Such amendments to the Bylaws are subject to shareholder approval of Proposal 2(a) and 2(b). A copy of the Amendment is attached as Exhibit A and the following summary is qualified by reference to the attached Amendment. Vote Required Shareholders will vote on each of the proposed changes as a separate matter. If a quorum is present at the annual meeting of shareholders, the proposal will be adopted if it receives the affirmative votes of the holders of a majority of the shares present, or represented, and entitled to vote upon the proposal at the meeting. Shareholders may expressly abstain from voting upon the proposal; such shares will have the effect of voting against the Amendment. Broker non-votes will have no effect on the required vote. If Proposal 2(a) is not approved, Proposal 2(b) will not be voted upon at the meeting. If Proposal 2(a) is approved, but Proposal 2(b) is not approved, only the provisions in Proposal 2(a) will be retained in the Amendment. The Amendment, including each provision approved by shareholders, will become effective when filed with Oregon's Secretary of State, which is expected to occur as soon as practicable after the shareholder meeting. Proposal 2(a): Approval of Provisions Setting Size of Board of Directors, classifying the Board of Directors and Permitting Directors to be Removed Only For Cause Article X of the proposed Amendment fixes the number of directors at not less than six nor more than eleven, provides for a staggered Board of Directors and permits the removal of directors only for "cause." For purposes of the Amendment, "cause" means that the director has: (i) committed an act of fraud or embezzlement against the Company; (ii) been convicted of, or plead nolo contendere to, a crime involving moral turpitude; or (iii) failed to perform the duties of a director, and such failure constitutes a breach of the director's duty or loyalty to the Company or provides an improper personal benefit to the director. The Board will be divided into three classes. As shown in Proposal #1, the directors will be classified alphabetically except for Mr. O'Shea who was classed with the longest initial term and for Mr. Gouveia who was classified with the shortest initial term so that the nominating committee would be composed of one director from each class. The Board chose to classify directors alphabetically in recognition of contribution made by each director. The term of office of directors of Class 1 would expire at the first annual meeting of shareholders after their election, that of Class 2 would expire at the second annual meeting after their election, and that of Class 3 would expire at the third annual meeting after their election. Oregon law requires that the term of any director elected to fill a vacancy must expire at the next shareholder meeting. The Board of Directors currently consists of eight members. If this provision is approved, at subsequent annual meetings, only those directors in the class of directors whose terms expires at the time of the annual meeting will be considered for election at that annual meeting of shareholders. The Board of Directors is authorized to increase or decrease the size of the Board of Directors (within the range described above) by the affirmative vote of two-thirds of the directors. Under the terms of the Amendment, shareholders no longer have the ability to change the size of the Board of Directors. Without the unanimous consent of the directors then in office: (i) no more than two additional directors may be added to the Board of Directors within any 12-month period; and (ii) no person who is affiliated as an owner, director, officer, employee or consultant of a company or business deemed by the Board of Directors to be competitive with that of the Company is eligible to serve on the Board of Directors of the Company. By classifying the Board of Directors, limiting the ability to change the size of the Board to the Board of Directors and allowing for removal of directors only for cause, it will become more difficult to change the Board of Directors. In addition, including the super-majority voting provision in the Amendment as described in Proposal 2(b) will make it more difficult to amend this provision. The Board of Directors recommends a vote FOR the provisions setting the size of the Board of Directors, classifying the Board of Directors, and permitting the removal of directors only for cause. Proposal 2(b): Approval of a Super-Majority Vote for Future Amendments to Certain Provisions in the Amendment Article XII of the proposed Amendment requires a super-majority shareholder vote to amend the provisions of Articles of Incorporation, as amended, relating to the Board of Directors (Article X- - Proposal 2(a) in this proxy statement), and to amend Article XII itself. Such amendments must be approved by: (i) the affirmative vote of 75 percent of all the outstanding shares of the Company entitled to vote on the matter, voting as a single class; and (ii) if any shares of the Company are entitled to vote on the matter as a separate voting group, the affirmative vote of 75 percent of such shares voting separately. Article XII increases the vote otherwise required for the Company's shareholders to approve such amendments, and correspondingly makes it more difficult for such changes to be effected, even if desired by a majority of the Company's shareholders. If Proposal 2(a) is not approved, Proposal 2(b) will not be considered. The Board of Directors recommends a vote FOR the approval of the super-majority vote for future amendments of certain provisions in the Restated Articles. PROPOSAL #3: AMENDMENT TO 1992 STOCK INCENTIVE PLAN The 1992 Stock Incentive Plan (the "Plan") was initially adopted by the Board on July 30, 1992 and was approved by the shareholders of the Company at the annual meeting held on November 20, 1992. The Plan was later amended in 1995 to increase the number of shares available under the Plan and in 1996 to extend the time awards may be made under the Plan. The Plan authorized the grant of options to purchase up to 3,000,000 shares of the Company's common stock. As of April 15, 1998, only _____ options were available to be granted to current or future employees. Management believes that the ability to grant incentive options is crucial to its continuing ability to attract and retain qualified employees. On September 10, 1997, the Board adopted an amendment (the "Amendment") to the Plan to increase the number of shares of Common Stock reserved for issuance pursuant to Awards (as defined below) by 650,000 shares to 3,650,000 shares, subject to adjustment for changes in capitalization. Shares outstanding under the Plan which expire or are otherwise terminated or not issued pursuant to Awards will become available for grants of new Awards under the Plan. A summary description of certain terms and provisions of the amended Plan follows. AWARDS AND ELIGIBILITY. The Plan provides for stock-based awards to (i) employees and officers of the Company and its subsidiaries, (ii) selected non-employee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary, and (iii) outside (non-employee) directors of the Company. Awards which may be granted under the Plan include stock options, stock bonuses, stock appreciation rights, and specified sales of stock (collectively, "Awards"). The Stock Option Committee of the Board of Directors (the "Committee") administers the Plan and determines the key employees and non-employee advisors of the Company and its subsidiaries who are to receive Awards under the Plan and the types, amounts, and terms of such Awards. The Committee currently consists of Ms. Fey and Mr. Plestina. No Awards may be granted under the Plan on or after July 29, 2002. At May 31, 1998, a total of 31 persons were eligible for Awards under the Plan, including each of the Company's executive officers, 27 other employees, and each of the Company's seven outside (non-employee) directors. At that date, these persons represented the pool of individuals considered to be eligible to participate in the Plan. Outside directors may receive only the non-discretionary options described under "Election of Directors -Board of Directors Composition, Compensation and Committees." PURPOSES. The purpose of the Plan is to promote and advance the interests of the Company and its shareholders by enabling the Company to attract, retain, and reward key employees, non-employee advisors, and directors. The Plan is also intended to strengthen the commonality of interests between the Company's shareholders and such employees, non-employee advisors, and directors by offering equity-based incentive Awards to promote a proprietary interest in pursuing the long-term growth, profitability, and financial success of the Company. OPTIONS. Options granted under the Plan may be either incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code (the "Code") or nonqualified options. The Committee determines the number of shares of Common Stock subject to options granted, the option price, the term of the option, the time or times at which the option may be exercised and whether an option is an incentive or nonqualified stock option. Incentive stock options, however, may be exercisable not more than ten years from the date of grant. The Plan does not limit the maximum term or amount of award for nonqualified options. The exercise price per share for options granted under the Plan generally must be at least 100 percent (for incentive stock options) or 75 percent (for nonqualified options) of the fair market value of a share of Common Stock on the date the option is granted. The purchase price for options may be paid in cash or, at the discretion of the Committee, in whole or in part in shares of Common Stock. In the event that the employment or service of the optionee with the Company or a parent or subsidiary corporation of the Company terminates for any reason other than for death or physical disability, vested options may be exercised at any time prior to the earlier of the expiration date of the option or the expiration of 90 days after the date of such termination. In the event of termination of employment due to death or disability, the options may be exercised at any time prior to the earlier of the expiration date of the option or the expiration of one year after the date of such termination. STOCK BONUSES. The Committee may award Shares under the Plan as stock bonuses. Shares awarded as a stock bonus shall be subject to such terms, conditions, and restrictions as shall be determined by the Committee, all of which shall be evidenced in a writing signed by the recipient prior to receiving the bonus Shares. STOCK SALES. The Committee may issue Shares under the Plan for such consideration (including promissory notes and services) as determined by the Committee, provided that in no event shall the consideration be less than 75 percent of the fair market value of the Shares at the time of issuance. Shares so issued shall be subject to the terms, conditions and restrictions determined by the Committee. The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the Shares issued, together with such other restrictions as may be determined by the Committee. STOCK APPRECIATION RIGHTS. The Committee may grant stock appreciation rights ("SARs") under the Plan. A recipient of SARs will receive, upon exercise, a payment (in cash or in shares of Common Stock) based on the increase in the price of a share of Common Stock between the date of grant and the date of exercise. SARs may be granted in connection with options or other Awards granted under the Plan or may be granted as independent Awards. If a SAR is granted in connection with an option, the SAR shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a SAR, any option or portion thereof to which the SAR relates terminates. If a SAR is granted in connection with an option, upon exercise of the option, the SAR or portion thereof to which the option relates terminates. TAX CONSEQUENCES TO THE COMPANY AND ITS SUBSIDIARIES. To the extent participants qualify for capital gains treatment with respect to the sale of shares acquired pursuant to exercise of an incentive stock options, the Company or its subsidiaries will not be entitled to any tax deductions in connection with incentive stock options. In all other cases, the Company or its subsidiaries will be entitled to receive a federal income tax deduction at the same time and in the same amount as the amount which is taxable to participants as ordinary income with respect to Awards. TAX CONSEQUENCES TO RECIPIENT. INCENTIVE STOCK OPTIONS. Incentive stock options under the Plan are intended to meet the requirements of Section 422 of the Internal Revenue Code. No income results to a participant upon the grant of an incentive stock option or upon the issuance of shares when the option is exercised. The amount realized on the sale or taxable exchange of such shares in excess of the exercise price will be considered a capital gain, except that if such disposition occurs within one year after exercise of the option or two years after grant of the option, the participant will recognize taxable compensation at ordinary income tax rates measured by the amount by which the lesser of (i) the fair market value on the date of exercise minus the exercise price or (ii) the amount realized on the sale of the share exceeds the exercise price. For purposes of determining alternative minimum taxable income, an incentive stock option is treated as a nonqualified option. Nonqualified Options. No taxable income is recognized upon the grant of a nonqualified option. In connection with the exercise of a nonqualified option, a participant will generally realize ordinary income measured by the difference between the exercise price and the fair market value of the shares acquired on the date of exercise. Bonus Shares and Stock Sales. Bonus shares awarded under the Plan and shares sold outright under the Plan, which are transferable or not subject to a substantial risk of forfeiture, are taxable as ordinary income equal to the excess of the fair market value of the shares received (determined as of the date of settlement) over the amount, if any, paid for the shares by the participant. In the case of shares that are not transferable and are subject to a substantial risk of forfeiture on the date of issuance, the participant will generally recognize ordinary income equal to the excess of the fair market value of shares received (determined as of the date on which the shares either become transferable or are not subject to a substantial risk of forfeiture) over the amount, if any, paid for the shares. In this case, a participant may elect to recognize income when the shares are received, rather than upon the expiration of the transfer restriction or risk of forfeiture, and, in such event, the amount of ordinary income will be determined as of the date of issuance rather than upon expiration of the applicable restriction. Stock Appreciation Rights. The grant of a SAR to a participant will not cause the recognition of income by the participant. Upon exercise of a SAR, the participant will realize ordinary income equal to the amount of cash payable to the participant plus the fair market value of any shares of Common Stock or other property delivered to the participant. CHANGES IN CAPITAL STRUCTURE. If the outstanding shares of Common Stock of the Company are hereafter increased or decreased or are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any recapitalization, reclassification, stock split, combination of shares or dividend payable in shares, the Committee shall make appropriate adjustments (i) in the number and kind of shares available for awards under the Plan; and (ii) in the number and kind of shares as to which outstanding options and stock appreciation rights, or portions thereof then unexercised, shall be exercisable, so that the participant's proportionate interest before and after the occurrence of the event is maintained. The Board recommends a vote FOR the proposed Amendment to the Plan. In the event the Amendment is not approved by the shareholders, the Plan will remain in effect as to the 3,000,000 shares of Common Stock previously authorized for issuance. OTHER MATTERS TO BE ACTED UPON It is not known whether any other matters will come before the Meeting other than as set out above and in the Notice of Meeting. However, if such should occur, the person named in the accompanying form of proxy intends to vote on the matters in accordance with his best judgment exercising discretionary authority with respect to amendments or variations or matters identified in the Notice of Meeting and other matters which may properly come before the Meeting or an adjournment thereof. SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES FOR THE MEETING Article II of the Company's Bylaws provides that advance notice of nominations for the election of directors or proposals for an amendment to the Company's Bylaws must be received by the Company thirty (30) days prior to the date of the shareholder meeting at which the shareholder wishes to present such nomination or proposal or, if less than 40 days' notice of the date of the meeting is given to shareholders, by the close of business on the 10th day following the date on which notice of the meeting was mailed to shareholders. Each notice of a nomination or proposal of a Bylaw amendment must contain, among other things, (i) the name and address of the shareholder who intends to make the nomination or proposal; (ii) a representation that the shareholder is a holder of record of common stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to present the nomination or proposal; (iii) certain biographical information concerning each person to be nominated for election as a director, the number of shares of common stock beneficially owned by such nominee, and the consent of such person to serve as a director if so elected; (iv) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (v) the provisions of any proposed Bylaw amendment and any financial interest of the shareholder in the proposal; and (vi) such other information regarding each nominee or proposal as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission. ANNUAL REPORT The Company's Annual Report to Shareholders for the fiscal year ended March 31, 1998 and the Company's Form 10-K for the fiscal year ended March 31, 1998 (the "10-K"), accompanies this proxy statement. On written request, the Company will provide, without charge, a copy of its 10-K filed with the Securities and Exchange Commission (including a list briefly describing the exhibits thereto), to any record holder or beneficial owner of the Company's Common Stock on July 24, 1998, the record date for the 1998 Annual Meeting of Shareholders, or to any person who subsequently becomes such a record holder or beneficial owner. Requests should be directed to the attention of the Secretary of the Company at the address of the Company set forth in the Notice of Annual Meeting of Shareholders immediately preceding this proxy statement. INDEPENDENT ACCOUNTANTS Arthur Andersen LLP, independent public accountants, examined the financial statements of the Company for fiscal 1998. No change in independent public accountants is contemplated for fiscal 1999. The Company expects representatives of Arthur Andersen LLP to be present at the 1998 annual meeting of shareholders and to be available to respond to appropriate questions from shareholders. The accountants will have the opportunity to make a statement at the meeting if they desire to do so. PROPOSALS OF SHAREHOLDERS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS Proposals of shareholders to be presented at the Meeting to be held in September 1999 must be received at the Company's executive offices by April 4, 1999, in order to be included in the Company's proxy statement and form of proxy concerning that meeting. DATED at Portland, Oregon, this 6th day of August, 1998. BY ORDER OF THE BOARD /S/ MICHAEL A. TEMPLE _______________________ Michael A. Temple Vice President, Chief Financial Officer and Secretary NOTICE OF ANNUAL SHAREHOLDERS' MEETING AND PROXY STATEMENT ----------------------------- August 6, 1998 PORTLAND, OREGON ----------------------------- (BIOJECT LOGO) BIOJECT MEDICAL TECHNOLOGIES INC. ANNUAL MEETING OF SHAREHOLDERS September 10, 1998 This Proxy is Solicited on Behalf of the Board of Directors James C. O'Shea and Michael A. Temple and each of them, as proxies, with full power of substitution in each of them, are hereby authorized to represent and to vote, as designated on the reverse of this proxy card, on all proposals and in the discretion of the proxies on such other matters as may properly come before the annual meeting of shareholders of Bioject Medical Technologies Inc. to be held on September 10, 1998 or any adjournment(s), postponement(s), or other delay(s) thereof (the "Meeting"), all shares of stock of Bioject Medical Technologies Inc. (the "Company") to which the undersigned is entitled to vote at the Meeting. Receipt of the Notice of Meeting and Proxy Statement is hereby acknowledged by the undersigned. (To be Signed on Reverse Side) /X/ Please mark your votes as in this example. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW: 1. Election of the following nominee(s) as directors to serve in such capacities until their successors are duly elected and qualified. / / FOR ALL (Except as marked / / WITHHELD FOR ALL to the contrary below) Nominees: David H. de Weese Grace K. Fey William A. Gouveia Eric T. Herfindal James C. O'Shea Richard J. Plestina John Ruedy, M.D. Michael T. Sember 2. To amend the Articles of Incorporation to provide for a classified Board of Directors; 3. To amend the 1992 Stock Incentive Plan to increase the number of shares available for issuance under the plan; and 4. Transaction of such other business as may properly come before the Meeting or any adjournments thereof. UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. PLEASE SIGN, DATE, AND MAIL YOUR PROXY TODAY. SIGNATURE: ______________________________ DATE: _________________________ SIGNATURE: ______________________________ DATE: _________________________ (SIGNATURE, IF HELD JOINTLY) NOTE: _____________________________________________________ Capacity (Title of Authority, i.e., Executor, Trustee) EX-3.(I) 2 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION Exhibit A ARTICLES OF AMENDMENT OF BIOJECT MEDICAL TECHNOLOGIES INC. Pursuant to ORS 60.431, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the corporation is Bioject Medical Technologies Inc. (the "Corporation"). SECOND: The Articles of Incorporation are hereby amended as follows: Article X is hereby deleted in its entirety and replaced with a new Article X to read as follows: ARTICLE X Directors Section 1. Number of Directors. The Board of Directors shall consist of not less than six nor more than eleven, the exact number to be set herein. Until increased or decreased as provided herein, the Board of Directors shall consist of eight members. The Board of Directors is authorized to increase or decrease the size of the Board of Directors (within the range specified above) at any time by the affirmative vote of two-thirds of the directors then in office. Without the unanimous consent of the directors then in office, no more than two additional directors shall be added to the Board of Directors in any 12-month period. Without the unanimous approval of the directors then in office, no person who is affiliated as an owner, director, officer, employee or consultant of a company or business deemed by the Board of Directors to be competitive with that of the Corporation shall be eligible to serve on the Board of Directors of the Corporation. Section 2. Classified Board. The Board shall be divided into three classes: Class I Directors, Class II Directors and Class III Directors. Each such class of directors shall be nearly equal in number of directors as possible. Each director shall serve for a term ending at the third annual shareholders' meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected as Class I Directors shall serve for a term ending at the annual meeting to be held in the year following the first election of directors by classes, the directors first elected as Class II Directors shall serve for a term ending at the annual meeting to be held in the second year following the first election of directors by classes and the directors first elected as Class III directors shall serve for a term ending at the annual meeting to be held in the third year following the first election of directors by classes. Notwithstanding the foregoing, each director shall serve until his or her successor shall have been elected and qualified or until his or her earlier death, resignation or removal. At each annual election, the directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the directors they succeed, unless, by reason of any intervening changes in the authorized number of directors, the Board shall designate one or more directorships whose term then expire as directorships of another class in order more nearly to achieve equality in the number of directors among the classes. When the Board fills a vacancy resulting from the death, resignation or removal of a director, the director chosen to fill that vacancy shall be of the same class as the director he or she succeeds, unless, by reason of any previous changes in the authorized number of directors, the Board shall designate the vacant directorship as a directorship of another class in order more nearly to achieve equality in the number of directors among the classes. The terms of any director elected by the Board to fill a vacancy will expire at the next shareholders meeting at which directors are elected, despite the class such director has been elected to fill. Notwithstanding the rule that the three classes shall be as nearly equal in number of directors as possible, upon any change in the authorized number of directors, each director then continuing to serve as such will nevertheless continue as a director of the class of which he or she is a member, until the expiration of his or her current term or his or her earlier death, resignation or removal. Newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 3. Initial Directors as Classified. The directors of the Corporation first elected to classes are eight (8) in number and their names and class are: Name Class Jim O'Shea III David de Weese I Grace Fey II Bill Gouveia I Toby Herfindal II Rick Plestina II John Ruedy, MD III Mike Sember III Section 4. Removal of Directors Directors may be removed only for cause. For purposes of this Amendment, "cause" shall mean that the director has: (i) committed an act of fraud or embezzlement against the Corporation; (ii) been convicted of, or plead nolo contendre to a crime involving moral turpitude; (iii) failed to perform to director's duties as a director and such failure constitutes a breach of the director's duty of loyalty to the Corporation or provides an improper personal benefit to the director. A new Article XII is hereby added and reads as follows: ARTICLE XII SHAREHOLDER APPROVAL OF CERTAIN EVENTS Notwithstanding any provision of Articles of Incorporation, as amended, or Bylaws of the Corporation, as amended, and notwithstanding the fact that some lesser percentage may be allowed by law, any amendment, change or repeal of Articles X or XII, or any other amendment of the Articles of Incorporation, as amended, which would have the effect of modifying or permitting circumvention of the provisions of Articles X or XII, shall require the following shareholder votes: (i) the affirmative votes of 75 percent of all outstanding shares of the Corporation entitled to vote on the matter, voting together as a single class; and (ii) if any shares of the Corporation are entitled to vote on the matter as a separate group, the affirmative vote of 75 percent of such shares, voting separately. THIRD: The amendment does not provide for an exchange, reclassification, or cancellation of issued shares. FOURTH: The foregoing amendment was adopted by the Board of Directors of the Corporation on July 16, 1998 and by the shareholders of the Corporation on September __, 1998 in accordance with the provisions of ORS 60.437. FIFTH: The number of shares of the corporation outstanding at the time of such adoption was _______ shares of common stock, 692,694 shares of Series A Convertible Preferred Stock and 134,333 shares of Series B Convertible Preferred Stock, of which only the common stock was entitled to vote thereon. SIXTH: The number of shares voting for and against such amendment were as follows: Class No. of Shares Voted For No. of Shares Voted Against Common Bioject Medical Technologies Inc. Date: ______, 1998 By:___________________________ James C. O'Shea President EX-10.58 3 RESTATED 1992 STOCK INCENTIVE PLAN BIOJECT MEDICAL TECHNOLOGIES INC. RESTATED 1992 STOCK INCENTIVE PLAN Restated Effective April 15, 1998 1. Purpose. The purpose of this Restated 1992 Stock Incentive Plan (the "Plan") is to enable Bioject Medical Technologies Inc., an Oregon corporation (the "Company"), to attract and retain the services of (a) selected employees, officers and directors of the Company or of any parent or subsidiary corporation of the Company, and (b) selected nonemployee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary. 2. Subject to the Plan. Subject to adjustment as provided below and in paragraph 11, up to 3,650,000 shares of Common Stock of the Company (the "Shares") shall be offered and issued under the Plan. No more than 3,000,000 of such Shares offered and issued under the Plan may be offered and issued pursuant to grants under the Plan of Incentive Stock Options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). If an option or a stock appreciation right granted under the Plan expires, terminates or is cancelled, the unissued Shares subject to such option or stock appreciation right shall again be available under the Plan. If Shares sold or awarded as a bonus under the Plan are forfeited to the Company or repurchased by the Company, the number of Shares forfeited or repurchased shall again be available under the Plan. 3. Effective Date and Duration of Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors of the Company (the "Board"). However, no option granted under the Plan shall become exercisable until the Plan is approved by the affirmative vote of the holders of a majority of the Common Stock of the Company represented at a shareholder meeting at which a quorum is present, and any such awards under the Plan prior to such approval shall be conditioned on and subject to such approval. Subject to this limitation, options and stock appreciation rights may be granted and Shares may be awarded as bonuses or sold under the Plan at any time after the effective date and before termination of the Plan. (b) Duration. No options or stock appreciation rights may be granted under the Plan, no stock bonuses may be awarded under the Plan, and no Shares may be sold pursuant to paragraph 8 of the Plan on or after July 29, 2002. However, the Plan shall continue in effect until all Shares available for issuance under the Plan have been issued and all restrictions on such Shares have lapsed. The Board may suspend or terminate the Plan at any time, except with respect to options, stock appreciation rights and Shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding options, stock appreciation rights, any right of the Company to repurchase Shares or the forfeitability of Shares issued under the Plan. 4. Administration. (a) The Plan shall be administered by a committee appointed by the Board consisting of not less than two directors (the "Committee"). The Committee shalldetermine and designate from time to time the individuals to whom awards shall be made, the amount of the awards, and the other terms and conditions of the awards; provided, however, that only the Board may amend or terminate the Plan as provided in paragraphs 3 and 14. At any time when the officers and directors of the Company are subject to Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall consist solely of "non-employee" directors as such term is defined from time to time in SEC Rule 16b-3(b)(3)(i) or successor rule. No member of the Committee shall be eligible to receive any award under the Plan while such person serves as a Committee member, except pursuant to paragraph 10. (b) Subject to the provisions of the Plan, the Committee may from time to time adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any vesting or exercise date, waive or modify any restriction applicable to Shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. 5. Types of Awards; Eligibility. The Committee may, from time to time, take the following actions under the Plan: (i) grant Incentive Stock Options, as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options ("Nonstatutory Stock Options") as provided in paragraph 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell Shares as provided in paragraph 8; and (v) grant stock appreciation rights as provided in paragraph 9. Any such awards may be made to employees (including employees who are officers or directors) of the Company or of any parent or subsidiary corporation of the Company, and to other individuals described in paragraph 1 who the Committee believes have made or will make an important contribution to the Company or its parent or subsidiaries; provided, however, that only employees of the Company or a parent or subsidiary shall be eligible to receive Incentive Stock Options under the Plan, and, provided further, that directors who are not employees shall receive awards only pursuant to paragraph 10. The Committee shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made under the Plan. At the discretion of the Committee, an individual may be given an election to surrender an award in exchange for the grant of a new award. 6. Option Grants (a) Grant. Each option granted under the Plan shall be evidenced by a stock option agreement in such form as the Committee shall prescribe from time to time in accordance with the Plan. With respect to each option grant, the Committee shall determine the number of Shares subject to the option, the option price, the period of the option, and the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Nonstatutory Stock Option. (b) Incentive Stock Options. Incentive Stock Options granted under the Plan shall be subject to the following terms and conditions: (i) No employee may be granted Incentive Stock Options under the Plan such that the aggregate fair market value, on the date of grant, of the Shares with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of the Code) of the Company or of any parent or subsidiary corporation of the Company exceeds $100,000. (ii) An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary corporation of the Company only if the option price is at least 110 percent of the fair market value, as described in paragraph 6(b)(iv), of the Shares subject to the option on the date it is granted, and the option by its terms is not exercisable more than five years from the date of grant. (iii) Subject to paragraphs 6(b)(ii) and 6(d), Incentive Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee, except that no Incentive Stock Option shall be exercisable more than 10 years from the date of grant. (iv) The option price per Share shall be determined by the Committee at the time of grant. Subject to paragraph 6(b)(ii), the option price shall not be less than 100 percent of the fair market value of the Shares covered by the Incentive Stock Option at the date the option is granted. The fair market value shall be deemed to be the average of the closing bid and asked prices for the Common Stock of the Company as reported on the National Association of Securities Dealers, Inc. Automated Quotation System on the day preceding the day the option is granted, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Common Stock of the Company as shall be specified by the Committee. (v) The Committee may at any time without the consent of the optionee convert an Incentive Stock Option into a Nonstatutory Stock Option. (c) Nonstatutory Stock Options. Nonstatutory Stock Options shall be subject to the following additional terms and conditions: (i) The option price for Nonstatutory Stock Options shall be determined by the Committee at the time of grant. The option price may not be less than 75 percent of the fair market value of the Shares covered by the Nonstatutory Stock Option on the date of grant. The fair market value of the Shares covered by a Nonstatutory Stock Option shall be determined pursuant to paragraph 6(b)(iv). (ii) Nonstatutory Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee. (d) Exercise of Options. Except as provided in paragraphs 6(e) and (f) or as determined by the Committee, no option granted under the Plan may be exercised unless at the time of such exercise the optionee is employed by or in the service of the Company or any parent or subsidiary corporation of the Company and shall have been so employed or have provided such service continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Committee shall not, however, be deemed an interruption of employment for purposes of the Plan. Unless otherwise determined by the Committee, vesting of options shall not continue during an absence on leave (including an extended illness) or on account of disability. Except as provided in paragraphs 6(f), 11 and 12, options granted under the Plan may vest and be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Committee, provided that options shall not be exercised for fractional shares. Unless otherwise determined by the Committee, if the optionee does not exercise an option in any one year with respect to the full number of Shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase those Shares in any subsequent year during the term of the option. (e) Restrictions on Transfer. Each option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and each option by its terms shall be exercisable during the optionee's lifetime only by the optionee; provided, however, that, with the consent of the Committee, which consent may be withheld in its sole discretion or conditioned on such requirements as the Committee shall deem appropriate, an officer or director of the Company who is subject to Section 16(b) of the Exchange Act may assign or transfer without consideration all or any portion of a Nonstatutory Stock Option granted under the Plan to such officer's or directors spouse (or former spouse) pursuant to a qualified domestic relations order. The holder of any Nonstatutory Stock Option that has been transferred pursuant to this paragraph 6(e) may be subject to treatment under tax and securities laws with respect to the transferred option which differs from the treatment to which the applicable officer or director was subject with respect to the option prior to the transfer. (f) Termination of Employment or Service. (i) In the event the employment or service of the optionee by the Company or a parent or subsidiary corporation of the Company terminates for any reason other than because of death or physical disability, the option may be exercised at any time prior to the expiration date of the option or the expiration of three months (one year in the case of officers and two years in the case of directors)after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. (ii) In the event of the termination of the optionee's employment or service with the Company or a parent or subsidiary corporation of the Company because the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code), the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. (iii) In the event of the death of an optionee while employed by or providing service to the Company or a parent or subsidiary corporation of the Company, the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such death, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option on the date of death, and only by the person or persons to whom such optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death. (iv) The Committee, at the time or grant or at any time thereafter, may extend the three-month and one-year expiration periods any length of time not later than the original expiration date of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Committee may determine. (v) To the extent that the option of any deceased optionee or of any optionee whose employment or service terminates is not exercised within the applicable period, all further rights to purchase Shares pursuant to such option shall cease and terminate. (g) Purchase of Shares. Unless the Committee determines otherwise, Shares may be acquired pursuant to an option only upon receipt by the Company of notice in writing from the optionee of the optionee's intention to exercise, specifying the number of Shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and, if required to comply with the Securities Act of 1933, as amended, or state securities laws, the notice shall include a representation that it is the optionee's present intention to acquire the Shares for investment and not with a view to distribution. The certificates representing the Shares shall bear any legends required by the Committee. Unless the Committee determines otherwise, on or before the date specified for completion of the purchase of Shares pursuant to an option, the optionee must have paid the Company the full purchase price of such Shares in cash (including, with the consent of the Committee, cash that may be the proceeds of a loan from the Company), or, with the consent of the Committee, in whole or in part, in Shares valued at fair market value, as determined pursuant to paragraph 6(b)(iv). Unless the Committee determines otherwise, all payments made to the Company in connection with the exercise of an option must be made by a certified or cashier's bank check or by the transfer of immediately available federal funds. No Shares shall be issued until full payment therefor has been made. With the consent of the Committee, an optionee may request the Company to apply automatically the Shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the optionee by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, an optionee may deliver Shares to the Company to satisfy the withholding obligation. 7. Stock Bonuses. The Committee may award Shares under the Plan as stock bonuses. Shares awarded as a stock bonus shall be subject to such terms, conditions, and restrictions as shall be determined by the Committee, all of which shall be evidenced in a writing signed by the recipient prior to receiving the bonus Shares. The Committee may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The certificates representing the Shares awarded shall bear any legends required by the Committee. The Company may require any recipient of a stock bonus to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the recipient by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a recipient may deliver Shares to the Company to satisfy the withholding obligation. 8. Stock Sales. The Committee may issue Shares under the Plan for such consideration (including promissory notes and services) as determined by the Committee, provided that in no event shall the consideration be less than 75 percent of the fair market value of the Shares at the time of issuance, determined pursuant to paragraph 6(b)(iv). Shares issued under this paragraph 8 shall be subject to the terms, conditions and restrictions determined by the Committee. The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the Shares issued, together with such other restrictions as may be determined by the Committee. The certificates representing the Shares shall bear any legends required by the Committee. The Company may require any purchaser of stock issued under this paragraph 8 to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the purchaser fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the purchaser by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a purchaser may deliver Shares to the Company to satisfy the withholding obligation. 9. Stock Appreciation Rights. (a) Grant. Stock appreciation rights may be granted under the Plan by the Committee, subject to such rules, terms, and conditions as the Committee prescribes. (b) Exercise. (i) A stock appreciation right shall be exercisable only at the time or times established by the Committee. If a stock appreciation right is granted in connection with an option, the stock appreciation right shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a stock appreciation right, any option or portion thereof to which the stock appreciation right relates terminates. If a stock appreciation right is granted in connection with an option, upon exercise of the option, the stock appreciation right or portion thereof to which the option relates terminates. (ii) The Committee may withdraw any stock appreciation right granted under the Plan at any time and may impose any conditions upon the exercise of a stock appreciation right or adopt rules and regulations from time to time affecting the rights of holders of stock appreciation rights. Such rules and regulations may govern the right to exercise stock appreciation rights granted before adoption or amendment of such rules and regulations as well as stock appreciation rights granted thereafter. (iii) Each stock appreciation right shall entitle the holder, upon exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one Share over its fair market value on the date of grant (or, in the case of a stock appreciation right granted in connection with an option, the option price per Share under the option to which the stock appreciation right relates), multiplied by the number of Shares covered by the stock appreciation right or the option, or portion thereof, that is surrendered. No stock appreciation right shall be exercisable at a time that the amount determined under this subparagraph is negative. Payment by the Company upon exercise of a stock appreciation right may be made in Shares valued at fair market value, in cash, or partly in Shares and partly in cash, all as determined by the Committee. (iv) For purposes of this paragraph 9, the fair market value of the Shares shall be determined pursuant to paragraph 6(b)(iv), on the trading day preceding the date the stock appreciation right is exercised. (v) No fractional Shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash may be paid in an amount equal to the value of the fraction or, if the Committee shall determine, the number of Shares may be rounded downward to the next whole Share. (vi) Each participant who has exercised a stock appreciation right shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the participant fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the participant by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a participant may satisfy this obligation, in whole or in part, by having the Company withhold from any Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Shares to the Company to satisfy the withholding amount. (vii) Upon the exercise of a stock appreciation right for Shares, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued. Cash payments of stock appreciation rights shall not reduce the number of Shares reserved for issuance under the Plan. 10. Option Grants to Non-Employee Directors. (a) Automatic Grants. Immediately after the close of each annual shareholder meeting (commencing with the 1993 annual meeting), each person then serving as a Non-Employee Director, including any such person who is elected at such meeting, shall automatically be granted a Nonstatutory Stock Option to purchase 17,500 Shares. For purposes of this paragraph, a "Non-Employee Director" is a director of the Company who is not an employee of the Company or of any parent or subsidiary corporation of the Company on the date the option is granted. (b) Terms of Options. The exercise price for options granted under this paragraph 10 shall be the fair market value of the Shares on the date of grant, determined pursuant to paragraph 6(b)(iv). Each such option shall have an eight-year term from the date of grant, unless earlier terminated as provided in paragraph 6(f), and shall vest and become exercisable with respect to 8,750 shares six months after the date of grant, with the remaining 8,750 shares vesting and becoming exercisable on the first anniversary of the date of grant. 11. Changes in Capital Structure. If the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any recapitalization, reclassification, stock split, combination of shares or dividend payable in shares, the Committee shall make appropriate adjustments (i) in the number and kind of shares available for awards under the Plan; and (ii) in the number and kind of shares as to which outstanding options and stock appreciation rights, or portions thereof then unexercised, shall be exercisable, so that the participant's proportionate interest before and after the occurrence of the event is maintained, provided that this paragraph 11 shall not apply with respect to transactions referred to in paragraph 12. The Committee may also require that any securities issued in respect of or exchanged for Shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any such adjustment made by the Committee shall be conclusive. 12. Effect of Reorganization or Liquidation. (a) Cash, Stock or Other Property for Stock. Except as provided in paragraph 12(b), upon a merger, consolidation, reorganization, plan of exchange or liquidation involving the Company, as a result of which the shareholders of the Company receive cash, stock or other property in exchange for or in connection with their Common Stock (any such transaction to be referred to in this paragraph 12 as an "Accelerating Event"), any option or stock appreciation right granted hereunder shall terminate, but the optionee shall have the right during a 30-day period immediately prior to any such Accelerating Event to exercise his or her option or stock appreciation right, in whole or in part, without any limitation with respect to vesting or exercisability (b) Stock for Stock. If the shareholders of the Company receive capital stock of another corporation ("Exchange Stock") in exchange for their Common Stock in any transaction involving a merger, consolidation, reorganization, or plan of exchange, all options granted hereunder shall be converted into options to purchase shares of Exchange Stock and all stock appreciation rights granted hereunder shall be converted into stock appreciation rights measured by the Exchange Stock, unless the Committee, in its sole discretion, determines that any or all such options or stock appreciation rights granted hereunder shall not be converted, but instead shall terminate in accordance with the provisions of paragraph 12(a). The amount and price of converted options and stock appreciation rights shall be determined by adjusting the amount and price of the options or stock appreciation rights granted hereunder to take into account the relative values of the Exchange Stock and the Common Stock in the transaction. (c) The rights set forth in this paragraph 12 shall be transferable only to the extent the related option or stock appreciation right is transferable. 13. Corporate Mergers, Acquisitions, Etc. The Committee may also grant options, grant stock appreciation rights, award stock bonuses and sell stock under the Plan having terms, conditions and provisions that vary from those specified in the Plan; provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock appreciation rights, stock bonuses and stock sold or awarded by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a parent or subsidiary corporation of the Company is a party. 14. Amendment of Plan. The Board may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason. Except as provided in paragraphs 6(b)(v), 11, 12 and 13, however, no change in an award already granted shall be made without the written consent of the holder of such award. 15. Approvals. The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company shall not be obligated to issue or deliver Shares under the Plan if such issuance or delivery would violate applicable state or federal securities laws, or if compliance with such laws would, in the opinion of the Company, be unduly burdensome or require the disclosure of information which would not be in the Company's best interests. 16. Employment and Service Rights. Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon any employee any right to be continued in the employment of the Company or any parent or subsidiary corporation of the Company or shall interfere in any way with the right of the Company or any parent or subsidiary corporation of the Company by whom such employee is employed to terminate such employee's employment at any time, for any reason, with or without cause, or to increase or decrease such employee's compensation or benefits; or (ii) confer upon any person engaged by the Company or any parent or subsidiary corporation of the Company any right to be retained or employed by the Company or the parent or subsidiary or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company or the parent or subsidiary. 17. Rights as a Shareholder. The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Shares until the date of issue to the recipient of a stock certificate for such Shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. -----END PRIVACY-ENHANCED MESSAGE-----