10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 000-15360

BIOJECT MEDICAL TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Oregon	93-1099680
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20245 SW 95th Avenue Tualatin, Oregon	97062
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (503) 692-8001

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

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

Common Stock without par value	18,068,533
(Class)	(Outstanding at August 13, 2010)

BIOJECT MEDICAL TECHNOLOGIES INC.

FORM 10-Q

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – June 30, 2010 and December 31, 2009 (unaudited)	2
	Consolidated Statements of Operations - Three and Six Months Ended June 30, 2010 and 2009 (unaudited)	3
	Consolidated Statements of Cash Flows - Six Months Ended June 30, 2010 and 2009 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 4.	Controls and Procedures	13
PART II - OTHER INFORMATION
Item 1A.	Risk Factors	13
Item 6.	Exhibits	20
Signatures		21

1

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2010			December 31, 2009
ASSETS
Current assets:
Cash	$	450,907		$	1,146,318
Accounts receivable, net of allowance for doubtful accounts of $5,149 and $5,149		504,198			899,311
Inventories		876,413			867,676
Other current assets		63,486			20,951
Total current assets		1,895,004			2,934,256
Property and equipment, net of accumulated depreciation of $7,584,997 and $7,343,888		828,978			1,070,088
Other assets, net		1,268,746			1,251,838
Total assets	$	3,992,728		$	5,256,182
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term notes payable	$	—		$	124,758
Accounts payable		667,906			949,963
Accrued payroll		191,510			163,512
Derivative liabilities		766			32,451
Other accrued liabilities		705,747			690,663
Deferred revenue		254,245			276,272
Total current liabilities		1,820,174			2,237,619
Long-term liabilities:
Deferred revenue		1,224,120			1,222,427
Other long-term liabilities		348,551			348,161
Commitments
Shareholders’ equity:
Preferred stock, no par value, 10,000,000 shares authorized:
Series D Convertible - 2,086,957 shares issued and outstanding at June 30, 2010 and December 31, 2009, liquidation preference of $1.15 per share		1,878,768			1,878,768
Series E Convertible - 3,308,392 shares issued and outstanding at June 30, 2010 and December 31, 2009, liquidation preference of $1.37 per share		5,478,466			5,478,466
Series F Convertible - 8,314 shares issued and outstanding at June 30, 2010 and December 31, 2009, liquidation preference of $75 per share		723,025			720,018
Series G Convertible - 92,448 shares issued and outstanding at June 30, 2010 and December 31, 2009, liquidation preference of $13 per share		1,251,358			1,205,034
Common stock, no par value, 100,000,000 shares authorized; 18,008,944 shares issued and outstanding at June 30, 2010 and 17,729,111 at December 31, 2010		114,605,704			114,355,059
Accumulated deficit		(123,337,438	)		(122,189,370	)
Total shareholders’ equity		599,883			1,447,975
Total liabilities and shareholders’ equity	$	3,992,728		$	5,256,182

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

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenue:
Net sales of products	$	1,040,222		$	1,551,655		$	2,131,590		$	3,409,201
License and technology fees		116,975			123,958			213,329			251,648
		1,157,197			1,675,613			2,344,919			3,660,849
Operating expenses:
Manufacturing		808,211			978,363			1,617,117			2,121,494
Research and development		372,931			334,844			745,300			771,718
Selling, general and administrative		569,448			470,002			1,083,295			1,051,037
Total operating expenses		1,750,590			1,783,209			3,445,712			3,944,249
Operating loss		(593,393	)		(107,596	)		(1,100,793	)		(283,400	)
Interest income		1,057			2,988			3,262			6,092
Interest expense		(2,955	)		(51,817	)		(32,891	)		(101,935	)
Change in fair value of derivative liabilities		39,217			(144,562	)		31,685			(145,983	)
		37,319			(193,391	)		2,056			(241,826	)
Net loss		(556,074	)		(300,987	)		(1,098,737	)		(525,226	)
Preferred stock dividend		(24,107	)		(12,471	)		(49,331	)		(24,942	)
Net loss allocable to common shareholders	$	(580,181	)	$	(313,458	)	$	(1,148,068	)	$	(550,168	)
Basic and diluted net loss per common share allocable to common shareholders	$	(0.03	)	$	(0.02	)	$	(0.06	)	$	(0.03	)
Shares used in per share calculations		17,823,950			16,992,461			17,776,792			16,802,963

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

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2010			2009
Cash flows from operating activities:
Net loss	$	(1,098,737	)	$	(525,226	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Compensation expenses related to fair value of stock-based awards		224,558			188,315
Stock contributed to 401(k) Plan		26,087			39,881
Depreciation and amortization		287,214			351,231
Other non-cash interest expense		25,242			77,471
Change in fair value of derivative instruments		(31,685	)		145,983
Change in deferred revenue		(20,334	)		(32,931	)
Change in deferred rent		5,023			74,349
Changes in operating assets and liabilities:
Accounts receivable, net		395,113			(115,169	)
Inventories		(8,737	)		24,872
Other current assets		(42,535	)		4,424
Accounts payable		(282,057	)		111,907
Accrued payroll		27,998			(63,166	)
Other accrued liabilities		15,084			145,853
Net cash provided by (used in) operating activities		(477,766	)		427,794
Cash flows from investing activities:
Capital expenditures		—			(18,112	)
Other assets		(63,012	)		(90,990	)
Net cash used in investing activities		(63,012	)		(109,102	)
Cash flows from financing activities:
Principal payments made on short and long-term debt		(150,000	)		(330,000	)
Payments made on capital lease obligations		(4,633	)		(11,372	)
Net cash used in financing activities		(154,633	)		(341,372	)
Decrease in cash		(695,411	)		(22,680	)
Cash:
Beginning of period		1,146,318			1,351,892
End of period	$	450,907		$	1,329,212
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,625		$	21,169
Supplemental non-cash information:
Preferred stock dividend to be settled in Series F or Series G preferred stock	$	49,331		$	24,942

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

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BIOJECT MEDICAL TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Going Concern

The financial information included herein for the three and six-month periods ended June 30, 2010 and 2009 is unaudited; however, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2009 is derived from Bioject Medical Technologies Inc.’s 2009 Annual Report on Form 10-K for the year ended December 31, 2009. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject’s 2009 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Due to our limited amount of additional committed capital, recurring losses, negative cash flows and accumulated deficit, the report of our independent registered public accounting firm for the year ended December 31, 2009 expressed substantial doubt about our ability to continue as a going concern.

We have historically suffered recurring operating losses and negative cash flows from operations. As of June 30, 2010, we had an accumulated deficit of $123.3 million with total shareholders’ equity of $0.6 million. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, assuming that we will continue as a going concern.

At June 30, 2010, we had a cash balance of $0.5 million and we had working capital of $0.1 million.

In March 2010, we repaid the remaining $150,000 of debt we had outstanding and, as of June 30, 2010, we did not have any short or long-term debt outstanding.

We continue to monitor our cash and have previously taken measures to reduce our expenditure rate, including temporary salary reductions and rent deferrals. In addition, we delayed capital and maintenance expenditures. However, if we do not enter into one or more licensing, development and supply agreements with sufficient up-front payments or increase sales to current customers or markets during the third quarter of 2010, we will need to do one or more of the following to raise additional resources, or reduce our cash requirements:

• secure additional short-term debt financing;

• secure additional long-term debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

While management is committed to working on a number of strategic options and alternatives intended to keep us as a going concern, there is no assurance that we will be successful.

Note 2. Inventories

Inventories are stated at the lower of cost or market. Cost is determined in a manner which approximates the first-in, first out (FIFO) method. Costs utilized for inventory valuation purposes include labor, materials and manufacturing overhead. Inventories, net of valuation reserves of $591,000 and $622,000 at June 30, 2010 and December 31, 2009, respectively, consisted of the following:

	June 30, 2010		December 31, 2009
Raw materials and components	$	542,628	$	496,208
Work in process		52,331		132,537
Finished goods		281,454		238,931
	$	876,413	$	867,676

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Note 3. Net Loss Per Common Share

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

	Three and Six Months Ended June 30,
	2010	2009
Stock options, restricted stock and warrants	4,934,731	3,224,641
Convertible preferred stock	15,471,626	6,226,749
Series E Payment-in-kind dividends	550,516	550,516
Series F Payment-in-kind dividends	133,263	95,997
Series G Payment-in-kind dividends	380,950	—
$1.25 million convertible debt	—	533,333
$600,000 convertible debt	—	800,000
Accrued interest on $600,000 convertible debt	—	99,244
Total	21,471,086	11,530,480

Note 4. Product Sales and Concentrations

Product sales to customers accounting for 10% or more of our product sales were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Merial	37	%	37	%	32	%	33	%
Ferring	30	%	25	%	30	%	17	%
Serono	18	%	28	%	26	%	36	%

At June 30, 2010, accounts receivable from Merial, Ferring and Serono represented 51%, 21% and 16%, respectively, of the accounts receivable balance. No other customers accounted for 10% or more of our accounts receivable as of June 30, 2010.

Note 5. Fair Value Measurements

Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad categories:

• Level 1 – quoted prices in active markets for identical securities;

• Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.; and

• Level 3 – significant unobservable inputs, including our own assumptions in determining fair value.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Certain of our convertible debt and equity agreements include derivative liabilities. These instruments were recorded at fair value and are marked to market each period. The fair value of each of these instruments is determined using the Black-Scholes valuation model.

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Following are the disclosures related to our financial assets and (liabilities) (in thousands):

	June 30, 2010
	Fair Value		Input Level
Warrants issued in connection with 2006 $1.5 million bridge loan	$	766	Level 3

	Warrants issued in connection with March 2006 $1.5 million bridge loan			$1.25 million convertible  debt conversion feature(1)
Black- Scholes Assumptions
Risk-free interest rate		0.15	%		—
Expected dividend yield		0.00	%		—
Contractual term (years)		0.19			—
Expected volatility		191	%		—
Certain Other Information
Fair value at December 31, 2009	$	(30,039	)	$	(2,412	)
Change in fair value		29,273			2,412
Fair value at June 30, 2010	$	(766	)	$	—

(1) The $1.25 million convertible debt was paid off during the first quarter of 2010 and, accordingly, there is no value attributable to the conversion feature at June 30, 2010.

Note 6. Other Current Liabilities

Included in other current liabilities was $628,000 and $618,000 at June 30, 2010 and December 31, 2009, respectively, related to prepaid inventory and credits for Serono.

Note 7. Amendments to 1992 Stock Incentive Plan

At our Annual Meeting of Shareholders, which was held June 10, 2010, our shareholders approved amendments to our 1992 Stock Incentive Plan (the “Plan”) to:

• increase the number of shares reserved for issuance thereunder by 1,500,000 shares to a total of 5,400,000 shares; and

• to extend the expiration date of the Plan from June 30, 2010 to June 9, 2020.

Note 8. Stock-Based Awards

On April 23, 2010, we granted options exercisable for a total of 600,000 shares of our common stock at an exercise price of $0.30 per share, the fair market value on the date of grant, to certain employees and executive officers. The options vested 50% immediately and will vest as to an additional 25% on each of the first and second anniversaries of the grant date. The fair value of the options granted, as determined utilizing the Black-Scholes valuation methodology, was approximately $170,000, $108,000 of which will be recognized in 2010.

On June 10, 2010, we granted options exercisable for a total of 1.38 million shares of our common stock at an exercise price of $0.15 per share, the fair market value on the date of grant, to certain employees, executive officers and members of our Board of Directors. The options vest as to 25% of the total on each of the first through fourth anniversaries of the grant date. The fair value of the options granted, as determined utilizing the Black-Scholes valuation methodology, was approximately $197,000, $27,000 of which will be recognized in 2010.

Also on June 10, 2010, we granted 400,000 restricted stock units (“RSUs”) to Mr. Makar, our President and Chief Executive Officer pursuant to his employment agreement with respect to his performance in 2008 and 2009. The RSUs vested immediately as to 50% of the shares and will vest as to an additional 25% of the shares on each of the first and second anniversaries of the grant date. This vesting schedule is accelerated as compared to the terms of Mr. Makar’s employment agreement in lieu of any cash bonus for 2008 or 2009. The RSUs had a fair value of $60,000, $37,500 of which will be recognized in 2010.

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Stock-based compensation was recognized in our consolidated statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Manufacturing	$	44,663	$	14,737	$	51,193	$	35,472
Research and development		9,549		4,716		11,675		10,101
Selling, general and administrative		117,145		55,131		161,690		124,974
	$	171,357	$	74,584	$	224,558	$	170,547

Note 9. Recent Accounting Guidance Not Yet Adopted

ASU 2010-17

In April 2010, the FASB issued ASU 2010-17, “Revenue Recognition – Milestone Method,” which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. The amendments in ASU 2010-17 are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. While we are still analyzing the provisions of ASU 2010-17, we believe that our current practices are consistent with the guidance in ASU 2010-17 and, accordingly, we do not expect the adoption of the provisions of ASU 2010-17 to have any effect on our financial position, results of operations or cash flows.

ASU 2010-06

Accounting Standards Update (“ASU”) 2010-06, “Improving Disclosures about Fair Value Measurements,” requires new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into or out of Level 1 and Level 2 fair-value classifications. It also requires information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair-value assets and liabilities. These disclosures are required for fiscal years beginning on or after December 15, 2009. The ASU also clarifies existing fair-value measurement disclosure guidance about the level of disaggregation, inputs and valuation techniques, which are required to be implemented in fiscal years beginning on or after December 15, 2010. Since the requirements of this ASU only relate to disclosure, the adoption of the guidance will not have any effect on our financial position, results of operations or cash flows.

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning cash requirements. Such forward looking statements (often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,” “anticipates” or “does not anticipate,” “plans,” “estimates” or “intends,” or stating that certain actions, events or results “may,” “could,” “would,” “should,” “might” or “will” be taken, occur or be achieved) involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, without limitation, the risk that we may not enter into anticipated licensing, development or supply agreements, the risk that we may not achieve the milestones necessary for us to receive payments under our development agreements, the risk that our products will not be accepted by the market, the risk that we will be unable to meet production demands as a result of supply or other factors, the risk that we will be unable to obtain needed debt or equity

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financing on satisfactory terms, or at all, risks related to the general economic environment and uncertainties in the financial markets, uncertainties related to our dependence on the continued performance of strategic partners and technology and uncertainties related to the time required for us or our strategic partners to complete research and development and obtain necessary clinical data and government clearances. See also Part II, Item 1A, Risk Factors.

Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. We assume no obligation to update forward-looking statements if conditions or management’s estimates or opinions should change, even if new information becomes available or other events occur in the future.

OVERVIEW

We are an innovative developer and manufacturer of needle-free injection therapy systems (“NFITS”).

Our NFITS work by forcing liquid medication at high speed through a tiny orifice held against the skin. This creates a fine stream of high-pressure medication that penetrates the skin, depositing the medication in the tissue beneath. By bundling customized needle-free delivery systems with partners’ injectable medications and vaccines, we can enhance demand for these products in the healthcare provider and end-user markets.

In January 2010, we established a strategic alliance with MPI Research, a leading pre-clinical research organization with experience in the development of injectable therapeutics. The strategic alliance creates a preferred partnership relationship, which allows us to gain access to a range of capabilities and resources needed for us to explore drug+device opportunities, including access to pharmacologic, analytical, safety and other preclinical testing resources available at MPI Research. The strategic alliance offers MPI Research the opportunity to provide our needle-free technology as an alternate delivery option to current drug/biologic manufacturers who may be interested in seeking a more highly competitive and differentiable drug+device brand.

In March 2010, we met the final milestone in our license, development and supply agreement with Merial for their new state-of-the-art spring-powered device for feline leukemia and canine melanoma vaccinations for companion animals and we initiated the first product shipments of the new device to Merial at the end of the first quarter of 2010.

Although revenues for the first two quarters of 2010 were lower than the same time period last year, we are undertaking actions related to both revenue and cash management in an attempt to improve our results. Such actions include the hiring of a new National Sales Manager who is focusing on increasing sales of our devices to the military and public health sectors. We are also exploring new options for funding of technologies to support the needs of the developing world and are targeting potential federally funded programs with our device technology in order to deliver new benefits for emergency preparedness and biodefense.

Also in March 2010, we repaid the remaining $150,000 of debt we had outstanding and, at June 30, 2010, we did not have any short or long-term debt outstanding.

We do not expect to report net income in 2010.

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GOING CONCERN AND CASH REQUIREMENTS FOR THE NEXT TWELVE-MONTH PERIOD

See Note 1 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

CONTRACTUAL PAYMENT OBLIGATIONS

A summary of our contractual commitments and obligations as of June 30, 2010 was as follows:

	Payments Due By Period
Contractual Obligation	Total		Remainder of 2010		2011 and 2012		2013 and 2014		2015 and beyond
Operating leases and deferred rent(1)	$	1,920,562	$	205,779	$	936,991	$	777,792	$	—
Capital leases		13,518		7,145		6,373		—		—
Purchase order commitments(2)		566,744		566,744		—		—		—
	$	2,500,824	$	779,668	$	943,364	$	777,792	$	—

(1) Operating leases and deferred rent includes $115,000 of deferred rent due beginning January 2011, or sooner if certain events occur.

(2) Purchase order commitments generally relate to future raw material inventory purchases, research and development projects and other operating expenses.

RESULTS OF OPERATIONS

The consolidated financial data for the three and six-month periods ended June 30, 2010 and 2009 are presented in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenue:
Net sales of products	$	1,040,222		$	1,551,655		$	2,131,590		$	3,409,201
License and technology fees		116,975			123,958			213,329			251,648
		1,157,197			1,675,613			2,344,919			3,660,849
Operating expenses:
Manufacturing		808,211			978,363			1,617,117			2,121,494
Research and development		372,931			334,844			745,300			771,718
Selling, general and administrative		569,448			470,002			1,083,295			1,051,037
Total operating expenses		1,750,590			1,783,209			3,445,712			3,944,249
Operating loss		(593,393	)		(107,596	)		(1,100,793	)		(283,400	)
Interest income		1,057			2,988			3,262			6,092
Interest expense		(2,955	)		(51,817	)		(32,891	)		(101,935	)
Change in fair value of derivative liabilities		39,217			(144,562	)		31,685			(145,983	)
Net loss		(556,074	)		(300,987	)		(1,098,737	)		(525,226	)
Preferred stock dividend		(24,107	)		(12,471	)		(49,331	)		(24,942	)
Net loss allocable to common shareholders	$	(580,181	)	$	(313,458	)	$	(1,148,068	)	$	(550,168	)
Basic and diluted net loss per common share allocable to common shareholders	$	(0.03	)	$	(0.02	)	$	(0.06	)	$	(0.03	)
Shares used in per share calculations		17,823,950			16,992,461			17,776,792			16,802,963

Revenue

The $0.5 million, or 33.0%, decrease and the $1.3 million, or 37.5%, decrease in product sales in the three and six-month periods ended June 30, 2010, respectively, compared to the same periods of 2009, were due primarily to the following:

• Decreases in sales to Serono from $441,000 to $186,000, or 57.9%, and from $1.2 million to $546,000, or 55.5% in the three and six-month periods ended June 30, 2010, respectively, compared to the same periods of 2009 due to reductions in their forecast in anticipation of the contract ending December 2010. We have firm orders through October 2010 and we do not expect Serono to continue purchasing from us after the contract expires;

• Decreases in sales to Merial from $578,000 to $382,000, or 34.0%, and from $1.1 million to $674,000, or 39.3% in the three and six-month periods ended June 30, 2010, respectively, compared to the same periods of 2009, due to delays in the timing and delivery of orders of existing product and for the new spring-powered device as a result of delays in production ramp-up;

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• Decrease in sales to Ferring from $382,000 to $316,000, or 17.2%, in the three-month period ended June 30, 2010 compared to the same period of 2009, due to timing of orders;

• Decreases in sales to the military from $115,000 to $101,000, or 12.2%, and from $235,000 to $148,000, or 37.0% in the three and six-month periods ended June 30, 2010, respectively, compared to the same periods of 2009; and

• The completion of a grant project for the Centers for Disease Control, which resulted in $137,000 of revenue in the six-month period ended June 30, 2009 and no revenue in 2010.

These factors were partially offset by:

• An increase in sales to Ferring from $590,000 to $631,000, or 7.0%, in the six-month period ended June 30, 2010 compared to the same period of 2009, due to the timing of orders.

We currently have supply agreements or commitments with Serono, Merial, Ferring Pharmaceuticals and the U.S. federal government. Our agreement with Serono expires in December 2010.

License and technology fees recognized in accordance with our agreements were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Serono	$	15,280	$	24,923	$	34,271	$	67,005
Merial		44,052		40,990		86,063		79,254
Royalty fees		22,643		23,878		47,995		50,064
Other		35,000		34,167		45,000		55,325
	$	116,975	$	123,958	$	213,329	$	251,648

We currently have an active licensing and development agreement, which includes commercial product supply provisions, with Merial.

Manufacturing Expense

Manufacturing expense is made up of the cost of products sold and manufacturing overhead expense related to excess manufacturing capacity.

The $0.2 million, or 17.4%, decrease and the $0.5 million, or 23.8%, decrease in manufacturing expense in the three and six-month periods ended June 30, 2010, respectively, compared to the same periods of 2009 were primarily due to lower product sales.

Research and Development Expense

Research and development costs include labor, materials and costs associated with clinical studies incurred in the research and development of new products and modifications to existing products.

The $38,000, or 11.4%, increase and the $26,000, or 3.4%, decrease in research and development expense in the three and six-month periods ended June 30, 2010, respectively, compared to the same periods of 2009 were primarily due the timing of expenses related to on-going projects.

Current significant projects include the next generation spring-powered device with an auto disable feature.

Selling, General and Administrative Expense

Selling, general and administrative costs include labor, travel, outside services and overhead incurred in our sales, marketing, management and administrative support functions.

The $99,000, or 21.2%, increase in selling, general and administrative expense in the three-month period ended June 30, 2010 compared to the same period of 2009 was primarily due to the hiring of a National Sales Manager and related expenses, as well as a $62,000 increase in stock-based compensation expense primarily as a result of stock-based awards granted in the second quarter of 2010.

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Interest Expense

Interest expense included the following:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Contractual interest expense	$	2,955	$	25,251	$	7,649	$	48,136
Amortization of debt issuance costs		—		2,822		—		6,790
Accretion of $1.25 million convertible debt		—		23,744		25,242		47,009
	$	2,955	$	51,817	$	32,891	$	101,935

Change in Fair Value of Derivative Liabilities

Our derivative liability is recorded at fair value and marked to market each period. The fair value is determined using the Black-Scholes valuation model.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception in 1985, we have financed our operations, working capital needs and capital expenditures primarily from private placements of securities, the exercise of warrants, loans, proceeds received from our initial public offering in 1986, proceeds received from a public offering of common stock in 1993, licensing and technology revenues and revenues from sales of products.

Total cash at June 30, 2010 was $0.5 million compared to $1.1 million at December 31, 2009. We had working capital of $0.1 million at June 30, 2010 compared to $0.7 million at December 31, 2009. Our debt retirement costs were $150,000 in the first six months of 2010 to pay off the remaining balance on our convertible loan, which was paid in March 2010. Following the repayment of this outstanding debt, we did not have any debt outstanding. However, even with the sale of Series G Preferred shares and the related cash investment in December 2009, given our current cash balance, our March 2010 debt repayment and our current rate of cash usage, if no new licensing, development or supply agreements with significant up-front payments are entered into or there is no significant increase in product sales in the third quarter of 2010, we anticipate that we will be unable to continue operations beyond the third quarter of 2010, unless we obtain additional debt or equity financing.

The overall decrease in cash during the first six months of 2010 resulted from $0.5 million of cash used in operating activities, $155,000 used for principal payments on debt and capital leases and $63,000 used for patent activity.

Net accounts receivable decreased $0.4 million to $0.5 million at June 30, 2010 compared to $0.9 million at December 31, 2009. Receivables from three different customers accounted for a total of 88% of our accounts receivable balance at June 30, 2010, with individual accounts totaling 51%, 21% and 16%, respectively. For the customer representing 51% of our balance at June 30, 2010, none of the amounts due are related to equipment purchased on their behalf compared to $0.5 million at December 31, 2009. Of the accounts receivable due at June 30, 2010, $393,000 was collected prior to the filing of this Form 10-Q. Historically, we have not had collection problems related to our accounts receivable.

Inventories were flat, totaling $0.9 million at both June 30, 2010 and December 31, 2009.

We did not have any capital expenditures in the first six months of 2010. We anticipate spending up to a total of $50,000 or more in 2010 for production molds for current research and development projects.

Accounts payable decreased $0.2 million to $0.7 million at June 30, 2010, compared to $0.9 million at December 31, 2009, primarily due to the payment of $0.5 million of invoices related to capital purchases on behalf of the customer mentioned above, partially offset by increases related to the timing of payments to vendors.

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Other accrued liabilities at June 30, 2010 and December 31, 2009 included $0.5 million and $0.6 million, respectively, of inventory credits that Serono could begin taking against current invoices or require repayment at any time.

Derivative liabilities at June 30, 2010 reflect the fair value of warrants issued in connection with a March 2006 $1.5 million bridge loan. The fair value of the derivative liabilities is adjusted on a quarterly basis using the Black-Scholes valuation model, with changes in fair value being recorded as a non-cash component of earnings.

Deferred revenue of $1.5 million at June 30, 2010 included $1.4 million received from Merial and $0.1 million received from Serono.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We reaffirm the critical accounting policies and estimates as reported in our Form 10-K for the year ended December 31, 2009, which was filed with the Securities and Exchange Commission on March 30, 2010.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

RECENT ACCOUNTING GUIDANCE NOT YET ADOPTED

See Note 9 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our President and Chief Executive Officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our President and Chief Executive Officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our President and Chief Executive Officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1A. RISK FACTORS

In addition to the other information contained in this Form 10-Q, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected by any of these risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

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We need to obtain funding in the third quarter of 2010 to continue operations. Sufficient funding may not be available to us and, if available, may be subject to conditions and the unavailability of funding could adversely affect our business and cause us to cease operations. At June 30, 2010, cash was $0.5 million and we had working capital of $0.1 million. We continue to monitor our cash and have previously taken measures to reduce our expenditure rate and delay capital and maintenance expenditures. However, even with the closing of the Series G Preferred Stock transaction in the fourth quarter of 2009, if we do not enter into one or more licensing development and supply agreements with sufficient up-front payments or increase sales to current customers or markets, we expect that we will need to do one or more of the following to provide additional resources during the third quarter of 2010:

• secure additional short-term debt financing;

• secure additional long-term debt financing;

• secure additional equity financing;

• secure a strategic partner; or

• reduce our operating expenditures.

This situation could be exacerbated if Serono uses its inventory credits against invoices or requires repayment of those credits. In addition, our contract with Serono expires in December 2010 and we do not expect Serono to continue purchasing from us after that time. If we do not replace the sales represented by Serono, our funding situation may worsen. While management continues to work on a number of strategic options and alternatives to keep Bioject operating, there are no assurances that we will be successful. Financing may not be available to us on acceptable terms or at all. If we are unable to obtain additional resources, our business could be adversely affected and we could be forced to cease operations.

We have a history of losses and may never be profitable. Since our formation in 1985, we have incurred significant annual operating losses and negative cash flow. At June 30, 2010, we had an accumulated deficit of $123.3 million and net working capital of $0.1 million. Due to our lack of additional committed capital, recurring losses, negative cash flows and accumulated deficit, the report of our independent registered public accounting firm dated March 30, 2010 expressed substantial doubt about our ability to continue as a going concern. We may never be profitable, which could have a negative effect on our stock price, our business and our ability to continue operations. Our revenues are derived from licensing and technology fees and from product sales. We sell our products to strategic partners, who market our products under their brand name, and to end-users such as public health clinics for vaccinations and the military for mass immunizations. We have not attained profitability at these sales levels. We may never be able to generate significant revenues or achieve profitability. Now, and in the future, we will require substantial additional financing. Such financing may not be available on terms acceptable to us, or at all, which would have a material adverse effect on our business. Any future equity financing could result in significant dilution to shareholders.

Our preferred stock has a liquidation preference and, as a result, if we are sold or liquidated, holders of common stock could receive nothing. We have outstanding shares of Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock. Under the terms of the preferred stock, if we are sold or liquidated, the holders of these shares would be entitled to receive approximately $9.7 million, at June 30, 2010, prior to any payments to the holders of common stock. Accordingly, if we are sold or liquidated, holders of common stock could receive nothing.

If our products are not accepted by the market, our business could fail. Our success will depend on market acceptance of our needle-free injection drug delivery systems and on market acceptance of other products under development. If our products do not achieve market acceptance, our business could fail. Currently, the dominant technology used for intramuscular and subcutaneous injections is the hollow-needle syringe, which has a cost per injection that is significantly lower than that of our products. Our products may be unable to compete successfully with needle-syringes.

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We may be unable to enter into additional strategic corporate licensing and distribution agreements or maintain existing agreements, which could cause our business to suffer. A key component of our sales and marketing strategy is to enter into licensing and supply arrangements with leading pharmaceutical and biotechnology companies for whose products our technology provides either increased medical effectiveness or a higher degree of market acceptance. Historically, these agreements have taken a long time to finalize, and the current economic environment may extend that period even further. If we cannot enter into these agreements on terms favorable to us or at all, our business may suffer.

In prior years, several agreements have been canceled by our partners prior to completion. These agreements were canceled for various reasons, including, but not limited to, costs related to obtaining regulatory approval, unsuccessful pre-clinical vaccine studies, changes in vaccine development and changes in business development strategies. These agreements resulted in significant short-term revenue. However, none of these agreements developed into the long-term revenue stream anticipated by our strategic partnering strategy.

We may be unable to enter into future licensing or supply agreements with major pharmaceutical or biotechnology companies. Even if we enter into these agreements, they may not result in sustainable long-term revenues which, when combined with revenues from product sales, could be sufficient for us to operate profitably.

Our new drug+device strategy is currently suspended and is subject to a number of risks and uncertainties and, as a result, we may not be successful in implementing the strategy. In 2007, we announced a new component of our business strategy pursuant to which we plan to attempt to secure rights to injectable medications to sell in combination with our products under our own brand. Successfully implementing this strategy is subject to a number of risks. We may not be successful in securing rights to medications we are interested in combining with our products. Even if successful in securing rights, these products would be subject to FDA approval, and it will be our responsibility to obtain such approval. This approval may not be obtained or may take a significant period of time to obtain. In addition, there is a risk that our device will not work for the new drug indication. We may also need to raise additional funds to finance this new strategy, and there is no assurance such funds will be available to us on acceptable terms or at all. We do not have experience manufacturing or marketing to end-users drug+device combinations. In addition, these new products may not be accepted by the market. Further, due to our current liquidity situation, we have temporarily suspended implementation of this strategy. Accordingly, there is no assurance that our new strategy will be successfully implemented, and failure to successfully implement the strategy could negatively affect our business.

We have amended our lease agreement for rent deferrals and, if we default under our lease agreement in the future, our landlord could terminate our lease, which would adversely affect our business. In November 2008, we negotiated a $15,000 rent deferral for each of November 2008, December 2008 and January 2009 and, in March 2009, we entered into an agreement pursuant to which we deferred $12,000 of rent for each of February, March and April 2009. On July 8, 2009, we entered into another amendment to our lease agreement, effective June 30, 2009, pursuant to which we deferred $12,000 of rent for each of May and June 2009. Absent certain triggering events causing the deferred rent to be due sooner, we will be required to start repaying the deferred rent in January 2011, when it is to be repaid in twelve equal installments, plus accrued interest. If we are unable to make the payments under the lease when due, including the deferred rent payments, or are unable to negotiate additional rent deferrals, our landlord could declare an event of default and terminate our lease, which would have a material adverse effect on our business.

We must retain qualified personnel in a competitive marketplace, or we may not be able to grow our business. Our success depends upon the personal efforts and abilities of our senior management. We may be unable to retain our key employees, namely our management team, or to attract, assimilate or retain other highly qualified employees. We have implemented workforce and salary reductions, and there remains substantial competition for highly skilled employees. Our key employees are not bound by agreements that could prevent them from terminating their employment at any time. If we fail to attract and retain key employees, our business could be harmed.

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We depend on a few significant customers. Our top three customers accounted for 88% of our total product sales in the first six months of 2010. Our supply agreement with one of these customers, Serono, expires in December 2010 and we do not expect Serono to continue purchasing from us after that time. If we do not replace the sales represented by Serono, our business will be negatively affected. In addition, if any of these customers delays, reduces or ceases ordering our products or services, whether as a result of the expiration of a supply agreement or otherwise, our business would be negatively affected.

Our common stock is listed on the Over-the-Counter Bulletin Board, which may impair the price at which our common stock trades, the liquidity of the market for our common stock and our ability to obtain additional funding. The Over-the-Counter Bulletin Board is an electronic quotation service maintained by the Financial Industry Regulatory Authority. As a consequence of this listing, the ability of a stockholder to sell our common stock, the price obtainable for our common stock and our ability to obtain additional funding may be materially impaired.

We have limited manufacturing experience, and may be unable to produce our products at the unit costs necessary for the products to be competitive in the market, which could cause our financial condition to suffer. We have limited experience manufacturing our products in commercially viable quantities. We have increased our production capacity for the Biojector^® 2000 system, the ZetaJet™ and the Vitajet^® product lines through automation of, and changes in, production methods, in order to achieve savings through higher volumes of production. If we are unable to achieve these savings, our results of operations and financial condition could suffer. The current cost per injection of the Biojector^® 2000 system, ZetaJet™ and Vitajet^® product lines is substantially higher than that of traditional needle-syringes, our principal competition. In order to reduce costs, a key element of our business strategy has been to reduce the overall manufacturing cost through automating production and packaging. There can be no assurance that we will achieve sales and manufacturing volumes necessary to realize cost savings from volume production at levels necessary to result in significant unit manufacturing cost reductions. Failure to do so will continue to make competing with needle-syringes on the basis of cost very difficult and will adversely affect our financial condition and results of operations. We may be unable to successfully manufacture devices at a unit cost that will allow the product to be sold profitably. Failure to do so would adversely affect our financial condition and results of operations.

We are subject to extensive government regulation and must continue to comply with these regulations or our business could suffer. Our products and manufacturing operations are subject to extensive government regulation in both the U.S. and abroad. If we cannot comply with these regulations, we may be unable to distribute our products, which could cause our business to suffer or fail. In the U.S., the development, manufacture, marketing and promotion of medical devices are regulated by the Food and Drug Administration (“FDA”) under the Federal Food, Drug, and Cosmetic Act (“FFDCA”). The FFDCA provides that new pre-market notifications under Section 510(k) of the FFDCA are required to be filed when, among other things, there is a major change or modification in the intended use of a device or a change or modification to a legally marketed device that could significantly affect its safety or effectiveness. A device manufacturer is expected to make the initial determination as to whether the change to its device or its intended use is of a kind that would necessitate the filing of a new 510(k) notification. The FDA may not concur with our determination that our current and future products can be qualified by means of a 510(k) submission or that a new 510(k) notification is not required for such products.

Future changes to manufacturing procedures could require that we file a new 510(k) notification. Also, future products, product enhancements or changes, or changes in product use may require clearance under Section 510(k), or they may require FDA pre-market approval (“PMA”) or other regulatory clearances. PMAs and regulatory clearances other than 510(k) clearance generally involve more extensive prefiling testing than a 510(k) clearance and a longer FDA review process. It is current FDA policy that pre-filled syringes are evaluated by the FDA by submitting a Request for Designation (“RFD”) to the Office of Combination Products (“OCP”). The pharmaceutical or biotechnology company with which we partner is responsible for the submission to the OCP, although we will have this responsibility with respect to drug+device combinations produced by us under our new strategy. A pre-filled syringe meets the FDA’s definition of a combination product, or a product comprised of two or more regulated components, i.e. drug/device. The OCP will assign a center with primary jurisdiction for a combination product (CDER, CDRH) to ensure the timely and effective pre-market review of the product. Depending on the circumstances, drug and combination drug/device regulation can be much more extensive and time consuming than device regulation.

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FDA regulatory processes are time consuming and expensive. Product applications submitted by us may not be cleared or approved by the FDA. In addition, our products must be manufactured in compliance with Good Manufacturing Practices, as specified in regulations under the FFDCA. The FDA has broad discretion in enforcing the FFDCA, and noncompliance with the FFDCA could result in a variety of regulatory actions ranging from product detentions, device alerts or field corrections, to mandatory recalls, seizures, injunctive actions and civil or criminal penalties. If we were to have a recall of our product in the field, it could negatively affect our results of operations, financial position and cash flows.

Sales of our products, including the Iject® pre-filled syringe, are dependent on regulatory approval being obtained for the product’s use with a given drug to treat a specific condition. It is the responsibility of the strategic partner producing the drug to obtain this approval. The failure of a partner to obtain regulatory approval or to comply with government regulations after approval has been received could harm our business. In order for a strategic partner to sell our devices for delivery of its drug to treat a specific condition, the partner must first obtain government approval. This process is subject to extensive government regulation both in the U.S. and abroad. As a result, sales of our products, including the Iject^® product, to any strategic partner are dependent on that partner’s ability to obtain regulatory approval. Accordingly, delay or failure of a partner to obtain that approval could cause our financial results to suffer. In addition, if a partner fails to comply with governmental regulations after initial regulatory approval has been obtained, sales to that partner may cease, which could cause our financial results to suffer.

If we cannot meet international product standards, we will be unable to distribute our products outside of the United States, which could cause our business to suffer. Distribution of our products in countries other than the U.S. may be subject to regulation in those countries. Failure to satisfy these regulations would impact our ability to sell our products in these countries and could cause our business to suffer.

We have received the following certifications from Underwriters Laboratories (“UL”) that our products and quality systems meet the applicable requirements, which allows us to label our products with the CE Mark and sell them in the European Community and non-European Community countries.

Certificate	Issue Date	Date Renewed
ISO 13485:2003 and CMDCAS	February 2006	January 2009
EC Certificate – Needle-free Injection Systems and Accessories (Biojector® 2000, cool.click®, ZetaJet™)	March 2007	January 2010
EC Certificate – Vial Adapters and Reconstitution Kits	March 2007	January 2009

If we are unable to continue to meet the standards of ISO 13485 or CE Mark certification, it could have a material adverse effect on our business and cause our financial results to suffer.

If the healthcare industry limits coverage or reimbursement levels, the acceptance of our products could suffer. The price of our products exceeds the price of needle-syringe combinations and, if coverage or reimbursement levels are reduced, market acceptance of our products could be harmed. The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement practices and operations of healthcare facilities. During the past several years, the healthcare industry has been subject to increased government regulation of reimbursement rates and capital expenditures. Among other things, third party payers are increasingly attempting to contain or reduce healthcare costs by limiting both coverage and levels of reimbursement for healthcare products and procedures. Because the price of the Biojector^® 2000 system exceeds the price of a needle-syringe, cost control policies of third party payers, including government agencies, may adversely affect acceptance and use of the Biojector^® 2000 system. In addition, on March 23, 2010 the Patient Protection and Affordable Care Act was signed into law and, commencing in 2013, the legislation imposes a 2.3% excise tax on sales of medical devices, which may negatively affect our business.

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We depend on outside suppliers for manufacturing. Our current manufacturing processes for the Biojector^® 2000 and ZetaJet™ jet injector and disposable syringes as well as manufacturing processes to produce our modified Vitajets^® consist primarily of assembling component parts supplied by outside suppliers. Some of these components are currently obtained from single sources, with some components requiring significant production lead times. In the past, we have experienced delays in the delivery of certain components and are currently experiencing such delays. These current delays, or any delays or interruptions we may experience in the future, including suppliers suspending or ceasing operations, could have a material adverse effect on our financial condition and results of operations.

Manufacturing difficulties could delay product shipments to customers. Delays in receiving approval for the manufacture of customers’ products or delays related to internal manufacturing difficulties could delay the timing of shipments to customers and negatively affect our results of operations, financial position and cash flows.

If we are unable to manage our growth, our results of operations could suffer. If our products achieve market acceptance or if we are successful in entering into significant product supply agreements with major pharmaceutical or biotechnology companies, we expect to experience rapid growth. Such growth would require expanded customer service and support, increased personnel, expanded operational and financial systems, and implementing new and expanded control procedures. We may be unable to attract sufficient qualified personnel or successfully manage expanded operations. As we expand, we may periodically experience constraints that would adversely affect our ability to satisfy customer demand in a timely fashion. Failure to manage growth effectively could adversely affect our financial condition and results of operations.

We may be unable to compete in the medical equipment field, which could cause our business to fail. The medical equipment market is highly competitive and competition is likely to intensify. If we cannot compete, our business will fail. Our products compete primarily with traditional needle-syringes, “safety syringes” and also with other alternative drug delivery systems. In addition, manufacturers of needle-syringes, as well as other companies, may develop new products that compete directly or indirectly with our products. There can be no assurance that we will be able to compete successfully in this market. A variety of new technologies (for example, micro needles on dissolvable patches and transdermal patches) are being developed as alternatives to injection for drug delivery. While we do not believe such technologies have significantly affected the use of injection for drug delivery to date, there can be no assurance that they will not do so in the future. Many of our competitors have longer operating histories as well as substantially greater financial, technical, marketing and customer support resources.

We are dependent on a single technology, and if it cannot compete or find market acceptance, our business will suffer. Our strategy has been to focus our development and marketing efforts on our needle-free injection technology. Focus on this single technology leaves us vulnerable to competing products and alternative drug delivery systems. If our technology cannot find market acceptance or cannot compete against other technologies, business will suffer. We perceive that healthcare providers’ desire to minimize the use of the traditional needle-syringe has stimulated development of a variety of alternative drug delivery systems such as “safety syringes,” jet injection systems, nasal delivery systems and transdermal diffusion “patches.” In addition, pharmaceutical companies frequently attempt to develop drugs for oral delivery instead of injection. While we believe that for the foreseeable future there will continue to be a significant need for injections, alternative drug delivery methods may be developed which are preferable to injection.

We rely on patents and proprietary rights to protect our technology. We rely on a combination of trade secrets, confidentiality agreements and procedures and patents to protect our proprietary technologies. We have been granted a number of patents in the U.S. and several patents in other countries covering certain technology embodied in our current jet injection system and certain manufacturing processes. Additional patent applications are pending in the U.S. and certain foreign

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countries. The claims contained in any patent application may not be allowed, or any patent or our patents collectively may not provide adequate protection for our products and technology. In the absence of patent protection, we may be vulnerable to competitors who attempt to copy our products or gain access to our trade secrets and know-how. In addition, the laws of foreign countries may not protect our proprietary rights to this technology to the same extent as the laws of the U.S. We believe we have independently developed our technology and attempt to ensure that our products do not infringe the proprietary rights of others.

If a dispute arises concerning our technology, we could become involved in litigation that might involve substantial cost. Such litigation might also divert substantial management attention away from our operations and into efforts to enforce our patents, protect our trade secrets or know-how or determine the scope of the proprietary rights of others. If a proceeding resulted in adverse findings, we could be subject to significant liabilities to third parties. We might also be required to seek licenses from third parties in order to manufacture or sell our products. Our ability to manufacture and sell our products might also be adversely affected by other unforeseen factors relating to the proceeding or its outcome.

If our products fail or cause harm, we could be subject to substantial product liability, which could cause our business to suffer. Producers of medical devices may face substantial liability for damages in the event of product failure or if it is alleged the product caused harm. We currently maintain product liability insurance and, to date, have experienced one product liability claim. There can be no assurance, however, that we will not be subject to a number of such claims, that our product liability insurance would cover such claims, or that adequate insurance will continue to be available to us on acceptable terms in the future. Our business could be adversely affected by product liability claims or by the cost of insuring against such claims.

There are a large number of shares eligible for sale into the public market, which may reduce the price of our common stock. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market, or the perception that such sales could occur. We have a large number of shares of common stock outstanding and available for resale. These sales also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. There are also a large number of shares of common stock issuable upon conversion of our outstanding preferred stock and exercise of warrants. In addition, as of June 30, 2010, we had approximately 297,000 shares of common stock available for future issuance under our stock incentive plan. As of June 30, 2010, options to purchase approximately 2.3 million shares of common stock were outstanding and approximately 157,000 restricted stock units were outstanding and will be eligible for sale in the public market from time to time subject to vesting.

Our stock price may be highly volatile, which increases the risk of securities litigation. The market for our common stock and for the securities of other small market-capitalization companies has been highly volatile in recent years. This increases the risk of securities litigation relating to such volatility. We believe that factors such as quarter-to-quarter fluctuations in financial results, new product introductions by us or our competition, public announcements, changing regulatory environments, sales of common stock by certain existing shareholders, substantial product orders and announcement of licensing or product supply agreements with major pharmaceutical or biotechnology companies could contribute to the volatility of the price of our common stock, causing it to fluctuate dramatically. General economic trends such as recessionary cycles and changing interest rates may also adversely affect the market price of our common stock.

Concentration of ownership could delay or prevent a change in control or otherwise influence or control most matters submitted to our shareholders. Certain funds affiliated with Life Sciences Opportunities Fund II (Institutional), L.P. (collectively, the “LOF Funds”) and its affiliates currently own shares of Series D Preferred Stock, Series E Preferred Stock, Series G Preferred Stock and warrants to purchase common stock representing in aggregate approximately 45.3% of our outstanding voting power (assuming exercise of the warrants). As a result, the LOF Funds and their affiliates have the potential to control matters submitted to a vote of shareholders, including a change of control transaction, which could prevent or delay such a transaction.

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ITEM 6. EXHIBITS

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

Exhibit No.	Description
3.1	2002 Restated Articles of Incorporation of Bioject Medical Technologies Inc., as amended.
3.2	Second Amended and Restated Bylaws of Bioject Medical Technologies, Inc. Incorporated by reference to Form 8-K filed July 5, 2007.
10.1	1992 Stock Incentive Plan, as amended.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 16, 2010	BIOJECT MEDICAL TECHNOLOGIES INC.
	(Registrant)
	/s/ RALPH MAKAR
	Ralph Makar
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ CHRISTINE M. FARRELL
	Christine M. Farrell
	Vice President of Finance
	(Principal Financial Officer)

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EX-3.1

Exhibit 3.1

2002 RESTATED ARTICLES OF INCORPORATION

OF

BIOJECT MEDICAL TECHNOLOGIES INC.

ARTICLE I

Name

The name of the corporation (the “Corporation”) shall be Bioject Medical Technologies Inc.

ARTICLE II

Duration

The Corporation’s duration shall be perpetual.

ARTICLE III

Purposes

The purposes for which the Corporation is organized are:

Section 1. In general, to carry on any lawful business whatsoever which is calculated, directly or indirectly, to promote the interests of the Corporation or to enhance the value of its properties.

Section 2. To engage in and carry on any lawful business or trade and exercise all powers granted to a corporation formed under the Oregon Business Corporation Act, including any amendments thereto or successor statute that may hereinafter be enacted.

ARTICLE IV

Authorized Capital Stock

Section 1. Classes. After giving effect to the reverse stock split set forth in Section 1.1, the Corporation shall be authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock”; the total number of shares which the Corporation shall have authority to issue is One Hundred Ten Million (110,000,000) ; the authorized number of shares of Common Stock shall be One Hundred Million (100,000,000), without par value; the authorized number of shares of Preferred Stock shall be Ten Million (10,000,000), without par value.

Section 1.1. Each five shares of issued and outstanding Common Stock of this Corporation were, on October 13, 1999 (which was the effective date of the Corporation’s previous Amended and Restated Articles of Incorporation), automatically reclassified into one share of Common Stock of this Corporation, thereby giving effect to a one-for-five reverse stock split (the “Reverse Stock Split”). All outstanding rights and obligations (including option plans, stock options and the exercise price thereof, stock purchase warrants and the exercise prices thereof and the conversion terms of the Corporation’s shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C Convertible Preferred Stock) relating to this Corporation’s Common Stock were on that date mathematically adjusted to reflect the Reverse Stock Split so that the proportionate ratio of such rights and obligations to the reclassified shares was equal to the proportionate ratio of such rights and obligations to the shares outstanding immediately prior to such reclassification. In lieu of the issuance of any fractional shares that otherwise resulted from the Reverse Stock Split, the Corporation issued to any shareholder that would have otherwise received fractional shares one whole share, the additional shares thereby issued being taken from authorized but theretofore unissued shares of Common Stock.

Section 2. Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series. Shares of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law. The board of directors of the Corporation is hereby authorized to fix the designations and powers, preferences and relative participating, optional or other rights, if any, and qualifications, limitations or other restrictions thereof, including, without limitation, the dividend rate (and whether or not dividends are cumulative), conversion rights, if any, voting rights, rights and terms of redemption (including sinking fund provisions, if any), redemption price and liquidation preferences of any wholly unissued series of Preferred Stock and the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding.

Designation of Rights and Preferences of Series A Convertible Preferred Stock,

Series B Convertible Preferred Stock and Series C Convertible Preferred Stock

Section 2.1. Definitions. The following terms shall have the respective meanings ascribed to them below.

“Board” shall mean the Board of Directors of the Corporation.

“Business Day” shall mean any day other than Saturday, Sunday or a day on which federally-chartered banks located in New York, New York or Portland, Oregon are permitted by law to be closed.

“Closing Date” shall mean October 15, 1997.

“Closing Price” at any date shall mean the last reported sale price of the Common Stock on the NASDAQ Stock Market or other principal market of the Common Stock on such date.

“Common Stock” shall mean, collectively, the Corporation’s Common Stock and any capital stock of any class of the Corporation (other than any Preferred Stock) hereafter authorized that is not limited to a fixed amount of percentage of par or stated value in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Corporation.

“Conversion Stock” shall mean shares of the Corporation’s Common Stock issuable upon the conversion of any shares of Preferred Stock.

“Excluded Stock” shall mean (i) shares of Common Stock issued or reserved for issuance by the Corporation as a stock dividend payable in shares of Common Stock, or upon any subdivision or split-up of the outstanding shares of Common Stock, or upon conversion of shares of the Preferred Stock, (ii) up to 3,650,000 shares of Common Stock (or Rights (as defined below)) therefor issued to directors, officers or employees of the Corporation or its affiliates (or in the case of options, granted at an exercise price) at less than Fair Value under a duly-enacted stock option or compensation plan, or (iii) any shares of Common Stock issuable upon exercise of any warrants currently outstanding or warrants which the Corporation has committed, as of October 15, 1997, to issue in the future.

“Fair Value” shall mean the fair market value of any securities or assets as reasonably and in good faith determined by the Board.

“Junior Securities” shall mean any of the Corporation’s equity securities (whether or not currently authorized) that are junior in liquidation preference to the Preferred Stock.

“Liquidation Value” of any share of Series A Preferred Stock or Series B Preferred Stock as of any particular date shall be equal to $15.00 per share. Liquidation Value of Series C Preferred Stock is the Series C Issuance Price.

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“Market Price” of any security shall mean the average of the closing prices of such security’s sales on all securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ Stock Market as of 4:00 p.m., New York time, or, if on any day such security is not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of the 10 trading days preceding the determination date. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ Stock Market or the over-the-counter market, the “Market Price” shall be the Fair Value thereof.

“Person” shall mean an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Preferred Stock” shall mean the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, or, as the context requires, all such series of preferred stock of the Corporation.

“Preferred Issuance Price” shall mean the purchase price per share for the Series A Preferred Stock, which is $15.00, and the purchase price per share for the Series B Preferred Stock, which is $15.00.

“Series C Issuance Price” means the original price per share at which Series C Preferred Stock is issued.

“Subsidiary” shall mean any Person of which the shares of outstanding capital stock or other equity interests, as the case may be, possessing the voting power under ordinary circumstances in electing the board of directors are, at the time as of which any determination is being made, owned by the Corporation either directly or indirectly through subsidiaries.

Section 2.2. Preferred Stock.

(a) Series A Preferred Stock. 1,235,000 shares of the preferred stock, without par value, of the Corporation are hereby constituted as a series of preferred stock of the Corporation designated as Series A Convertible Preferred Stock (the “Series A Preferred Stock”). Such amount shall be adjusted by the Corporation in the event that any adjustments to the Series A Preferred Stock are required as set forth herein, and, in connection therewith, the Corporation shall promptly take all necessary or appropriate actions and make all necessary or appropriate filings in connection therewith.

(b) Series B Preferred Stock. 200,000 shares of the preferred stock, without par value, of the Corporation are hereby constituted as a series of preferred stock of the Corporation designated as Series B Convertible Preferred Stock (the “Series B Preferred Stock”). Such amount shall be adjusted by the Corporation in the event that any adjustments to the Series B Preferred Stock are required as set forth herein, and, in connection therewith, the Corporation shall promptly take all necessary or appropriate action and make all necessary or appropriate filings in connection therewith.

(c) Series C Preferred Stock. 500,000 shares of the preferred stock, without par value, of the Corporation are hereby constituted as a series of preferred stock of the Corporation designated as Series C Convertible Preferred Stock (the “Series C Preferred Stock”). Such amount shall be adjusted by the Corporation in the event that any adjustments to the Series C Preferred Stock are required as set forth herein, and, in connection therewith, the Corporation shall promptly take all necessary or appropriate action and make all necessary or appropriate filings in connection therewith.

Section 2.3. Dividends.

(a) General.

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(1) Series A Preferred Stock. Each outstanding share of Series A Preferred Stock shall accrue from the date of issuance through October 15, 2001 a dividend equal to 9% per annum of the Preferred Issuance Price of Series A Preferred Stock, compounded semiannually beginning on September 2, 1998; such dividend shall be paid by the issuance of additional shares of Series A Preferred Stock, based upon a value equal to the Preferred Issuance Price.

(2) Series B Preferred Stock. The holder of each share of Series B Preferred Stock shall be entitled to receive, pro rata among such holders and on a pari passu basis with the holders of the Series C Preferred Stock and the holders of Common Stock, as if the Series B Preferred Stock had been converted into Common Stock immediately prior to the record date in respect thereof, when and as declared by the Board out of funds legally available for the declaration and payment of dividends, cash dividends at the same rate and in the same amount per share as any and all dividends declared and paid in respect of the Common Stock. Except as set forth above, such holders shall not be entitled to receive any dividends.

(3) Series C Preferred Stock. The holder of each share of Series C Preferred Stock shall be entitled to receive, pro rata among such holders and on a pari passu basis with the holders of the Series B Preferred Stock and the holders of Common Stock, as if the Series C Preferred Stock had been converted into Common Stock immediately prior to the record date in respect thereof, when and as declared by the Board out of funds legally available for the declaration and payment of dividends, cash dividends at the same rate and in the same amount per share as any and all dividends declared and paid in respect of the Common Stock. Except as set forth above, such holders shall not be entitled to receive any dividends.

(b) Payment of Dividends.

(1) Series A Preferred Stock. Dividends accrued and unpaid on shares of Series A Preferred Stock shall be payable in accordance with Section 2.3(a)(1) above.

(2) Series B Preferred Stock. Dividends payable in respect of the Series B Preferred Stock shall be paid as and when dividends are paid in respect of the Common Stock.

(3) Series C Preferred Stock. Dividends payable in respect of the Series C Preferred Stock shall be paid as and when dividends are paid in respect of the Common Stock.

(4) Change in Dividend Rate. If the Corporation shall fail to declare or pay a dividend on a date on which dividends are to be compounded pursuant to Section 2.3(a)(1) hereof, dividends on each share of Series A Preferred Stock shall thereupon begin to accrue at the rate of 9% of the sum of (a) the Preferred Issuance Price and (b) accrued and unpaid dividends on such date. If a dividend that was accrued and unpaid on a date dividends are to be compounded is subsequently paid, the rate at which dividends accrue shall thereupon be lowered to reflect such payment.

Section 2.4. Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, each holder of Preferred Stock shall be entitled to receive from amounts remaining after satisfaction of creditors and holders of securities (if any) with liquidation preferences senior to the Preferred Stock, and pro rata based on the respective outstanding liquidation preferences with holders of securities with a liquidation preference pari passu to the Preferred Stock, an amount equal to the Liquidation Value, plus accrued and unpaid dividends thereon, per share multiplied by the number of shares of Preferred Stock, held by such holder, until paid in full, in preference and priority to any distribution to any holder of Junior Securities. The Corporation shall provide written notice of such liquidation, dissolution or winding up, not less than 30 days prior to the payment date stated therein, to each record holder of any shares of Preferred Stock.

Section 2.5. Voting Rights.

(a) No Voting. Except as provided in Section 2.5(b) below or as required by the Oregon Business Corporation Act, the outstanding shares of Preferred Stock shall not be entitled to vote on any matter as to which stockholders of the Corporation shall be entitled to vote.

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(b) Special Voting Rights. The Corporation shall not, without first obtaining the affirmative vote or written consent of a majority in interest of the Series A Preferred Stock, voting as a class:

(1) amend or repeal any provision of, or add any provision to, the Corporation’s Articles of Incorporation or By-laws if such action would adversely alter preferences, rights, privileges or powers of, or the restrictions provided herein for the benefit of, the Series A Preferred Stock;

(2) create a series of Preferred Stock with a liquidation preference senior to the Series A Preferred Stock;

(3) effect any merger, consolidation or similar transaction; or

(4) increase or decrease the number of authorized shares of Series A Preferred Stock, except as required by Section 2.2 hereof.

Section 2.6. Conversion.

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

(b) Series B Preferred Stock. Series B Preferred Stock is convertible in the same manner and subject to the same terms and conditions as provided for in Section 2.6(a) above with respect to the holders of Series A Preferred Stock.

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

(d) Conversion Procedure.

(1) Before any holder of shares of Preferred Stock shall be entitled to convert any of such shares into shares of Common Stock, such holder shall surrender the certificate or certificates, duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock, and shall give written notice to the Corporation at its principal corporate office of the election to convert such shares and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued.

(2) Each conversion of any shares of Preferred Stock shall be deemed to have been effected on the close of business on the date on which the certificate or certificates representing such Preferred Stock to be converted have been surrendered at the principal corporate office of the Corporation or the office of any transfer agent for the Preferred Stock. At such time as such conversion has been effected, the rights of the holder of such Preferred Stock as a holder shall cease, the Person or Persons in whose name or names any certificate or certificates for shares of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby.

(3) As soon as possible after a conversion has been effected (but in any event within five business days in the case of clause (6) below), the Corporation or its transfer agent shall deliver to the converting holder:

(A) a certificate or certificates representing the number of shares of Conversion Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; and

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(B) payment in an amount equal to the amount payable under clause (6) below with respect to such conversion.

(4) The issuance of certificates for shares of Conversion Stock upon conversion of the Preferred Stock shall be made without charge to the holders of such Preferred Stock for any cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Conversion Stock. Upon conversion of each share of Preferred Stock, the Corporation shall take all such actions as are necessary in order to ensure that the Conversion Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable.

(5) The Corporation shall not close its books against the transfer of the Preferred Stock or of Conversion Stock issued or issuable upon conversion of the Preferred Stock in any manner which interferes with the timely conversion of the Preferred Stock. The Corporation shall assist and cooperate with any holder of the Preferred Stock or Conversion Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of shares hereunder (including, without limitations, making any filings required to be made by the Corporation).

(6) If any fractional interest in a share of Conversion Stock would, except for the provisions of this clause (6), be deliverable upon any conversion of the Preferred Stock, the Corporation, in lieu of delivering the fractional share therefor, shall pay an amount to the holder thereof equal to the Market Price of such fractional interest as of the date of conversion.

(7) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Conversion Stock, solely for the purpose of issuance upon the conversion of the Preferred Stock, such number of shares of Conversion Stock issuable upon the conversion of all outstanding shares of Preferred Stock. All shares of Conversion Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to ensure that all such shares of Conversion Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange or market upon which shares of Conversion Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance and except for filings, notices of applicability and permissions solely within the control of, or laws and regulations solely applicable to, the holders of the Preferred Stock).

(e) Anti-dilution Adjustments.

(1) Changes in Common Stock. In case the Corporation shall at any time or from time to time after October 13, 1999 (i) pay a dividend or make any other distribution with respect to its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock or (iv) issue any shares of its capital stock or other assets in a reclassification or reorganization of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Corporation is the continuing entity), then the number and kind of shares of capital stock of the Corporation or other assets that may be received upon the conversion of the Preferred Stock shall be adjusted to the number of shares of Conversion Stock and amount of any such securities, cash or other property of the Corporation which the holders would have owned or have been entitled to receive after the happening of any of the events described above had the Preferred Stock been converted immediately prior to the record date (or, if there is no record date, the effective date) for such event. An adjustment made pursuant to this clause (1) shall become effective upon the effective date of such payment, sub-division, combination or issuance as described above. Any Conversion Stock or other assets to be acquired as a result of such adjustment shall not be issued prior to the effective date of such event. For the purposes of this clause (1), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation.

(2) Issuance of Rights. In case the Corporation shall issue to all holders of its Common Stock rights, options or warrants to subscribe for or purchase, or other securities exchangeable for or convertible into, shares of Common Stock that are not distributed to holders of Preferred Stock (any such rights,

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options, warrants or other securities, collectively, “Rights”) (excluding rights to purchase Common Stock pursuant to a Corporation plan for reinvestment of dividends or interest and excluding any Excluded Stock) at a subscription offering, exercise or conversion price per share (as defined below, the “offering price per share”) which, before deduction of customary discounts and commissions, is lower than the current Market Price per share of Common Stock on the record date of such issuance or grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the number of shares of Conversion Stock issuable upon conversion of the Preferred Stock shall be adjusted by multiplying the number of shares of Conversion Stock issuable upon conversion of the Preferred Stock immediately prior to any adjustment in connection with such issuance or grant by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding (exclusive of any treasury shares) on the record date of issuance or grant of such Rights plus the number of shares which the aggregate offering price (as defined below) of the total number of shares of Common Stock so offered would purchase at the current Market Price per share of Common Stock on the record date, and the numerator of which is the number of shares of Common Stock outstanding plus the aggregate number of shares of Common Stock issuable upon exercise of the rights. Such adjustment shall be made immediately after the record date for the issuance or granting of such Rights. For purposes of this clause, the “offering price per share” of Common Stock shall, in the case of Rights, be determined by dividing (x) the total amount received or receivable by the Corporation in consideration of the issuance of such Rights plus the total consideration payable to the Corporation upon exercise thereof (the “aggregate offering price”), by (y) the total number of shares of Common Stock covered by such Rights.

(3) Dividends and Distributions. In case the Corporation shall distribute to all holders of Common Stock any dividend or other distribution of evidences of its indebtedness or other assets (in each case other than cash dividends and other than as provided in clause (1) above in which the holders of the Preferred Stock are otherwise entitled to share, as provided herein) or Rights, then, in each case, all holders of the Preferred Stock shall be entitled to receive all of the same dividends, distributions or Rights, as the case may be, as the holders of Common Stock, on an as-converted basis, as and when distributed to the holders of Common Stock, at such time, if any, that the holders of the Preferred Stock shall have elected to convert such stock to Common Stock, as provided herein.

(4) Computations. For the purpose of any computation under clauses (1) and (2) above, the current Market Price per share of Common Stock at any date shall be as set forth in (i) the definition of Market Price for the 10 consecutive trading days commencing 20 trading days prior to the earlier to occur of (A) the date as of which the Market Price is to be computed or (B) the last full trading day before the commencement of “ex-dividend” trading in the Common Stock relating to the event giving rise to the adjustment required by clause (1) or (2) or (ii) any other arm’s-length adjustment formula that the Board may use in good faith. In the event the Common Stock is not then publicly traded or if for any other reason the current market price per share cannot be determined pursuant to the foregoing provisions of this clause (4) the current market price per share shall be the Fair Value thereof.

(5) Securities. For the purpose of this Section 2.6, the term “shares of Common Stock” shall mean (i) the class of stock designated as Common Stock, without par value, of the Corporation on the date of filing this Certificate or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

(6) Re-Adjustment. If, at any time after any adjustment to the number of Shares of Conversion Stock issuable upon conversion of the Preferred Stock and the Conversion Price shall have been made pursuant to clause (2) of this Section 2.6, any rights, options, warrants or other securities convertible into or exchangeable for shares of Common Stock shall have expired, or any thereof shall not have been exercised, the Conversion Price and the number of shares of Conversion Stock issuable upon conversion of the Preferred Stock shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (A) the only shares of Common Stock offered were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options or warrants and (B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation for the issuance, sale or grant of all such rights, options or warrants whether or not exercised; provided, further that no such readjustment shall have the effect of increasing the Conversion Price or decreasing the number of shares of Conversion Stock issuable upon conversion of the Preferred Stock by an amount

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(calculated by adjusting such increase or decrease as appropriate to account for all other adjustments pursuant to this Section 2.6 following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants.

(e) Reorganization, Reclassification Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation’s assets to another Person or other transaction which is effected in such a manner that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an “Organic Change”. Prior to the consummation of any Organic Change, the Corporation shall make appropriate provisions to ensure that each of the holders of each share of the Preferred Stock shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Conversion Stock immediately theretofore acquirable and receivable upon the conversion of such holder’s Preferred Stock, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Preferred Stock immediately prior to such Organic Change. In each such case, the Corporation shall also make appropriate provisions to ensure that the provisions of this Section 2.6 hereof shall thereafter be applicable to the Preferred Stock. The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor corporation (if other than the Corporation) resulting from consolidation or merger or the corporation purchasing such assets assumes by written instrument the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire.

(f) Notices.

(1) Immediately upon any adjustment of the number of shares issuable upon conversion of the Preferred Stock, the Corporation shall give written notice thereof to all holders of the Preferred Stock, setting forth in reasonable detail and certifying the calculation of such adjustment.

(2) The Corporation shall give written notice to all holders of the Preferred Stock at least 10 days prior to the date on which the Corporation closes its books or takes a record of determining rights to receive any dividends or distributions. The Corporation shall also give written notice to the holders of the Preferred Stock at least 30 days prior to the date on which Organic Change shall occur.

Section 2.7. Registration of Transfer. The Corporation shall keep a register for the registration of the record holders of the Preferred Stock. Upon the surrender of any certificate representing any shares of Preferred Stock, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation’s expense, provided that the holder will be responsible for any transfer taxes if the certificate is register in a new name) a new certificate or certificates in exchange therefore representing in the aggregate the number of shares of the Preferred Stock, as applicable, represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of shares of the Preferred Stock, as applicable, as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such Preferred Stock represented by the surrendered certificate.

Section 2.8. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder and an undertaking of indemnity from a creditworthy indemnitor shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of the Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such series represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.

Section 2.9. Amendment and Waiver. No amendment, modification or waiver shall be binding or effective with respect to any provision of Section 2.1 through Section 2.10 of these Articles of Incorporation without

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the prior written consent of a Majority in Interest of each of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock outstanding at the time such action is taken.

Section 2.10. Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier or telecopy service, charges prepaid, and shall be deemed to have been given when so mailed or sent (a) to the Corporation, at its principal executive offices and (b) to any stockholder, at such holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder).

Section 3. Additional Preferred Stock. This Section 3 sets forth the designation, preferences, limitations and relative rights of a series of Preferred Stock of the corporation as determined by the board of directors of the corporation pursuant to its authority under Oregon Revised Statutes 60.134 and Section 2 of Article IV of these Articles of Incorporation.

Section 3.1. Designation and Amount. The shares of such series shall be designated as “Series R Participating Preferred Stock” and the number of shares constituting such series shall be 125,000.

Section 3.2. Dividends and Distributions

(a) The holders of shares of Series R Participating Preferred Stock shall be entitled to receive, when and as declared by the board of directors, out of funds legally available for the purpose, dividends in an amount per share equal to 1,000 (the “Adjustment Number”) multiplied by the aggregate per share amount of all cash dividends, and the Adjustment Number multiplied by the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in Common Stock or a subdivision of the outstanding Common Stock (by reclassification or otherwise), declared on the Common Stock, without par value, of the corporation (the “Common Stock”) after the first issuance of any share or fraction of a share of Series R Participating Preferred Stock.

(b) The corporation shall declare a dividend or distribution on the Series R Participating Preferred Stock as provided in subparagraph 3.2(a) at the same time that it declares a dividend or distribution on the Common Stock (other than a dividend payable in Common Stock).

(c) Dividends shall not be cumulative. Unpaid dividends shall not bear interest. Dividends paid on the shares of Series R Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.

Section 3.3. Voting Rights. The holders of Series R Participating Preferred Stock shall have the following voting rights:

(a) Each share of Series R Participating Preferred Stock shall entitle the holder thereof to the number of votes equal to the Adjustment Number then in effect on all matters submitted to a vote of the shareholders of the corporation.

(b) Except as otherwise provided herein or by law, the holders of Series R Participating Preferred Stock and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the corporation.

Section 3.4. Certain Restrictions

(a) Whenever dividends or distributions payable on the Series R Participating Preferred Stock as provided in Section 3.2 have not been declared or paid for any fiscal year, until all such dividends and distributions for such fiscal year on Series R Participating Preferred Stock outstanding shall have been declared and paid in full, the corporation shall not in such fiscal year

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(1) declare or pay dividends on or make any other distributions on any shares of stock ranking junior or on a parity (either as to dividends or upon liquidation, dissolution or winding up) to the Series R Participating Preferred Stock except dividends paid ratably on the Series R Participating Preferred Stock and all such parity stock on which dividends are payable in proportion to the total amounts to which the holders of all such shares are then entitled and dividends or distributions payable in Common Stock;

(2) purchase or otherwise acquire for consideration any shares of Series R Participating Preferred Stock or any shares of stock ranking on a parity with the Series R Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the board of directors) to all holders of such shares upon such terms as the board of directors, after consideration of the respective dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(b) The corporation shall not permit any subsidiary of the corporation to purchase or otherwise acquire for consideration any shares of stock of the corporation unless the corporation could, under subparagraph 3.4(a), purchase or otherwise acquire such shares at such time and in such manner.

Section 3.5 Restriction on Issuance of Stock; Reacquired Stock. The corporation shall not issue any shares of Series R Participating Preferred Stock except upon exercise of rights (the “Rights”) issued pursuant to the Rights Agreement dated as of June 25, 2002, between the corporation and American Stock Transfer & Trust Company (the “Rights Agreement”), a copy of which is on file with the secretary of the corporation at its principal executive office and shall be made available to shareholders of record without charge upon written request. Any shares of Series R Participating Preferred Stock purchased or otherwise acquired by the corporation in any manner whatsoever may be restored to the status of authorized but unissued shares after the acquisition thereof. All such shares shall upon any such restoration become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by the board of directors, subject to the conditions and restrictions on issuance set forth herein.

Section 3.6 Liquidation, Dissolution or Winding Up

(a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series R Participating Preferred Stock unless, prior thereto, the holders of shares of Series R Participating Preferred Stock shall have received the Adjustment Number multiplied by the per share amount to be distributed to holders of Common Stock, plus an amount equal to declared and unpaid dividends and distributions thereon to the date of such payment (the “Series R Liquidation Preference”). Following the payment of the full amount of the Series R Liquidation Preference, no additional distributions shall be made to the holders of shares of Series R Participating Preferred Stock.

(b) In the event that there are not sufficient assets available to permit payment in full of the Series R Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank senior to or on a parity with the Series R Participating Preferred Stock, then assets shall be distributed first to holders of any series of Preferred Stock ranking senior to the Series R Participating Preferred Stock to the extent of their liquidation preferences and such remaining assets shall be distributed ratably to the holders of Series R Participating Preferred Stock and such parity shares in proportion to their respective liquidation preferences.

Section 3.7 Consolidation, Merger, etc. In case the corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series R Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number multiplied by the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.

Section 3.8 Anti-Dilution, Adjustments to Adjustment Number. In the event the corporation shall at any time after July 19, 2002 (the “Rights Declaration Date”) (a) declare any dividend on Common Stock payable in shares of Common Stock, (b) subdivide the outstanding shares of Common Stock, or (c) combine the outstanding

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shares of Common Stock into a smaller number of shares, then in each such case the Adjustment Number for all purpose of this Section 3 of Article IV shall be adjusted by multiplying the Adjustment Number then in effect by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the corporation shall at any time after the Rights Declaration Date, fix a record date for the issuance of rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Stock or securities convertible into Common Stock at a price per share of Common Stock (or having a conversion price per share, if a security convertible into Common Stock) less than the then Current Per Share Market Price (as defined in Section 11(d) of the Rights Agreement) of the Common Stock on such record date, then in each such case the Adjustment Number for all purposes of this Section 3 of Article IV shall be adjusted by multiplying the Adjustment Number then in effect by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible) and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price (as defined in Section 11(d) of the Rights Agreement). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors. Shares of Common Stock owned by or held for the account of the corporation shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed. In the event that such rights, options or warrants are not so issued, the Adjustment Number shall be readjusted as if such record date had not been fixed; and to the extent such rights, options or warrants are issued but not exercised prior to their expiration, the Adjustment Number shall be readjusted to be the number which would have resulted from the adjustment provided for in this paragraph 3.8 if only the rights, options or warrants that were exercised had been issued.

Section 3.9 No Redemption. Shares of the Series R Participating Preferred Stock shall not be redeemable at the option of the corporation or any holder thereof. Notwithstanding the foregoing sentence, the corporation may acquire Series R Participating Preferred Stock in any other manner permitted by law.

Section 3.10 Amendment. Subsequent to the Distribution Date (as defined in the Rights Agreement) these articles of incorporation shall not be further amended in any manner which would materially alter or change the preferences, limitations and relative rights of the Series R Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series R Participating Preferred Stock, voting separately as a class.

Section 3.11 Fractional Shares. Shares of Series R Participating Preferred Stock may be issued in fractions of a share in integral multiples of one one-thousandth of a share, which shall entitle the holder, in proportion to such holders’ fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series R Participating Preferred Stock.

Section 4. Additional Preferred Stock. This Section 4 sets forth the designation, preferences, limitations and relative rights of a series of Preferred Stock of the corporation as determined by the board of directors of the corporation pursuant to its authority under Oregon Revised Statutes 60.134 and Section 2 of Article IV of these Articles of Incorporation.

4.1 Designation and Amount.

(a) Designation. The shares of such series shall be designated as “Series D Convertible Preferred Stock,” no par value (hereinafter referred to as “Series D Preferred”) and the number of shares constituting all of the Series D Preferred shall be 2,086,957 shares. Any shares of Series D Preferred Stock that are redeemed by the Corporation and retired and any shares of Series D Preferred Stock that are converted in accordance with Section 4 shall be restored to the status of authorized, unissued, and undesignated shares of the Corporation’s class of Preferred Stock and shall not be subject to issuance, and may not thereafter be outstanding, as shares of Series D Preferred Stock.

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(b) Stated Value. Each share of Series D Preferred Stock shall have a stated value equal to $1.15 (as adjusted for any stock dividends, combinations, splits, recapitalizations, and the like)(the “Series D Stated Value”).

4.2. Dividends. The holder of each share of Series D Preferred Stock shall be entitled to receive, pro rata among such holders and on a pari passu basis with the holders of Common Stock, as if the Series D Preferred Stock had been converted into Common Stock pursuant to the provisions of Section 3.4 hereof immediately prior to the record date with respect to such dividend, when, as, and if declared by the Board of Directors of the Corporation out of funds legally available for declaration and payment of dividends, cash dividends at the same rate and in the same amount per share as any and all dividends declared and paid upon the then outstanding shares of the Common Stock of the Corporation.

4.3. Liquidation Preference.

(a) Preferences. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation (a “Liquidation”), subject to the rights of any series of Preferred Stock hereafter authorized, issued, or outstanding, the holders of Series D Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Corporation available for distribution to its shareholders (if any), before any payment shall be made in respect of the Common Stock or any series of Preferred Stock or other equity securities of the Corporation with rights junior to the Series D Preferred Stock with respect to liquidation preference, and pro rata based on the respective liquidation preferences with holders of Preferred Stock with a liquidation preference pari passu with the Series D Preferred Stock, an amount per share of Series D Preferred Stock equal to the Series D Stated Value, plus all accrued but unpaid dividends thereon to the date fixed for distribution (the “Series D Liquidation Preference”).

Corporation available for distribution to its shareholders shall be insufficient to pay the holders of Series D Preferred Stock, the full amount to which they shall be entitled pursuant to this Section 4.3(a), then all the assets so available for distribution to the Corporation’s shareholders shall be distributed ratably first to the holders of the Series D Preferred Stock in proportion to the aggregate amounts that would be payable to such holders if the assets of the Corporation were sufficient to pay the amount to which they were entitled pursuant to this Section 4.3(a).

(b) Remaining Assets. Upon completion of the distributions required by Section 4.3(a), and subject to any other distributions that may be required with respect to any other series of Preferred Stock hereafter authorized, issued, or outstanding, the remaining assets and funds of the Corporation available for distribution to its shareholders, if any, shall be distributed among the holders of the holders of Common Stock.

(c) Deemed Liquidation. For purposes of this Section 4.3(c), a Liquidation shall be deemed to be occasioned by, or to include, (a) the acquisition of the Corporation by another person or entity or group of affiliated persons or entities by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, or consolidation but excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation) that results in the transfer of more than 50% of the outstanding voting power of the Corporation (an “Acquisition”); or (b) a sale, lease, or other transfer of all or substantially all of the assets of the Corporation (an “Asset Transfer”); provided, however, that if the outstanding shares of Series D Preferred Stock in the aggregate represent more than 50% of the voting power of the Corporation, a transfer or sale of more than 50% of the outstanding voting power of the Corporation involving solely a transfer or sale of Series D Preferred Stock shall not be considered to be an Acquisition for the purposes of this Section and shall not result in a deemed Liquidation. The occurrence of an Acquisition or Asset Transfer shall entitle the holders of Series D Preferred Stock to receive at the closing in cash, securities, or other property (valued as provided in Section 4.3(d) below) the respective amounts as specified in Section 4.3(a) and 4.3(b) in liquidation and redemption of their Series D Preferred Stock, unless the holders of a majority of the outstanding shares of Series D Preferred Stock, voting separately as a class, affirmatively vote that such transaction shall not be deemed to be a Liquidation.

(d) Valuation of Non-Cash Assets. Whenever the distribution provided for in this Section 4.3 shall be payable in securities or property other than cash, its value will be determined as follows:

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(1) Securities not subject to investment letter or other similar restrictions on free marketability covered by (2) below:

(A) If traded on a securities exchange or through the Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

(B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing; and

(C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors.

(2) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (1)(A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined by this Corporation and the holders of not less than a majority of the voting power of all then outstanding shares of Series D Preferred Stock.

(e) Liquidation Notice. The Corporation shall give written notice to each holder of record of Series D Preferred Stock at their respective addresses as the same shall appear on the stock records of the Corporation of any proposed transaction described in paragraph (3) that would constitute a Liquidation not later than 20 days prior to the shareholders’ meeting called to approve such transaction or 20 days prior to the closing of such transaction, whichever is earlier, and shall notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the proposed transaction and the provisions of this Section 4.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first written notice provided for herein or sooner than 10 days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of not less than a majority of the then outstanding Series D Preferred Stock. Prior to the closing of a transaction described in Section 4.3(c) that would constitute a Liquidation, the Corporation shall either (a) make all cash distributions that the Corporation is required to make to the holders of Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock, and Series R Preferred Stock, pursuant to the first or second paragraphs of this Section 4.3, (b) set aside sufficient funds from which the cash distributions to the holders of Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock, and Series R Preferred Stock can be made, or (c) establish an escrow or other similar arrangement with a third party pursuant to which the proceeds payable to the Corporation from an Acquisition or Asset Transfer will be used to make the liquidating payments to the holders of Series D Preferred Stock immediately after the consummation of such transaction.

4.4. Conversion.

(a) Right to Convert. Each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time after the issuance of such share, into such number of shares of Common Stock equal to the product obtained by multiplying the Conversion Rate then in effect by the number of shares of Series D Preferred Stock being converted. The “Conversion Rate” in effect at any time for conversion of the Series D Preferred Stock shall be the quotient obtained by dividing (a) the Series D Stated Value by (b) the Conversion Price. The “Conversion Price” shall initially be $1.15. The Conversion Price shall be adjusted from time to time in accordance with Section 4.4(f).

(b) Exercise of Conversion Right. Each holder of Series D Preferred Stock desiring to convert any or all of such shares into shares of Common Stock pursuant to Section 4.4(a) shall surrender the certificate or certificates representing the shares of Series D Preferred Stock being converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto), at the principal executive office of the Corporation, the offices of the transfer agent for the Series D Preferred Stock, or such office or offices

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in the continental United States of an agent for conversion as may from time to time be designated by notice to the holders of the Series D Preferred Stock by the Corporation or the transfer agent for the Series D Preferred Stock, accompanied by written notice of conversion. Such notice of conversion shall specify (a) the number of shares of Series D Preferred Stock to be converted, and (b) the address to which such holder wishes delivery to be made of such new certificates to be issued upon such conversion. Upon surrender of a certificate representing a share or shares of Series D Preferred Stock for conversion pursuant to Section 4.4(a), the Corporation shall, within five (5) business days of such surrender, issue, and send (with receipt to be acknowledged) to or upon the written order of such holder, at the address designated by such holder, a certificate or certificates for the number of validly issued, fully paid, and non-assessable shares of Common Stock to which such holder shall be entitled upon conversion and cash with respect to any fractional interest in a share of Common Stock as provided in Section 4.4(d). In the event that there shall have been surrendered a certificate or certificates representing shares of Series D Preferred Stock, only part of which are to be converted, the Corporation shall issue and deliver to or upon the written order of such holder a new certificate or certificates representing the number of shares of Series D Preferred Stock which shall not have been converted. Upon the occurrence of any automatic conversion of the outstanding Series D Preferred Stock, the holders of such stock shall surrender the certificates representing such shares at the principal executive office of Corporation, the offices of the transfer agent for the Series D Preferred Stock, or such other place as may be designated by the Corporation. Thereupon, there shall be issued and delivered to each such holder, promptly at such office and in the name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which such Series D Preferred Stock was convertible on the date on which such automatic conversion occurred and cash in respect of any fraction of a share as provided in Section 4.4(d).

(c) Effective Date of Conversion. The issuance by the Corporation of shares of Common Stock pursuant to Section 4.4(a) shall be effective as of the earlier of (a) the delivery to such holder of the certificates representing the shares of Common Stock issued upon conversion thereof, or (b) immediately prior to the close of business on the day of surrender of the certificate or certificates for the shares of Series D Preferred Stock to be converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto) as provided in these Articles of Amendment. On and after the effective day of the conversion, the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock. All accrued and unpaid dividends on shares of Series D Preferred Stock surrendered for conversion shall be paid in full as of the effective date of conversion. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act the conversion may, at the option of any holder tendering Series D Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive Common Stock upon conversion of such Series D Preferred Stock shall not be deemed to have converted such Series D Preferred Stock until immediately prior to the closing of such sale of securities.

(d) No Fractional Shares. The Corporation shall not be obligated to issue and deliver any fractional share of Common Stock upon any conversion of shares of Series D Preferred Stock, but in lieu thereof shall pay to the holder converting such Series D Preferred Stock an amount of cash based on the fair value of a share of Common Stock as of the time when those entitled to receive those fractions are determined.

(e) Common Stock Available. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of shares of Series D Preferred Stock as herein provided, free from any preemptive rights, such number of shares of Common Stock as shall be issuable upon the conversion of all the shares of Series D Preferred Stock then outstanding and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series D Preferred Stock, in addition to such other remedies as shall be available to the holders of Series D Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in reasonable best efforts to obtain the requisite shareholder approval of any necessary amendment to the Corporation’s Articles of Incorporation.

(f) Anti-dilution Adjustments.

(1) Reorganizations, Mergers, Consolidations, Acquisitions, and Asset Transfers. If, prior to the conversion of all of the Series D Preferred Stock, there shall be (i) any merger, consolidation, exchange

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of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Corporation shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Corporation or another entity, (ii) any dividend or other distribution of cash, other assets, or of notes or other indebtedness of the Corporation (in each case other than regular cash dividends and other than as provided in Section 4.4(f)(2) below in which the holders of Series D Preferred Stock are otherwise entitled to share, as provided herein), any other securities of the Corporation (except Common Stock), or Rights (as hereinafter defined) to the holders of its Common Stock, or (iii) any Acquisition or Asset Transfer that is not deemed to be a liquidation pursuant to Section 4.3(c) hereof, then the holders of Series D Preferred Stock shall thereafter have the right to receive upon conversion of Series D Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of shares of Common Stock, immediately theretofore issuable upon conversion, such cash, stock, securities, Rights, and/or other assets that the holder would have been entitled to receive in such transaction had the Series D Preferred Stock been converted immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holders of the Series D Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Rate and the number of shares issuable upon conversion of the Series D Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the conversion thereof. In case of any distribution of any security (including rights or warrants to subscribe for any such securities) of the Corporation (except Common Stock and Rights included in Section 4.4(f)(3) below) to the holders of its Common Stock where the nature of that security is such that the adjustment provisions in this Section 4.4(f)(1) would not properly grant to the holder of Series D Preferred Stock rights intended to be granted hereby, then in each such case the Conversion Price in effect thereafter shall be determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction the numerator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price on the record date mentioned below, less the fair market value (as determined in good faith by the Board of Directors) of the securities distributed by the Corporation and the denominator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price; such adjustment shall become effective as of the record date for the determination of shareholders entitled to receive such distribution. The subdivision or combination of shares of Common Stock issuable upon conversion of shares of Series D Preferred Stock at any time outstanding into a greater or lesser number of shares of Common Stock shall not be deemed to be a reclassification of the Common Stock of the Corporation for the purposes of this Section 4.4(f)(1).

The Corporation shall not effect any transaction described in this Section 4 4(d)(1) unless (i) it first gives at least 20 days prior notice of such merger, consolidation, exchange of shares, recapitalization, reorganization, distribution, Acquisition, Asset Transfer, or other similar event (during which time the holders of the Series D Preferred Stock shall be entitled to convert their Series D Preferred Stock into shares of Common Stock to the extent permitted hereby), and (ii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the obligation of the Corporation under the Articles of Incorporation, including the obligation of this Section 4.4(f)(1).

(2) Adjustment for Stock Splits, Dividends, and Combinations. If at any time or from time to time after the date of the first issuance of Series D Preferred Stock, the Corporation shall subdivide or split-up the outstanding shares of Common Stock, or shall declare a dividend or other distribution on its outstanding Common Stock payable in shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock that are not distributed to the holders of Series D Preferred Stock (“Common Stock Equivalents”), without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), the Conversion Price in effect immediately prior to such subdivision or the declaration of such dividend shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series D Preferred Stock shall be increased in proportion to the increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time, and in case the Corporation shall at any time combine the outstanding shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall be proportionately increased, effective at the close of business on the date of such subdivision, dividend, or combination, as the case may be

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(3) Issuance of Rights. In case the Corporation shall issue to all holders of its Common Stock rights, options, or warrants to subscribe for or purchase, or other securities exchangeable for or convertible into, shares of Common Stock that are not distributed to holders of Series D Preferred Stock (any such rights, options, warrants, or other securities, collectively, “Rights”) (excluding rights to purchase Common Stock pursuant to a Corporation plan for reinvestment of dividends or interest and excluding any Excluded Stock) at a subscription offering, exercise, or conversion price per share (as defined below, the “offering price per share”) which, before deduction of customary discounts and commissions, is lower than the Current Marker Price per share of Common Stock on the record date of such issuance or grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to any adjustment in connection with such issuance or grant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the record date of issuance or grant of such Rights plus the number of shares that the aggregate offering price (as defined below) of the total number of shares of Common Stock so offered would purchase at the Current Market Price per share of Common Stock on the record date, and the denominator of which is the number of shares of Common Stock outstanding plus the aggregate number of shares of Common Stock issuable upon exercise of the Rights. Such adjustments shall be made immediately after the record date for the issuance or granting of such Rights. For purposes of this clause, the “offering price per share” of Common Stock shall, in the case of Rights, be determined by dividing (x) the total amount received or receivable by the Corporation upon exercise thereof (the “aggregate offering price”), by (y) the total number of shares of Common Stock covered by such Rights.

(4) Computations. For the purpose of any computation under Section 4.4(f)(3) above, the “Current Market Price” per share of Common Stock at any date shall mean the average of the closing price of the Common Stock on all securities exchanges (including the NASDAQ Stock Market) on which it may at the time be listed, or, if there have been no sales on any such exchange on any day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on the NASDAQ Stock Market as of 4:00 p.m., New York time, or if on any day such security is not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest ask prices on such day in the domestic over-the-counter market as reported by the OTC Bulletin Board, Pink Sheets LLC, or any similar successor organization, in each case for (i) the 10 consecutive trading days commencing 20 trading days prior to the earlier to occur of (A) the date as of which the Current Market Price is to be computed or (B) the last full trading day before the commencement of “ex-dividend” trading in the Common Stock relating to the event giving rise to the adjustment required by Section 4.4(f)(3) or (ii) any other arm’s-length adjustment formula that the Board of Directors may use in good faith. In the event the Common Stock is not then publicly traded or if for any other reason the Current Market Price per share cannot be determined pursuant to the foregoing provisions of this Section 4.4(f)(4), the Current Market Price per share shall be the fair market value of the Common Stock as reasonably and in good faith determined by the Board of Directors.

(5) Securities. For the purpose of this Section 4.4, the term “shares of Common Stock” shall mean (i) the class of stock designated as Common Stock, without par value, of the Corporation on the date of filing these Articles of Amendment or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

(6) Re-Adjustment. If, at any time after any adjustment to the number of Shares of Common Stock issuable upon conversion of the Series D Preferred Stock and the Conversion Price shall have been made pursuant to Section 4.4(f)(3) any rights, options, warrants, or other securities convertible into or exchangeable for shares of Common Stock shall have expired, or any thereof shall not have been exercised, the Conversion Price and the number of shares of Conversion Stock issuable upon conversion of the Preferred Stock shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case me be) as if (i) the only shares of Common Stock offered were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options or warrants and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation for the issuance, sale or grant of all such rights, options or warrants whether or not exercised; provided, further that no such readjustment shall have the effect of increasing the Conversion Price or decreasing the number of shares of Conversion Stock issuable upon conversion of the Series D Preferred Stock by an amount (calculated by adjusting such increase or decrease as appropriate to account for all other adjustments pursuant to this Section 4.4(f)

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following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants.

(7) Miscellaneous

(A) All calculations under this Section 4.4(f) shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be.

(B) No adjustment in the Series D Conversion Prices need be made if such adjustment would result in a change in such Series D Conversion Price of less than $0.01. Any adjustment of less than $0.01, which is not made, shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in such Series D Conversion Price.

(C) In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series D Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(g) Good Faith. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, share exchange, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of Section 4.4(f) and in the taking of all such actions as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series D Preferred Stock against impairment.

(h) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series D Conversion Price pursuant to Section 4.4(f), the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the holders of Series D Preferred Stock a certificate signed by the Chief Financial Officer (or an officer holding a similar position) of the Corporation setting forth (a) such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and (b) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of his shares. The Corporation shall, upon the written request at any time of any holder of Series D Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the Series D Conversion Price at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of such holder’s Series D Preferred Stock.

4.5. Voting Rights.

(a) General Voting Rights. Except as otherwise required by applicable law or the Articles of Incorporation, each holder of Series D Preferred Stock shall have the right to one vote for each share of Common Stock into which Series D Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together with the holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote and shall vote as a series where required by law or as provided below. Fractional voting shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series D Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). In addition to any rights granted to a holder of shares of Series D Preferred Stock pursuant to the Series D Certificate, shares of Series D Preferred Stock shall be entitled to vote as a class or series, separate and apart from any other series of

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Preferred Stock or any holders of shares of Common Stock, on any matter as to which class voting (or series voting, as applicable) is required under applicable law. Notwithstanding anything in this Section 4 to the contrary, solely for purposes of determining the number of shares of Common Stock into which each share of Series D Preferred Stock could then be converted for purposes of determining voting rights under this Section 4.5(a), the Conversion Price shall initially be the greater of (i) $1.15 or (ii) the closing bid price of the Common Stock on the Nasdaq SmallCap Market on the trading day immediately prior to the date that the share of Series D Preferred Stock is issued, as such value may be adjusted pursuant to Section 4.4(f).

(b) Protective Provisions. So long as at least 25% of the originally issued shares of Series D Preferred Stock (subject to adjustment for any stock splits, stock dividends, combinations, recapitalizations, and the like) are outstanding as a single class, and except as otherwise mandated by applicable law or the terms of the Articles of Incorporation, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of not less than a majority of the then outstanding Series D Preferred Stock, voting as a class:

(1) take any action (by reclassification, merger, consolidation, reorganization, or otherwise) that adversely affects the rights, preferences, and privileges of the holders of the Series D Preferred Stock;

(2) amend, alter, or repeal any provision of, or add any provision to the Articles of Incorporation and/or the Articles of Amendment (whether by reclassification, merger, consolidation, reorganization, or otherwise) or bylaws of the Corporation to change the rights, powers, or preferences of the Series D Preferred Stock;

(3) declare or pay dividends on shares of Common Stock or Preferred Stock that is junior to the Series D Preferred Stock, except as provided in Section 4.2 and except with respect to the Series R Preferred Stock;

(4) create any new series or class of Preferred Stock or other security having a preference or priority as to dividends or upon liquidation senior or pari passu with that of the Series D Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(5) reclassify any class or series of Preferred Stock into shares with a preference or priority as to dividends or assets superior to or on a parity with that of the Series D Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(6) apply any of its assets to the redemption or acquisition of shares of Common Stock or Preferred Stock, which is redeemable by its terms, junior to the Series D Preferred Stock, except pursuant to any agreement granting the Corporation a right of first refusal or similar rights, and except in connection with purchases at fair market value from employees, advisors, officers, directors, consultants, and service providers of the Corporation upon termination of employment or service;

(7) increase or decrease the number of authorized shares of any series of Preferred Stock or Common Stock of the Corporation;

(8) agree to an Acquisition or Asset Transfer;

(9) materially change the nature of the Corporation’s business; or

(10) liquidate, dissolve, or wind up the affairs of the Corporation.

4.6. Miscellaneous.

(a) Transfer and Documentary Taxes. The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series D

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Preferred Stock or shares of Common Stock or other securities issued on account of Series D Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of shares of Series D Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series D Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person with respect to any such shares or securities other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment described in this sentence unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(b) Delivery of Certificates. In the event that the holder of shares of Series D Preferred Stock shall not by written notice designate the address to which the certificate or certificates representing shares of Common Stock to be issued upon conversion of such shares should be sent, the Corporation shall be entitled to send the certificate or certificates representing such shares to the address of such holder shown on the records of the Corporation or any transfer agent for the Series D Preferred Stock.

(c) Transfer Agents. The Corporation may appoint, and from time to time discharge and change, a transfer agent of the Series D Preferred Stock. Upon any such appointment or discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series D Preferred Stock.

(d) Conversion Agents. The Corporation may appoint, and from time to time may replace, a conversion agent for the Series D Preferred Stock. Upon any such replacement of the conversion agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series D Preferred Stock.

(e) Transfer of Stock. The Series D Preferred Stock shall be transferable by the holders, provided that such transfer is made in compliance with applicable federal and state securities laws and any applicable agreements between the Corporation and the holders of Series D Preferred Stock.

Section 5.1 Designation and Amount.

(a) Designation. The shares of such series shall be designated as “Series E Convertible Preferred Stock,” no par value (hereinafter referred to as “Series E Preferred”), and the number of shares constituting all of the Series E Preferred shall be 4,000,000 shares. Any shares of Series E Preferred Stock that are redeemed by the Corporation and retired and any shares of Series E Preferred Stock that are converted in accordance with Section 5.4 shall be restored to the status of authorized, unissued, and undesignated shares of the Corporation’s class of Preferred Stock and shall not be subject to issuance, and may not thereafter be outstanding, as shares of Series E Preferred Stock.

(b) Stated Value. Each share of Series E Preferred Stock shall have a stated value equal to $1.37 (as adjusted for any stock dividends, combinations, splits, recapitalizations, and the like) (the “Series E Stated Value”).

5.2. Dividends. Subject to the rights of any series of Preferred Stock hereafter authorized, issued or outstanding, and subject to Section 5.3(a) below, the holders of shares of Series E Preferred stock shall receive cumulative dividends, pro rata among such holders, prior to and in preference to any dividend on the Series D Preferred Stock or Common Stock during any fiscal year, at the per annum rate of 8% of the Series E Stated Value, compounded annually, during the two years following the initial issuance of shares of Series E Preferred Stock, and following such two year period such dividends shall terminate; provided, however, that any such dividend shall accrue and be payable, subject to Section 5.3(a) hereof, only in additional shares of Series E Preferred Stock (the “PIK Dividends”), each share of which shall be valued at the Series E Stated Value, and such additional shares shall be entitled to all rights and privileges of the Series E Preferred Stock; provided, further, that such dividends shall only be paid in connection with (though prior to) a Liquidation under Section 5.3 (or a transaction that shall constitute a Liquidation as provided in Section 5.3(c)) or conversion of the Series E Preferred Stock pursuant to

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Section 5.4. Dividends accrued and payable under this Section 5.2 and the value of each such share received shall be subject to equitable adjustment whenever there shall occur a stock split, stock dividend, combination, recapitalization, reclassification or other similar event involving a change in the Series E Preferred Stock. The holder of each share of Series E Preferred Stock shall be entitled to receive, pro rata among such holders and on a pari passu basis with the holders of Common Stock, as if the Series E Preferred Stock had been converted into Common Stock pursuant to the provisions of Section 5.4 hereof immediately prior to the record date with respect to such dividend, when, as, and if declared by the Board of Directors of the Corporation out of funds legally available for declaration and payment of dividends, cash dividends at the same rate and in the same amount per share as any and all dividends declared and paid upon the then outstanding shares of the Common Stock of the Corporation.

The Corporation shall at all times take all actions as are reasonably necessary to ensure that a sufficient number of shares of Series E Preferred Stock are authorized and reserved for issuance to satisfy all stock dividends to be accrued or paid pursuant to the first paragraph of this Section 5.2.

5.3. Liquidation Preference.

(a) Preferences. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation (a “Liquidation”), subject to the rights of any series of Preferred Stock hereafter authorized, issued, or outstanding, the holders of Series E Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Corporation available for distribution to its shareholders (if any), before any payment shall be made in respect of the Common Stock, the Series D Preferred Stock or any other series of Preferred Stock or other equity securities of the Corporation with rights junior to the Series E Preferred Stock with respect to liquidation preference, and pro rata based on the respective liquidation preferences with holders of Preferred Stock with a liquidation preference pari passu with the Series E Preferred Stock, an amount per share of Series E Preferred Stock equal to the Series E Stated Value, plus all accrued but unpaid dividends thereon to the date fixed for distribution, including specifically and without limitation, the PIK Dividends to the extent not previously issued (the “Series E Liquidation Preference”). The Corporation may, with the prior written consent of the holders of a majority of the Series E Preferred Stock then outstanding, prior to a Liquidation, declare for payment and pay in cash all dividends with respect to the Series E Preferred Stock that are accrued and unpaid as of immediately prior to the Liquidation, provided that there are assets of the Corporation legally available therefor (the “Cash Alternative”). For the avoidance of doubt and notwithstanding anything in this Section 5.2 or Section 5.3 to the contrary, holders of Series E Preferred Stock have the right to convert pursuant to the terms of Section 5.4 below all or any portion of such Series E Preferred Stock (including any shares of Series E Preferred Stock paid as dividends) into shares of Common Stock prior to any Liquidation.

If upon, liquidation, dissolution, or winding up of the Corporation, the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of Series E Preferred Stock the full amount to which they shall be entitled pursuant to this Section 5.3(a), then all the assets so available for distribution to the Corporation’s shareholders shall be distributed ratably first to the holders of the Series E Preferred Stock in proportion to the aggregate amounts that would be payable to such holders if the assets of the Corporation were sufficient to pay the amount to which they were entitled pursuant to this Section 5.3(a).

(b) Remaining Assets. Upon completion of the distributions required by Section 5.3(a) and by Section 4.3(a) with respect to the Series D Preferred Stock, and subject to any other distributions that may be required with respect to any other series of Preferred Stock hereafter authorized, issued, or outstanding, the remaining assets and funds of the Corporation available for distribution to its shareholders, if any, shall be distributed among the holders of the holders of Common Stock.

(c) Deemed Liquidation. For purposes of this Section 5.3, a Liquidation shall be deemed to be occasioned by, or to include, (a) the acquisition of the Corporation by another person or entity or group of affiliated persons or entities by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, or consolidation but excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation) that results in the transfer of more than 50% of the outstanding voting power of the Corporation (an “Acquisition”); or (b) a sale, lease, or other transfer of all or substantially all of the assets of the Corporation (an “Asset Transfer”); provided, however, that if the outstanding shares of Series E Preferred Stock (excluding accrued but unpaid dividends) in the aggregate represent more than 50% of the voting

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power of the Corporation, a transfer or sale of more than 50% of the outstanding voting power of the Corporation involving solely a transfer or sale of Series E Preferred Stock shall not be considered to be an Acquisition for the purposes of this Section and shall not result in a deemed Liquidation. The occurrence of an Acquisition or Asset Transfer shall entitle the holders of Series E Preferred Stock to receive at the closing in cash, securities, or other property (valued as provided in Section 5.3(d) below) the respective amounts as specified in Section 5.3(a) in liquidation and redemption of their Series E Preferred Stock, unless the holders of a majority of the outstanding shares of Series E Preferred Stock, voting separately as a class, affirmatively vote that such transaction shall not be deemed to be a Liquidation.

(d) Valuation of Non-Cash Assets. Whenever the distribution provided for in this Section 5.3 shall be payable in securities or property other than cash, its value will be determined as follows:

(1) Securities not subject to investment letter or other similar restrictions on free marketability covered by (2) below:

(A) If traded on a securities exchange or through the Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

(B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing; and

(C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors.

(2) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (1)(A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined by this Corporation and the holders of not less than a majority of the voting power of all then outstanding shares of Series E Preferred Stock (excluding accrued but unpaid dividends).

(e) Liquidation Notice. The Corporation shall give written notice to each holder of record of Series E Preferred Stock at their respective addresses as the same shall appear on the stock records of the Corporation of any proposed transaction described in Section 5.3(c) that would constitute a Liquidation not later than 20 days prior to the shareholders’ meeting called to approve such transaction or 20 days prior to the closing of such transaction, whichever is earlier, and shall notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the proposed transaction and the provisions of this Section 5.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first written notice provided for herein or sooner than 10 days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of not less than a majority of the then outstanding Series E Preferred Stock (excluding accrued but unpaid dividends). Prior to the closing of a transaction described in Section 5.3(c) that would constitute a Liquidation, the Corporation shall issue all PIK Dividends unless the Cash Alternative is approved pursuant to Section 5.3(a) and shall either (a) make all cash distributions that the Corporation is required to make to the holders of Series E Preferred Stock, pursuant to this Section 5.3(a), (b) set aside sufficient funds from which the cash distributions to the holders of Series E Preferred Stock, can be made, or (c) establish an escrow or other similar arrangement with a third party pursuant to which the proceeds payable to the Corporation from an Acquisition or Asset Transfer will be used to make the liquidating payments to the holders of Series E Preferred Stock immediately after the consummation of such transaction.

5.4. Conversion.

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(a) Right to Convert. Each share of Series E Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time after the issuance of such share, into such number of shares of Common Stock equal to the product obtained by multiplying the Conversion Rate (as hereinafter defined) then in effect by the number of shares of Series E Preferred Stock being converted. In connection with any conversion of shares of Series E Preferred Stock pursuant to this Section 5.4(a), the holder of the shares being converted may elect to convert all PIK Dividends accrued (but not issued). The “Conversion Rate” in effect at any time for conversion of the Series E Preferred Stock shall be the quotient obtained by dividing (a) the Series E Stated Value by (b) the Conversion Price. The “Conversion Price” shall initially be $1.37. The Conversion Price shall be adjusted from time to time in accordance with Section 5.4(f).

(b) Exercise of Conversion Right. Each holder of Series E Preferred Stock desiring to convert any or all of such shares into shares of Common Stock pursuant to Section 5.4(a) shall surrender the certificate or certificates representing the shares of Series E Preferred Stock being converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto), at the principal executive office of the Corporation, the offices of the transfer agent for the Series E Preferred Stock, or such office or offices in the continental United States of an agent for conversion as may from time to time be designated by notice to the holders of the Series E Preferred Stock by the Corporation or the transfer agent for the Series E Preferred Stock, accompanied by written notice of conversion. Such notice of conversion shall specify (a) the number of shares of Series E Preferred Stock to be converted, and (b) the address to which such holder wishes delivery to be made of such new certificates to be issued upon such conversion. Upon surrender of a certificate representing a share or shares of Series E Preferred Stock for conversion pursuant to Section 5.4(a), the Corporation shall, within five (5) business days of such surrender, issue, and send (with receipt to be acknowledged) to or upon the written order of such holder, at the address designated by such holder, a certificate or certificates for the number of validly issued, fully paid, and non-assessable shares of Common Stock to which such holder shall be entitled upon conversion and cash with respect to any fractional interest in a share of Common Stock as provided in Section 5.4(d). In the event that there shall have been surrendered a certificate or certificates representing shares of Series E Preferred Stock, only part of which are to be converted, the Corporation shall issue and deliver to or upon the written order of such holder a new certificate or certificates representing the number of shares of Series E Preferred Stock which shall not have been converted. Upon the occurrence of any automatic conversion of the outstanding Series E Preferred Stock, the holders of such stock shall surrender the certificates representing such shares at the principal executive office of Corporation, the offices of the transfer agent for the Series E Preferred Stock, or such other place as may be designated by the Corporation. Thereupon, there shall be issued and delivered to each such holder, promptly at such office and in the name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which such Series E Preferred Stock was convertible on the date on which such automatic conversion occurred and cash in respect of any fraction of a share as provided in Section 5.4(d).

(c) Effective Date of Conversion. The issuance by the Corporation of shares of Common Stock pursuant to Section 5.4(a) shall be effective as of the earlier of (a) the delivery to such holder of the certificates representing the shares of Common Stock issued upon conversion thereof, or (b) immediately prior to the close of business on the day of surrender of the certificate or certificates for the shares of Series E Preferred Stock to be converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto) as provided in these Articles of Amendment. On and after the effective day of the conversion, the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock. All accrued and unpaid dividends on shares of Series E Preferred Stock surrendered for conversion shall be paid in full as of the effective date of conversion (other than the PIK Dividends, the treatment of which is provided for in Section 5.4(a)). If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act the conversion may, at the option of any holder tendering Series E Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive Common Stock upon conversion of such Series E Preferred Stock shall not be deemed to have converted such Series E Preferred Stock until immediately prior to the closing of such sale of securities.

(d) No Fractional Shares. The Corporation shall not be obligated to issue and deliver any fractional share of Common Stock upon any conversion of shares of Series E Preferred Stock, but in lieu thereof shall pay to the holder converting such Series E Preferred Stock an amount of cash based on the fair value of a share of Common Stock as of the time when those entitled to receive those fractions are determined.

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(e) Common Stock Available. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of shares of Series E Preferred Stock as herein provided, free from any preemptive rights, such number of shares of Common Stock as shall be issuable upon the conversion of all the shares of Series E Preferred Stock then outstanding and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series E Preferred Stock, in addition to such other remedies as shall be available to the holders of Series E Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in reasonable best efforts to obtain the requisite shareholder approval of any necessary amendment to the Corporation’s Articles of Incorporation.

(f) Anti-dilution Adjustments.

(1) Reorganizations, Mergers, Consolidations, Acquisitions, and Asset Transfers. If, prior to the conversion of all of the Series E Preferred Stock (including the PIK Dividends), there shall be (i) any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Corporation shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Corporation or another entity, (ii) any dividend or other distribution of cash, other assets, or of notes or other indebtedness of the Corporation (in each case other than the PIK Dividends, regular cash dividends and other than as provided in Section 5.4(f)(2) below in which the holders of Series E Preferred Stock are otherwise entitled to share, as provided herein), any other securities of the Corporation (except Common Stock), or Rights (as hereinafter defined) to the holders of its Common Stock, or (iii) any Acquisition or Asset Transfer that does not constitute a Liquidation pursuant to Section 5.3(c) hereof, then the holders of Series E Preferred Stock shall thereafter have the right to receive upon conversion of Series E Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of shares of Common Stock, immediately theretofore issuable upon conversion, such cash, stock, securities, Rights, and/or other assets that the holder would have been entitled to receive in such transaction had the Series E Preferred Stock been converted immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holders of the Series E Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Rate and the number of shares issuable upon conversion of the Series E Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the conversion thereof. In case of any distribution of any security (including rights or warrants to subscribe for any such securities) of the Corporation (except Common Stock and Rights included in Section 5.4(f)(3) below) to the holders of its Common Stock where the nature of that security is such that the adjustment provisions in this Section 5.4(f)(1) would not properly grant to the holder of Series E Preferred Stock rights intended to be granted hereby, then in each such case the Conversion Price in effect thereafter shall be determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction the numerator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price (as hereinafter defined) on the record date mentioned below, less the fair market value (as determined in good faith by the Board of Directors) of the securities distributed by the Corporation and the denominator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price; such adjustment shall become effective as of the record date for the determination of shareholders entitled to receive such distribution. The subdivision or combination of shares of Common Stock issuable upon conversion of shares of Series E Preferred Stock at any time outstanding into a greater or lesser number of shares of Common Stock shall not be deemed to be a reclassification of the Common Stock of the Corporation for the purposes of this Section 5.4(f)(1).

The Corporation shall not effect any transaction described in this Section 5.4(f)(1) unless (i) it first gives at least 20 days prior notice of such merger, consolidation, exchange of shares, recapitalization, reorganization, distribution, Acquisition, Asset Transfer, or other similar event (during which time the holders of the Series E Preferred Stock shall be entitled to convert their Series E Preferred Stock into shares of Common Stock to the extent permitted hereby), and (ii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the obligation of the Corporation under the Articles of Incorporation, including the obligation of this Section 5.4(f)(1).

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(2) Adjustment for Stock Splits, Dividends, and Combinations. If at any time or from time to time after the date of the first issuance of Series E Preferred Stock, the Corporation shall subdivide or split-up the outstanding shares of Common Stock, or shall declare a dividend or other distribution on its outstanding Common Stock payable in shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock that are not distributed to the holders of Series E Preferred Stock (“Common Stock Equivalents”), without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), the Conversion Price in effect immediately prior to such subdivision or the declaration of such dividend shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series E Preferred Stock shall be increased in proportion to the increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time, and in case the Corporation shall at any time combine the outstanding shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall be proportionately increased, effective at the close of business on the date of such subdivision, dividend, or combination, as the case may be.

(3) Issuance of Rights. In case the Corporation shall issue to all holders of its Common Stock rights, options, or warrants to subscribe for or purchase, or other securities exchangeable for or convertible into, shares of Common Stock that are not distributed to holders of Series E Preferred Stock (any such rights, options, warrants, or other securities, collectively, “Rights”) (excluding rights to purchase Common Stock pursuant to a Corporation plan for reinvestment of dividends or interest) at a subscription offering, exercise, or conversion price per share (as defined below, the “offering price per share”) which, before deduction of customary discounts and commissions, is lower than the Current Market Price per share of Common Stock on the record date of such issuance or grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to any adjustment in connection with such issuance or grant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the record date of issuance or grant of such Rights plus the number of shares that the aggregate offering price (as defined below) of the total number of shares of Common Stock so offered would purchase at the Current Market Price per share of Common Stock on the record date, and the denominator of which is the number of shares of Common Stock outstanding plus the aggregate number of shares of Common Stock issuable upon exercise or conversion of the Rights. Such adjustments shall be made immediately after the record date for the issuance or granting of such Rights. For purposes of this clause, the “offering price per share” of Common Stock shall, in the case of Rights, be determined by dividing (x) the total amount received or receivable by the Corporation in respect of the offering, upon exercise or conversion thereof (the “aggregate offering price”), by (y) the total number of shares of Common Stock covered by such Rights.

(4) Computations. For the purpose of any computation under this Section 5.4(f), the “Current Market Price” per share of Common Stock at any date shall mean the average of the closing price of the Common Stock on all securities exchanges (including the NASDAQ Stock Market) on which it may at the time be listed, or, if there have been no sales on any such exchange on any day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on the NASDAQ Stock Market as of 4:00 p.m., New York time, or if on any day such security is not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest ask prices on such day in the domestic over-the-counter market as reported by the OTC Bulletin Board, Pink Sheets LLC, or any similar successor organization, in each case for (i) the 10 consecutive trading days commencing 20 trading days prior to the earlier to occur of (A) the date as of which the Current Market Price is to be computed or (B) the last full trading day before the commencement of “ex-dividend” trading in the Common Stock relating to the event giving rise to the adjustment required by Section 5.4(f), or (ii) if the Common Stock is not listed on a securities exchange, any other arm’s length adjustment formula that the Board of Directors may use in good faith. In the event the Common Stock is not then publicly traded or if for any other reason the Current Market Price per share cannot be determined pursuant to the foregoing provisions of this Section 5.4(f)(4), the Current Market Price per share shall be the fair market value of the Common Stock as reasonably and in good faith determined by the Board of Directors.

(5) Securities. For the purpose of this Section 5.4, the term “shares of Common Stock” shall mean (i) the class of stock designated as Common Stock, without par value, of the Corporation on the

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date of filing these Articles of Amendment or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

(6) Re-Adjustment. If, at any time after any adjustment to the number of Shares of Common Stock issuable upon conversion of the Series E Preferred Stock and the Conversion Price shall have been made pursuant to this Section 5.4(f) any rights, options, warrants, or other securities convertible into or exchangeable for shares of Common Stock shall have expired, or any thereof shall not have been exercised, the Conversion Price and the number of shares of Conversion Stock issuable upon conversion of the Series E Preferred Stock shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case me be) as if (i) the only shares of Common Stock offered were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options or warrants and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation for the issuance, sale or grant of all such rights, options or warrants whether or not exercised; provided, further that no such readjustment shall have the effect of increasing the Conversion Price or decreasing the number of shares of Conversion Stock issuable upon conversion of the Series E Preferred Stock by an amount (calculated by adjusting such increase or decrease as appropriate to account for all other adjustments pursuant to this Section 5.4(f) following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants.

(7) Miscellaneous.

(A) All calculations under this Section 5.4(f) shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be.

(B) No adjustment in the Conversion Price need be made if such adjustment would result in a change in such Conversion Price of less than $0.01. Any adjustment of less than $0.01, which is not made, shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in such Conversion Price.

(C) In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series E Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(g) Good Faith. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, share exchange, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of Section 5.4(f) and in the taking of all such actions as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series E Preferred Stock against impairment.

(h) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 5.4(f), the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the holders of Series E Preferred Stock a certificate signed by the Chief Financial Officer (or an officer holding a similar position) of the Corporation setting forth (a) such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and (b) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of his shares. The Corporation shall, upon the written request at any time of any holder of Series E Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the Conversion Price at the time in effect,

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and (c) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of such holder’s Series E Preferred Stock.

5.5. Voting Rights.

(a) General Voting Rights. Except as otherwise required by applicable law or the Articles of Incorporation, each holder of Series E Preferred Stock shall have the right to one vote for each share of Common Stock into which Series E Preferred Stock could then be converted (excluding any PIK Dividends), and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together with the holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote and shall vote as a series where required by law or as provided below. Fractional voting shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series E Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). In addition to any rights granted to a holder of shares of Series E Preferred Stock pursuant to this Section 5, shares of Series E Preferred Stock shall be entitled to vote as a class or series, separate and apart from any other series of Preferred Stock or any holders of shares of Common Stock, on any matter as to which class voting (or series voting, as applicable) is required under applicable law. Notwithstanding anything in this Section 5 to the contrary, solely for purposes of determining the number of shares of Common Stock into which each share of Series E Preferred Stock could then be converted for purposes of determining voting rights under this Section 5.5(a), the Conversion Price shall initially be the greater of (i) $1.37 or (ii) the closing bid price of the Common Stock on the Nasdaq SmallCap Market on the trading day immediately prior to the date that the share of Series E Preferred Stock is issued, as such value may be adjusted pursuant to Section 5.4(f).

(b) Protective Provisions. So long as any of the originally issued shares of Series E Preferred Stock (subject to adjustment for any stock splits, stock dividends, combinations, recapitalizations, and the like and excluding PIK Dividends) are outstanding as a single class, and except as otherwise mandated by applicable law or the terms of the Articles of Incorporation, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of not less than a majority of the then outstanding Series E Preferred Stock, voting as a class:

(1) take any action (by reclassification, merger, consolidation, reorganization, or otherwise) that adversely affects the rights, preferences, and privileges of the holders of the Series E Preferred Stock;

(2) amend, alter, or repeal any provision of, or add any provision to the Articles of Incorporation and/or the Articles of Amendment (whether by reclassification, merger, consolidation, reorganization, or otherwise) or bylaws of the Corporation;

(3) declare or pay dividends on shares of Common Stock or Preferred Stock that is junior to the Series E Preferred Stock;

(4) create any new series or class of Preferred Stock or other security having a preference or priority as to dividends or upon liquidation senior to or pari passu with that of the Series E Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(5) reclassify any class or series of Preferred Stock into shares with a preference or priority as to dividends or assets superior to or on a parity with that of the Series E Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(6) apply any of its assets to the redemption or acquisition of shares of Common Stock or Preferred Stock, except pursuant to any agreement granting the Corporation a right of first refusal or similar rights, and except in connection with purchases at fair market value from employees, advisors, officers, directors, consultants, and service providers of the Corporation upon termination of employment or service;

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(7) increase or decrease the number of authorized shares of any series of Preferred Stock or Common Stock of the Corporation;

(8) agree to an Acquisition or Asset Transfer;

(9) materially change the nature of the Corporation’s business; or

(10) liquidate, dissolve, or windup the affairs of the Corporation.

5.6. Miscellaneous.

(a) Transfer and Documentary Taxes. The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series E Preferred Stock or shares of Common Stock or other securities issued on account of Series E Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of shares of Series E Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series E Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person with respect to any such shares or securities other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment described in this sentence unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(b) Delivery of Certificates. In the event that the holder of shares of Series E Preferred Stock shall not by written notice designate the address to which the certificate or certificates representing shares of Common Stock to be issued upon conversion of such shares should be sent, the Corporation shall be entitled to send the certificate or certificates representing such shares to the address of such holder shown on the records of the Corporation or any transfer agent for the Series E Preferred Stock.

(c) Transfer Agents. The Corporation may appoint, and from time to time discharge and change, a transfer agent of the Series E Preferred Stock. Upon any such appointment or discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series E Preferred Stock.

(d) Conversion Agents. The Corporation may appoint, and from time to time may replace, a conversion agent for the Series E Preferred Stock. Upon any such replacement of the conversion agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series E Preferred Stock.

(e) Transfer of Stock. The Series E Preferred Stock shall be transferable by the holders, provided that such transfer is made in compliance with applicable federal and state securities laws and any applicable agreements between the Corporation and the holders of Series E Preferred Stock.”

Section 6. Additional Preferred Stock. This Section 6 sets forth the designation, preferences, limitations and relative rights of a series of Preferred Stock of the corporation as determined by the board of directors of the corporation pursuant to its authority under Oregon Revised Statutes 60.134 and Section 2 of Article IV of these Articles of Incorporation.

6.1 Designation and Amount.

(a) Designation. The shares of such series shall be designated as “Series F Convertible Preferred Stock,” no par value (hereinafter referred to as “Series F Preferred”), and the number of shares constituting all of the Series F Preferred shall be 9,645 shares. Any shares of Series F Preferred Stock that are redeemed by the Corporation and retired and any shares of Series F Preferred Stock that are converted in accordance with Section 6.4

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shall be restored to the status of authorized, unissued, and undesignated shares of the Corporation’s class of Preferred Stock and shall not be subject to issuance, and may not thereafter be outstanding, as shares of Series F Preferred Stock.

(b) Stated Value. Each share of Series F Preferred Stock shall have a stated value equal to $75.00 (as adjusted for any stock dividends, combinations, splits, recapitalizations, and the like) (the “Series F Stated Value”).

6.2. Dividends. Subject to the rights of any series of Preferred Stock hereafter authorized, issued or outstanding, and subject to Section 6.3(a) below, the holders of shares of Series F Preferred stock shall receive cumulative dividends, pro rata among such holders, prior to and in preference to any dividend on the Series D Preferred Stock or Common Stock during any fiscal year and pari passu with any dividend on the Series E Preferred Stock during any fiscal year, at the per annum rate of 8% of the Series F Stated Value, compounded annually, during the two years following the initial issuance of shares of Series F Preferred Stock, and following such two year period such dividends shall terminate; provided, however, that any such dividend shall accrue and be payable, subject to Section 6.3(a) hereof, only in additional shares of Series F Preferred Stock (the “Series F PIK Dividends”), each share of which shall be valued at the Series F Stated Value, and such additional shares shall be entitled to all rights and privileges of the Series F Preferred Stock; provided, further, that such dividends shall only be paid in connection with (though prior to) a Liquidation under Section 6.3 (or a transaction that shall constitute a Liquidation as provided in Section 6.3(c)) or conversion of the Series F Preferred Stock pursuant to Section 6.4. Dividends accrued and payable under this Section 6.2 and the value of each such share received shall be subject to equitable adjustment whenever there shall occur a stock split, stock dividend, combination, recapitalization, reclassification or other similar event involving a change in the Series F Preferred Stock. The holder of each share of Series F Preferred Stock shall be entitled to receive, pro rata among such holders and on a pari passu basis with the holders of Common Stock, as if the Series F Preferred Stock had been converted into Common Stock pursuant to the provisions of Section 6.4 hereof immediately prior to the record date with respect to such dividend, when, as, and if declared by the Board of Directors of the Corporation out of funds legally available for declaration and payment of dividends, cash dividends at the same rate and in the same amount per share as any and all dividends declared and paid upon the then outstanding shares of the Common Stock of the Corporation.

The Corporation shall at all times take all actions as are reasonably necessary to ensure that a sufficient number of shares of Series F Preferred Stock are authorized and reserved for issuance to satisfy all stock dividends to be accrued or paid pursuant to the first paragraph of this Section 6.2.

6.3. Liquidation Preference.

(a) Preferences. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation (a “Liquidation”), subject to the rights of any series of Preferred Stock hereafter authorized, issued, or outstanding, the holders of Series F Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Corporation available for distribution to its shareholders (if any), before any payment shall be made in respect of the Common Stock, the Series D Preferred Stock, the Series E Preferred Stock or any other series of Preferred Stock or other equity securities of the Corporation with rights junior to the Series F Preferred Stock with respect to liquidation preference, and pro rata based on the respective liquidation preferences with holders of Preferred Stock with a liquidation preference pari passu with the Series F Preferred Stock, an amount per share of Series F Preferred Stock equal to the Series F Stated Value, plus all accrued but unpaid dividends thereon to the date fixed for distribution, including specifically and without limitation, the Series F PIK Dividends to the extent not previously issued (the “Series F Liquidation Preference”). The Corporation may, with the prior written consent of the holders of a majority of the Series F Preferred Stock then outstanding, prior to a Liquidation, declare for payment and pay in cash all dividends with respect to the Series F Preferred Stock that are accrued and unpaid as of immediately prior to the Liquidation, provided that there are assets of the Corporation legally available therefor (the “Cash Alternative”). For the avoidance of doubt and notwithstanding anything in this Section 6.2 or Section 6.3 to the contrary, holders of Series F Preferred Stock have the right to convert pursuant to the terms of Section 6.4 below all or any portion of such Series F Preferred Stock (including any shares of Series F Preferred Stock paid as dividends) into shares of Common Stock prior to any Liquidation.

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If upon, liquidation, dissolution, or winding up of the Corporation, the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of Series F Preferred Stock the full amount to which they shall be entitled pursuant to this Section 6.3(a), then all the assets so available for distribution to the Corporation’s shareholders shall be distributed ratably first to the holders of the Series F Preferred Stock in proportion to the aggregate amounts that would be payable to such holders if the assets of the Corporation were sufficient to pay the amount to which they were entitled pursuant to this Section 6.3(a).

(b) Remaining Assets. Upon completion of the distributions required by Section 6.3(a), by Section 5.3(a) with respect to the Series E Preferred Stock and by Section 4.3(a) with respect to the Series D Preferred Stock, and subject to any other distributions that may be required with respect to any other series of Preferred Stock hereafter authorized, issued, or outstanding, the remaining assets and funds of the Corporation available for distribution to its shareholders, if any, shall be distributed among the holders of the holders of Common Stock.

(c) Deemed Liquidation. For purposes of this Section 6.3, a Liquidation shall be deemed to be occasioned by, or to include, (a) the acquisition of the Corporation by another person or entity or group of affiliated persons or entities by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, or consolidation but excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation) that results in the transfer of more than 50% of the outstanding voting power of the Corporation (an “Acquisition”); or (b) a sale, lease, or other transfer of all or substantially all of the assets of the Corporation (an “Asset Transfer”); provided, however, that if the outstanding shares of Series F Preferred Stock (excluding accrued but unpaid dividends) in the aggregate represent more than 50% of the voting power of the Corporation, a transfer or sale of more than 50% of the outstanding voting power of the Corporation involving solely a transfer or sale of Series F Preferred Stock shall not be considered to be an Acquisition for the purposes of this Section and shall not result in a deemed Liquidation. The occurrence of an Acquisition or Asset Transfer shall entitle the holders of Series F Preferred Stock to receive at the closing in cash, securities, or other property (valued as provided in Section 6.3(d) below) the respective amounts as specified in Section 6.3(a) in liquidation and redemption of their Series F Preferred Stock, unless the holders of a majority of the outstanding shares of Series F Preferred Stock, voting separately as a class, affirmatively vote that such transaction shall not be deemed to be a Liquidation.

(d) Valuation of Non-Cash Assets. Whenever the distribution provided for in this Section 6.3 shall be payable in securities or property other than cash, its value will be determined as follows:

(1) Securities not subject to investment letter or other similar restrictions on free marketability covered by (2) below:

(A) If traded on a securities exchange or through the Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

(B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing; and

(C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors.

(2) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (1)(A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined by this Corporation and the holders of not less than a majority of the voting power of all then outstanding shares of Series F Preferred Stock (excluding accrued but unpaid dividends).

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(e) Liquidation Notice. The Corporation shall give written notice to each holder of record of Series F Preferred Stock at their respective addresses as the same shall appear on the stock records of the Corporation of any proposed transaction described in Section 6.3(c) that would constitute a Liquidation not later than 20 days prior to the shareholders’ meeting called to approve such transaction or 20 days prior to the closing of such transaction, whichever is earlier, and shall notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the proposed transaction and the provisions of this Section 6.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first written notice provided for herein or sooner than 10 days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of not less than a majority of the then outstanding Series F Preferred Stock (excluding accrued but unpaid dividends). Prior to the closing of a transaction described in Section 6.3(c) that would constitute a Liquidation, the Corporation shall issue all Series F PIK Dividends unless the Cash Alternative is approved pursuant to Section 6.3(a) and shall either (a) make all cash distributions that the Corporation is required to make to the holders of Series F Preferred Stock, pursuant to this Section 6.3(a), (b) set aside sufficient funds from which the cash distributions to the holders of Series F Preferred Stock, can be made, or (c) establish an escrow or other similar arrangement with a third party pursuant to which the proceeds payable to the Corporation from an Acquisition or Asset Transfer will be used to make the liquidating payments to the holders of Series F Preferred Stock immediately after the consummation of such transaction.

6.4. Conversion.

(a) Right to Convert. Each share of Series F Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time after the issuance of such share, into such number of shares of Common Stock equal to the product obtained by multiplying the Conversion Rate (as hereinafter defined) then in effect by the number of shares of Series F Preferred Stock being converted. In connection with any conversion of shares of Series F Preferred Stock pursuant to this Section 6.4(a), the holder of the shares being converted may elect to convert all Series F PIK Dividends accrued (but not issued). The “Conversion Rate” in effect at any time for conversion of the Series F Preferred Stock shall be the quotient obtained by dividing (a) the Series F Stated Value by (b) the Conversion Price. The “Conversion Price” shall initially be $0.75. The Conversion Price shall be adjusted from time to time in accordance with Section 6.4(f).

(b) Exercise of Conversion Right. Each holder of Series F Preferred Stock desiring to convert any or all of such shares into shares of Common Stock pursuant to Section 6.4(a) shall surrender the certificate or certificates representing the shares of Series F Preferred Stock being converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto), at the principal executive office of the Corporation, the offices of the transfer agent for the Series F Preferred Stock, or such office or offices in the continental United States of an agent for conversion as may from time to time be designated by notice to the holders of the Series F Preferred Stock by the Corporation or the transfer agent for the Series F Preferred Stock, accompanied by written notice of conversion. Such notice of conversion shall specify (a) the number of shares of Series F Preferred Stock to be converted, and (b) the address to which such holder wishes delivery to be made of such new certificates to be issued upon such conversion. Upon surrender of a certificate representing a share or shares of Series F Preferred Stock for conversion pursuant to Section 6.4(a), the Corporation shall, within five (5) business days of such surrender, issue, and send (with receipt to be acknowledged) to or upon the written order of such holder, at the address designated by such holder, a certificate or certificates for the number of validly issued, fully paid, and non-assessable shares of Common Stock to which such holder shall be entitled upon conversion and cash with respect to any fractional interest in a share of Common Stock as provided in Section 6.4(d). In the event that there shall have been surrendered a certificate or certificates representing shares of Series F Preferred Stock, only part of which are to be converted, the Corporation shall issue and deliver to or upon the written order of such holder a new certificate or certificates representing the number of shares of Series F Preferred Stock which shall not have been converted. Upon the occurrence of any automatic conversion of the outstanding Series F Preferred Stock, the holders of such stock shall surrender the certificates representing such shares at the principal executive office of Corporation, the offices of the transfer agent for the Series F Preferred Stock, or such other place as may be designated by the Corporation. Thereupon, there shall be issued and delivered to each such holder, promptly at such office and in the name as shown on such surrendered certificate or certificates, a certificate or certificates for the

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number of shares of Common Stock into which such Series F Preferred Stock was convertible on the date on which such automatic conversion occurred and cash in respect of any fraction of a share as provided in Section 6.4(d).

(c) Effective Date of Conversion. The issuance by the Corporation of shares of Common Stock pursuant to Section 6.4(a) shall be effective as of the earlier of (a) the delivery to such holder of the certificates representing the shares of Common Stock issued upon conversion thereof, or (b) immediately prior to the close of business on the day of surrender of the certificate or certificates for the shares of Series F Preferred Stock to be converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto) as provided in these Articles of Amendment. On and after the effective day of the conversion, the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock. All accrued and unpaid dividends on shares of Series F Preferred Stock surrendered for conversion shall be paid in full as of the effective date of conversion (other than the Series F PIK Dividends, the treatment of which is provided for in Section 6.4(a)). If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act the conversion may, at the option of any holder tendering Series F Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive Common Stock upon conversion of such Series F Preferred Stock shall not be deemed to have converted such Series F Preferred Stock until immediately prior to the closing of such sale of securities.

(d) No Fractional Shares. The Corporation shall not be obligated to issue and deliver any fractional share of Common Stock upon any conversion of shares of Series F Preferred Stock, but in lieu thereof shall pay to the holder converting such Series F Preferred Stock an amount of cash based on the fair value of a share of Common Stock as of the time when those entitled to receive those fractions are determined.

(e) Common Stock Available. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of shares of Series F Preferred Stock as herein provided, free from any preemptive rights, such number of shares of Common Stock as shall be issuable upon the conversion of all the shares of Series F Preferred Stock then outstanding and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series F Preferred Stock, in addition to such other remedies as shall be available to the holders of Series F Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in reasonable best efforts to obtain the requisite shareholder approval of any necessary amendment to the Corporation’s Articles of Incorporation.

(f) Anti-dilution Adjustments.

(1) Reorganizations, Mergers, Consolidations, Acquisitions, and Asset Transfers. If, prior to the conversion of all of the Series F Preferred Stock (including the Series F PIK Dividends), there shall be (i) any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Corporation shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Corporation or another entity, (ii) any dividend or other distribution of cash, other assets, or of notes or other indebtedness of the Corporation (in each case other than the Series F PIK Dividends, regular cash dividends and other than as provided in Section 6.4(f)(2) below in which the holders of Series F Preferred Stock are otherwise entitled to share, as provided herein), any other securities of the Corporation (except Common Stock), or Rights (as hereinafter defined) to the holders of its Common Stock, or (iii) any Acquisition or Asset Transfer that does not constitute a Liquidation pursuant to Section 6.3(c) hereof, then the holders of Series F Preferred Stock shall thereafter have the right to receive upon conversion of Series F Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of shares of Common Stock, immediately theretofore issuable upon conversion, such cash, stock, securities, Rights, and/or other assets that the holder would have been entitled to receive in such transaction had the Series F Preferred Stock been converted immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holders of the Series F Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Rate and the number of shares issuable upon conversion of the Series F Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the conversion thereof. In case of any

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distribution of any security (including rights or warrants to subscribe for any such securities) of the Corporation (except Common Stock and Rights included in Section 6.4(f)(3) below) to the holders of its Common Stock where the nature of that security is such that the adjustment provisions in this Section 6.4(f)(1) would not properly grant to the holder of Series F Preferred Stock rights intended to be granted hereby, then in each such case the Conversion Price in effect thereafter shall be determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction the numerator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price (as hereinafter defined) on the record date mentioned below, less the fair market value (as determined in good faith by the Board of Directors) of the securities distributed by the Corporation and the denominator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price; such adjustment shall become effective as of the record date for the determination of shareholders entitled to receive such distribution. The subdivision or combination of shares of Common Stock issuable upon conversion of shares of Series F Preferred Stock at any time outstanding into a greater or lesser number of shares of Common Stock shall not be deemed to be a reclassification of the Common Stock of the Corporation for the purposes of this Section 6.4(f)(1).

The Corporation shall not effect any transaction described in this Section 6.4(f)(1) unless (i) it first gives at least 20 days prior notice of such merger, consolidation, exchange of shares, recapitalization, reorganization, distribution, Acquisition, Asset Transfer, or other similar event (during which time the holders of the Series F Preferred Stock shall be entitled to convert their Series F Preferred Stock into shares of Common Stock to the extent permitted hereby), and (ii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the obligation of the Corporation under the Articles of Incorporation, including the obligation of this Section 6.4(f)(1).

(2) Adjustment for Stock Splits, Dividends, and Combinations. If at any time or from time to time after the date of the first issuance of Series F Preferred Stock, the Corporation shall subdivide or split-up the outstanding shares of Common Stock, or shall declare a dividend or other distribution on its outstanding Common Stock payable in shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock that are not distributed to the holders of Series F Preferred Stock (“Common Stock Equivalents”), without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), the Conversion Price in effect immediately prior to such subdivision or the declaration of such dividend shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series F Preferred Stock shall be increased in proportion to the increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time, and in case the Corporation shall at any time combine the outstanding shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall be proportionately increased, effective at the close of business on the date of such subdivision, dividend, or combination, as the case may be.

(3) Issuance of Rights. In case the Corporation shall issue to all holders of its Common Stock rights, options, or warrants to subscribe for or purchase, or other securities exchangeable for or convertible into, shares of Common Stock that are not distributed to holders of Series F Preferred Stock (any such rights, options, warrants, or other securities, collectively, “Rights”) (excluding rights to purchase Common Stock pursuant to a Corporation plan for reinvestment of dividends or interest) at a subscription offering, exercise, or conversion price per share (as defined below, the “offering price per share”) which, before deduction of customary discounts and commissions, is lower than the Current Market Price per share of Common Stock on the record date of such issuance or grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to any adjustment in connection with such issuance or grant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the record date of issuance or grant of such Rights plus the number of shares that the aggregate offering price (as defined below) of the total number of shares of Common Stock so offered would purchase at the Current Market Price per share of Common Stock on the record date, and the denominator of which is the number of shares of Common Stock outstanding plus the aggregate number of shares of Common Stock issuable upon exercise or conversion of the Rights. Such adjustments shall be made immediately after the record date for the issuance or granting of such Rights. For purposes of this clause, the “offering price per

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share” of Common Stock shall, in the case of Rights, be determined by dividing (x) the total amount received or receivable by the Corporation in respect of the offering, upon exercise or conversion thereof (the “aggregate offering price”), by (y) the total number of shares of Common Stock covered by such Rights.

(4) Computations. For the purpose of any computation under this Section 6.4(f), the “Current Market Price” per share of Common Stock at any date shall mean the average of the closing price of the Common Stock on all securities exchanges (including the NASDAQ Stock Market) on which it may at the time be listed, or, if there have been no sales on any such exchange on any day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on the NASDAQ Stock Market as of 4:00 p.m., New York time, or if on any day such security is not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest ask prices on such day in the domestic over-the-counter market as reported by the OTC Bulletin Board, Pink Sheets LLC, or any similar successor organization, in each case for (i) the 10 consecutive trading days commencing 20 trading days prior to the earlier to occur of (A) the date as of which the Current Market Price is to be computed or (B) the last full trading day before the commencement of “ex-dividend” trading in the Common Stock relating to the event giving rise to the adjustment required by Section 6.4(f), or (ii) if the Common Stock is not listed on a securities exchange, any other arm’s length adjustment formula that the Board of Directors may use in good faith. In the event the Common Stock is not then publicly traded or if for any other reason the Current Market Price per share cannot be determined pursuant to the foregoing provisions of this Section 6.4(f)(4), the Current Market Price per share shall be the fair market value of the Common Stock as reasonably and in good faith determined by the Board of Directors.

(5) Securities. For the purpose of this Section 6.4, the term “shares of Common Stock” shall mean (i) the class of stock designated as Common Stock, without par value, of the Corporation on the date of filing these Articles of Amendment or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

(6) Re-Adjustment. If, at any time after any adjustment to the number of Shares of Common Stock issuable upon conversion of the Series F Preferred Stock and the Conversion Price shall have been made pursuant to this Section 6.4(f) any rights, options, warrants, or other securities convertible into or exchangeable for shares of Common Stock shall have expired, or any thereof shall not have been exercised, the Conversion Price and the number of shares of Conversion Stock issuable upon conversion of the Series F Preferred Stock shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case me be) as if (i) the only shares of Common Stock offered were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options or warrants and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation for the issuance, sale or grant of all such rights, options or warrants whether or not exercised; provided, further that no such readjustment shall have the effect of increasing the Conversion Price or decreasing the number of shares of Conversion Stock issuable upon conversion of the Series F Preferred Stock by an amount (calculated by adjusting such increase or decrease as appropriate to account for all other adjustments pursuant to this Section 6.4(f) following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants.

(7) Miscellaneous.

(A) All calculations under this Section 6.4(f) shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be.

(B) No adjustment in the Conversion Price need be made if such adjustment would result in a change in such Conversion Price of less than $0.01. Any adjustment of less than $0.01, which is not made, shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in such Conversion Price.

(C) In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any

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shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series F Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(g) Good Faith. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, share exchange, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of Section 6.4(f) and in the taking of all such actions as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series F Preferred Stock against impairment.

(h) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 6.4(f), the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the holders of Series F Preferred Stock a certificate signed by the Chief Financial Officer (or an officer holding a similar position) of the Corporation setting forth (a) such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and (b) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of his shares. The Corporation shall, upon the written request at any time of any holder of Series F Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the Conversion Price at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of such holder’s Series F Preferred Stock.

6.5 Voting Rights.

(a) General Voting Rights. Except as otherwise required by applicable law or the Articles of Incorporation, each holder of Series F Preferred Stock shall have the right to one vote for each share of Common Stock into which Series F Preferred Stock could then be converted (excluding any Series F PIK Dividends), and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together with the holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote and shall vote as a series where required by law or as provided below. Fractional voting shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series F Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). In addition to any rights granted to a holder of shares of Series F Preferred Stock pursuant to this Section 6, shares of Series F Preferred Stock shall be entitled to vote as a class or series, separate and apart from any other series of Preferred Stock or any holders of shares of Common Stock, on any matter as to which class voting (or series voting, as applicable) is required under applicable law.

(b) Protective Provisions. So long as any of the originally issued shares of Series F Preferred Stock (subject to adjustment for any stock splits, stock dividends, combinations, recapitalizations, and the like and excluding Series F PIK Dividends) are outstanding as a single class, and except as otherwise mandated by applicable law or the terms of the Articles of Incorporation, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of not less than a majority of the then outstanding Series F Preferred Stock, voting as a class:

(1) take any action (by reclassification, merger, consolidation, reorganization, or otherwise) that adversely affects the rights, preferences, and privileges of the holders of the Series F Preferred Stock;

(2) amend, alter, or repeal any provision of, or add any provision to the Articles of Incorporation and/or the Articles of Amendment (whether by reclassification, merger, consolidation, reorganization, or otherwise) or bylaws of the Corporation;

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(3) declare or pay dividends on shares of Common Stock or Preferred Stock that is junior to the Series F Preferred Stock;

(4) create any new series or class of Preferred Stock or other security having a preference or priority as to dividends or upon liquidation senior to or pari passu with that of the Series F Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(5) reclassify any class or series of Preferred Stock into shares with a preference or priority as to dividends or assets superior to or on a parity with that of the Series F Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(6) apply any of its assets to the redemption or acquisition of shares of Common Stock or Preferred Stock, except pursuant to any agreement granting the Corporation a right of first refusal or similar rights, and except in connection with purchases at fair market value from employees, advisors, officers, directors, consultants, and service providers of the Corporation upon termination of employment or service;

(7) increase or decrease the number of authorized shares of any series of Preferred Stock or Common Stock of the Corporation;

(8) agree to an Acquisition or Asset Transfer;

(9) materially change the nature of the Corporation’s business; or

(10) liquidate, dissolve, or windup the affairs of the Corporation.

6.6. Miscellaneous.

(a) Transfer and Documentary Taxes. The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series F Preferred Stock or shares of Common Stock or other securities issued on account of Series F Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of shares of Series F Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series F Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person with respect to any such shares or securities other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment described in this sentence unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(b) Delivery of Certificates. In the event that the holder of shares of Series F Preferred Stock shall not by written notice designate the address to which the certificate or certificates representing shares of Common Stock to be issued upon conversion of such shares should be sent, the Corporation shall be entitled to send the certificate or certificates representing such shares to the address of such holder shown on the records of the Corporation or any transfer agent for the Series F Preferred Stock.

(c) Transfer Agents. The Corporation may appoint, and from time to time discharge and change, a transfer agent of the Series F Preferred Stock. Upon any such appointment or discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series F Preferred Stock.

(d) Conversion Agents. The Corporation may appoint, and from time to time may replace, a conversion agent for the Series F Preferred Stock. Upon any such replacement of the conversion agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series F Preferred Stock.

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(e) Transfer of Stock. The Series F Preferred Stock shall be transferable by the holders, provided that such transfer is made in compliance with applicable federal and state securities laws and any applicable agreements between the Corporation and the holders of Series F Preferred Stock.

Section 7. Additional Preferred Stock. This Section 7 sets forth the designation, preferences, limitations and relative rights of a series of Preferred Stock of the corporation as determined by the board of directors of the corporation pursuant to its authority under Oregon Revised Statutes 60.134 and Section 2 of Article IV of these Articles of Incorporation.

7.1 Designation and Amount.

(a) Designation. The shares of such series shall be designated as “Series G Convertible Preferred Stock,” no par value (hereinafter referred to as “Series G Preferred”), and the number of shares constituting all of the Series G Preferred shall be 184,615 shares. Any shares of Series G Preferred Stock that are redeemed by the Corporation and retired and any shares of Series G Preferred Stock that are converted in accordance with Section 7.4 shall be restored to the status of authorized, unissued, and undesignated shares of the Corporation’s class of Preferred Stock and shall not be subject to issuance, and may not thereafter be outstanding, as shares of Series G Preferred Stock.

(b) Stated Value. Each share of Series G Preferred Stock shall have a stated value equal to $13.00 (as adjusted for any stock dividends, combinations, splits, recapitalizations, and the like) (the “Series G Stated Value”).

7.2 Dividends. Subject to the rights of any series of Preferred Stock hereafter authorized, issued or outstanding, and subject to Section 7.3(a) below, the holders of shares of Series G Preferred Stock shall receive cumulative dividends, pro rata among such holders, prior to and in preference to any dividend on Common Stock and on all outstanding series of Preferred Stock (Series A, Series B, Series C, Series D, Series E, Series F and Series R) at the per annum rate of 8% of the Series G Stated Value, payable in the sole discretion of the Board of Directors of the Corporation in cash or in additional shares of Series G Preferred Stock (the “Series G PIK Dividends”), each share of which shall be valued at the Series G Stated Value, and such additional shares shall be entitled to all rights and privileges of the Series G Preferred Stock. Dividends accrued and payable under this Section 7.2 and the value of each such share received shall be subject to equitable adjustment whenever there shall occur a stock split, stock dividend, combination, recapitalization, reclassification or other similar event involving a change in the Series G Preferred Stock. The holder of each share of Series G Preferred Stock shall be entitled to receive, pro rata among such holders and on a pari passu basis with the holders of Common Stock, as if the Series G Preferred Stock had been converted into Common Stock pursuant to the provisions of Section 7.4 hereof immediately prior to the record date with respect to such dividend, when, as, and if declared by the Board of Directors of the Corporation out of funds legally available for declaration and payment of dividends, cash dividends at the same rate and in the same amount per share as any and all dividends declared and paid upon the then outstanding shares of the Common Stock of the Corporation, in addition to the dividends payable pursuant to the first sentence of Section 7.2. To the extent that the holders of shares of Series G Preferred Stock receive dividends in the form of Series G PIK Dividends, then all other series of Preferred Stock for which dividends are declared, must similarly receive dividends in kind and not in cash, unless a majority of the holders of the Series G Preferred Stock consent to a cash dividend payment.

The Corporation shall at all times take all actions as are reasonably necessary to ensure that a sufficient number of shares of Series G Preferred Stock are authorized and reserved for issuance to satisfy all stock dividends to be accrued or paid pursuant to the first paragraph of this Section 7.2. If the Corporation shall fail to declare or pay a dividend on the Series G Preferred Stock by the 90^th day following each anniversary of the date the Series G Preferred Stock was first issued for the preceding twelve-month period, dividends on each share of Series G Preferred Stock shall thereupon begin to accrue at the per annum rate of 10% of the Series G Stated Value, payable in cash or in additional shares of Series G Preferred Stock, as determined by the Board of Directors of the Corporation in its sole discretion. At such time as the Corporation cures all failures to declare or pay dividends on the Series G Preferred Stock and all accrued and unpaid dividends are paid, the dividend rate for the Series G Preferred Stock shall return to the 8% per annum rate.

7.3 Liquidation Preference.

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(a) Preferences. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation (a “Liquidation”), subject to the rights of any series of Preferred Stock hereafter authorized, issued, or outstanding, the holders of Series G Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Corporation available for distribution to its shareholders (if any), before any payment shall be made in respect of the Common Stock and any outstanding series of Preferred Stock (Series A, Series B, Series C, Series D, Series E, Series F and Series R) or any other series of Preferred Stock or other equity securities of the Corporation with rights junior to the Series G Preferred Stock with respect to liquidation preference, an amount per share of Series G Preferred Stock equal to the Series G Stated Value, plus all accrued but unpaid dividends thereon to the date fixed for distribution (the “Series G Liquidation Preference”). For the avoidance of doubt and notwithstanding anything in this Section 7.2 or Section 7.3 to the contrary, holders of Series G Preferred Stock have the right to convert pursuant to the terms of Section 7.4 below all or any portion of such Series G Preferred Stock (including any shares of Series G Preferred Stock paid as dividends) into shares of Common Stock prior to any Liquidation.

If upon, liquidation, dissolution, or winding up of the Corporation, the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of Series G Preferred Stock the full amount to which they shall be entitled pursuant to this Section 7.3(a), then all the assets so available for distribution to the Corporation’s shareholders shall be distributed ratably first to the holders of the Series G Preferred Stock in proportion to the aggregate amounts that would be payable to such holders if the assets of the Corporation were sufficient to pay the amount to which they were entitled pursuant to this Section 7.3(a).

(b) Remaining Assets. Upon completion of the distributions required by Section 7.3(a), by Section 6.3(a) with respect to the Series F Preferred Stock, by Section 5.3(a) with respect to the Series E Preferred Stock and by Section 4.3(a) with respect to the Series D Preferred Stock, and subject to any other distributions that may be required with respect to any other series of Preferred Stock hereafter authorized, issued, or outstanding, the remaining assets and funds of the Corporation available for distribution to its shareholders, if any, shall be distributed among the holders of the holders of Common Stock.

(c) Deemed Liquidation. For purposes of this Section 7.3, a Liquidation shall be deemed to be occasioned by, or to include, (a) the acquisition of the Corporation by another person or entity or group of affiliated persons or entities by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation) that results in the transfer of more than 50% of the outstanding voting power of the Corporation (an “Acquisition”); or (b) a sale, lease, foreclosure or other transfer of all or substantially all of the assets of the Corporation (an “Asset Transfer”); provided, however, that if the outstanding shares of Series G Preferred Stock (excluding accrued but unpaid dividends) in the aggregate represent more than 50% of the voting power of the Corporation, a transfer or sale of more than 50% of the outstanding voting power of the Corporation involving solely a transfer or sale of Series G Preferred Stock shall not be considered to be an Acquisition for the purposes of this Section and shall not result in a deemed Liquidation. The occurrence of an Acquisition or Asset Transfer shall entitle the holders of Series G Preferred Stock to receive at the closing in cash, securities, or other property (valued as provided in Section 7.3(d) below) the respective amounts as specified in Section 7.3(a) in liquidation and redemption of their Series G Preferred Stock, unless the holders of a majority of the outstanding shares of Series G Preferred Stock, voting separately as a class, affirmatively vote that such transaction shall not be deemed to be a Liquidation.

(d) Valuation of Non-Cash Assets. Whenever the distribution provided for in this Section 7.3 shall be payable in securities or property other than cash, its value will be determined as follows:

(1) Securities not subject to investment letter or other similar restrictions on free marketability covered by (2) below:

(A) If traded on a securities exchange or through the Nasdaq Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

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(B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing; and

(C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors.

(2) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (1)(A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined by this Corporation and the holders of not less than a majority of the voting power of all then outstanding shares of Series G Preferred Stock (excluding accrued but unpaid dividends).

(e) Liquidation Notice. The Corporation shall give written notice to each holder of record of Series G Preferred Stock at their respective addresses as the same shall appear on the stock records of the Corporation of any proposed transaction described in Section 7.3(c) that would constitute a Liquidation not later than 20 days prior to the shareholders’ meeting called to approve such transaction or 20 days prior to the closing of such transaction, whichever is earlier, and shall notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the proposed transaction and the provisions of this Section 7.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first written notice provided for herein or sooner than 10 days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of not less than a majority of the then outstanding Series G Preferred Stock (excluding accrued but unpaid dividends). Prior to the closing of a transaction described in Section 7.3(c) that would constitute a Liquidation (other than a foreclosure), the Corporation shall either (a) make all cash distributions that the Corporation is required to make to the holders of Series G Preferred Stock, pursuant to this Section 7.3(a), (b) set aside sufficient funds from which the cash distributions to the holders of Series G Preferred Stock, can be made, or (c) establish an escrow or other similar arrangement with a third party pursuant to which the proceeds payable to the Corporation from an Acquisition or Asset Transfer will be used to make the liquidating payments to the holders of Series G Preferred Stock immediately after the consummation of such transaction.

7.4 Conversion.

(a) Right to Convert. Each share of Series G Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time after the issuance of such share, into such number of shares of Common Stock equal to the product obtained by multiplying the Conversion Rate (as hereinafter defined) then in effect by the number of shares of Series G Preferred Stock being converted. The “Conversion Rate” in effect at any time for conversion of the Series G Preferred Stock shall be the quotient obtained by dividing (a) the Series G Stated Value by (b) the Conversion Price. The “Conversion Price” shall initially be $0.13. The Conversion Price shall be adjusted from time to time in accordance with Section 7.4(f).

(b) Exercise of Conversion Right. Each holder of Series G Preferred Stock desiring to convert any or all of such shares into shares of Common Stock pursuant to Section 7.4(a) shall surrender the certificate or certificates representing the shares of Series G Preferred Stock being converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto), at the principal executive office of the Corporation, the offices of the transfer agent for the Series G Preferred Stock, or such office or offices in the continental United States of an agent for conversion as may from time to time be designated by notice to the holders of the Series G Preferred Stock by the Corporation or the transfer agent for the Series G Preferred Stock, accompanied by written notice of conversion. Such notice of conversion shall specify (a) the number of shares of Series G Preferred Stock to be converted, and (b) the address to which such holder wishes delivery to be made of such new certificates to be issued upon such conversion. Upon surrender of a certificate representing a share or shares of Series G Preferred Stock for conversion pursuant to Section 7.4(a), the Corporation shall, within five (5) business days of such surrender, issue, and send (with receipt to be acknowledged) to or upon the written order of such holder, at the address designated by such holder, a certificate or certificates for the number of validly issued, fully paid, and non-assessable shares of Common Stock to which such holder shall be entitled upon conversion and

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cash with respect to any fractional interest in a share of Common Stock as provided in Section 7.4(d). In the event that there shall have been surrendered a certificate or certificates representing shares of Series G Preferred Stock, only part of which are to be converted, the Corporation shall issue and deliver to or upon the written order of such holder a new certificate or certificates representing the number of shares of Series G Preferred Stock which shall not have been converted. Upon the occurrence of any automatic conversion of the outstanding Series G Preferred Stock, the holders of such stock shall surrender the certificates representing such shares at the principal executive office of Corporation, the offices of the transfer agent for the Series G Preferred Stock, or such other place as may be designated by the Corporation. Thereupon, there shall be issued and delivered to each such holder, promptly at such office and in the name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which such Series G Preferred Stock was convertible on the date on which such automatic conversion occurred and cash in respect of any fraction of a share as provided in Section 7.4(d).

(c) Effective Date of Conversion. The issuance by the Corporation of shares of Common Stock pursuant to Section 7.4(a) shall be effective as of the earlier of (a) the delivery to such holder of the certificates representing the shares of Common Stock issued upon conversion thereof, or (b) immediately prior to the close of business on the day of surrender of the certificate or certificates for the shares of Series G Preferred Stock to be converted, duly assigned or endorsed for conversion (or accompanied by duly executed stock powers relating thereto) as provided in these Articles of Amendment. On and after the effective day of the conversion, the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock. All accrued and unpaid dividends on shares of Series G Preferred Stock surrendered for conversion shall be paid in full as of the effective date of conversion (in cash or in Series G PIK Dividends). If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act the conversion may, at the option of any holder tendering Series G Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive Common Stock upon conversion of such Series G Preferred Stock shall not be deemed to have converted such Series G Preferred Stock until immediately prior to the closing of such sale of securities.

(d) No Fractional Shares. The Corporation shall not be obligated to issue and deliver any fractional share of Common Stock upon any conversion of shares of Series G Preferred Stock, but in lieu thereof shall pay to the holder converting such Series G Preferred Stock an amount of cash based on the fair value of a share of Common Stock as of the time when those entitled to receive those fractions are determined.

(e) Common Stock Available. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of shares of Series G Preferred Stock as herein provided, free from any preemptive rights, such number of shares of Common Stock as shall be issuable upon the conversion of all the shares of Series G Preferred Stock then outstanding and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series G Preferred Stock, in addition to such other remedies as shall be available to the holders of Series G Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in reasonable best efforts to obtain the requisite shareholder approval of any necessary amendment to the Corporation’s Articles of Incorporation.

(f) Anti-dilution Adjustments.

(1) Reorganizations, Mergers, Consolidations, Acquisitions, and Asset Transfers. If, prior to the conversion of all of the Series G Preferred Stock there shall be (i) any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Corporation shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Corporation or another entity, (ii) any dividend or other distribution of cash, other assets, or of notes or other indebtedness of the Corporation (other than regular cash dividends in which holders of Series G Preferred Stock are otherwise entitled to share, as provided herein, and other than as provided in Section 7.4(f)(2) below), any other securities of the Corporation (except Common Stock) or Rights (as hereinafter defined) to the holders of its Common Stock, or (iii) any Acquisition or Asset Transfer that does not constitute a Liquidation pursuant to Section 7.3(c) hereof, then the holders of Series G Preferred Stock shall thereafter have the right to

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receive upon conversion of Series G Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of shares of Common Stock, immediately theretofore issuable upon conversion, such cash, stock, securities, Rights, and/or other assets that the holder would have been entitled to receive in such transaction had the Series G Preferred Stock been converted immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holders of the Series G Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Rate and the number of shares issuable upon conversion of the Series G Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the conversion thereof. In case of any distribution of any security (including rights or warrants to subscribe for any such securities) of the Corporation (except Common Stock and Rights included in Section 7.4(f)(3) below) to the holders of its Common Stock where the nature of that security is such that the adjustment provisions in this Section 7.4(f)(1) would not properly grant to the holder of Series G Preferred Stock rights intended to be granted hereby, then in each such case the Conversion Price in effect thereafter shall be determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction the numerator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price (as hereinafter defined) on the record date mentioned below, less the fair market value (as determined in good faith by the Board of Directors) of the securities distributed by the Corporation and the denominator of which shall be the total number of outstanding shares of Common Stock multiplied by the Current Market Price; such adjustment shall become effective as of the record date for the determination of shareholders entitled to receive such distribution.

The Corporation shall not effect any transaction described in this Section 7.4(f)(1) unless (i) it first gives at least 20 days prior notice of such merger, consolidation, exchange of shares, recapitalization, reorganization, distribution, Acquisition, Asset Transfer, or other similar event (during which time the holders of the Series G Preferred Stock shall be entitled to convert their Series G Preferred Stock into shares of Common Stock to the extent permitted hereby), and (ii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the obligation of the Corporation under the Articles of Incorporation, including the obligation of this Section 7.4(f)(1).

(2) Adjustment for Stock Splits, Dividends, and Combinations. If at any time or from time to time after the date of the first issuance of Series G Preferred Stock, the Corporation shall subdivide or split-up the outstanding shares of Common Stock, or shall declare a dividend or other distribution on its outstanding Common Stock payable in shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock that are not distributed to the holders of Series G Preferred Stock (“Common Stock Equivalents”), without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), the Conversion Price in effect immediately prior to such subdivision or the declaration of such dividend shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series G Preferred Stock shall be increased in proportion to the increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time, and in case the Corporation shall at any time combine the outstanding shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall be proportionately increased, effective at the close of business on the date of such subdivision, dividend, or combination, as the case may be.

(3) Issuance of Rights. In case the Corporation shall issue to all holders of its Common Stock rights, options, or warrants to subscribe for or purchase, or other securities exchangeable for or convertible into, shares of Common Stock that are not distributed to holders of Series G Preferred Stock (any such rights, options, warrants, or other securities, collectively, “Rights”) (excluding rights to purchase Common Stock pursuant to a Corporation plan for reinvestment of dividends or interest) at a subscription offering, exercise, or conversion price per share (as defined below, the “offering price per share”) which, before deduction of customary discounts and commissions, is lower than the Current Market Price per share of Common Stock on the record date of such issuance or grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to any adjustment in connection with such issuance or grant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the record date of issuance or grant of such Rights plus the

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number of shares that the aggregate offering price (as defined below) of the total number of shares of Common Stock so offered would purchase at the Current Market Price per share of Common Stock on the record date, and the denominator of which is the number of shares of Common Stock outstanding plus the aggregate number of shares of Common Stock issuable upon exercise or conversion of the Rights. Such adjustments shall be made immediately after the record date for the issuance or granting of such Rights. For purposes of this clause, the “offering price per share” of Common Stock shall, in the case of Rights, be determined by dividing (x) the total amount received or receivable by the Corporation in respect of the offering, upon exercise or conversion thereof (the “aggregate offering price”), by (y) the total number of shares of Common Stock covered by such Rights.

(4) Computations. For the purpose of any computation under this Section 7.4(f), the “Current Market Price” per share of Common Stock at any date shall mean the average of the closing price of the Common Stock on all securities exchanges (including the NASDAQ Stock Market) on which it may at the time be listed, or, if there have been no sales on any such exchange on any day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on the NASDAQ Stock Market as of 4:00 p.m., New York time, or if on any day such security is not quoted in the NASDAQ Stock Market, the average of the highest bid and lowest ask prices on such day in the domestic over-the-counter market as reported by the OTC Bulletin Board, Pink Sheets LLC, or any similar successor organization, in each case for (i) the 10 consecutive trading days commencing 20 trading days prior to the earlier to occur of (A) the date as of which the Current Market Price is to be computed or (B) the last full trading day before the commencement of “ex-dividend” trading in the Common Stock relating to the event giving rise to the adjustment required by Section 7.4(f), or (ii) if the Common Stock is not listed on a securities exchange, any other arm’s length adjustment formula that the Board of Directors may use in good faith. In the event the Common Stock is not then publicly traded or if for any other reason the Current Market Price per share cannot be determined pursuant to the foregoing provisions of this Section 7.4(f)(4), the Current Market Price per share shall be the fair market value of the Common Stock as reasonably and in good faith determined by the Board of Directors.

(5) Securities. For the purpose of this Section 7.4, the term “shares of Common Stock” shall mean (i) the class of stock designated as Common Stock, without par value, of the Corporation on the date of filing these Articles of Amendment or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

(6) Re-Adjustment. If, at any time after any adjustment to the number of Shares of Common Stock issuable upon conversion of the Series G Preferred Stock and the Conversion Price shall have been made pursuant to this Section 7.4(f) any rights, options, warrants, or other securities convertible into or exchangeable for shares of Common Stock shall have expired, or any thereof shall not have been exercised, the Conversion Price and the number of shares of Conversion Stock issuable upon conversion of the Series G Preferred Stock shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case me be) as if (i) the only shares of Common Stock offered were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options or warrants and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation for the issuance, sale or grant of all such rights, options or warrants whether or not exercised; provided, further that no such readjustment shall have the effect of increasing the Conversion Price or decreasing the number of shares of Conversion Stock issuable upon conversion of the Series G Preferred Stock by an amount (calculated by adjusting such increase or decrease as appropriate to account for all other adjustments pursuant to this Section 7.4(f) following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants.

(7) Miscellaneous.

(A) All calculations under this Section 7.4(f) shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be.

(B) No adjustment in the Conversion Price need be made if such adjustment would result in a change in such Conversion Price of less than $0.01. Any adjustment of less than $0.01,

41

which is not made, shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in such Conversion Price.

(C) In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series G Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

(g) Good Faith. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, share exchange, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of Section 7.4(f) and in the taking of all such actions as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series G Preferred Stock against impairment.

(h) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to Section 7.4(f), the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the holders of Series G Preferred Stock a certificate signed by the Chief Financial Officer (or an officer holding a similar position) of the Corporation setting forth (a) such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and (b) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of his shares. The Corporation shall, upon the written request at any time of any holder of Series G Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the Conversion Price at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of such holder’s Series G Preferred Stock.

7.5 Voting Rights.

(a) General Voting Rights; Board Nominee Rights; Reduction in the Size of the Board. Except as otherwise required by applicable law or the Articles of Incorporation, each holder of Series G Preferred Stock shall have the right to one vote for each share of Common Stock into which Series G Preferred Stock could then be converted and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together with the holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote and shall vote as a series where required by law or as provided below. Fractional voting shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series G Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). In addition to any rights granted to a holder of shares of Series G Preferred Stock pursuant to this Section 7, shares of Series G Preferred Stock shall be entitled to vote as a class or series, separate and apart from any other series of Preferred Stock or any holders of shares of Common Stock, on any matter as to which class voting (or series voting, as applicable) is required under applicable law. For so long as at least 90,000 shares of Series G Preferred Stock are outstanding (as adjusted for stock splits, stock dividends, combinations and the like) the holders of a majority of the Series G Preferred Stock shall have the right to nominate two persons for election to the Board of Directors of the Corporation, and for so long as at least 50,000 shares of Series G Preferred Stock are outstanding (as adjusted for stock splits, stock dividends, combinations and the like) the holders of a majority of the Series G Preferred Stock shall have the right to nominate one person for election to the Board of Directors of the Corporation.

(b) Protective Provisions. So long as any of the originally issued shares of Series G Preferred Stock (subject to adjustment for any stock splits, stock dividends, combinations, recapitalizations, and the like) are

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outstanding as a single class, and except as otherwise mandated by applicable law or the terms of the Articles of Incorporation, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of not less than a majority of the then outstanding Series G Preferred Stock, voting as a class:

(1) take any action (by reclassification, merger, consolidation, reorganization, or otherwise) that adversely affects the rights, preferences, and privileges of the holders of the Series G Preferred Stock;

(2) amend, alter, or repeal any provision of, or add any provision to the Articles of Incorporation and/or the Articles of Amendment (whether by reclassification, merger, consolidation, reorganization, or otherwise) or bylaws of the Corporation;

(3) declare or pay dividends on shares of Common Stock or Preferred Stock that is junior to the Series G Preferred Stock;

(4) create any new series or class of Preferred Stock or any debt or equity security having a preference or priority as to dividends, interest or upon liquidation senior to or pari passu with that of the Series G Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(5) reclassify any class or series of Preferred Stock into shares with a preference or priority as to dividends or assets superior to or on a parity with that of the Series G Preferred Stock (by reclassification, merger, consolidation, reorganization, or otherwise);

(6) apply any of its assets to the redemption or acquisition of shares of Common Stock or Preferred Stock, except pursuant to any agreement granting the Corporation a right of first refusal or similar rights, and except in connection with purchases at fair market value from employees, advisors, officers, directors, consultants, and service providers of the Corporation upon termination of employment or service;

(7) increase or decrease the number of authorized shares of any series of Preferred Stock or Common Stock of the Corporation;

(8) agree to an Acquisition or Asset Transfer;

(9) materially change the nature of the Corporation’s business;

(10) liquidate, dissolve, or windup the affairs of the Corporation; or

(11) increase the number of shares of Common Stock reserved for issuance under the Company’s 1992 Stock Incentive Plan in excess of 5,400,000 shares (as adjusted for stock splits, stock dividends, and the like) or otherwise reserve for issuance or issue shares of common stock to employees or directors of the Company under any stock incentive plan or agreement not in effect on December 18, 2009; or

(12) prepay any indebtedness for borrowed money.

7.6 Miscellaneous.

(a) Transfer and Documentary Taxes. The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series G Preferred Stock or shares of Common Stock or other securities issued on account of Series G Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of shares of Series G Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Series G Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person with respect to any such shares or securities other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment

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described in this sentence unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(b) Delivery of Certificates. In the event that the holder of shares of Series G Preferred Stock shall not by written notice designate the address to which the certificate or certificates representing shares of Common Stock to be issued upon conversion of such shares should be sent, the Corporation shall be entitled to send the certificate or certificates representing such shares to the address of such holder shown on the records of the Corporation or any transfer agent for the Series G Preferred Stock.

(c) Transfer Agents. The Corporation may appoint, and from time to time discharge and change, a transfer agent of the Series G Preferred Stock. Upon any such appointment or discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series G Preferred Stock.

(d) Conversion Agents. The Corporation may appoint, and from time to time may replace, a conversion agent for the Series G Preferred Stock. Upon any such replacement of the conversion agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of Series G Preferred Stock.

(e) Transfer of Stock. The Series G Preferred Stock shall be transferable by the holders, provided that such transfer is made in compliance with applicable federal and state securities laws and any applicable agreements between the Corporation and the holders of Series G Preferred Stock.”

ARTICLE VIII

Preemptive Rights

The owners of shares of stock of the Corporation shall not have preemptive rights to subscribe for or purchase any part of new or additional issues of stock, or securities convertible into stock, of any class whatsoever, whether now or hereafter authorized, and whether issued for cash, property, services, by way of dividends, or otherwise.

ARTICLE IX

Cumulative Voting

Each shareholder entitled to vote at any election for directors shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for those election he has a right to vote, and no shareholder shall be entitled to cumulate his votes.

ARTICLE X

Limitation of Directors’ Liability

A director shall have no liability to the Corporation or its shareholders for monetary damages for conduct as a director, except for (a) any breach of the director’s duty of loyalty to the Corporation or its shareholders; (b) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law by the director; (c) conduct violating ORS 60.367; or (d) any transaction from which the director derives an improper personal benefit. If the Oregon Business Corporation Act is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director shall be eliminated or limited to the full extent permitted by the Oregon Business Corporation Act as so amended. Any repeal or modification of this Article shall not adversely affect any right or protection of a director that exists at the time of such repeal or modification and that extends to an act or omission of such director occurring prior to such repeal or modification.

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ARTICLE XI

Bylaws; Amendment of Articles

Section 1. Bylaws. The board of directors shall have full power to adopt, alter, amend or repeal the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power of the shareholders to adopt, alter, amend or repeal the Bylaws.

Section 2. Amendment of Articles. The Corporation reserves the right to amend, alter, change or repeal any provisions contained in its Articles of Incorporation in any manner now or hereafter prescribed or permitted by statute. All rights of shareholders of the Corporation are granted subject to this reservation.

ARTICLE XII

Directors

Section 1. Number of Directors. The Board of Directors shall consist of not less than four nor more than eleven, the exact number to be set as provided herein. Until increased or decreased as provided herein, the Board of Directors shall consist of six 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 of the Board of Directors of the Corporation.

Section 2. Board Composition.

Section 2.1. Classified Board. Subject to Section 2.2 of this Article IX, 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.

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.

Section 2.2. Declassified Board. Notwithstanding anything contained in Section 2 of this Article IX to the contrary, beginning at the 2011 Annual Meeting of Shareholders, directors will be elected annually for one-year terms, except that any director whose term expires at the 2012 Annual Meeting of Shareholders or the 2013 Annual Meeting of Shareholders will continue to hold office until the end of the term for which that Director was elected or appointed and until that Director’s successor has been elected and qualified, subject, to his or her prior death, resignation, retirement, disqualification, or removal from office. Accordingly, (i) at the 2011 Annual Meeting of Shareholders, the directors whose terms expire at that meeting will be elected to hold office for a one-year term expiring at the 2012 Annual Meeting of Shareholders; (ii) at the 2012 Annual Meeting of Shareholders, the directors whose terms expire at that meeting will be elected to hold office for a one-year term expiring at the 2013 Annual

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Meeting of Shareholders; and (iii) at the 2013 Annual Meeting of Shareholders, the directors whose terms expire at that meeting will be elected to hold office for a one-year term expiring at the 2014 Annual Meeting of Shareholders.

Section 2.3. Vacancies. 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. Any Director so chosen shall hold office until the next annual meeting of the Shareholders and until his or her successor has been duly elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 3. Removal of Directors. Directors may be removed with or without cause.

Amended:	November 15, 2004
	May 30, 2006
	January 22, 2008
	December 18, 2009
	June 15, 2010

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EX-10.1

Exhibit 10.1

BIOJECT MEDICAL TECHNOLOGIES INC.

RESTATED 1992 STOCK INCENTIVE PLAN*

(AS AMENDED AS OF SEPTEMBER 13, 2001, MARCH 13, 2003

APRIL 26, 2005, [AND] MARCH 8, 2007 AND MARCH 31, 2010)

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. Shares Subject to the Plan. Subject to adjustment as provided below and in paragraph 10, up to [3,900,000] 5,400,000 shares of Common Stock of the Company (the “Shares”) shall be offered and issued under the Plan. If an option or a stock appreciation right granted under the Plan expires, terminates or is cancelled, the unissued Shares subject to such option or stock appreciation right shall again be available under the Plan. If Shares sold or awarded as a bonus under the Plan are forfeited to the Company or repurchased by the Company, the number of Shares forfeited or repurchased shall again be available under the Plan.

3. Effective Date and Duration of Plan.

(a) Effective Date. The Plan shall become effective when adopted by the Board of Directors of the Company (the “Board”). However, no option granted under the Plan shall become exercisable until the Plan is approved by the affirmative vote of the holders of a majority of the Common Stock of the Company represented at a shareholder meeting at which a quorum is present, and any such awards under the Plan prior to such approval shall be conditioned on and subject to such approval. Subject to this limitation, options and stock appreciation rights may be granted and Shares may be awarded as bonuses or sold under the Plan at any time after the effective date and before termination of the Plan.

(b) Duration. No options or stock appreciation rights may be granted under the Plan, no stock bonuses may be awarded under the Plan, and no Shares may be sold pursuant to paragraph 8 of the Plan on or after [June 30, 2010] June 9, 2020. However, the Plan shall continue in effect until all Shares available for issuance under the Plan have been issued and all restrictions on such Shares have lapsed. The Board may suspend or terminate the Plan at any time, except with respect to options, stock appreciation rights and Shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding options, stock appreciation rights, any right of the Company to repurchase Shares or the forfeitability of Shares issued under the Plan.

4. Administration.

(a) The Plan shall be administered by a committee appointed by the Board consisting of not less than two directors (the “Committee”). The Committee shall determine and designate from time to time the individuals to whom awards shall be made, the amount of the awards, and the other terms and conditions of the awards; provided, however, that only the Board may amend or terminate the Plan as provided in paragraphs 3 and 13. At any time when the officers and directors of the Company are subject to Section 16(b) of the Securities Exchange Act of 1934

* Text in brackets and italics is to be deleted; text in bold and underline is new.

1

(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.

(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.

(c) Notwithstanding anything to the contrary contained in this paragraph 4, the Board of Directors may delegate to the Chief Executive Officer of the Company, as a one-member committee of the Board of Directors, the authority to grant awards to any eligible employee who is not, at the time of such grant, subject to the reporting requirements and liability provisions contained in Section 16 of the Securities Exchange Act of 1934 and the regulations thereunder.

5. Types of Awards; Eligibility. The Committee may, from time to time, take the following actions under the Plan: (i) grant Incentive Stock Options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options (“Nonstatutory Stock Options”) as provided in paragraph 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell Shares as provided in paragraph 8; and (v) grant stock appreciation rights as provided in paragraph 9. Any such awards may be made to employees (including employees who are officers or directors) of the Company or of any parent or subsidiary corporation of the Company, and to other individuals described in paragraph 1 who the Committee believes have made or will make an important contribution to the Company or its parent or subsidiaries; provided, however, that only employees of the Company or a parent or subsidiary shall be eligible to receive Incentive Stock Options under the Plan. 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. No employee may be granted options or stock appreciation rights under the Plan for more than 200,000 shares of Common Stock in any calendar year.

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

2

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), 10 and 11, 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

3

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 director’s 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 of grant or at any time thereafter, may extend the three-month and one-year expiration periods any length of time not later than the original expiration date of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Committee may determine.

(v) To the extent that the option of any deceased optionee or of any optionee whose employment or service terminates is not exercised within the

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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

5

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.

6

(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. 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 in all other share amounts set forth in 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 10 shall not apply with respect to transactions referred to in paragraph 11. 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.

11. Effect of Reorganization or Liquidation.

(a) Cash, Stock or Other Property for Stock. Except as provided in paragraph 11(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 11 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 11(a). The amount and price of converted options and stock appreciation rights shall be determined by adjusting the amount and price of the

7

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 11 shall be transferable only to the extent the related option or stock appreciation right is transferable.

12. 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.

13. 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), 10, 11 and 12, however, no change in an award already granted shall be made without the written consent of the holder of such award.

14. 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.

15. 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.

16. 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.

Amended:	September 13, 2001
	March 13, 2003
	April 26, 2005
	March 8, 2007
	March 31, 2010

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Ralph Makar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bioject Medical Technologies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2010

/s/ Ralph Makar

Ralph Makar

President and Chief Executive Officer

Bioject Medical Technologies Inc.

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Christine M. Farrell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bioject Medical Technologies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2010

/s/ Christine M. Farrell

Christine M. Farrell

Vice President of Finance and

Principal Financial Officer

Bioject Medical Technologies Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934 AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Bioject Medical Technologies Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ralph Makar, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/Ralph Makar

Ralph Makar

President and Chief Executive Officer

Bioject Medical Technologies Inc.

August 16, 2010

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Bioject Medical Technologies Inc. and will be retained by Bioject Medical Technologies Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934 AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Bioject Medical Technologies Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christine M. Farrell, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Christine M. Farrell

Christine M. Farrell

Vice President of Finance and

Principal Financial Officer

Bioject Medical Technologies Inc.

August 16, 2010

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to Bioject Medical Technologies Inc. and will be retained by Bioject Medical Technologies Inc. and furnished to the Securities and Exchange Commission or its staff upon request.