SB-2/A: Optional form for registration of securities to be sold to the public by small business issuers

Published on August 14, 1996


Exhibit 1.1


Form of

2,000,000 Units


MICROVISION, INC.

UNDERWRITING AGREEMENT

_______, 1996



Paulson Investment Company, Inc.
marion bass securities corporation
As Representatives of the
Several Underwriters
c/o Paulson Investment Company, Inc.
811 SW Front Avenue
Portland, Oregon 97204


Gentlemen:

Microvision, Inc., a Washington corporation (the "Company"), proposes
to sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as Representatives (the "Representatives") an
aggregate of 2,000,000 Units (the "Firm Units"). Each Unit will consist of one
share of the Company's Common Stock, no par value (the "Common Stock"), and one
Warrant to purchase one share of Common Stock, substantially in the form filed
as an exhibit to the Registration Statement (hereinafter defined) (the
"Warrants"). The respective amounts of the Firm Units to be so purchased by the
several Underwriters are set forth opposite their names in Schedule I hereto.
The Company also proposes to grant to the Representatives an option to purchase
in the aggregate up to 300,000 additional Units, identical to the Firm Units
(the "Option Units"), as set forth below. The offer and sale of the Firm Units
and the Option Units pursuant to this Underwriting Agreement (the "Agreement")
is referred to herein as the "Offering."

As the Representatives, you have advised the Company that (a) you are
authorized to enter into this Agreement for yourselves as Representatives and on
behalf of the several Underwriters, (b) the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Units set
forth opposite their respective names in Schedule I, and (c) you may purchase
the Option Units, as set forth below. The Firm Units and the Option Units (to
the extent the aforementioned option is exercised) are herein collectively
called the "Units."




In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:

1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The company represents and warrants to each of the Underwriters as
follows:

(a) A registration statement on Form SB-2 (File No. 333-5276-LA) with
respect to the Units has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b), or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Units, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus."

(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Washington, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Prospectus. Except as described in the Prospectus,
the Company does not own and never has owned any interest in any corporation or
other business entity. The Company is duly qualified to transact business in
all jurisdictions in which the failure to be so qualified would have a material
adverse effect on the earnings, business, management, properties, assets,
rights, operations or condition (financial or otherwise) or prospects ("Business
and Properties") of the Company.



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(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable and
have been issued and sold by the Company in compliance in all material respects
with applicable Federal and state securities laws; the Common Stock to be
included in the Units has been duly authorized and when issued and paid for as
contemplated herein will be validly issued, fully paid and non-assessable; and
no preemptive rights of shareholders exist with respect to any security of the
Company or the issue and sale thereof. Other than as described in the
Registration Statement, neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated by this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock or other securities
of the Company.

(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. The Common Stock and the Warrants conform
to the description thereof contained in the Registration Statement. The form of
certificates for the Common Stock and Warrants conform to the corporate law of
the State of Washington. Except as disclosed in the Prospectus, there are no
outstanding rights, options or warrants for the purchase of any securities of
the Company, and the Company is not a party to any agreement pursuant to which
any person has the right to purchase any securities of the Company. Effective
immediately following the Closing Date (hereinafter defined), there will be no
person holding any anti-dilution rights with respect to the securities of the
Company.

(e) Except as described in the Registration Statement, the Company
has not (i) issued any capital stock or any options, warrants, convertible
securities or other rights to purchase its capital stock, (ii) increased its
long-term or short-term debt, or (iii) declared or paid any dividends on its
capital stock.

(f) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Units nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform to, the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendments thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment


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or supplement, in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of any Underwriter through either of
the Representatives, specifically for use in the preparation thereof.

(g) The financial statements of the Company, together with related
notes and schedules as set forth in the Registration Statement, present fairly
the financial position and the results of operations and cash flows of the
Company as of the indicated dates and for the indicated periods. Such financial
statements and related schedules have been prepared in accordance with generally
accepted accounting principles, consistently applied through the periods
involved, except as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data of the Company included in the Registration Statement
present fairly the information shown therein and such data have been compiled on
a basis consistent with the financial statements presented therein.

(h) Price Waterhouse LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations.

(i) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company before any court or
administrative agency or otherwise which if determined adversely to the Company
might result in any material adverse change in the Business and Properties of
the Company or prevent the consummation of the transactions contemplated hereby.

(j) The Company has good and marketable title to all of the
properties and assets reflected in the financial statements (or as described
in the Registration Statement), subject to no lien, mortgage, pledge, charge
or encumbrance of any kind except those reflected in such financial
statements (or as described in the Registration Statement) or which are not
material in amount. The Company occupies its leased properties under valid
and binding leases conforming in all material respects to the description
thereof set forth in the Registration Statement.

(k) The Company has filed all Federal, state and foreign income tax
returns which have been required to be filed and has paid all taxes indicated by
said returns and all assessments received by it to the extent that such taxes
have become due and are not being contested in good faith. All tax liabilities
have been adequately provided for in the financial statements of the Company.

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(l) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the Business and Properties of the
Company, whether or not occurring in the ordinary course of business, and there
has not been any material transaction entered into or any material transaction
that is probable of being entered into by the Company, other than transactions
in the ordinary course of business and changes and transactions described in the
Registration Statement, as it may be amended or supplemented. The Company has
no material contingent obligations which are not disclosed in the Company's
financial statements included in the Registration Statement or elsewhere in the
Prospectus, as it may be amended or supplemented.

(m) The Company is not, nor, with the giving of notice or lapse of
time or both, will it be, in violation of or in default under its articles of
incorporation or bylaws or under any agreement, lease, contract, indenture or
other instrument or obligation to which it is a party or by which it, or any of
its properties, is bound and which default is material in respect of the
Business and Properties of the Company. The execution and delivery of this
Agreement and the consummation of the transactions contemplated herein and the
fulfillment of the terms hereof will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company is
a party, or of the articles of incorporation or bylaws of the Company or any
order, rule or regulation applicable to the Company of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction over the Company or its assets.

(n) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Units for public offering by
the Underwriters under state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.

(o) The Company holds or has licensed the rights to all material
patents, patent rights, trademarks, trade names, copyrights, trade secrets and
licenses of any of the foregoing (collectively, "Intellectual Property Rights")
that are necessary for the conduct of its business as conducted and as proposed
to be conducted in accordance with the description contained in the

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Prospectus; there is no claim pending or, to the knowledge of the Company,
threatened against the Company alleging any infringement of Intellectual
Property Rights, or any material violation of the terms of any license
relating to Intellectual Property Rights, nor does the Company know of any
basis for any such claim. The Company knows of no material infringement by
others of Intellectual Property Rights owned by or licensed to the Company.

(p) The Company has obtained, is in compliance in all material
respects with and maintains in full force and effect, all material licenses,
certificates, permits, orders or other, similar authorizations granted or issued
by any governmental agency (collectively "Government Permits") required to
conduct its business as it is presently conducted. No proceeding to revoke,
limit or otherwise materially change any Government Permit has been commenced
or, to the Company's knowledge, is threatened against the Company, the Human
Interface Technology Lab (the "HITL") or any supplier to the Company with
respect to materials supplied to the Company, and the Company has no reason to
anticipate that any such proceeding will be commenced against the Company, the
HITL or any such supplier. Except as disclosed or contemplated in the
Prospectus, the Company has no reason to believe that any pending application
for a Government Permit will be denied or limited in a manner inconsistent with
the Company's business plan as described in the Prospectus.

(q) The Company is in compliance with all laws, rules, regulations,
orders of any court or administrative agency, operating licenses or other
requirements imposed by any governmental body applicable to it, including, to
its knowledge and without limitation, all applicable laws, rules, regulations,
licenses or other governmental standards relating to the protection of the
environment or applicable to the industry in which the Company operates; and the
conduct of the business of the Company, as described in the Prospectus, will not
cause the Company to be in violation of any such requirements.

(r) Neither the Company nor, to the Company's best knowledge, any of
its affiliates has taken or intends to take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Units.

(s) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations of the Commission thereunder.

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(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

(u) The Company carries, or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of its business and the
value of its properties and as is customary for companies engaged in similar
industries.

(v) The Company is not a party to, and the Company (including any
predecessor) has not, within five years of the effective date of the
Registration Statement, been a party to any pension plan governed by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").

(w) The Company is in compliance with all provisions of Section 1 of
Laws of Florida, Chapter 92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS
WITH CUBA.

(x) The Warrants have been duly authorized for issuance to the
various purchasers of the Units and will, when issued, possess rights,
privileges and characteristics as represented in the most recent form of
Warrants filed as an exhibit to the Registration Statement; the securities to be
issued upon exercise of the Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Warrants, will be duly and validly
issued, fully paid, non-assessable and free of preemptive rights, and all
corporate action required to be taken for the authorization and issuance of the
Warrants, and the securities to be issued upon their exercise, have been validly
and sufficiently taken.

(y) The Representatives' Warrants (as defined in paragraph (d) of
Section 2 hereof) have been duly authorized for issuance to the Representatives
and will, when issued, possess rights, privileges, and characteristics as
represented in the most recent form of Representatives' Warrants filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Representatives' Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Representatives' Warrants, will be
duly and validly issued, fully paid, non-assessable and free of preemptive
rights, and all corporate action required to be taken for the

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authorization and issuance of the Representatives' Warrants, and the
securities to be issued upon their exercise, have been validly and
sufficiently taken.

(z) The Company has caused each officer and director and each person
who owns, beneficially or of record, 5% or more of the Common Stock outstanding
immediately prior to this offering to furnish to the Representatives, on or
prior to the date of this Agreement, a letter or letters, in form and substance
satisfactory to the Underwriters ("Lockup Agreements"), pursuant to which each
such person shall agree (A) not to offer to sell, sell, contract to sell, sell
short or otherwise dispose of any shares of Common Stock or other capital stock
of the Company, or any other securities convertible, exchangeable or exercisable
for Common Stock or derivatives of Common Stock owned by such person, or request
the registration for the offer or sale of any of the foregoing for a period of
one year after the date of this Agreement, directly or indirectly, except with
the prior written consent of Paulson Investment Company, Inc. and (B) to provide
prior written notice to the Representatives of any offers to sell, sales,
contracts to sell, short sales or other dispositions of Common Stock pursuant to
Rule 144 under the Act or any similar provisions enacted subsequent to the date
of this Agreement, for a period of one year from the date of this Agreement.

(aa) The Company has not at any time during the last five years (i)
made any unlawful contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.

(ab) Except as disclosed in the Prospectus and to the Underwriters,
neither the Company nor any of its officers, directors or affiliates have caused
any person, other than the Underwriters, to be entitled to reimbursement or
compensation of any kind, including, without limitation, any compensation that
would be includable as underwriter compensation under the NASD's Corporate
Financing Rule with respect to the offering of the Units, as a result of the
consummation of such offering based on any activity of such person as a finder,
agent, broker, investment adviser or other financial service provider.

(ac) The Common Stock and the Warrants have been approved for
inclusion, subject to official notice of issuance, in the Nasdaq National
Market.

(ad) The Company took all action necessary in accordance with
Washington law, its Articles of Incorporation and

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its Amended and Restated Bylaws to convene its 1996 Annual Meeting of
Shareholders held on August 9, 1996, at which meeting all action required
under Washington law was taken to approve (a) the Restated Articles of
Incorporation of the Company, (b) the 1996 Stock Option Plan and the 1996
Independent Director Stock Plan, (c) the 1-for-3.2 reverse split of the
capital stock of the Company, and to elect the number of directors authorized
by the Restated Articles of Incorporation, the Amended and Restated Bylaws or
resolution adopted pursuant to such articles or bylaws.

2. PURCHASE, SALE AND DELIVERY OF THE UNITS.

(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_________ per Unit, the number of Firm
Units set forth opposite the name of each underwriter in Schedule I hereof,
subject to adjustment in accordance with Section 9 hereof.

(b) Payment for the Firm Units to be sold hereunder is to be made in
New York Clearing House funds and, at the option of the Representatives, by
certified or bank cashier's checks drawn to the order of the Company or bank
wire to an account specified by the Company against either uncertificated or
certificated delivery of the Firm Units to the Representatives for the several
accounts of the Underwriters, which delivery, if certificated, shall take place
in such location in New York, New York as may be specified by the
Representatives. Such payment is to be made at the offices of Tonkon, Torp,
Galen, Marmaduke & Booth, 888 S.W. Fifth Avenue, Portland, Oregon 97204-2099, at
7:00 a.m., Pacific time, on the third business day after the date of this
Agreement or at such other time and date not later than five business days
thereafter as the Representatives and the Company shall agree, such time and
date being herein referred to as the "Closing Date." (As used herein, "business
day" means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and not permitted by law or
executive order to be closed.) Except to the extent uncertificated Firm Units
are delivered at closing, the certificates for the Firm Units will be delivered
in such denominations and in such registrations as the Representatives shall
request in writing not later than the second full business day prior to the
Closing Date, and will be made available for inspection by the Representatives
at least one business day prior to the Closing Date.

(c) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the

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Representatives to purchase the Option Units at the price per Unit as set
forth in paragraph (a) of this Section 2. The option granted hereby may be
exercised in whole or in part by giving written notice (i) at any time before
the Closing Date and (ii) only once thereafter within 45 days after the date
of this Agreement, by the Representatives to the Company setting forth the
number of Option Units as to which the Representatives are exercising the
option, the names and denominations in which the Option Units are to be
registered and the time and date at which certificates representing such
Units are to be delivered. The time and date at which certificates for
Option Units are to be delivered shall be determined by the Representatives
but shall not be earlier than three nor later than ten full business days
after the exercise of such option, nor in any event prior to the Closing Date
(such time and date being herein referred to as the "Option Closing Date").
If the date of exercise of the option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The option with respect to the Option Units granted hereunder
may be exercised only to cover over-allotments in the sale of the Firm Units
by the Underwriters. The Representatives may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the
Company. To the extent, if any, that the option is exercised, payment for
the Option Units shall be made on the Option Closing Date in New York
Clearing House funds and, at the option of the Representatives, by certified
or bank cashier's check drawn to the order of the Company or by bank wire to
an account specified by the Company against delivery of certificates therefor
at such location in New York, New York as may be specified by the
Representatives.

(d) In addition to the sums payable to the Representatives as
provided elsewhere herein, the Representatives shall be entitled to receive at
the closing, for themselves alone and not as representatives of the
Underwriters, as additional compensation for their services, purchase warrants
(the "Representatives' Warrants") for the purchase of up to 200,000 Units at
a price of $__________ per Unit, upon the terms and subject to adjustment as
described in the form of Representatives' Warrants filed as an exhibit to the
Registration Statement.

3. OFFERING BY THE UNDERWRITERS.

It is understood that the several Underwriters are to make a public
offering of the Firm Units as soon as the Representatives deem it advisable to
do so. The Firm Units are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Units are purchased pursuant
to Section 2 hereof, the

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Representatives will offer them to the public on the foregoing terms.

It is further understood that the Representatives will act as
representatives of the Underwriters in the offering and sale of the Units in
accordance with an Agreement Among Underwriters entered into by the
Representatives and the several other Underwriters.

4. COVENANTS OF THE COMPANY.

The Company covenants and agrees with the several Underwriters that:

(a) The Company will (A) prepare and timely file with the Commission
under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved
by the Representatives containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.

(b) The Company will advise the Representatives promptly (A) when any
post-effective amendment to the Registration Statement shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if any is
issued.

(c) The Company will cooperate with the Representatives in
endeavoring to qualify the Units for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents as are or
may be required to continue such

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qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Units.

(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, three signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.

(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so as to
permit the completion of the distribution of the Units as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with the law.

(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the requirements
of the Act and Rule 158 of the Rules and Regulations and will advise the
Representatives in writing when such statement has been so made available.

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(g) The Company will (i) deliver to its shareholders annual reports
containing financial statements audited by its independent accountants and
quarterly reports concerning unaudited financial information for each of the
first three quarters of each fiscal year, and (ii) for a period of five years
from the Closing Date, deliver to the Representatives copies of annual reports
and copies of all other documents, reports and information furnished by the
Company to its shareholders or filed with any securities exchange or the NASD
pursuant to the requirements of such exchange or association or with the
Commission pursuant to the Act or the Exchange Act. The Company will deliver to
the Representatives similar reports with respect to significant subsidiaries, as
that term is defined in the Rules and Regulations, which are not consolidated in
the Company's financial statements.

(h) Except with the prior written consent of the Representatives,
which consent will not be unreasonably withheld, no offering, sale, short sale
or other disposition of any shares of Common Stock of the Company or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock or derivative of Common Stock (or any agreement for such, other than
pursuant to the Company's 1996 Stock Option Plan and 1996 Independent Director
Stock Plan) will be made for a period of one year after the date of this
Agreement, directly or indirectly, by the Company otherwise than hereunder.

(i) The Company will use its best efforts to maintain the listing of
the Common Stock and the Warrants on the Nasdaq National Market.

(j) The Company will apply the net proceeds of its sale of the Units
as set forth in the Prospectus and will file such reports with the Commission
with respect to the sale of the Units and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.

(k) The Company will not invest, or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company or any of its subsidiaries to register as an investment
company under the 1940 Act.

(l) The Company will maintain the currency of the prospectus forming
a part of an effective registration statement filed with respect to the Common
Stock issuable upon exercise of the Warrants and the Representatives' Warrants
at all times during which any of the Warrants or Representatives' Warrants
remain outstanding.

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(m) The Company will, if it commences to engage in any business with
the government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes in
any material way, provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.

(n) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.

(o) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.

5. COSTS AND EXPENSES.

(a) The Representatives shall be entitled to receive from the
Company, for themselves alone and not as representatives of the Underwriters, a
nonaccountable expense allowance equal to 3% of the aggregate public offering
price of Units sold to the Underwriters in connection with the Offering. The
Representatives shall be entitled to withhold this allowance on the Closing Date
(less the $35,000 advance against such amount that has been paid by the Company)
with respect to Units delivered on the Closing Date and to require the Company
to make payment of this allowance on the Option Closing Date with respect to
Units delivered on the Option Closing Date.

(b) In addition to the payment described in paragraph (a) of this
Section 5, the Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limitation, the following: accounting fees of the Company; the fees and
disbursements of counsel for the Company; the cost of printing and delivering
to, or as requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters'
Selling Memorandum, the Underwriters' Invitation Letter, the Listing
Application, the Blue Sky Survey and any supplements or amendments thereto; the
filing fees of the Commission; the filing fees and expenses (including legal
fees and disbursements) incident to securing any required review by the NASD of
the terms of the sale of the Units; the Listing Fee of the Nasdaq National
Market; and the expenses, including the fees and disbursements

14

of counsel for the Underwriters, incurred in connection with the
qualification of the Units under State securities or Blue Sky laws. Any
transfer taxes imposed on the sale of the Units to the several Underwriters
will be paid by the Company. The Company shall not, however, be required to
pay for any other of the Underwriters' expenses (other than those related to
qualification under NASD regulations and state securities or Blue Sky laws),
except that if this Agreement shall not be consummated, then the Company
shall reimburse the several Underwriters for reasonable accountable
out-of-pocket expenses, including fees and disbursements of counsel, incurred
in connection with investigating, marketing and preparing to market the Units
or in contemplation of performing their obligations hereunder (less the
$35,000 advance that has been paid by the Company); but the Company shall not
in any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the Units.

6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS.

The several obligations of the Underwriters to purchase the Firm Units
on the Closing Date and the Option Units, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of its covenants and obligations
hereunder and to the following additional conditions:

(a) All post-effective amendments to the Registration Statement and
any subsequent registration statement filed pursuant to Rule 462(b) of the Rules
and Regulations shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company, shall be contemplated
by the Commission and no injunction, restraining order, or order of any nature
by a Federal or state court of competent jurisdiction shall have been issued as
of the Closing Date which would prevent the issuance of the Units.

(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Stoel Rives LLP,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be,

15

addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that:

(i) The Company has been duly organized and is validly existing
as a corporation under the laws of the State of Washington, with corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company is duly qualified to
transact business in all jurisdictions in which the conduct of its business
requires such qualification or in which the failure to qualify would have a
materially adverse effect upon the business of the Company.

(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Common Stock have been duly authorized; the outstanding shares of
the Common Stock have been duly authorized and validly issued and are fully paid
and non-assessable; all of the securities of the Company conform to the
description thereof in the Prospectus; the certificates for the Common Stock and
Warrants, assuming they are in the form filed with the Commission, are in due
and proper form; the shares of Common Stock included in the Units to be sold by
the Company pursuant to this Agreement, including shares of Common Stock to be
sold as a part of the Option Units, have been duly authorized and, upon issuance
and delivery thereof and payment therefor as contemplated in this Agreement and
the Registration Statement, will be validly issued, fully paid and non-
assessable; no preemptive rights of shareholders exist with respect to any of
the Common Stock of the Company or the issuance or sale thereof pursuant to any
applicable statute or the provisions of the Company's charter documents or, to
such counsel's knowledge, pursuant to any contractual obligation.

(iii) The Warrants and the Representatives' Warrants have been
authorized for issuance to the purchasers of Units or the Representatives, as
the case may be, and will, when issued, possess rights, privileges, and
characteristics as represented in the most recent form of Warrants or
Representatives' Warrants, as the case may be, filed as an exhibit to the
Registration Statement; the securities to be issued upon exercise of the
Warrants or Representatives' Warrants, as the case may be, when issued and
delivered against payment therefor in accordance with the terms of the Warrants
or Representatives' Warrants, will be duly and validly issued, fully paid, non-
assessable and free of preemptive rights, and all corporate action required to
be taken for the authorization and issuance of the Warrants, the
Representatives' Warrants, and the securities to be issued upon their exercise,
has been validly and sufficiently taken.

16

(iv) Except as described in the Prospectus, to the knowledge of
such counsel, there are no outstanding securities of the Company convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of capital stock of the Company and there are no outstanding or
authorized options, warrants or rights of any character obligating the Company
to issue any shares of its capital stock or any securities convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company or any
other person has the right, contractual or otherwise, which has not been
satisfied or effectively waived, to cause the Company to sell or otherwise issue
to them, or to permit them to underwrite the sale of, any Common Stock, or the
right to have any Common Stock or other securities of the Company included in
the Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.

(v) The Registration Statement has become effective under the
Act and, to the best knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.

(vi) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the Rules and Regulations (except that such
counsel need not express an opinion as to the financial statements and related
schedules therein).

(vii) The statements under the captions "Management-Employment
Agreements," "Management-Benefit Plans," "Description of Securities," and
"Shares Eligible for Future Sale" in the Prospectus and in Item 24 of the
Registration Statement, insofar as such statements constitute a summary of
documents referred to therein or matters of law, accurately summarize in all
material respects the information called for with respect to such documents and
matters.

(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are accurately summarized in all
material respects.

(ix) Such counsel knows of no legal or governmental proceedings
pending or threatened against the Company.

17

(x) such counsel has reviewed the patent, patent prosecution
files and patent applications relating to the technology licensed to the Company
by the University of Washington as described in the Prospectus and, on the basis
of such review and such other investigation as such counsel deems relevant,
those portions of the Prospectus that describe the patent and patent
applications of the University of Washington accurately describe such patents
and patent applications and, to the knowledge of such counsel, there are no
pending or threatened actions, suits or proceedings by others (including
governmental authorities) relating to claims that either the Company or the
University of Washington is infringing or otherwise violating any patent rights
of others.

(xi) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or bylaws of the
Company, or any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may be bound.

(xii) This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms, except for those provisions relating
to indemnity or contribution for liabilities arising under the Act.

(xiii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein
(other than as may be required by the NASD or as required by state securities
and Blue Sky laws as to which such counsel need not express an opinion) except
such as have been obtained or made, specifying the same.

(xiv) The Company is not, and will not become, as a result of the
transactions contemplated by this Agreement and application of the net proceeds
therefrom as described in the Prospectus, required to register as an investment
company under the 1940 Act.

In rendering such opinion, such counsel may rely, as to matters
governed by laws of states other than Washington or Federal laws, on local
counsel in such jurisdictions, provided that in each case such counsel shall
state that they believe that they and the Underwriters are justified in relying
on such other counsel. In addition to the matters set forth above, the opinion
of Stoel Rives LLP shall also include a statement to the effect


18

that nothing has come to the attention of such counsel that has caused it to
believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated
therein pursuant to Rule 430A under the Act) and as of the Closing Date or
the Option Closing Date, as the case may be, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii)
the Prospectus, or any supplement thereto, on the date it was filed pursuant
to the Rules and Regulations and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading (except that such counsel need not express any view as to the
financial statements and related schedules therein). With respect to such
statement, Stoel Rives LLP may state that its belief is based upon the
procedures set forth therein, but is without independent check and
verification.

(c) The Representatives shall have received from Tonkon, Torp,
Galen, Marmaduke & Booth, counsel for the Underwriters, an opinion dated the
Closing Date or the Option Closing Date, as the case may be, substantially to
the effect specified in subparagraphs (i), (v) and (vi) of paragraph (b) of
this Section 6. In rendering such opinion, Tonkon, Torp, Galen, Marmaduke &
Booth may rely as to all matters governed other than by the laws of the State
of Oregon or Federal laws on the opinion of counsel referred to in paragraph
(b) of this Section 6. In addition to the matters set forth above, such
opinion shall also include a statement to the effect that nothing has come to
the attention of such counsel that has caused them to believe that (i) the
Registration Statement, at the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to
Rule 430A under the Act) and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and (ii) the Prospectus, or
any supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
light of circumstances under which they were made, not misleading (except
that such counsel need not express any view as to financial statements and
related schedules therein). With respect to such statement, Tonkon, Torp,
Galen, Marmaduke & Booth may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.

19

(d) The Representatives shall have received at or prior to the
Closing Date from Tonkon, Torp, Galen, Marmaduke & Booth a memorandum or
summary, in form and substance satisfactory to the Representatives, with respect
to the qualification for offering and sale by Underwriters of the Units under
the state securities or Blue Sky laws of such jurisdictions as the
Representatives may reasonably have designated to the Company.

(e) The Representatives, on behalf of the several Underwriters, shall
have received, on each of the dates hereof, the Closing Date and the Option
Closing Date, as the case may be, a letter dated the date hereof, the Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, of Price Waterhouse LLP confirming that
they are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form and in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations, and containing such other statements and information as are
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.

(f) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer of the Company to the effect that, as of the Closing
Date or the Option Closing Date, as the case may be:

(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
the best of his knowledge, contemplated by the Commission;

(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;

(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;

(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary

20


in order to make the statements therein not misleading, and since the
effective date of the Registration Statement no event has occurred which
should have been set forth in a supplement to or an amendment of the
Prospectus which has not been set forth in such supplement or amendment; and

(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the Business and Properties of the Company,
whether or not arising in the ordinary course of business.

(g) The Company shall have furnished to the Representative such
further documents confirming the representations and warranties, covenants and
conditions contained herein and related matters as the Representatives may
reasonably have requested.

(h) The Lockup Agreements described in Section 4(j) shall have been
executed and delivered, and shall be in full force and effect.

(i) The Common Stock and Warrants shall have been approved for
inclusion, subject to official notice of issuance, in the Nasdaq National
Market.

The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Tonkon, Torp,
Galen, Marmaduke & Booth, counsel for the Underwriters.

If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing
(including by facsimile transmission) at or prior to the Closing Date or the
Option Closing Date, as the case may be. In such event, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).

7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.

The obligations of the Company to sell and deliver the portion of the
Units required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration

21


Statement shall have been issued and in effect or proceedings therefor
initiated or threatened.

8. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities to which
such Underwriter or any such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they were made; and will reimburse each Underwriter and each such controlling
person in accordance with Section 8(c) for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
offering of the Units, whether or not such Underwriter or controlling person is
a party to any action or proceeding; PROVIDED, HOWEVER, that the Company will
not be liable in any such case to the extent that (i) any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof or, (ii) with respect to the
Preliminary Prospectus, any such loss, claim, damage or liability of such
Underwriter relates to the failure of such Underwriter to deliver a copy of the
Prospectus at, or prior to, the confirmation of the sale of the Units to the
person alleging such loss, claim, damage or liability, where the alleged untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.

(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise,

22

insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
under which they were made; and will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; PROVIDED, HOWEVER, that
each Underwriter will be liable in each case to the extent, and only to the
extent, that (i) such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof or, (ii) with respect to the Preliminary Prospectus, any
such loss, claim, damage or liability relates to the failure of such
Underwriter to deliver a copy of the Prospectus at, or prior to, the
confirmation of the sale of the Units to the person alleging such loss,
claim, damage or liability, where the alleged untrue statement or omission of
a material fact contained in such Preliminary Prospectus was corrected in the
Prospectus. This indemnity agreement will be in addition to any liability
which such Underwriter may otherwise have.

(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and such
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such

23

indemnified party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay as
incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention
of such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and
employ counsel acceptable to the indemnified party within a reasonable period
of time after notice of commencement of the action. It is understood that
the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm for all such indemnified parties.
Such firm shall be designated in writing by Paulson in the case of parties
indemnified pursuant to Section 8(a) and by the Company in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. In addition, the indemnifying party will not,
without the prior written consent of the indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding in which indemnification may be sought
hereunder unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action or proceeding.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is

24

appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Units purchased by such Underwriter, and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
fraudulent misrepresentation. The Underwriters' obligations in this Section
8(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.

(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that

25

any other contributing party may join him or it as an additional defendant in
any such proceeding in which such other contributing party is a party.

(f) Any losses, claims, damages or liabilities for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, or expenses are incurred. The indemnity and
contribution agreements contained in this Section 8 and the representations and
warranties of the Company set forth in this Agreement shall remain operative and
in full force and effect, regardless of (i) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter, the
Company, its directors or officers or any persons controlling the Company, (ii)
acceptance of any Units and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company, shall
be bound by and entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.

9. DEFAULT BY UNDERWRITERS.

If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Units
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), the
Representatives shall use their reasonable efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company upon the terms set forth herein, the Firm Units or Option
Units, as the case may be, which the defaulting Underwriter or Underwriters
failed to purchase. If during such 36 hours the Representatives shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option Units, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of Firm
Units or Option Units, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Units or Option Units, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of Firm Units or Option Units, as the case may be, with respect
to which such default shall occur equals or exceeds 10% of the Firm Units or
Option Units, as the case may be, covered hereby, the Company or the
Representatives shall have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement

26


without liability on the part of the non-defaulting Underwriters or of the
Company, except for expenses to be paid by the Company under Section 5 hereof
and except to the extent provided in Section 8 hereof. In the event of a
default by any Underwriter or Underwriters, as set forth in this Section 9, the
Closing Date or Option Closing Date, as the case may be, may be postponed for
such period, not exceeding seven days, as the Representatives, may determine in
order that the required changes in the Registration Statement or in the
Prospectus or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.

10. NOTICES.

All communications hereunder shall be in writing and, except as
otherwise provided herein, shall be mailed, delivered, telecopied or telegraphed
and confirmed as follows:

if to the Representatives or the Underwriters:

Paulson Investment Company, Inc.
811 SW Front Avenue
Portland, Oregon 97204
Attention: Chester L.F. Paulson


with a copy to:

Tonkon, Torp, Galen,
Marmaduke & Booth
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, Oregon 97204
Attention: Thomas P. Palmer

if to the Company:

Microvision, Inc.
2203 Airport Way South, Suite 100
Seattle, Washington 98134
Attention: Richard F. Rutkowski

with a copy to:

Stoel Rives LLP
3600 Union Square
600 University Street
Seattle, Washington 98101-3197
Attention: Ronald J. Lone

27

11. TERMINATION.

This Agreement may be terminated by the Representatives by notice to
the Company as follows:

(a) at any time prior to the earlier of (i) the time the Units are
released by the Representatives for sale by notice to the Underwriters, or (ii)
11:30 a.m. on the first business day following the date of this Agreement;

(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
Business and Properties of the Company, whether or not arising in the ordinary
course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in the Representatives'
reasonable judgment, make it impracticable to market the Units or to enforce
contracts for the sale of the Units, (iii) the Dow Jones Industrial Average
shall have fallen by 15 percent or more from its closing price on the day
immediately preceding the date that the Registration Statement is declared
effective by the Commission, (iv) suspension of trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (v) the enactment, publication, decree or
other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in the Representatives' opinion materially
and adversely or may materially and adversely affect the business or operations
of the Company, (vi) declaration of a banking moratorium by United States or New
York State authorities; (vii) the suspension of trading of the Common Stock or
the Warrants by the Commission or the NASD on the Nasdaq National Market or
(viii) the taking of any action by any governmental body or agency in respect of
its monetary or fiscal affairs which in the Representatives' reasonable opinion
has a material adverse effect on the securities markets in the United States; or

(c) as provided in Sections 6 and 9 of this Agreement.

12. SUCCESSORS.

This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and their respective

28

successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person
will have any right or obligation hereunder. No purchaser of any of the
Units from any Underwriter shall be deemed a successor or assign merely
because of such purchase.

13. INFORMATION PROVIDED BY UNDERWRITERS.

The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), the legends required by Item
502(d) of Regulation S-B under the Act and the information under the caption
"Underwriting" in the Prospectus.

14. MISCELLANEOUS.

The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Units under
this Agreement.

This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Oregon. All disputes relating to this Agreement shall
be adjudicated before a court located in Multnomah County, Oregon to the
exclusion of all other courts that might have jurisdiction.

If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.

Very truly yours,

MICROVISION, INC.


By
-------------------------------------------
Chief Executive Officer

29

The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.

PAULSON INVESTMENT COMPANY, INC.

As Representative of the several
Underwriters listed on Schedule I


By
-------------------------------
Authorized Officer


marion bass securities corporation

As Representative of the several
Underwriters listed on Schedule I



By
-------------------------------
Authorized Officer

30

SCHEDULE I

SCHEDULE OF UNDERWRITERS



NUMBER OF FIRM UNITS
UNDERWRITER TO BE PURCHASED

Paulson Investment Company, Inc.

marian bass securities corporation




------------------
Total ------------


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