EXHIBIT 10.3

 

THIS NOTE, AND THE SECURITIES ISSUABLE PURSUANT TO A CONVERSION OF THIS NOTE,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”).  THIS NOTE, AND THE SECURITIES ISSUABLE PURSUANT TO A CONVERSION OF THIS
NOTE, HAVE BEEN ACQUIRED WITHOUT A VIEW TO DISTRIBUTION AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THIS NOTE, OR FOR THE SECURITIES ISSUABLE PURSUANT TO
A CONVERSION OF THIS NOTE, AS THE CASE MAY BE, UNDER THE ACT AND UNDER ANY
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL FOR THE HOLDER
(CONCURRED IN BY LEGAL COUNSEL FOR THE CORPORATION) THAT SUCH REGISTRATION IS
NOT REQUIRED AS TO SUCH SALE OR OFFER

 

Form of Convertible Subordinated Promissory Note

 

$                            

 

Tualatin, Oregon

 

 

As of December 5, 2007

 

For value received, Bioject Medical Technologies Inc., an Oregon corporation
(the “Company”), promises to pay to                                     (the
“Holder”) the principal sum of
                                                         dollars
($                      ), together with interest thereon as set forth herein
(this “Note”).

 

The following is a statement of the rights of the Holder and the conditions to
which this Note is subject, and to which the Holder, by the acceptance of this
Note, agrees:

 

1.                                      Payment Terms.  The unpaid principal
balance from time to time outstanding under this Note shall bear interest at the
rate of 8% per annum.  The outstanding principal balance of and accrued but
unpaid interest under this Note shall be repaid by the Company on or before
May 15, 2009 (the “Maturity Date”) unless prepaid pursuant to the terms hereof. 
Except as otherwise provided herein, both principal and interest shall be
payable on the Maturity Date in lawful money of the United States of America to
the Holder at its offices in 20245 S.W. 95th Ave., Tualatin, OR 97062 (or at
such other location as shall be designated by the Holder in a written notice to
the Company), in same day funds.

 

2.                                      Events of Default.  If any of the events
specified in this Section 2 shall occur (herein individually referred to as an
“Event of Default”), the Holder of the Note may, so long as such condition
exists, declare the entire principal and unpaid accrued interest hereon
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived:

 

(a)                                 Default in the payment of the principal and
unpaid accrued interest of this Note when due and payable if such default is not
cured by the Company within ten (10) business days after the Holder has given
the Company written notice of such default; or

 

(b)                                 Any breach by the Company of any
representation, warranty, or covenant in this Note; provided, that, in the event
of any such breach, to the extent such breach is susceptible to cure, such
breach shall not have been cured by the Company within ten (10) business days
after written notice to the Company of such breach; or

 

(c)                                  The Company shall (i) apply for or consent
to the appointment of a receiver, trustee, liquidator or custodian of itself or
of all or a substantial part of its property, (ii) make a general assignment for
the benefit of its or any of its creditors, (iii) be dissolved or liquidated in
full or in part, (iv) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the

 

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appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it or (v) take any action
for the purpose of effecting any of the foregoing; or

 

(d)                                 Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of the Company or of all or a
substantial part of the property thereof, or an involuntary case or other
proceedings seeking liquidation, reorganization or other relief with respect to
the Company or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered, or such case or proceeding shall not be dismissed, discharged or
stayed within 60 days of commencement.

 

Notwithstanding anything to the contrary contained herein, if any of the events
described in Sections 2(c) or (d) occur, this Note shall be automatically
accelerated and the entire principal and unpaid accrued interest thereon shall
immediately become due and payable without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived.

 

3.                                      Prepayment.  Prior to the Maturity Date,
this Note may not be prepaid except with the written consent of Holder.

 

4.                                      Conversion.

 

4.1                               Voluntary and Automatic Conversion.

 

4.1.1                     Holder, at his sole option and upon giving written
notice to the Company, may at any time prior to the payment of this Note in
full, convert the outstanding principal and unpaid interest under this Note into
the number of shares of the Company’s Common Stock equal to the sum of the
outstanding principal balance of this Bridge Note plus all accrued and unpaid
interest owing under this Bridge Note, divided by $0.75 (as adjusted for stock
splits, stock dividends and the like in the same manner as the Exercise Price
(as defined in the Warrant, dated the date hereof and issued to Holder) is
adjusted pursuant to such Warrant)).

 

4.1.2                     If a Qualified Financing is completed on or before the
Maturity Date, the outstanding principal amount of this Note plus accrued and
unpaid interest hereunder shall automatically convert into the securities issued
in the Qualified Financing concurrently with the closing of the transaction on
the Financing Date at a conversion price per share equal the Financing Price
without any other action by Holder.

 

4.1.3                     For purposes of this Section 4.1, the following terms
shall have the definitions set forth below:

 

“Qualified Financing” means the offering by the Company of shares of equity
securities, including units consisting of stock and warrants, resulting in the
receipt of cash proceeds by the Company after the date hereof of at least Five
Million Dollars ($5,000,000) in the aggregate (the “Minimum Proceeds”) on or
prior to the Maturity Date (as defined herein).  For purposes of this Note,
Minimum Proceeds shall not be deemed to include the conversion of the principal
amount of the Note and any other convertible promissory notes of the Company of
like tenor to this Note in an aggregate principal amount not to exceed $1.5
million and accrued and unpaid interest thereon.

 

“Financing Date” means the date of the closing of the Qualified  Financing
pursuant to which the Company receives the Minimum Proceeds.

 

“Financing Price” shall mean the price per share or unit, as applicable, for the
securities issued in the Qualified Financing.

 

4.2                               Notice of Conversion Pursuant to Section 4.2. 
If this Note is converted pursuant to Section 4.1.1, written notice shall be
given by the Holder of this Note to the Company at the place where the principal
executive office of the Company is located, notifying the Company of Holder’s
election to convert. If this Note is automatically converted pursuant to
Section 4.1.2, written notice shall be delivered to the Holder of this Note

 

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at the address last shown on the records of the Company for the Holder or given
by the Holder to the Company for the purpose of notice or, if no such address
appears or is given, at the place where the principal executive office of the
Company is located, notifying the Holder of the conversion, specifying the
conversion price, the principal amount of the Note converted, the amount of
accrued interest converted, the date of such conversion and calling upon such
Holder to surrender to the Company, in the manner and at the place designated,
the Note.

 

4.3                               Delivery of Stock Certificates; Effect of
Conversion.  No fractional shares of preferred stock shall be issued upon
conversion of this Note.  Upon conversion of this Note into stock, in lieu of
the Company issuing any fractional shares to the Holder, the Company shall pay
to the Holder the amount of outstanding principal that is not so converted in
cash.  As promptly as practicable after the conversion of this Note, the Company
at its expense will issue and deliver to the Holder of this Note a certificate
or certificates for the number of shares of stock or units, as applicable,
issuable upon such conversion (rounded down to the nearest whole number, such
that no fractional shares shall be issued).  Such certificate or certificates
shall bear such legends as are required by applicable state and federal
securities laws in the opinion of counsel to the Company.  Upon conversion of
this Note, the Company shall be forever released from all its obligations and
liabilities under this Note.

 

4.4                               Payment of Expenses and Taxes on Conversion. 
The Company shall pay all expenses, taxes (excluding income or franchise taxes)
and other charges payable in connection with the preparation, execution,
issuance and delivery of stock certificate(s) pursuant to this Section 4, except
that, in the event such stock certificate(s) shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer fees, which shall be payable upon the execution and delivery of such
stock certificate(s), shall be paid by the Holder hereof to the Company at the
time of delivering this Note to the Company upon conversion.

 

5.                                      Subordination.  To induce one or more
lenders to extend credit to the Company, and for the benefit of such lenders,
Holder agrees, by its acceptance of this Note, for itself and for each future
holder (if any) of this Note, that the obligations evidenced by this Note (the
“Subordinated Obligations”) are expressly subordinate and junior in right of
payment to all principal amounts of, and accrued interest on (including, without
limitation, any interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company), each loan agreement, bridge note, revolving
credit note, term note and other indebtedness, obligation and liability of the
Company under any agreement or contract with any Senior Creditor, the payment or
performance of which is expressly secured by a security interest in all or
substantially all of the assets of the Company (the “Senior Obligations”).  For
purposes of this note, “subordinate and junior in right of payment” shall mean
that no part of the Subordinated Obligations shall have any claim to the
Company’s assets on a parity with or prior to the claim of the Senior
Obligations.  From and after the date of receipt of notice from any Senior
Creditor of any default with respect to any of the Senior Obligations, Holder
shall not ask for, demand, sue for, take or receive any payments with respect to
all or any part of the Subordinated Obligations or any security therefor,
whether from the Company or any other source, unless and until the Senior
Obligations have been paid in full.  Holder further agrees that upon any
distribution of money or assets, or readjustment of the indebtedness of the
Company whether by reason of foreclosure, liquidation, composition, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the Subordinated Obligations, or the application
of the assets of the Company to the payment or liquidation thereof, the Senior
Creditors shall be entitled to receive payment in full in cash of all of the
Senior Obligations prior to the payment of any part of the Subordinated
Obligations.

 

6.                                      Assignment.  The rights and obligations
of the Company and the Holder of this Note shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the parties.

 

7.                                      Waiver and Amendment.  Any provision of
this Note may be amended, waived or modified upon the written consent of the
Company and the Holder.

 

8.                                      Notices.  All notices required or
permitted hereunder shall be in writing and shall be deemed effectively given
(a) upon personal delivery to the party to be notified, (b) when sent by
confirmed telex or facsimile (provided that notice is also given under clause
(c) below) if sent during normal business hours of the recipient; if not sent
during normal business hours of the recipient, then on the next business day, or
(c) upon receipt by the party to be notified by nationally recognized overnight
courier service.  All communications shall be sent to the party at

 

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the address as set forth herein or at such other address as such party may
designate by ten (10) days advance written notice to the other party hereto.

 

9.                                      Governing Law; Waiver of Jury Trial. 
This Note shall be governed by and construed in accordance with the laws of the
state of Oregon, exclusive of conflicts of law provisions.  IN THE EVENT OF ANY
DISPUTE AMONG OR BETWEEN ANY OF THE PARTIES TO THIS NOTE ARISING OUT OF THE
TERMS OF THIS NOTE, THE PARTIES HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF
THE COURTS LOCATED IN THE COUNTY OF MULTNOMAH, STATE OF OREGON, OR THE UNITED
STATES DISTRICT COURTS FOR THE DISTRICT OF OREGON FOR RESOLUTION OF SUCH
DISPUTE, AND AGREE NOT TO CONTEST SUCH EXCLUSIVE JURISDICTION OR SEEK TO
TRANSFER ANY ACTION RELATING TO SUCH DISPUTE TO ANY OTHER JURISDICTION. THE
COMPANY AND THE HOLDER AGREE TO ACCEPT SERVICE OF PROCESS PURSUANT TO THE
PROCEDURES SET FORTH IN SECTION 8.  THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
NOTE.

 

10.                               Heading; References.  All headings used herein
are used for convenience only and shall not be used to construe or interpret
this Note.  Except where otherwise indicated, all references herein to Sections
refer to Sections hereof.

 

IN WITNESS WHEREOF, each of the Company and Holder has executed this Convertible
Promissory Note as of the date first above written.

 

 

 

Bioject Medical Technologies Inc.

 

 

 

 

 

By: 

/s/ Ralph Makar

 

Name: 

Ralph Makar

 

Title:

President and CEO

 

Address: 20245 S.W. 95th Ave,

 

 

Tualatin, OR 97062

 

Facsimile Number: 503-692-6698

 

 

 

 

 

                            

 

 

 

 

 

By: 

                            

 

Name: 

James C. Gale

 

Title:

 Managing Director

 

 

 

Address of Holder:

 

 

 152 W. 57th Street, 19th Floor

 

 

 New York, NY 10019

 

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