Exhibit 10.3

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY
BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR
(B) IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS NOTE IS SUBJECT
TO THAT CERTAIN CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT, DATED OCTOBER
24, 2008, BY AND AMONG THE COMPANY AND THE PURCHASERS NAMED THEREIN.
 
AVAX TECHNOLOGIES, INC.
 
CONVERTIBLE PROMISSORY NOTE

 
[$_____.00]
_______ __, 2008

AVAX TECHNOLOGIES, INC., a Delaware corporation (the “Company”), for value
received, promises to pay to [____] or registered assigns (the “Holder”), the
principal sum of [________] Dollars $[__] on December 31, 2008, and interest
(computed on the basis of a 365-day year) from the date hereof on the unpaid
principal amount from time to time outstanding at the rate of six percent (6%)
per annum, due and payable in arrears on the maturity date hereof, unless
payment is required at an earlier date pursuant to the terms hereof. This Note
is one of a series of similar Notes issued by the Company in the aggregate
principal amount not to exceed $1,500,000.
 
1. Conversion.
 
(a) Voluntary Conversion. At any time after the date hereof until this Note is
no longer outstanding, this Note shall be convertible, in whole or in part, into
shares of Common Stock, $.004 par value per share, of the Company (“Common
Stock”) at the option of the Holder, at any time and from time to time, at a
rate of one (1) share of Common Stock for each $0.09 (subject to adjustment, the
“Conversion Price”) of unpaid principal of and interest on this Note on the
Conversion Date (as defined below). The Holder shall effect conversions by
delivering to the Company a Notice of Conversion specifying therein the
principal amount of the Note to be converted and the date on which such
conversion shall be effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder.
Conversions hereunder shall have the effect of lowering the outstanding
principal amount of the Note in an amount equal to the applicable conversion.
The Holder and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s).

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(b) Mandatory Conversion. This Note shall automatically convert into the
securities described below and at the conversion ratios described below upon the
closing of the Offering (as defined in Section 1(c)) if the closing of the
Offering occurs on or prior to the maturity date of this Note. Upon the closing
of the Offering, all principal of and accrued and unpaid interest on this Note
will automatically convert, at the election of the Holder, into either (i)1
share of Common Stock, $.004 par value per share, of the Company (“Common
Stock”) for each $0.09 of unpaid principal of and interest on this Note on the
conversion date, or (ii) into that number of securities issued by the Company in
the Offering equal to the quotient obtained by dividing the principal and
accrued interest owed hereunder on the conversion date by the lesser of (a) $.09
or (b) ninety percent (90%) of the price at which the securities are issued in
the Offering and otherwise on the same terms and conditions and with the same
rights and preferences as the securities issued in the Offering. To exercise
this election as to the form and amount of securities to be received upon
conversion of this Note, the Holder shall deliver to the Company during usual
business hours at the Company’s principal executive office written notice in
form satisfactory to the Company that the Holder elects to receive the
conversion securities specified in either clause (i) or clause (ii) above. Such
notice shall also state the name or names (with address) in which the
certificate or certificates for shares (or other securities) that are issuable
on such conversion are to be registered.
 
(c) Offering of Securities. In accordance with Section 7.5 of the Convertible
Note and Warrant Purchase Agreement dated the date hereof (the “Agreement”), the
Company will use its reasonable efforts to close an offering of securities on or
before November 15, 2008, in which the gross proceeds to the Company are not
less than $15,000,000 (the “Offering”). Upon the closing of the Offering, the
Note will automatically convert into either (i) shares of Common Stock, or (ii)
the securities issued in the Offering, in accordance with Section 1(b).
 
(d) Surrender of Note and Delivery of Certificates. When surrendered for
automatic conversion this Note shall, unless the shares (or other securities)
issuable on conversion are to be issued in the same name as the name in which
this Note is then registered, be duly endorsed by, or accompanied by instruments
of transfer in form satisfactory to the Company duly executed by, the holder or
his or its duly authorized attorney. As promptly as practicable after the
surrender of this Note for conversion and the receipt of the notice specified
above, the Company shall deliver or cause to be delivered to the Holder, or on
the Holder’s written order, a certificate or certificates for the number of full
shares (or other securities) issuable upon the conversion of this Note, in
accordance with the provisions hereof. Such conversion shall be deemed to have
been made automatically on the closing of the Offering, and from and after such
time, the Holder will have no rights hereunder other than the right to receive
the conversion shares (or other securities) and the Holder in whose name any
certificate or certificates for shares of shall be issuable upon such conversion
shall be deemed to have become on the Conversion Date the Holder of record of
the shares represented thereby.
 
2. Adjustment of Conversion Price.
 
(a) Stock Dividends, Stock Splits, etc. If the Company:
 
(i) declares a dividend of Common Stock on its Common Stock,
 
 
 

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(ii) subdivides its outstanding Common Stock into a larger number of shares of
Common Stock by reclassification, stock split or otherwise, or
 
(iii) combines its outstanding Common Stock into a smaller number of shares of
Common Stock by reclassification, reverse stock split or otherwise,
 
the number of shares of Common Stock issuable upon conversion of this Note
pursuant to Section 1 immediately prior to any such event shall be adjusted
proportionately so that thereafter the Holder shall be entitled to receive upon
conversion of this Note the number of shares of Common Stock which such Holder
would have owned after the happening of any of the events described above had
this Note been converted immediately prior to the happening of such event,
provided that the Conversion Price shall in no event be reduced to less than the
par value of the shares issuable upon conversion. An adjustment made pursuant to
this Section 2 will become effective immediately after the record date in the
case of a dividend and will become effective immediately after the effective
date in the case of a subdivision or combination.
 
(b) Merger or Consolidation. If, prior to maturity of this Note, the Company at
any time consolidates or merges with another corporation (other than a merger or
consolidation in which the Company is the surviving corporation), the Holder
hereof will thereafter be entitled to receive, upon the conversion hereof, the
securities or property to which a Holder of the number of shares of Common Stock
then deliverable upon the conversion hereof would have been entitled upon such
consolidation or merger, and the Company shall take such steps in connection
with such consolidation or merger as may be necessary to ensure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to any securities or property thereafter deliverable upon the
conversion of this Note.
 
(c) Subsequent Equity Sales. (i) If, at any time while this Note is Outstanding,
the Company issues additional shares of Common Stock or rights, warrants,
options or other securities or debt convertible, exercisable or exchangeable for
shares of Common Stock or otherwise entitling any person to acquire shares of
Common Stock (collectively, “Common Stock Equivalents”) at a price (exclusive of
commissions payable by the Company in connection therewith) per share of Common
Stock less than the Conversion Price (as adjusted hereunder to such date), then
the Conversion Price shall be reduced to such price. For purposes of this
paragraph, in connection with any issuance of any Common Stock Equivalents, (A)
the maximum number of shares of Common Stock potentially issuable at any time
upon conversion, exercise or exchange of such Common Stock Equivalents (the
“Deemed Number”) shall be deemed to be outstanding upon issuance of such Common
Stock Equivalents, (B) the Effective Price applicable to such Common Stock shall
equal the minimum dollar value of consideration payable to the Company to
purchase such Common Stock Equivalents and to convert, exercise or exchange them
into Common Stock (net of any discounts, fees, commissions and other expenses),
divided by the Deemed Number, and (C) no further adjustment shall be made to the
Conversion Price upon the actual issuance of Common Stock upon conversion,
exercise or exchange of such Common Stock Equivalents.
 
(ii) If, at any time while this Note is outstanding, the Company issues Common
Stock Equivalents with an Effective Price or a number of underlying shares that
floats or resets or otherwise varies or is subject to adjustment based (directly
or indirectly) on market prices of the Common Stock (a “Floating Price
Security”), then for purposes of applying the preceding paragraph in connection
with any subsequent conversion, the Effective Price will be determined
separately on each Conversion Date and will be deemed to equal the lowest
Effective Price at which any holder of such Floating Price Security is entitled
to acquire Common Stock on such Conversion Date (regardless of whether any such
holder acquires any shares on such date).

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(d) No adjustments to the Conversion Price shall be required:
 
(i) Unless such adjustment would require an increase or decrease of at least
$0.01 per share of Common Stock; provided, however, that any adjustments that by
reason of this Section 2(d)(i) are not required to be made shall be carried
forward and cumulated with amounts in any subsequent adjustment, and provided,
further, however, that adjustments shall be required and made in accordance with
the provisions of this Section 2 (other than this Section 2(d)(i)) not later
than such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Note or Common Stock issuable upon the
exercise hereof. All calculations that shall be required pursuant to this
Section 2 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. Anything in this Section 2 to the contrary
notwithstanding, the Company shall be entitled to make such adjustments to the
Conversion Price, in addition to those required by this Section 2 as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders is not taxable.
 
(ii) If the Company issues shares of Common Stock pursuant to (a) the exercise
of any warrants (or warrants or options to acquire any shares of convertible
preferred stock) of the Company outstanding on the date hereof, (b) the exercise
of the Notes, or a portion thereof, (c) the conversion of shares of any series
of convertible preferred stock of the Company outstanding on the date hereof, or
(d) the exercise of any stock options or warrants currently outstanding or
issued after the date hereof pursuant to any Company benefit plan or
compensation arrangement for employees of the Company.
 
(e) Notice. If the Company proposes to take any action referred to in this
Section 2, or to effect the liquidation, dissolution or winding up of the
Company, then the Company shall cause notice thereof to be mailed to the Holder
at least ten (10) days prior to the record date or effective date, as
applicable, of the stock dividend, merger, consolidation or other event subject
to this Section.
 
(f) Statement of Adjustment. Whenever the Conversion Price is adjusted as
provided in Section 2, the Company shall promptly file at the Company’s
principal executive office, a statement, signed by the Chairman of the Board,
the President or any Vice President of the Company, showing in reasonable detail
the facts requiring such adjustment and the Conversion Price that will be
effective after such adjustment. The Company shall also cause a notice setting
forth any such adjustment to be sent by mail, first class, postage prepaid, to
each Holder this Note. Where appropriate, such notice may be given in advance
and may be included as part of a notice required to be mailed under the
provisions of Section 2(e).

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(g) Fractional Shares. No fractional shares of Common Stock will be issued upon
conversion of this Note, but a payment in cash will be made in respect of any
fraction of a share which would otherwise be issuable upon the conversion of
this Note. Such payment shall be based on the fair market value of the Common
Stock at the time of conversion of this Note.
 
(h) Securities Act of 1933. Upon conversion of this Note, the Holder may be
required to execute and deliver to the Company an instrument, in form
satisfactory to the Company, representing that the shares (or other securities)
issuable upon conversion hereof are being acquired for investment only and not
with a view to distribution within the meaning of the Securities Act of 1933, as
amended.
 
3. Prepayment of Principal. The principal amount of this Note may NOT be prepaid
in whole or in part, without the prior written consent of the Holder.
 
4. Default.
 
The entire unpaid principal of this Note and the interest then accrued on this
Note shall become and be immediately due and payable, upon written demand of the
Holder, or at the option of the Holder, in its sole discretion, convertible in
accordance with Section 1(a) hereof, in either case without any other notice or
demand of any kind or any presentment or protest, if any one of the following
events occurs and be continuing at the time of such demand:
 
(a) If the Offering has not closed on or before the maturity date hereof and the
Company fails to pay the principal amount of and all accrued interest on this
Note on the maturity date hereof; or
 
(b) If the Company defaults in the performance of any other obligation under
this Note or the Agreement, and such default continues for ten (10) days after
notice thereof by the Holder hereof to the Company; or
 
(c) If the Company (i) makes an assignment for the benefit of creditors, (ii)
applies for, consents to, acquiesces in, files a petition seeking or admits (by
answer, default or otherwise) the material allegations of a petition filed
against it seeking the appointment of a trustee, receiver or liquidator, in
bankruptcy or otherwise, of itself or of all or a substantial portion of its
assets, or a reorganization, arrangement with creditors or other remedy, relief
or adjudication available to or against a bankrupt, insolvent or debtor under
any bankruptcy or insolvency law or any law affecting the rights of creditors
generally, or (iii) admits in writing its inability to pay its debts generally
as they become due; or
 
(d) If an order for relief shall have been entered by a bankruptcy court or if a
decree, order or judgment shall have been entered adjudging the Company
insolvent, or appointing a receiver, liquidator, custodian or trustee, in
bankruptcy or otherwise, for it or for all or a substantial portion of its
assets, or approving the winding-up or liquidation of its affairs on the grounds
of insolvency or nonpayment of debts, and such order for relief, decree, order
or judgment shall remain undischarged or unstayed for a period of sixty (60)
days; or
 
(e) If any substantial part of the property of the Company is sequestered or
attached and is not returned to the possession of the Company or released from
such attachment within sixty (60) days.

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5. General.
 
(a) Successors and Assigns. This Note, and the obligations and rights of the
Company hereunder, shall be binding upon and inure to the benefit of the
Company, the Holder, and their respective successors and assigns.
 
(b) Recourse. Recourse under this Note is to the general unsecured assets of the
Company only and in no event to the officers, directors or stockholders of the
Company.
 
(c) Changes. Changes in or additions to this Note may be made or compliance with
any term, covenant, agreement, condition or provision set forth herein may be
omitted or waived (either generally or in a particular instance and either
retroactively or prospectively), upon written consent of the Company and the
Holder.
 
(d) Currency. All payments shall be made in such coin or currency of the United
States of America as at the time of payment is legal tender therein for the
payment of public and private debts.
 
(e) Saturdays, Sundays, Holidays. If any date specified in this Note as a date
for the making of any payment of principal or interest under this Note falls on
a Saturday, Sunday or on a day that is a legal holiday in the State of
Pennsylvania, then the date for the making of that payment shall be the next
subsequent day that is not a Saturday, Sunday or legal holiday.
 
(f) Governing Law. This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
Delaware.

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IN WITNESS WHEREOF, this Note has been executed and delivered on the date first
above written by the duly authorized representative of the Company.

 

 
AVAX TECHNOLOGIES, INC.
     
By:
       
Name: Francois Martelet
   
Title: Chief Executive Officer

 

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