Exhibit 10.2

THIS CONVERTIBLE PROMISSORY NOTE (THIS “NOTE”) AND THE SECURITIES THAT MAY BE
ACQUIRED PURSUANT TO THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE OFFERED,
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON,
OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S PROMULGATED UNDER THE
SECURITIES ACT), IN THE ABSENCE OF SUCH REGISTRATION, UNLESS SUCH TRANSACTION IS
EXEMPT FROM OR NOT SUBJECT TO REGISTRATION UNDER THE SECURITIES ACT, AND HOLDER
HAS, IF REQUIRED BY THE COMPANY, DELIVERED AN OPINION OF COUNSEL TO THAT
EFFECT.  BY ACCEPTING THIS NOTE, HOLDER REPRESENTS, AMONG OTHER THINGS, THAT IT
IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a) OF THE SECURITIES ACT) AND
IS NOT A U.S PERSON, AND IS ACQUIRING THIS NOTE AND WILL ACQUIRE ANY CONVERSION
SHARES (AS DEFINED HEREIN) OUTSIDE THE U.S. AND IN ACCORDANCE WITH REGULATION S,
AND WILL NOT ENGAGE IN ANY HEDGING TRANSACTIONS WITH RESPECT TO THIS NOTE OR THE
COMMON STOCK OF THE COMPANY PRIOR TO THE EXPIRATION OF THE DISTRIBUTION
COMPLIANCE PERIOD (AS DEFINED HEREIN) EXCEPT IN COMPLIANCE WITH THE SECURITIES
ACT.  ISSUANCE OF THE CONVERSION SHARES IS CONDITIONED UPON THE CONTINUED
AVAILABILITY OF REGULATION S IN RESPECT OF HOLDER AT TIME OF CONVERSION, OR THE
AVAILABILITY TO HOLDER OF ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT IN RESPECT OF SUCH ISSUANCE.

CONVERTIBLE PROMISSORY NOTE

US $_________

 

__________, 2006

 

FOR VALUE RECEIVED, Osiris Therapeutics, Inc., a Delaware corporation (the
“Company”), having an address of 2001 Aliceanna Street, Baltimore, MD 21231,
U.S.A., hereby promises to pay to the order of ________________ (the “Holder”),
at the offices of Holder at ________________ or such other place as may be
designated by Holder to the Company in writing, the aggregate principal amount
of __________________________ U.S. Dollars ($ _________) (the “Principal”)
together with accrued and unpaid interest, upon the terms and conditions
hereinafter set forth.

1.             PAYMENT TERMS.  THE COMPANY PROMISES TO PAY TO HOLDER THE FINAL
PAYMENT AMOUNT (AS HEREINAFTER DEFINED) ON APRIL 30, 2009 (THE “MATURITY DATE”),
UNLESS THIS NOTE IS EARLIER REDEEMED BY THE COMPANY OR CONVERTED INTO COMMON
STOCK (AS HEREINAFTER DEFINED) OF THE COMPANY, PURSUANT TO SECTION 3 HEREOF, AS
APPLICABLE.  ALL ACCRUED AND UNPAID INTEREST SHALL BE DUE AND PAYABLE IN
ACCORDANCE WITH SECTION 2 HEREOF.  ALL PAYMENTS HEREUNDER SHALL BE MADE IN
LAWFUL MONEY OF THE UNITED STATES OF AMERICA. PAYMENT SHALL BE CREDITED FIRST TO
THE ACCRUED AND UNPAID INTEREST THEN DUE AND PAYABLE AND THE REMAINDER TO
PRINCIPAL.  “FINAL PAYMENT AMOUNT” MEANS AN AMOUNT EQUAL TO THE SUM OF THE TOTAL
UNPAID PRINCIPAL PLUS ANY ACCRUED AND UNPAID INTEREST.

2.             INTEREST.  INTEREST ON THE OUTSTANDING PORTION OF PRINCIPAL OF
THIS NOTE SHALL ACCRUE AT A RATE OF TEN PERCENT (10%) PER ANNUM.  ALL
COMPUTATIONS OF INTEREST SHALL BE MADE ON THE BASIS OF A 360-DAY YEAR FOR ACTUAL
DAYS ELAPSED.  ALL ACCRUED INTEREST SHALL BE DUE AND PAYABLE

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IN CASH ON EACH PAYMENT DATE (AS HEREINAFTER DEFINED), THE MATURITY DATE,  THE
REDEMPTION DATE (AS HEREINAFTER DEFINED) OR CONVERSION DATE (AS HEREINAFTER
DEFINED), AS THE CASE MAY BE, IN EACH CASE IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THIS NOTE.  “PAYMENT DATE” MEANS EACH OF APRIL 30, 2007, OCTOBER
30, 2007, APRIL 30, 2008 AND OCTOBER 30, 2008. ANY ACCRUED BUT UNPAID INTEREST
WILL BE PAID IN CASH AT THE TIME OF CONVERSION. IF A PAYMENT DATE, THE MATURITY
DATE, THE REDEMPTION DATE OR THE CONVERSION DATE, BE ON A DAY THAT IS NOT A
BUSINESS DAY, PAYMENT OF ANY AMOUNTS DUE AND PAYABLE ON SUCH DATE SHALL BE
EFFECTED ON THE IMMEDIATELY FOLLOWING BUSINESS DAY.

3.             CONVERSION OR REDEMPTION OF THIS NOTE.

(A)                                  CONVERSION.  IF AT ANY TIME AFTER FEBRUARY
9, 2007, EITHER (I) THE CLOSING PRICE (AS DEFINED BELOW) OF THE COMMON STOCK,
PAR VALUE USD 0.001 PER SHARE (“COMMON STOCK”) OF THE COMPANY SHALL FOR 10
CONSECUTIVE TRADING DAYS FOLLOWING SUCH DATE EQUAL USD 25.00 (THE “THRESHOLD
AMOUNT”)OR HIGHER OR (II) THE HOLDER SHALL MAKE WRITTEN REQUEST FOR CONVERSION
OF THIS NOTE UPON THE COMPANY (THE FIRST TO OCCUR OF (I) OR (II) AFTER FEBRUARY
9, 2007, THE “CONVERSION DATE”), THIS NOTE SHALL BE CONVERTED IN ITS ENTIRETY
AND NOT IN PART INTO SHARES OF THE COMMON STOCK.  THE NUMBER OF SHARES OF COMMON
STOCK TO WHICH HOLDER SHALL BE ENTITLED UPON SUCH CONVERSION SHALL BE EQUAL TO
THE SUM OF THE TOTAL UNPAID PRINCIPAL DIVIDED BY USD $18.00 (THE “NOTE
CONVERSION RATE”). ANY ACCRUED BUT UNPAID INTEREST WILL BE PAID IN CASH AT THE
TIME OF CONVERSION. FOR PURPOSES OF THIS PARAGRAPH 3(A), THE TERM „CLOSING
PRICE” SHALL MEAN, AS REASONABLY DETERMINED BY THE COMPANY, THE REPORTED CLOSING
PRICE ON THE NASDAQ GLOBAL MARKET.

(B)                                 REDEMPTION.  THIS NOTE MAY BE REDEEMED BY
THE COMPANY AT ANY TIME BY PAYMENT TO HOLDER IN IMMEDIATELY AVAILABLE FUNDS OF
THE SUM OF THE TOTAL UNPAID PRINCIPAL PLUS ANY ACCRUED BUT UNPAID INTEREST.  THE
COMPANY MUST PROVIDE WRITTEN NOTICE TO HOLDER NOT LESS THAN 30 DAYS PRIOR TO THE
EFFECTIVE DATE OF SUCH REDEMPTION (THE “REDEMPTION DATE”).

(C)                                  MECHANICS OF AUTOMATIC CONVERSION  UPON THE
OCCURRENCE OF EITHER OF THE EVENTS SPECIFIED IN SECTION 3(A) ABOVE, THIS NOTE
SHALL BE CONVERTED INTO COMMON STOCK AUTOMATICALLY WITHOUT ANY FURTHER ACTION BY
HOLDER; PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT BE OBLIGATED TO ISSUE A
CERTIFICATE OR CERTIFICATES EVIDENCING THE SHARES OF COMMON STOCK ISSUABLE UPON
SUCH CONVERSION OF THIS NOTE (“CONVERSION SHARES”) UNLESS THE ORIGINAL OF THIS
NOTE IS DELIVERED TO THE COMPANY, OR HOLDER NOTIFIES THE COMPANY IN WRITING THAT
SUCH ORIGINAL OF THIS NOTE HAS BEEN LOST, STOLEN OR DESTROYED, AND HOLDER
EXECUTES AN AGREEMENT SATISFACTORY TO THE COMPANY TO, AMONG OTHER THINGS,
INDEMNIFY THE COMPANY FROM ANY LOSS INCURRED BY THE COMPANY IN CONNECTION WITH
SUCH ORIGINAL OF THIS NOTE.  UPON SURRENDER BY HOLDER TO THE COMPANY OF THE
ORIGINAL OF THIS NOTE AT THE OFFICE OF THE COMPANY, THERE SHALL BE ISSUED AND
DELIVERED TO HOLDER PROMPTLY AT SUCH OFFICE AND IN HOLDER’S NAME AS SHOWN ON THE
ORIGINAL OF THIS NOTE, A CERTIFICATE OR CERTIFICATES FOR THE APPLICABLE NUMBER
OF CONVERSION SHARES ON THE CONVERSION DATE.  ANY SUCH CERTIFICATE SHALL BEAR A
CONSPICUOUS LEGEND SIMILAR TO THAT SET FORTH ON PAGE 1 OF THIS NOTE (INSOFAR AS
APPLICABLE) AND OTHERWISE REFERRING TO REITERATING THE RESTRICTIONS ON TRANSFER
AND OTHER TERMS HEREOF APPLICABLE TO THE CONVERSION SHARES UPON ISSUANCE.

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(D)                                 NO FRACTIONAL SHARES.  THE NUMBER OF COMMON
SHARES RESULTING FROM A CONVERSION OF THIS NOTE PURSUANT TO SECTION 3(A) ABOVE
SHALL BE ROUNDED UP TO THE NEXT HIGHER INTEGRAL SHARE OF COMMON STOCK, AND NO
FRACTIONAL SHARES SHALL BE ISSUABLE BY THE COMPANY UPON CONVERSION OF THIS
NOTE.  CONVERSION OF THIS NOTE SHALL BE DEEMED PAYMENT IN FULL OF THIS NOTE AND
THIS NOTE SHALL THEREUPON BE CANCELLED.

4.               THE INDEBTEDNESS EVIDENCED HEREBY RANKS PARI PASSU IN RIGHT OF
PAYMENT TO THE INDEBTEDNESS EVIDENCED FROM TIME TO TIME BY THE OTHER OF THE
OFFERED NOTES (AS DEFINED BELOW) AND TO ANY OTHER CONVERTIBLE DEBT SECURITIES OF
THE COMPANY NOW OR HEREAFTER EXISTING AND SO PROVIDING, AND THE INDEBTEDNESS
EVIDENCED HEREBY RANKS SENIOR IN RIGHT OF PAYMENT TO ALL CLASSES AND SERIES OF
THE COMPANY’S CAPITAL STOCK.  BY ACCEPTING THIS NOTE THE HOLDER DOES EXPRESSLY
CONSENT TO THE AFORESAID RANKING IN RIGHT OF PAYMENT AND AGREES TO PERFORM, FROM
TIME TO TIME, SUCH ACTS, AND TO EXECUTE, ACKNOWLEDGE AND/OR DELIVER SUCH OTHER
INSTRUMENTS, DOCUMENTS AND AGREEMENTS, AS MAY FROM TIME TO TIME BE REQUESTED BY
THE COMPANY, OR AS MAY FROM TIME TO TIME OTHERWISE BE REASONABLY REQUESTED,
NECESSARY OR REQUIRED, TO SO CONFIRM OR PROVIDE.

5.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  THE COMPANY
REPRESENTS AND WARRANTS TO HOLDER AS FOLLOWS:

(A)                                  THE EXECUTION AND DELIVERY BY THE COMPANY
OF THIS NOTE (I) ARE WITHIN THE COMPANY’S CORPORATE POWER AND AUTHORITY, AND
(II) HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION.

(B)                                 THIS NOTE IS A LEGALLY BINDING OBLIGATION OF
THE COMPANY, ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH THE TERMS
HEREOF, EXCEPT TO THE EXTENT THAT (I) SUCH ENFORCEABILITY IS LIMITED BY
BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR OTHER LAWS RELATING TO OR
AFFECTING GENERALLY THE ENFORCEMENT OF CREDITORS’ RIGHTS, AND (II) THE
AVAILABILITY OF THE REMEDY OF SPECIFIC PERFORMANCE OR IN INJUNCTIVE OR OTHER
EQUITABLE RELIEF IS SUBJECT TO THE DISCRETION OF THE COURT BEFORE WHICH ANY
PROCEEDING THEREFORE MAY BE BROUGHT.

6.             USE OF PROCEEDS.  THE PROCEEDS RECEIVED BY THE COMPANY FROM THE
SALE OF THIS NOTE SHALL BE USED BY THE COMPANY FOR WORKING CAPITAL, REDEMPTION
OR REPAYMENT OF DEBT OR OTHER GENERAL CORPORATE PURPOSES.

7.             NO WAIVER IN CERTAIN CIRCUMSTANCES.  NO COURSE OF DEALING OF
HOLDER NOR ANY FAILURE OR DELAY BY HOLDER TO EXERCISE ANY RIGHT, POWER OR
PRIVILEGE UNDER THIS NOTE SHALL OPERATE AS A WAIVER HEREUNDER AND ANY SINGLE OR
PARTIAL EXERCISE OF ANY SUCH RIGHT, POWER OR PRIVILEGE SHALL NOT PRECLUDE ANY
LATER EXERCISE THEREOF OR ANY EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE
HEREUNDER.

8.             CERTAIN WAIVERS BY THE COMPANY.  EXCEPT AS EXPRESSLY PROVIDED
OTHERWISE IN THIS NOTE, THE COMPANY AND EVERY ENDORSER OR GUARANTOR, IF ANY, OF
THIS NOTE WAIVE PRESENTMENT, DEMAND, NOTICE, PROTEST AND ALL OTHER DEMANDS AND
NOTICES IN CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE, DEFAULT OR
ENFORCEMENT OF THIS NOTE, AND ASSENT TO ANY EXTENSION OR POSTPONEMENT OF THE
TIME OF PAYMENT OR ANY OTHER INDULGENCE, TO ANY SUBSTITUTION, EXCHANGE OR
RELEASE OF COLLATERAL AVAILABLE TO HOLDER, IF ANY, AND TO THE ADDITION OR
RELEASE OF ANY OTHER PARTY OR PERSON PRIMARILY OR SECONDARILY LIABLE.

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9.             NO UNLAWFUL INTEREST.  NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, PAYMENT OF ANY INTEREST OR OTHER AMOUNT HEREUNDER SHALL NOT BE
REQUIRED IF SUCH PAYMENT WOULD BE UNLAWFUL.  IN ANY SUCH EVENT, THIS NOTE SHALL
AUTOMATICALLY BE DEEMED AMENDED SO THAT INTEREST CHARGES AND ALL OTHER PAYMENTS
REQUIRED HEREUNDER, INDIVIDUALLY AND IN THE AGGREGATE, SHALL BE EQUAL TO BUT NOT
GREATER THAN THE MAXIMUM PERMITTED BY LAW.  AS A CONDITION TO ITS OBLIGATION TO
MAKE ANY PAYMENT OF INTEREST HEREUNDER WITHOUT WITHHOLDING AS MAY OTHERWISE BE
REQUIRED UNDER APPLICABLE U.S. TAX LAWS, THE COMPANY MAY REQUIRE THAT THE HOLDER
SUBMIT TO THE COMPANY A PROPERLY COMPLETED IRS FORM W-8 OR SIMILAR OR SUCCESSOR
FORM SUFFICIENTLY DEMONSTRATING TO THE REASONABLE SATISFACTION OF THE COMPANY
THAT NO SUCH WITHHOLDING IS REQUIRED.

10.           REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDER.  BY ACCEPTING
THIS NOTE, HOLDER REPRESENTS AND WARRANTS TO THE COMPANY, AND AGREES, AS
FOLLOWS:

(A)                                  THE PRINCIPAL ADDRESS OF HOLDER IS OUTSIDE
OF THE UNITED STATES, AND HOLDER IS NOT A U.S. PERSON AS SUCH TERM IS DEFINED
AND USED IN REGULATION S.

(B)                                 AT THE TIME THE “BUY” ORDER WAS ORIGINATED
IN RESPECT OF HOLDER’S ACQUISITION OF THIS NOTE, HOLDER WAS OUTSIDE OF THE U.S.,
AND HOLDER IS OUTSIDE THE U.S. AS OF THE DATE OF THE EXECUTION AND DELIVERY OF
THIS NOTE BY HOLDER.  NO OFFER TO ACQUIRE THIS NOTE WAS MADE TO HOLDER OR ITS
REPRESENTATIVES INSIDE THE UNITED STATES.

(C)                                  HOLDER IS AN “ACCREDITED INVESTOR” WITHIN
THE MEANING OF RULE 501(A) UNDER THE SECURITIES ACT.

(D)                                 HOLDER IS ACQUIRING THIS NOTE AND WILL
ACQUIRE ANY CONVERSION SHARES FOR HIS/HER/ITS OWN ACCOUNT, NOT ON BEHALF OR FOR
THE ACCOUNT OF ANY U.S. PERSON, AND NEITHER THE PURCHASE OF THIS NOTE NOR THE
ACQUISITION OF THE CONVERSION SHARES HAS BEEN PRE-ARRANGED WITH A PURCHASER IN
THE U.S.

(E)                                  THE HOLDER WILL MAKE ALL RESALES OF THIS
NOTE AND ANY CONVERSION SHARES ONLY OUTSIDE OF THE UNITED STATES IN COMPLIANCE
WITH REGULATION S, OR PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.  SPECIFICALLY, HOLDER WILL NOT RESELL THIS NOTE OR ANY
CONVERSION SHARES TO ANY U.S. PERSON OR WITHIN THE UNITED STATES PRIOR TO THE
EXPIRATION OF ONE YEAR (THE “DISTRIBUTION COMPLIANCE PERIOD”) AFTER THE CLOSING
OF THE OFFERING TO WHICH THIS NOTE RELATES, EXCEPT PURSUANT TO REGISTRATION
UNDER THE SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT.

(F)                                    HOLDER WILL NOT ENGAGE IN ANY HEDGING
TRANSACTIONS WITH RESPECT TO THIS NOTE OR THE COMMON STOCK OF THE COMPANY AT ANY
TIME PRIOR TO THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD, EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT.

(G)                                 THE COMPANY IS AND WILL BE RELYING ON THE
TRUTH AND ACCURACY OF HOLDER’S REPRESENTATIONS, WARRANTIES, AGREEMENTS,
ACKNOWLEDGEMENTS AND UNDERSTANDINGS AS SET FORTH HEREIN, IN ORDER TO DETERMINE
THE APPLICABILITY OF SUCH EXEMPTIONS AND THE SUITABILITY OF HOLDER AND
HIS/HER/ITS ACQUISITION OF THE NOTE AND CONVERSION SHARES UPON CONVERSION
HEREOF.

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(H)                                 HOLDER HAS BEEN FURNISHED WITH, OR HAS
ACQUIRED, COPIES OF ALL OF THE DOCUMENTS FILED BY THE COMPANY WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION DURING THE TWELVE MONTHS PRIOR TO THE
DATE HEREOF, AS WELL AS ALL OTHER DOCUMENTS MADE AVAILABLE BY THE COMPANY FOR
PUBLIC DISSEMINATION DURING THE SAME PERIOD, INCLUDING, BUT NOT LIMITED TO,
PRESS RELEASES, AND HOLDER HAS BEEN PROVIDED ALL NECESSARY AND APPROPRIATE
INFORMATION ABOUT THE COMPANY TO MAKE AN INFORMED INVESTMENT DECISION WITH
RESPECT TO THE ACQUISITION OF THIS NOTE.

(I)                                     HOLDER HAS SUFFICIENT KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS AND IS CAPABLE OF EVALUATING THE
RISKS AND MERITS OF HOLDER’S INVESTMENT IN THE COMPANY; HOLDER HAS BEEN PROVIDED
THE OPPORTUNITY TO MAKE ALL NECESSARY AND APPROPRIATE INQUIRIES OF THE COMPANY
REGARDING COMPANY’S BUSINESS AND ASSOCIATED RISKS, AND COMPANY HAS COMPLIED WITH
ALL SUCH REQUESTS; AND HOLDER IS ABLE FINANCIALLY TO BEAR THE RISK OF LOSING
HOLDER’S FULL INVESTMENT IN THIS NOTE.

(J)                                     THE NOTE IS BEING ACQUIRED AND ANY
CONVERSION SHARES WILL BE ACQUIRED IN A TRANSACTION NOT INVOLVING A PUBLIC
OFFERING WITHIN THE UNITED STATES WITHIN THE MEANING OF THE SECURITIES ACT, AND
HOLDER UNDERSTANDS THAT THIS NOTE HAS NOT BEEN AND WILL NOT BE, AND ANY
CONVERSION SHARES HAVE NOT BEEN AND MAY NOT BE, REGISTERED UNDER THE SECURITIES
ACT OR REGISTERED OR QUALIFIED UNDER ANY THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION, ARE AND WILL BE “RESTRICTED SECURITIES” AND CANNOT BE RESOLD
OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT,
AND REGISTERED OR QUALIFIED UNDER ANY OTHER APPLICABLE SECURITIES LAWS, OR AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS AVAILABLE.  PRIOR TO ANY
PROPOSED TRANSFER OF THIS NOTE OR ANY CONVERSION SHARES, HOLDER SHALL, AMONG
OTHER THINGS, GIVE WRITTEN NOTICE TO THE COMPANY OF HOLDER’S INTENTION TO EFFECT
SUCH TRANSFER, IDENTIFYING THE TRANSFEREE AND DESCRIBING THE MANNER OF THE
PROPOSED TRANSFER AND, IF REQUESTED BY THE COMPANY, ACCOMPANIED BY (I)
INVESTMENT REPRESENTATIONS BY THE TRANSFEREE SIMILAR TO THOSE MADE BY HOLDER IN
THIS SECTION 10 AND (II) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO
THE EFFECT THAT THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER
THE SECURITIES ACT AND WITHOUT REGISTRATION OR QUALIFICATION UNDER APPLICABLE
STATE OR OTHER SECURITIES LAWS.  EACH CERTIFICATE FOR ANY CONVERSION SHARES
SHALL BEAR A LEGEND  SIMILAR TO THAT SET FORTH ON PAGE 1 OF THIS NOTE (INSOFAR
AS APPLICABLE) AND OTHERWISE REFERRING TO REITERATING THE RESTRICTIONS ON
TRANSFER AND OTHER TERMS HEREOF APPLICABLE TO THE CONVERSION SHARES UPON
ISSUANCE.

(K)                                  HOLDER UNDERSTANDS THAT NO U.S. FEDERAL OR
STATE GOVERNMENT OR AGENCY HAS PASSED ON OR MADE ANY RECOMMENDATION OR
ENDORSEMENT OF OFFERING FOR SALE OR THE SALE OF THIS NOTE, OR WITH RESPECT TO
THE CONVERSION SHARES.

(L)                                     HOLDER ACKNOWLEDGES THAT THIS NOTE IS
ONE OF SEVERAL SIMILAR NOTES (COLLECTIVELY THE “OFFERED NOTES”) IN THE AGGREGATE
PRINCIPAL AMOUNT OF UP TO $20,000,000, OR AT THE OPTION OF THE COMPANY, A
GREATER AMOUNT; AND THAT THERE IS NO RESTRICTION IMPOSED HEREBY UPON THE COMPANY
IN RESPECT OF THE INCURRING BY THE COMPANY OF ADDITIONAL DEBT OR THE ISSUANCE BY
THE COMPANY OF ADDITIONAL DEBT OR EQUITY SECURITIES, OR OTHERWISE.

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11.           ANTI-DILUTION.  IF THE COMPANY EXECUTES A STOCK SPLIT, REVERSE
STOCK SPLIT, OR RE-CAPITALIZATION, OR MAKES A DIVIDEND OR OTHER DISTRIBUTION IN
CASH OR SHARES ON COMMON STOCK, OR RECLASSIFIES ALL OR PART OF ITS OUTSTANDING
COMMON STOCK (ANY OF THE FOREGOING A “DILUTION TRANSACTION”), THE NOTE
CONVERSION RATE AND THRESHOLD AMOUNT SPECIFIED IN SECTION 3(A) ABOVE SHALL EACH
BE EQUITABLY AND PROPORTIONATELY ADJUSTED SO THAT THIS NOTE SHALL BE CONVERTED
AS OF THE SAME DATE AS IT WOULD HAVE OTHERWISE CONVERTED HAD SUCH DILUTION
TRANSACTION NOT OCCURRED, AND SO THAT THE HOLDER OF THIS NOTE SHALL UPON
CONVERSION FOLLOWING A DILUTION EVENT BE ENTITLED TO RECEIVE THE NUMBER AND KIND
OF SHARES OF COMMON STOCK THAT SUCH HOLDER WOULD HAVE OWNED OR HAVE BEEN
ENTITLED TO RECEIVE IMMEDIATELY PRIOR TO THE HAPPENING OF A DILUTION TRANSACTION
AND THEN, FOLLOWING SUCH CONVERSION, SUBSEQUENTLY SUBJECTED TO THE EFFECT
THEREOF.

12.           REGISTRATION.  UPON THE REQUEST OF HOLDER OR OF ANY HOLDER OF ANY
OF THE OTHER OFFERED NOTES (COLLECTIVELY, THE “OFFERED NOTEHOLDERS”) FOLLOWING
THE FIRST TO OCCUR OF THE CONVERSION OF THIS NOTE AND THE CONVERSION OF ANY OF
THE OFFERED NOTES AND THE ISSUANCE OF CONVERSION SHARES HEREUNDER OR THEREUNDER
AND AS DEFINED THEREIN, AND PROVIDED THAT THE COMPANY SHALL THEN BE, OR IF NOT,
AT SUCH TIME THEREAFTER AS THE COMPANY SHALL BECOME, ELIGIBLE TO EFFECT THE
REGISTRATION PURSUANT TO THE SECURITIES ACT OF THE SHARES OF COMMON STOCK ISSUED
OR ISSUABLE HEREUNDER OR UPON CONVERSION OF THE OTHER OFFERED NOTES
(COLLECTIVELY, THE “REGISTRABLE SECURITIES”) ON FORM S-3 OR ON ANOTHER  “SHORT
FORM” REGISTRATION STATEMENT, THE COMPANY SHALL USE COMMERCIALLY REASONABLE
EFFORTS TO EFFECT REGISTRATION PURSUANT TO THE SECURITIES ACT, OF THE
REGISTRABLE SECURITIES OR THE RESALE THEREOF BY THE OFFERED HOLDERS ON FORM S-3
OR ON ANOTHER SHORT FORM REGISTRATION STATEMENT.  THE COMPANY SHALL HAVE NO
OBLIGATION HEREUNDER TO EFFECT ANY SUCH REGISTRATION AT ANY TIME WHICH, AS
DETERMINED BY THE COMPANY, NEITHER FORM S-3 NOR ANY OTHER SIMILAR SHORT-FORM
REGISTRATION STATEMENT IS AVAILABLE THEREFOR, NOR SHALL THE COMPANY HAVE ANY
OBLIGATION TO MAINTAIN THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT FOR MORE
THAN ONE YEAR.  THE COMPANY MAY DELAY THE FILING OF ANY SUCH REGISTRATION
STATEMENT AS A RESULT OF CONSTRAINTS OR RESTRICTIONS UNDER APPLICABLE LAW SO
REQUIRING AS DETERMINED BY THE COMPANY, OR SUSPEND THE EFFECTIVENESS OF ANY SUCH
REGISTRATION STATEMENT AND/OR REQUIRE BY WRITTEN NOTICE THAT THE OFFERED
NOTEHOLDERS IMMEDIATELY CEASE SALES OF SHARES IN THE EVENT THAT FROM TIME TO
TIME (I) THE COMPANY FILES ANOTHER REGISTRATION STATEMENT (OTHER THAN A
REGISTRATION STATEMENT ON FORM S-8 OR ITS SUCCESSOR FORM) UNDER THE SECURITIES
ACT FOR A THEN PENDING OR ANTICIPATED PUBLIC OFFERING OF ITS SECURITIES, OR (II)
AN EVENT HAS OCCURRED, OR THE COMPANY HAS ENTERED INTO A TRANSACTION, WHICH THE
COMPANY DETERMINES IN GOOD FAITH MUST BE DISCLOSED IN ORDER FOR THE COMPANY TO
COMPLY WITH THE PUBLIC DISCLOSURE REQUIREMENTS IMPOSED ON THE COMPANY UNDER THE
SECURITIES ACT.  THE COMPANY SHALL NOT BE REQUIRED TO INCLUDE ANY REGISTRABLE
SECURITIES IN ANY SUCH REGISTRATION STATEMENT UNLESS THE HOLDER (I) PROVIDES TO
THE COMPANY IN A TIMELY MANNER SUCH INFORMATION REGARDING THE HOLDER AS IS
REQUIRED BY THE SECURITIES ACT TO BE INCLUDED IN THE REGISTRATION STATEMENT OR
PROVIDED TO THE COMPANY, (II) SHALL HAVE PROVIDED TO THE COMPANY ITS WRITTEN
AGREEMENT (X) TO INDEMNIFY THE COMPANY AND EACH OF ITS OFFICERS, DIRECTORS AND
AGENTS AGAINST, AND TO HOLD THE COMPANY AND ITS OFFICERS, DIRECTORS AND AGENTS
HARMLESS FROM, ANY LOSSES, CLAIMS, DAMAGES, EXPENSES OR LIABILITIES (INCLUDING
REASONABLE ATTORNEYS FEES) TO WHICH THE COMPANY OR ANY OF ITS OFFICERS,
DIRECTORS OR AGENTS MAY BECOME SUBJECT BY REASON OF ANY STATEMENT OR OMISSION IN
THE REGISTRATION STATEMENT MADE IN RELIANCE UPON, OR IN CONFORMITY WITH, A
WRITTEN STATEMENT BY SUCH HOLDER FURNISHED PURSUANT HERETO OR ANY FAILURE OF
HOLDER TO COMPLY WITH THE PROVISIONS OF THIS SECTION 12, AND (Y) TO REPORT TO
THE COMPANY SALES MADE PURSUANT TO THE REGISTRATION STATEMENT.

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13.           SECURITY INTEREST.  THE COMPANY’S OBLIGATIONS UNDER THIS NOTE AND
THE OTHER OFFERED NOTES ARE SECURED BY A GRANT OF, AND THE COMPANY DOES HEREBY
GRANT TO THE HOLDER (AND HAS SIMILARLY GRANTED OR IS OR WILL SIMILARLY GRANT TO
THE OTHER OFFERED NOTEHOLDERS IN RESPECT OF THE OBLIGATIONS UNDER THE OTHER
OFFERED NOTES), SUBJECT TO THE TERMS, PROVISIONS AND LIMITATIONS HEREOF, A
SECURITY INTEREST IN (THE “COLLATERAL”) ALL TANGIBLE AND INTANGIBLE ASSETS OF
THE COMPANY NOW EXISTING OR HEREAFTER ARISING (TOGETHER WITH PRODUCTS AND
PROCEEDS), OTHER THAN AND IN ANY EVENT EXCLUDING:

(I) ALL TANGIBLE AND INTANGIBLE ASSETS WHICH ARE THE SUBJECT OF ANY SECURITY
INTEREST PREVIOUSLY GRANTED BY THE COMPANY WHICH WOULD PROHIBIT OR CONFLICT WITH
A GRANT OF A SECURITY INTEREST HEREUNDER OR UNDER THE OTHER OFFERED NOTES, AND
IN ANY EVENT AND WITHOUT REGARD TO WHETHER OR NOT SO PROHIBITED OR CONFLICTING,
EXCLUDING ALL TANGIBLE AND INTANGIBLE ASSETS WHICH ARE THE SUBJECT OF A SECURITY
INTEREST PREVIOUSLY GRANTED BY THE COMPANY IN FAVOR OF BOSTON SCIENTIFIC
CORPORATION, AND

(II) WHETHER NOW OR HEREAFTER EXISTING OR ARISING, ALL (A) LEASES AND OTHER
CONTRACTS, (B) LICENSES (INCLUDING LICENSES TO SOFTWARE AND INTELLECTUAL
PROPERTY), (C) RIGHTS OF THE COMPANY UNDER SUCH LEASES, OTHER CONTRACTS AND
LICENSES, (D) PROPERTY, IF ANY, THAT IS OR BECOMES THE SUBJECT OF SUCH LEASES,
OTHER CONTRACTS OR LICENSES, AND (E) WITHOUT LIMITING (A) THROUGH (C),
COLLABORATIVE ARRANGEMENTS BY AND BETWEEN THE COMPANY AND ANY THIRD PARTY AND
ANY AND ALL INTERESTS OR RIGHTS OF THE COMPANY IN RESPECT OF THE ASSETS RELATED
THERETO.

THE SECURITY INTEREST GRANTED HEREBY, AND ANY CORRESPONDING LIEN, IS AND SHALL
BE FURTHER SUBJECT AND SUBORDINATE TO ANY SECURITY INTEREST AND LIEN GRANTED BY
THE COMPANY IN THE COLLATERAL AND ESTABLISHED AT ANY TIME OR FROM TIME TO TIME
IN THE FUTURE AS PART OF ANY FINANCING ARRANGEMENTS THAT MAY BE ENTERED INTO BY
AND BETWEEN THE COMPANY AND ANY BANK OR FINANCIAL INSTITUTION, AND SHALL RANK
PARI PASSU AND SHALL BE DEEMED HEREBY AND THEREBY TO BE SPREAD WITH THE SECURITY
INTERESTS OTHERWISE GRANTED AND LIENS ESTABLISHED OR CREATED IN THE COLLATERAL
PURSUANT TO OR AS CONTEMPLATED BY THE OTHER OFFERED NOTES OR ANY OTHER
CONVERTIBLE DEBT SECURITIES OF THE COMPANY AS MAY BE ISSUED FROM TIME TO TIME
AND WHICH SO EXPRESSLY PROVIDE, AND THE HOLDER BY ACCEPTING THIS NOTE DOES
HEREBY EXPRESSLY CONSENT THERETO, IT BEING THE INTENTION OF THE COMPANY AND THE
HOLDER THAT THE SECURITY INTEREST HEREBY GRANTED, AND ANY CORRESPONDING LIEN
ESTABLISHED OR CREATED, SHALL RANK IN RIGHT OF PRIORITY (SUBJECT IN ANY EVENT TO
THE LIMITS AND EXCLUSIONS OTHERWISE HEREIN PROVIDED) IN RESPECT OF THE
COLLATERAL SENIOR ONLY TO THE GENERAL UNSECURED INDEBTEDNESS AND OTHER UNSECURED
OBLIGATIONS OF THE COMPANY NOW OR HEREAFTER EXISTING, PARI PASSU WITH THE
SECURITY INTERESTS GRANTED AND LIENS ESTABLISHED OR CREATED PURSUANT TO OR AS
CONTEMPLATED BY THE OTHER OFFERED NOTES AND ANY OTHER CONVERTIBLE DEBT
SECURITIES OF THE COMPANY AS MAY BE ISSUED FROM TIME TO TIME AND WHICH SO
EXPRESSLY PROVIDE, AND JUNIOR TO ANY OTHER LIEN CREATED OR SECURITY INTEREST
GRANTED BY THE COMPANY.

IN THE EVENT COMPANY FAILS TO PERFORM ANY OF ITS REPAYMENT OBLIGATIONS UNDER
THIS NOTE, AND SUCH DEFAULT IS CONTINUING FOR A PERIOD OF 10 BUSINESS DAYS AFTER
WRITTEN NOTICE FROM HOLDER TO THE COMPANY (“DEFAULT”), HOLDER MAY ACCELERATE
REPAYMENT OF THE PRINCIPAL PLUS ANY ACCRUED INTEREST AND EXERCISE, WITHOUT
FURTHER NOTICE, ALL RIGHTS AND REMEDIES UNDER THIS NOTE OR ENFORCE ANY RIGHTS
OTHERWISE AVAILABLE.  IN THE CASE OF SUCH DEFAULT, HOLDER SHALL GIVE THE COMPANY
NOT LESS THAN 60 BUSINESS DAYS PRIOR WRITTEN NOTICE OF ITS INTENDED DISPOSITION
OF THE COLLATERAL; PROVIDED, HOWEVER, IF COMPANY CURES SUCH DEFAULT PRIOR TO
EXPIRATION OF SUCH NOTICE PERIOD, DEFAULT WILL BE NOT DEEMED TO HAVE OCCURRED
AND HOLDER SHALL HAVE NO RIGHTS TO ACCELERATE REPAYMENT OR ENFORCE THE
COLLATERAL.  FOR THE PURPOSE OF ENFORCING ANY AND ALL RIGHTS AND REMEDIES UNDER
THIS NOTE, HOLDER MAY (I) REQUIRE THE COMPANY TO, UPON HOLDER’S

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reasonable request, assemble all or any part of the Collateral as directed by
the Holder and make it available to Holder during normal business hours at the
Company’s headquarters, (ii) to the extent permitted by applicable law, enter,
without breach of the peace, any premises where any such Collateral is or may be
located and, reasonably seize and remove such Collateral from such premises,
(iii) direct the Company to reasonably provide relevant information from the
Company’s books and records relating to the Collateral, and (iv) prior to the
disposition of any of the Collateral, store or transfer the Collateral, process,
repair or recondition such Collateral or otherwise prepare it for disposition in
any manner and to the extent Holder deems reasonably appropriate. 
Notwithstanding anything to the contrary herein, the security interest granted
hereby is expressly limited to the Final Payment Amount outstanding under this
Note and Holder shall exercise the foregoing rights in such a fashion so as to
minimize disruption to Company and its business operations and only to the
extent necessary to recover such unpaid Final Payment Amount.  Holder and the
Company shall work in good faith to effectuate the intent of the previous
sentence.  The security interest granted hereby and any corresponding lien
created or established, shall terminate and expire upon payment in full of the
Final Payment Amount or upon the occurrence of the Conversion Date, which ever
first occurs, and without further action on the part of the Company or Holder. 
Holder will execute any documents or instruments the Company may reasonably
request to evidence such expiration.  All rights and remedies of the Holder
hereunder shall be exercised in a manner which recognizes rights of the other
Offered Noteholders in respect of the Collateral and in respect of the lien and
payment priority provided for hereunder.

BY ACCEPTANCE OF THIS NOTE, HOLDER ACKNOWLEDGES AND AGREES THAT (I) CERTAIN
ASSETS OF THE COMPANY ARE EXCLUDED FROM THE SECURITY INTEREST GRANTED HEREBY,
(II) THE SECURITY INTEREST GRANTED TO HOLDER PURSUANT HERETO, AND ANY
CORRESPONDING LIEN CREATED OR ESTABLISHED, IS AND SHALL BE SUBJECT AND
SUBORDINATE TO ANY LIEN AND SECURITY INTEREST HERETOFORE OR HEREAFTER GRANTED BY
THE COMPANY OR CREATED AND ESTABLISHED AS PART OF ANY FINANCING ARRANGEMENT THAT
MAY BE ENTERED INTO BY AND BETWEEN THE COMPANY AND ANY BANK OR FINANCIAL
INSTITUTION AND, SUBJECT IN ANY EVENT TO THE LIMITS AND EXCLUSIONS OTHERWISE
HEREIN PROVIDED, SUCH LIEN AND SECURITY INTEREST SHALL RANK SENIOR ONLY TO THE
GENERAL UNSECURED INDEBTEDNESS AND OTHER UNSECURED OBLIGATIONS OF THE COMPANY
NOW OR HEREAFTER EXISTING, (III) THE COMPANY IS ISSUING OR MAY ISSUE THE OTHER
OFFERED NOTES, AND IN ADDITION THERETO MAY ALSO ISSUE FROM TIME TO TIME IN THE
FUTURE OTHER CONVERTIBLE DEBT SECURITIES, AND HAS GRANTED OR MAY GRANT IN
CONNECTION WITH THE ISSUANCE OF THE OTHER OFFERED NOTES OR SUCH OTHER
CONVERTIBLE DEBT SECURITIES, SECURITY INTERESTS IN THE COLLATERAL WHICH MAY, AND
THE LIEN IN RESPECT OF WHICH MAY, RANK PARI PASSU IN PRIORITY WITH THE SECURITY
INTEREST GRANTED HEREBY, AND HOLDER DOES HEREBY CONSENT TO THE GRANT BY THE
COMPANY OF SUCH SECURITY INTERESTS AND THE ESTABLISHMENT AND CREATION OF SUCH
LIENS.  HOLDER SHALL PERFORM, FROM TIME TO TIME, SUCH ACTS, AND SHALL EXECUTE,
ACKNOWLEDGE AND/OR DELIVER SUCH OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS AS
THE COMPANY REASONABLY MAY REQUEST IN ORDER TO CONSUMMATE THE TRANSACTIONS
PROVIDED FOR IN THIS NOTE.  WITHOUT LIMITING THE FOREGOING, BY ACCEPTING THIS
NOTE THE HOLDER DOES EXPRESSLY CONSENT TO THE AFORESAID RANKING IN RESPECT OF
LIEN PRIORITY AND SUBORDINATION AND AGREES TO PERFORM, FROM TIME TO TIME, SUCH
ACTS, AND TO EXECUTE, ACKNOWLEDGE AND/OR DELIVER SUCH INSTRUMENTS, DOCUMENTS AND
AGREEMENTS, AS MAY FROM TIME TO TIME BE REQUESTED BY THE COMPANY, OR AS MAY FROM
TIME TO TIME OTHERWISE BE REASONABLY REQUESTED, NECESSARY OR REQUIRED, TO SO
CONFIRM OR PROVIDE.

14.           MISCELLANEOUS.  NO MODIFICATION, RESCISSION, WAIVER, FORBEARANCE,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS NOTE SHALL BE MADE, EXCEPT BY A
WRITTEN AGREEMENT DULY EXECUTED BY EACH OF THE COMPANY AND HOLDER.  THIS NOTE
MAY NOT BE CONVEYED, ASSIGNED OR

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transferred by Holder without the prior written consent of the Company.  Any
permitted subsequent Holder of this Note shall be deemed, by accepting this
Note, to have made and reaffirmed to the Company each and every of the
acknowledgements, consents, agreements, representations, warranties and
covenants of the original Holder hereof.  All notices hereunder shall be in
writing and be deemed given if personally delivered, sent by overnight courier
(provided proof of delivery is received) or sent by telecopy (provided a
confirmation of transmission is received) at the addresses of the respective
parties set forth in the initial paragraph of this Note or such other address as
either party shall notify the other of from time to time.  The Company hereby
submits to personal jurisdiction in the State of Maryland, consents to the
jurisdiction of any competent state or federal district court sitting in the
County of Montgomery County, Maryland, and waives any and all rights to raise
lack of personal jurisdiction as a defense in any action, suit or proceeding in
connection with this Note or any related matter.  This Note shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Maryland, without reference to conflicts of law provisions of such state.

IN WITNESS WHEREOF, the undersigned have caused this Note to be executed and
delivered by a duly authorized officer as of the date first above written.

 

 

 

 

 

Osiris Therapeutics, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

ACCEPTED as of the date first above written:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Holder:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

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