Exhibit 10.5


 


THIS PROMISSORY NOTE (THIS “NOTE”) HAS 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.


 


PROMISSORY NOTE


 


	
  US
  $1,500,000.00

  	
   

  	
  June 12,
  2008

  



 


FOR VALUE RECEIVED, Osiris
Therapeutics, Inc. , a Delaware corporation (the “ Company ”), having an address of 7015
Albert Einstein Drive, Columbia, MD, 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 One Million Five Hundred
Thousand  U.S. Dollars  ($1,500,000.00) (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 December 12, 2008 (the “Maturity Date”), unless this Note is
earlier redeemed by 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 twenty percent (20%) 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 in
cash on the Maturity Date or  the Redemption Date (as hereinafter defined)
as the case may be, in each case in accordance with the terms and conditions of
this Note. Any accrued but unpaid interest will be paid in cash at the time of
conversion. If the Maturity Date or the Redemption 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.


 


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3.             Redemption of this Note.  This Note may be redeemed by the Company upon any
monthly anniversary date of issuance 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 10 days prior to the effective date of such redemption (the “Redemption Date”).


 


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 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.


 


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.


 


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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 for his/her/its own
account, not on behalf or for the account of any U.S. Person, and the purchase
of this Note has not been pre-arranged with a purchaser in the U.S.


 


(e)                                            The Holder will make all resales of this Note 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 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 upon conversion hereof.


 


(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 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 registered under the Securities Act or registered or qualified under any the
securities laws of any state or other jurisdiction, are and will be 


 


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“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, 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.


 


(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.


 


(l)                                               Holder acknowledges that this Note is one of several
similar notes (collectively the “Offered
Notes”) in the aggregate principal amount of up to $10,000,000, 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.


 


11.          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 


 


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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
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.


 


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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 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.


 


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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:

  	
   Philip R.
  Jacoby, Jr.

  
	
   

  	
  Title:

  	
   Interim Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
  ACCEPTED as of
  the date first above written:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
					



 


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