EXHIBIT 10.5


 


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                       ,
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               ,
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                                        
(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
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.


 


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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 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.


 


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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 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.


(Signature Page Follows)


 


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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.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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