Document:

EXHIBIT 10.3

 

CONVERTIBLE PROMISSORY NOTE CONVERSION AGREEMENT

 

 

THIS CONVERTIBLE PROMISSORY NOTE CONVERSION AGREEMENT (this
“Agreement”) is made and entered into this 19th day of December 2007 by and
among OSIRIS THERAPEUTICS, INC., a Delaware corporation (the “Company”), and
the person(s) listed on and executing the signature page hereto or a
counterpart thereof (each, a “Noteholder” and collectively, the “Noteholders”).

 

WHEREAS, each Noteholder holds one or more Convertible
Promissory Notes each bearing interest at a rate of ten percent (10%) per annum
and becoming due and payable in full upon maturity on April 30, 2009, issued by
the Company in the principal amount set forth on the signature page hereto
(each, a “Note” and collectively, the “Notes”), convertible at the option of
each such Noteholder into shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), at a conversion rate of one share of
Common Stock for each $18.00 of unpaid principal balance under each respective Note,
with any accrued but unpaid interest being paid in cash at the time of
conversion (the “Original Conversion Rate”); and

 

WHEREAS, in consideration of and to induce each
Noteholder’s agreement to convert their respective Note(s), and conditioned
upon such Noteholder’s execution and delivery of this Agreement, and the
acceptance of this Agreement by the Company in respect of such Noteholder, the
Company is willing to change the conversion rate applicable to each Note held
by such Noteholder from the Original Conversion Rate to one share of Common
Stock for each $13.00 of the aggregate of the unpaid principal and accrued
interest on the Notes through the date hereof (the “New Conversion Rate”); and

 

WHEREAS, each Noteholder wishes to convert all of the outstanding
unpaid principal and accrued and unpaid interest under such Noteholder’s
respective Note(s) into shares of Common Stock in accordance with this
Agreement.

 

NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereby covenant and agree as follows:

 

1.             Conversion of Notes; Change in
Exercise Price.  Subject to the terms
and conditions set forth herein, upon acceptance by the Company of this
Agreement in respect of a Noteholder (such acceptance constituting the
agreement on the part of the Company to modify the conversion rate applicable
under each Note held by such Noteholder to be and become the New Conversion
Rate), the entire outstanding unpaid principal amount of the corresponding
Note(s) held by a Noteholder, together with the accrued and unpaid interest in
respect thereof, will then be, and deemed to have been, converted into the
number of shares of Common Stock determined by dividing (x) such aggregate
amount of principal and interest by (y) the New Conversion Rate.  Each Noteholder agrees that the Company’s
decision to change the Original Conversion Rate to the New Conversion Rate is
contingent upon such Noteholder’s decision to convert the Note(s) held by such
Noteholder, and delivery by the Noteholder and acceptance by the Company of
this Agreement and that such Noteholder’s decision to convert the Note(s) held
by such Noteholder pursuant to this Agreement is irrevocable.

 

 

1

 

 

2.             Manner of Conversion/Termination
of Notes.  On, or promptly following
acceptance of this Agreement by the Company, the Company shall issue and deliver
to each Noteholder a certificate or certificates or other document evidencing
the shares of Common Stock issued upon conversion of the Notes(s) held by such
Noteholder as provided for under Section 1 of this Agreement, and upon receipt
of such certificate or certificates or other document evidencing the shares of
Common Stock by such Noteholder, the Note(s) held by such Noteholder will be
deemed paid in full, with no further obligations of the Company thereunder, and
all rights of the Noteholder under such Note(s) (including without limitation
any security interests granted or existing thereunder) shall cease, such
Note(s) shall be deemed cancelled and of no further force and effect, and each
Noteholder shall be deemed to be a holder of record of the shares of Common
Stock of the Company into which such Note(s) was converted; provided,
however, that notwithstanding anything herein to the contrary, the rights
of such Noteholder set forth in Section 12 of the Note(s) held by such
Noteholder shall survive the consummation of the transactions contemplated
hereunder and remain in full force and effect. 
Each Noteholder shall promptly deliver the Note(s) held by such
Noteholder to the Company, marked paid in full.

 

3.             Representations of Noteholders.  Each Noteholder represents and warrants to
the Company that: (i) such Noteholder has, and at the time immediately prior to
the acceptance hereof by the Company and conversion of the Note(s) held by such
Noteholder, it will have, good and valid title to the Note(s) indicated below
as being held by such Noteholder, free and clear of all liens, security
interests, encumbrances, equities and claims, with no defects of title
whatsoever; (ii) such Noteholder is not a party to or bound by any agreement,
or any judgment, decree or ruling of any governmental authority, affecting or
relating to such Noteholder’s right to convert the Note(s) of such Noteholder
as contemplated hereby; and (iii) notwithstanding anything herein to the
contrary, the representations, warranties and covenants of such Noteholder set
forth in Section 10 of the applicable Note (a copy of which section is attached
hereto as Exhibit A) be, and hereby are, ratified and confirmed in all
respects as if such representations, warranties and covenants were made by such
Noteholder as of the date hereof and in respect of the transactions hereby
contemplated and the shares of Common Stock to be issued pursuant hereto.

 

4.             Indemnification of Company.  Each Noteholder agrees to indemnify and hold
harmless the Company and each of its respective officers, directors, agents,
attorneys, accountants and affiliates from and against all damages, losses,
costs and expenses (including reasonable attorneys’ fees) that they may incur
by reason of the failure of such Noteholder to fulfill any of the terms or
conditions of this Agreement, or by reason of any breach of the representations
and warranties made by such Noteholder herein or in any other document provided
by any such Noteholder to the Company in connection with the transactions
contemplated hereby.  Any Noteholder who
is also an officer or director of, or consultant to, the Company agrees to
indemnify and hold harmless the Company from any and all claims or consequences
based in whole or in part upon an assertion by any third party that the
transactions hereby contemplated in respect of such Noteholder constitute
compensation under any rule or regulation of any exchange or trading market
upon which the Common Stock is listed for trading.  The Company and any such Noteholder agree
that no such compensation is intended

 

 

2

 

hereby,
and agree, further, to cooperate with each other and with any asserting party
in furtherance of the resolution of any such matter without consequence to the
Company; provided, however, that in any event, the Noteholder agrees to
indemnify the Company as aforesaid and in furtherance thereof to take whatever
actions may be required of such Noteholder to effect such resolution and to
alleviate any such consequence, as and in the manner, the Company determines to
be necessary or appropriate under the circumstances.

 

5.             Waiver
of Notice.  The Company and each
Noteholder hereby waive any and all notice required pursuant to the Notes in
respect of the transactions hereby contemplated.

 

6.             Survival of Representations and
Warranties.  All representations and
warranties made hereunder shall survive the consummation of the transactions
contemplated hereunder.

 

7.             Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of the respective parties hereto, their legal
representatives, successors, and assigns.

 

8.             Non-waiver.  No delay or failure by any party to exercise
any right under this Agreement, and no partial or single exercise of that
right, shall constitute a waiver of that or any other right, unless otherwise
expressly provided herein.

 

9.             Headings.  Headings in this Agreement are for
convenience only and shall not be used to interpret or construe its provisions.

 

10.           Governing Law.  This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.

 

11.           Obligations Several.  The obligations of the respective Noteholders
hereunder are several and not joint.

 

12.           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall be one and the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

 

3

 

 

IN
WITNESS WHEREOF the parties have signed this Agreement as of the date first set
forth above.

 

NOTEHOLDERS:

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

COMPANY:

 

OSIRIS
THERAPEUTICS, INC.

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Date:

  	
  December
          , 2007

  	
   

  

 

 

4

 

EXHIBIT A

 

NOTEHOLDER REPRESENTATIONS, WARRANTIES AND COVENANTS

 

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.

 

 

A-1

 

 

(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.

 

(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

 

 

A-2

 

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.

 

 

A-3Exhibit 4.1

 

	
  WH

  	
  

  	
   

  
	
   

  	
   

  	
   

  
	
  COMMON
  STOCK

  	
  CHARTERED UNDER THE LAWS
  OF THE UNITED STATES OF AMERICA

  	
  SEE REVERSE FOR CERTAIN
  DEFINITIONS

  CUSIP 92934C 10 1

  

 

This Certifies that

 

is the owner of:

 

FULLY
PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF $0.0001 EACH
OF

WSB HOLDINGS INC.

 

(hereinafter referred to as
the “Corporation”), a Delaware corporation. The shares represented by this
certificate are transferable only on the stock transfer books of the
Corporation by the holder of record hereof, or by his duly authorized attorney
or legal representative, upon the surrender of this certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Corporation’s transfer agent and registrar.

 

IN WITNESS WHEREOF, the
Corporation has caused this certificate to be executed by the facsimile
signatures of its duly authorized officers and has caused a facsimile of its
corporate seal to be hereunto affixed.

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
  [SEAL]

  WSB HOLDINGS INC

  	
  

  
	
  SECRETARY

  	
  2007

  	
  CHAIRMAN

  

 

	
   

  	
  COUNTERSIGNED AND
  REGISTERED:

  
	
   

  	
  AMERICAN
  STOCK TRANSFER & TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
  TRANSFER
  AGENT AND REGISTRAR

  
	
   

  	
   

  
	
   

  	
  BY

  
	
   

  	
  

  
	
   

  	
  AUTHORIZED
  SIGNATURE

  

 

 

WSB HOLDINGS INC.

 

The shares represented by
this certificate are issued subject to all the provisions of the certificate of
incorporation and bylaws of WSB Holdings Inc. (the “Corporation”) as from time
to time amended (copies of which are on file at the principal executive office
of the Corporation), to all of which the holder by acceptance hereof assents.

 

The Corporation will furnish
to any shareholder upon request and without charge a full statement of the
designations, preferences, limitations and relative rights of the shares of
each class authorized to be issued, the variations in the relative rights and
preferences between the shares of each series of shares of the Corporation so
far as the same have been fixed and determined, and the authority of the Board
of Directors to fix and determine the relative rights and preferences of
classes and series of the shares of the Corporation. Such request may be made
to the Corporation or the Transfer Agent.

 

The
following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full according
to applicable laws or regulations:

 

	
  TEN COM

  	
  –

  	
  as tenants in common

  	
  UNIF
  GIFT MIN ACT–

  	
   

  	
  Custodian

  	
   

  
	
  TEN ENT

  	
  –

  	
  as tenants by the
  entireties

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
  JTTEN

  	
  –

  	
  as joint tenants with right
  of

  	
  under
  Uniform Gifts to Minors

  
	
   

  	
   

  	
  survivorship and not as

  	
  Act

  	
   

  	
   

  
	
   

  	
   

  	
  in common

  	
   

  	
  (State)

  	
   

  
									

 

Additional
abbreviations may also be used though not in the above list.

 

For value received,               hereby
sell, assign and transfer unto

 

PLEASE INSERT SOCIAL SECURITY
OR 

OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

PLEASE
PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE

 

                                                                                                                                                                Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint 

 

                                                                                                                                                                Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises. 

 

Dated

 

	
  X 

  	
   

  
	
   

  	
   

  
	
  X 

  	
   

  
	
  NOTICE: 

  	
  THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND
  WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
  PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

  

 

	
  SIGNATURE(S)
  GUARANTEED

  
	
   

  
	
  BY

  	
   

  	
   

  	
   

  

THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

 

KEEP THIS
CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE
CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF
A REPLACEMENT CERTIFICATE.

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