EX-10 3 crnc-8k_090303exhibit.htm CRNC 8-K SEPTEMBER 3, 2003 Exhibit 10.1

THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES,
BLUE SKY OR OTHER APPLICABLE LAWS OF ANY STATE, OR ANY OTHER RELEVANT
JURISDICTION, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS IT IS (A) REGISTERED AND/OR QUALIFIED PURSUANT TO THE
RELEVANT PROVISIONS OF U.S. FEDERAL SECURITIES LAWS, THE SECURITIES, BLUE SKY,
OR OTHER APPLICABLE LAWS OF ANY STATE, OR OTHER RELEVANT JURISDICTION OR (B)
EXEMPT FROM SUCH REGISTRATION OR QUALIFICATION. THEREFORE, NO SALE, PLEDGE OR
OTHER TRANSFER OF THIS SECURITY SHALL BE MADE, NO ATTEMPTED SALE, PLEDGE OR
OTHER TRANSFER SHALL BE VALID, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE ANY
EFFECT TO ANY SUCH TRANSACTION UNLESS (A) SUCH TRANSACTION SHALL HAVE BEEN DULY
REGISTERED UNDER THE SECURITIES ACT AND QUALIFIED OR APPROVED UNDER THE
SECURITIES, BLUE SKY, OR OTHER APPLICABLE LAWS OF ANY STATE, OR OTHER RELEVANT
JURISDICTION, OR (B) THE OBLIGOR SHALL HAVE BEEN SATISFIED THAT SUCH
REGISTRATION, QUALIFICATION OR APPROVAL IS NOT REQUIRED.

Convertible Subordinated Promissory Note

$__________ - Principal Amount               Issue Date - _______ __, 2003

For Value Received, Crdentia Corp, a Delaware corporation ("Obligor"), hereby
promises to pay to the order of ____________ or its assigns ("Holder"), in
lawful money of the United States at the address of Holder set forth below, the
principal sum of ___________ dollars ($____), together with interest thereon
from the date of this Promissory Note (the "Note") on the unpaid principal
balance. Interest shall accrue at a rate of ten percent (10%) per annum, simple
interest, and shall be payable quarterly. Subject to the conversion provisions
set forth herein, unpaid principal together with all accrued and unpaid interest
shall be due and payable in full on ________ __, 2004 (the "Due Date"). This
Note may be prepaid, in whole or in part, at any time without premium or
penalty.

This Note is being issued as one of a series of convertible subordinated
promissory notes (collectively, the "Notes") issued by the Obligor on or about
the date hereof pursuant to certain Subscription Agreements among the Obligor
and the holders of the Notes. Any of the terms of this Note may be waived or
modified only in writing, signed by the Obligor and the holders of sixty six and
two-thirds percent (66 2/3%) of the aggregate principal amount of all then
outstanding notes issued by the Obligor pursuant to the Subscription Agreements.

The outstanding principal balance plus accrued and unpaid interest on this Note
shall be converted at Holder's option and in Holder's sole discretion prior to
the Due Date into shares of the Obligor's Common Stock (the "Common Stock"). The
number of shares of Common Stock shall be equal to the quotient obtained by
dividing (a) the aggregate outstanding principal due, plus accrued and unpaid
interest on this Note on the date of conversion by (b) the Conversion Price. For
purposes of this Note, the "Conversion Price" shall mean the lesser of (x) one
dollar and fifty cents ($1.50) or (y) the per share price of the Obligor's
equity securities issued upon the closing of the Obligor's next private equity
financing (the "New Financing"). If Obligor shall issue after the Issue Date any
Additional Stock for a consideration per share less than the Conversion Price in
effect immediately prior to the issuance of such Additional Stock, the
Conversion Price in effect immediately prior to such issuance shall be forthwith
adjusted to the price paid per share for such Additional Stock. For purposes of
this Note, Additional Stock shall mean any shares of Common Stock issued by
Obligor after the Issue Date other than: (a) Common Stock issued pursuant to the
conversion of the Notes or the conversion of exercise of any convertible or
exercisable instrument outstanding prior to the Issue Date, (b) Common Stock
issuable or issued to employees, consultants, directors or vendors of Obligor
pursuant to a stock plan or restricted stock plan, (c) Common Stock issued or
issuable in a public offering, (d) Common Stock issued in connection with the
acquisition of another corporation or entity by Obligor and (e) Common Stock
issued in connection with strategic alliances or to strategic corporate partners
or to parties that are providing Obligor with equipment loans, real property
leases, loans, credit lines, guarantees of indebtedness, licensing agreements,
consulting agreements, cash price reductions or similar transactions.

In the event that Obligor completes a New Financing prior to the Due Date, the
outstanding principal balance plus accrued and unpaid interest on this Note
shall be converted at Holder's option and in Holder's sole discretion into the
equity securities issued in the New Financing. The number of shares of equity
securities shall be equal to the quotient obtained by dividing (a) the aggregate
outstanding principal due, plus accrued and unpaid interest on this Note on the
date of such conversion by (b) the per share price of such equity securities
issued in the New Financing.

No fractional shares will be issued upon conversion of this Note. In lieu of any
fractional share to which Holder would otherwise be entitled, Obligor will pay
to Holder in cash that amount of the unconverted principal and interest balance
of this Note. Upon conversion of this Note into such equity securities, Holder
shall surrender this Note, duly endorsed, at the principal offices of the
Obligor or any transfer agent for the Obligor. At its expense, Obligor will, as
soon as practicable thereafter, issue and deliver to Holder a certificate for
the number of shares of equity securities to which Holder is entitled upon such
conversion, together with any other securities and property to which Holder is
entitled upon such conversion under the terms of this Note, including a check
payable to Holder for any cash amounts payable as described above. Upon
conversion of this Note into such equity securities, Obligor will be forever
released from all its obligations and liabilities under this Note, including
without limitation the obligation to pay the principal and interest amounts.

If any payment of principal or interest on this Note shall become due on a
Saturday, Sunday, or a public holiday under the laws of the State of California,
such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment.

The indebtedness evidenced by this Note is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, in right of payment to the prior
payment in full of all the Obligor's Senior Debt. For purposes of this Note,
"Senior Debt" shall mean the principal of (and premium, if any) and unpaid
interest on, or other payment obligation with respect to (a) all indebtedness of
the Obligor to commercial banks, equipment lessors and other traditional lending
institutions for money borrowed by the Obligor whether or not secured, and (b)
any such indebtedness to commercial banks or any debentures, notes or other
evidence of indebtedness issued in exchange for such indebtedness.
Notwithstanding anything herein to the contrary, no payment of principal or
interest shall be made on this Note if, but only as long as, there exists any
default, or the existence of any event which, with the giving of notice, would
constitute a default, in the payment of Senior Debt, as determined by the terms
of any such Senior Debt. Holder shall execute, at or following the date hereof,
as the case may be, all subordination documents required by the holders of
Senior Debt necessary to effectuate the terms of the foregoing.

In the event that Obligor (a) fails to make payment on any date for payment
herein above specified of all principal and interest due hereunder on such date,
(b) admits in writing its inability to pay its debts as they become due, or
makes a general assignment for the benefit of creditors or files any petition or
action for relief under any bankruptcy, reorganization, insolvency or moratorium
law, or any other law or laws for the relief of, or relating to, debtors or (c)
an involuntary petition is filed against Obligor under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws for the
relief of, or relating to, debtors unless such petition shall be dismissed or
vacated within sixty (60) days of the date thereof, Obligor shall be deemed to
be in default hereunder. In the event of such default, Holder may, at Holder's
option and in Holder's sole discretion, five (5) days after giving notice of
default to Obligor, accelerate the maturity of all amounts due under this Note
by giving notice of such acceleration.

The acceptance by Holder of any payment hereunder which is less than the payment
in full of all amounts due and payable at the time of such payment shall not
constitute a waiver of the right to accelerate at that time or any subsequent
time or nullify any prior acceleration without the express consent of Holder
except as and to the extent otherwise provided by law.

Obligor waives presentment, demand for performance, notice of nonperformance,
protest, notice of protest, and notice of dishonor (but not notice of default).
No delay on the part of Holder in exercising any right hereunder shall operate
as a waiver of such right under this Note. This Note is being delivered in and
shall be construed in accordance with the laws of the State of California as
applied to contracts entered into by California residents within the State of
California, which contracts are to be performed entirely within the State of
California.

The right to plead any and all statutes of limitations as a defense to any
demand on this Note, or any guaranty hereof, or any agreement to the same, or
any instrument securing this Note, or any and all obligations or liabilities
arising out of or in connection with this Note, is expressly waived by Obligor
and each and every endorser or guarantor if any, to the fullest extent permitted
by law.

Notwithstanding anything to the contrary contained herein, the total liability
for payments hereunder in the nature of interest shall not exceed the limits
imposed by applicable interest rate limitation laws.

The provisions of this Note are intended by Obligor to be severable and
divisible and the invalidity or unenforceability of a provision or term herein
shall not invalidate or render unenforceable the remainder of this Note or any
part thereof.

If the indebtedness represented by this Note or any part thereof is collected at
law or in equity or in bankruptcy, receivership or other judicial proceedings or
if this Note is placed in the hands of attorneys for collection after default,
Obligor agrees to pay, in addition to the principal and interest payable hereon,
reasonable attorneys' fees and costs incurred by Holder.

Any notice or other communication (except payment) required or permitted
hereunder shall be in writing and shall be deemed to have been given upon
delivery if personally delivered or one day after deposit if deposited in the
United States mail for mailing by certified mail, postage prepaid, and addressed
as follows:

If to Holder:
                                            
                                            
                                            

If to Obligor:
Crdentia Corp.
Attention: James D. Durham
455 Market Street, Suite 1220
San Francisco, California 94105

with a copy to:
Steven G. Rowles, Esq.

Morrison & Foerster LLP
3811 Valley Centre Drive, Suite 500
San Diego, CA 92130

Any payment shall be deemed made upon receipt by Holder. Holder or Obligor may
change their address for purposes of this paragraph by giving to the other party
notice in conformance with this paragraph of such new address.

Obligor:                                             Crdentia Corp.,

                                                            a Delaware
corporation

By:                                            

                                                            Name: James D.
Durham
                                                            Title: Chief
Executive Officer