Exhibit
10.3


 


THIS
NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.


 


BONE
BIOLOGICS CORPORATION

SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE


 


	$1,000,000	February
    6, 2017


 


FOR
VALUE RECEIVED, Bone Biologics Corporation, a Delaware Corporation (the “Company”) promises to pay to
The Musculoskeletal Transplant Foundation (“Holder”), in lawful money of the United States of America,
the principal amount of One Million dollars ($1,000,000) (“Principal Amount”), upon the terms and subject
to the conditions set forth herein (this “Subordinated Note”). The following is a statement of the rights
of Holder and the conditions to which this Subordinated Note is subject, and to which Holder, by the acceptance of this Subordinated
Note, agrees:


 


1.       Maturity
Date; Prepayment. If not sooner paid or converted pursuant to the terms hereof, the outstanding Principal Amount plus all
accrued and unpaid interest thereon shall be due and payable on December 31, 2017 (“Maturity Date”).
The Subordinated Note may be prepaid at any time provided that the Company pays all accrued interest thereon.


 


2.       Interest.


 


(a)       Simple
Interest. Interest shall accrue on the unpaid Principal Amount from the date hereof until the date this Subordinated Note
is paid in full or converted at the rate of eight and one/half percent (81⁄2%) simple interest per year (“Interest
Rate”). All accrued interest shall be due and payable in full upon maturity or prepayment of this Note.


 


3.       Conversion.


 


(a)       Mandatory
Conversion Upon Qualified Financing. In the event of the sale or series of sales of securities to non-current stockholders
of Company, other than a note (the “HIC New Note”) issued concurrently herewith to Hankey Capital, LLC
(“HIC”), by the Company after the date hereof which results in gross proceeds to the Company in the
aggregate amount of at least five million dollars ($5,000,000) (a “Qualified Financing”), the outstanding
Principal Amount of this Subordinated Note together with any accrued but unpaid interest shall be converted into the same securities
issued in the Qualified Financing (the “QF Securities”) at a conversion price which will be the purchase
price per share or per unit based on the actual pre-money valuation used in determining the purchase price for the QF Securities.
The Company shall provide notice to Holder at least seven (7) days prior to the closing of a Qualified Financing as to the number
of shares or units Holder would receive. In conjunction with the conversion, Holder shall become a party to and shall execute
all definitive agreements subject to the Qualified Financing (as defined below) (the “Qualified Financing Agreements”).


 


(b)       Optional
Conversion Prior to Qualified Financing. At any time prior to the Maturity Date or a conversion pursuant to Section 3(a),
at the option of the Holder, the outstanding Principal Amount of this Subordinated Note and accrued interest may be converted
into shares of the Common Stock of the Company at a conversion price of $1.00 per share.


 




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(c)       Other
Mandatory Conversion. If this Subordinated Note has not been paid or converted prior to the Maturity Date, the outstanding
Principal Amount of this Subordinated Note and accrued interest shall be automatically converted into shares of Common Stock of
the Company at a conversion price of $1.00 per share.


 


(d)       QF
Securities. In the case of a conversion pursuant to Section 3(a), if the QF Securities are senior securities, including Preferred
Stock, then the number of shares of such senior securities to be received shall be calculated based on the conversion price of
the senior securities.


 


(e)       Conversion
Procedure. Upon conversion, Holder shall surrender this Subordinated Note (or a notice to the effect that the original Subordinated
Note has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the
Company from any loss incurred by it in connection with this Subordinated Note). If the conversion is pursuant to Section 3(a),
Holder shall then execute and deliver to the Company the Qualified Financing Agreements. Upon conversion of this Subordinated
Note in full, the Company shall be forever released from all its obligations and liabilities under this Subordinated Note and
this Subordinated Note shall be deemed of no further force or effect, whether or not the original of this Subordinated Note has
been delivered to the Company for cancellation.


 


4.       Security
Interest. The Company hereby grants to Holder the security interest in all of the assets of the Company second in priority
only to the security interest granted to HIC in connection with the various secured convertible notes previously issued by the
Company to HIC and the HIC New Note (individually, an “HIC Note” and collectively, the “HIC
Notes”).


 


5.       Subordination;
Rank.


 


(a)       Agreement
to Subordinate. The payment of the principal of and interest on, and any other amounts due in respect of, this Subordinated
Note is subordinated in right of payment, to the extent and in the manner stated in this Section 5, to the prior payment of the
HIC Notes.


 


(b)       No
Payment on Note if Senior Notes are in Default. Notwithstanding anything in this Subordinated Note to the contrary, no payment
on account of principal of, interest on or other amounts due in respect of this Subordinated Note, shall be made by or on behalf
of the Company if, at the time of such payment, or immediately after giving effect thereto, there shall exist under any HIC Note
any default in the payment of all or any portion of principal of or interest thereon, which default shall have resulted in the
full amount of the such Note being declared due and payable and which default shall not have been cured or waived. The Company
shall notify Holder in writing promptly following the occurrence of the foregoing. In the event that, notwithstanding the provisions
of this Section 5, payments are made by or on behalf of the Company in contravention of the provisions of this Section 5, such
payments shall be held by the Company in trust for the benefit of, and shall be paid over to and delivered to, the holder of any
HIC Note so in default, for application to the payment of such Note remaining unpaid.


 


(c)       Obligation
of the Company Unconditional. Nothing contained in this Subordinated Note is intended to or shall impair, as between the Company
and Holder, the obligation of the Company, which is absolute and unconditional, to pay to Holder the principal of and interest
on this Subordinated Note as and when the same shall become due and payable in accordance with its terms, nor shall anything herein
prevent Holder from exercising all remedies otherwise permitted by applicable law upon an Event of Default, subject to the rights,
if any, under this Section 5, of the holder of any HIC Note in respect of cash received upon the exercise of any such remedy.


 




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6.       Events
of Default. The occurrence of any of the following shall constitute an “Event of Default” under
this Subordinated Note:


 


(a)       Failure
to Pay. The Company shall fail to pay when due the principal amount and unpaid accrued interest due under this Subordinated
Note on the Maturity Date (provided, Holder must first give written notice to the Company of its failure to pay and the Company
shall have failed to cure such payment obligation within seven (7) business days of the date the notice was given); or


 


(b)       Voluntary
Bankruptcy or Insolvency Proceedings. 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) admit in writing its inability to pay
its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved
or liquidated, (v) 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 (vi) take any action for the purpose of effecting any of the foregoing; or


 


(c)       Involuntary
Bankruptcy or Insolvency Proceedings. 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 any of its Subsidiaries, if any, 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
proceeding shall not be dismissed or discharged within 60 days of commencement.


 


7.       Rights
of Holder upon Default. Upon the occurrence of any Event of Default and at any time thereafter during the continuance of such
Event of Default, subject to Section 6, Holder may by written notice to the Company, declare all outstanding obligations payable
by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding, and, subject to Section 6,
enforce its rights as secured party under the Uniform Commercial Code applicable to the Company.


 


8.       Representations
and Warranties of Holder. Holder represents and warrants to the Company upon the acquisition of the Subordinated Note as follows:


 


(a)       Binding
Obligation. Holder has full legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Subordinated Note constitutes a valid and binding obligation of Holder, enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’
rights generally and general principles of equity.


 


(b)       Securities
Law Compliance. Holder has been advised that the issuance of this Subordinated Note and the securities into which it may be
converted have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or
any state securities laws and, therefore, cannot be sold unless such sale or transfer is registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration requirements is available. Holder is aware that
the Company is under no obligation to effect any such registration with respect to the Subordinated Note or the securities into
which it may be converted or to file for or comply with any exemption from registration. Holder has not been formed solely for
the purpose of making this loan and is investing in the Subordinated Note for its own account for investment, not as a nominee
or agent, and not with a view to, or for resale in connection with, the distribution thereof, and Holder has no present intention
of selling, granting any participation in, or otherwise distributing the same. Holder has such knowledge and experience in financial
and business matters that Holder is capable of evaluating the merits and risks of such investment, is able to incur a complete
loss of such investment without impairing Holder’s financial condition and is able to bear the economic risk of such investment
for an indefinite period of time. Holder is an accredited investor as such term is defined in Rule 501 of Regulation D under the
Securities Act and shall submit to the Company such further assurances of such status as may be reasonably requested by the Company.


 




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9.       Representations
and Warranties of Company. The Company represents and warrants to the Holder upon the acquisition of the Subordinated Note
as follows:


 


(a)       Binding
Obligation. The Company has full legal capacity, power and authority to execute and deliver this Agreement and to perform
its obligations hereunder. This Subordinated Note constitutes a valid and binding obligation of the Company, enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the
enforcement of creditor’s rights generally and general principles of equity.


 


(b)       Insolvency.
No step has been taken to initiate any process for bankruptcy or other insolvency process of the Company, including (without limitation)
an appointment of an insolvency officer, an arrangement made with creditors either formally under a court or insolvency process
or informally or an enforcement of any third party security over any of the assets or undertaking of the Company.


 


(c)       Organization
and Qualification. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware,
with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.
The Company is not in violation of any of the provisions of its governing documents.


 


(d)       Issuance
of Investor Securities Upon Conversion. The potential issuance of the investor securities upon proper conversion of the Subordinated
Note is duly authorized and is free from all pre-emptive rights, liens and charges with respect to the issuance thereof.


 


(e)       No
Conflicts. The execution, delivery and performance of the Subordinated Note by the Company and the consummation by the Company
of the transactions contemplated herein do not and will not: (i) conflict with or violate any provision of the Company’s
charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise)
or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected,
except such as could not, individually or in the aggregate, have or result in a material adverse effect on the Company.


 


(f)       Access
to Information. Holder acknowledges that the Company has given Holder access to the corporate records and accounts of the
Company and has made its officers and representatives available for interview by Holder, and has furnished Holder with all documents
and other information required for Holder to make an informed decision with respect to the purchase of the Subordinated Note.


 




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10.       Piggyback
Registration Statement. The Company hereby grants to Holder the right to include any common shares issued or issuable hereunder
in any registration statement filed by the Company with the Securities and Exchange Commission allowing the inclusion of such
shares subject to customary cutback provisions and giving priority to the Company and other holders of the Company securities
who have priority rights.


 


11.       Miscellaneous.


 


(a)       Successors
and Assigns; Certificate Representing this Subordinated Note or Securities Issuable on Conversion Hereof; Transfer of this Subordinated
Note or Securities Issuable on Conversion Hereof.


 


(i)       Subject
to the restrictions on transfer described in Section 8(b), the rights and obligations of the Company and Holder shall be binding
upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.


 


(ii)       Each
certificate representing this Subordinated Note or the securities issuable upon conversion hereof shall bear a legend as to the
applicable restrictions on transferability in order to assure compliance with the Securities Act and applicable state securities
laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.


 


(iii)       Holder
shall only be entitled to offer, sell or otherwise distribute this Note or the securities into which it may be converted with
the prior written consent of the Company, which may be given or withheld in the Company’s sole discretion. If an offer,
sale or other distribution is approved by the Company, Holder must provide the Company with a written opinion of Holder’s
counsel, or other evidence reasonably satisfactory to the Company, to the effect that such offer, sale or other distribution may
be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such reasonably
satisfactory opinion, if so requested, or other evidence, the Company, as promptly as practicable, shall issue the appropriate
replacement note or securities. The Subordinated Note thus transferred and each certificate representing the securities thus transferred
shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act,
unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities
Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the
foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the
Company. Prior to presentation of this Subordinated Note for registration of transfer, the Company shall treat the registered
holder hereof as the owner and holder of this Subordinated Note for the purpose of receiving all payments of principal and interest
hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected
by notice to the contrary.


 


(b)       Suitability.
Notwithstanding anything to the contrary, the Company shall have the absolute right to redeem this Subordinated Note and/or prohibit
conversion and sever its relationship with Holder at any time, if the Company determines in its sole discretion that its relationship
with Holder may jeopardize its state, federal, or other legal licenses, or otherwise jeopardize its ability to conduct business
in a highly regulated industry.


 


(c)       Waiver
and Amendment. Any provision of this Subordinated Note may be amended, waived or modified upon the written consent of the
Company and the Holder provided, however, that no such amendment, waiver or consent shall: (i) reduce the principal amount of
this Subordinated Note without Holder’s written consent, or (ii) reduce the rate of interest of this Note without Holder’s
written consent.


 




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(d)       Notices.
All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing
and faxed, mailed or delivered to each party at the respective addresses of the parties, or at such other address or facsimile
number as the Company shall have furnished to Holder in writing. All such notices and communications will be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile
(with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized
standing or (v) four days after being deposited in the U.S. mail, first class with postage prepaid.


 


(e)       Payment.
Unless converted into the Company’s securities pursuant to the terms hereof, payment shall be made in lawful tender of the
United States.


 


(f)       Usury.
In the event any interest is paid on this Subordinated Note that is deemed to be in excess of the then legal maximum rate, then
that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment
of principal and applied against the principal of this Subordinated Note.


 


(g)       Only
Company Liable. In no event shall any stockholder, officer, director or employee of the Company be liable for any amounts
due or payable pursuant to this Subordinated Note.


 


(h)       Governing
Law. This Subordinated Note and all actions arising out of or in connection with this Note shall be governed by and construed
in accordance with the laws of the State of California, without regard to the conflicts of law provisions of the State of California,
or of any other state.


 


(i)       Waiver
of Jury Trial; Judicial Reference. By acceptance of this Subordinated Note, Holder hereby agrees and the Company hereby agrees
to waive their respective rights to a jury trial of any claim or cause of action based upon or arising out of this Subordinated
Note.


 


Signature
on the following page.


 




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The
Company has caused this Subordinated Note to be issued as of the date first written above.


 


	 	BONE BIOLOGICS CORPORATION
	 	 	 
	 	By:	           
	 	Name:	 
	 	Title:	 


 


	NAME
    OF HOLDER:	 
	THE
    MUSCULOSKELETAL TRANSPLANT FOUNDATION	 
	 	 	 
	By:	 	 
	 	 	 
	Name:	 	 
	 	 	 
	Title:	                      	 
	 	 	 
	Address:	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 


 




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