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EXHIBIT 10.3
CONVERTIBLE PROMISSORY NOTE
AND SECURITY AGREEMENT
$3,500,000.00 maximum Portland, Oregon
September 1, 1999
WHEREAS ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ("RGS") has loaned funds to microHelix Labs,
Inc. and mHL Development Company ("mHL") covered by a promissory note beginning
May, 1998, and whereas mHL will need additional funding from RGS prior to
outside funding in the future, mHL promises to pay to the order of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇ ("RGS") in lawful money of the United States of America, all principal
amounts loaned to mHL under this convertible promissory note up to a maximum of
Three Million Five Hundred Thousand Dollars ($3,500,000.00) together with
interest on such amount from the date of advance at the interest rate of twelve
percent (12%) per annum (the "Interest Rate"). Interest shall be computed on the
outstanding principal amount on the basis of a 365-day year and actual days
elapsed. mHL shall pay in full the aggregate principal amounts loaned under this
agreement, together with all accrued and unpaid interest thereon, on or before
December 31, 2002. This agreement supercedes the note agreement dated May, 1998.
In lieu of payment, RGS, at his option, may convert any or all of this note to
Preferred Stock of mHL at the lesser of $1.00 per share, or the price paid by an
outside investor in an equity round which raises at least $4 million. Conversion
will take place on or before December 31, 2002.
Repayments may be made, at any time and from time to time, in whole or
in part, without penalty or premium. Any prepayment shall include accrued and
unpaid interest to the date of prepayment on the amount prepaid. All payments
shall be made directly to the RGS in immediately available funds.
As security for the amounts due under this Note, mHL pledges and grants
to RGS a security interest in the assets mHL, including intellectual property.
In the event that RGS uses his own or an outside attorney to construe,
interpret, or enforce any of the provisions of this Note or take any action in
any bankruptcy, insolvency or similar proceeding affecting creditors' rights
generally (including, without limitation, prosecution of a motion for relief
from stay, proposal of a Chapter 11 plan, objection to a disclosure statement or
a Chapter 11 or 13 plan, or objection to proposed use, sale or lease of
property) or in mediation or arbitration, RGS shall be entitled to recover from
mHL its reasonable attorney fees and other costs incurred regardless of whether
any legal proceeding is commenced. If any legal action, arbitration or other
proceeding is brought, the prevailing party shall be entitled to recover its
reasonable attorney fees and other costs incurred in connection therewith, both
at trial and on any appeal therefrom or petitions for review thereof.
All parties to this Note hereby waive presentment, dishonor, notice of
dishonor, and protest. All parties to this Note hereby consent to, and the
holder of this Note is hereby expressly authorized to make, without notice, any
and all renewals, extensions, modifications
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or waivers of the time for or the terms of payment of any sum or sums due under
this Note, or under any documents or instruments relating to or securing this
Note, or the performance of any covenants, conditions or agreements hereof or
thereof, or the taking or release of collateral securing this Note. The
liability of all parties on this Note shall not be discharged by any action
consented to above taken by any holder of this Note.
MHL may not assign or transfer this Note without the prior written
consent of RGS. This Note is made with reference to, and is to be construed in
accordance with, the laws of the State of Oregon, exclusive of choice of law or
conflicts of law rules or principles.
MHL executes this Note as of the date first above written, and it is
intended to include all loans from RGS between May, 1998 and the date of the
note, and acknowledges receipt of a copy of this Note.
mHL Development Co, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
