Exhibit 10.17(b)

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY
STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS (i) SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS AND (ii) AT THE OPTION OF
THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED HAS BEEN DELIVERED TO THE COMPANY.

HELIX BIOMEDIX, INC.

CONVERTIBLE PROMISSORY NOTE

 

  February 14, 2008 $3,000,000.00   Bothell, Washington

FOR VALUE RECEIVED, Helix BioMedix, Inc., a Delaware corporation (“Company”),
promises to pay to RBFSC, Inc. (“Holder”), or his registered assigns, the
principal sum of Three Million Dollars ($3,000,000), or such lesser amount as
shall then equal the outstanding principal amount hereof, together with interest
from the date of this Note on the unpaid principal balance at a rate equal to
eight percent (8%) per annum, computed on the basis of the actual number of days
elapsed. All unpaid principal, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be due and payable on the
earlier of (i) February 14, 2010 (the “Maturity Date”) or (ii) when such amounts
are declared due and payable by the Holder or made automatically due and
payable, in each case upon or after the occurrence of an Event of Default (as
defined below). This Note is issued pursuant to the Convertible Note and Warrant
Purchase Agreement of even date herewith (as amended, modified or supplemented,
the “Purchase Agreement”) between Company and the Investor (as defined in the
Purchase Agreement).

The following is a statement of the rights of Holder and the conditions to which
this Note is subject, and to which the Holder hereof, by the acceptance of this
Note, agrees:

1. Definitions. As used in this Note, the following capitalized terms have the
following meanings:

(a) “Company” includes the corporation initially executing this Note and any
Person which shall succeed to or assume the obligations of Company under this
Note.

(b) “Holder” shall mean the Person specified in the introductory paragraph of
this Note or any Person who shall at the time be the registered holder of this
Note.

(c) “Person” shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability
company, an unincorporated association, a joint venture or other entity or a
governmental authority.

--------------------------------------------------------------------------------

2. Interest. Accrued interest on this Note shall be payable at such time as the
outstanding principal amount hereof shall be paid in full.

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

(a) Failure to Pay. Company shall fail in any material respect to pay any
principal payment, any interest or other payment required under the terms of
this Note on the date due and such payment shall not have been made within
fifteen (15) days of Company’s receipt of Holder’s written notice to Company of
such failure to pay; or

(b) Breaches of Covenants. Company shall fail in any material respect to observe
or perform any covenant, obligation, condition or agreement contained in this
Note (other than those covenants specified in Section 3(a) hereof) and such
failure shall continue for thirty (30) days after Company’s receipt of Holder’s
written notice to Company thereof; or

(c) Representations and Warranties. Any representation or warranty made by
Company to Holder in this Note shall be untrue in any material respect when
made; or

(d) Voluntary Bankruptcy or Insolvency Proceedings. 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 in full or in part, (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

(e) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the
appointment of a receiver, trustee, liquidator or custodian of 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
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 proceeding shall not be dismissed or discharged within
sixty (60) days of commencement.

4. Rights of Holder upon Default. Upon the occurrence or existence of any Event
of Default (other than an Event of Default referred to in Sections 3(d) and 3(e)
hereof) and at any time thereafter during the continuance of such Event of
Default, Holder may, by written notice to Company, declare all outstanding
obligations payable by 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. Upon the occurrence or existence of any Event of Default
described in Sections 3(d) and 3(e) hereof, immediately and without notice, all
outstanding obligations payable by Company hereunder shall automatically become
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. In addition to the foregoing remedies,
upon the occurrence or existence of any Event of Default, Holder may exercise
any other right, power or remedy permitted to it by law, either by suit in
equity or by action at law, or both.

 

-2-

--------------------------------------------------------------------------------

5. Conversion.

(a) Automatic Conversion upon Financing. Upon the closing (or first in a series
of closings) of the next equity financing in which Company sells shares of its
equity securities (the “Equity Securities”) for an aggregate consideration of at
least $5,000,000 (excluding the aggregate principal and accrued interest due on
this Note) that occurs on or before June 29, 2008 (the “Equity Financing”), the
principal and accrued interest due on this Note shall automatically be converted
into shares of the Equity Securities as set forth in Section 5(c) below. The
conversion shall be deemed to have occurred as of the date of such closing or
the date of the first closing in a series of closings (the “Financing Closing
Date”). As a condition precedent (which may be waived by Company) to conversion
of this Note as provided for in this Section 5, the Holder will be required to
execute the definitive Stock Purchase Agreement and such other agreements
prepared in connection with the Equity Financing. The number of shares of Equity
Securities into which this Note shall be automatically converted shall be
determined by dividing the principal and accrued interest due on this Note as of
the date of conversion by an amount equal to the per share price of the Equity
Securities issued and sold in the Equity Financing.

(b) Voluntary Conversion. At any time after June 29, 2008, to the extent this
Note is still outstanding and has not otherwise been converted or repaid in
full, the Holder will have the option, in its sole discretion, to convert this
Note into shares of Company’s Common Stock. The number of shares of Common Stock
into which this Note may be voluntarily converted shall be determined by
dividing the principal and accrued interest due on this Note as of the date of
conversion by an amount equal to eighty percent (80%) of the average per share
closing sales price for Company’s Common Stock during the prior 90-day period.

(c) Issuance of Securities on Conversion. As soon as practicable after
conversion of this Note, Company, at its expense, will cause to be issued in the
name of and delivered to the Holder a certificate or certificates representing
the number of fully paid and nonassessable shares of the Equity Securities or
Common Stock (as applicable) to which Holder shall be entitled upon such
conversion. No fractional shares will be issued upon conversion of this Note.

(d) Termination of Rights. All rights with respect to this Note shall terminate
upon conversion hereof in accordance with this Section 5, whether or not this
Note has been surrendered. Notwithstanding the foregoing, the Holder agrees to
surrender this Note to Company for cancellation as soon as is practicable
following conversion of this Note.

6. Successors and Assigns. Subject to the restrictions on transfer described in
Section 8 below, the rights and obligations of Company and Holder 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 Company and Holder.

8. Transfer of this Note or Securities Issuable Upon Conversion Hereof. With
respect to any contemplated offer, sale or other disposition of this Note or
securities into which such Note may be converted, the Holder will first give
written notice to Company prior thereto, describing briefly the manner thereof,
together with a written opinion of the Holder’s counsel to the effect that such
offer, sale or other disposition may be effected without registration or
qualification under any federal or state law then in effect. Promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, Company, as promptly as practicable, shall notify the Holder that the
Holder may sell or otherwise dispose of this Note or such securities, all in
accordance with the terms of the notice delivered to Company. If a determination
has been made pursuant to this Section 8 that the opinion of counsel for the
Holder is not reasonably satisfactory

 

-3-

--------------------------------------------------------------------------------

to Company, then Company shall so notify the Holder promptly after such
determination has been made. The 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 of 1933, as amended (the “Act”), unless in the opinion of
counsel for Company such legend is not required in order to ensure compliance
with the Act. Company may issue stop transfer instructions to its transfer agent
in connection with such restrictions.

9. Notices. All notices and other communications under this Note shall be in
writing and shall be delivered in person, via facsimile machine, sent by
documented overnight delivery service, or mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed (a) if to the Holder,
at the address of the Holder set forth in the Purchase Agreement, or (b) if to
the Company, to the attention of its President or Chief Financial Officer at its
principal offices at 22118 20th Avenue SE, Suite 204, Bothell, WA 98021. Unless
otherwise specified in this Note, all such notices and other written
communications shall be effective (and considered delivered and received for the
purposes of this Note) (i) if delivered, upon delivery, (ii) if by facsimile
machine during normal business hours upon transmission with confirmation of
receipt by the receiving party’s facsimile terminal and if not sent during
normal business hours, then on the next day, (iii) if sent by documented
overnight delivery service, on the date following the date on which such notice
is delivered to such overnight delivery service for mailing, or (iv) if mailed
via first-class regular mail, three (3) day after depositing in the U.S. Mail.

10. No Stockholder Rights. Nothing contained in this Note shall be construed as
conferring upon the Holder or any other person the right to vote or to consent
or to receive notice as a stockholder in respect of meetings of stockholder for
the election of directors of Company or any other matters or any rights
whatsoever as a stockholder of Company; and no dividends or interest shall be
payable or accrued in respect of this Note or the interest represented hereby or
the equity securities obtainable hereunder until, and only to the extent that,
this Note shall have been converted.

11. Payment; Prepayment.

(a) Payment shall be made in lawful tender of the United States.

(b) Company shall have the right to prepay at any time, without penalty, in
whole or in part, the unpaid principal and interest due on this Note.

12. Governing Law; Venue. This 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 Washington, without regard to the conflicts of law
provisions of the State of Washington or of any other state. The parties
expressly stipulate that any litigation under this Agreement shall be brought in
the state courts of King County, Washington or in the United States District
Court for the Western District of Washington. The parties agree to submit to the
exclusive jurisdiction and venue of those courts.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

-4-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Company has caused this Note to be issued as of the date
first written above.

 

HELIX BIOMEDIX, INC., a Delaware corporation By:     Title:    

 

Acknowledged and Agreed: HOLDER:    RBFSC, Inc.

[Signature Page to Convertible Promissory Note]