Exhibit 10.3

 

REVOLVING PROMISSORY NOTE

 

$2,500,000

Durham, North Carolina

July 10, 2003

 

FOR VALUE RECEIVED, the undersigned, PARADIGM GENETICS, INC., a Delaware
corporation (“Borrower”) promises to pay to the order of Silicon Valley Bank, a
California-chartered bank (“Bank”), at such place as the holder hereof may
designate, in lawful money of the United States of America, the aggregate unpaid
principal amount of all advances (“Advances”) made by Bank to Borrower in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank of even date herewith (as amended from time to time,
the “Loan Agreement”), up to a maximum principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000) (“Principal Sum”), or so much thereof as
may be advanced or readvanced and remains unpaid. Borrower shall also pay
interest on the aggregate unpaid principal amount of such Advances, as follows:

 

Commencing as of the date hereof and continuing until repayment in full of all
sums due hereunder, the unpaid Principal Sum shall bear interest at the variable
rate of interest, per annum, most recently announced by Bank as its “prime
rate,” whether or not such announced rate is the lowest rate available from Bank
(the “Prime Rate”), plus one and one half percent (1.50%) per annum, provided
that the rate of interest on this Note shall not at any time fall below five and
three quarters percent (5.75%) per annum. The rate of interest charged under
this Note shall change immediately and contemporaneously with any change in the
Prime Rate. All interest payable under the terms of this Note shall be
calculated on the basis of a 360-day year and the actual number of days elapsed.

 

The unpaid Principal Sum, together with interest thereon at the rate or rates
provided above, shall be payable as follows:

 

(a)    Interest only on the unpaid principal amount shall be due and payable
monthly in arrears, commencing August 5, 2003, and continuing on the fifth day
of each calendar month thereafter to maturity; and

 

(b)    Unless sooner paid, the unpaid Principal Sum, together with interest
accrued and unpaid thereon, shall be due and payable in full on the Revolving
Maturity Date.

 

The fact that the balance hereunder may be reduced to zero from time to time
pursuant to the Loan Agreement will not affect the continuing validity of this
Note or the Loan Agreement, and the balance may be increased to the Principal
Sum after any such reduction to zero.

 

Borrower further agrees that, if any payment made by Borrower or any other
person is applied to this Note and is at any time annulled, set aside,
rescinded, invalidated, declared to be fraudulent or preferential or otherwise
required to be refunded or repaid, or the proceeds of any

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property hereafter securing this Note is required to be returned by Bank to
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, such Borrower, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or repayment,
Borrower’s liability hereunder (and any lien, security interest or other
collateral securing such liability) shall be and remain in full force and
effect, as fully as if such payment had never been made, or, if prior thereto
any such lien, security interest or other collateral hereafter securing
Borrower’s liability hereunder shall have been released or terminated by virtue
of such cancellation or surrender, this Note (and such lien, security interest
or other collateral) shall be reinstated in full force and effect, and such
prior cancellation or surrender shall not diminish, release, discharge, impair
or otherwise affect the obligations of Borrower in respect of the amount of such
payment (or any lien, security interest or other collateral securing such
obligation).

 

This Note is the “Revolving Promissory Note” described in the Loan Agreement, to
which reference is hereby made for a more complete statement of the terms and
conditions under which the loans and advances evidenced hereby are made. This
Note is secured as provided in the Loan Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings given to such terms in
the Loan Agreement.

 

Borrower irrevocably waives the right to direct the application of any and all
payments at any time hereafter received by Bank from or on behalf of Borrower
and Borrower irrevocably agrees that Bank shall have the continuing exclusive
right to apply any and all such payments against the then due and owing
obligations of Borrower as Bank may deem advisable. In the absence of a specific
determination by Bank with respect thereto, all payments shall be applied in the
following order:

 

(a)    then due and payable fees and expenses;

 

(b)    then due and payable interest payments and mandatory prepayments; and

 

(c)    then due and payable principal payments and optional prepayments.

 

Bank is hereby authorized by Borrower to endorse on Bank’s books and records
each Advance made by Bank under this Note and the amount of each payment or
prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any error in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.

 

The occurrence of any one or more of the following events shall constitute an
event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:

 

(a)    The failure of Borrower to pay to Bank within three (3) Business Days of
when due any and all amounts payable by Borrower to Bank under the terms of this
Note; or

 

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(b)    The occurrence of an Event of Default (as defined therein) under the
terms and conditions of any of the other Loan Documents.

 

Upon the occurrence of an Event of Default, at the option of Bank, all amounts
payable by Borrower to Bank under the terms of this Note shall immediately
become due and payable by Borrower to Bank without notice to Borrower or any
other person, and Bank shall have all of the rights, powers, and remedies
available under the terms of this Note, any of the other Loan Documents and all
applicable laws. Borrower and all endorsers, guarantors, and other parties who
may now or in the future be primarily or secondarily liable for the payment of
the indebtedness evidenced by this Note hereby severally waive presentment,
protest and demand, notice of protest, notice of demand and of dishonor and
non-payment of this Note and expressly agree that this Note or any payment
hereunder may be extended from time to time without in any way affecting the
liability of Borrower, guarantors and endorsers.

 

Borrower promises to pay all costs and expense of collection of this Note and to
pay all reasonable attorneys’ fees incurred in such collection, whether or not
there is a suit or action, or in any suit or action to collect this Note or in
any appeal thereof. No delay by Bank in exercising any power or right hereunder
shall operate as a waiver of any power or right. Time is of the essence as to
all obligations hereunder.

 

This Note is issued pursuant to the Loan Agreement, which shall govern the
rights and obligations of Borrower with respect to all obligations hereunder.

 

Borrower acknowl­edges and agrees that this Note shall be governed by the laws
of the State of North Carolina, excluding conflicts of laws principles, even
though for the conve­nience and at the request of Borrower, this Note may be
executed elsewhere.

 

BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF NORTH CAROLINA IN ANY ACTION, SUIT, OR
PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF NORTH CAROLINA, BORROWER ACCEPTS JURISDICTION OF THE COURTS AND
VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWER AND BANK EACH HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS

 

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LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Borrower has caused this Note to be executed under seal by
its duly authorized officers as of the date first written above.

 

WITNESS/ATTEST:

 

     

PARADIGM GENETICS, INC.

 

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      By:  

    /s/    HEINRICH GUGGER            (SEAL)

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Name:

Title:

 

Heinrich Gugger

President & CEO

 

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