PROTEIN POLYMER TECHNOLOGIES, INC.
8% PROMISSORY NOTE
DUE ____________, 200_

$ __________
________, 200_

THIS NOTE IS ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF
THE SECURITIES ACT OF 1933 (THE "ACT") AND QUALIFICATION PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS. IT CAN NOT BE SOLD, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE UNITED STATES UNLESS REGISTERED PURSUANT TO THE ACT AND
QUALIFIED UNDER APPLICABLE STATE LAW OR, IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO MAKER, AN EXEMPTION THEREFROM IS AVAILABLE.

FOR VALUE RECEIVED, the undersigned, Protein Polymer Technologies, Inc., with an
address at 11494 Sorrento Valley Road, San Diego, California 92121, ("Maker"),
promises to pay to _____________, with an address at ____________ ("Payee"), on
___________, 200_, or sooner as otherwise provided herein (the "Maturity Date"),
the principal amount of _______________ ($_________) Dollars in lawful money of
the United States of America (the "Principal”) together with all accrued
interest. This Note bears simple interest (the "Interest") at the annual rate of
eight percent (8%), except as otherwise provided herein, until the Principal and
all accrued Interest thereon (collectively the “Obligations”) shall be paid in
full.

1.
Interest.

Maker shall pay the Interest, in arrears, on the Maturity Date. Interest on the
Note will accrue from the most recent date to which Interest has been paid or,
if no Interest has been paid, from the date of delivery of the Note. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.

2.
Method of Payment.

Maker will pay Principal and Interest in money of the United States that at the
time of payment is legal tender for the payment of public and private debts. All
payments shall be sent to Payee at its address first set forth above or such
other address as Payee shall notify Maker pursuant to the provisions of
Paragraph 10 (h) below. Anything to the contrary notwithstanding, Maker, at its
option, may pay Principal and/or Interest in shares of its Common Stock at the
rate of ______ ($______) _____ per share. 
 
 
 

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

 
 
$___________ Secured Promissory Note
of Protein Polymer Technologies, Inc.
payable to _________.
dated _______, 200_

3.
Covenants.

Maker covenants and agrees that from and after the date hereof and until the
date of repayment in full of the Obligations it shall comply with the following
conditions:

(i) Maintenance of Existence and Conduct of Business. Maker shall, and shall
cause each of its subsidiaries, if any, to (A) do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and rights; and (B) continue to conduct its business so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times.

(ii) Books and Records. Maker shall, and shall cause each of its subsidiaries,
if any, to keep adequate books and records of account with respect to its
business activities.

(iii) Insurance. Maker shall, and shall cause each of its subsidiaries, if any,
to maintain insurance policies insuring such risks as are customarily insured
against by companies engaged in businesses similar to those operated by Maker or
such subsidiaries, if any, as the case may be. All such policies are to be
carried with reputable insurance carriers and shall be in such amounts as are
customarily insured against by companies with similar assets and properties
engaged in a similar business.

(iv) Compliance with Law. Maker shall, and shall cause each of its subsidiaries,
if any, to comply in all material respects with all federal, state and local
laws and regulations applicable to it or such subsidiaries, as the case may be,
which, if breached, would have a material adverse effect on Maker's or such
subsidiaries', as the case may be, business or financial condition.

(v) Compliance with Material Agreements, Licenses, Patents and Financial
Obligations. All of the terms of Maker’s and/or its subsidiaries’, if any, and
affiliates’, material agreements, licenses, including but limited to its
patents, and financial obligations shall be complied with, and each of them
shall be kept in full force and effect in accordance with their respective terms

4.
Reorganization of Maker.

If Maker is party to a merger, consolidation or a transaction in which it is not
the surviving or continuing entity or transfers or leases all or substantially
all of its assets, the person who is the surviving or continuing entity or is
the transferee or lessee of such assets shall assume the terms of this Note and
the Obligations.

 
-2-

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

 

$___________ Secured Promissory Note
of Protein Polymer Technologies, Inc.
payable to _________.
dated _______, 200_

5.
Representations, Warranties, Covenants and Acknowledgements of Maker.

Maker represents and warrants that: (i) it, and each of its subsidiaries, if
any, is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
power to carry on its business as now conducted and to own its properties and
assets it now owns; (ii) it, and each of its subsidiaries, if any, is duly
qualified or licensed to do business as a foreign corporation in good standing
in the jurisdictions in which ownership of property or the conduct of its
business requires such qualification except jurisdictions in which the failure
to qualify to do business will have no material adverse effect on its business,
prospects, operations, properties, assets or condition (financial or otherwise);
(iii) it, and each of its subsidiaries, if any, and/or affiliates thereof, holds
all material licenses and patents and otherwise complies with all material laws,
rules and regulations required to permit it to own its property and conduct its
business in the jurisdictions in which it owns its property and conducts its
business; (iv) it has full power and authority to execute and deliver this Note,
and that the execution and delivery of this Note will not result in the breach
of or default under, with or without the giving of notice and/or the passage of
time, any other agreement, financial instrument, arrangement or indenture to
which it is a party or by which it may be bound, or the violation of any law,
statute, rule, decree, judgment or regulation binding upon it; (v) it, and each
of its subsidiaries, if any, is in material compliance with all of its financial
obligations and all of its material agreements; (vi) there is no material
action, suit, proceeding, or investigation pending or currently threatened
against it or any of its subsidiaries, if any; and (vii) it has taken and will
take all acts required, including but not limited to authorizing the signatory
hereof on its behalf to execute this Note, so that upon the execution and
delivery of this Note, it shall constitute the valid and legally binding
obligation of Maker enforceable against Maker in accordance with the terms
thereof.

6.
Defaults and Remedies.

(a) Events of Default. The occurrence or existence of any one or more of the
following events or conditions (regardless of the reasons therefor) shall
constitute an "Event of Default" hereunder:

(i) Maker shall fail to make any payment of Principal or Interest when due and
payable or declared due and payable pursuant to the terms hereof;

(ii)  Maker shall fail to perform any other obligation and/or covenant as
required by this Note in accordance with the terms hereof and such failure to
perform shall not have been cured within five (5) business days after Maker’s
receipt of notice of such failure to perform;

(iii) Any representation or warranty made in this Note by Maker shall be untrue
or incorrect in any material respect as of the date when made or deemed made;

 
-3-

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

 

$___________ Secured Promissory Note
of Protein Polymer Technologies, Inc.
payable to _________.
dated _______, 200_

(iv) Any money judgment, writ or warrant of attachment, or similar process not
covered by insurance in excess of Fifty Thousand ($50,000) Dollars in the
aggregate shall be entered or filed against Maker or any of its properties or
other assets and shall remain unpaid, unvacated, unbonded or unstayed for a
period of ten (10) days;

(v) Maker shall make an assignment for the benefit of creditors or shall be
unable to pay its debts as they become due;

(vi) Maker shall have received a written notice of default related to any
material agreement to which it is a party and such act of default shall remain
uncured after any applicable cure period;

(vii) A case or proceeding shall have been commenced against Maker or any of its
subsidiaries, if any, (each a “Proceeding Company”) in a court having competent
jurisdiction seeking a decree or order in respect of a Proceeding Company (A)
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy or other
similar law; (B) appointing a custodian, receiver, liquidator, assignee, trustee
or sequestrator (or similar official) of a Proceeding Company, or any of its
properties; or (C) ordering the winding-up or liquidation of the affairs of a
Proceeding Company, and such case or proceeding shall remain unstayed or
undismissed for a period of ten (10) consecutive days or such court shall enter
a decree or order granting the relief sought in such case or proceeding; or

(viii) A Proceeding Company shall (A) file a petition seeking relief under Title
11 of the United States Code, as now constituted or hereafter amended, or any
other applicable federal, state or foreign bankruptcy or other similar law; or
(B) consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or the taking of possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of such Proceeding Company, or any of its properties.

(b) Remedies. Upon the occurrence of an Event of Default specified in Paragraph
6(a) above, all Obligations then remaining unpaid hereunder shall immediately
become due and payable in full, plus interest on the unpaid portion of the
Obligations at the highest rate permitted by applicable law, without notice to
Maker and without presentment, demand, protest or notice of protest, all of
which are hereby waived by Maker together with all reasonable costs and expenses
of the collection and enforcement of this Note, including reasonable attorney's
fees and expenses, all of which shall be added to the amount due under this
Note. The rights, powers, privileges and remedies of Payee pursuant to the terms
hereof are cumulative and not exclusive of any other rights, powers, privileges
and remedies which Payee may have under this Note or any other instrument or
agreement
 
 
-4-

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

 
 
$___________ Secured Promissory Note
of Protein Polymer Technologies, Inc.
payable to _________.
dated _______, 200_

7.
Acknowledgment of Payee's Investment Representations.

By accepting this Note, Payee acknowledges that this Note has been or will be
registered under the Act or qualified under any state securities laws and that
the transferability thereof is restricted by the registration provisions of the
Act as well as such state laws. Based upon the representations and agreements
being made by it herein, this Note is being issued to it pursuant to an
exemption from such registration provided by Section 4(2) of the Act, and
applicable state securities law qualification exemptions. Payee represents that
it (i) is an “Accredited Investor” as that term is defined in Rule 501 (a) of
Regulation D promulgated under the Act, and (ii) is acquiring this Note for its
own account, for investment purposes only and not with a view to resale or other
distribution thereof, nor with the intention of selling, transferring or
otherwise disposing of all or any part of these securities for any particular
event or circumstance, except selling, transferring or disposing of them only
upon full compliance with all applicable provisions of the Act, the Securities
Exchange Act of 1934, the Rules and Regulations promulgated by the Commission
thereunder, and any applicable state securities laws. In addition, Payee
understands and acknowledges that any routine sales of these securities made in
reliance upon Rule 144 promulgated by the Commission under the Act can be
effected only in the amounts set forth in and pursuant to the other terms and
conditions, including applicable holding periods, of that Rule. Payee further
understands and agrees that no transfer of this Note shall be valid unless made
in compliance with the restrictions set forth on the front of this Note,
effected on Maker's books by the registered holder hereof, in person or by an
attorney duly authorized in writing, and similarly noted hereon as provided in
Paragraph 10(k) below.

8.
Limitation of Interest Payments.

Nothing contained in this Note or in any other agreement between Maker and Payee
requires Maker to pay or Payee to accept interest in an amount that would
subject Payee to any penalty or forfeiture under applicable law. In no event
shall the total of all charges payable hereunder, whether of interest or of such
other charges, which may or might be characterized as interest, exceed the
maximum rate permitted to be charged under the laws of the States of
______________________________________ or any other state or jurisdiction in
which either Maker or Payee may be located or may conduct business. Should Payee
receive any payment that is or would be in excess of that permitted to be
charged under such laws, such payment shall have been and shall be deemed to
have been made in error and shall automatically be applied to reduce the
Principal outstanding on this Note.
 
 
-5-

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

 
 
$___________ Secured Promissory Note
of Protein Polymer Technologies, Inc.
payable to _________.
dated _______, 200_

9.
Maker’s Right to Prepay the Note.

Maker may prepay this Note without penalty.

10.
Miscellaneous.

(a) Effect of Forbearance. No forbearance, indulgence, delay or failure to
exercise any right or remedy by Payee with respect to this Note shall operate as
a waiver or as an acquiescence in any default.

(b) Effect of Single or Partial Exercise of Right. No single or partial exercise
of any right or remedy by Payee shall preclude any other or further exercise
thereof or any exercise of any other right or remedy by Payee.

(c) Gender. The use herein of the masculine pronouns or similar terms shall be
deemed to include the feminine and neuter genders as well and the use of the
singular pronouns shall be deemed to include the plural as well.

(d) Governing Law; Waiver of Right to Jury Trial; Venue. Maker hereby agrees
that this Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the internal laws of the
_________________ applicable to contracts made and to be performed entirely
within such jurisdiction. Maker hereby waives all right to trial by jury in any
action, suit or proceeding brought to enforce or defend any rights or remedies
under this Note, and agrees that any lawsuit brought to enforce or interpret the
provisions of this Note shall be instituted in the federal courts in __________,
and Maker further agrees to submit to the personal jurisdiction of such court
and waives any objection which it may have, based on improper venue, forum non
conveniens or sufficiency of contact with the forum state, to the conduct of any
proceeding in any such court and waives personal service of any and all process
upon it, and consents that all such service of process be made by mail or
messenger directed to it at the address set forth in Paragraph 10(h) below and
that service so made shall be deemed to be completed upon the earlier of actual
receipt or three (3) days after the same shall have been posted to its address.
Nothing contained in this Paragraph 10(d) affects the right of Payee to serve
legal process in any other manner permitted by law, select the internal laws of
a jurisdiction other than the ________________ pursuant to which this Note shall
be construed and enforced or bring any action or proceeding against Maker or its
property in the courts of any other jurisdiction and Maker agrees to submit to
the personal jurisdiction of such courts as aforesaid.

(e) Headings. The headings and captions of the various paragraphs herein are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.

(f) Loss, Theft, Destruction or Mutilation. Upon receipt by Maker of evidence
reasonably satisfactory to it of loss, theft, destruction or mutilation of this
Note, Maker shall make and deliver or caused to be made and delivered to Payee a
new Note of like tenor in lieu of this Note.
 
 
-6-

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

 
 
$___________ Secured Promissory Note
of Protein Polymer Technologies, Inc.
payable to _________.
dated _______, 200_

(g) Modification of Note or Waiver of Terms Thereof Relating to Payee. No
modification or waiver of any of the provisions of this Note shall be effective
unless in writing and signed by Payee and then only to the extent set forth in
such writing, or shall any such modification or waiver be applicable except in
the specific instance for which it is given. This Note may not be discharged
orally but only in writing duly executed by Payee.

(h) Notice. All offers, acceptances, notices, requests, demands and other
communications under this Note shall be in writing and, except as otherwise
provided herein, shall be deemed to have been given only when delivered in
person, via facsimile transmission if receipt thereof is confirmed by the
recipient, or, if mailed, when mailed by certified or registered mail prepaid,
to the parties at their respective addresses first set forth above, or at such
other address as may be given in writing in future by either party to the other.

(i) Successors and Assigns. This Note shall be binding upon Maker, its
successors, assigns and transferees, and shall inure to the benefit of and be
enforceable by Payee and his successors and assigns.
 
(j) Severability. If one or more of the provisions or portions of this Note
shall be deemed by any court or quasi-judicial authority to be invalid, illegal
or unenforceable in any respect, the invalidity, illegality or unenforceability
of the remaining provisions, or portions of provisions contained herein shall
not in any way be affected or impaired thereby.

(k) Transfer. This Note shall be transferable only on the books of Maker upon
delivery thereof duly endorsed by Payee or by its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his authority shall be produced. Upon any registration of transfer,
Maker shall deliver a new Note or Notes to the person entitled thereto.
Notwithstanding the foregoing, Maker shall have no obligation to cause Notes to
be transferred on its books to any person if, in the opinion of counsel to
Maker, such transfer does not comply with the provisions of the Act and the
rules and regulations thereunder.

(signature page to follow)
 
-7-

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

 

$___________ Secured Promissory Note
of Protein Polymer Technologies, Inc.
payable to _________.
dated _______, 200_

IN WITNESS WHEREOF, Maker has caused this Note to be executed on its behalf by
an officer thereunto duly authorized as of the date first set forth above.

 
Protein Polymer Technologies, Inc.,
 
a Delaware corporation
             
By:   
   
   
James B. McCarthy,
   
Interim President and Chief
   
Executive Officer

 
-8-

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