Exhibit 10.26
**CONVERTIBLE PROMISSORY NOTE**   $1,300,000 December 3, 2003
     **FOR VALUE RECEIVED**, the undersigned, **ENTRX CORPORATION**, a Delawarecorporation (the “Maker”), hereby promises to pay to the order of PandoraSelect Partners L.P., a British Virgin Islands limited partnership, or itsassigns (the “Payee”), at such place as the Payee may designate in writing, theprincipal sum of One Million Three Hundred Thousand Dollars ($1,300,000), underthe terms set forth herein.
1.      **Interest**. The unpaid principal balance hereof from time to time outstandingshall bear interest from the date hereof at the rate of ten percent (10%) perannum.
2.      **Payment**. The principal and interest hereof is payable as follows:
     (a) Payments in cash of interest only are payable in arrears on December15, 2003 and on January 15, February 15, March 15 and April 15, 2004; and
     (b) Commencing on May 15, 2004, and on the 15th day of each of thefollowing 32 months, Maker shall pay amortized principal and interest on thisNote of $45,221.45 (the “Monthly Scheduled Payment”).
3.      **Optional Payment in Stock**.
     (a) In lieu of making a cash payment under subsection 2(b) above, Makermay pay the Monthly Scheduled Payment, or any portion thereof, but only to theextent permitted by this subsection (a), by the issuance of shares of its $0.10par value common stock (the “Common Stock”), the per share value of which iscomputed as provided in Subsection (b) below. Despite the foregoing, thenumber of shares of Common Stock which may be issued to pay all or any portionof a particular Monthly Scheduled Payment may not exceed the lesser of (i) 8%of the aggregate number of traded shares of Common Stock reported on the NASDAQSystem (or if not then traded on the NASDAQ System, on the OTC Bulletin Boardas reported by bigcharts.com, or if this service is discontinued, such otherreporting service acceptable to Payee) for the 20 trading days immediatelypreceding such Monthly Scheduled Payment due or (ii) a number of shares ofCommon Stock which, when added to the number of shares of Common Stock owned ofrecord together by Payee and its affiliates, would not cause Payee and itsaffiliates together to own of record more than 4.99% of the Maker’s outstandingCommon Stock. In computing under this subsection (a) the aggregate number oftraded shares during any time period, the Maker shall exclude (i) shares soldby or for the account or at the direction of the Maker, officers or directorsof Maker or any members of their immediate families or any affiliates of Makerand (ii) shares determined solely by Payee (for which Payee shall so inform theMaker in writing) to represent unlawful or potentially unlawful sales. Makermay pay the Monthly Scheduled Payment, or any portion thereof, by the issuanceof Common Stock only if, at the time of such payment, Maker has in effect aregistration statement on Form S-2 with the SEC and applicable state securitieslaws covering the original issuance of such shares by the Maker or the resaleof such shares by the Payee. Further, Maker may not pay a Monthly ScheduledPayment, or any portion thereof, by the issuance of Common Stock if, at thetime of such payment, the per share value of the Maker’s Common Stock (ascomputed in accordance with subsection (b) below) is less than $0.72 per share.
     (b) The per share value of the Common Stock as of a specified ScheduledMonthly Payment date for the purposes of this Section 3 is 90% (rounded to thenearest $.01) of the average (rounded to the nearest $.01) of the high closingbid prices of Maker’s Common Stock on the NASDAQ System (or if not then tradedon the NASDAQ System, then on the OTC Bulletin Board as reported bybigcharts.com, or if this service is discontinued, such other reporting serviceacceptable to Payee) for the 20 trading days immediately preceding theparticular Scheduled Monthly Payment date.
 

 

     (c) Payment by Common Stock shall be deemed to be made by Maker by givingwritten notice to the Payee of the number of shares being issued in suchpayment, and the Maker’s calculation of the per share market value undersubsection (b) above; provided that certificates representing those shares aredelivered to Payee within 20 days of the due date of the Scheduled MonthlyPayment.
4.      **Conversion**.
     (a) At any time while any portion of the principal or interest of thisNote is outstanding (including during the notice period prior to any optionalcash prepayment by the Maker), the Payee may give the Maker written notice ofits intention to convert all or any portion of the outstanding principal and/oraccrued, but unpaid interest on this Note into shares of the Maker’s CommonStock based on $1.35 per share (the “Conversion Rate”). Upon receipt of thePayee’s notice, the Maker shall immediately cause certificates representingthese shares to be delivered to Payee within 20 days of, and Payment shall bedeemed to have been made on, the date of such notice.
     (b) The Conversion Rate shall be adjusted proportionally for anysubsequent stock dividend or split, stock combination or other similarrecapitalization, reclassification or reorganization of or affecting Maker’sCommon Stock. In case of any consolidation or merger to which the Maker is aparty other than a merger or consolidation in which the Maker is the continuingcorporation, or in case of any sale or conveyance to another corporation of theproperty of the Maker as an entirety or substantially as an entirety, or in thecase of any statutory exchange of securities with another corporation(including any exchange effected in connection with a merger of a thirdcorporation into the Maker), then instead of receiving shares of Maker’s CommonStock, Payee shall have the right thereafter to receive the kind and amount ofshares of stock and other securities and property which the Payee would haveowned or have been entitled to receive immediately after such consolidation,merger, statutory exchange, sale or conveyance had the same portion of thisNote been paid or converted immediately prior to the effective date of suchconsolidation, merger, statutory exchange, sale or conveyance and, in any suchcase, if necessary, appropriate adjustment shall be made in the application ofthe provisions set forth in this Section with respect to the rights andinterests thereafter of the Payee, to the end that the provisions set forth inthis Section shall thereafter correspondingly be made applicable, as nearly asmay reasonably be, in relation to any shares of stock and other securities andproperty thereafter deliverable in connection with this Note. The provisionsof this subsection shall similarly apply to successive consolidations, mergers,statutory exchanges, sales or conveyances.
     (c) Despite anything above to the contrary, the Payee may not convert thisNote into Common Stock under this Section 4 during the time period and to theextent that the shares of Maker’s Common Stock that the Payee could acquireupon the conversion would cause Payee’s Beneficial Ownership of Maker’s CommonStock to exceed 4.99% of Maker’s outstanding Common Stock; provided, however,that the limitations on the right to exercise a Warrant for 400,000 shares ofCommon Stock being issued to Payee in connection with this Note, as provided bysuch Warrant, shall first reduce Payee’s Beneficial Ownership of Maker’s CommonStock before limitation of Payee’s conversion rights hereunder; and providedfurther, that the limitation of Payee’s conversion rights hereunder shall firstreduce Payee’s Beneficial Ownership before limiting the number of shares thatMaker may issue to Payee as payment hereunder pursuant to Section 3(a) above.The Payee will, at the request of Maker, from time to time, notify Maker ofPayee’s computation of Payee’s Beneficial Ownership. The parties shall computePayee’s “Beneficial Ownership” of Maker’s Common Stock in accordance with U.S.Securities and Exchange Commission (“SEC”) Rule 13d-3.
5.      **Security**. The full and timely payment of this Note (together with theMaker’s obligations under a Purchase Agreement of this date among Maker, Payeeand Whitebox Advisors, LLC) shall be secured by a Pledge Agreement of this date(the “Pledge Agreement”).
6.      **Optional Prepayments**. The Maker may prepay this Note, in whole or in part,and in cash, without penalty by Maker upon fifteen days written notice toPayee. Prepayments shall be applied first to accrued but unpaid interest andthen to principal.
 

 

7.      **Default**. The occurrence of any one or more of the following events shallconstitute an event of default, upon which Payee may declare the entireprincipal amount of this Note, together with all accrued but unpaid interest,to be immediately due and payable in cash (despite provisions otherwise forpayment with Common Stock):
     (a) The Maker shall fail to make any required payment of principal orinterest when due, and in its proper form (i.e., in cash, in stock or by acombination thereof), and such failure shall continue for 10 days after the duedate thereof.
     (b) The Maker shall be in default of any term or provision of the PledgeAgreement, the Registration Rights Agreement of this date between Maker andPayee or the Warrant being issued on the date hereof by Maker to Payee.
     (c) Wayne W. Mills shall be in default of any term or provision of theGuaranty Agreement being entered into by him on the date hereof for the benefitof the Payee.
     (d) The Maker shall become insolvent or any bankruptcy, reorganization,debt arrangement or other proceeding under any bankruptcy or insolvency lawshall be instituted by or against the Maker.
     Without limiting the above, the Maker acknowledges that payments on thevarious scheduled due dates in Sections 2 and 3(c) are of essence and that anyfailure to timely pay any installment of principal or interest (whether aspermitted by cash, with stock or by a combination thereof and within anypermitted grace period above) permits Payee to declare this Note immediatelydue in cash in its entirety without any prior notice of any kind to Maker.
8.      **Applicable Law**. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THE NOTESHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUTGIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.
9.      **Waivers**. The Maker hereby waives presentment for payment, notice ofdishonor, protest and notice of payment and all other notices of any kind inconnection with the enforcement of this Note.
10.      **No Setoffs**. The Maker shall pay principal and interest under the Notewithout any deduction for any setoff or counterclaim.
11.      **Costs of Collection**. If this Note is not paid when due, the Maker shallpay Payee’s reasonable costs of collection, including reasonable attorney’sfees.          **ENTRX CORPORATION**          By  Wayne W. Mills, Chief Executive Officer