**EXHIBIT 10.3**

 

# **SECUREDPROMISSORY NOTE**

# ** **

| $50,000.00 | Pasadena, California |
|------------|----------------------|
|       | May 27, 2005    |

 

**FORVALUE RECEIVED**, the undersigned hereby jointly and severally(if applicable) promises to pay to PREFERRED BUSINESS CREDIT, INC., aCalifornia Corporation, at 300 N. Lake Ave., Pasadena, California, 91101, or atsuch other address as the holder may specify in writing, the principal sum of FiftyThousand and 00/100 Dollars ($50,000.00) plus interest as providedbelow.

 

This note shall bearinterest at the rate of 14.0% per annum, computed on the basis of a 360day year for actual days elapsed.  Thisrate is based upon the prime rate of interest of 6.0%, the rate in effect as ofthis date.  The prime rate of interest isthe prime rate announced as being charged by Union Bank of California, SanFrancisco, from time to time.  In theevent the prime rate is from time to time hereafter changed, the rate ofinterest provided in this note shall be correspondingly changed.  For each month the rate of interest chargedunder this note shall be based upon the average prime rate in effect duringsuch month.  In no event shall the rateof interest chargeable hereunder be less than 1.0% per month.

 

Principal shall bepayable in twelve equal monthly installments of Two Thousand and 00/100 Dollars($2,000.00) commencing July 1, 2005 and continue thereafter on the 1st dayof each month, plus interest shall be payable monthly commencing July 1,2005 and continue thereafter on the 1st day of each month, and one finalinstallment on July 1, 2007 equal to all principal outstanding togetherwith all accrued and unpaid interest.

 

This note is secured bythat certain Loan and Security Agreement (“Agreement”) dated February 20,2001, and is subject to all of the terms and conditions thereof.  In the event of default under the Agreement,including but not limited to, the failure to pay any installment of principalor interest hereunder when due, the holder of this note may, at its electionand without notice to the undersigned, declare the entire balance hereofimmediately due and payable.

 

If any installment ofprincipal or interest hereunder is not paid when due, the holder shall have thefollowing rights in addition to the rights set forth in the precedingparagraph: (a) the right to add unpaid interest to principal and to havesuch amount thereafter bear interest as provided in this note, and (b) ifany installment is more than ten days past due, the right to collect a chargeequal to the greater of $15.00 or five percent of the delinquent payment.  This charge is the result of a reasonableendeavor by the undersigned and the holder to estimate the holder’s added costsand damages resulting from the undersigned’s failure to timely make paymentsunder this note; hence the undersigned agrees that the charge shall be presumedto be the amount of damage sustained by the holder since it is extremelydifficult to determine the actual amount necessary to reimburse the holder ofsuch damages.  If this note is not paid whendue, the undersigned further promises to pay all costs of collection,foreclosure fees and reasonable attorney’s fees incurred by the holder whetheror not suit is filed hereon.

 

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Provided the undersignedis not then in default hereunder or under any other agreement with the holderof this note, this note may be prepaid at any time after one year from the datehereof by paying the balance of principal owing plus all accrued and unpaidinterest and charges, together with a prepayment charge of N/A on the amountprepaid.

 

Presentment for payment,notice of dishonor, protest, and notice of protest are expressly waived.  This note cannot be changed, modified,amended or terminated orally.

 

**Waiverby Trial of Jury.**  THE UNDERSIGNED, TO THE EXTENT IT MAY LEGALLYDO SO, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THISNOTE, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THEDEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS NOTE OR THE TRANSACTIONSRELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, ANDIRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  THE UNDERSIGNED, TO THE EXTENT IT MAY LEGALLYDO SO, HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, ORPROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT THE HOLDEROF THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITHANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVEROF ITS RIGHT TO TRIAL BY JURY.

 

**INWITNESS WHEREOF**, this Note has been executed and delivered onthe date first set forth above.

 

 
|   | LEE  PHARMACEUTICALS      |
|--------|---------------------------|
|   | a California  corporation |
|   |                      |
|   |                      |
|   | By:                       | Ronald G. Lee |   |
|   | Ronald G. Lee,  President |
|        |                           |  |  |

 

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