**Exhibit10.3**

 

**SECURED PROMISSORY NOTE**

 

| $216,000.00 |   | Pasadena, California |
|-------------|--------|----------------------|
|        |   | February 3, 2004     |

 

**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 ofTwo Hundred Sixteen Thousand and 00/100 Dollars ($216,000.00) plus interest asprovided below.

 

This note shall bear interest at the rate of 12.0% per annum, computedon the basis of a 360 day year for actual days elapsed.  This rate is based upon the prime rate ofinterest of 4.0%, the rate in effect as of this date.  The prime rate of interest is the prime rate announced as beingcharged by Union Bank of California, San Francisco, from time to time.  In the event the prime rate is from time totime hereafter changed, the rate of interest provided in this note shall becorrespondingly changed.  For each monththe rate of interest charged under this note shall be based upon the averageprime rate in effect during such month. In no event shall the rate of interest chargeable hereunder be less than1.0% per month.

 

Principal shall be payable in twenty four equal monthly installments ofNine Thousand and 00/100 Dollars ($9,000.00) commencing March 1, 2004 andcontinue thereafter on the 1st day of each month, plus interest shall bepayable monthly commencing March 1, 2004 and continue thereafter on the 1st dayof each month, and one final installment on March 1, 2006 equal to allprincipal outstanding together with all accrued and unpaid interest.

 

This note is secured by that certain Loan and Security Agreement(“Agreement”) dated February 20, 2001 and is subject to all of the terms andconditions thereof.  In the event ofdefault under the Agreement, including but not limited to, the failure to payany installment of principal or interest hereunder when due, the holder of thisnote may, at its election and without notice to the undersigned, declare theentire balance hereof immediately due and payable.

 

If any installment of principal or interest hereunder is not paid whendue, the holder shall have the following rights in addition to the rights setforth in the preceding paragraph: (a) the right to add unpaid interest toprincipal and to have such amount thereafter bear interest as provided in thisnote, and (b) if any installment is more than ten days past due, the right tocollect a charge equal to the greater of $15.00 or five percent of thedelinquent payment.  This charge is theresult of a reasonable endeavor by the undersigned and the holder to estimatethe holder’s added costs and damages resulting from the undersigned’s failureto timely make payments under this note; hence the undersigned agrees that thecharge shall be presumed to be the amount of damage sustained by the holdersince it is extremely difficult to determine the actual amount necessary toreimburse the holder of such damages. If this note is not paid when due, the undersigned further promises topay all costs of collection, foreclosure fees and reasonable attorney’s feesincurred by the holder whether or not suit is filed hereon.

 

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Provided the undersigned is not then in default hereunder or under anyother agreement with the holder of this note, this note may be prepaid at anytime after one year from the date hereof by paying the balance of principalowing plus all accrued and unpaid interest and charges, together with aprepayment charge of N/A on the amount prepaid.

 

Presentment for payment, notice of dishonor, protest, and notice ofprotest are expressly waived.  This notecannot be changed, modified, amended or terminated orally.

 

**Waiverby Trial by Jury.**  THEUNDERSIGNED, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVES ANYRIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, ORPROCEEDING ARISING UNDER OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY CONNECTEDWITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITHRESPECT TO THIS NOTE OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHERNOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING INCONTRACT, TORT OR OTHERWISE.  THEUNDERSIGNED, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY AGREES THAT ANY SUCHCLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY ACOURT TRIAL WITHOUT A JURY AND THAT THE HOLDER OF THIS NOTE MAY FILE ANORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTENEVIDENCE OF THE CONSENT OF THE UNDERSIGNED TO THE WAIVER OF ITS RIGHT TO TRIALBY JURY.

 

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

 

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

 

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