**Exhibit10.4**

 

SECURED PROMISSORYNOTE

 
| $50,000.00 |   | Pasadena, California |   |
|------------|--------|----------------------|--------|
|       |   |                 |   |
|       |   | February  4, 2003    |   |

 

 

FOR VALUE RECEIVED, theundersigned hereby jointly and severally (if applicable) promises to pay toPREFERRED BUSINESS CREDIT, INC., a California Corporation, at 300 N.Lake Ave.,Pasadena, California 91101, or at such other address as the holder may specifyin writing, the principal sum of FiftyThousand and 00/100Dollars ($50,000.00) plus interest as provided below.

 

This note shall bearinterest at the rate of 12.25% per annum, computed on the basis of a 360day year for actual days elapsed.  Thisrate is based upon the prime rate of interest of 4.25%, the rate in effect asof this date.  The prime rate ofinterest is the prime rate announced as being charged by Union Bank ofCalifornia, San Francisco, from time to time. In the event the prime rate is from time to time hereafter changed, therate of interest 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 15 equal monthly installments of $2,000.00 commencing March 1, 2003and continue thereafter on the 1st day of each month, plus interest shall bepayable monthly commencing March 1, 2003 and continue thereafter on the 1st dayof each month, and one final installment on May 20, 2004 equal to all principaloutstanding together with all accrued and unpaid interest.

 

This note is secured bythat certain Loan and Security Agreement (“Agreement”) dated February 20, 2001and 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 hereof immediatelydue 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 unpaidinterest to principal and to have such amount thereafter bear interest asprovided in this note, and (b) if any installment is more than ten days pastdue, the right to collect a charge equal to the greater of $15.00 or fivepercent of the deliquent payment.  Thischarge is the result of a reasonable endeavor by the undersigned and the holderto estimate the holder’s added costs and damages resulting from theundersigned’s failure to timely make payments under this note; hence theundersigned agrees that the charge shall be presumed to be the amount of damagesustained by the holder since it is extremely difficult to determine the actualamount necessary to reimburse the holder of such damages. If this note is notpaid when due, 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.

 

**Waiver of Trial by Jury.**  THE UNDERSIGNED, TO THE EXTENT IT MAYLEGALLY DO 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 TOTHIS NOTE, 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 MAYLEGALLY DO SO, HEREBY AFGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OFACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THATTHE HOLDER OF THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THISSECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE UNDERSIGNED TOTHE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

**IN WITNESS WHEREOF**, this Note has beenexecuted and delivewred on the date first set forth above.

 

 
|   | LEE PHARMACEUTICALS       |
|--------|---------------------------|
|   |                      |
|   |                      |
|   |                      |
|   | By:                       | RONALD G. LEE |
|   | Ronald G. Lee,  President |
|        |                           |  |  |

 

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February 4, 2003

 

 

Mr. Farhad Motia

Preferred BusinessCredit, Inc.

Pasadena, CA 91101

 

 

Dear Farhad:

 

You have this daymodified the financing arrangement between PREFERRED BUSINESS CREDIT, INC. andLee Pharmaceuticals (“Borrower”).  AsGuarantor(s) of all present and future obligations of Borrower to PREFERREDBUSINESS CREDIT, INC., the undersigned hereby confirms that my ContinuingGuaranty of the obligations of Borrower dated February 20, 2001, remains in fullforce and effect notwithstanding the recent modifications of your financing.

 
| Very truly yours,         |
|---------------------------|
|                      |
| RONALD G. LEE             |   |
| Ronald G. Lee,  Guarantor |

 

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