Document:

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                                                                    Exhibit 10.3

                            REVOLVING REDUCING NOTE

$7,000,000.00

                                                            Bellevue, Washington
                                                                   June 10, 2003

         FOR VALUE RECEIVED, the undersigned NASTECH PHARMACEUTICAL COMPANY INC.
("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at Bellevue RCBO, 205 108th Avenue, NE, Suite
600, Bellevue, WA 98004, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of Seven Million Dollars ($7,000,000.00), or
so much thereof as may be advanced and be outstanding, with interest thereon, to
be computed on each advance from the date of its disbursement as set forth
herein.

DEFINITIONS:

         As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:

         (a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Washington are authorized or required by law to
close.

         (b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for 1, 2 or 3 months, as designated by Borrower, during which all or
a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR provided however, that no Fixed Rate Term may be
selected for a principal amount less than Five Hundred Thousand Dollars
($500,000.00); and provided further, that no Fixed Rate Term shall extend beyond
the scheduled maturity date hereof. If any Fixed Rate Term would end on a day
which is not a Business Day, then such Fixed Rate Term shall be extended to the
next succeeding Business Day.

         (c) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:

                    LIBOR =           Base LIBOR
                            -------------------------------
                            100% - LIBOR Reserve Percentage

         (i) "Base LIBOR means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

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         (ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) far
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank far expected changes in such reserve
percentage during the applicable Fixed Rate Term.

         (d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.

INTEREST:

         (a) Interest The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum one and one half percent (1.5%) below the
Prime Rate in effect from time to time, or (ii) at a fixed rate per annum
determined by Bank to be three quarters percent (.75%) above LIBOR in effect on
the first day of the applicable Fixed Rate Term. When interest is determined in
relation to the Prime Rate, each change in the rate of interest hereunder shall
became effective on the date each Prime Rate change is announced within Bank.
With respect to each LIBOR selection hereunder, Bank is hereby authorized to
note the date, principal amount, interest rate and Fixed Rate Term applicable
thereto end any payments made thereon on Bank's books and records either
manually or by electronic entry) and/or on any schedule attached to this Note,
which notations shall be prima fade evidence of the accuracy of the information
noted.

         (b) Selection of Interest Rate Options. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term. Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection, (A)
if requested by Bank, Borrower provides to Bank written conformation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it's sole option
but without obligation to do so, accepts Borrower's notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time any
advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Prime Rate interest selection for such advance or
the principal amount to which such Fixed as term applied.

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         (c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interested equalization taxes, stamp taxes or
other taxes (except income and franchise taxes) imposed by any domestic or
foreign governmental authority and related in any manner to LIBOR, and (ii)
future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements for costs imposed by any domestic or
foreign governmental authority or resulting from compliance by Bank with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR. In determining which
of the foregoing are attributable to any LIBOR option available to Borrower
hereunder, any reasonable allocation made by bank among its operations shall be
conclusive and binding upon Borrower. I

         (d) Payment of Interest. Interest accrued on this Note shall be payable
on the 1st day of each month, commencing August 1, 2003.

         (e) Default Interest From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (compute on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

         (a) Borrowing and Repayment. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount set forth above or such lesser
amount as shall at any time be available hereunder. The unpaid principal balance
of this obligation at any time shall be the total amounts advanced hereunder by
the holder hereof less the amount of principal payments made hereon by or for
any Borrower. which balance may be endorsed hereon from time to time by the
holder. The outstanding principal balance of this Note shall be due and payable
in full on July 1, 2004.

         (b) Reductions In Availability. Notwithstanding the principal amount
set forth above, the maximum principal amount available under this Note shall be
reduced automatically and without further notice on the lst day of each month,
commencing July 1, 2003, by the amount of One Hundred Forty-five Thousand Eight
Hundred Thirty-three Dollars ($145,833.00). If the outstanding principal balance
of this Note on any such date is greater than the new maximum principal amount
then available hereunder, Borrower shall make a principal reduction on this Note
on such date in an amount sufficient to reduce the then outstanding principal
balance hereof to an amount not greater than said new maximum principal amount

        (c) Advances. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
(i) Greg Weaver or Ingrid Simms, any one acting alone, who are authorized to
request advances and direct the disposition of any advances until written notice
of the revocation of such authority is received by the holder at the office
designated above, or (ii) any person, with

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respect to advances deposited to the credit of any deposit account of any
Borrower, which advances, when so deposited, shall be conclusively presumed to
have been made to or for the benefit of each Borrower regardless of the fact
that persons other than those authorized to request advances may have authority
to draw against such account. The holder shall have no obligation to determine
whether any person requesting an advance is or has been authorized by any
Borrower.

         (d) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.

PREPAYMENT:

         (a) Prime Rate. Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to the Prime Rate at any time,
in any amount and without penalty.

         (b) LIBOR. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of Five Hundred Thousand Dollars ($500,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:

             (i)     Determine the amount of interest which would have accrued
                     each month on the amount prepaid at the interest rate
                     applicable to such amount had it remained outstanding until
                     the last day of the Fixed Rate Term applicable thereto.

             (ii)    Subtract from the amount determined in (i) above the amount
                     of interest which would have accrued for the same month on
                     the amount prepaid for the remaining term of such Fixed
                     Rate Term at LIBOR in effect on the date of prepayment for
                     new loans made for such term and in a principal amount
                     equal to the amount prepaid.

             (iii)   If the result obtained in (ii) for any month is greater
                     than zero, discount that difference by LIBOR used in (ii)
                     above.

Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay

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any prepayment fee where due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum two percent (2.0%) above
the Prime Rate in effect from time to time (computed on the basis of a 360-day
year, actual days elapsed). Each change in the rate of interest on any such past
due prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.

EVENTS OF DEFAULT:

         The occurrence of any of the following shall constitute an "Event of
Default" under this Note:

         (a) The failure to pay any principal, interest, fees or other charges
when due hereunder or under any contract, instrument or document executed in
connection with this Note.

         (b) The filing of a petition by or against any Borrower, any guarantor
of this Note or any general partner or joint venture in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of any Borrower or Third Party Obligor; any
Borrower or Third Party Obligor becomes insolvent, makes a general assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any attachment or like levy on any property of any Borrower or Third
Party Obligor.

         (c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.

         (d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligation, or any other liability
of any kind to any person or entity, including the holder.

         (e) Any financial statement provided by any Borrower or Third Party
Obligor to Bank proves to be incorrect, false or misleading in any material
respect.

         (f) Any sale or transfer of all or a substantial or material part of
the assets of any Borrower or Third Party Obligor other than in the ordinary
course of its business.

         (g) Any violation or breach of any provision of, or any defined event
of default under, any addendum to this Note or any loan agreement, guaranty,
security agreement, deed of trust, mortgage or other document executed in
connection with or securing this Note.

MISCELLANEOUS:

         (a) Remedies. Upon the occurrence of any Event of Default, the holder
of at the this Note, holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each

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Borrower, and the obligation, if any, of the holder to extend any further credit
hereunder shall immediately cease and terminate. Each Borrower shall pay to the
holder immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys' fees: (to include
outside counsel fees and all allocated costs of the holder's in-house counsel)
expended or incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing Incurred in
connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.

         (b) Obligations Joint and Several. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.

         (c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Washington.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

         IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.

NASTECH PHARMACEUTICAL COMPANY INC.

By:  /s/ STEVEN QUAY
     ---------------------------
     Steven Quay, CEO

By:  /s/ GREG WEAVER
     --------------------------
     Greg Weaver, CFO

                                      -6-<PAGE>
                                                                    Exhibit 10.4

                           ADDENDUM TO PROMISSORY NOTE

         THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by NASTECH PHARMACEUTICAL COMPANY INC. ("Borrower") and payable to
WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), or order, dated as of June 10,
2003, in the principal amount of Seven Million Dollars ($7,000,000.00) (the
"Note")

         The following provisions are hereby incorporated into the Note:

                  1. So long as Bank remains committed to extend credit to
         Borrower under this Note and until payment in full of all obligations
         of Borrower hereunder, Borrower shall provide to Bank all of the
         following, in form and detail satisfactory to Bank:

                  (a) not later than 45 days after and as of the end of each
         quarter, a financial statement of Borrower, prepared by Borrower, to
         include balance sheet and income statement;

                  (b) not later than 30 days after and as of the end of each
         month, a statement of Borrower, prepared by Wells Capital Management;

                  (c) from time to time such financial and other information as
         Bank may reasonably request; and

                  (d) Unused Commitment Fee. Borrower shall pay to Bank a fee
         equal to one half of one percent (.50%) per annum (computed on the
         basis of a 360-day year, actual days elapsed) on the average daily
         unused amount of the Line of Credit, which fee shall be calculated on a
         quarterly basis by Bank and shall be due and payable by Borrower in
         arrears according to the following grid:

                  >3,125,000.00 = 0.25%
                  <3,125,000.00 = 0.50%

         ARBITRATION

         (a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related loan and security documents which are the
subject of this Note and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.

         (b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Washington selected by the American Arbitration Association
("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United
States Code), notwithstanding any conflicting choice of law provision in any of
the documents between the parties; and (iii) be conducted by the AAA, or such
other administrator as the parties shall mutually agree upon, in accordance with
the AAA's commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the

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arbitration shall be conducted in accordance with the AAA's optional procedures
for large, complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial disputes to
be referred to, as applicable, as the "Rules"). If there is any inconsistency
between the terms hereof and the Rules, the terms and procedures set forth
herein shall control. Any party who fails or refuses to submit to arbitration
following a demand by any other party shall bear all costs and expenses incurred
by such other party in compelling arbitration of any dispute. Nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. Section 91 or any similar applicable
state law.

         (c) No Waiver of Provisional Remedies. Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

         (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Washington or a neutral retired judge of the
state or federal judiciary of Washington, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrators discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Washington and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Washington Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

         (e) Discovery. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly limited
to matters directly relevant to the dispute being arbitrated and must be
completed no later than 20 days before the hearing date and within 180 days of
the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.

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         (f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Note shall be determined by a separate
arbitration proceeding and such dispute shall not be consolidated with other
disputes or included in any class proceeding.

         (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award
all costs and expenses of the arbitration proceeding.

         (h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the documents between the parties or the subject matter of the
dispute shall control. This Note may be amended or modified only in writing
signed by each party hereto. If any provision of this Note shall be held to be
prohibited by or invalid under applicable law such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Note. This arbitration provision shall survive termination, amendment or
expiration of any of the documents or any relationship between the parties.

         IN WITNESS WHEREOF, this Addendum has been executed as of the same date
as the Note.

NASTECH PHARMACEUTICAL COMPANY INC.

By /s/ STEVEN QUAY
   ---------------------------------
   Steven Quay, CEO

By: /s/ GREG WEAVER
   ---------------------------------
   Greg Weaver, CFO

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