Document:

Exhibit 10.2

THIS NOTE, AND THE SHARES OF STOCK ISSUABLE UPON CONVERSION HEREOF, HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
FOREIGN OR STATE SECURITIES LAWS AND MAY NOT BE REOFFERED, SOLD, TRANSFERRED,
PLEDGED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (1) REGISTRATION UNDER
SUCH ACT OR LAWS OR (2) AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THIS
NOTE, AND THE SHARES OF STOCK ISSUABLE UPON CONVERSION HEREOF, ARE ALSO SUBJECT
TO SECTION 3.2 OF A BRIDGE LOAN AGREEMENT DATED DECEMBER ___, 2001 AMONG
MEDTRONIC INTERNATIONAL, LTD., RESTORAGEN, INC. AND VARIOUS OTHER LENDERS NAMED
THEREIN.

                      SECURED CONVERTIBLE PROMISSORY NOTE

$_____________                                                 December __, 2001

     FOR VALUE RECEIVED, Restoragen, Inc., a Delaware corporation (the
"Company"), promises to pay to the order of ______________________ or
registered assigns ("Holder"), at the office of Holder at
_________________________________________________ or at such other place as
Holder may designate in writing, the principal sum of _________________ Dollars
($___________) (the "Principal Amount") on the terms set forth below. Interest
on the unpaid principal balance shall accrue daily from the date hereof,
compounded quarterly, at a per annum rate of interest equal to the prime rate
then in effect as announced by Wells Fargo Bank Minnesota, N.A. plus three
percent. All payments of interest and principal hereunder shall be made in U.S.
currency.

     This Note is made in connection with that certain Bridge Loan Agreement
dated as of December __, 2001 among the Company, Medtronic International, Ltd.
("Medtronic") and various other lenders named therein (the "Bridge Loan
Agreement"). Payment of this Note is secured by a first-priority security
interest in all of the Company's assets pursuant to a Security Agreement of
even date herewith between the Company and Medtronic, as agent for itself and
the other lenders pursuant to the Bridge Loan Agreement (the "Security
Agreement").

     1. Definitions. Capitalized terms not defined herein shall have the same
meaning as set forth in the Investment Agreement. The following terms shall
have the meanings herein specified:

     "Common Stock" means authorized Common Stock, $.01 par value per share, of
the Company.

     "Company" shall have the meaning set forth in the initial paragraph
hereof.

     "Conversion Notice" shall have the meaning set forth in Section 2(c)
hereof.

                                      -1-
<PAGE>

     "Conversion Price" shall mean the price at which the Principal Amount, and
all accrued interest on such Principal Amount, is converted or convertible
pursuant to Section 2 hereof, and in all cases as adjusted pursuant to Section
3 hereof.

     "Conversion Shares" means the shares of Preferred Stock or Common Stock or
debt instruments issuable upon conversion of this Note.

     "Event of Default" means an event specified in Section 5 hereof.

     "Excluded Issuances" means (i) the issuance or sale of shares of Common
Stock or Preferred Stock upon the exercise of currently outstanding options or
warrants, or (ii) the grant of options, and the issuance of Common Stock upon
the exercise thereof, to Company employees or consultants pursuant to a stock
option or equity incentive plan approved by a majority of the Company's Board
of Directors.

     "Holder" means the initial holder named in the first paragraph hereof and
each permitted endorsee, pledgee, assignee, owner and holder of this Note, as
such; and any consent, waiver or agreement in writing by the then Holder with
respect to any matter or thing in connection with this Note, whether altering
any provision hereof or otherwise, shall bind all subsequent Holders.
Notwithstanding the foregoing, the Company may treat the registered holder of
this Note as the Holder for all purposes.

     "HSR Act" means the Hart Scott-Rodino Antitrust Improvement Act of 1976,
as amended.

     "Preferred Stock" means any class or series of the Company's capital stock
having a preference over the Common Stock upon a liquidation of the Company.

     "Qualified Additional Financing" means the receipt by the Company,
subsequent to issuance of this Note, in one or more transactions or agreements,
of aggregate gross proceeds of at least Seventeen Million Dollars ($17,000,000)
from (i) the sale of the Company's equity securities to unrelated third parties
(other than Excluded Issuances) and/or (ii) Qualified Collaborative Financing;
provided that at least Seven Million Five Hundred Thousand Dollars ($7,500,000)
of such aggregate amount shall be from sales of equity securities to unrelated
third parties. For purposes of this definition, a third party shall be
"unrelated" if neither such third party nor any affiliate of such third party
has entered into, or in connection with such purchase of Company equity
securities would enter into any joint venture, development, distribution,
licensing, supply or similar agreement with the Company or any Company
subsidiary.

     "Qualified Collaborative Financing" means (i) funding received by the
Company from collaborative partners to be used by the Company for development
to be performed by the Company on projects included within the Company's
current (as of the date of this Note) business plan, and (ii) funding received
by the Company from collaborative partners for development to be performed by
the Company on projects outside of the Company's current (as of the date of
this Note) business plan, to the extent use of such funding is not restricted
to such additional development and such funding is in excess of the estimated
cost to the Company of

                                      -2-
<PAGE>

performing such additional development during the first twelve months after
receipt of such funding. "Qualified Collaborative Financing" excludes loans for
facility construction.

     "Qualified Initial Public Offering" means the closing of a firmly
underwritten sale of Common Stock by the Company which is registered under the
Securities Act of 1933, resulting in gross proceeds to the Company of at least
$50,000,000 and the Common Stock being listed on the New York Stock Exchange or
the American Stock Exchange or being quoted on the Nasdaq Stock Market.

     "Qualified Preferred Stock" means Preferred Stock having terms at least as
favorable to the Holder thereof as set forth on Annex A hereto.

     Words of one gender include the other gender; the singular includes the
plural; and the plural includes the singular, unless the context otherwise
requires.

     2. Conversion of the Note. All outstanding principal and accrued interest
on this Note shall automatically be converted, subject to HSR Act requirements
as follows:

     (a) Upon IPO. Upon the closing of a Qualified Initial Public Offering, the
entire outstanding principal amount of this Note and all accrued interest
thereon shall be automatically converted, without any further action by the
Holder and whether or not this Note is surrendered to the Company, into a
number of shares of Common Stock equal to the quotient of (i) the outstanding
principal amount of this Note plus all accrued interest thereon, divided by
(ii) the lower of (A) $12.50 (adjusted to reflect any stock splits, stock
dividends or combinations occurring with respect to the Common Stock after the
date hereof), and (B) the lowest per share price at which such Common Stock is
issued or sold (or is deemed to be issued or sold pursuant to Section 3(e)
below) after the date of this Note through and including such Qualified Initial
Public Offering (other than Excluded Issuances).

     (b) Upon Qualified Additional Financing. Upon completion of a Qualified
Additional Financing, the entire outstanding principal amount of this Note and
all accrued interest thereon shall be automatically converted, without any
further action by the Holder and whether or not this Note is surrendered to the
Company, into either, at the Holder's option:

          (i) a number of shares of Common Stock equal to the quotient of (A)
     the outstanding principal amount of this Note plus all accrued interest
     thereon, divided by (B) the lower of (I) $12.50 (adjusted to reflect any
     stock splits, stock dividends or combinations occurring with respect to
     the Common Stock after the date hereof), or (II) the lowest per common
     share equivalent price at which equity was sold in such Qualified
     Additional Financing; or

          (ii) such number of shares of any class or series of Preferred Stock
     sold by the Company as part of such Qualified Additional Financing or of a
     Qualified Preferred Stock, at Holder's option, equal to the quotient of
     (A) the outstanding principal amount of this Note plus all accrued
     interest thereon, divided by (B) the lower of (I) the price at which such
     class or series of Preferred Stock was sold as part of such Qualified
     Additional Financing, or (II) the number of shares into which each such
     shares of

                                      -3-
<PAGE>

     Preferred Stock is initially convertible multiplied by the lower of $12.50
     (adjusted to reflect any stock splits, stock dividends or combinations
     occurring with respect to the Common Stock after the date hereof) or the
     lowest per common share equivalent price at which equity was sold in such
     Qualified Additional Financing.

The Company shall give Holder written notice of such Qualified Additional
Financing, including the price and terms of any securities sold as part thereof
and Holder shall have 20 days after such notice in which to elect the type of
Conversion Shares issued upon the conversion pursuant to this subsection.

     (c) Upon Election of Sixty Percent of Notes. Upon the written election of
the holders of at least sixty percent (60%) of the aggregate principal amount
of loans outstanding at any time made pursuant to the Bridge Loan Agreement
delivered to the Company (a "Conversion Notice"), the entire outstanding
principal amount of this Note and all accrued interest thereon shall be
automatically converted, without any further action by the Holder and whether
or not this Note is surrendered to the Company, into either, at the Holder's
option:

          (i) a number of shares of Qualified Preferred Stock equal to the
     quotient of (A) the then outstanding principal amount of this Note plus
     all accrued interest thereon, divided by (B) the lower of (I) $12.50
     (adjusted to reflect any stock splits, stock dividends or combinations
     occurring with respect to the Common Stock after the date hereof), or (II)
     the lowest per common share equivalent price at which equity was issued or
     sold (or is deemed to be issued or sold pursuant to Section 3(e) below)
     after the date of this Note and prior to such conversion election (other
     than Excluded Issuances); or

          (ii) such number of shares of any class or series of Preferred Stock
     issued or sold by the Company after the date of this Note and prior to
     such conversion election equal to the quotient of (A) the then outstanding
     principal amount of this Note plus all accrued interest thereon, divided
     by (B) the lower of (I) the price at which such class or series of
     Preferred Stock was sold, or (II) the number of shares into which each
     such shares of Preferred Stock is initially convertible multiplied by the
     lower of $12.50 (adjusted to reflect any stock splits, stock dividends or
     combinations occurring with respect to the Common Stock after the date
     hereof), and the lowest per common share equivalent price at which equity
     was issued or sold after the date of this Note and prior to such
     conversion election (excluding sales of equity pursuant to currently
     outstanding options or warrants).

     (d) Upon Proposed Prepayment. If the Company gives written notice of
intent to prepay some or all of the outstanding principal amount of this Note
(and all accrued and unpaid interest thereon), and the provisions of Section
2(b) are not applicable, then each Holder shall have the option, exercisable by
delivery of written notice to the Company within 20 days after the Company's
notice of prepayment, to convert all but not less than all of the principal
amount proposed to be prepaid (and all accrued but unpaid interest thereon)
into either, at Holder's option:

                                      -4-
<PAGE>

          (i) such number of shares of any class or series of Preferred Stock
     issued or sold by the Company in connection with such repayment or of a
     Qualified Preferred Stock, at Holder's option, equal to the quotient of
     (A) the outstanding principal amount of this Note plus all accrued
     interest thereon, divided by (B) the lower of (I) the lowest price at
     which such class or series of Preferred Stock was sold in connection with
     such repayment, or (II) the number of shares into which each such shares
     of Preferred Stock is initially convertible multiplied by the lower of
     $12.50 (adjusted to reflect any stock splits, stock dividends or
     combinations occurring with respect to the Common Stock after the date
     hereof) or the lowest per common share equivalent price at which equity
     was issued or sold through and including the date of proposed repayment;
     or

          (ii) if the Company obtained or proposes to obtain the funds to
     effect such proposed prepayment from the issuance of debt securities, into
     debt securities having the same rights, on a pari passu basis, as those
     issued or to be issued by the Company in such financing, in a principal
     amount equal to the principal amount (and all accrued but unpaid interest
     thereon) of the Notes so converted.

     (e) Limitation of Percentage Ownership. Notwithstanding the above, if the
number of Conversion Shares to be issued to the Holder pursuant to this Section
2, when added to the number of other shares of voting stock of the Company held
by Holder and its Affiliates, would exceed nineteen and nine-tenths percent
(19.9%) of the total number of issued and outstanding voting shares of the
Company, then the Holder may elect in writing to transfer effective voting
control (by irrevocable proxy or other method designated by the Holder and
reasonably acceptable to the Company) of such Conversion Shares in excess of
19.9% of the total number of issued and outstanding voting shares of the
Company to the Company's Chief Executive Officer for so long as such shares,
when added to all other shares of Common Stock of the Company owned by the
Holder and its Affiliates would exceed 19.9% of the total number of issued and
outstanding voting shares of the Company. The Company will not, without the
Holder's consent, redeem, repurchase or otherwise effect a recapitalization
which would result in the Holder and its Affiliates owning more than nineteen
and nine-tenths percent (19.9%) of the total number of issued and outstanding
voting shares of the Company.

     (f) Delivery of Conversion Shares. The shares issued on conversion of this
Note shall be delivered as follows:

     (1) As promptly as practicable after automatic conversion pursuant to
Section 2(a) or (b) hereof, or after delivery of a Conversion Notice pursuant
to Section 2(c) or (d) hereof, the Company shall deliver to the Holder, or to
such person or persons as are designated by the Holder in the Conversion
Notice, a certificate or certificates representing the number of shares of
Common Stock or Preferred Stock, as the case may be, into which this Note or
portion thereof is to be converted in the name of the Holder, together with any
cash payable in respect of a fractional share equal to such fraction multiplied
by the fair market value of the Common Stock at the time of conversion, as
determined in good faith by the Company's Board of Directors. Such conversion
shall be deemed to have been effected at the close of business on the date when
this Note shall have been surrendered to the Company for conversion, so that
the person entitled to receive such Conversion Shares shall be treated for all
purposes as having become the record

                                      -5-
<PAGE>

holder of such Conversion Shares at such time and the conversion shall be at
the Conversion Price in effect at the time.

     (g) Reservation of Shares. The Company agrees that, during the period
within which this Note may be converted, the Company will at all times have
authorized and in reserve, and will keep available solely for delivery upon the
conversion of this Note, Common Stock and other securities and property as from
time to time shall be receivable upon the conversion of this Note, free and
clear of all restrictions on issuance, sale or transfer other than those
imposed by law and free and clear of all pre-emptive rights. The Company agrees
that the Common Stock represented by each and every Conversion Share delivered
on the conversion of this Note shall, at the time of such delivery, be validly
issued and outstanding, fully paid and non-assessable, and the Company will
take all such action as may be necessary to assure that the stated value or par
value per share of the Common Stock is at all times equal to or less than the
Conversion Price.

     3. Protection Against Dilution.

     (a) Adjustment for Stock Splits, Dividends and Combinations. If the
Company, at any time after the date of this Note or the date of an equity sale
upon which the Conversion Price is based, subdivides, declares a dividend
payable in or combines the class or series of capital stock issuable upon
conversion hereof, then the Conversion Price in effect immediately prior to the
subdivision, combination or record date for such dividend shall forthwith be
proportionately increased, in the case of combination, or decreased, in the
case of subdivision or dividend payable in capital stock.

     (b) Adjustment for Other Dividends and Distributions. If the Company, at
any time after the date of this Note or the date of an equity sale upon which
the Conversion Price is based, distributes to holders of Common Stock any
assets (excluding cash dividends during any fiscal year in an aggregate amount
not exceeding 20% of the Company's income from continuing operations in the
immediately preceding fiscal year) or debt securities or any rights or warrants
to purchase debt securities, assets or other securities (including Common
Stock), the Conversion Price shall be adjusted in accordance with the formula:

                             C1 = C x [(O x M) - F]
                                  -----------------
                                        O x M

                  where:

                    C1 = the adjusted Conversion Price.

                    C = the Conversion Price prior to adjustment
                        pursuant to this subsection.

                    M = the fair market value per share of Common
                        Stock before the record date mentioned
                        below, as determined in good faith by the
                        Company's Board of Directors with the
                        advice of the Company's investment banker.

                                      -6-
<PAGE>

                    O = the number of shares of Common Stock outstanding
                        on the record date mentioned below.

                    F = the fair market value on the record date
                        of the aggregate of all assets, securities,
                        rights or warrants distributed, as
                        determined in good faith by the Company's
                        Board of Directors with the advice of the
                        Company's investment banker.

The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.

     (c) Adjustment for Reorganizations, Mergers, Etc. If any capital
reorganization or reclassification of the capital stock of the Company, or
share exchange, combination, consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of Common
Stock or Preferred Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock or such Preferred Stock,
then, as a condition of such reorganization, reclassification, share exchange,
combination, consolidation, merger or sale, lawful and adequate provision shall
be made whereby the Holder shall thereafter have the right to receive upon
conversion of this Note, upon the basis and upon the terms and conditions
specified in this Note and in lieu of the shares of the capital stock of the
Company into which this Note could be converted, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock or Preferred Stock
equal to the maximum number of shares of such stock issuable upon conversion of
this Note, and in any such case appropriate provisions shall be made with
respect to the rights and interests of Holder to the end that the provisions
hereof (including without limitation provisions for adjustments of the
Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company shall not effect any such share exchange,
combination, consolidation, merger or sale, unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting from
such share exchange, combination, consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and mailed
to the Holder, at the last address of such Holder appearing on the books of the
Company, the obligation to deliver to such Holder such shares of stock,
securities or assets that, in accordance with the foregoing provisions, such
Holder may thereafter be entitled to receive upon conversion of this Note.

     (d) Successive Adjustments and Notice. The above provisions of this
Section 3 shall similarly apply to successive stock splits, combinations,
dividends, reorganizations, reclassifications, consolidations, mergers or
sales. Notice of such event and of such adjustment to the Conversion Price
resulting from such proposed event shall be mailed to the Holder not less than
fifteen (15) days prior to such event.

     (e) Issuance of Options or Warrants. If the Company in any manner issues
or sells any options or warrants to subscribe for or to purchase Common Stock
(such options or

                                      -7-
<PAGE>

warrants being herein called "Options") (other than Excluded Issuances), the
Company shall be deemed to have issued the shares of Common Stock issuable upon
the exercise of such Option.

     4. Payment of this Note - Principal and Interest.

     (a) Payment on Maturity Date. On _______________, 2003, the two-year
anniversary date of the date hereof, the Company will pay to the Holder in cash
an amount equal to the then outstanding principal of this Note and all accrued
and unpaid interest thereon.

     (b) Payment on an Event of Default. If an Event of Default occurs and is
continuing, then the Holder may, by written notice to the Company, declare this
Note immediately due and payable and demand payment of all principal and
accrued interest that has not been converted pursuant to Section 2 above, and,
at any time thereafter, the Holder may proceed to collect such unconverted
principal and accrued interest.

     (c) Prepayment. Subject to Section 2(d) hereof, the Company may prepay all
or any portion of this Note at any time upon written notice to Holder at least
twenty (20) days in advance of the date set for such prepayment in such notice.
Such notice shall describe the source of funds for such prepayment and the
terms of any securities or debt instruments issued or proposed to be issued in
connection with such repayment. No prepayment may be made unless the Company
simultaneously proposes to prepay all (or a pro rata portion of all) Notes
issued pursuant to the Bridge Loan Agreement. Any partial payment shall be
applied first to accrued interest and then to principal. Once paid, all of the
Holder's rights under this Note will be extinguished, including rights to
conversion.

     5. Events of Default. The existence of any of the following conditions
shall constitute an Event of Default.

     (a) If the Company defaults in the payment of any principal or interest on
the Notes when the same becomes due and payable and such default continues for
more than ten (10) calendar days following notice to the Company by the Holder.

     (b) Commencement of proceedings under any bankruptcy or insolvency law or
other law for the reorganization, arrangement, composition or similar relief or
aid of debtors or creditors if such proceeding remains undismissed and unstayed
for a period of 60 days following notice to the Company by the Holder.

     (c) If the Company shall dissolve, liquidate or wind up its affairs or
sell all or substantially all of its assets.

     (d) If the Company breaches in any material respect any of its
representations, warranties, covenants or agreements set forth in the Bridge
Loan Agreement, this Note (other than a breach described in Section 5(a)
above), or the Security Agreement and such breach shall not be cured within
thirty (30) days after written notice thereof shall have been given to the
Company by the Holder.

                                      -8-
<PAGE>

     (e) One or more final unappealable judgments are entered against the
Company involving aggregate unpaid liability not covered by insurance in excess
of $1,000,000, and such amounts are not paid in full within 30 days.

     (f) Attachment or similar process of execution is levied against a
material portion of the Company's assets and such process is not terminated and
any orders issued pursuant thereto canceled within ninety (90) calendar days.

     6. Transfer.

     (a) Transfer of this Note shall be subject to (i) the prior approval of
the Company, except for a transfer to an affiliate of the Holder or a successor
to substantially all of the Holder's business and assets to which this Note
relates, which consent shall not be unreasonably withheld and (ii) prior
delivery by the proposed transferee to the Company of an opinion of counsel
reasonably satisfactory to the Company that such transfer is in compliance with
all federal and all applicable securities laws. The Holder may transfer this
Note only in whole and not in part and only to an assignee that assumes all of
the Holder's rights and obligations under the Bridge Loan Agreement (including
under the Security Agreement), in the manner and to the extent permitted by the
Bridge Loan Agreement. In order to transfer this Note, the Holder, or its duly
authorized attorney, shall surrender this Note at the office of the Company,
accompanied by an assignment duly executed by the Holder.

     (b) This Note is, and each certificate representing Conversion Shares
shall be, stamped or otherwise imprinted with a legend substantially in the
following form:

     "The securities represented hereby have not been registered under the
     Securities Act of 1933, as amended, or any applicable foreign state
     securities laws and may not be reoffered, sold, transferred, pledged, or
     otherwise disposed of except pursuant to (1) registration under such Act
     or laws or (2) an opinion of counsel reasonably acceptable to the Company
     to the effect that such registration is not required. In addition, this
     Note, and the shares of stock issuable upon conversion hereof, are also
     subject to Section 3.2 of a Bridge Loan Agreement dated December ____,
     2001 among Medtronic International, Ltd., Restoragen, Inc. and various
     other lenders named therein."

     (c) The Holder represents, warrants and covenants that: (1) any shares
acquired upon conversion of this Note shall be acquired for the Holder's
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the shares in violation of the Securities Act of 1933
Act, as amended (the "1933 Act"), or any rule or regulation under the 1933 Act,
(2) the Holder has had such opportunity as he/she/it has deemed adequate to
obtain from representatives of the Company such information as is necessary to
permit the Holder to evaluate the merits and risks of his/her/its investment in
the Company, (3) the Holder is able to bear the economic risk of holding such
shares acquired pursuant to the conversion of this Note for an indefinite
period, and (4) the Holder understands that (A) the shares acquired pursuant to
the conversion of this Note will not be registered under the 1933 Act; (B) such
shares cannot be sold, transferred or otherwise disposed of unless they are
subsequently registered under the 1933 Act or an exemption from registration is
then available; (C) in any

                                      -9-
<PAGE>

event, the exemption from registration under Rule 144 will not be available for
at least one year and even then will not be available unless a public market
then exists for the Common Stock, adequate information concerning the Company
is then available to the public, and other terms and conditions of Rule 144 are
complied with; and (D) there is now no registration statement on file with the
SEC with respect to any capital stock of the Company.

By converting this Note, the Holder shall be deemed to have reaffirmed, as of
the date of such conversion, the representations made in this Section 6(c),
provided that the Company provides any information described in (c)(2) above
that the Holder requests.

     7. Loss or Mutilation of Note. Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, together with an indemnity reasonably satisfactory to the Company,
in the case of loss, theft, or destruction, or the surrender and cancellation
of this Note, in the case of mutilation, the Company shall execute and deliver
to the Holder a new Note of like tenor and denomination as this Note.

     8. Note Holder not Shareholder. This Note does not confer upon the Holder
any right to vote or to consent or to receive notice as a shareholder of the
Company, as such, in respect of any matters, whatsoever, or any other rights or
liabilities as a shareholder, prior to the conversion hereof.

     9. Waivers. The failure of the Holder to enforce at any time any of the
provisions of this Note shall not, absent an express written waiver signed by
the Holder specifying the provision being waived, be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Note or
any part hereof or the right of the Holder thereafter to enforce each and every
such provision. No waiver of any breach of this Note shall be held to be a
waiver of any other or subsequent breach.

     10. Taxes. The Company agrees that it will pay, when due and payable, any
and all stamp, original issue or similar taxes which may be payable in respect
of the issue of this Note, and/or any Conversion Shares or certificates
therefor. The Company shall not, however, be required to pay any stamp,
original issue or similar tax which may be payable in respect of any transfer
involved in the transfer and delivery of stock certificates to a person other
than the Holder.

     11. Notices. All notices or other communications to a party required or
permitted hereunder shall be in writing and shall be delivered personally or by
facsimile (receipt confirmed electronically) to such party (or, in the case of
an entity, to an executive officer of such party) or shall be sent by a
reputable express delivery service or by certified mail, postage prepaid with
return receipt requested, addressed as follows:

if to the Holder to:

          -------------------------------
          -------------------------------
          -------------------------------

                                     -10-
<PAGE>

          Attention:
                    ---------------------
          Fax:
              ---------------------------

with a copy to:

          -------------------------------
          -------------------------------
          -------------------------------
          Attention:
                    ---------------------
          Fax:
              ---------------------------

if to the Company to:

           Restoragen, Inc.
           4130 N.W. 37th Street
           Lincoln, NE  68524-1637
           Attention: Chief Financial Officer
           Fax: (402) 470-2345

with a copy to:

           Davis Polk & Wardwell
           450 Lexington Avenue
           New York, NY  10017
           Attention: Lucy Fato, Esq.
           Fax: (212) 450-3596

     Any party may change the above specified recipient and/or mailing address
by notice to all other parties given in the manner herein prescribed. All
notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally or by facsimile, provided that any such
facsimile is received during regular business hours at the recipient's
location) or on the day shown on the return receipt (if delivered by mail or
delivery service).

     12. Headings. The titles and headings to the Sections herein are inserted
for the convenience of reference only and are not intended to be a part of or
to affect the meaning or interpretation of this Note. This Note shall be
construed without regard to any presumption or other rule requiring
construction hereof against the party causing this Note to be drafted.

     13. Applicable Law. The legality, validity, enforceability and
interpretation of this Note and the relationship of the parties hereunder shall
be governed by the laws of the State of Delaware, without giving effect to the
principles of conflict of laws.

                                     -11-
<PAGE>

     IN WITNESS WHEREOF, the undersigned has caused this Secured Convertible
Promissory Note to be signed in its name by the signature of its duly
authorized representative.

                                          RESTORAGEN, INC.

                                          By:___________________________________

                                          Its:__________________________________

                                     -12-
<PAGE>

                                                                        Annex A

                                Minimum Terms of
                           Qualified Preferred Stock

Issue:                       Preferred Stock (the "Preferred Stock") issuable
                             upon conversion of Restoragen, Inc.'s (the
                             "Company") Secured Convertible Promissory Notes,
                             dated as of December ___, 2001 (the "Notes").

Stated Value:                Applicable Note Conversion Price (as defined in
                             the Notes).

Dividends:                   The holders of Preferred Stock will be entitled to
                             receive an annual 9.75% cumulative dividend per
                             share.

Voting Rights:               Holders of Preferred Stock will have the right to
                             vote with the common stockholders on all matters
                             submitted to a vote of stockholders of the
                             Company, on an as if converted basis, but also
                             vote as a separate class on all matters adversely
                             affecting the Preferred Stock.

Board                        The rights of Medtronic International, Ltd.
Representation:              ("Medtronic") and SMS Group (as defined in the
                             Bridge Loan Agreement) to each designate a board
                             representative to the Company's Board of Directors
                             pursuant to Section 3.2 of the Bridge Loan
                             Agreement, dated as of December ___, 2001 (the
                             "Bridge Loan Agreement"), among the Company,
                             Medtronic, SMS Securities Sigg Merkli Schroedel AG
                             ("SMS Securities") and the other lenders
                             (collectively, the "Noteholders") will survive
                             conversion.

Holder's Option to Convert:  At the holder's option, the Preferred Stock will
                             be convertible into common stock at the Conversion
                             Price (as defined below), subject to adjustment
                             for dilution.

Conversion Price:            The conversion price per share of Preferred Stock
                             (the "Conversion Price") shall be the applicable
                             Note Conversion Price, subject to adjustment for
                             anti-dilution protection.

Automatic                    The Preferred Stock will be converted into common
Conversion:                  stock automatically upon the occurrence of either
                             (i) a "Qualified Initial Public Offering" (as
                             defined in the Notes) or (ii) the election of the
                             holders of a majority of the holders of Preferred

                                     -13-
<PAGE>

                             Stock voting as a separate class; provided, that
                             if Medtronic and SMS Securities and its
                             co-investors are the only holders of Preferred
                             Stock in the same proportion as the Notes
                             initially held by them, the consent of 60% of the
                             Preferred Stockholders shall be required for such
                             conversion.

Liquidation Preference:      In the event of any liquidation, dissolution, or
                             winding up of the Company (each, a "Liquidation")
                             the holders of Preferred Stock will be entitled to
                             receive pari passu with the holders of any other
                             class or series of preferred stock now existing or
                             hereafter outstanding, an amount in cash equal to
                             the Stated Value, plus all unpaid and accumulated
                             dividends.

Anti-Dilution Provisions:    The conversion rights of the Preferred Stock will
                             be adjusted to provide standard antidilution
                             protection, including adjustments for
                             extraordinary dividends, recapitalization, or
                             subdivisions, combinations or reclassifications of
                             common stock, issuance of shares at prices below
                             the conversion price based on a full-ratchet
                             formula.

Registration Rights:         The holders of Preferred Stock will have the same
                             registration rights as the Noteholders set forth
                             in the Bridge Loan Agreement.

Most Favored Nation:         To the extent any holder of any class or series of
                             preferred stock of the Company outstanding at the
                             time of conversion has any additional or more
                             favorable rights, the holders of Preferred Stock
                             will be afforded the same rights.

Conditions:                  The conversion of the Notes into the Preferred
                             Stock will be subject to customary conditions,
                             including without limitation, the following: (a) a
                             Certificate of Designation setting forth the
                             rights of the Preferred Stock shall have been
                             filed with the Secretary of State of the State of
                             Delaware; and (b) an Investor Rights Agreement
                             containing the rights set forth herein, to the
                             extent not included in the Certificate of
                             Designation, in form and substance satisfactory to
                             the Noteholders shall have been executed by all
                             parties thereto.

                                     -14-Exhibit 10.3

                               SECURITY AGREEMENT

DATE:           December __, 2001

DEBTOR:         Restoragen, Inc.                  Tax I.D. #47-0727668
                4130 N.W. 37th Street             Organization I.D. #0002339166
                Lincoln, Nebraska  68524-1637

SECURED PARTY:  Medtronic International, Ltd., as Agent
                World Headquarters
                710 Medtronic Parkway, N.E.
                Minneapolis, MN  55432-5604

     1. Security Interest and Collateral. To secure the payment of outstanding
principal and interest on that certain $10,000,000 Secured Convertible
Promissory Note of even date herewith made by Debtor to Medtronic
International, Ltd. ("Medtronic") and each other Secured Convertible Promissory
Note made by Debtor pursuant to that certain Bridge Loan Agreement dated
December __, 2001 by and among Debtor, Medtronic and the other lenders named
therein (the "Loan Agreement") (individually a "Note", collectively the
"Notes") and the performance of every liability and obligation of every type
and description that Debtor may now or at any time hereafter owe to any Secured
Party pursuant to the Loan Agreement or pursuant to this Agreement, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is absolute or contingent, liquidated or unliquidated,
or sole, joint, several or joint and several (all such debts, liabilities and
obligations and any amendments, extensions, renewals or replacements thereof
collectively referred to herein as the "Obligations"), Debtor hereby grants
Medtronic, as agent for itself and for the lenders who are parties to the Loan
Agreement (each such lender a "Secured Party"; Medtronic and all such lenders
the "Secured Parties"), a first priority security interest (the "Security
Interest") in all the following property of Debtor (the "Collateral"):

     A.   Certain Accounts and Rights to Payment: Each and every right of
          Debtor to the payment of money arising out of the grant of any
          license rights in any of Debtor's intellectual property or other
          general intangibles, whether such right to payment now exists or
          hereafter arises, whether such right to payment is or is not already
          earned by performance, and howsoever such right to payment may be
          evidenced, together with all other rights and interests (including
          all liens and security interests) which Debtor may at any time have
          by law or agreement against any such licensee ("License
          Receivables"); and

     B.   General Intangibles: All general intangibles of Debtor, whether now
          owned or hereafter acquired, including, but not limited to,
          applications for patents (including, but not limited to, those listed
          on Schedule 1 hereto), patents (including, but not limited to, those
          listed on Schedule 1 hereto), copyrights, trademarks (including, but
          not limited to, those listed on Schedule 2 hereto), trade

<PAGE>

          secrets, good will, tradenames, all licenses of any of the foregoing,
          customer lists, permits and franchises, software, and the right to
          use Debtor's name, and any and all membership interests, governance
          rights, and financial rights in each and every limited liability
          company, and all payment intangibles and all other General
          Intangibles of the Debtor, as such term may be defined in the UCC;

together with all substitutions and replacements for and products of any of the
foregoing property and proceeds of any and all of the foregoing property
together with all books and records of Debtor related to the Collateral.

     2. Representations, Warranties and Agreements. Debtor represents, warrants
and agrees that:

          2.1. Debtor is a corporation duly organized, validly existing and in
     good standing under the laws of the state of Delaware, and the state of
     Delaware has been Debtor's state of organization since before July 1,
     2001. Debtor has full power and authority to execute this Agreement, to
     perform Debtor's obligations hereunder and to subject the Collateral to
     the Security Interest. Debtor's taxpayer identification number is the
     number shown at the beginning of this Agreement. Debtor's organizational
     identification number is the number shown at the beginning of this
     Agreement.

          2.2. Debtor's chief place of business is located at the address shown
     at the beginning of this Agreement. Debtor's records concerning its
     License Receivables and general intangibles are kept at such address.
     Debtor will give at least 30 days' advance written notice to Secured Party
     of any change in Debtor's jurisdiction of organization or chief place of
     business and any change in or addition of any Collateral location. Debtor
     will take all such actions as Medtronic may reasonably request to permit
     Medtronic to establish and perfect the Security Interest in all
     jurisdictions Medtronic deems necessary, including but not limited to the
     execution, delivery or endorsement of any and all instruments, documents,
     assignments, security agreements and other agreements and writings that
     Medtronic may at any time reasonably request in order to secure, protect,
     perfect or enforce the Security Interest and any Secured Party's rights
     under this Agreement.

          2.3. Debtor has (or will have at the time Debtor acquires rights in
     Collateral hereafter arising) absolute title to each item of Collateral
     free and clear of all security interests, liens and encumbrances. Debtor
     will keep all Collateral free and clear of all security interests, liens
     and encumbrances except the Security Interest, and will defend the
     Collateral against all claims or demands of all persons other than the
     Secured Parties; provided that Debtor may grant a second priority security
     interest in the Collateral in connection with up to $20,000,000 of
     additional debt financing if and only if such additional secured parties
     enter into an appropriate intercreditor subordination agreement with
     Medtronic that gives Medtronic, as agent for the Secured Parties, control
     over all actions regarding foreclosure on the Collateral. Debtor will
     promptly pay or properly and timely contest all taxes and other
     governmental charges levied or assessed upon or
     upon or

                                       2
<PAGE>

     against any Collateral or against the creation, perfection or continuance
     of the Security Interest.

          2.4. Until the Obligations are satisfied in full, Debtor will not,
     without Medtronic's prior written consent, sell any of the Collateral or
     enter into any agreement that is inconsistent with any Secured Party's
     rights under this Agreement, except that Debtor may grant licenses to and
     enter into collaborative arrangements with respect to the Collateral in
     the ordinary course of business so long as such agreements are not
     inconsistent with any Secured Party's rights under the Loan Agreement or
     this Agreement. Debtor further agrees that it will not take any action, or
     permit any action to be taken by others under its control, or fail to take
     any action, that would affect the validity of the Collateral or
     enforcement of any Secured Party's rights in the Collateral.

          2.5. This Agreement has been duly and validly authorized by all
     necessary action by Debtor.

          2.6. Debtor will at all reasonable times and with reasonable notice
     permit Medtronic or its representatives to examine or inspect any
     Collateral, wherever located, and to examine, inspect and copy Debtor's
     books and records pertaining to the Collateral and its business and
     financial condition. In the case of an Event of Default or if in
     connection with Medtronic's evaluation of the Collateral pursuant to
     Section 1 of this Agreement, Medtronic reasonably deems itself to be
     inadequately secured, and provided that Medtronic keeps such information
     confidential, Medtronic may send and discuss with licensees of Debtor's
     intellectual property requests for verifications of amounts owed to
     Debtor.

          2.7. If Medtronic at any time so requests after the occurrence of an
     Event of Default, Debtor will promptly transfer to Medtronic any
     instrument, document, chattel paper, or investment properties constituting
     the Collateral, duly endorsed or assigned by Debtor.

          2.8. Debtor will keep accurate and complete records pertaining to the
     Collateral and pertaining to Debtor's business and financial condition and
     submit to Medtronic such periodic reports concerning the Collateral and
     Debtor's business and financial condition as Medtronic may from time to
     time reasonably request.

          2.9. Debtor will pay when due or reimburse each Secured Party on
     demand for all costs of collection of any of the Obligations and all other
     out-of-pocket expenses (including all reasonable attorneys' fees) incurred
     by such Secured Party in connection with the satisfaction, protection,
     defense or enforcement of the Security Interest or the protection, defense
     or enforcement of this Agreement or any or all of the Obligations,
     including expenses incurred in any litigation or bankruptcy or insolvency
     proceedings.

          2.10. The Obligations have been incurred and the Collateral will be
     used primarily for business purposes.

                                       3
<PAGE>

          2.11. All License Receivables are (or will be when arising) the
     valid, genuine and legally enforceable obligation, subject to no defense,
     set-off or counterclaim (other than those arising in the ordinary course
     of business) of each licensee named therein or in Debtor's records
     pertaining thereto as being obligated to pay such obligation. Debtor will
     not subordinate any License Receivable to claims of other creditors of
     such licensee.

          2.12. Debtor will promptly notify Secured Party of any material loss
     of or damage to any Collateral or of any adverse change in the prospect of
     payment of any material sums due under any license constituting
     Collateral.

          2.13. Debtor will from time to time execute such financing statements
     as Medtronic may reasonably deem required to be filed in order to perfect
     the Security Interest and, if any Collateral is covered by a certificate
     of title, execute such documents as may be required to have the Security
     Interest properly noted on a certificate of title. In addition, Debtor
     authorizes Medtronic to file any financing statement Medtronic deems
     necessary.

          2.14 Debtor will not use or keep any Collateral, or permit it to be
     used or kept, for any unlawful purpose or in violation of any federal,
     state or local law, statute or ordinance.

          2.15. If Debtor at any time fails to perform or observe any agreement
     contained in this Section 2, and if such failure shall continue for a
     period of 30 calendar days after Medtronic gives Debtor written notice
     thereof, Medtronic may (but need not) perform or observe such agreement on
     behalf and in the name, place and stead of Debtor (or, at Medtronic's
     option, in Medtronic's own name) and may (but need not) take any and all
     other actions that Medtronic may reasonably deem necessary to cure or
     correct such failure. Debtor shall pay Medtronic on demand the amount of
     all monies expended and all costs and expenses (including reasonable
     attorneys' fees) incurred by Medtronic in connection with or as a result
     of Medtronic's performing or observing such agreements or taking such
     actions, together with interest thereon from the date expended or incurred
     by Medtronic at the highest rate then applicable to any of the
     Obligations. To facilitate the performance or observance by Medtronic of
     such agreements of Debtor (in the event Debtor does not cure any such
     failure during the above-described 30-day period), Debtor hereby
     irrevocably appoints (which appointment is coupled with an interest)
     Medtronic, or its delegate, as the attorney-in-fact of Debtor with the
     right (but not the duty) from time to time to create, prepare, complete,
     execute, deliver, endorse or file, in the name and on behalf of Debtor,
     any and all instruments, documents, financing statements, and other
     agreements and writings required to be obtained, executed, delivered or
     endorsed by Debtor under this Section 2.

     3. Account Verification and Collection Rights of Medtronic. Following an
Event of Default, Medtronic shall have the right to verify any License
Receivables in the name of Debtor or in Medtronic's own name; and Debtor,
whenever requested pursuant to the terms of this Section, shall furnish
Medtronic with duplicate statements of the License Receivables, which
statements may be mailed or delivered by Medtronic for that purpose. Medtronic
may, at any

                                       4
<PAGE>

time after the occurrence of an Event of Default, notify any License Receivable
debtor that such right to payment has been assigned or transferred to Medtronic
for security and shall be paid directly to Medtronic as agent for the Secured
Parties. If Medtronic so requests, at any time after the occurrence of an Event
of Default, Debtor will so notify such License Receivable debtors in writing
and will indicate on all invoices to such License Receivable debtors that the
amount due is payable directly to Medtronic as agent for the Secured Parties.
At any time after Medtronic or Debtor gives such notice to a License Receivable
debtor, Medtronic may (but need not), on behalf of the Secured Parties or in
Debtor's name, demand, sue for, collect or receive any money or property at any
time payable or receivable on account of, or securing, any such License
Receivable, or grant any extension to, make any compromise or settlement with
or otherwise agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such License Receivable debtor.

     4. Events of Default. The occurrence of any of the following shall, at the
option of the Medtronic, be an Event of Default:

          A. Any "Event of Default" (as defined in such agreement) by Debtor
     under any note or any other agreement evidencing the Obligations;

          B. Debtor's failure to comply with any representation, warranty or
     covenant hereunder if not cured within thirty (30) days after written
     notice;

          C. Transfer or disposition of any of the Collateral, except as
     permitted by this Agreement; or

          D. Attachment, execution or levy on any of the Collateral.

     5. Remedies upon Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter, Medtronic, on behalf of all the Secured
Parties, may exercise any one or more of the following rights and remedies:

          5.1. declare all Obligations to be immediately due and payable, which
     shall then be immediately due and payable, without presentment or other
     notice or demand;

          5.2. exercise and enforce any or all rights and remedies available
     upon default to a secured party under the Uniform Commercial Code,
     including but not limited to the right to take possession of any
     Collateral, proceeding without judicial process if permitted by law or by
     judicial process, and the right to use, sell, lease or otherwise dispose
     of any or all of the Collateral, and in connection therewith, Medtronic
     may require Debtor to make the Collateral available to Medtronic at a
     place to be designated by Medtronic that is reasonably convenient to both
     parties, and if notice to Debtor of any intended disposition of Collateral
     or any other intended action is required by law in a particular instance,
     such notice shall be deemed commercially reasonable if given (in the
     manner specified in Section 8.2) at least 10 business days prior to the
     date of intended disposition or other action; or

                                       5
<PAGE>

          5.3. exercise or enforce any or all other rights or remedies
     available to Medtronic by law or agreement against the Collateral,
     including specifically the right to use the Collateral, against Debtor or
     against any other person or property.

All rights and remedies of the Secured Parties shall be cumulative and may be
exercised singularly or concurrently, at Medtronic's option, and the exercise
or enforcement of any one such right or remedy shall neither be a condition to
nor bar the exercise or enforcement of any other.

     6. Other Personal Property. Unless at the time Medtronic takes possession
of any tangible Collateral, or within seven days thereafter, Debtor gives
written notice to Medtronic of the existence of any goods, papers or other
property of Debtor, not affixed to or constituting a part of such Collateral,
but which are located or found upon or within such Collateral, neither
Medtronic nor any other Secured Party shall be responsible or liable to Debtor
for any action taken or omitted by or on behalf of Medtronic or any other
Secured Party with respect to such property without actual knowledge of the
existence of any such property or without actual knowledge that it was located
or to be found upon or within such Collateral.

     7. Termination of Security Interest; Release of Collateral. When all
outstanding Obligations have been irrevocably paid in full, the Security
Interest shall terminate and all rights to each item of Collateral shall revert
to the Debtor. At any time before the Security Interest terminates pursuant to
Section 7, Medtronic may, at the written request of the Debtor, release any of
the Collateral (but not all or substantially all the Collateral). Upon any such
termination of the Security Interest or release of Collateral, Medtronic will,
at the expense of the Debtor, execute and deliver to Debtor such documents as
Debtor shall reasonably request to evidence the termination of the Security
Interest or the release of such Collateral, as the case may be.

     8. Miscellaneous.

          8.1. This Agreement can be waived, modified, amended, terminated or
     discharged, and the Security Interest can be released, only explicitly in
     a writing signed by Medtronic. A waiver signed by Medtronic shall be
     effective only in the specific instance and for the specific purpose
     given. Mere delay or failure to act shall not preclude the exercise or
     enforcement of Medtronic's or any other Secured Party's rights or
     remedies.

          8.2. All notices to be given to Debtor shall be deemed sufficiently
     given if delivered or mailed by registered or certified mail, postage
     prepaid, to Debtor at its address set forth above or at such other address
     as Debtor may subsequently provide to Medtronic.

          8.3. Any Secured Party's duty of care with respect to Collateral in
     its possession (as imposed by law) shall be deemed fulfilled if such
     Secured Party exercises reasonable care in physically safekeeping such
     Collateral or, in the case of Collateral in the custody or possession of a
     bailee or other third person, exercises reasonable care in the selection
     of the bailee or other third person, and such Secured Party need not
     otherwise preserve, protect, insure or care for any Collateral. Neither
     Medtronic nor any other Secured Party shall be obligated to preserve any
     rights Debtor may have against prior parties, to realize on the

                                       6
<PAGE>

     Collateral at all or in any particular manner or order, or to apply any
     cash proceeds of Collateral in any particular order of application.

          8.4. This Agreement shall be binding upon and inure to the benefit of
     Debtor and the Secured Parties and their respective successors and assigns
     and shall take effect when signed by Debtor and delivered to Medtronic,
     and Debtor waives notice of Medtronic's or any other Secured Party's
     acceptance hereof. Except for an assignment to SMS Securities Sigg Merkli
     Schroedel AG or its affiliates, or to a successor to substantially all of
     Medtronic's business and assets to which this Agreement relates, Medtronic
     will not assign its rights under this Agreement without the Company's
     consent, which shall not be unreasonably withheld.

          8.5. A carbon, photographic or other reproduction of this Agreement
     or of any financing statement signed by Debtor shall have the same force
     and effects as the original for all purposes of a financing statement.

          8.6. This Agreement shall be governed by the internal laws of the
     State of Delaware. If any provision or application of this Agreement is
     held unlawful or unenforceable in any respect, such illegality or
     unenforceability shall not affect other provisions or applications which
     can be given effect and this Agreement shall be construed as if the
     unlawful or unenforceable provision or application had never been
     contained herein or prescribed hereby.

          8.7. All representations and warranties contained in this Agreement
     shall survive the execution, delivery and performance of this Agreement
     and the creation and payment of the Obligations.

     ACCORDINGLY, this Security Agreement has been duly executed by the parties
as of the date first set forth above.

                                        RESTORAGEN, INC.

                                        By:
                                           ------------------------------------
                                           Its:
                                               --------------------------------

                                        MEDTRONIC INTERNATIONAL, LTD.

                                        By:
                                           ------------------------------------
                                           Its:
                                               --------------------------------

                                       7

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