Document:

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                                                                   EXHIBIT 10.39

                                    EXHIBIT A

                      TERMS AND CONDITIONS OF OPTION GRANT
                           AND/OR STOCK PURCHASE UNDER
                                MICROHELIX, INC.
                       2002 NONQUALIFIED STOCK OPTION PLAN

      These Terms and Conditions apply to an option grant or stock sale made to
you by the Company pursuant to its 2002 Nonqualified Stock Option Plan (the
"Plan").

1. YOUR REPRESENTATIONS. The Company is relying on your ability to make these
representations, in part in order to remain in compliance with laws governing
sale or transfer of securities. Your ability to make them is a condition of the
Company's ability to sell you Shares, or grant you Options. Any capitalized
terms not otherwise defined herein, shall have the meanings given in the Plan.
You represent these things:

      1.1 INVESTMENT INTENT; FINANCIAL CAPABILITY. Your good faith intention in
acquiring the Shares is to hold them for your own benefit for an indefinite
period. You don't have any current intention to sell or transfer any of them.
Whatever you are paying for Shares (or if you are getting options, whatever you
ultimately elect to pay) will be an amount you can afford to be without for an
indefinite period, or even to lose completely.

      1.2 INVESTIGATION OF TERMS AND VALUE. You have made whatever investigation
you think you need to feel well informed with your understanding of the terms
under which these securities are issued, and also with the value being placed on
them. You know you can talk to any counselor you wish about it, and confirm you
have had a chance to do that before you signed anything.

      1.3 TRANSFER RESTRICTED. There may be several types of restrictions on
your ability to transfer your securities. The restrictions may include:

            1.3.1 YOUR AGREEMENTS. You understand that if you are being granted
      Options, they are not transferrable at all, and that if you are being sold
      Shares there may be restrictions on its transfer derived from a
      Shareholder Agreement. If the Shares you are purchasing are subject to a
      Shareholder Agreement, it is attached hereto as an Exhibit.

            1.3.2 SECURITIES LAW. Aside from the restrictions your Shareholder
      Agreement may impose, you also understand that the Shares must be held
      indefinitely unless they are registered as the law requires. While there
      are some exemptions from registration available, the most common ("Rule
      144") is only available upon the satisfaction of certain conditions,
      including a required holding period. While other exemptions may be
      available, the conditions attached to them may be difficult to satisfy.
      Also, the restrictions are stricter if you are an officer or director of
      the Company, or a beneficial owner of ten percent or more of any class of
      the Company's equity securities.

Page 1 - TERMS OF OPTION GRANT OR STOCK PURCHASE
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      1.4 LEGENDS WILL BE ON CERTIFICATE. The certificate representing the
Shares will bear a legend that tells people their transfer is prohibited, absent
registration or an opinion of counsel acceptable to counsel for the Company that
registration is not required.

2. BEING GRANTED OPTIONS. If you are being granted Options, these terms and
conditions apply to you.

      2.1 NATURE OF OPTION. The Option is a "NONQUALIFIED" option and it is not
intended to qualify as an "Incentive Stock Option", as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").

      2.2 EXERCISE PRICE. The Exercise Price for the Option shall be determined
by the Board of Directors of the Company.

      2.3 EXERCISE. You may exercise the Option as follows:

            2.3.1 WHEN EXERCISE BECOMES POSSIBLE. Your Option becomes
      exercisable on the dates described in the exercise schedule in the Stock
      Option or Grant Agreement. No more option rights can become exercisable
      once you are no longer an Employee or Consultant. (The terms "Employee"
      and "Consultant" shall have the same meaning given them in the Plan).

            2.3.2 WHEN EXERCISE STOPS BEING POSSIBLE. Your right to exercise the
      Option ends when the term of the Option expires. Notwithstanding the
      foregoing, your right to exercise will terminate at the end of a fixed
      period of time after your service as an Employee or Consultant ends. That
      fixed period of time is three months unless otherwise provided for by the
      Board. It gets extended to twelve months if you stop being an Employee
      because you are permanently and totally disabled, or because you die,
      unless otherwise provided for by the Board. (If you die, your estate may
      exercise your Option for you.)

            2.3.3 NO FRACTIONAL SHARES. You may not exercise this Option for a
      fraction of a Share.

            2.3.4 HOW TO EXERCISE. You exercise your Option by sending the
      Company your Notice of Exercise. The Company may amend the form from time
      to time, but the current form is attached as Exhibit C (if you are getting
      shares directly, not options, Exhibit C will be different). Fill it out,
      sign it, and deliver it in person or by certified mail to the Company's
      President, Secretary, or Chief Financial Officer. Include payment -- the
      exercise is not valid without it.

            2.3.5 WHAT TO PAY. You must pay the option exercise price, when you
      exercise your Option. Pay it in cash, cashier's or certified check, or
      collected funds, or any other form of consideration authorized by the
      Plan. If the fair market value of the Shares on the date you exercise your
      Option is higher than the exercise price, you must also pay to the Company
      any deposits required to meet the Company's applicable tax withholding
      obligations or other payroll deduction obligations. That is because you
      are getting the Option in part because you are performing services for the
      Company, so the IRS considers the difference between fair market value of
      the Shares and the exercise price to be ordinary income which you receive
      on the date you exercise your Option. Then, when

Page 2 - TERMS OF OPTION GRANT OR STOCK PURCHASE
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      you resell the Shares, any difference between the sale price, and the fair
      market value of the Shares on the date of exercise will be treated as
      capital gain or loss. If the Shares you receive upon the exercise of your
      Option are subject to vesting conditions, review Section 3.2.2 below,
      regarding an 83(b) election.

            2.3.6 WARNING. The Company cannot issue Shares unless it can do so
      legally, and in a way that complies with the rules of any stock exchange
      (including NASDAQ) upon which the Shares may then be listed. The Company
      may not be able to issue the Shares unless a registration under applicable
      federal and/or state law is in effect at the time of exercise, unless the
      Company's counsel is satisfied an exemption is available. You may need to
      make additional representations or warranties to qualify for exemptions
      from registration.

            2.3.7 ISSUANCE OF SHARES. Assuming everything has been correctly
      done and all rules and laws complied with, the Shares will be considered
      issued to you on the date your Option is exercised.

      2.4 OPTIONS NOT TRANSFERABLE EXCEPT BY WILL. You can't transfer this
Option, except through your will or through the laws of intestacy. The terms of
the Option bind your estate, its executors and administrators, and your heirs
and successors.

3. PURCHASING SHARES. If you are purchasing Shares directly, these terms and
conditions apply to you.

      3.1 SUBSCRIPTION. Your execution of the purchase documents constitutes
your subscription for the Shares.

            3.1.1 PAYMENT. You agree to pay for the Shares at the Purchase Price
      times the number of shares to be issued.

            3.1.2 TAX DEPOSIT. If the fair market value of the Shares on the
      date you buy them is higher than the price you are paying, you must also
      pay to the Company any deposits required to meet the Company's applicable
      tax withholding obligations or other payroll deduction obligations. That
      is because you are getting the Shares in part because you are performing
      services for the Company, so the IRS considers the difference between fair
      market value and purchase price to be ordinary income which you receive on
      the date you purchase the Shares. Then, when you resell the Shares, any
      difference between the sale price, and the fair market value of the Shares
      on the date of purchase will be treated as capital gain or loss.

      3.2 VESTING CONDITIONS.

            3.2.1 WHERE SHOWN. Any vesting conditions that apply on the date the
      Shares are issued will be shown on the Stock Subscription Agreement. The
      Shareholder Agreement will define what restrictions apply to Shares as to
      which the vesting conditions have not yet been satisfied ("Unvested
      Shares").

            3.2.2 WARNING FOR UNVESTED SHARES: CONSIDER 83(B) ELECTION. If your
      Shares are subject to vesting conditions, the IRS will delay the official
      "purchase" date for tax purposes, unless you make an election that you
      don't want them to do that. Your election

Page 3 - TERMS OF OPTION GRANT OR STOCK PURCHASE
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      is called an "83(b) Election." Filing an "83(b) Election" allows you to be
      treated as having acquired the Shares on the date they were issued to you,
      whether or not the vesting conditions are satisfied yet. If the Shares
      increase in value before the vesting conditions are satisfied, filing the
      83(b) Election will be an advantage to you, however filing the 83(b)
      Election could be a disadvantage to you if the Shares decrease in value
      prior to a disposition, including a disposition to the Company arising out
      of a failure to satisfy vesting conditions. YOU MUST MAKE A SECTION 83(B)
      ELECTION NO LATER THAN THIRTY DAYS AFTER PURCHASE, OR LOSE THE OPPORTUNITY
      TO DO SO. If you are buying Shares subject to a vesting schedule, an 83(b)
      Election Form and further description is attached as Exhibit C (Exhibit C
      will be different if you are getting options and not Shares).

      3.3 SHAREHOLDER AGREEMENT. Shares issued now may be subject to a
Shareholder Agreement which, if applicable, will be provided to you along with
these Terms and Conditions. You will execute a copy of the Shareholder Agreement
if the Company asks you to, but even if you are not asked to execute it and it
is attached hereto as an exhibit, the Shareholder Agreement applies to all your
Shares acquired as part of the Shares purchase.

4. OTHER ISSUES.

      4.1 TERMS SUPPLEMENT PLAN. The words used here are used in the same sense
as they are used in the Plan. Please refer to it for clarification, if needed.
Also, the Plan controls over any other document, with respect to grants of stock
or options under it.

      4.2 NO FURTHER OBLIGATION. You confirm that the Company has no obligation
to issue or sell any additional securities to you.

      4.3 PROPRIETARY INFORMATION. The Company may provide you from time to time
with information that is proprietary to the Company. The Company and you agree
that these things are "Proprietary Information": all correspondence between you
and the Company, documents, corporate records (including minutes and stock
records), employee lists, financial statements, trade secrets, processes, data,
know-how, improvements, inventions, techniques, marketing plans and strategies,
and information concerning customers or vendors of the Company.

            4.3.1 YOUR OBLIGATION. You will keep all Proprietary Information
      confidential while you hold the Shares (or Options for them), and for
      three years after that. You won't use the Proprietary Information, or
      disclose it to anyone else. (As an Employee or Consultant, you may have
      additional obligations with respect to Proprietary Information you
      receive. Particularly, if you are subject to an Employment Nondisclosure
      and Development Agreement or any other agreement with the Company which
      provides for a longer nondisclosure or confidential period, such agreement
      will control in regards to the length of time that you must maintain the
      confidentiality of Proprietary Information.)

            4.3.2 RESERVATION. The Company does not intend to limit your rights
      under law, as a shareholder, to receive information, or to use it for
      proper shareholder purposes.

      4.4 JURISDICTION AND LAW. These Terms and Conditions are part of the
option grant or stock grant issued by the Company and are considered executed
and entered into in the State of Oregon. It will be governed by and interpreted
under the laws of that state. Any litigation

Page 4 - TERMS OF OPTION GRANT OR STOCK PURCHASE
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relating to it will be brought only in the state or federal courts located in
Portland, Oregon. You and the Company each waive whatever rights may exist to a
jury trial in any such litigation (unless that waiver cannot be legally made in
advance of trial). The Company and you both consent to exclusive jurisdiction in
Oregon.

Page 5 - TERMS OF OPTION GRANT OR STOCK PURCHASE<PAGE>
                                                                   EXHIBIT 10.40

                              NOTICE OF GRANT AWARD

 SMALL BUSINESS INNOVATION RESEARCH PROG                  Issue Date: 03/20/2002
 Department of Health and Human Services
 National Institutes Of Health
 NATIONAL INSTITUTE OF MENTAL HEALTH

 Grant Number:           1 R43 MH65011-01
 Principal Investigator: HADJICOSTIS, ANDY N PHD
 Project Title:          Miniature 24-Channel Interactive Neural Probe Amplifier

 SASS, DICK
 PRESIDENT
 MICROHELIX, INC
 116125 SW 72ND AVE
 PORTLAND, OR 97224
 UNITED STATES

 Budget Period: 03/20/2002 - 08/19/2002
 Project Period: 03/20/2002 - 08/19/2002

 Dear Business official:

 The National Institutes of Health hereby awards a grant in the amount of
 $191,083(see "Award Calculation" in Section 1) to MICROHELIX, INC. in support
 of the above referenced project. This award is pursuant to the authority of 42
 USC 241 42 CFR PART 52 15 USC 638 and is subject to terms and conditions
 referenced below.

 Acceptance of this award including the Terms and Conditions is acknowledged by
 the grantee when funds are drawn down or otherwise obtained from the grant
 payment system.

 Award recipients are responsible for reporting inventions derived or reduced to
 practice in the performance of work under this grant. Rights to inventions vest
 with the grantee organization provided certain requirements are met and there
 is acknowledgement of NIH support. In addition, recipients must ensure that
 patent and license activities are consistent with their responsibility to make
 unique research resources developed under this award available to the
 scientific community, in accordance with NIH policy. For additional
 information, please visit http://www.iedison.gov.

 If you have any questions about this award, please contact the individual(s)
 referenced in the information below.

 Sincerely yours,

 Kathy Hancock
 Grants Management Officer
 NATIONAL INSTITUTE OF MENTAL HEALTH

 See additional information below
<PAGE>
 SECTION I - AWARD DATA 1 R43 MH65011-01

 AWARD CALCULATION (U.S. Dollars):

<TABLE>
<S>                                                                   <C>
 Salaries and Wages                                                   $ 51,100
 Fringe Benefits                                                      $ 16,352
 Personnel Costs                                                      $ 67,452
 Consultant Services                                                  $ 17,100
 Equipment                                                            $ 22,650
 Supplies                                                             $ 10,785
 Travel Costs                                                         $  4,800
 Other Costs                                                          $ 11,700
 Federal Direct Costs                                                 $134,487
 Federal F&A Costs                                                    $ 44,095
 APPROVED BUDGET                                                      $178,582
 Fee                                                                  $ 12,501
 TOTAL FEDERAL AWARD AMOUNT                                           $191,083
</TABLE>

 FISCAL INFORMATION:
 CFDA Number:     93.242
 EIN:             1911758621A1
 Document Number: R3MH65011A

  IC/   CAN       FY2002

  MH / 8429315    191,083

 NIH ADMINISTRATIVE DATA:
  PCC: TT-B  OC: 41.4A /Processed: HANCOCKK 020314 0325

 SECTION II  PAYMENT/HOTLINE INFORMATION - 1 R43 MH65011-01

 For Payment and HHS Office of Inspector General Hotline Information, see the
 NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm

 SECTION III - TERMS AND CONDITIONS - 1 R43 MH65011-01

 This award is based on the application submitted to, and as approved by, the
 NIH on the above-titled project and is subject to the terms and conditions
 incorporated either directly or by reference in the following:

 a. The grant program legislation and program regulation cited in this Notice of
 Grant Award.

 b. The restrictions on the expenditure of federal funds in appropriations acts,
 to the extent those restrictions are pertinent to the award.

 c. 45 CFR Part 74 or 45 CFR Part 92 as applicable.

 d. The NIH Grants Policy Statement, including addenda in effect as of the
 beginning date of the budget period.

 e. This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.

 (see NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
 for certain references cited above.)

 Carry over of an unobligated balance into the next budget period requires
 Grants Management Officer prior approval.

 Treatment of Program Income:
 Additional Costs

 SECTION IV- ADDITIONAL TERMS AND CONDITIONS - 1 R43 MH65011-01
<PAGE>
 Allowable costs conducted by for-profit organizations will be determined by
 applying the cost principles of Contracts with Commercial Organizations set
 forth in 48 CFR, Subpart 31.2. Administrative regulations are found in 45 CFR,
 Part 74.

 Prior approval, where required, must be obtained in writing from the Grants
 Management contact shown on this Notice of Grant Award.

 Intellectual property rights: Normally, the awardee organization retains the
 principal worldwide patent rights to any invention developed with United States
 Government support. UNDER TITLE 37 Code of Federal Regulations Part 401, the
 Government receives a royalty-free license for its use, reserves the right to
 require the patent holder to license others in certain circumstances, and
 requires that anyone exclusively licensed to sell the invention in the United
 States must normally manufacture it substantially in the United States.

 Rights and obligations related to inventions created or reduced to practice as
 a result of this award are detailed in 35 U.S.C. 205 and 37 CFR Part 401. These
 inventions must be reported to the Extramural Invention Reporting and
 Technology Resources Branch, OPERA, NIH, 6701 Rockledge Drive, MSC 7750,
 Bethesda, MD 20892-7750, (301) 435-1986. For additional information, access the
 NIH link on the Interagency Edison web site (www.iedison.gov) which includes an
 electronic invention reporting system, reference information and the text to 37
 CFR 401.

 To the extent authorized by 35 U.S.C., Section 205, the Government will not
 make public any information disclosing an NIH-supported invention for a 4-year
 period to allow the awardee organization a reasonable time to file a patent
 application, nor will the Government release any information that is part of
 that patent application.

 PAYMENT INFORMATION: The awardee organization will receive information and
 forms from the Payment Management System of the Department of Health and Human
 Services regarding requests for cash, manners of payment, and associated
 reporting requirements. Payment may be made at any time. Requests for advance
 funding must be timed to coincide with the organization's immediate cash needs,
 thus keeping to a minimum the amount of Federal cash held in recipient bank
 accounts. The telephone number for the Payment Management System Office (301)
 443-1660.

 The fixed fee provided as part of this Notice of Grant Award is in addition to
 direct and facilities and administrative costs. The fee is to be drawn down
 from the DHHS Payment Management System in increments proportionate to the draw
 down of costs.

 This award represents the final year of the competitive segment for this grant.
 Therefore, as stated in the NIH Grants Policy Statement, March 2001, pages
 148-9, a Financial Status Report (OMB 269) must be submitted within 90 days of
 the expiration date. In addition, unless an application for competitive renewal
 is funded, grant closeout documents consisting of a Final Invention Statement
 (HHS 568), (not applicable to training, construction, conference or cancer
 education grants) and a final progress report must also be submitted within 90
 days of the expiration date.

 The Final Progress Report may be typed on plain white paper and should include,
 at a minimum, a summary statement of progress toward the achievement of the
 originally stated aims, a list of results (positive or negative) considered
 significant, and a list of publications resulting from the project as well as
 plans for further publications. An original and one copy are required.

 The Final Progress Report and Final Invention Statement should be sent to the
 awarding component.

 The Financial Status Report should be submitted electronically to the Office of
 Financial Management (OFM), NIH. Information about the electronic transmittal
 of FSRs can be obtained from OFM by calling (301) 402-5297. Other Financial
 Status Reports may be mailed to:

 OFFICE OF FINANCIAL MANAGEMENT
 GRANTS ACCOUNTING BRANCH
 NATIONAL INSTI TUT ES OF HEALTH
 31 CENTER DRIVE ROOM B1B05A MSC 2050
 BETHESDA MD 20892-2050

 Grantees may submit prior approval requests for NIH grants and cooperative
 agreements via
<PAGE>
 e-mail as detailed in the NIH Guide announcement OD-00-009. The announcement
 can be found at
 http://grants.nih.gov/grants/guide/notice-files/NOT-OD-00-009.html. Prior
 approval requests for this grant should be directed to the Grants Management
 Specialist listed below.

 Direct inquiries regarding scientific programmatic issues to the program
 official listed below.

 Direct inquiries regarding fiscal and administrative matters to the grants
 management specialist listed below.

 Margaret Grabb, Program Official
 Phone: 301-443-3563     Email: mgrabb@mail.nih.gov  Fax: 301-443-1731

 Cheryl A Nathaniel, Grants Specialist
 Phone: (301) 402-7191   Email: cni5b@nih.gov  Fax: (301) 402-7827

 SPREADSHEET GRANT NUMBER: 1
 R43 MH65011-01 P.I.:
 HADJICOSTIS, ANDY N
 INSTITUTION: MICROHELIX, INC.

<TABLE>
<CAPTION>
                                  YEAR  01

<S>                               <C>
 Salaries and Wages                51,100
 Fringe Benefits                   16,352
 Personnel Costs                   67,452
 Consultant Services               17,100
 Equipment                         22,650
 Supplies                          10,785
 Travel Costs                       4,800
 Other Costs                       11,700
 TOTAL FEDERAL DC                 134,487
 TOTAL FEDERAL F&A                 44,095
 TOTAL COST                       178,582
 FEE                               12,501
</TABLE>

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