**Exhibit 10.4**

*** ***

***THIS NOTE HAS NOT BEEN REGISTERED WITH THESECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE INRELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLDEXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACTOR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITHAPPLICABLE STATE SECURITIES LAWS.***

 
| No. A1   | U.S. $396,500.00  | Original Issue Date: June 13, 2005 |
|----------|-------------------|------------------------------------|
| Holder:  | John Fife         |                               |
|     |              |                               |
|     |              |                               |
| Address: | 303 Wacker Drive  |                               |
|     | Suite 301         |                               |
|     | Chicago, IL 60601 |                               |

 

**SERIES2005 SECURED NOTE DUE AUGUST 11, 2005**

 

THIS Note isone of a duly authorized issue of Notes of POWER 3 MEDICAL PRODUCTS, INC., aNew York corporation, having a principal place of business at 3400 ResearchForest Drive, The Woodlands, Texas 77381 (the “Company”), designated as its Note (the “Note”),  due upon the earlier of (i) August 11, 2005;or (ii) on the fifth day following the effective date of the Company’sregistration statement on Form SB-2 (file no.                )  (“Maturity Date”), in anaggregate face amount of up Three Hundred Ninety Six Thousand Five Hundred and00/100 Dollars ($396,500.00).

 

FOR VALUERECEIVED, the Company promises to pay to the Holder or registered assigns, theprincipal sum of Three Hundred Ninety Thousand and 00/100 Dollars($390,000.00), on the Maturity Date.  Upondefault, all amounts due hereunder shall bear interest at the rate of 18% perannum from the day such interest is due hereunder through and including thedate of payment.  The principal of, andinterest on, this Note are payable in such coin or currency of the UnitedStates of America as at the time of payment is legal tender for payment ofpublic and private debts, at the address of the Holder last appearing on theNote Register.

 

This Note issubject to the following additional provisions:

 

Section 1.               The Notes are exchangeable for an equal aggregateprincipal amount of Notes of different authorized denominations, as requestedby the Holder surrendering the same but shall not be issuable in denominationsof less than integral multiples of Twenty Thousand Dollars ($20,000) unlesssuch amount represents the full principal balance of Notes outstanding to suchHolder.  No service charge will be madefor such registration of transfer or exchange.

 

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Section 2.

 

(a)           The Holder, by acceptance hereof,agrees to give written notice to the Company before transferring this Note;such notice will describe briefly the proposed transfer and will give theCompany the name, address, and tax identification number of the proposedtransferee, and will further provide the Company with an opinion of theHolder’s counsel that such transfer can be accomplished in accordance withfederal and applicable state securities laws (unless such transaction ispermitted by the plan of distribution in an effective Registration Statement).  Promptly upon receiving such written notice,the Company shall present copies thereof to the Company’s counsel.

 

(i)            If in the opinionof such counsel the proposed transfer may be effected without registration orqualification (under any federal or state securities laws), the Company, aspromptly as practicable, shall notify the Holder of such opinion, whereupon theHolder shall be entitled to transfer this Note or to dispose of UnderlyingShares received upon the previous conversion of this Note, all in accordancewith the terms of the notice delivered by the Holder to the Company; providedthat an appropriate legend may be endorsed on this Note respecting restrictionsupon transfer thereof necessary or advisable in the opinion of counsel andsatisfactory to the Company to prevent further transfers which would be inviolation of Section 5 of the Securities Act and applicable state securitieslaws; and provided further that the prospective transferee or purchaser shallexecute such documents and make such representations, warranties, andagreements as may be required solely to comply with the exemptions relied uponby the Company for the transfer or disposition of the Note.

 

(ii)           If in the opinionof the counsel referred to in this Section 2, the proposed transfer ordisposition of this Note described in the written notice given pursuant to thisSection 2 may not be effected without registration or qualification of thisNote, the Company shall promptly give written notice thereof to the Holder, andthe Holder will limit its activities in respect to such as, in the opinion ofsuch counsel, are permitted by law.

 

(b)           Prior to transfer ofthis Note in compliance with this Section 2, the Company and any agent of theCompany may treat the person in whose name this Note is duly registered on theNote Register as the owner hereof for the purpose of receiving payment asherein provided and for all other purposes, whether or not this Note isoverdue, and neither the Company nor any such agent shall be affected by noticeto the contrary.

 

Section 3.               Events of Default.

 

“Event of Default” wherever used herein, means any one of thefollowing events (whatever the reason and whether it shall be voluntary orinvoluntary or effected by operation of law or pursuant to any judgment, decreeor order of any court, or any order, rule or regulation of any administrativeor governmental body):

 

(i)            anydefault in the payment of the principal of, interest on, or other obligationsin respect of, this Note, free of any claim of subordination, as and when thesame shall become due and payable, (whether on the Maturity Date or byacceleration or otherwise);

 

(ii)           the Company or any Pledgor shall fail to observe or performany other covenant, agreement or warranty contained in, or otherwise commit anybreach of, this Note or the Stock

 

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Pledge Agreement, including but not limited to the obligation of thePledgor to issue additional Collateral, and such failure or breach shall nothave been remedied within 10 days after the date on which notice of suchfailure or breach shall have been given;

 

(iii)          theCompany shall commence a voluntary case under the United States Bankruptcy Codeor insolvency laws as now or hereafter in effect or any successor thereto (the“Bankruptcy Code”); or an involuntary case is commenced against theCompany under the Bankruptcy Code and the petition is not controverted within30 days, or is not dismissed within 60 days, after commencement of suchinvoluntary case; or a “custodian” (as defined in the Bankruptcy Code) isappointed for, or takes charge of, all or any substantial part of the propertyof the Company or the Company commences any other proceeding under anyreorganization, arrangement, adjustment of debt, relief of debtors,dissolution, insolvency or liquidation or similar law of any jurisdictionwhether now or hereafter in effect relating to the Company or there iscommenced against the Company any such proceeding which remains undismissed fora period of 60 days; or the Company is adjudicated insolvent or bankrupt; orany order of relief or other order approving any such case or proceeding isentered; or the Company suffers any appointment of any custodian or the likefor it or any substantial part of its property which continues undischarged orunstayed for a period of 60 days; or the Company makes a general assignment forthe benefit of creditors; or the Company shall fail to pay, or shall state thatit is unable to pay its debts generally as they become due;r the Company shallcall a meeting of all of its creditors with a view to arranging a compositionor adjustment of its debts; or the Company shall by any act or failure to actindicate its consent to, approval of or acquiescence in any of the foregoing;or any corporate or other action is taken by the Company for the purpose ofeffecting any of the foregoing;

 

(iv)          theCompany shall default in any of its obligations under any mortgage, creditagreement or other facility, indenture, agreement or other instrument underwhich there may be issued, or by which there may be secured or evidenced anyindebtedness of the Company in an amount exceeding twenty thousand dollars($20,000), whether such indebtedness now exists or shall hereafter be createdand such default shall result in such indebtedness becoming or being declareddue and payable prior to the date on which it would otherwise become due andpayable;

 

(v)           theCompany shall be a party to any Change of Control Transaction (as defined inSection 6), shall agree to sell or dispose of all or in excess of 49% of itsassets (based on book value calculation as reflected in the Company’s mostrecent financial statements) in one or more transactions (whether or not suchsale would constitute a Change of Control Transaction).

 

Section 4.               Interest Rate Limitation. The parties intend toconform strictly to the applicable usury laws in effect from time to timeduring the term of the Loan. Accordingly, if any transaction contemplatedhereby would be usurious under such laws, then notwithstanding any otherprovision hereof: (i) the aggregate of all interest that is contracted for,charged, or received under this Agreement or under any other Loan Documentshall not exceed the maximum amount of interest allowed by applicable law (the“Highest Lawful Rate”), and any excess shall be promptly credited to Borrowerby Lender (or, to the extent that such consideration shall have been paid, suchexcess shall be promptly refunded to Borrower by Lender); (ii) neither Borrowernor any other Person now or hereafter liable hereunder shall be obligated topay the amount of such interest to the extent that it is in excess of theHighest Lawful Rate; and (iii) the effective

 

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rate of interest shall be reduced to theHighest Lawful Rate. All sums paid, or agreed to be paid, to Lender for the use,forbearance, and detention of the debt of Borrower to Lender shall, to theextent permitted by applicable law, be allocated throughout the full term ofthe Note until payment is made in full so that the actual rate of interest doesnot exceed the Highest Lawful Rate in effect at any particular time during thefull term thereof. If at any time the rate of interest under the Note exceedsthe Highest Lawful Rate, the rate of interest to accrue pursuant to thisAgreement shall be limited, notwithstanding anything to the contrary in thisAgreement, to the Highest Lawful Rate, but any subsequent reductions in theBase Rate shall not reduce the interest to accrue pursuant to this Agreementbelow the Highest Lawful Rate until the total amount of interest accrued equalsthe amount of interest that would have accrued if a varying rate per annumequal to the interest rate under the Note had at all times been in effect. Ifthe total amount of interest paid or accrued pursuant to this Agreement underthe foregoing provisions is less than the total amount of interest that wouldhave accrued if a varying rate per annum equal to the interest rate under theNote had been in effect, then Borrower agrees to pay to Lender an amount equalto the difference between (x) the lesser of (A) the amount of interest thatwould have accrued if the Highest Lawful Rate had at all times been in effect,or (B) the amount of interest that would have accrued if a varying rate perannum equal to the interest rate under the Note had at all times been ineffect, and (y) the amount of interest accrued in accordance with the otherprovisions of this Agreement.

 

Section 5.               Prepayment.

 

(a)                                  TheCompany shall have the right to prepay this Note in whole or in part thereonprior to the Maturity Date.

 

(b)           (i)            TheCompany shall give at least five (5) business days, but not more than ten (10) business days, written noticeof any intention to prepay this Note prior to the Maturity Date to the Holderwhich notice shall specify the “Prepayment Date”.

 

Section 6.               Definitions.  For the purposes hereof, the following termsshall have the following meanings:

 

“Business Day” means any day except Saturday, Sunday and any daywhich shall be a legal holiday or a day on which banking institutions in theState of New York are authorized or required by law or other government actionto close.

 

“Change of Control Transaction” means the occurrence of any of(i) an acquisition after the date hereof by an individual or legal entity or“group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)of in excess of 49% of the voting securities of the Company coupled with areplacement of more than one-half of the members of the Company’s board ofdirectors which is not approved by those individuals who are members of theboard of directors on the date hereof in one or a series of relatedtransactions, or (ii) the merger of the Company with or into another entity,consolidation or sale of all or substantially all of the assets of the Companyin one or a series of related transactions, unless following such transaction,the holders of the Company’s securities continue to hold at least 40% of suchsecurities following such transaction. The execution by the Company of an agreement to which the Company is aparty or by which it is

 

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bound providingfor any of the events set forth above in (i) or (ii) does not constitute theoccurrence of the event until after the event in fact occurs.

 

Section 7.               Except as expressly providedherein, no provision of this Note shall alter or impair the obligation of theCompany, which is absolute and unconditional, to pay the principal of, interestand liquidated damages (if any) on, this Note at the time, place, and rate, andin the coin or currency, herein prescribed. This Note is a direct obligation of the Company.

 

Section 8.               If this Note shall be mutilated,lost, stolen or destroyed, the Company shall execute and deliver, in exchangeand substitution for and upon cancellation of a mutilated Note, or in lieu ofor in substitution for a lost, stolen or destroyed Note, a new Note for theprincipal amount of this Note so mutilated, lost, stolen or destroyed but onlyupon receipt of evidence of such loss, theft or destruction of such Note, andof the ownership hereof, and indemnity, if requested, all reasonablysatisfactory to the Company.

 

Section 9.

Choice of Law and Venue; Submission toJurisdiction; Service of Process.

 

(a)           THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION,INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BEDETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THESTATE OF NEW YORK (WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF).THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITHTHIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTSLOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR, AT THE SOLE OPTION OFHOLDER, IN ANY OTHER COURT IN WHICH HOLDER SHALL INITIATE LEGAL OR EQUITABLEPROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER INCONTROVERSY.

 

(b)           COMPANY HEREBY SUBMITS FOR ITSELF AND IN RESPECT OF ITSPROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION OF THE AFORESAIDCOURTS AND WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT ITMAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUETO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.

 

(c)           COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,COMPLAINT, OR OTHER PROCESS ISSUED IN ANY ACTION OR PROCEEDING AND AGREES THATSERVICE OF SUCH SUMMONS, COMPLAINT, OR OTHER PROCESS MAY BE MADE BY REGISTEREDOR CERTIFIED MAIL ADDRESSED TO COMPANY.

 

(d)           NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TOAFFECT THE RIGHT OF HOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTEDBY LAW, OR TO PRECLUDE THE ENFORCEMENT BY HOLDER OF ANY JUDGMENT OR ORDEROBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TOENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

 

 (e)                             To theextent determined by such court, the Company shall reimburse the Holder for anyreasonable legal fees and disbursements incurred by the Holder in enforcementof or protection of any of its rights under any of this Note.

 

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Section 10.             Any waiver by the Company or the Holder of a breach ofany provision of this Note shall not operate as or be construed to be a waiverof any other breach of such provision or of any breach of any other provisionof this Note.  The failure of the Companyor the Holder to insist upon strict adherence to any term of this Note on oneor more occasions shall not be considered a waiver or deprive that party of theright thereafter to insist upon strict adherence to that term or any other termof this Note.  Any waiver must be inwriting.

 

Section 11.             If any provision of this Note is invalid, illegal orunenforceable, the balance of this Note shall remain in effect, and if anyprovision is inapplicable to any person or circumstance, it shall neverthelessremain applicable to all other persons and circumstances.

 

Section 12.             Whenever any payment or other obligation hereunder shallbe due on a day other than a Business Day, such payment shall be made on thenext succeeding Business Day (or, if such next succeeding Business Day falls inthe next calendar month, the preceding Business Day in the appropriate calendarmonth).

 

Section 13.             Security.  The obligation of the Company for payment ofprincipal, interest and all other sums hereunder, in the event of a default andfailure of the Company to perform hereunder, is secured by the pledge ofcertain securities (the “Pledged Shares”) by Steven B. Rash as Pledgorunder the terms and conditions of a Stock Pledge Agreement, and a Guarantyexecuted and delivered by Steven B. Rash as Guarantor.

 

Section 14.             Registration Rights. If, at any time prior to payment infull of this Note, the Company participates (whether voluntarily or by reasonof an obligation to a third party) in the registration of any shares of theCompany’s stock (other than a registration on Form S-4, S-8 or successor form),the Company shall give written notice thereof to the Holder and the Holdershall have the right, exercisable within ten (10) business days after receiptof such notice, to demand inclusion of all or a portion of the Pledged Sharesin such registration statement.  If theHolder exercises such election, the Pledged Shares so designated shall beincluded in the registration statement at no cost or expense to the Holder(other than any costs or commissions which would be borne by the Holder ).  TheHolder’s rights under this Section 7 shall expire at such time as the Holdercan sell all of the Pledged Shares under Rule 144(k) without volume or otherrestrictions or limit. 

 

Section 15.             Waiverof Jury Trial

 

COMPANY HEREBY WAIVE ITS RESPECTIVE RIGHTSTO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OFTHIS NOTE. COMPANY REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER AND KNOWINGLYAND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGALCOUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS AWRITTEN CONSENT TO A TRIAL BY THE COURT.

 

 

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**IN WITNESS WHEREOF**, the Company has causedthis instrument to be duly executed by an officer duly authorized for suchpurpose, as of the date first above indicated.

 
|   |   | POWER 3 MEDICAL PRODUCTS, INC.           |
|--------|--------|------------------------------------------|
|   |   |                                     |
|   |   |                                     |
|   |   | By:                                      | /s/: Steven B. Rash |   |
|   |   | Steven B. Rash, Chief  Executive Officer |

 

Attest:

 
| By:                                              | /s/ Linh  Rivera |   |
|--------------------------------------------------|------------------|--------|
| Linh Rivera,  Executive Administrative Assistant |

 

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