**Exhibit 10.1**

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ORTHE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSEDOF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT ANDAPPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATIONREQUIREMENTS OF SUCH ACT AND SUCH LAWS. NEITHER THE SECURITIES AND EXCHANGECOMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON ORENDORSED THE MERITS OF THIS NOTE.

 

**PROMISSORYNOTE**

 
| $251,000.00 |   | The  Woodlands, Texas |
|-------------|--------|-----------------------|
|        |   | April 5,  2005   |

 

 

FOR VALUE RECEIVED, POWER 3 MEDICAL PRODUCTS,INC., a New York corporation (the “Maker”), promises to pay to the order ofCordillera Fund L.P., a limited partnership (the “Payee”), pursuant to theterms and conditions contained in this promissory note (this “Note”) theprincipal sum of Two Hundred Fifty-One Thousand Dollars ($251,000.00), togetherwith interest on the unpaid principal balance from the date hereof until paidin full, if applicable, at the rate and on the terms provided herein.

 

1.             Termand Payment.  Principal and interestof this Note shall be payable as follows:

 

(i)            Theentire unpaid principal balance of this Note shall be payable, in cash, withinone Business Day (as hereinafter defined) of the closing of the Maker’sissuance and sale of $1,600,000 aggregate principal amount of debenturespursuant to the Securities Purchase Agreement dated October 28, 2004, asamended, which closing is to occur within five trading days of theeffectiveness of the Maker’s registration statement on Form SB-2 currentlypending with the U.S. Securities and Exchange Commission (the “RegistrationStatement Funding”); provided, however, that if the Registration StatementFunding does not occur on or before August 15, 2005, the entire unpaidprincipal balance of this Note shall be due and payable in full on suchdate.  The payment date of the principalis referred to as the “Payment Date.”

 

(ii)           Interest,computed on the unpaid principal balance of this Note, shall be due and payableat Payee’s option, as follows:

 

(A)          theaccrued and unpaid interest calculated in accordance with Section 2 belowshall be paid, in cash, concurrently upon the Payment Date; or

 

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(B)           theaccrued and unpaid interest payable on this Note shall be considered paid, infull, upon Maker’s issuance and delivery of restricted shares of Maker’s commonstock calculated by the following formula: $251,000 ÷ common stock price X 20%= Number of Shares to be Issued, such issuance and delivery to occur on thedate which is 95 days following the effectiveness of the registration statement**[****, subject to the provisions of the Securities PurchaseAgreement].**

 

If the Payment of interest or principal isdue on a day that is not a Business Day (as hereinafter defined), such paymentshall be made on the first Business Day following such payment date.  For purposes of this Note, “Business Day”means any day other than Saturday, Sunday or any other day on which nationalbanking associations in the State of New York generally are closed forcommercial banking business.

 

2.             InterestRate. During the period ending on the Payment Date (the “Payment Period”),the unpaid principal balance of this Note shall bear simple interest at a perannum rate equal to ten percent (10%) for such period determined in accordancewith this Section 2. Notwithstanding the foregoing, upon an Event ofDefault (as hereinafter defined) with respect to the Payment and until suchEvent of Default shall have been cured, such Payment shall bear interest at arate of twelve percent (12%) per annum. Interest shall be payable as provided in Section 1 above.

 

3.             Eventof Default. It is expressly provided that upon failure in the punctualpayment of theprincipal due hereunder, as the same shall become due andpayable, and the passage of thirty (30) days following when such payment wasdue and payable, during which period the Maker may make such payment(s) as aredue and payable and prevent a default of this Note, an “Event of Default” willhave occurred. Upon an Event of Default and until such Event of Default shallhave been cured, the holder of this Note may, at its option, without furthernotice or demand, (i) declare the outstanding principal balance of thisNote, and accrued but unpaid interest payable on this Note in cash at the rateprovided in Section 2 hereof, at once due and payable, (ii) pursueany and all rights, remedies and recourses available to the holder hereof,including but not limited to any such rights, remedies or recourses at law orin equity, or (iii) pursue any combination of the foregoing; and in theevent default is made in the prompt payment of this Note when due or declareddue, and the same is placed in the hands of an attorney for collection, or suitis brought on the same, or the same is collected through probate, bankruptcy orother judicial proceedings, then the Maker agrees and promises to pay all costsof collection, including reasonable attorney’s fees.

 

4.             Rightof Prepayment.  The Maker shall havethe right to prepay all or any part of the unpaid principal or interest hereonat any time without premium or penalty. Any and all prepayments with respect to this Note shall be applied firstto payment of accrued interest as of the date of such prepayment and thebalance, if any, shall be applied in reduction of the unpaid principal.

 

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5.             NoRight of Setoff.   THE PAYEE ACKNOWLEDGES AND AGREES THAT THEMAKER HAS NO RIGHTS OF SETOFF AGAINST THE PAYMENT AND THEREFORE SHALL NOTWITHHOLD OR REDUCE THE PAYMENT ON THIS NOTE BY ANY AMOUNTS DUE FROM THE PAYEETO THE MAKER.

 

6.             NoUsury Intended; Usury Savings Clause.  In no event shall interestcontracted for, charged or received hereunder, plus any other charges in connectionherewith which constitute interest, exceed the maximum interest permitted byapplicable law. The amounts of such interest or other charges previously paidto the holder of the Note in excess of the amounts permitted by applicable lawshall be applied by the holder of the Note to reduce the principal of theindebtedness evidenced by the Note, or, at the option of the holder of theNote, be refunded. To the extent permitted by applicable law, determination ofthe legal maximum amount of interest shall at all times be made by amortizing,prorating, allocating and spreading in equal parts during the period of thefull stated term of the loan and indebtedness, all interest at any timecontracted for, charged or received from the Maker hereof in connection withthe loan and indebtedness evidenced hereby, so that the actual rate of intereston account of such indebtedness is uniform throughout the term hereof.

 

7.             Transferability.  The Payee may not transfer, sell, assign,pledge, hypothecate, bequeath, gift, create a lien on, place in trust, assignor in any other way encumber or dispose of, directly or indirectly and whetheror not by operation of law or for value*,*this Note orthe obligations represented hereby (collectively, “transfer”) or any beneficialinterest in this Note or any of the obligations represented hereby without theMaker’s prior written consent, which shall not be unreasonably withheldprovided that the transferee of this Note or any portion hereof (i) executesand delivers to the Maker an appropriate document, satisfactory to the Maker,in which such permitted transferee agrees that it shall be bound by the sametransfer restrictions set forth herein with respect to all or any portion ofthis Note received by such permitted transferee and (ii) delivers to theMaker an opinion of counsel or other evidence satisfactory to the Maker to theeffect that the proposed transfer may be made without registration under theSecurities Act of 1933 or the securities laws of any state.

 

8.             Waivers.  The Maker hereby waives presentment, protest,demand for payment, notice of dishonor and all other notices of any kind.  No waiver of any default shall operate as awaiver of any other default or of the same default on any future occasion, andno action to enforce payment hereunder nor any indulgences or otherarrangements granted to the Maker, including any extension of time for paymentdue thereon, shall release, waive or otherwise affect any right of the owner orholder hereof.

 

9.             GoverningLaw.  This Note will be governed bythe laws of the State of New York without giving effect to any choice orconflict of law principles of any jurisdiction.

 

[The rest of this page isintentionally left blank.]

 

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                IN WITNESS WHEREOF, theMaker has caused this Note to be executed as of the day and year first abovewritten.

 

 
|   | **POWER 3 MEDICAL PRODUCTS, INC.** |
|--------|------------------------------------|
|   |                               |   |
|   |                               |   |
|   | By:                                |   | /s/ Steven B. Rash |
|   | Name:                              | Steven B. Rash |
|   | Title:                             | Chairman/CEO |
|   |                               |   |
|   |                               |   |
|   | **CORDILLERA FUND L.P.**           |
|   |                               |   |
|   |                               |   |
|   | By:                                |   | /s/ Stephen J. Carter |
|   | Name:                              | Stephen J. Carter |
|   | Title:                             | Co-CEO of Andrew Carter Capital |
|   |                               | The GP of ACCF Gen Par, L.P. |
|   |                               | The GP of the Cordillera Fund L.P. |
|        |                                    |  |  |  |

 

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