Exhibit 10.4


 


THIS NOTE HAS NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE 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

  	
   

  



 


SERIES
2005 SECURED NOTE DUE AUGUST 11, 2005


 


THIS Note is
one of a duly authorized issue of Notes of POWER 3 MEDICAL PRODUCTS, INC., a
New York corporation, having a principal place of business at 3400 Research
Forest 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’s
registration statement on Form SB-2 (file no.                )  (“Maturity Date”), in an
aggregate face amount of up Three Hundred Ninety Six Thousand Five Hundred and
00/100 Dollars ($396,500.00).


 


FOR VALUE
RECEIVED, the Company promises to pay to the Holder or registered assigns, the
principal sum of Three Hundred Ninety Thousand and 00/100 Dollars
($390,000.00), on the Maturity Date.  Upon
default, all amounts due hereunder shall bear interest at the rate of 18% per
annum from the day such interest is due hereunder through and including the
date of payment.  The principal of, and
interest on, this Note are payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts, at the address of the Holder last appearing on the
Note Register.


 


This Note is
subject to the following additional provisions:


 


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


 





















 


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 the
Company the name, address, and tax identification number of the proposed
transferee, and will further provide the Company with an opinion of the
Holder’s counsel that such transfer can be accomplished in accordance with
federal and applicable state securities laws (unless such transaction is
permitted 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 opinion
of such counsel the proposed transfer may be effected without registration or
qualification (under any federal or state securities laws), the Company, as
promptly as practicable, shall notify the Holder of such opinion, whereupon the
Holder shall be entitled to transfer this Note or to dispose of Underlying
Shares received upon the previous conversion of this Note, all in accordance
with the terms of the notice delivered by the Holder to the Company; provided
that an appropriate legend may be endorsed on this Note respecting restrictions
upon transfer thereof necessary or advisable in the opinion of counsel and
satisfactory to the Company to prevent further transfers which would be in
violation of Section 5 of the Securities Act and applicable state securities
laws; and provided further that the prospective transferee or purchaser shall
execute such documents and make such representations, warranties, and
agreements as may be required solely to comply with the exemptions relied upon
by the Company for the transfer or disposition of the Note.


 


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


 


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


 


Section 3.               Events of Default.


 


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


 


(i)            any
default in the payment of the principal of, interest on, or other obligations
in respect of, this Note, free of any claim of subordination, as and when the
same shall become due and payable, (whether on the Maturity Date or by
acceleration or otherwise);


 


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


 





















 


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


 


(iii)          the
Company shall commence a voluntary case under the United States Bankruptcy Code
or insolvency laws as now or hereafter in effect or any successor thereto (the
“Bankruptcy Code”); or an involuntary case is commenced against the
Company under the Bankruptcy Code and the petition is not controverted within
30 days, or is not dismissed within 60 days, after commencement of such
involuntary case; or a “custodian” (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or any substantial part of the property
of the Company or the Company commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or there is
commenced against the Company any such proceeding which remains undismissed for
a period of 60 days; or the Company is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or proceeding is
entered; or the Company suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues undischarged or
unstayed for a period of 60 days; or the Company makes a general assignment for
the benefit of creditors; or the Company shall fail to pay, or shall state that
it is unable to pay its debts generally as they become due;r the Company shall
call a meeting of all of its creditors with a view to arranging a composition
or adjustment of its debts; or the Company shall by any act or failure to act
indicate 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 of
effecting any of the foregoing;


 


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


 


(v)           the
Company shall be a party to any Change of Control Transaction (as defined in
Section 6), shall agree to sell or dispose of all or in excess of 49% of its
assets (based on book value calculation as reflected in the Company’s most
recent financial statements) in one or more transactions (whether or not such
sale would constitute a Change of Control Transaction).


 


Section 4.               Interest Rate Limitation. The parties intend to
conform strictly to the applicable usury laws in effect from time to time
during the term of the Loan. Accordingly, if any transaction contemplated
hereby would be usurious under such laws, then notwithstanding any other
provision hereof: (i) the aggregate of all interest that is contracted for,
charged, or received under this Agreement or under any other Loan Document
shall not exceed the maximum amount of interest allowed by applicable law (the
“Highest Lawful Rate”), and any excess shall be promptly credited to Borrower
by Lender (or, to the extent that such consideration shall have been paid, such
excess shall be promptly refunded to Borrower by Lender); (ii) neither Borrower
nor any other Person now or hereafter liable hereunder shall be obligated to
pay the amount of such interest to the extent that it is in excess of the
Highest Lawful Rate; and (iii) the effective


 





















 


rate of interest shall be reduced to the
Highest 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 the
extent permitted by applicable law, be allocated throughout the full term of
the Note until payment is made in full so that the actual rate of interest does
not exceed the Highest Lawful Rate in effect at any particular time during the
full term thereof. If at any time the rate of interest under the Note exceeds
the Highest Lawful Rate, the rate of interest to accrue pursuant to this
Agreement shall be limited, notwithstanding anything to the contrary in this
Agreement, to the Highest Lawful Rate, but any subsequent reductions in the
Base Rate shall not reduce the interest to accrue pursuant to this Agreement
below the Highest Lawful Rate until the total amount of interest accrued equals
the amount of interest that would have accrued if a varying rate per annum
equal to the interest rate under the Note had at all times been in effect. If
the total amount of interest paid or accrued pursuant to this Agreement under
the foregoing provisions is less than the total amount of interest that would
have accrued if a varying rate per annum equal to the interest rate under the
Note had been in effect, then Borrower agrees to pay to Lender an amount equal
to the difference between (x) the lesser of (A) the amount of interest that
would 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 per
annum equal to the interest rate under the Note had at all times been in
effect, and (y) the amount of interest accrued in accordance with the other
provisions of this Agreement.


 


Section 5.               Prepayment.


 


(a)                                  The
Company shall have the right to prepay this Note in whole or in part thereon
prior to the Maturity Date.


 


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


 


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


 


“Business Day” means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to 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 a
replacement of more than one-half of the members of the Company’s board of
directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, 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 Company
in 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 such
securities following such transaction. 
The execution by the Company of an agreement to which the Company is a
party or by which it is


 





















 


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


 


Section 7.               Except as expressly provided
herein, no provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, interest
and liquidated damages (if any) on, this Note at the time, place, and rate, and
in 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 exchange
and substitution for and upon cancellation of a mutilated Note, or in lieu of
or in substitution for a lost, stolen or destroyed Note, a new Note for the
principal amount of this Note so mutilated, lost, stolen or destroyed but only
upon receipt of evidence of such loss, theft or destruction of such Note, and
of the ownership hereof, and indemnity, if requested, all reasonably
satisfactory to the Company.


 


Section 9.


Choice of Law and Venue; Submission to
Jurisdiction; Service of Process.


 


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


 


(b)           COMPANY HEREBY SUBMITS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE
TO 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 THAT
SERVICE OF SUCH SUMMONS, COMPLAINT, OR OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO COMPANY.


 


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


 


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


 





















 


Section 10.             Any waiver by the Company or the Holder of a breach of
any provision of this Note shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision
of this Note.  The failure of the Company
or the Holder to insist upon strict adherence to any term of this Note on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Note.  Any waiver must be in
writing.


 


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


 


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


 


Section 13.             Security.  The obligation of the Company for payment of
principal, interest and all other sums hereunder, in the event of a default and
failure of the Company to perform hereunder, is secured by the pledge of
certain securities (the “Pledged Shares”) by Steven B. Rash as Pledgor
under the terms and conditions of a Stock Pledge Agreement, and a Guaranty
executed and delivered by Steven B. Rash as Guarantor.


 


Section 14.             Registration Rights. If, at any time prior to payment in
full of this Note, the Company participates (whether voluntarily or by reason
of an obligation to a third party) in the registration of any shares of the
Company’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 Holder
shall have the right, exercisable within ten (10) business days after receipt
of such notice, to demand inclusion of all or a portion of the Pledged Shares
in such registration statement.  If the
Holder exercises such election, the Pledged Shares so designated shall be
included 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 ).  The
Holder’s rights under this Section 7 shall expire at such time as the Holder
can sell all of the Pledged Shares under Rule 144(k) without volume or other
restrictions or limit. 


 


Section 15.             Waiver
of Jury Trial


 


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


 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


 





















 


IN WITNESS WHEREOF, the Company has caused
this instrument to be duly executed by an officer duly authorized for such
purpose, 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