Exhibit 10.1


 


THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS. NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR
ENDORSED THE MERITS OF THIS NOTE.


 


PROMISSORY
NOTE


 


	
  $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 of
Cordillera Fund L.P., a limited partnership (the “Payee”), pursuant to the
terms and conditions contained in this promissory note (this “Note”) the
principal sum of Two Hundred Fifty-One Thousand Dollars ($251,000.00), together
with interest on the unpaid principal balance from the date hereof until paid
in full, if applicable, at the rate and on the terms provided herein.


 


1.             Term
and Payment.  Principal and interest
of this Note shall be payable as follows:


 


(i)            The
entire unpaid principal balance of this Note shall be payable, in cash, within
one Business Day (as hereinafter defined) of the closing of the Maker’s
issuance and sale of $1,600,000 aggregate principal amount of debentures
pursuant to the Securities Purchase Agreement dated October 28, 2004, as
amended, which closing is to occur within five trading days of the
effectiveness of the Maker’s registration statement on Form SB-2 currently
pending with the U.S. Securities and Exchange Commission (the “Registration
Statement Funding”); provided, however, that if the Registration Statement
Funding does not occur on or before August 15, 2005, the entire unpaid
principal balance of this Note shall be due and payable in full on such
date.  The payment date of the principal
is referred to as the “Payment Date.”


 


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


 


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


 





















 


(B)           the
accrued and unpaid interest payable on this Note shall be considered paid, in
full, upon Maker’s issuance and delivery of restricted shares of Maker’s common
stock 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 the
date which is 95 days following the effectiveness of the registration statement[, subject to the provisions of the Securities Purchase
Agreement].


 


If the Payment of interest or principal is
due on a day that is not a Business Day (as hereinafter defined), such payment
shall 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 national
banking associations in the State of New York generally are closed for
commercial banking business.


 


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


 


3.             Event
of Default. It is expressly provided that upon failure in the punctual
payment of theprincipal due hereunder, as the same shall become due and
payable, and the passage of thirty (30) days following when such payment was
due and payable, during which period the Maker may make such payment(s) as are
due and payable and prevent a default of this Note, an “Event of Default” will
have occurred. Upon an Event of Default and until such Event of Default shall
have been cured, the holder of this Note may, at its option, without further
notice or demand, (i) declare the outstanding principal balance of this
Note, and accrued but unpaid interest payable on this Note in cash at the rate
provided in Section 2 hereof, at once due and payable, (ii) pursue
any and all rights, remedies and recourses available to the holder hereof,
including but not limited to any such rights, remedies or recourses at law or
in equity, or (iii) pursue any combination of the foregoing; and in the
event default is made in the prompt payment of this Note when due or declared
due, and the same is placed in the hands of an attorney for collection, or suit
is brought on the same, or the same is collected through probate, bankruptcy or
other judicial proceedings, then the Maker agrees and promises to pay all costs
of collection, including reasonable attorney’s fees.


 


4.             Right
of Prepayment.  The Maker shall have
the right to prepay all or any part of the unpaid principal or interest hereon
at any time without premium or penalty. 
Any and all prepayments with respect to this Note shall be applied first
to payment of accrued interest as of the date of such prepayment and the
balance, if any, shall be applied in reduction of the unpaid principal.


 


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5.             No
Right of Setoff.   THE PAYEE ACKNOWLEDGES AND AGREES THAT THE
MAKER HAS NO RIGHTS OF SETOFF AGAINST THE PAYMENT AND THEREFORE SHALL NOT
WITHHOLD OR REDUCE THE PAYMENT ON THIS NOTE BY ANY AMOUNTS DUE FROM THE PAYEE
TO THE MAKER.


 


6.             No
Usury Intended; Usury Savings Clause. 
 In no event shall interest
contracted for, charged or received hereunder, plus any other charges in connection
herewith which constitute interest, exceed the maximum interest permitted by
applicable law. The amounts of such interest or other charges previously paid
to the holder of the Note in excess of the amounts permitted by applicable law
shall be applied by the holder of the Note to reduce the principal of the
indebtedness evidenced by the Note, or, at the option of the holder of the
Note, be refunded. To the extent permitted by applicable law, determination of
the legal maximum amount of interest shall at all times be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
full stated term of the loan and indebtedness, all interest at any time
contracted for, charged or received from the Maker hereof in connection with
the loan and indebtedness evidenced hereby, so that the actual rate of interest
on 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, assign
or in any other way encumber or dispose of, directly or indirectly and whether
or not by operation of law or for value, this Note or
the obligations represented hereby (collectively, “transfer”) or any beneficial
interest in this Note or any of the obligations represented hereby without the
Maker’s prior written consent, which shall not be unreasonably withheld
provided that the transferee of this Note or any portion hereof (i) executes
and delivers to the Maker an appropriate document, satisfactory to the Maker,
in which such permitted transferee agrees that it shall be bound by the same
transfer restrictions set forth herein with respect to all or any portion of
this Note received by such permitted transferee and (ii) delivers to the
Maker an opinion of counsel or other evidence satisfactory to the Maker to the
effect that the proposed transfer may be made without registration under the
Securities 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 a
waiver of any other default or of the same default on any future occasion, and
no action to enforce payment hereunder nor any indulgences or other
arrangements granted to the Maker, including any extension of time for payment
due thereon, shall release, waive or otherwise affect any right of the owner or
holder hereof.


 


9.             Governing
Law.  This Note will be governed by
the laws of the State of New York without giving effect to any choice or
conflict of law principles of any jurisdiction.


 


[The rest of this page is
intentionally left blank.]


 


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                IN WITNESS WHEREOF, the
Maker has caused this Note to be executed as of the day and year first above
written.


 


 


	
   

  	
  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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