SERIES 2006 SECURED NOTE DUE AUGUST 12, 2006
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.
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No.
B1
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U.S.
$266,000.00
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Original
Issue Date: May 31, 2006
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Holder:
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▇▇▇▇
▇▇▇▇
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Address:
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▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
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Suite
301
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Chicago,
IL 60601
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SERIES
2006 SECURED NOTE DUE AUGUST 12, 2006
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 ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the “Company”),
designated as its Note (the “Note”),
due
upon the earlier of (i) August 12, 2006; 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 Two Hundred Sixty
Six Thousand and 00/100 Dollars ($266,000.00).
FOR
VALUE
RECEIVED, the Company promises to pay to the Holder or registered assigns,
the
principal sum of Two Hundred Sixty Six Thousand and 00/100 Dollars
($266,000.00), 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. If any payment is
not
received by the Holder within fifteen (15) days
following its due date, without limiting any right or remedy under this Note,
the Holder may charge a late fee equal to one and one-half (1.5%) percent of
the
total amount overdue. 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; 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 $2,000,000.00, 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); or
(vi) The
Company shall have its Common Stock suspended or delisted from trading for
in
excess of three (3) Trading Days:
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 ▇▇▇▇▇▇); (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) 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. Legal
Expenses.
In
consideration the agreements herein and in order to induce the Holder to make
and maintain the Loan pursuant to the Note, the Company hereby agrees to pay
the
reasonable fees and expenses of one counsel for the Holder.
Section
10. 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
11. 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
12.
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
13. 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
14. 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
▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇▇ as Pledgors under the terms and conditions
of a
Stock Pledge Agreement, and a Guaranty executed and delivered by such
parties.
Section
15.
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
16.
Waiver
of Jury Trial.
Company
hereby waives 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 it 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.
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POWER
3 MEDICAL PRODUCTS, INC.
By:
/s/:
▇▇▇▇▇▇ ▇.
▇▇▇▇
▇▇▇▇▇▇
▇. ▇▇▇▇, Chief Executive Officer
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Attest:
By:
/s/:
▇▇▇▇
▇▇▇▇▇▇