**Exhibit10.22**

 

 

January 5, 2006

 

**CONFIDENTIAL**

 

Power 3 MedicalProducts, Inc.3400 Research Forest DriveSuite B2-3Woodlands, TX 773812

 

Attention:      Steven Rash

Chairman, President and CEO

 

Dear Steven:

 

This letter confirms the understanding and agreementbetween Glocap Funding LLC (“Glocap”), a New York limited liability company,and Power 3 Medical Products, Inc. (together with its subsidiaries andaffiliates, the “Company”), as follows:

 

1.     TheCompany hereby engages Glocap Funding LLC (“Glocap”) to act as its exclusivefinancial advisor in connection with a possible sale or other transfer,directly or indirectly and whether in one or a series of transactions, of allor a significant portion of the assets or securities of the Company or anyextraordinary corporate transaction involving a change in control of, or aninvestment by a third party in, the Company, regardless of the form orstructure of such transaction (the “Transaction”).

 

2.     Glocapwill provide the Company with financial advice and assistance in connectionwith the Transaction, which may involve, to the extent requested by the Companyand appropriate for the Transaction, advice and assistance in connection withdefining strategic and financial objectives and alternatives, reviewing historicand projected financial information, assisting in preparation of valuationanalyses, identifying potential parties to a Transaction, assisting in thepreparation of a confidential memorandum describing the Company and relatedmarketing materials for distribution to such parties, and assisting innegotiations of the financial terms and structure of the Transaction. If theCompany should request Glocap to provide additional services not otherwisecontemplated by this letter agreement, such as a fairness opinion, the Companyand Glocap will enter into an additional letter agreement which will set forththe nature and scope of the services, appropriate compensation and othercustomary matters, as mutually agreed upon by the Company and Glocap. In orderto coordinate the efforts in connection with a Transaction, the Company andGlocap promptly will inform and consult with each other with respect toinquiries received from third parties in connection with a Transaction.

 

3.     TheCompany agrees to pay the following fees to Glocap for its services renderedunder this agreement:

 

a.     Retainer:A retainer equal to $30,000 in freely tradeable common stock of the Company, tobe distributed to Glocap upon the signing of the Engagement Letter;

 

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b.     CashSuccess Fees: A fee equal to 5.0% of the first $5 million in AggregateTransaction Value (as defined below); plus 3.5% for the next $5 million; plus2.0% of the next $20 million; plus 1.0% of any Aggregate Transaction Value inexcess of $30 million, payable in cash at the closing date of the Transaction. However,in no event shall success fees at the closing be less than $400,000. If (i) aTransaction is not consummated, but the Company receives a “break-up” fee orany other payment as a result of the termination of the Transaction or (ii) theCompany or any of its stockholders or any other person or entity realizes anyprofits from the exercise of any options or warrants granted in connection witha Transaction, then the Company will pay to Glocap a fee equal to twenty-five percent(25%) of such fee, profit or other payment, payable in cash when any suchamount is paid to the Company or any such option or warrant is exercised.

 

As used in this letteragreement, “Transaction Value” means the total value (on the date of payment)of all consideration (including cash, securities or other property) paid orreceived or to be paid or received, directly or indirectly, in connection witha Transaction in respect of the assets of the Company or the securities of theCompany, plus the principal amount of any debt (including capitalized leasesand accounts payable that are extended beyond their contractual or customarypayment term) of the Company outstanding or assumed, refinanced or extinguishedin connection with a Transaction, and amounts payable in connection with aTransaction in respect of employment or consulting agreements to the extentsuch payments exceed customary “arms-length” amounts, agreements not to competeor similar arrangements. If the Transaction takes the form of a stock purchase,recapitalization or similar transaction, “Transaction Value” will also includethe value of all shares retained by the shareholders of the Company. If anyportion of Transaction Value is payable in the form of securities, the value ofsuch securities, for purposes of calculating our transaction fee, will bedetermined based on the average closing price for such securities for the 20trading days prior to the closing of the Transaction. In the case of securitiesthat do not have an existing public market, our transaction fee will bedetermined based on the fair market value of such securities as mutually agreedupon in good faith by the Company and Glocap prior to the closing of theTransaction. Fees on amounts paid into escrow will be payable upon theestablishment of such escrow. Fees relating to contingent payments other thanescrowed amounts will be calculated based on the present value of thereasonably expected amount of such contingent payments as determined in goodfaith by the Company and Glocap prior to the closing of the Transaction,utilizing a discount rate equal to the prime rate published in The WallStreet Journal on the last business day preceding the closing of theTransaction.

 

c.     FutureTransactions: If, during the twenty-four (24) month period following thetermination of this Agreement the Company closes a Transaction with any party(i) that Glocap identified to the Company prior to such termination, (ii) as towhich Glocap advised the Company prior to such termination, or (iii) with whichthe Company or Glocap had discussions prior to such termination (collectively, the “Identified Parties”), the feespayable pursuant to clause (b) of this paragraph will be due.

 

d.     OtherTransactions: If the Company enters into a financing transaction throughprivate or public securities, whether debt or equity, with a party during theterm of the Agreement or with an Identified Party during the twenty-four (24)month period following the termination of this Agreement (an “AlternativeTransaction”), the Company agrees to pay Glocap a fee relating to suchtransaction based upon similar fee percentages in clauses (b) above calculated

 

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on the amount of thefinancing. However, in no event shall success fees on an AlternativeTransaction be less than $400,000.

 

4.     Inaddition to any fees that may be payable to Glocap under this agreement,whether or not there is a closing of the Offering, the Company agrees toreimburse Glocap, upon request made from time to time, for all of itsreasonable out-of-pocket expenses incurred in connection with this engagement,including the reasonable fees and disbursements of its legal counsel. Theforegoing costs, expenses and charges will be paid by the Company to Glocappromptly upon receipt by the Company of an invoice(s) from Glocap.

 

5.     (a)The Company will furnish or cause to be furnished to Glocap such information asGlocap believes appropriate to its assignment and to satisfy its due diligencerequirements (the “Information”). The Company recognizes and confirms thatGlocap will use and rely primarily on the Information and on informationavailable from generally recognized public sources in performing the servicescontemplated by this agreement without having independently verified the same,does not assume responsibility for the accuracy or completeness of theInformation and such other information, and will not make an appraisal of theCompany or its business or assets. To the best of the Company’s knowledge, theInformation to be furnished by the Company, when delivered, will be true andcorrect in all material respects and will not contain any material misstatementof fact or omit to state any material fact necessary to make the statementscontained therein not misleading. The Company will promptly notify Glocap if itlearns of any material inaccuracy or misstatement in, or material omissionfrom, any Information theretofore delivered to Glocap.

 

(b)   All suchInformation, whether oral or written, will be kept confidential by Glocapexcept for such Information (i) that is already or becomes public through nobreach of this provision, (ii) that is in the materials delivered by theCompany to prospective parties, or that the Company agrees may be disclosed,(iii) that Glocap is required to disclose by applicable law, regulation orlegal process, or (iv) that becomes available to Glocap on a non-confidentialbasis from a third party who is not bound by a confidentiality obligation tothe Company; and provided, further, that the Information may be disclosed toGlocap’s directors, officers, employees, agents, advisors and representativesin connection with its engagement hereunder, who shall be informed of theconfidential nature of the Information and that such Information is subject toa confidentiality agreement or if, on the advice of counsel, Glocap iscompelled to disclose such Information.

 

6.     TheCompany agrees to indemnify Glocap as set forth in Glocap’s standard indemnityprovisions attached hereto as Addendum A.

 

7.     Theengagement hereunder may be terminated by either the Company or Glocap at anytime upon written notice to that effect to the other party, with no furtherobligation, it being understood that the provisions of paragraphs 3, 4, 5(b),6, 8 and 9 of this Agreement shall survive any such termination.

 

8.     Theinvalidity or unenforceability of any provision of this Agreement shall notaffect the validity or enforceability of any other provisions of thisAgreement, which shall remain in full force and effect.

 

9.     ThisAgreement may not be amended or modified except in writing signed by each ofthe parties and shall be governed by and construed and enforced in accordancewith the laws of the State of New York without giving effect to principles ofconflicts of law. The Company and Glocap hereby irrevocably and unconditionallyconsent to submit to the exclusive jurisdiction of the courts of the State ofNew York and of the United States District Courts located in the City of NewYork for any lawsuits, claims or other proceedings arising out of or relatingto this agreement and agree not to commence any such lawsuit, claim or otherproceeding except in such courts. The Company and Glocap hereby irrevocably andunconditionally waive any objection to the laying of venue of any lawsuit,claim, or other 

 

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proceeding arising out of or relating to thisagreement in the courts of the State of New York or the United States DistrictCourts located in the City of New York, and hereby further irrevocably andunconditionally waive and agree not to plead or claim in any such court thatany such lawsuit, claim or other proceeding brought in any such court has beenbrought in an inconvenient forum. Any right to trial by jury with respect toany lawsuit, claim or other proceeding arising out of or relating to thisAgreement or the services to be rendered by Glocap hereunder is expressly andirrevocably waived.

 

Please confirm that the foregoing is in accordancewith our understanding by signing and returning to us the enclosed duplicate ofthis letter.

 
|   | Sincerely yours,    |
|--------|---------------------|
|   |                |
|   | GLOCAP FUNDING  LLC |
|   |                |
|   |                |
|   | By:                 |  /s/: Mitchell Stern |   |
|   |                |
|   |                |
|   | Name:               | Mitchell Stern |   |
|        |                     |  |  |  |

 
| Agreed to and  Accepted         |
|---------------------------------|
| as of the date set forth above: |
|                            |   |
| POWER 3 MEDICAL  PRODUCTS, INC. |
|                            |   |
|                            |   |
| By:                             |  /s/: Steven B. Rash |   |
|                            |   |
| Name:                           | Steven B. Rash |   |
|                            |   |
| Title:                          | Chairman and CEO |   |
|                                 |  |  |  |  |

 

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** **

**Addendum A**

 

This Addendum A is attached to and incorporated by reference into theforegoing letter agreement (the “Agreement”). Capitalized terms used herein andnot otherwise defined herein shall have the meanings assigned to such terms inthe Agreement.

 

The Company agrees to indemnify and hold harmless Glocap and itsaffiliates, the respective directors, officers, members, employees and agentsof Glocap and its affiliates, and each other person, if any, controlling Glocapor any of its affiliates within the meaning of the federal securities laws(Glocap and each such other person or entity are hereinafter referred to as an “IndemnifiedPerson”) from and against any and all losses, claims, damages, expenses(including fees and disbursements of counsel) and liabilities (or actions orproceedings in respect thereof) (collectively “Losses”) caused by, relating to,based upon or arising out of (i) Glocap’s engagement under the Agreement, anytransaction contemplated by such engagement or any Indemnified Person’s role inconnection therewith (all of the foregoing are collectively hereafter referredto as the “Engagement”) or (ii) any untrue statement or alleged untruestatement of a material fact contained in any offering materials, including butnot limited to private placement memoranda used to offer securities of theCompany in a transaction subject to Glocap’s engagement under the Agreement, assuch materials may be amended or supplemented (and including but not limited toany documents deemed to be incorporated therein by reference), or caused by anyomission or alleged omission to state therein a material fact necessary inorder to make the statements therein, in the light of the circumstances underwhich they were made, not misleading; provided, however, that with respect toclause (i) above, such indemnification obligation shall not apply to any suchLoss to the extent it is found in a final judgment by a court of competentjurisdiction (not subject to further appeal) to have resulted primarily anddirectly from the gross negligence or willful misconduct of the IndemnifiedPerson seeking indemnification. The Company agrees to reimburse eachIndemnified Person for all expenses (including fees and disbursements ofcounsel) as they are incurred by such Indemnified Person in connection withinvestigating, preparing, defending, paying, settling or compromising anyclaim, action, suit, proceeding or Loss, whether or not in connection with anaction in which any Indemnified Person is a named party. The Company alsoagrees that an Indemnified Person shall not have any liability (whether director indirect, in contract or otherwise) to the Company or its affiliates,directors, officers, employees, agents or shareholders, directly or indirectlyfor or in connection with the Engagement, except for any Losses that are foundin a final judgment by a court of competent jurisdiction (not subject tofurther appeal) to have resulted primarily and directly from such IndemnifiedPerson’s gross negligence or willful misconduct. In no event, regardless of thelegal theory advanced, shall any Indemnified Person be liable for anyconsequential, indirect, incidental or special damages of any nature.

 

If any action, suit, proceeding, or investigation is commenced, as towhich such Indemnified Person proposes to demand such indemnification, suchIndemnified Person shall notify the Company with reasonable promptness;provided, however that any failure by such Indemnified Person to notify theCompany shall not relieve the Company from its obligations hereunder, except asand to the extent the failure of such timely notice materially prejudices theCompany. If the Company so elects or at the request of an Indemnified Person,the Company will assume the defense of such action, suit, proceeding orinvestigation, including the employment of counsel reasonably satisfactory tosuch Indemnified Person and the payment of all fees and expenses of suchcounsel. In the event, however, that such Indemnified Person reasonablydetermines in its judgment that representation by common counsel would beinappropriate due to actual or potential differing interests or if the Companyfails to assume the defense of the action, suit, proceeding or investigation ina timely manner, then such Indemnified Person may employ separate counsel torepresent or defend it in any such action, suit, proceeding or investigationand the Company will pay the fees and disbursements of such counsel; provided,however, that the Company will not be required to pay the fees anddisbursements of more than one separate counsel for all Indemnified Persons inany jurisdiction in any single action or proceeding. In any action orproceeding the defense of which the Company assumes, an Indemnified Person willhave the right to participate in such litigation and to retain its own counselat such Indemnified Person’s own expense. The Company shall not be liable forany settlement of any action or proceeding effected without its writtenconsent, but if settled with such consent the Company agrees to indemnify theIndemnified Party from and against any Loss by reason of such settlement. The Companyshall not settle any claim, action, suit or proceeding related to theEngagement or the Agreement unless the settlement also includes anunconditional release of all Indemnified Persons from all liabilities arisingout of such claim, action, suit or proceeding.

 

If the indemnification sought by an Indemnified Person hereunder isfound in a final judgment by a court of competent jurisdiction (not subject tofurther appeal) to be unenforceable, even though the express provisions hereofprovide for indemnification in such case, then the Company shall contribute tothe Losses for which such indemnification is held unavailable in suchproportion as is appropriate to reflect the relative benefits received by theCompany, on the one hand, and Glocap, on the other hand, in connection with theEngagement reflected in the Agreement, or if such allocation is not permittedby applicable law, in such proportion as is appropriate to reflect not only therelative benefits but the relative fault of the Company on the one hand andGlocap on the other hand, in connection with the statements, acts or omissionswhich resulted in such Losses, as well as any other relevant equitableconsiderations. The respective relative benefits received by the Company andGlocap in connection with any transaction shall be deemed to be in the sameproportion as the aggregate fee paid or payable to Glocap in connection withthe transaction bears to the total value of the transaction. The relative faultof the Company and Glocap shall be determined by reference to, among otherthings, whether the statements, actions or omissions to act were by the Companyor Glocap and the parties’ relative intent, knowledge, access to informationand opportunity to correct or prevent such action or omission to act. Notwithstandingthe foregoing, in no event shall the aggregate contribution of all IndemnifiedPersons for all Losses in connection with any transaction exceed the amount offees actually received by Glocap pursuant to the Agreement.

 

If multiple claims are brought against an Indemnified Person in anarbitration, with respect to at least one of which indemnification is permittedunder applicable law and provided for under the Agreement, the Company agreesthat any arbitration award shall be conclusively deemed to be based on claimsas to which indemnification is permitted and provided for, except to the extentthe arbitration award expressly states that the award, or any portion thereof,is based solely on a claim as to which indemnification is not available.

 

The obligations of the Company referred to above shall be in additionto any liability which the Company may otherwise have and shall be binding uponand inure to the benefit of any successors, assigns, heirs and personalrepresentatives of any Indemnified Person and the Company. Neither terminationof the Agreement nor completion of the Engagement shall affect theseindemnification provisions which shall then continue in full force and effect.

 

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