Exhibit
10.22


 





 


January 5, 2006


 


CONFIDENTIAL


 


Power 3 Medical
Products, Inc.

3400 Research Forest Drive

Suite B2-3

Woodlands, TX 773812


 


Attention:      Steven Rash


Chairman, President and CEO


 


Dear Steven:


 


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


 


1.     The
Company hereby engages Glocap Funding LLC (“Glocap”) to act as its exclusive
financial advisor in connection with a possible sale or other transfer,
directly or indirectly and whether in one or a series of transactions, of all
or a significant portion of the assets or securities of the Company or any
extraordinary corporate transaction involving a change in control of, or an
investment by a third party in, the Company, regardless of the form or
structure of such transaction (the “Transaction”).


 


2.     Glocap
will provide the Company with financial advice and assistance in connection
with the Transaction, which may involve, to the extent requested by the Company
and appropriate for the Transaction, advice and assistance in connection with
defining strategic and financial objectives and alternatives, reviewing historic
and projected financial information, assisting in preparation of valuation
analyses, identifying potential parties to a Transaction, assisting in the
preparation of a confidential memorandum describing the Company and related
marketing materials for distribution to such parties, and assisting in
negotiations of the financial terms and structure of the Transaction. If the
Company should request Glocap to provide additional services not otherwise
contemplated by this letter agreement, such as a fairness opinion, the Company
and Glocap will enter into an additional letter agreement which will set forth
the nature and scope of the services, appropriate compensation and other
customary matters, as mutually agreed upon by the Company and Glocap. In order
to coordinate the efforts in connection with a Transaction, the Company and
Glocap promptly will inform and consult with each other with respect to
inquiries received from third parties in connection with a Transaction.


 


3.     The
Company agrees to pay the following fees to Glocap for its services rendered
under this agreement:


 


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


 

















 


b.     Cash
Success Fees: A fee equal to 5.0% of the first $5 million in Aggregate
Transaction Value (as defined below); plus 3.5% for the next $5 million; plus
2.0% of the next $20 million; plus 1.0% of any Aggregate Transaction Value in
excess 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) a
Transaction is not consummated, but the Company receives a “break-up” fee or
any other payment as a result of the termination of the Transaction or (ii) the
Company or any of its stockholders or any other person or entity realizes any
profits from the exercise of any options or warrants granted in connection with
a 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 such
amount is paid to the Company or any such option or warrant is exercised.


 


As used in this letter
agreement, “Transaction Value” means the total value (on the date of payment)
of all consideration (including cash, securities or other property) paid or
received or to be paid or received, directly or indirectly, in connection with
a Transaction in respect of the assets of the Company or the securities of the
Company, plus the principal amount of any debt (including capitalized leases
and accounts payable that are extended beyond their contractual or customary
payment term) of the Company outstanding or assumed, refinanced or extinguished
in connection with a Transaction, and amounts payable in connection with a
Transaction in respect of employment or consulting agreements to the extent
such payments exceed customary “arms-length” amounts, agreements not to compete
or similar arrangements. If the Transaction takes the form of a stock purchase,
recapitalization or similar transaction, “Transaction Value” will also include
the value of all shares retained by the shareholders of the Company. If any
portion of Transaction Value is payable in the form of securities, the value of
such securities, for purposes of calculating our transaction fee, will be
determined based on the average closing price for such securities for the 20
trading days prior to the closing of the Transaction. In the case of securities
that do not have an existing public market, our transaction fee will be
determined based on the fair market value of such securities as mutually agreed
upon in good faith by the Company and Glocap prior to the closing of the
Transaction. Fees on amounts paid into escrow will be payable upon the
establishment of such escrow. Fees relating to contingent payments other than
escrowed amounts will be calculated based on the present value of the
reasonably expected amount of such contingent payments as determined in good
faith by the Company and Glocap prior to the closing of the Transaction,
utilizing a discount rate equal to the prime rate published in The Wall
Street Journal on the last business day preceding the closing of the
Transaction.


 


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


 


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


 


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


 


4.     In
addition 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 to
reimburse Glocap, upon request made from time to time, for all of its
reasonable out-of-pocket expenses incurred in connection with this engagement,
including the reasonable fees and disbursements of its legal counsel. The
foregoing costs, expenses and charges will be paid by the Company to Glocap
promptly 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 as
Glocap believes appropriate to its assignment and to satisfy its due diligence
requirements (the “Information”). The Company recognizes and confirms that
Glocap will use and rely primarily on the Information and on information
available from generally recognized public sources in performing the services
contemplated by this agreement without having independently verified the same,
does not assume responsibility for the accuracy or completeness of the
Information and such other information, and will not make an appraisal of the
Company or its business or assets. To the best of the Company’s knowledge, the
Information to be furnished by the Company, when delivered, will be true and
correct in all material respects and will not contain any material misstatement
of fact or omit to state any material fact necessary to make the statements
contained therein not misleading. The Company will promptly notify Glocap if it
learns of any material inaccuracy or misstatement in, or material omission
from, any Information theretofore delivered to Glocap.


 


(b)   All such
Information, whether oral or written, will be kept confidential by Glocap
except for such Information (i) that is already or becomes public through no
breach of this provision, (ii) that is in the materials delivered by the
Company to prospective parties, or that the Company agrees may be disclosed,
(iii) that Glocap is required to disclose by applicable law, regulation or
legal process, or (iv) that becomes available to Glocap on a non-confidential
basis from a third party who is not bound by a confidentiality obligation to
the Company; and provided, further, that the Information may be disclosed to
Glocap’s directors, officers, employees, agents, advisors and representatives
in connection with its engagement hereunder, who shall be informed of the
confidential nature of the Information and that such Information is subject to
a confidentiality agreement or if, on the advice of counsel, Glocap is
compelled to disclose such Information.


 


6.     The
Company agrees to indemnify Glocap as set forth in Glocap’s standard indemnity
provisions attached hereto as Addendum A.


 


7.     The
engagement hereunder may be terminated by either the Company or Glocap at any
time upon written notice to that effect to the other party, with no further
obligation, 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.     The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.


 


9.     This
Agreement may not be amended or modified except in writing signed by each of
the parties and shall be governed by and construed and enforced in accordance
with the laws of the State of New York without giving effect to principles of
conflicts of law. The Company and Glocap hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of the State of
New York and of the United States District Courts located in the City of New
York for any lawsuits, claims or other proceedings arising out of or relating
to this agreement and agree not to commence any such lawsuit, claim or other
proceeding except in such courts. The Company and Glocap hereby irrevocably and
unconditionally 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 this
agreement in the courts of the State of New York or the United States District
Courts located in the City of New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that
any such lawsuit, claim or other proceeding brought in any such court has been
brought in an inconvenient forum. Any right to trial by jury with respect to
any lawsuit, claim or other proceeding arising out of or relating to this
Agreement or the services to be rendered by Glocap hereunder is expressly and
irrevocably waived.


 


Please confirm that the foregoing is in accordance
with our understanding by signing and returning to us the enclosed duplicate of
this 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 the
foregoing letter agreement (the “Agreement”). Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Agreement.


 


The Company agrees to indemnify and hold harmless Glocap and its
affiliates, the respective directors, officers, members, employees and agents
of Glocap and its affiliates, and each other person, if any, controlling Glocap
or 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 “Indemnified
Person”) from and against any and all losses, claims, damages, expenses
(including fees and disbursements of counsel) and liabilities (or actions or
proceedings in respect thereof) (collectively “Losses”) caused by, relating to,
based upon or arising out of (i) Glocap’s engagement under the Agreement, any
transaction contemplated by such engagement or any Indemnified Person’s role in
connection therewith (all of the foregoing are collectively hereafter referred
to as the “Engagement”) or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any offering materials, including but
not limited to private placement memoranda used to offer securities of the
Company in a transaction subject to Glocap’s engagement under the Agreement, as
such materials may be amended or supplemented (and including but not limited to
any documents deemed to be incorporated therein by reference), or caused by any
omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that with respect to
clause (i) above, such indemnification obligation shall not apply to any such
Loss to the extent it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from the gross negligence or willful misconduct of the Indemnified
Person seeking indemnification. The Company agrees to reimburse each
Indemnified Person for all expenses (including fees and disbursements of
counsel) as they are incurred by such Indemnified Person in connection with
investigating, preparing, defending, paying, settling or compromising any
claim, action, suit, proceeding or Loss, whether or not in connection with an
action in which any Indemnified Person is a named party. The Company also
agrees that an Indemnified Person shall not have any liability (whether direct
or indirect, in contract or otherwise) to the Company or its affiliates,
directors, officers, employees, agents or shareholders, directly or indirectly
for or in connection with the Engagement, except for any Losses that are found
in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily and directly from such Indemnified
Person’s gross negligence or willful misconduct. In no event, regardless of the
legal theory advanced, shall any Indemnified Person be liable for any
consequential, indirect, incidental or special damages of any nature.


 


If any action, suit, proceeding, or investigation is commenced, as to
which such Indemnified Person proposes to demand such indemnification, such
Indemnified Person shall notify the Company with reasonable promptness;
provided, however that any failure by such Indemnified Person to notify the
Company shall not relieve the Company from its obligations hereunder, except as
and to the extent the failure of such timely notice materially prejudices the
Company. If the Company so elects or at the request of an Indemnified Person,
the Company will assume the defense of such action, suit, proceeding or
investigation, including the employment of counsel reasonably satisfactory to
such Indemnified Person and the payment of all fees and expenses of such
counsel. In the event, however, that such Indemnified Person reasonably
determines in its judgment that representation by common counsel would be
inappropriate due to actual or potential differing interests or if the Company
fails to assume the defense of the action, suit, proceeding or investigation in
a timely manner, then such Indemnified Person may employ separate counsel to
represent or defend it in any such action, suit, proceeding or investigation
and the Company will pay the fees and disbursements of such counsel; provided,
however, that the Company will not be required to pay the fees and
disbursements of more than one separate counsel for all Indemnified Persons in
any jurisdiction in any single action or proceeding. In any action or
proceeding the defense of which the Company assumes, an Indemnified Person will
have the right to participate in such litigation and to retain its own counsel
at such Indemnified Person’s own expense. The Company shall not be liable for
any settlement of any action or proceeding effected without its written
consent, but if settled with such consent the Company agrees to indemnify the
Indemnified Party from and against any Loss by reason of such settlement. The Company
shall not settle any claim, action, suit or proceeding related to the
Engagement or the Agreement unless the settlement also includes an
unconditional release of all Indemnified Persons from all liabilities arising
out of such claim, action, suit or proceeding.


 


If the indemnification sought by an Indemnified Person hereunder is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to be unenforceable, even though the express provisions hereof
provide for indemnification in such case, then the Company shall contribute to
the Losses for which such indemnification is held unavailable in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and Glocap, on the other hand, in connection with the
Engagement reflected in the Agreement, or if such allocation is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but the relative fault of the Company on the one hand and
Glocap on the other hand, in connection with the statements, acts or omissions
which resulted in such Losses, as well as any other relevant equitable
considerations. The respective relative benefits received by the Company and
Glocap in connection with any transaction shall be deemed to be in the same
proportion as the aggregate fee paid or payable to Glocap in connection with
the transaction bears to the total value of the transaction. The relative fault
of the Company and Glocap shall be determined by reference to, among other
things, whether the statements, actions or omissions to act were by the Company
or Glocap and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such action or omission to act. Notwithstanding
the foregoing, in no event shall the aggregate contribution of all Indemnified
Persons for all Losses in connection with any transaction exceed the amount of
fees actually received by Glocap pursuant to the Agreement.


 


If multiple claims are brought against an Indemnified Person in an
arbitration, with respect to at least one of which indemnification is permitted
under applicable law and provided for under the Agreement, the Company agrees
that any arbitration award shall be conclusively deemed to be based on claims
as to which indemnification is permitted and provided for, except to the extent
the 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 addition
to any liability which the Company may otherwise have and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of any Indemnified Person and the Company. Neither termination
of the Agreement nor completion of the Engagement shall affect these
indemnification provisions which shall then continue in full force and effect.