Document:

Exhibit 10.21

 

STOCK PLEDGE AGREEMENT

 

STOCK
PLEDGE AGREEMENT (“Agreement”) entered into as of the 28th
day of March 2006 by and among John Fife (the “Secured Party”),  and those persons identified on the signature
page hereof (each a “Pledgor”).

 

RECITALS

 

A.            Pledgors
have agreed to pledge certain shares as security for: (i) the performance
by Power 3 Medical Products, Inc. A New York corporation of its
obligations under its Series 2006 Note in an aggregate face amount of Four
Hundred Thousand and 00/100 Dollars ($400,000.00) payable to the Secured Party
(the “Note”)and (ii) the performance by Pledgor of its Guaranty
delivered to Secured Party of even date herewith.  Capitalized terms in this Agreement which are
not identified herein will have the meanings given such terms in the Note.

 

B.            The
Secured Party is willing to accept the Note from the Company only upon
receiving Pledgors’ Guaranty and pledge of certain stock as set forth in this
Agreement.

 

NOW,
THEREFORE, in consideration of the premises, the mutual covenants and
conditions contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

 

1.             Grant
of Security Interest. Pledgors hereby pledge to the Secured Party as
collateral and security for the Secured Obligations (as defined in paragraph 2)
the securities initially set forth on the attached Schedule 1 of this
Agreement, (the “Pledged Shares”). If on any monthly anniversary during
the term of the Note, the market value of the Collateral then held by the
escrow agent, does not equal or exceeed 300% of the principal amount of the
Note then within 5 days of such date, the Pledgor shall deliver to be held
under the terms of this Agreement a certificate or certificates for additional
shares and necessary stock powers equal to not less than 300% of the principal
amount of the Note. The Pledgor shall deliver same and a statement setting
forth the necessary amount of Collateral not later than the first business day
following each such monthly anniversary. Unless otherwise set forth on Schedule 1
of this Agreement, each Pledgor is the beneficial and record owner of the
Pledged Shares set forth opposite such Pledgor’s name on such Schedule. Such
Pledged Shares, together with any additions, replacements,  accessions substitutes therefor, or proceeds
thereof, are hereinafter referred to collectively as the “Collateral.”
Market Value means the average closing bid price for the ten trading days prior
to the date on which the Collateral is valued for purposes of this Section 1.

 

2.             Secured
Obligations. During the term hereof, the Collateral shall secure the
following:

 

a.  The
performance by the Company of its obligations, covenants, and agreements under
the Note.

 

b. The
performance by the Pledgor of its obligations, covenants, and agreements under
the Guaranty.

 

The obligations,
covenants and agreements described in clause (a)and (b)  are the “Secured
Obligations.”

 

3.             Perfection
of Security Interests. (a)  Upon execution of this Agreement by each
Pledgor, such Pledgor shall deliver the Pledge Shares, together with Stock
Powers (with Medallion Guarantees annexed).

 

(b)           The
Company and each Pledgor will, at its expense, cause to be searched the public
records with respect to the Collateral and will execute, deliver, file and
record (in such manner and form as each Secured Party may require),
or permit each Secured Party to file and record, as its attorney in fact, any
financing statements, any carbon, photographic or other reproduction of a
financing statement or this Agreement (which shall be sufficient as a financing
statement hereunder), any specific assignments or other paper that may be
reasonably necessary or desirable, or that such Secured Party may request,
in order to create, preserve, perfect or validate any Security Interest or to
enable such Secured Party to exercise and enforce its rights hereunder with
respect to any of the Collateral. The Company and each of the Pledgors hereby
appoints each Secured Party as the Company’s or

 

 

such Pledgor’s
attorney-in-fact to execute in the name and behalf of the Company or such
Pledgor, as the case may be, such additional financing statements as such
Secured Party may request.

 

4.             Assignment.
In connection with the transfer of the Note in accordance with their terms, a
Secured Party may assign or transfer the whole or any part of its
security interest granted hereunder, and may transfer as collateral
security the whole or any part of Secured Party’s security interest in the
Collateral. Any transferee of the Collateral shall be vested with all of the
rights and powers of Secured Party hereunder with respect to the Collateral.

 

5.             Pledgors’
Warranty. (A) Title. Each Pledgor represents and warrants hereby to
the Secured Party as follows with respect to the Pledged Shares set forth
opposite such Pledgors name on Schedule 2 to this Agreement:

 

(i) that
the Collateral is free and clear of any encumbrances of every nature
whatsoever, and such Pledgor is the sole owner of the Pledged Shares;

 

(ii) Such
Pledgor further agree not to grant or create, any security interest, claim,
lien, pledge or other encumbrance with respect to such Collateral or attempt to
sell, transfer or otherwise dispose of the Collateral, until the Secured
Obligations have been paid in full or this Agreement terminates; and

 

(iii)          this
Agreement constitutes a legal, valid and binding obligation of such Pledgor
enforceable in accordance with its terms (except as the enforcement thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws, now or hereafter in effect),

 

B.            Other:     (i) Pledgor
has made necessary inquiries of the Company and believes that the Company fully
intends to fulfill and has the capability of fulfilling the Secured Obligations
to be performed by the Company in accordance with the terms of the Notes.

 

(ii)           The
Pledgors are not (and neither of them is ) acting, and have not (and neither of
them has) agreed to act, in any plan to sell or dispose of any Shares in a
manner intended to circumvent the registration requirements of the Securities
Act of 1933, as amended, or any applicable state law.

 

(iii)          Pledgor
has been advised by counsel of the elements of a bona-fide pledge for purposes
of Rule 144(d)(3)(iv) under the Securities Act of 1933, as amended,
including the relevant SEC interpretations and affirm the pledge of shares by
each of the undersigned pursuant to this Pledge Agreement will constitute a
bona-fide pledge of such shares for purposes of such Rule.

 

6.             Collection
of Dividends and Interest. During the term of this Agreement and so long as
Pledgors are not in default under the Notes, 
Pledgors are authorized to collect all dividends, distributions,
interest payments, and other amounts that may be, or may become, due
on any of the Collateral.

 

7.             Voting
Rights. During the term of this Agreement and until such time as this
Agreement has terminated or Secured Party has exercised its rights under this
Agreement to foreclose its security interest in the Collateral, Pledgors shall
have the right to exercise any voting rights evidenced by, or relating to, the
Collateral.

 

8.             Warrants
and Options. In the event that, during the term of this Agreement,
subscription, spin-off, warrants, dividends, or any other rights or option shall
be issued in connection with the Collateral, such warrants, dividends, rights
and options shall be immediately delivered to Secured Party to be held under
the terms hereof in the same manner as the Collateral.

 

9.             Preservation
of the Value of the Collateral. Pledgors shall pay all taxes, charges, and
assessments against the Collateral and do all acts necessary to preserve and
maintain the value thereof.

 

10.           Secured
Party as Pledgor’s Attorney-in-Fact.

 

(a)           Pledgor
hereby irrevocably appoints Secured Party as Pledgor’s attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name of Pledgor,
Secured Party or otherwise, from time to time at Secured Party’s discretion, to
take any action and to execute any instrument that Secured Party may reasonably

 

 

deem necessary or
advisable to accomplish the purposes of this Agreement, including: (i) upon
the occurrence and during the continuance of an Event of Default, to receive,
indorse, and collect all instruments made payable to Pledgor representing any
dividend, interest payment or other distribution in respect of the Collateral
or any part thereof to the extent permitted hereunder and to give full
discharge for the same and to execute and file governmental notifications and
reporting forms; (ii) to arrange for the transfer of the Collateral on the
books of any of the Company or any other Person to the name of Secured Party or
to the name of Secured Party’s nominee.

 

(b)           In
addition to the designation of Secured Party as Pledgor’s attorney-in-fact in
subsection (a), Pledgor hereby irrevocably appoints Secured Party as
Pledgor’s agent and attorney-in-fact to make, execute and deliver any and all
documents and writings which may be necessary or appropriate for approval
of, or be required by, any regulatory authority located in any city, county,
state or country where Pledgor or any of the Company engage in business, in
order to transfer or to more effectively transfer any of the Pledged Interests
or otherwise enforce Secured Party’s rights hereunder.

 

11.           Remedies
upon Default.

 

Upon
the occurrence and during the continuance of an Event of Default under the Note
and/or the Guaranty “Event of Default”):

 

(a)           Secured
Party may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party on default under the Code (irrespective
of whether the Code applies to the affected items of Collateral), and Secured
Party may also without notice (except as specified below) sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange, broker’s board or at any of Secured Party’s offices or
elsewhere, for cash, on credit or for future delivery, at such time or times
and at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. To the maximum extent permitted by applicable
law, Secured Party may be the purchaser of any or all of the Collateral at
any such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the Collateral
sold at any such public sale, to use and apply all or any part of the
Secured Obligations as a credit on account of the purchase price of any
Collateral payable at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of
Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights
of redemption, stay, or appraisal that it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. Pledgor agrees that, to the extent notice of sale shall be required by
law, at least ten (10) calendar days notice to Pledgor of the time and
place of any public sale or the time after which a private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from tme to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the maximum extent permitted by law, Pledgor hereby waives any claims against
Secured Party arising because the price at which any Collateral may have
been sold at such a private sale was less than the price that might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree.

 

(b)           Pledgor
hereby agrees that any sale or other disposition of the Collateral conducted in
conformity with reasonable commercial practices of banks, insurance companies,
or other financial institutions in the city and state where Secured Party is
located in disposing of property similar to the Collateral shall be deemed to
be commercially reasonable.

 

(c)           Pledgor
hereby acknowledges that the sale by Secured Party of any Collateral pursuant
to the terms hereof in compliance with the Securities Act of 1933 as now in
effect or as hereafter amended, or any similar statute hereafter adopted with
similar purpose or effect (the “Securities Act”), as well as applicable “Blue
Sky” or other state securities laws, may require strict limitations as to
the manner in which Secured Party or any subsequent transferee of the
Collateral may dispose thereof. Pledgor acknowledges and agrees that in
order to protect Secured Party’s interest it may be necessary to sell the
Collateral at a price less than the maximum price attainable if a sale were delayed
or were made in another manner, such as a public offering under the Securities
Act. Pledgor has no objection to sale in such a manner and agrees that Secured
Party shall have no obligation to obtain the maximum possible price for the
Collateral. Without limiting the generality of the foregoing, Pledgor agrees
that, upon the occurrence and during the continuation of an Event of Default,
Secured Party may, subject to applicable law, from time to time attempt to sell
all or any part of the Collateral by a private placement, restricting the
bidders and prospective purchasers to those who will represent and agree that
they are purchasing for investment only and not

 

 

for distribution. In so
doing, Secured Party may solicit offers to buy the Collateral or any part thereof
for cash, from a limited number of investors reasonably believed by Secured
Party to be institutional investors or other accredited investors who might be
interested in purchasing the Collateral. If Secured Party shall solicit such
offers, then the acceptance by Secured Party of one of the offers shall be
deemed to be a commercially reasonable method of disposition of the Collateral.

 

(d)           If
Secured Party shall determine to exercise its right to sell all or any portion
of the Collateral pursuant to this Section, Pledgor agrees that, upon request
of Secured Party, Pledgor will, at its own expense:

 

(i)            execute
and deliver, or cause the officers and directors of the Company to execute and
deliver, to any person, entity or governmental authority as Secured Party may choose,
any and all documents and writings which, in Secured Party’s reasonable
judgment, may be necessary or appropriate for approval, or be required by,
any regulatory authority located in any city, county, state or country where
Pledgor or the Company engage in business, in order to transfer or to more
effectively transfer the Pledged Interests or otherwise enforce Secured Party’s
rights hereunder; and

 

(ii)           do
or cause to be done all such other acts and things as may be necessary to
make such sale of the Collateral or any part thereof valid and binding and
in compliance with applicable law; and

 

(iii)          cause
the Company to timely file all periodic reports required to be filed by the
Company under the Securities Exchange Act of 1934.

 

Pledgor
acknowledges that there is no adequate remedy at law for failure by it to
comply with the provisions of this Section and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.

 

(e)           PLEDGOR
EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW: (i) ANY
CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME SECURED
PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS
SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS
OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR
STATUTE NOW EXISTING OR HEREAFTER ENACTED; AND (iii) EXCEPT AS SET FORTH
IN SUBSECTION (a) OF THIS SECTION 11, ANY REQUIREMENT OF NOTICE,
DEMAND, OR ADVERTISEMENT FOR SALE.

 

12.           (a)Term
of Agreement. This Agreement shall continue in full force and effect until
the earlier of the payment in full of the Note. If the Note is paid in full,
the security interests in the relevant Collateral shall be deemed released, and
any portion of the Collateral not transferred to or sold by any one or more
Secured Parties shall be returned to the Pledgor (and for such purpose,
delivery to Darrin Ocasio, Esq., of Sichenzia Ross Friedman Ference LLP of
New York, NY shall deemed to comply with such return requirement). Upon
termination of this Pledge Agreement, the relevant Collateral shall be returned
within five (5) Trading Days to Debtor or to the Pledgor, as contemplated
above.

 

(b) Application
of Proceeds. Upon the occurrence and during the continuance of an Event of
Default, any cash held by Secured Party as Collateral and all cash Proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral pursuant to the
exercise by Secured Party of its remedies as a secured creditor as provided in Section 9
shall be applied from time to time by the Secured Part as provided in the
Note.

 

13.           Indemnity
and Expenses.

 

Pledgor
agrees:

 

(a)           To
indemnify and hold harmless Secured Party and each of its directors, officers,
employees, agents and affiliates from and against any and all claims, damages,
demands, losses, obligations, judgments and

 

 

liabilities (including, without
limitation, reasonable attorneys’ fees and expenses) in any way arising out of
or in connection with this Agreement or the Secured Obligations, except to the
extent the same shall arise as a result of the gross negligence or willful
misconduct of the party seeking to be indemnified; and

 

(b)           To
pay and reimburse Secured Party upon demand for all reasonable costs and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) that Secured Party may incur in connection with (i) the
custody, use or preservation of, or the sale of, collection from or other
realization upon, any of the Collateral, including the reasonable expenses of
re-taking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, (ii) the exercise or enforcement of any
rights or remedies granted hereunder, under the Note or otherwise available to
it (whether at law, in equity or otherwise), or (iii) the failure by
Pledgor to perform or observe any of the provisions hereof. The provisions
of this Section shall survive the execution and delivery of this
Agreement, the repayment of any of the Secured Obligations, the termination of
the commitments of Secured Party under the Note and the termination of this
Agreement.

 

14.           Duties
of Secured Party.

 

The
powers conferred on Secured Party hereunder are solely to protect its interests
in the Collateral and shall not impose on it any duty to exercise such powers.
Except as provided in Section 9-207 of the Code, Secured Party shall have
no duty with respect to the Collateral or any responsibility for taking any
necessary steps to preserve rights against any Persons with respect to any
Collateral.

 

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

 

(a)           THE
VALIDITY OF THIS AGREEMENT, 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 AGREEMENT 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 SECURED PARTY, IN ANY OTHER
COURT IN WHICH SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.

 

(b)           PLEDGOR
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)           PLEDGOR
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 PLEDGOR AT ITS ADDRESS FOR NOTICES IN ACCORDANCE WITH THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF PLEDGOR’S ACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED
STATES MAILS, PROPER POSTAGE PREPAID.

 

(d)           NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF SECURED
PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY SECURED PARTY 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.

 

16.           Amendments;
etc.

 

No
amendment or waiver of any provision of this Agreement nor consent to any
departure by Pledgor herefrom shall in any event be effective unless the same
shall be in writing and signed by Secured Party, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No failure on the part of Secured Party to
exercise, and no delay in exercising any right under this Agreement, any

 

 

other Credit Document, or
otherwise with respect to any of the Secured Obligations, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right under
this Agreement, any other Credit Document, or otherwise with respect to any of
the Secured Obligations preclude any other or further exercise thereof or the
exercise of any other right. The remedies provided for in this Agreement or
otherwise with respect to any of the Secured Obligations are cumulative and not
exclusive of any remedies provided by law.

 

17.           Notices.

 

Unless
otherwise specifically provided herein, all notices shall be in writing
addressed to the respective party as set forth below: and may be
personally served, faxed, telecopied or sent by overnight courier service or
United States mail:

 

If to
Pledgor:

 

Steven
B. Rash

c/o
Power3 Medical Products, Inc.

3400
Research Forest Drive

The
Woodlands, Texas 77381

Fax
No.:  281-466-1481

 

Ira
Goldknopf

42
Brushwood Court

The
Woodlands, TX 77380

 

with a
copy to:

 

Sichenzia
Ross Friedman Ference LLP

1065
Avenue of the Americas

New
York, NY 10018

 

Fax
No.:  212-930-9725

Attn:       Darrin
M. Ocasio, Esq.

 

If to
Secured Party:

 

John
Fife

303
East Wacker Drive

Suite 301

Chicago,
Il 60601

 

Fax
No.: 312 819  9701

 

with a
copy to:

 

Samuel
M. Krieger, Esq.

Krieger
and Prager LLP

39
Broadway

New
York, NY. 10006

 

Fax
No.: 212 363 2999

 

Any
notice given pursuant to this section shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by fax, on the date
of transmission if transmitted on a Business Day before 4:00 p.m. at the
place of receipt or, if not, on the next succeeding Business Day; (c) if
delivered by overnight courier, two (2) days after delivery to such
courier properly addressed; or (d) if by United States mail, four (4) Business
Days after depositing in the United States mail, with postage prepaid and
properly addressed. Any party hereto may change the address or fax number
at which it is to receive notices hereunder by notice to the other party in
writing in the foregoing manner.

 

 

18.           Continuing
Security Interest.

 

This
Agreement shall create a continuing security interest in the Collateral and
shall: (a) remain in full force and effect until the indefeasible payment
in full of the Secured Obligations, including the cash collateralization,
expiration, or cancellation of all Secured Obligations, if any, consisting of
letters of credit, and the full and final termination of any commitment to
extend any financial accommodations under the Credit Agreement; (b) be
binding upon Pledgor and its successors and assigns; and (c) inure to the
benefit of Secured Party and its successors, transferees, and assigns. Upon the
indefeasible payment in full of the Secured Obligations, including the cash
collateralization, expiration, or cancellation of all Secured Obligations, if
any, consisting of letters of credit, and the full and final termination of any
commitment to extend any financial accommodations under the Credit Agreement,
the security interests granted herein shall automatically terminate and all
rights to the Collateral shall revert to Pledgor. Upon any such termination,
Secured Party will, at Pledgor’s expense, execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination.
Such documents shall be prepared by Pledgor and shall be in form and
substance reasonably satisfactory to Secured Party.

 

19.           Security
Interest Absolute.

 

To the
maximum extent permitted by law, all rights of Secured Party, all security
interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:

 

(a)           any
lack of validity or enforceability of any of the Secured Obligations or any
other agreement or instrument relating thereto, including any of the Credit
Documents;

 

(b)           any
change in the time, manner, or place of payment of, or in any other term of,
all or any of the Secured Obligations, or any other amendment or waiver of or
any consent to any departure from any of the Credit Documents, or any other
agreement or instrument relating thereto;

 

(c)           any
exchange, release, or non-perfection of any other collateral, or any release or
amendment or waiver of or consent to departure from any guaranty for all or any
of the Secured Obligations; or

 

(d)           any
other circumstances that might otherwise constitute a defense available to, or
a discharge of, Pledgor.

 

20.           Headings.

 

Section and
subsection headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement or be
given any substantive effect.

 

21.           Severability.

 

In
case any provision in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

 

22.           Counterparts;
Telefacsimile Execution.

 

This
Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed counterpart of
this Agreement but the failure to deliver an original executed counterpart shall
not affect the validity, enforceability, or binding effect hereof.

 

23.           Waiver
of Marshaling.

 

Each
of Pledgor and Secured Party acknowledges and agrees that in exercising any
rights under or with respect to the Collateral: (a) Secured Party is under
no obligation to marshal any Collateral; (b) may, in its absolute
discretion, realize upon the Collateral in any order and in any manner it so
elects; and (c) may, in its absolute discretion, apply the proceeds of any
or all of the Collateral to the Secured Obligations in any order and in any

 

 

manner it so elects.
Pledgor and Secured Party waive any right to require the marshaling of any of
the Collateral.

 

24.           Waiver
of Jury Trial.

 

PLEDGOR
AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. PLEDGOR
AND SECURED PARTY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
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.

 

 

IN
WITNESS WHEREOF, Pledgor and Secured Party have caused this Agreement to be
duly executed and delivered by their officers thereunto duly authorized as of
the date first written above.

 

	
   

  	
  STEVEN B. RASH

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/: Steven B.
  Rash

  	
  3/28/06

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Steven B. Rash

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  IRA L. GOLDKNOPF

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/: Ira L
  Goldknopf

  	
  3/8/06

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Ira L. Goldknopf

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JOHN FIFE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/: John Fife

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

Schedule 1

 

Pledged Interests:
4,000,000 shares of common stock of Power3 Medical Products, Inc.

 

Name of Issuer: Power3
Medical Products, Inc.

 

Jurisdiction of
Organization: New York

 

Type of Interest: Share
of common stock

 

Number of Shares/Units
(if applicable): see above

 

Certificate Number(s) (if
any) 15047, 15028, 15027, 15026, 15025

 

Percentage of Outstanding
Interests in Issuer: approximately

 

Date of certificate: October 26,
2005 and November 21, 2005

 

Additional Collateral as Set
forth in Section 1.

 

Schedule 2

 

Pledgor
Information:

 

	
  For Pledgor That
  Is a Registered Organization

  
	
  Jurisdiction of
  Organization:

  	
   

  	
   

  
	
   

  
	
  Type of
  Organization:

  	
   

  	
   

  
	
   

  
	
  Organizational
  ID Number (if any):

  	
   

  	
   

  
	
   

  
	
  For Pledgor That
  Is An Individual: Ira Goldknopf

  
	
   

  
	
  Address of
  Principal Residence: See Notice section

  
	
   

  
	
  For Pledgor That
  Is Neither a Registered Organization nor an Individual:

  
	
   

  
	
  Type of
  Organization: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

 

2

 

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 

 

3

 

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

  	
   

  
					

 

4

 

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.

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