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MEMORANDUM
To: Xx. Xxxx X. Xxxxxx
From: Xxxxxxx X. Xxxxxxx
Date: March 2, 1999
Subject: SRS Advisory Engagement Letter
This memorandum memorializes the agreement (the "Agreement") between EGS
Securities Corp. ("EGS") and Sabratek Corporation ("Sabratek" or the "Company")
and confirms the understanding between such parties regarding the engagement of
EGS by Sabratek pursuant to which EGS will perform certain financial advisory
services on behalf of the Company. Such advisory services to be undertaken by
EGS will relate (1) to the prospective acquisition of, or (2) any other
consummation of a strategic relationship with (any individual transaction within
the context of (1) or (2) above, a "Transaction" hereinafter defined) Strategic
Reimbursement Services, Inc. ("SRS"). The terms of the Agreement are outlined as
follows:
1. The Company hereby engages EGS as its financial advisor in connection
with a Transaction with SRS.
2. XXX accepts the engagement described in Paragraph 1 and accordingly
agrees to undertake the following, at the option of the Company:
a) to assist the Company in assessing the strategic value of a
Transaction with SRS;
b) if applicable, to assist the Company with valuation analyses to
be used by management in its negotiations with SRS, provided,
however, that EGS will not have an obligation to render a
written appraisal of any of SRS' assets or liabilities or to
provide a "fairness opinion;"
c) to advise the Company with respect to the form and structure of
a Transaction;
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d) to advise the Company as to strategy and tactics for negotiating
with SRS and to coordinate and assist in related discussions;
and
e) to assist the Company in its due diligence documentation and, if
applicable, to assist in the preparation of definitive
documentation relating to a Transaction
f) to assist the Company in negotiating a definitive agreement or
agreements with SRS.
3. In consideration for services rendered pursuant to paragraphs 1 and 2 of
this Agreement, the Company shall issue to EGS, at or shortly after the
Closing (hereinafter defined) of a Transaction, a success fee in the
form of shares of common stock of Sabratek ("Success Fee"), the number
of shares of which will be determined, by mutual agreement, at Closing
based on the actual services rendered by EGS.
Sabratek shall register any and all shares of common stock issued to EGS
pursuant to the terms of this Agreement, in the first registration form
filed on behalf of the equity holders of SRS who received common stock
of Sabratek in the Transaction. EGS shall not be subject to any sale
restrictions on such shares other than regulatory restrictions, if any.
4. The Company will also reimburse EGS, promptly upon request, for all
reasonable out-of-pocket expenses incurred in connection with this
Agreement.
5. The Company warrants that it is unconditionally authorized to compensate
EGS according to the formula outlined herein.
6. For the purposes of this Agreement:
a) "Sabratek" or the "Company" shall refer to Sabratek Corporation,
as well as any affiliate, joint venture investment, partner,
successor or predecessor company or any related entity;
b) "SRS" shall refer to Strategic Reimbursement Services, Inc., as
well as any affiliate, joint venture investment, partner,
successor or predecessor company or any related entity;
c) "Transaction" shall refer to any acquisition of, or other
strategic relationship established between, Sabratek and SRS,
including but not limited to: (i) a sale, purchase or transfer
of any equity interests (including, without limitation, options,
warrants or similar interests), (ii) a lease of assets other
than in the normal course of business, (iii) a merger or
consolidation, (iv) the formation of a joint venture or
partnership or any other business combination, (v) the execution
of any product or technology licensing agreement, (vi) the sale,
grant or other transfer of any option or other right (whether or
not contingent upon any future event) to acquire any equity
interests or assets or to enter into any product or technology
license or to consummate any other related transaction or, (vii)
any similar transaction;
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d) "Closing" shall refer to the execution of definitive agreements
to enter into a Transaction. In the event that a Transaction
involves multiple steps (e.g., execution of an option agreement
to acquire assets at a subsequent date), Closing shall refer to
the execution of agreements committing the parties to the first
of these successive related Transactions.
7. The Company shall furnish, or cause to be furnished, to EGS all
reasonable information requested by EGS for the purpose of rendering
services hereunder (the "Information"). The Company recognizes and
confirms that EGS:
a) will use and rely 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; and
b) does not assume responsibility for the accuracy or completeness
of the Information and such other information. EGS agrees to
keep confidential all non-public Information provided to it by
the Company, except as required by law or as contemplated by the
terms of this Agreement and will use such Information solely for
the purposes described in this Agreement. Notwithstanding
anything to the contrary contained herein, EGS may disclose
non-public Information to its or Sabratek's agents and advisors
whenever EGS determines that such disclosure is necessary to
provide the services contemplated hereunder; provided that EGS
will first advise the Company as to third parties receiving
confidential Information concerning the Company and the Company
shall first consent to such disclosure. Such party or parties
will further agree to handle the Information confidentially.
Upon the termination of this Agreement, EGS shall return the
Information, and all copies thereof, to the Company. This
provision may be enforced with equitable remedies.
8. EGS will use its "reasonable best efforts" to assist the Company,
pursuant to paragraph 2 of this Agreement, during the engagement period,
but there is no commitment, expressed or implied, by EGS or any of its
affiliates to effect the successful Closing of a Transaction.
9. Except as required by law, any advice rendered by EGS pursuant to its
engagement hereunder shall be treated as confidential by the Company and
any party to whom the Company discloses such advice, and shall not be
disclosed publicly in any manner without the prior written consent of
EGS. Without prior notification to EGS, the Company shall not make any
legally required disclosure of such advice nor make any legally required
public announcement or filing in which EGS' name appears.
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10. Because EGS will be acting on behalf of the Company, the Company agrees
to the indemnification and contribution provisions (the
"Indemnification") attached to this Agreement as Annex A and
incorporated herein in their entirety.
11. In the event that a Transaction or other transaction with an entity
other than SRS is effected and the Company is not the surviving entity,
the Company shall use its reasonable best efforts to cause the surviving
company or purchaser to assume and honor the obligations and liabilities
of the Company hereunder, including, without limitation, the Company's
obligations and liabilities pursuant to provisions concerning
indemnification, contribution, and the Company's obligations to pay fees
and to reimburse expenses contained herein and under the Indemnification
provisions.
12. This Agreement may be terminated by either party at any time after 12
months from the date hereof on 30 days' prior written notice, without
liability, except for the Company's obligations (which shall survive
such termination) as to (i) reimbursement or payment for any Transaction
fees and expenses incurred by EGS prior to termination of this
Agreement, and (ii) any reimbursement, indemnity or contribution payable
by the Company pursuant to Annex A (subject to the limitations therein).
Notwithstanding anything contained in the preceding sentence, if a
Transaction is Closed (within one year of such termination) with SRS or
any other party: (i) for which EGS has provided the Company advisory
services in contemplation of a Transaction as part of this Agreement,
the Company shall pay to EGS Transaction Fees as specified herein.
13. This Agreement may not be amended or modified except in writing and when
mutually executed by the Company and EGS, and shall be governed and
construed in accordance with the internal laws of the State of New York
without reference to principles of conflicts of laws. Any controversy or
claim arising out of or relating to this Agreement, or the transactions
contemplated hereby, or the breach hereof or thereof, shall be settled
by binding and final arbitration in accordance with the then-existing
Commercial Arbitration Rules of the American Arbitration Association.
Unless otherwise agree, arbitration shall be conducted in Chicago,
Illinois before a single arbitrator appointed in accordance with such
Rules. The arbitrator shall follow the law governing this Agreement. The
arbitrator's decision shall include a statement specifying in reasonable
detail the basis for and computation of the amount of the award, if any.
The parties shall be entitled to conduct discovery in accordance with
the Federal Rules of Civil Procedure, as in effect in the jurisdiction
where the arbitration occurs. Judgement upon the arbitration award may
be entered in any court having jurisdiction.
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Please confirm that the foregoing is in accordance with the Company's
understanding by signing and returning to EGS the enclosed duplicate of
this Agreement.
Sincerely,
EGS SECURITIES CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxx
Managing Director
Accepted and agreed to as of
the date first written above,
SABRATEK CORPORATION
By: /s/ Xxxx Xxxxxx
-----------------------------------
Title: CFO
--------------------------------
Attachment
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ANNEX A
INDEMNIFICATION
In addition to the fees and expenses which the Company has agreed to pay for the
services to be performed pursuant to the letter agreement of even date herewith
(the "Agreement"), the Company agrees: (i) to indemnify and hold EGS (which term
for the purposes of this letter includes its directors, controlling persons [as
such term is defined under the Securities Act of 1933], the officers, employees
and agents) harmless against and from all losses, claims, damages or
liabilities, joint or several (and all actions, claims, proceeds and
investigations in respect thereof), to which EGS may become subject in
connection with its performance of the services described in the attached letter
agreement under any of the Federal securities laws, under any other statute, at
common law or otherwise; (ii) that EGS will not be culpable for and will have no
liability to the Company for or with respect to any and all losses, claims,
damages or liabilities, joint or several, of the Company incurred in connection
with EGS' performance of the services described in the Agreement; and (iii) in
each case to reimburse EGS for all reasonable legal and other out-of-pocket
expenses (including the cost of investigation and preparation) as and when
incurred by EGS arising out of or in connection with any action, claim,
proceeding or investigation (whether initiated or conducted by the Company or
any other party) in connection therewith, whether or not resulting in any
liability (and whether or not EGS is defendant in, or target of, any such
action, claim, proceeding or investigation); provided, however, that the Company
shall not be liable to EGS pursuant to clauses (i) and (iii) above and the
Company's exculpation of EGS pursuant to clause (ii) above shall not apply in
any such case to the extent that any such loss, claim, damage or liability is
found in a final judgment by a court of competent jurisdiction to have resulted
from EGS gross negligence, bad faith, or willful misconduct or the gross
negligence, bad faith, or willful misconduct of any other indemnified person
hereunder, and amounts paid and reimbursement of expenses under (iii) above
shall be refunded. If for any reason the foregoing indemnification (including
reimbursement pursuant to clause (iii) above) or the exculpation is unavailable
to EGS or insufficient to hold it harmless (other than by reason of the proviso
to the preceding sentence), then the Company shall contribute to the amount paid
or payable by EGS as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Company on the one hand and EGS on the other hand but also the relative
fault of the Company and EGS as well as any relevant equitable considerations,
provided that, in no event, will EGS' aggregate contribution hereunder exceed
the amount of fees actually received by EGS pursuant to the Agreement. The
indemnity, exculpation, reimbursement and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall survive any termination of the Agreement and
shall be binding upon and extend to the benefit of any successors, assigns,
heirs and personal representatives of the Company and EGS.
If any action, claim proceeding or investigation is instituted or threatened
against EGS in respect of which indemnity may be sought against the Company
hereunder, EGS shall promptly notify the Company thereof in writing, but the
omission to notify the Company shall relieve the Company from any other
obligation of liability that the Company may have to EGS under this letter or
otherwise, only to the extent that such delay in
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notification materially prejudices the Company's defenses of such claim or
action. The Company shall assume the defense of such action, including the
employment of counsel and the payment of reasonable expenses. EGS shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of EGS unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action or the Company shall not have employed counsel to
have charge of the defense of such action or in the opinion of counsel to EGS
that there may be defenses available to it which are unique or separate to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of EGS), in any of which events such
fees and expenses shall be borne by the Company; provided, that the Company
shall only be responsible for the fees and expenses of one counsel in each
jurisdiction. The Company will not be liable hereunder for any settlement
thereof by EGS without the Company's written consent, which will not be
unreasonably withheld. The Company shall not, without the prior written consent
of EGS settle or compromise any claim, or permit a default or consent to the
entry of any judgment in respect thereof, unless such settlement, compromise or
consent includes the giving by the claimant to EGS of an unconditional and
irrevocable release from all liability in respect of such claim.
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MEMORANDUM
To: Xxxx X. Xxxxxx
From: Xxxxxxx X. Xxxxxxx
Date: July 5, 1999
Subject: SRS Advisory Fees
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This memorandum serves to confirm the determination, by mutual
agreement per the terms of my memorandum to you dated March 2, 1999, that EGS
will receive 3,500 shares of common stock of Sabratek for services rendered in
connection with the SRS Transaction (as defined in the memorandum). The terms of
issuance, registration and sale of such stock will follow the terms outlined in
the aforementioned memorandum.
Please confirm your understanding and acceptance of our agreement by
signing below and faxing a copy of this memorandum to me.
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Chief Financial Officer
Sabratek Corporation
