WRITER'S DIRECT LINE
(312) 750-3501
May 15, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Sabratek Corporation
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 1997
Dear Sir or Madam:
On behalf of Sabratek Corporation, a Delaware corporation (the
"Company"), we hereby submit electronically the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997.
Manually executed signature pages have been executed prior to the time
of this electronic filing and will be retained by the Company for five years.
Please contact the undersigned at (312) 750-3501 at your earliest
convenience with any questions you may have.
Very truly yours,
/s/ David S. Guin
David S. Guin
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1997
Commission File Number 1-11831
SABRATEK CORPORATION
(Exact name of registrant as specified in its charter)
36-3700639
(I.R.S. Employer Identification Number)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
5601 West Howard Street
Niles, Illinois 60714
(Address of Principal Executive Offices, Including Zip Code)
(847) 647-2760
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2) have
been subject to such filing requirements for the past 90 days.
Yes X No
As of May 12, 1997, 9,782,579 shares of Sabratek Corporation's Common Stock were
outstanding.
<PAGE>
SABRATEK CORPORATION
FORM 10-Q
For the Quarterly Period Ended March 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PART I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996.......................................... 3
Statements of Operations
Three Months Ended March 31, 1997 and 1996 (Unaudited).................................... 4
Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 (Unaudited).................................... 5
Notes to Financial Statements (Unaudited)................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................. 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................11
Item 2. Changes In Securities..........................................................................11
Item 6. Exhibits and Reports on Form 8-K...............................................................11
</TABLE>
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<PAGE>
SABRATEK CORPORATION
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------ -----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash & cash equivalents $6,372 $ 10,447
Short-term investments in marketable securities 3,492 4,352
Receivables:
Trade, net of allowance for doubtful accounts
of $275 and $146 at March 31, 1997 11,757 8,305
and December 31, 1996, respectively
Other - 125
-------- -------
Total receivables 11,757 8,430
------- -------
Inventories 6,326 5,049
Other current assets 819 586
-------- --------
Total current assets 28,766 28,864
------- -------
Property, plant and equipment, net 2,103 1,775
Intangible assets, net 4,424 41
Notes receivable 802 200
Long-term investments in marketable securities 2,001 2,012
Other 72 59
-------- ---------
$38,168 $32,951
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $168 $168
Current portion of capital lease obligation 107 132
Current portion of long-term debt 152 3
Accounts payable 2,133 2,247
Accrued expenses:
Payroll & commissions 1,446 1,265
Warranty 277 236
Other 731 86
Due to affiliated company 132 140
------ ------
Total current liabilities 5,146 4,277
------ ------
Long-term capital lease obligation 7 23
Long-term debt 1 1
-------- --------
Total liabilities 5,154 4,301
------ ------
Stockholders' equity:
Common stock, par value $.01, issued and 84 82
outstanding; 8,413,568 at March 31, 1997,
8,196,981 at December 31, 1996
Additional paid-in capital 46,210 42,891
Deferred compensation (16) (17)
Unrealized gains - 4
Accumulated deficit (13,264) (14,310)
-------- --------
Total stockholders' equity 33,014 28,650
------- -------
$38,168 $32,951
======= =======
</TABLE>
See accompanying notes to financial statements
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<PAGE>
SABRATEK CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
Three Months Ended
March 31,
--------------------------------
1997 1996
--------------------------------
Net sales $7,467 $2,944
Cost of sales 3,027 1,456
--------------------------------
Gross margin 4,440 1,488
Selling, general and administrative expenses 3,499 1,476
--------------------------------
Operating income 941 12
Other income (expense):
Interest income 143 2
Interest expense (5) (104)
Stock appreciation rights - (1,626)
Other (12) -
--------------------------------
Net income (loss) before taxes 1,067 (1,716)
Income tax expense 21 -
--------------------------------
Net income (loss) $1,046 $(1,716)
================================
Weighted average shares outstanding (1996 pro 9,536 6,610
forma)
================================
Net income (loss) per share (1996 pro forma) $0.11 $(0.25)
================================
See accompanying notes to financial statements.
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<PAGE>
SABRATEK CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
March 31 March 31,
1997 1996
----------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,046 $ (1,716)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 133 69
Stock appreciation rights expense - 1,628
Non-cash expense 31 -
Provision for bad debts 69 17
Changes in assets and liabilities
Receivables (2,989) (805)
Other receivable 125 -
Inventories (1,264) (197)
Accounts payable (773) (519)
Accrued expenses 660 132
Due to affiliated company (8) 11
Other (228) (119)
----------------------------------------------
Net cash used in operating activities (3,198) (1,499)
----------------------------------------------
Cash flows from investing activities:
Purchases of property, plant, equipment (206) (41)
Sale and maturity of marketable securities 867 -
Purchase of Rocap, Inc., net of cash acquired (1,283) -
Issuance of note receivable (602) -
----------------------------------------------
Net cash used in investing activities (1,224) (41)
----------------------------------------------
Cash flows from financing activities:
Repayment of short-term debt - (320)
Repayment of long-term debt (1) (1)
Proceeds from issuance of long-term debt - 1,590
Payments of capital lease, net (41) (40)
Proceeds from exercise of stock options and warrants 389 -
Proceeds from issuance of stock, net - 1,556
----------------------------------------------
Net cash provided by financing activities 347 2,785
----------------------------------------------
Increase (decrease) in cash (4,075) 1,245
Cash and cash equivalents at beginning of period 10,447 8
----------------------------------------------
Cash and cash equivalents at end of period $ 6,372 $ 1,253
==============================================
</TABLE>
See accompanying notes to financial statements
- 5 -
<PAGE>
SABRATEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 and 1996
(UNAUDITED)
(1) Financial Statements
The financial statements included herein have been prepared by the
Company, without audit, and include all adjustments of a normal recurring nature
which are, in the opinion of management, necessary for fair presentation of the
results of operations for the three month period ended March 31, 1997 pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures in these financial statements are adequate
to make the information presented not misleading. These financial statements
should be read in conjunction with the Company's financial statements and the
notes thereto included in the Company's Form 10-K filed by the Company with the
Securities and Exchange Commission for the year ended December 31, 1996. The
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
(2) Acquisition
On February 25, 1997, the Company purchased substantially all of the
assets of Rocap, Inc., a Massachusetts corporation ("Rocap"), which produces and
markets pre-packaged injectable prescription pharmaceuticals and pre-filled
flush syringes. Terms of the purchase are summarized as follows:
1) $100,000 in cash.
2) Forgiveness of $300,000 in debt owed to the Company as evidenced by a
bridge loan agreement entered into on January 15, 1997.
3) $2,900,000 in common stock of the Company which is contingently valued
at 131,593 shares. Final shares deliverable will be determined by the
Company's stock price at July 1, 1997. The Company has the option to
pay in cash rather than shares.
4) Assumption of $650,078 in net liabilities.
Using the purchase method of accounting, the purchase price was
allocated to assets acquired and liabilities assumed based on their estimated
fair values. This treatment resulted in the excess of the purchase price over
the estimated fair value of net tangible assets acquired being recorded as
goodwill of $4,404,570. The results of operations acquired have been included in
the statement of operations since the date of acquisition.
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<PAGE>
(3) Notes Receivable
The Company has loaned $802,000 to two non-affiliated corporations in
the form of four separate Non-Negotiable Promissory Notes due upon demand at
various dates between May 1, 1997 and February 28, 1999. The notes bear interest
at a rate of 5.5% for $600,000 of the principal amount and 6% for $202,000 of
the principal amount.
(4) Supplemental Disclosures of Cash Flow Information
Cash paid for interest during the three month periods ended March 31,
1997 and 1996 was $5,138 and $27,255, respectively.
(5) Stock Options
During the three month period ended March 31, 1997, the Company issued
8,628 shares, in aggregate, of common stock upon the exercise of stock options
pursuant to the Sabratek Corporation Amended and Restated 1993 Stock Option Plan
(the "Plan"). The option exercises resulted in proceeds to the Company of
$67,279, in aggregate.
Options for a total of 226,304 shares of common stock were granted
during the period pursuant to the Plan at an exercise price equal to the fair
market value on the date of grant. The stock options vest over a multi-year
period.
(6) Warrants
During the three month period ended March 31, 1997, the Company issued
76,367 shares, in aggregate, of common stock upon the exercise of warrants. The
warrant exercises resulted in proceeds to the Company of $322,000, in aggregate.
(7) Subsequent Events
In April, 1997, the Company completed a public offering for 1,291,486
primary shares of common stock and 176,574 shares of common stock by and for the
account of existing stockholders at a price to the public of $18.00. Proceeds to
the Company were $21,968,177 after underwriters' discounts and commissions.
(8) Recent Accounting Pronouncement
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" ("EPS"). Implementation of SFAS No. 128 is required for the periods
ending after December 15, 1997. The standard establishes new methods for
computing and presenting EPS and replaces the presentation of primary and
fully-diluted EPS with basic and diluted EPS. The new methods under this
standard are not expected to have a significant impact on the Company's EPS
amounts.
- 7 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since its inception in 1989, through 1991, the Company was in its
development stage and engaged primarily in research and development product
engineering and activities related to obtaining clearance from the FDA for its
first product, the 3030 Stationary Pump. The Company has a limited operating
history and, although profitable for the last three calendar quarters, has
experienced significant operating losses since inception. Upon receiving FDA
clearance for the 3030 Stationary Pump in mid-1992, the Company focused its
efforts on creating a domestic and international sales and marketing network, as
well as a manufacturing capability, to assist in the distribution of its first
product to the alternate-site health care market. Concurrent with these sales
and marketing activities, the Company continued to fund the research,
development and regulatory clearance activities of other device and software
products.
The Company commercially launched the 6060 Ambulatory Pump and related
disposable supplies in late 1995 and its MediVIEW and PumpMaster in late 1996.
Since then, the Company has continued its sales and marketing activities
domestically and internationally for the distribution of its products and
continued to fund the research and development of additional products. On
Februray 25, 1997, the Company acquired substantially all the assets of Rocap
which produces and markets pre-packaged injectable prescripton pharmaceuticals
and pre-filled flush syringes. In addition, the Company derives revenues from
the rental of its multi-therapy infusion devices, servicing of products, and the
sale of extended warranties.
The Company sells its products both directly to alternate-site and
acute-care providers, as well as to third-party distributors. The Company's
distributors and customers may purchase several months of inventory at any one
time which may cause fluctuations in quarterly revenues. Quarterly fluctuations
may also result from other factors. The Company also markets and sells its
products internationally and, as a result, its revenues may be affected by
fluctuations in exchange rates. Failure to obtain regulatory approval for the
distribution of new products domestically or in international markets, or
regulatory problems in general, may affect the revenues of the Company.
Results of Operations
Three months ended March 31, 1997 vs. Three months ended March 31, 1996
Net Sales. Net sales increased $4.6 million to $7.5 million for the
three month period ended March 31, 1997 as compared to the three month period
ended March 31, 1996, an increase of 159%. The increase is attributable to
several factors; incremental sales volume of the 3030 Stationary Pump and the
6060 Ambulatory Pump and their related disposables, an increase in the average
per unit selling price due to a higher ratio of direct sales versus distributor
sales, sales of the Rocap product line (Rocap was acquired in February, 1997),
and the addition of the MediVIEW and PumpMaster products.
Cost of Sales. Cost of sales increased $1.5 million to $3.0 million for
the three month period ended March 31, 1997 as compared to $1.5 million for the
three month period ended March 31, 1996, an increase of 100%. Approximately $1.4
million of the increase represents direct product costs
- 8 -
<PAGE>
associated with incremental sales-volume. The balance of the increase is
attributable to costs relating to the expansion of production capacity.
Gross Margin. Gross margin increased $2.9 million to $4.4 million for
the three month period ended March 31, 1997 as compared to $1.5 million for the
three month period ended March 31, 1996, an increase of 193%. The increase is
due primarily to increased unit sales volume and the variable contribution
margin thereon as well as higher average pricing levels and a more favorable
product mix of the 6060 Ambulatory Pump volume to the 3030 Stationary Pump
volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.0 million to $3.5 million for the three
month period ended March 31, 1997 as compared to $1.5 million for the three
month period ended March 31, 1996, an increase of 133%. The increase is due to
the expansion of the Company's direct sales force and clinical support staff and
the associated travel expenses, as well as greater commission expense associated
with increased sales. Also contributing to the increase was the addition of
administrative and management personnel, as well as the expansion of the Niles,
Illinois facility. Selling, general and administrative expenses decreased as a
percent of sales to 47% for the three month period ended March 31, 1997 from 52%
for the three month period ended March 31, 1996.
Operating Income. Operating income increased $929,000 to $941,000 for
the three month period ended March 31, 1997 as compared to $12,000 for the three
month period ended March 31, 1996. Operating income as a percent of sales
increased to 13% for the three month period ended March 31, 1997 from less than
1% for the three month period ended March 31, 1996. The increase in operating
income was due to incremental gross margin generated by increased sales volume
of new and existing products and higher average selling prices as discussed
above.
Interest Income. Interest income increased to $143,000 for the three
month period ended March 31, 1997 as compared to $2,000 for the three month
period ended March 31, 1996. The increase reflects the investment return of
unused proceeds from the Company's initial public offering which occurred in
June, 1996.
Interest Expense. Interest expense decreased to $5,000 for the three
month period ended March 31, 1997 as compared to $104,000 for the three month
period ended March 31, 1996. The decrease is attributable to the elimination and
conversion of all convertible debt outstanding in conjunction with the Company's
initial public offering in June, 1996.
Stock Appreciation Rights Expense. No stock appreciation rights expense
is recorded for the three month period ended March 31, 1997. The stock
appreciation rights expense for the three month period ended March 31, 1996 of
$1.6 million was non-recurring.
Income Tax Provision. Income tax provision of $21,000 for the three
month period ended March 31, 1997 reflects an effective rate for Alternative
Minimum Tax. The Company expects allowable net operating loss carryforwards to
offset pretax income for its 1997 tax year. Due to net losses for the three
month period ended March 31, 1996, the Company did not incur any federal or
state income tax liability for the period.
- 9 -
<PAGE>
Net Income (Loss). Net income for the three month period ended March
31, 1997 was $1.0 million as compared to a net loss of $1.7 million for the
three month period ended March 31, 1996. Net income for the three month period
ended March 31, 1997 was achieved primarily as a result of incremental gross
margin generated by increased unit sales volume of new and existing products and
higher average selling prices. Also contributing to net income was increased
interest income from the investment of excess cash and the absence of interest
expense relating to convertible debt.
Liquidity and Capital Resources
In June, 1996, the Company completed an initial public offering with
proceeds of $26.7 million, after underwriters' discounts and commissions. As of
March 31, 1997, cash balances were invested in U.S. Treasury Bills, U.S.
Treasury Notes, a short-term bond mutual fund, and a money market account.
As of March 31, 1997, the Company had approximately $11.9 million in
cash, cash equivalents, short-term and long-term investments in marketable
securities, and had net working capital of approximately $24.0 million. During
the three months ended March 31, 1997, the Company entered into a credit
agreement with up to $9.5 million of available borrowing. Subsequent to March
31, 1997 the Company completed a secondary public offering with proceeds of
approximately $22.0 million, after underwriters' discounts and commissions.
The Company used cash in its operations of approximately $3.2 million
for the three months ended March 31, 1997. Cash used in operations for the
period exceeds the Company's operating results for the same period due,
primarily, to the growth in trade accounts receivable and inventories as a
result of actual and anticipated growth in sales volume.
The Company believes that its financial assets will be sufficient to
fund its operations for the foreseeable future. Future liquidity and capital
resources could be adversely influenced by certain factors including the
Company's dependence on a relatively new customer base, regulatory or
legislative changes pertaining to health care, product liability exposure
regarding the delivery of medication, dependence on future product development,
and others. There can be no assurance that the Company will not require
additional financing and may, in the future, seek additional funds through bank
facilities, debt or equity offerings and to the extent such additional financing
is not available, the Company could suffer material adverse effects to its
financial condition and the results of its operations.
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<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On February 5, 1997, SIMS Deltec filed a complaint in the
United States District Court for the District of Minnesota alleging that
Sabratek's manufacture, use and/or sale of the MediVIEW software in conjunction
with its infusion pumps infringes on a patent entitled "Systems and Methods of
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. Subsequently, SIMS Deltec filed an amended
pleading that raised additional claims against Sabratek and two of its employees
including trade secret misappropriation, unfair competition and interference
with SIMS Deltec's customers. SIMS Deltec seeks injunctive relief, unspecified
monetary damages and costs. In addition, SIMS Deltec filed for a preliminary
injunction against Sabratek seeking to prevent on a preliminary basis Sabratek's
manufacture and sale of the MediVIEW system. The Company and the individual
defendants intend to vigorously defend against the allegations made by SIMS
Deltec. Protracted litigation or an adverse outcome in this matter could have a
material adverse impact on the Company's business, financial condition and
results of operations.
Item 2. Changes In Securities
During the period covered by this report, the Company issued
the following securities without registration under the Securities Act of 1933,
as amended.
From January 14, 1997 to March 31, 1997, the Company issued
76,367 shares of common stock upon the exercise of warrants and options not
covered by a registration statement. The Company received proceeds of
approximately $322,000 upon the exercise of such warrants. All such issuances of
common stock were exempt from registration pursuant to Section 4(2) of the
Securitise Act of 1933, as amended.
On February 25, 1997, the Company issued 131,593 shares of
Common Stock valued at $2,900,000 to Rocap, Inc. as partial consideration for
the acquisition of substantially all of the assets of Rocap. This sale was
exempt from registration in reliance on Section 4(2) of the Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Page Incorporation
Exhibit Number (if by Reference
Number Description of Documents applicable) (if applicable)
------ ------------------------ ----------- ---------------
<C> <S> <C> <C>
2
3.1 Articles of Incorporation +
3.2 ByLaws +
10.1 Agreement with Americorp Financial, Inc. re: Leasing +
Services, dated March 22, 1995
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
10.1.1 Amendment, dated September 16, 1996, to Agreement +++
with Americorp Financial, Inc.
10.2 Agreement with Clintec Nutrition Company re: +
Development Agreement, dated September 1, 1995
10.3 Intentionally Omitted
10.4 Intentionally Omitted
10.5 Distributorship Agreement with CO-Medical, Inc., +
dated February 17, 1992
10.6 Distributorship Agreement with Clinical Technology +
Inc., dated August 1, 1992
10.7 Intentionally Omitted
10.8 Intentionally Omitted
10.9 Distributorship Agreement with Advanced Medical, +
Inc., dated September 1, 1991
10.10 Distributorship Agreement with Healthcare +
Technology, dated October 9, 1991
10.11 Intentionally Omitted
10.12 Intentionally Omitted
10.13 Pump Contract with Chartwell Home Therapies, dated +
November 22, 1993
10.14 Sales Agreement with Pharmacy Corporation of +
America, dated March 17, 1995
10.15 Sales & Marketing Agreement with Alpha +
Group, dated November 6, 1995
10.16 Foreign Distributorship Agreement with MED-O-GEN +
INC., dated September 22, 1995
10.17 Foreign Distributorship Agreement with Yoon Duk +
Separation Technology, dated April 17, 1995
10.18 Foreign Distributorship Agreement with Upwards +
Biosystems Ltd., dated March 8, 1995
10.19 Foreign Distributorship Agreement with Grupo Grifols, +
S.A., dated September 17, 1993
10.20 Foreign Distributorship Agreement with JMS +
Company, dated March 22, 1996
10.21 Foreign Distributorship Agreement with Brasimpex +
10.22 Foreign Distributorship Agreements with Medicare (s) +
PTE LTD., dated February 10, 1995
10.23 Intentionally Omitted
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <C> <C>
10.24 Intentionally Omitted
10.25 Master Lease Agreement with Comdisco, Inc., dated +
August 9, 1994
10.26 Stock Option Plan +
10.27 Lease for Real Property located at 5601 West Howard, +
Niles, Illinois, dated as of May 31, 1994
10.27.1 Amendment, dated October 30, 1996, to Lease for Real +++
Property located at 5601 West Howard, Niles, Illinois
10.28 Employment Agreement for K. Shan Padda +
10.29 Employment Agreement for Anil Rastogi +
10.30 Asset Purchase Agreement, dated February 25, 1997, ++
by and among Sabratek Corporation; Rocap, Inc. and
Elliott Mandell
10.31 Employment Agreement for Stephen L. Holden ++++
10.32 Employment Agreement for Elliott Mandell ++
10.33 Lease Agreement for property located at 11 Sixth ++++
Road, Woburn, Massachusetts, dated February 1, 1997
10.34 Lease Agreement for property located at 5 Constitution ++++
Way, Woburn, Massachusetts, dated June 26, 1995
10.35 Lease Agreement for property located at 1629 Prime E-1
Court, Suite 100, Orlando, Florida, dated March 11,
1997
11.1 Statement re: computation of per share earnings E-16
27 Financial Data Schedule E-17
</TABLE>
+ Incorporated by reference to the Company's Registration Statement on
Form S-1, declared effective by the Commission on June 21, 1996
(File No. 333-3866).
++ Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Commission on March 11, 1997.
+++ Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the Commission
on March 31, 1997.
++++ Originally filed as an Exhibit to the Registration Statement on Form
S-1 on March 17, 1997.
(b) Reports on Form 8-K
The Company's current report on Form 8-K, dated February 25, 1997
(filed March 12, 1997), is incorporated herein by this reference.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SABRATEK CORPORATION
Date: May 14, 1997 By: /s/ K. Shan Padda
------------------------
K. Shan Padda
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the undersigned, in his capacity as the principal
financial officer of the registrant.
Date: May 14, 1997 By: /s/ Stephen L. Holden
----------------------------
Stephen L. Holden
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the undersigned, in his capacity as the chief
accounting officer of the registrant.
Date: May 14, 1997 By: /s/ Scott Skooglund
--------------------------
Scott Skooglund
Chief Accounting Officer
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<PAGE>
EXHIBIT 10.35
Airport III LEASE AGREEMENT
THIS AGREEMENT, made and entered into effective the 11th day of March, 1997, at
Orlando, Florida between Weeks Realty, L.P. (Lessor) and Sabratek Corporation
d.b.a. Rocap, a division of Sabratek Corporation (Lessee).
WITNESSETH:
Premises
- --------
1. Lessor, in consideration of the payments to it by Lessee of the rents herein
contained, which Lessee agrees to promptly pay, and in consideration of the
performance by Lessee of the covenants hereinafter provided, which Lessee agrees
to fully and promptly perform, does hereby lease to Lessee:
A) Approximately 14,400 square feet of space, hereinafter referred to
as the "Leased Premises," as shown outlined in red on the plan attached hereto
as "Exhibit A" and incorporated herein by reference; located at 1629 Prime
Court, Suite 100, Orlando, FL 32809 and known as Airport Commerce Center (Orange
County, Florida) according to the present system of naming streets and numbering
buildings.
B) The Leased Premises constitutes 33% of the total leasable area
within the Building.
Term
- ----
2. The term of this Lease shall be for a period of 120 months beginning June 1,
1997, and ending on May 31, 2007. This period shall be referred to as the "Lease
Term".
Rental
- ------
3. During the first year of the Lease Term as Total Rental for the use and
occupancy of the Leased Premises, Lessee shall pay to Lessor in lawful money of
The United States of America the sum of $104,400 per year payable at the rate of
$8,700.00 per month, plus Florida State sales tax, in advance on the first day
of each and every month during said lease term. The Total Rental includes the
annual Operating Expense Factor of $1,500.00 described in Paragraph 6,
"Operating Expenses" of this lease, and an annual Base Rent of $7,200.00.
A) Lessee has deposited with Lessor simultaneously with Lessee's
execution of this lease, the sum of $8,700.00 plus Florida State sales tax for a
total of $9,222.00 which will be credited to Lessee for payment of the first
month's rent.
B) If this lease commences on a day other than the first day of the
month, the first monthly installment of rent shall be adjusted and prorated so
that Lessee shall only pay rent for the actual number of days in the first month
of said term. For all other months Lessee shall pay the full monthly installment
on the first day of each and every month.
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<PAGE>
C) Rent shall be mailed or delivered by Lessee to Lessor at such place
as Lessor may designate in writing, and rent shall be payable promptly on the
first day of each and every month without prior demand therefor by Lessor.
D) Lessee hereby agrees with Lessor that in the event that rental and
other sums due hereunder are received after the tenth (10th) day of the month in
which they are due, Lessee shall
E) The Base Rental as set forth above in this paragraph shall be
increased by twelve percent (12%) beginning on the sixth year of the Lease Term.
Additional Rent
- ---------------
4. In addition to rent set forth herein, all other payments to be made by Lessee
to Lessor (including, but not limited to, reimbursement for any special or
extraordinary services requested or required by Lessee) shall be deemed to be
and shall become additional rent hereunder, whether or not the same be
designated as such; and shall be due and payable within thirty (30) days
following demand by Lessor or together with the next succeeding installment of
rent, whichever shall first occur, together with sales tax thereon; and Lessor
shall have the same remedies for failure to pay the same as for a non-payment of
rent.
Security Deposit
- ----------------
5. Lessee shall, upon the execution of this lease, deposit with Lessor as
security for the payment of rent and the performance of all other covenants to
be performed by Lessee, the sum of $9,222.00. Said security deposit shall be
non-interest bearing. If Lessee defaults in the payment of any monthly rental
installment within five (5) days after receipt of written demand therefor or
fails to perform any other covenant within ten (10) days after receipt of
written demand therefor, Lessor, at its option, may apply sufficient sums from
the security deposit towards payment thereof. If Lessor elects to so apply the
security deposit, or any part thereof, Lessee shall be obliged to immediately
replenish the security deposit for the amount so applied by Lessor. The total
security deposit shall be held by Lessor until expiration of the initial term or
until expiration of any renewal term if any renewal option which exists is
exercised, and the unused portion of the security deposit not having been used
to repair and/or restore any damage resulting from Lessee's actions or neglect
to the Leased Premises shall be refunded by Lessor to Lessee at the end of the
term of this lease or any renewal thereof. The security deposit shall not be
applied to rent except upon approval of Lessor.
Operating Expenses
- ------------------
6. The Total Rental set forth in Paragraph 3, "Rental" above includes the
"Operating Expense Factor" equal to $1.25 per square foot of the Leased
Premises, per year to cover Lessee's prorata share (see Paragraph 1.) of the
projected Operating Expenses of the Building, site and the parking and landscape
areas for the calendar year in which this Lease commences. The term "Operating
Expenses" used in this Lease Agreement represents the total annualized cost of
operating the property including, but is not limited to, common and exterior
area Maintenance and Service costs, Real Estate Taxes and Assessments, Insurance
Premiums, and other reasonable costs associated with management and operation of
the Property. Costs shall not include depreciation on any improvement, any major
capital expenses or improvements, particularly major re-roofing or pavement
re-surfacing work; moving or relocation
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<PAGE>
costs; legal or collection costs; remodeling costs; commissions and salaries of
employees of the Property. Excepting adjustments resulting from increases in
Real Estate taxes and insurance premiums, annual increases in the Operating
Expense Factor will be limited to five percent (5%) cumulatively.
A) Specifically, Common Maintenance and Service costs shall include
routine cleaning and maintenance of the exterior of the Leased Premises to
include periodic window cleaning; the cleaning, maintenance and sweeping of the
parking lot and sidewalks; the care and maintenance of the landscaping and
landscaped areas to include the retention pond areas and irrigation systems;
common area security lighting and other power charges, if any; domestic and
irrigation water, sanitary sewer charges and assessments; routine rubbish
collection, if any; and any other costs customarily considered reasonable as
common maintenance and service costs.
B) Real Estate Taxes and Assessments shall include real estate taxes or
any new and different taxes, and assessments levied or charged against the
entire land and building as a completed office building. All sales tax on rents
and personal property taxes charged or levied against Lessee's furniture,
fixtures and equipment in the Leased Premises shall be paid by Lessee.
C) Insurance costs shall include the cost of insuring the Building
against loss by fire or casualty with extended coverage, including insurance of
rents, in an amount(s) determined by the Lessor. In the event the cost of
premiums on said fire and extended insurance increases due to the hazardous
nature of the use and occupancy by Lessee of the Leased Premises, then the
entire increase in insurance cost shall be paid by Lessee in a lump sum within
thirty (30) days following receipt of invoice from the Lessor.
D) Commencing on the first day of the calendar year following lease
commencement, and continuing thereafter throughout the term of this lease and
any renewal, the Operating Expense Factor of the Total Rental set forth in
Paragraph 3, "Rent" may be periodically adjusted to reflect Lessee's prorata
share of actual or estimated decreases or increases in Operating Expenses.
Lessor shall provide the cost data upon which the determination of costs and
increases are based in a format it shall determine to be consistent with
reasonable and customary business practice. In the event that actual operating
expenses for a preceding period are less than the sum ("Factor") paid by the
Lessee under this provision, Lessor shall refund or credit such excess to the
account of the Lessee; if the sum collected is less than the actual operating
expenses, Lessee shall reimburse Lessor for such variation upon invoice therefor
accompanied by supporting data.
Construction
- ------------
7. The Lessor hereby agrees to complete the improvements to the Leased Premises
as shown in Exhibit "B" attached hereto. Lessor shall make its best efforts to
complete construction of the premises by June 1, 1997 but if the construction is
not substantially completed and the Leased Premises are not available for
occupancy by said date, Lessee shall have no claim against Lessor due to such
delay, excepting that the term of this lease shall not commence until the Leased
Premises are deemed to be available to Lessee. The Leased Premises shall be
deemed to be available to Lessee when construction by Lessor is substantially
completed (notwithstanding the necessity of minor repairs and adjustments still
to be made by the Lessor, or notwithstanding that Lessee has not completed
installation and/or connection of his fixtures and/or equipment) or when Lessee
actually occupies the Leased Premises whichever occurs first.
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<PAGE>
Utilities
- ---------
8. Lessee shall pay for electric power consumed at its Leased Premises, which
shall be separately metered.
A) Lessor shall furnish water and sewer services to the Leased Premises
and Lessee shall reimburse Lessor for these charges as part of the "Operating
Expense Factor" (Paragraph 6.) in accordance with an allocation of total usage
(number of gallons per day) for the Leased Premises.
B) Lessor reserves the right to install, at Lessor's discretion,
separate meters for any public utility.
C) Lessee shall arrange and pay for trash collection services at the
Leased Premises.
Insurance
- ---------
9. Lessor shall arrange to insure the Building of which the Leased Premises form
a part against loss by fire or casualty with extended coverage in an amount
determined by the Lessor and said policies shall include a standard waiver of
subrogation clause against Lessee.
A) Lessee shall at all times and at its cost maintain comprehensive
public liability insurance on the Leased Premises with limits of at least
$1,000,000.00 for personal injury, and death, and property damage. Said public
liability policies shall carry both the names of Lessor and Lessee as the named
insured as their respective interest may appear and Lessee shall provide Lessor
with a copy thereof prior to the lease commencement date and shall exhibit
receipts showing payment of premiums on request from Lessor. Such policy shall
further provide that the insurer shall not cancel, alter or allow expiration or
other termination thereof without at least thirty (30) days' prior written
notice from such insurer to Lessor.
B) Lessee shall at all times and at its expense maintain insurance
against loss by fire and other casualty with extended coverage on its furniture,
fixtures, inventory, equipment, supplies and personal property, and said
policies shall include a standard waiver of subrogation clause against Lessor.
Use of Premises
- ---------------
10. Lessee shall use and occupy the Leased Premises only for use as an office,
warehouse and production facility for medical systems and pharmaceutical
products and for no other purpose without Lessor's prior written consent.
A) No routine repair or servicing of any automobile or truck shall be
allowed in the Leased Premises, in any parking or loading areas, roadways or
other areas serving the Building or within the Complex. No vehicle abandoned or
disabled or in a state of non-operation or disrepair shall be left upon the
property of the Lessor, and Lessee shall enforce this restriction against
Lessee's employees, agents, visitors, licensees, invitees, contractors and
customers. Should Lessor determine that a violation of this restriction has
occurred, Lessor shall have the right to cause the offending vehicle, equipment,
trailer or machinery to be removed from Lessor's property, and all costs of such
removal shall be the obligation
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<PAGE>
of the Lessee responsible for such vehicle under the terms of the lease and
shall be reimbursed to the Lessor by Lessee within ten (10) days of written
notice to Lessee.
B) Lessor hereby grants to Lessee, its employees, guests and invitees
the right to use the off-street parking lot on which the Building is situated.
Said parking lot shall be used by the Lessee, its employees, guests and
invitees, in common with other lessees of said Building, their employees, guests
and invitees, and in common with the Lessor and its employees, guests and
invitees. If the Lessor designates a portion of the parking lot for employee
parking, employees of the Lessee shall use that portion of the lot thereby
leaving the remaining parking spaces in the lot open for guest in and out
traffic. At all times in the absence of designated parking, Lessee, its
employees and guests, shall use those parking areas closest to Lessee's premises
to the extent possible. Lessee shall have thirty-five parking spaces of which
five shall be reserved for the exclusive use of Lessee.
C) Automobiles and/or trucks shall not routinely be stored in the
Leased Premises.
Interruption of Service
- -----------------------
11. Lessor does not warrant that any services to be provided by Lessor will be
free from interruption due to causes beyond Lessor's reasonable control. In the
event of temporary interruption of services or unavoidable delay in the making
of repairs, the same shall not be deemed an eviction or disturbance of Lessee's
use and possession of the Leased Premises nor render Lessor liable to Lessee for
damage by abatement of rent or otherwise, nor shall the same relieve Lessee from
performance of Lessee's obligations under this lease.
Waiver of Claim
- ---------------
12. Subject to the limitations in compliance with paragraph 27 of this Lease,
Lessee waives and releases all claims against Lessor, its agents, employees, and
servants, in respect of, and they shall not be liable for, injury to person or
damage to property sustained by Lessee or by any occupant of the Leased Premises
or the Building, or any other person occurring in or about the Building, or the
Leased Premises resulting directly, or indirectly, from any existing or future
condition, defect, matter or thing in the Leased Premises, or the Building or
any part of it, or from equipment or appurtenance therein, or from accident, or
from any occurrence, act, negligence or omission of any lessee or occupant of
the Building, or of any other person; but nothing in the paragraph shall be
deemed to relieve Lessor from liability for damages or injuries to person or
property caused by or resulting from the negligence of Lessor, its agents,
servants or employees. This paragraph shall apply also to damage caused as
aforesaid or by flooding, sprinkling devices, air conditioning apparatus, water,
frost, steam, excessive heat or cold, falling objects, broken glass, sewage,
gas, odors or noise, or the bursting or leaking of pipes or plumbing fixtures
and shall apply equally whether any such damage results from the act or
circumstance, whether of a like or wholly different nature. If any such damage
to the Leased Premises or to the Building or any equipment or appurtenance
therein, or to Lessee thereof, results from any act or omission or negligence of
Lessee, its agents, employees or invitees. Lessor, at Lessor's option, may
repair such damage and Lessee shall, within ten (10) days following demand by
Lessor, reimburse Lessor forthwith for all cost of such repairs and damages both
to the Building and to the lessees or occupants thereof, in excess of the
amount, if any, paid to Lessor under insurance covering such damages. All
property in the Building or in the Leased Premises belonging to Lessee, its
agents, employees or invitees, or to any occupant of the Leased Premises, shall
be there at the risk of Lessee or other person only, and Lessor shall not be
liable
- E-5 -
<PAGE>
for damage thereto or theft, misappropriation, or loss thereof. Lessee agrees to
hold Lessor harmless and to indemnify it against claims and liability for
injuries to all persons and for the damages to, due to act of omission of
Lessee, its agents, employees, guests, customers, clients and invitees.
Care of Premises
- ----------------
13. Lessee shall, throughout the lease term, take good care of the leased
premises and fixtures, appurtenances, doors and windows, and mechanical
equipment therein, excepting that which may be covered by applicable warranty,
and, at its sole cost and expense, make all non-structural repairs thereto and
perform maintenance thereon as and when needed to preserve them in good working
order and condition, reasonable wear and tear from use and damage from the
elements, fire or other casualty, excepted. Notwithstanding the foregoing, all
damage or injury to the Leased Premises or to any other part of the Building, or
to its fixtures, equipment and appurtenances, whether requiring structural or
non-structural repairs, caused by or resulting from carelessness, omission,
neglect or improper conduct of Lessee, its servants, employees, invitees or
licensees, shall be repaired by the Lessee at its sole expense to the
satisfaction of Lessor reasonably exercised. Lessee shall also repair all damage
to the Building and the demised premises caused by the moving of Lessee's
fixtures, furniture or equipment. All the aforesaid repairs shall be of quality
or class equal to the original work or construction. If Lessee fails after ten
(10) days' notice to proceed with due diligence to make repairs required to be
made by it, the same may be made by Lessor at the expense of Lessee. Lessee
shall give Lessor prompt notice of any defective condition in the Leased
Premises which it is required to repair or replace. Lessor shall remedy the
condition with due diligence but at the expense of Lessee if repairs are
necessitated by damage or injury attributable to Lessee, Lessee's servants,
agents, employees, invitees, or licensees as aforesaid. All repair work and/or
modifications made to the Leased Premises must be made by licensed and bonded
contractor(s) approved by Lessor.
A) Lessee shall be responsible for the cost of all maintenance and
repairs (except as may be covered under applicable warranty) to the heating,
ventilating and air conditioning system(s) serving the Leased Premises. Lessor,
at Lessor's option, may elect to enter into a reasonable service contract for
the periodic professional inspection and maintenance of all the heating,
ventilating and air conditioning equipment serving the building in which Leased
Premises is a part. If Lessor so elects, Lessee shall pay its allocated share of
the cost of the service contract.
B) At commencement of this Lease, Lessor shall supply the Leased
Premises with the required lamps, bulbs, ballasts and starters, but replacement
thereof shall be at Lessee's expense.
C) Lessor agrees that during the full term of this lease it will, at
its own expense, keep the exterior and structural parts of the Building in good
condition and repair, and that it will make such repairs promptly as they become
necessary. Exterior repairs shall be deemed to include exterior walls,
foundations, pavement, roof, gutters, downspouts, and plumbing which is a part
of the structure or foundation. Lessor shall make such interior replacements as
are necessitated by equipment failure and repairs and replacements necessitated
by fire or perils covered by extended coverage clauses (whether or not caused by
the active or passive negligence of the Lessee) for which damage or loss
insurance is carried by the Lessor and for which insurance proceeds are
recovered, including interior reconstruction and/or redecorating necessitated by
such fire or other perils.
- E-6 -
<PAGE>
D) Lessor shall arrange to keep the exterior parking lot, driveways,
and sidewalks clean and free from rubbish and other objects and in good repair,
arrange for water and sewer and other services necessary for the operation and
maintenance of the Property including but not limited to grass cutting and
landscape maintenance.
Compliance with Laws and Regulations
- ------------------------------------
14. Lessee shall comply with all Federal, State, County and City laws,
ordinances, rules and regulations affecting or respecting the use or occupancy
of the Leased Premises by the Lessee or the business at any time thereon
transacted by the Lessee, and Lessee shall comply with all rules which may be
hereafter adopted by Lessor for the protection, welfare and orderly management
of the Building and its lessees or occupants.
Holding Over
- ------------
15. Upon expiration of this lease, Lessee's continued possession of the Leased
Premises shall be deemed a month-to-month tenancy terminable by Lessor or Lessee
upon fifteen (15) days' notice.
Signs
- -----
16. Lessee shall not install or locate signs in the windows and doors of the
Leased Premises or any other part of the Building or grounds without first
securing Lessor's written consent. Any signs installed by Lessee with Lessor's
permission shall be maintained in good repair and shall be removed and any
building or grounds damage therefrom restored by Lessee at expiration of this
lease at Lessee's expense. Lessee shall have Lessor's permission to install a
freestanding sign at the entrance to building D. Size and design to be approved
by Lessor.
Warranty of Quiet Enjoyment
- ---------------------------
17. Lessee, upon paying the rents and keeping and performing the covenants of
this lease to be performed by Lessee, shall peacefully and quietly hold, occupy,
and enjoy said premises during said term or any renewal thereof without any let,
hindrance or molestation by Lessor or any persons lawfully claiming under
Lessor.
A) Lessee shall not commit nor suffer any waste upon the Leased
Premises, nor cause nor allow any nuisance or other act or thing which does or
may disturb the quiet enjoyment of any other Lessee in the Building containing
the Leased Premises or any other building in the Complex of which the Leased
Premises are a part, including without limitation the parking, service and
landscaped areas of such Complex.
B) Lessee shall not make or allow any noise or odor to be made upon the
Leased Premises, whether as a part of Lessee's normal operations or otherwise,
which will or might disturb other Lessees.
Assignment and Subletting
18. Lessee shall not assign this lease nor sublet all or any part of the Leased
Premises without first securing Lessor' written consent. If Lessor does consent
to an assignment or subletting, the assignee
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<PAGE>
and/or sublessee shall first assume in writing all of the obligations of Lessee
under this lease and Lessee shall, for the full term of this lease, continue to
be jointly and severally liable with such assignee or sublessee for the payment
of rents and the performance of all obligations required of Lessee under this
lease. Lessee hereby acknowledges that the use to which the Leased Premises are
put and the compatibility of any occupant of the Leased Premises with our
lessees, and the ability to pay rent when due are of prime importance and
significance to the Lessor in the operation and maintenance of the Building in
which the Leased Premises are located.
Fire or Other Casualty
- ----------------------
19. In the event the Leased Premises shall be destroyed or so damaged or injured
by fire or other casualty during the life of this lease, whereby the same shall
be rendered untenantable, then Lessor shall have the right to render such
premises tenantable by repairs within one hundred twenty (120) days therefrom
and this lease shall not terminate. If said premises are not rendered tenantable
within said time, it shall be optional with either party hereto to cancel this
lease, and in the event of such cancellation, the rent shall be paid only to the
date of such fire or casualty. The cancellation herein mentioned shall be
evidenced in writing. During any time that the premises remain untenantable due
to causes set forth in this paragraph, the rent or a just and fair proportion
thereof shall abate.
Eminent Domain
- --------------
20. If the whole of the Leased Premises shall be taken by any public authority
under the power of eminent domain, or if so much of the Building or grounds
shall be taken by any such authority under the power of eminent domain so that
the Lessee cannot continue to operate its business in the Leased Premises, then
the term of this lease shall cease as of the day possession is taken by such
public authority and the rent shall be paid up to that day with proportionate
refund by Lessor of any such rent as may have been paid in advance or deposited
as security. The amount awarded for any taking under the power of eminent domain
shall belong to and be the property of the Lessor whether such amount be awarded
as compensation for diminution in value to the leasehold or to the fee of the
premises or as damage to the residue.
Waiver
- ------
21. No waiver of any of the covenants and agreements here contained or of any
breach thereof shall be taken to constitute a waiver of any other subsequent
breach of such covenants and agreements or to justify or authorize the
non-observance at any time of the same or of any other covenants and agreements
hereof.
Notices
- -------
22. All notices required under this lease to be given to Lessee may be given to
it at 1629 Prime Court, Suite 100, Orlando, FL 32809, or at such other place as
Lessee may designate in writing. Any such notice to be given to Lessor under
this lease shall be given to it at 8351 Parkline Blvd., Suite 300, Orlando, FL
32709, or at such other place as Lessor may designate in writing. All notices
shall be in writing and shall be sent by certified mail, postage prepaid, or by
telecopy facsimile transmission, or by personal delivery.
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<PAGE>
Subordination
- -------------
23. This Lease is subject and subordinate to all mortgages which may now or
hereafter affect the Leased Premises or the Building of which it forms a part,
and to all renewals, modifications, consolidations, replacements and extensions
thereof, subject to the remaining provisions of this paragraph. In confirmation
of such subordination, Lessee shall execute promptly any subordination agreement
which shall also include a non-disturbance agreement by any mortgagee which
shall provide that so long as Lessee performs all the terms, covenants and
conditions of this Lease and agrees to attorn to the mortgagee or other party of
superior interest, Lessee's right to possession under this Lease shall not be
disturbed and all the rights of the Lessee hereunder shall remain in full force
and effect for the full term of this Lease and any renewal periods. Such
agreement shall be in form and substance reasonably acceptable to Lessee.
Fixtures and Alterations
- ------------------------
24. Lessee shall not, without Lessor's prior written consent, attach any
fixtures in or to the Leased Premises or change, alter or make additions to the
Leased Premises, nor attach or affix any article hereto, nor permit any annoying
sound device, overload any floor, or deface the Leased Premises. Any attached
fixtures or any alterations, additions or improvements made or attached by
Lessee upon the property shall, on the expiration or termination of this lease,
if requested by Lessor, be promptly removed at Lessee's expense and the Leased
Premises restored by Lessee at its expense to its original condition, ordinary
wear and tear excepted. Any such fixture, alteration, addition and/or
improvement not requested to be removed shall remain on the Leased Premises and
shall become and remain the property of Lessor. All Lessee's fixtures,
installations and personal property not removed from the Leased Premises upon
expiration or termination, and not required by Lessor to have been removed as
provided in this paragraph, shall be conclusively presumed to have been
abandoned by Lessee and title thereto shall pass to Lessor under this lease as
by a bill of sale.
Redelivery of Premises
- ----------------------
25. Lessee shall, on the expiration of this lease, deliver up the Leased
Premises in as good order and condition as it now is or may be put by Lessor,
reasonable use and ordinary wear and tear thereof and damage by fire or other
unavoidable casualty, condemnation or appropriation excepted, and Lessee shall
promptly surrender all keys to the Leased Premises to Lessor.
Examination and Exhibiting Premises
- -----------------------------------
26. Subject to Lessee's reasonable security and operating restrictions and
advance notice requirements, Lessor or its duly authorized agent shall have the
right to enter the Leased Premises at all reasonable times to examine the
condition of the same and to make repairs to the Leased Premises or the
Building. Within six (6) months prior to the date of the expiration of the
lease, Lessor or its authorized agent shall have the right to enter the Leased
Premises at all reasonable times for the purpose of exhibiting the same to
prospective lessees.
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<PAGE>
Indemnification
- ---------------
27. Lessee shall pay all loss or damage occasioned by or growing out of the use
and occupancy of the Leased Premises by Lessee, its agents, employees, guests,
customers and invitees, and Lessee will indemnify, protect, and save Lessor
harmless from and against any loss of liability thereof or therefor and from and
against any expense, cost and attorney's fees incurred in connection with any
claim for such loss or damage, including costs and attorney's fees on appeal.
The foregoing indemnification provision shall not apply to any claims arising
from or due to any act, neglect, fault or omission of Lessor, or of any of
Lessor's employees, agents or contractors (collectively, "Lessor's
Representatives"), or arising from or due to breach or default in the
performance of any obligation on Lessor's part to be performed under the terms
of this Lease.
Cleanliness Of Premises
- -----------------------
28. Lessee will keep the interior of the Leased Premises clean and will not
improperly or unlawfully release, store, handle, or dispose of any refuse, trash
or hazardous materials or contaminants in the Leased Premises or in or around
the Building of which the Leased Premises form a part. Lessee shall immediately
notify Lessor and appropriate governmental agencies and authorities having
jurisdiction if a release of such materials occurs, and shall take complete
corrective action to clean and remove the material and restore the Premises in
compliance with procedures established by such authorities, and shall provide
appropriate evidence of compliance. Lessee agrees to hold Lessor harmless of and
from any liability, public or private, arising as a result of such release or
contamination and such indemnification shall survive expiration or termination
of the Lease. Lessor represents that, to the best of its knowledge, there is
neither currently nor has there been any release or discharge of any hazardous
substances in or around the Leased Premises or the Building.
Other Provisions
- ----------------
29. A) In the event of litigation between Lessor and Lessee, the prevailing
party will be entitled to recover its reasonable legal and other expenses
including court costs.
B) Lessor shall have the right, at any time without liability to Lessee
to decorate and to make, at Lessor's own expense, repairs, alterations,
additions and improvements, structural or otherwise, in or to the Leased
Premises, the Building or any part thereof, and to perform any acts related to
the safety, protection and preservation thereof, and during such operations to
take into and through the Leased Premises or any part of the Building all
material and equipment required and to close or temporarily suspend operation of
entrances, doors, corridors or other facilities, provided that Lessor shall
cause as little inconvenience or annoyance to Lessee as is reasonably necessary
in the circumstances, and shall not do any act which permanently reduces the
size of the Leased Premises. Lessor may do any such work during ordinary
business hours and Lessee shall pay Lessor for overtime and other expenses
incurred if such work is done during other hours at Lessee's request.
C) All approvals required of and between Lessor and Lessee under the
provisions of this Agreement shall not be unreasonably withheld.
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<PAGE>
Rights and Remedies Reserved to Lessor
- --------------------------------------
30. All rights and remedies of Lessor herein enumerated shall be cumulative and
none shall exclude any other right or remedy allowed by law.
A) If any voluntary or involuntary petition or similar pleading under
any section or sections of any bankruptcy act shall be filed by or against
Lessee, or any voluntary or involuntary proceedings in any court shall be
instituted to declare Lessee insolvent or unable to pay Lessee's debts, or
Lessee makes an assignment for the benefit of its creditors, or a trustee or
receiver is appointed for Lessor or for the major part of Lessee's property, and
such petition or action is not released or dismissed within thirty (30) days,
then and in any such event Lessor may, if Lessor so elects, but not otherwise,
and with or without notice of such election and with or without entry or other
action by lessor, forthwith terminate this lease, and notwithstanding any other
provisions of this lease, Lessor shall forthwith upon such termination be
entitled to recover damages in an amount equal to the then present value of the
rent specified in Paragraphs 3 and 4 of this lease for the residue of the stated
term hereof, less the fair rental income of the premises received by Lessor for
the residue of the stated term. Lessor shall make all reasonable efforts to
re-lease the premises.
B) If Lessee defaults in the prompt payment of rent and such default
shall continue for seven (7) days after the same be due and payable; or in the
performance or observance of any other provision of this lease and such other
default shall continue for ten (10) days, after notice thereof shall have been
given to Lessee; or if the leasehold interest of Lessee be levied upon under
execution or attached by process of law; or if Lessee abandons the Leased
Premises; then and in any such event Lessor, if it so elects forthwith, or any
time thereafter while such default continues, either may terminate Lessee's
right to possession without terminating this lease, or may terminate this lease.
C) Upon any termination of this lease, whether by lapse of time or
otherwise; or upon any termination of the Lessee's right to possession without
termination of the lease; the Lessee shall surrender possession and vacate the
Leased Premises immediately and deliver possession thereof to the Lessor.
D) Lessee shall be deemed to have abandoned the Leased Premises if rent
is not currently paid and Lessee is absent from the premises for a period of
fifteen (15) days. If the Lessee abandons the Leased Premises or otherwise
entitles the Lessor so to elect, and if the Lessor elects to terminate the
Lessee's right to possession only, without terminating the lease, the Lessor
may, at the Lessor's option, enter into the Leased Premises, remove the Lessee's
signs and other evidences of tenancy, and take and hold possession thereof as
provided in Paragraph 30(C) without such entry and possession terminating the
lease or releasing the Lessee, in whole or in part, from the Lessee' obligation
to pay the rent hereunder for the full term. Upon and after entry into
possession without termination of the lease, the Lessor may relet the Leased
Premises or any part thereof for the account of the Lessee to any person, firm
or corporation other than the Lessee for such rent, for such time, and upon such
terms as the Lessor in the Lessor's sole discretion shall determine. In any such
case, the Lessor may make repairs in or to the Leased Premises, and redecorate
the same to extent deemed by the Lessor necessary or desirable, and the Lessee
shall, upon demand, pay the cost thereof together with the Lessor's expenses of
the reletting. If the consideration collected by the Lessor upon any such
reletting for the Lessee's account is not sufficient to pay the full amount of
unpaid rent reserved in this lease, together with the costs of repairs,
alterations, additions, redecorating, and the Lessor's expenses, the Lessee
shall pay to the Lessor the amount of each deficiency upon demand.
- E-11 -
<PAGE>
E) Lessee shall pay all Lessor's costs, charges and expenses, including
the fees of counsel, agents and others retained by Lessor, incurred in enforcing
Lessee's obligations hereunder or incurred by Lessor in any litigation,
negotiation, bankruptcy or insolvency proceeding or transaction including those
in which Lessee causes Lessor, without Lessor's fault, to become involved or
concerned.
F) If Lessee violates any of the terms and provisions of this lease, or
defaults in any of its obligations hereunder, other than the payment or rent or
other sums payable hereunder, such violation may be restrained or such
obligation enforced by injunction.
G) Lessee agrees that it will promptly pay said rent at the times above
stated; that, if any part of the rent remains due and unpaid for ninety (90)
days next after the same shall become due and payable, Lessor shall have the
option of declaring the balance of the entire rental term of this lease to be
immediately due and payable, and Lessor may then proceed to collect all of the
unpaid rent called for by this lease by distress or otherwise.
Liens
- -----
31. A) Lessee agrees that Lessee will pay all liens of contractors,
subcontractors, mechanics, laborers, materialmen, and other liens of like
character, and will indemnify Lessor against all legal costs and charges, bond
premiums for release of liens, including reasonable attorney's fees reasonably
incurred (whether litigation is necessary or not) in discharging the Leased
Premises or any part thereof from any liens, judgments, or encumbrances caused
or suffered by Lessee. It is understood and agreed between the parties hereto
that the cost and charges above referred to shall be considered as additional
rent. The foregoing shall not be deemed to authorize any repairs, alterations,
additions or improvements by Lessee.
B) The Lessee herein shall not have any authority to create any liens
for labor or material on the Lessor's interest in the above described property,
and all persons contracting with the Lessee for the erection, installation,
alteration, or repair of improvements on or to the above described premises, and
all materialmen, contractors, mechanics and laborers are hereby charged with
notice that they must look to the Lessee and to the Lessee's interest only in
the above described property to secure the payment of any bill for work done or
material furnished during the rental period created by this lease.
Estoppel Certificate
- --------------------
32. Lessee and Lessor, upon request, one from the other, shall give or exchange
with, one with the other, estoppel certificates which shall confirm to others
that the lease is in full force and effect, that neither party is in default
and/or such other information regarding the lease as may be reasonably
appropriate and factual.
Validity
- --------
33. It is understood and agreed that in the event any provision of this lease
shall be adjudged, decreed, held or ruled to be invalid, such portion shall be
deemed severable, and it shall not invalidate or impair the agreement as a whole
or any other provision of the agreement.
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<PAGE>
Successors and Assigns
- ----------------------
34. This Lease and all provisions, covenants and conditions thereof shall be
binding upon and inure to the benefit of the heirs, legal representatives, and
successors, and assigns of the parties hereto, except that no person, firm,
corporation nor court officer holding under or through Lessee in violation of
any of the terms, provisions or conditions of this lease, shall have any right,
interest or equity in or to this lease, the terms of this lease or the premises
covered by this lease.
Entire Agreement
- ----------------
35. This lease document and the addenda attached hereto constitute the entire
agreement between the parties and supersedes all prior agreements. No waiver,
modifications, additions or addends to this Lease Agreement shall be valid
unless in writing and signed by both the Lessor and the Lessee. The addenda
listed here are a part of this Lease Agreement.
Disclosure Statement
Exhibit "A"
Exhibit "B"
Special Provisions Addendum
IN WITNESS WHEREOF, Lessor and Lessee have hereunto executed this lease as of
the day and year first above written.
Witnessed
WEEKS REALTY, LP
- -------------------------- --------------------------------------
LESSOR
By: /s/
- -------------------------- --------------------------------------
SABRATEK CORPORATION D.B.A. ROCAP, INC.
- -------------------------- ---------------------------------------
LESSEE
By: /s/ Elliott Mandell
- -------------------------- ----------------------------------------
President
- E-13 -
<PAGE>
ADDENDUM
DISCLOSURE STATEMENT
1. AGENCY DISCLOSURE
Mike Borling (Licensee) of Ensign Properties, Inc., is, by this document, giving
notice to the Tenant (Buyer/Seller/Tenant/Landlord) that he/she/it is the agent
and representative of the Landlord (Buyer/Seller/Tenant/Landlord).
The undersigned(s) acknowledges that this written notice was received before the
undersigned(s) signed a contractual offer or lease agreement in compliance with
Section 475.25(1)(q) Florida Statutes, and Rule 21V-10.033, Florida
Administrative Code.
/s/ Elliott Mandell
- --------------------------------------- -------------------
Signed: Buyer/Seller/Tenant/Landlord Date
- --------------------------------------- -------------------
Signed: Licensee Date
Doris Fay Hood
- --------------------------------------
Name of Broker
2. RADON GAS - Notice to Prospective Purchaser/Tenant
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. Pursuant to Section 404.056(8), Florida Statutes.
3. COMPENSATION - If applicable
The buyer/lessee acknowledges that Ensign Properties is being paid by the
seller/lessor. Pursuant to Rule 2-13.003(2), Florida Administrative Code.
- E-14 -
<PAGE>
SPECIAL PROVISIONS ADDENDUM
---------------------------
These Special Provisions form a part of that certain Lease Agreement, dated the
_____________ day of March, 1997, made and entered into between Weeks Realty LP,
Inc. ("Lessor") and Sabratek Corporation d.b.a. Rocap, Inc. ("Lessee"). Unless
otherwise specifically defined herein, all terms in these Special Provisions
with an initial capital letter shall have the same definitions ascribed thereto
in the Lease Agreement to which they are attached. To the extent that these
Special Provisions conflict with, or are inconsistent with the terms, conditions
and provisions of the Lease Agreement to which they are attached, these Special
Provisions shall govern and control.
1. REIMBURSEMENT OF LEASEHOLD IMPROVEMENT COSTS: The Lessee shall reimburse
Lessor for all direct and indirect costs to complete Leasehold Improvements
(described in Exhibit B) above Lessor's contribution of $187,200.00. Such
reimbursement shall be payable monthly, as additional rent, by the sum which
shall amortize the total sum by constant payment. Such reimbursement shall be
payable monthly, as additional rent by that sum which shall amortize the total
cost by constant payment over one hundred twenty (120) consecutive months with
an interest rate of 10.25% per annum on the unpaid balance. The total sum
subject to amortization shall be as reasonably determined by Lessor and approved
by Lessee as a result of competitive construction bids based upon complete and
final plans approved by Lessee along with such other costs for permits, impact
fees, design and engineering associated with the work. Initial estimate for
Leasehold improvements have been estimated at $345,600.00. This amount exceeds
Lessor's contribution of $187,200 by $158,400.00 and will be amortized over the
Lease term as described above. Final construction cost to be determined once
plans are finalized and construction bids have been received. Any savings
achieved will be passed on the Lessee by way of reducing the Leasehold
amortization amount.
2. OPTIONS TO RENEW: Provided Lessee has complied with all terms and conditions
of this Lease Agreement or promptly remedied any default, Lessee shall have
options to renew the lease agreement for Two (2) additional five (5) year terms.
Lessee must notify Lessor of their intention to exercise these options one
hundred twenty (120) days prior to Lease termination. At that time Lessor and
Lessee shall negotiate the new rental rate at then market rates.
3. AIR COMPRESSOR AND EMERGENCY GENERATOR: Lessee shall be permitted to install
an air compressor and an emergency generator where indicated on attached floor
plan, provided they are screened from view. Lessee may cover this area if they
desire. Natural gas or propane shall power the generator.
4. FIRST RIGHT OF REFUSAL: Tenant shall have a first right of refusal on the
adjacent 4,800 square foot suite, suite 400. Upon a signed proposal being
received by Lessor for suite 400, Lessor shall notify Lessee of this signed
proposal and Lessee will have three (3) business days to notify Lessor of
Lessee's intention to lease the suite on an immediate basis. Terms and
conditions will be at least equivalent to the terms and conditions outlined in
the signed proposal.
LESSEE /s/ E. M.
--------------------------
LESSOR --------------------------
- E-15 -
<PAGE>
EXHIBIT 11.1
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
(pro forma)
--------------------------------------------------------------------
<S> <C> <C>
Net income (loss) in thousands $1,046 ($1,716)
Adjustment to interest expense assuming
conversion of debt at beginning of period - 77
--------------------------------------------------------------------
Adjusted net income (loss) $1,046 ($1,639)
====================================================================
Weighted average common shares
outstanding 8,286,846 1,717,899
Weighted average preferred shares
outstanding assuming conversion - 1,838,114
Effect of conversion of convertible
subordinated debentures - 612,358
Additional shares pursuant to SAB 83 - 2,441,200
Additional shares for options and warrants
outstanding under treasury-stock method 1,248,683 -
--------------------------------------------------------------------
9,535,529 6,609,571
====================================================================
Net income (loss) per share $0.11 $(0.25)
====================================================================
</TABLE>
- E-16 -
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULES
<TABLE>
<CAPTION>
ITEM NUMBER ITEM DESCRIPTION AMOUNT
<C> <S> <C>
5-02(1) cash and cash items 6,372,691
5-02(2) marketable securities 5,495,520
5-02(3)(a)(1) notes and accounts receivable-trade 12,021,651
5-02(4) allowance for doubtful accounts 274,776
5-02(6) inventory 6,326,070
5-02(9) total current assets 28,717,268
5-02(13) property, plant and equipment 2,264,462
5-02(14) accumulated depreciation 161,989
5-02(18) total assets 37,768,763
5-02(21) total current liabilities 4,796,196
5-02(22) bonds, mortgages and similar debt 7,469
5-02(28) preferred stock - mandatory redemption 0
5-02(29) preferred stock - no mandatory redemption 0
5-02(30) common stock 84,136
5-02(31) other stockholders' equity 32,965,098
5-02(32) total liabilities and stockholders' equity 37,768,763
5-03(b)1(a) net sales of tangible products 7,466,762
5-03(b)1 total revenue 7,466,762
5-03(b)2(a) cost of tangible goods sold 3,026,472
5-03(b)2 total costs and expenses applicable to sales and revenues 3,026,472
5-03(b)3 other costs and expenses 3,498,873
5-03(b)5 provision for doubtful accounts and notes 68,625
5-03(b)(8) interest and amortization of debt discount 0
5-03(b)(10) income before taxes and other items 1,067,188
5-03(b)(11) income tax expense 0
5-03(b)(14) income/loss continuing operations 0
5-03(b)(15) discontinued operations 0
5-03(b)(17) extraordinary items 0
5-03(b)(18) cumulative effect-changes in accounting principles 0
5-03(b)(19) net income 1,045,844
5-03(b)(20) income per share - primary 0.11
5-03(b)(20) earnings per share - fully diluted na
- E-17 -
</TABLE>
