<PAGE> 1
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 JUNE 30, 1998
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)
8111 North St. Louis Avenue
Skokie, Illinois 60076
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(847) 720-2400
(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 August 3, 1998, 10,652,144 shares of Sabratek Corporation's Common Stock
were outstanding.
<PAGE> 2
SABRATEK CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets
June 30, 1998 (Unaudited) and December 31, 1997 .......................... 3
Statements of Operations
Three Months and Six Months Ended June 30, 1998 and 1997 (Unaudited) ..... 4
Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997 (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 ........................................................ 12
Item 2. Changes in Securities ..................................................... 12
Item 4. Submissions of Matters to a Vote of Securityholders ....................... 12
Item 5. Other Information ......................................................... 13
Item 6. Exhibits and Reports on Form 8-K .......................................... 13
</TABLE>
-2-
<PAGE> 3
SABRATEK CORPORATION
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 74,074 $ 19,598
Investments in marketable securities 2,003 5,004
Receivables:
Trade, net of allowance for doubtful accounts
of $703 and $503 at June 30, 1998
end December 31, 1997, respectively 21,226 15,293
Other 780 208
--------- ---------
Total receivables 22,006 15,501
--------- ---------
Inventories 20,882 13,719
Other current assets 1,182 821
--------- ---------
Total current assets 120,147 54,643
--------- ---------
Property, plant and equipment, net 4,070 3,546
Notes receivable 924 233
Investments in marketable securities 19,629 --
Intangible assets, net 18,507 12,644
Other 2,810 101
--------- ---------
$ 166,087 $ 71,167
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt, including capital lease obligation $ 4 $ 25
Accounts payable 4,329 3,718
Payroll &commissions 866 2,039
Warranty 324 304
Accrued expense 1,526 300
Other 36 102
--------- ---------
Total current liabilities 7,085 6,488
--------- ---------
Long-term debt 85,000 --
Long-term obligations 857 264
--------- ---------
Total liabilities 92,942 6,752
--------- ---------
Stockholders' equity:
Common stock, par value $.01, issued and
Outstanding; 10,637,144 at June 30, 1998,
10,325,280 at December 31, 1997 106 103
Additional paid-in capital 73,675 71,344
Other (11) (12)
Income tax benefit 2,190 --
Accumulated other comprehensive income 12 44
Accumulated deficit (2,827) (7,064)
--------- ---------
Total stockholders' equity 73,145 64,415
--------- ---------
$ 166,087 $ 71,167
========= =========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE> 4
SABRATEK CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------
1998 1997 1998 1997
--------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 16,301 $ 9,848 $ 31,457 $ 17,314
Cost of sales 6,989 4,159 13,716 7,185
--------------------------------------------
Gross margin 9,312 5,689 17,741 10,129
Selling, general and administrative expenses 5,923 4,427 11,590 7,937
--------------------------------------------
Operating income 3,389 1,262 6,151 2,192
Other income (expense):
Interest income 1,128 414 1,343 557
Interest expense (1,063) (16) (1,068) (22)
--------------------------------------------
Net income before taxes 3,454 1,660 6,426 2,727
Provision for income taxes 1,178 33 2,190 55
--------------------------------------------
Net income $ 2,276 $ 1,627 $ 4,236 $ 2,672
============================================
Basic income per share $ 0.22 $ 0.17 $ 0.40 $ 0.30
============================================
Basic weighted average shares outstanding 10,570 9,823 10,484 9,055
============================================
Diluted income per share $ 0.20 $ 0.15 $ 0.36 $ 0.26
============================================
Diluted weighted average shares outstanding 11,639 10,890 11,681 10,195
============================================
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE> 5
SABRATEK CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------
June 30, June 30,
1998 1997
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,236 $ 2,672
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 1,332 $ 316
Deferred compensation 1 1
Non-cash interest expense 1,063 51
Tax effect of stock option exercises 2,190 --
Provision for bad debts 200 112
Changes in assets and liabilities:
Receivables (6,132) (4,107)
Other receivable (573) (184)
Inventories (7,163) (3,763)
Other current assets (407) (230)
Accounts payable 611 509
Accrued liabilities (1,153) --
Long term obligations 594 --
Other 98 (238)
--------------------
Net cash used in operating activities (5,103) (4,861)
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, equipment (994) (812)
Issuance of note receivable (691) (1,282)
Purchase of intangible assets (6,626) (12)
Purchases of marketable securities (19,655) (1,599)
Sale and maturity of marketable securities 2,996 --
Purchase of Rocap, Inc., net of cash acquired -- (1,434)
--------------------
Net cash used in investing activities (24,970) (5,139)
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term debt -- (50)
Repayment of long-term debt -- (1)
Payments of capital lease, net (23) (81)
Proceeds from issuance of long-term debt, net 82,238 --
Proceeds from exercise of stock options and warrants 2,334 1,848
Proceeds from issuance of stock, net -- 21,605
--------------------
Net cash provided by financing activities 84,549 23,321
--------------------
Increase in cash and cash equivalents 54,476 13,321
Cash and cash equivalents at beginning of period 19,598 10,447
--------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 74,074 $ 23,768
====================
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE> 6
SABRATEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 and 1997
(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 and six month periods ended June 30,
1998 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, 1997. The results of operations for the three month
and six month periods ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
(2) SALE OF CONVERTIBLE NOTES
In April, 1998, the Company sold in a private placement, 6% Convertible
Notes ("Notes") in an aggregate principal amount of $85,000,000. The Notes are
unsecured and mature on April 15, 2005. Interest is payable at a fixed rate of
6% on April 14 and October 15 of each year, commencing on October 15, 1998. The
Notes are convertible at any time prior to maturity at the option of the holder
into shares of common stock of the Company at a conversion price of $40.46 per
share. The Company may redeem the Notes, in whole or in part, at any time after
April 18, 2001.
(3) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest during the six month periods ended June 30, 1998 and
1997 was $5,012 and $11,495, respectively.
(4) STOCK OPTIONS
During the six month period ended June 30, 1998, the Company issued 203,999
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
$1,726,593, in aggregate. In addition, 5,338 shares of common stock were issued
pursuant to the Company's Stock Purchase Plan resulting in aggregate proceeds of
$133,951.
Options for a total of 330,600 shares of common stock were granted during
the six month 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-
<PAGE> 7
(5) WARRANTS
During the six month period ended June 30, 1998, the Company issued 102,527
shares, in aggregate, of common stock upon the exercise of warrants. The warrant
exercises resulted in proceeds to the Company of $473,727, in aggregate.
(6) COMPREHENSIVE INCOME
During the quarter ended June 30, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS No. 130"), "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenue, expenses, gains and losses) in
a full set of general-purpose financial statements, and requires a total for
comprehensive income to be provided in condensed financial statements of interim
periods. Comprehensive income includes all changes in stockholders' equity
during the period except those resulting from investments by owners and
distributions to owners. Comprehensive income (loss) for the six months ended
June 30, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 2,276 $ 1,627 $ 4,236 $ 2,672
Other comprehensive
Income (loss):
Unrealized holding gains
(losses) arising during the period (32) 36 (39) 32
Less: reclassification adjustment
For amounts realized in net income 4 5 7 5
------- ------- ------- -------
Net unrealized gain (loss) (28) 41 (32) 37
------- ------- ------- -------
Comprehensive income $ 2,248 $ 1,668 $ 4,204 $ 2,709
======= ======= ======= =======
</TABLE>
(7) SUBSEQUENT EVENTS
In July, 1998, the Company purchased all of the capital stock of CMS
HealthCare, Inc. ("CMS"), a Florida corporation based in Tampa, for $160,000
in cash. The Company could be obligated to make additional payments to the
former stockholders of CMS pursuant to an earnout formula on pre-tax income
over a specified period.
(8) RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1997, the Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company is required to adopt this
new standard for periods ending after fiscal 1997, but is not required to be
reported in the interim financial statements in the first year of application.
This statement establishes standards for the way companies are to report
information about operating segments. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Company is currently evaluating the impact of this standard on disclosures
required in its financial statements.
-7-
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's founding vision and strategic focus is the creation of a
virtual hospital room for the alternate-site health care market. From its
inception in 1989 through mid-1992, 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 six years of operating history and,
although profitable since the third quarter of 1996, experienced significant
operating losses from its inception through mid-1996. 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 both MediVIEW(R) and the PumpMaster(R) 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
February 25, 1997, the Company acquired substantially all the assets of
Rocap,Inc. which produces and markets prepackaged injectable prescription
pharmaceuticals and pre-filled flush syringes. In addition, the Company derives
revenues from the servicing of products, sale of accessories, sale of extended
warranties and consulting services.
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 make bulk purchases which may cause fluctuations
in quarterly revenues. 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 adverse regulatory
changes, may also affect the revenues of the Company.
The Company has entered into strategic partnerships, including Unitron and
GDS, which provide components of the virtual hospital room. Management intends
to pursue additional acquisition and partnering opportunities in order to
further accelerate the development of the virtual hospital room.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 VS. THREE MONTHS ENDED JUNE 30, 1997
AND SIX MONTHS ENDED JUNE 30, 1998 VS. SIX MONTHS ENDED JUNE 30, 1997
Net sales. Net sales increased $6.5 million to $16.3 million for the three
month period ended June 30, 1998 as compared to $9.8 million for the three month
period ended June 30, 1997, an increase of 66%. Net sales increased $14.2
million to $31.5 million for the six month period ended June 30, 1998 as
compared to $17.3 million for the six month period ended June 30, 1997, an
increase of 82%. The increase for the three month and six month periods
attributable to several factors; incremental unit sales volume of the 3030
Stationary Pump and 6060 Ambulatory Pump and their respective disposables, an
increase in the average per unit selling price due to a higher ratio of direct
sales versus dealer sales, the incremental unit sales volume of the Rocap
product line resulting from sales channel integration, additional sales of the
MediVIEW(R) and PumpMaster(R) products, and the sale of licensed products from
GDS Technology, Inc.
-8-
<PAGE> 9
Cost of Sales. Cost of sales increased $2.8 million to $7.0 million for the
three month period ended June 30, 1998 as compared to $4.2 million for the three
month period ended June 30, 1997, an increase of 68%. Cost of sales increased
$6.5 million to $13.7 million for the six month period ended June 30, 1998 as
compared to $7.2 million for the six month period ended June 30, 1997, an
increase of 91%. The increase for the three month and six month periods is
primarily attributable to direct product costs associated with incremental unit
sales volume of the 3030 and 6060 infusion pumps and related disposables, as
well as the addition of the Rocap product line. To a lesser extent, the increase
for the three month period is attributable to costs relating to the expansion of
production capacity.
Gross Margin. Gross margin increased $3.6 million to $9.3 million for the
three month period ended June 30, 1998 as compared to $5.7 million for the three
month period ended June 30, 1997, an increase of 64%. Gross margin increased
$7.6 million to $17.7 million for the six month period ended June 30, 1998 as
compared to $10.1 million for the six month period ended June 30, 1997, an
increase of 75 %. The increase for the three month and six month periods is due
primarily to the incremental unit sales volume and the per unit contribution
thereon, including the allocation of fixed manufacturing costs over a greater
number of units. Gross margin as a percent of sales decreased to 57% for the
three month period ended June 30, 1998, as compared to 58% for the three month
period ended June 30, 1997. Gross margin as a percentage of sales decreased to
56% for the six month period ended June 30, 1998, as compared to 58% for the six
month period ended June 30, 1997. The decrease in percentage is attributable to
the lower average gross margin generated from the Rocap product line.
Selling General and Administrative Expenses. Selling, general and
administrative expenses increased $1.5 million to $5.9 million for the three
month period ended June 30, 1998 as compared to $4.4 million for the three month
period ended June 30, 1997, an increase of 34%. Selling, general and
administrative expenses increased $3.7 million to $11.6 million for the six
month period ended June 30, 1998 as compared to $7.9 million for the six month
period ended June 30, 1997, an increase of 46%. The increase for the three month
and six month periods is due primarily to the expansion of the Company's direct
sales force and clinical support staff and associated travel. Also contributing
to the increase for the six month period ended June 30, 1998 was two full
quarter of expenses relating to the Rocap product line, and the addition of
administrative and management personnel. Selling, general and administrative
expenses as a percent of sales decreased to 36% for the three month period ended
June 30, 1998 as compared to 45% for the three month period ended June 30, 1997.
Selling, general and administrative expenses as a percent of sales decreased to
37% for the six month period ended June 30, 1998 as compared to 46% for the six
month period ended June 30, 1997.
Operating Income. Operating income increased $2.1 million to $3.4 million
for the three month period ended June 30, 1998 as compared to $1.3 million for
the three month period ended June 30, 1997, an increase of 169%. Operating
income increased $4.0 million to $6.2 million for the six month period ended
June 30, 1998 as compared to $2.2 million for the six month period ended June
30, 1997, an increase of 181%. Operating income as a percent of sales increased
to 21% for the three month period ended June 30, 1998 as compared to 13% for the
three month period ended June 30, 1997. Operating income as a percent of sales
increased to 20% for the six month period ended June 30, 1998 as compared to 13%
for the six month period ended June 30, 1997. The increase in operating income
is due primarily to incremental gross margin generated by increased unit sales
volume of new and existing products, as described above.
-9-
<PAGE> 10
Interest Income. Interest income increased $714,000 to $1.1 million for the
three month period ended June 30, 1998 as compared to $414,000 for the three
month period ended June 30, 1997, and increase of 172%. Interest income
increased $786,000 to $1.3 million for the six month period ended June 30, 1998
as compared to $557,000 for the six month period ended June 30, 1997, an
increase of 141%. The increase is attributable to a higher average amount of
cash available for investment as compared to that of the comparative period. The
Company completed a secondary public offering in April, 1997 which resulted in
proceeds to the Company of approximately $22 million, after underwriting
discounts and commissions. In addition, the Company completed the sale of
convertible notes in April, 1998 which resulted in net proceeds to the Company
of approximately $82.3 million.
Interest Expense. Interest expense increased $1.0 million to $1,063,000 for
the three month period ended June 30, 1998 as compared to $16,000 for the three
month period ended June 30, 1997, an increase of 6,544%. Interest expense
increased $1.0 million to $1,068,000 for the six month period ended June 30,
1998 as compared to $22,000 for the six month period ended June 30, 1997, an
increase of 4,755%. The increase for the three month and six month periods is
attributable to the sale of 6% convertible notes in April, 1998, for which
interest expense is recorded at a rate of $1.3 million per full fiscal quarter.
Interest expense would be reduced proportionately for any notes converted into
common stock.
Provision for Income Taxes. The provision for income taxes increased $1.1
million to $1.2 million for the three month period ended June 30, 1998 as
compared to $33,000 for the three month period ended June 30, 1997, an increase
of 3,470%. The provision for income taxes increased $2.1 million to $2.2 million
for the six month period ended June 30, 1998, as compared to $55,000 for the six
month period ended June 30, 1997, an increase of 3,882%. The provision for
income taxes for the three month and six month periods ended June 30, 1998
reflects an estimated 34% effective annual tax rate, after adjusting for
allowable net operating loss carryforwards. The provision for income taxes for
the three month and six month periods ended June 30, 1997 ultimately was
reversed by year end 1997 as no federal, state or alternative minimum tax was
incurred due to allowable net operating loss carryforwards and compensation
related book versus tax differences.
Net Income Net income increased $649,000 to $2.3 million for the three
month period ended June 30, 1998 as compared to $1.6 million for the three month
period ended June 30, 1997, an increase of 40%. Net income increased $1.5
million to $4.2 million for the six month period ended June 30, 1998 as compared
to $2.7 million for the six month period ended June 30, 1997, an increase of
59%. The increase in net income for the three month and six month periods was
achieved primarily as a result of incremental gross margin generated by
increased unit sales volume of new and existing products, as discussed above.
Also contributing to the increase in net income was the decrease in general and
administrative expenses, as a percent of sales. The increase in net income was
partially offset by an increase in the provision for income taxes.
-10-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
In April, 1998, the Company completed the private sale of 6% Convertible
Notes in an aggregate principal amount of $85,000,000 maturing in 2005. The
interest is fixed and is payable semi-annually. The notes are convertible into
the Company's common stock at a conversion price of $40.46 anytime at the option
of the noteholders. The Company may redeem the notes at anytime after April 18,
2001. Net proceeds to the Company were approximately $82.2 million and such
proceeds were used to purchase investment grade securities.
As of June 30, 1998, the Company had approximately $95.7 million in cash,
cash equivalents, and investments in marketable securities, and had net working
capital of approximately $113.1 million. In March, 1997, the Company entered
into a two-year credit agreement with a financial institution with up to $9.5
million of available borrowing. As of July 31, 1998, no borrowing has been made
under the credit agreement.
The Company used cash in its operations of approximately $5.1 million for
the six months ended June 30, 1998. Cash used in operations for the period
exceeds the Company's operating income 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.
During the third quarter of 1997, the Company entered into strategic
partnerships with Unitron and GDS. The Company has made cumulative payments of
$13.6 million to Unitron and GDS in cash license fees, in aggregate, pursuant to
the respective license agreements. In addition, should the Company decide to
license other products, or exercise its right to acquire either Unitron or GDS,
such acquisitions could require additional outlays of cash.
In September, 1997, the Company initiated a hedging program through the use
of forward contracts to minimize foreign currency fluctuation exposure. As of
July 31, 1998, the aggregate U.S. dollar amount of the contracts is $1,794,435
and such contracts expire at various dates through March, 1999.
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, 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.
-11-
<PAGE> 12
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(R) 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 other
pleadings that raised additional claims against Sabratek and three 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(R) system. On August 4,
1997, the District Court denied the motion for preliminary injunction.
Additionally, one of the claims against a Sabratek employee has been dismissed
with prejudice. 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.
In addition, Sabratek has filed a complaint against SIMS Deltec in the
United States District Court for the Northern District of Illinois alleging that
SIMS Deltec employees have made misstatements about Sabratek's products.
Sabratek has stated claims under the Federal Lanham Act to stop SIMS Deltec's
improper disparagement and has requested preliminary and permanent injunctive
relief, monetary damages and costs.
ITEM 2. CHANGES IN SECURITIES
During the six month period ended June 30, 1998, the Company issued the
following securities without registration under the Securities Act of 1933, as
amended.
From February 12, 1998 to June 26, 1998, the Company issued 102,527 shares
of common stock upon the exercise of warrants not covered by a registration
statement. The Company received aggregate proceeds of approximately $473,727
upon the exercise of such warrants. All such issuances of common stock were
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITYHOLDERS
(a) At the Annual Meeting of Stockholders held on June 4, 1998, the
following directors were elected:
<TABLE>
<CAPTION>
For Withheld
--------- ---------------
<S> <C> <C>
Mark Lampert 9,806,583 12,576
William D. Lautman 9,622,683 196,476
Marvin Samson 9,806,683 12,476
</TABLE>
-12-
<PAGE> 13
(b) At the Annual Meeting of Stockholders held on June 4, 1998, the
following resolution was passed:
Resolved, that the Company adopt the Amendment to the Amended and Restated
1993 Stock Option Plan to provide for the increase in formula grant of stock
options to Independent Directors to 10,000 shares per year, and additionally,
1200 shares for serving on a committee, plus 600 shares for serving as Chairman
of a committee.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Shares voted 6,028,523 3,762,588 28,048
</TABLE>
ITEM 5. OTHER INFORMATION
In July, 1998 the following management changes were announced.
Stephen L. Holden was named President and Treasurer. Mr. Holden previously
held the positions of Senior Vice President, Chief Financial Officer and
Treasurer. Vincent J. Capponi was named Vice President and Chief Operating
Officer. Mr. Capponi previously held the position of Vice President of
Operations. Paul S. Jurewicz was appointed Senior Vice President and Chief
Financial Officer. Prior to joining the Company, Mr. Jurewicz held the
positions of Chief Financial Officer of Option Care, Inc., and Chief Financial
Officer of Health Management, Inc. Anil K. Rastogi resigned from his position
as President and Chief Operating Officer, which he held for approximately three
years. Alan E. Jordan resigned from his position as Senior Vice President of
Sales and Marketing, but will remain a consultant to the company.
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)
------ ------------------------ ----------- ---------------
<S> <C> <C> <C>
3.1 Articles of Incorporation H
3.2 ByLaws H
10.1 Agreement with Americorp Financial, Inc. re: Leasing H
Services, dated March 22, 1995
10.1.1 Amendment, dated September 16, 1996, to Agreement HHH
with Americorp Financial, Inc.
10.2 Agreement with Clintec Nutrition Company re: H
Development Agreement, dated September 1, 1995
10.3 Intentionally Omitted
10.4 Intentionally Omitted
10.5 Distributorship Agreement with CO-Medical, Inc., dated H
February 17, 1992
10.6 Distributorship Agreement with Clinical Technology Inc H
dated August 1, 1992
10.7 Intentionally Omitted
10.8 Intentionally Omitted
10.9 Distributorship Agreement with Advanced Medical, Inc., H
dated September 1, 1991
10.10 Distributorship Agreement with Healthcare Technology, H
dated October 9, 1991
10.11 Intentionally Omitted
10.12 Intentionally Omitted
10.13 Pump Contract with Chartwell Home Therapies, dated H
</TABLE>
-13-
<PAGE> 14
<TABLE>
<CAPTION>
Page Incorporation
Exhibit Number(if by Reference
Number Description of Documents applicable) (if applicable)
------ ------------------------ ----------- ---------------
<S> <C> <C> <C>
November 22, 1993
10.14 Sales Agreement with Pharmacy Corporation of America, H
dated March 17, 1995
10.15 Sales & Marketing Agreement with Alpha H
Group, dated November 6, 1995
10.16 Foreign Distributorship Agreement with MED-O-GEN H
INC., dated September 22, 1995
10.17 Foreign Distributorship Agreement with Yoon Duk H
Separation Technology, dated April 17, 1995
10.18 Foreign Distributorship Agreement with Upwards H
Biosystems Ltd., dated March 8, 1995
10.19 Foreign Distributorship Agreement with Grupo Grifols, H
S.A., dated September 17, 1993
10.20 Foreign Distributorship Agreement with JMS Company, H
dated March 22, 1996
10.21 Foreign Distributorship Agreement with Brasimpex H
10.22 Foreign Distributorship Agreements with Medicare (s) H
PTE LTD., dated February 10, 1995
10.23 Intentionally Omitted
10.24 Intentionally Omitted
10.25 Master Lease Agreement with Comdisco, Inc., dated H
August 9, 1994
10.26 Stock Option Plan H
10.27 Lease for Real Property located at 5601 West Howard, H
Niles, Illinois, dated as of May 31, 1994
10.27.1 Amendment, dated October 30 1996, to Lease for Real HHH
Property located at 5601 West Howard, Niles, Illinois
10.28 Employment Agreement for K. Shan Padda H
10.29 Employment Agreement for Anil Rastogi H
10.30 Asset Purchase Agreement, dated February 25, 1997, by HH
and among Sabratek Corporation; Rocap, Inc. and Elliott
Mandell
10.31 Employment Agreement for Stephen L. Holden HHHH
10.32 Employment Agreement for Elliott Mandell HH
10.33 Lease Agreement for property located at 11 Sixth Road, HHHH
Woburn, Massachusetts, dated February 1, 1997
10.34 Lease Agreement for property located at 5 Constitution HHHH
</TABLE>
-14-
<PAGE> 15
<TABLE>
<S> <C> <C>
Way, Woburn, Massachusetts, dated June 26, 1995
10.35 Lease Agreement for property located at 1629 Prime HHHHH
Court, Suite 100 Orlando, Florida. dated March 11,
1997
10.36 Lease Agreement for property located at 8350 Parkline
Blvd., Orlando, Florida, dated June 18, 1998
11.1 Statement re: computation of per share earnings
27 Financial Data Schedule
</TABLE>
H 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).
HH Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Commission on March 11, 1997.
HHH 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.
HHHH Incorporated by reference to the Company's Registration Statement on
Form S-1, declared effective by the Commission on April 4, 1997 (File
No. 333-23437).
HHHHH Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 filed with the Commission on May
15, 1997.
(b) Reports on Form 8-K
Not applicable
-15-
<PAGE> 16
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: August 14, 1998 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, for the period covered by this report.
Date: August 14, 1998 By: /s/ Stephen L. Holden
--------------------------------
Stephen L. Holden
President
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: August 14, 1998 By: /s/ Paul S. Jurewicz
--------------------------------
Paul S. Jurewicz
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 of ficer of the registrant.
Date: August 14, 1998 By: /s/ Scott Skooglund
-------------------------------
Scott Skooglund
Chief Accounting Officer
-16-
<PAGE> 1
EXHIBIT 10.36
AIRPORT COMMERCE CENTER
NET INDUSTRIAL LEASE
MULTI TENANT BUILDING
1. Parties.
THIS LEASE, dated, for reference purposes only, June 18, 1998, is made
between REYNOLDS METALS DEVELOPMENT COMPANY, a Delaware Corporation
("Landlord") and ROCAP, a division of Sabratek Corporation, a Delaware
corporation ("Tenant").
2. Premises.
Landlord hereby leases to the Tenant and Tenant leases from Landlord for
the term, at the rental, and upon all of the conditions set forth herein, the
portion of that certain real property situated in the County of Orange, State of
Florida, commonly known as 8350 Parkline Boulevard, Orlando, Florida, comprising
approximately 40,544 square feet as indicated on Exhibit "A" attached hereto and
by reference made a part hereof (the "Premises"), together with improvements as
indicated on Exhibit "B" attached hereto and by reference made a part hereof
(the "Improvements").
3. Term.
3.1 Term. The term of this Lease shall commence on the latter of when the
Premises and Improvements are completed in good and workmanlike manner and in
compliance with the plans, specifications and completion schedule as indicated
on Exhibit "C" (the "Plans and Specifications") or September 1,1998 (subject to
Section 3.2) (the "Commencement Date") and shall end at midnight, on May 31,
2007, unless sooner terminated pursuant to any provision hereof. Tenant shall
have the option to renew the Lease for two (2) consecutive five (5) year terms.
Tenant shall provide Landlord with written notice via certified mail no later
than 180 days prior to expiration of the then term of its intent to exercise its
option to renew. Annual Rent for the renewal period shall be calculated annually
based on the Annual Rent for the prior Lease Year plus a percent increase equal
to the percent increase in the Consumer Price Index for the prior Lease Year.
3.2 Delay in Completion of Improvements. Landlord will take all steps
reasonably necessary in order to ensure that the Improvements are completed no
later than September 1, 1998; however, if the completion of the Improvements
shall be delayed due to (a) any act or omission of the Tenant or any of its
employees, agents or contractors (including, but not limited to (i) any delays
due to changes in or additions
<PAGE> 2
to the Improvements, or (ii) any delays by Tenant in the submission of plans,
drawings, specification, or other information or in approving drawings or in
giving any authorizations or approvals); (b) any delays beyond control of
Landlord including, but not limited to, strikes, lockouts, civil commotion,
warlike conditions, invasion, rebellion, hostility, inclement weather, inability
to obtain material or services and acts of God; or (c) any delays caused by
governmental regulations or controls, Landlord shall not be subject to any
liability therefore, nor shall such failure affect the validity of the Lease or
the obligations of Tenant hereunder, but in such case, Tenant shall not be
obligated to pay rent until the Premises and Improvements are completed in good
and workmanlike manner in compliance with the Plans and Specifications. Landlord
shall keep Tenant informed of the status and progress of said construction.
3.3 Early Possession. If Tenant occupies the Premises prior to the
Commencement Date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Tenant shall pay rent
for such period at the initial monthly rates set forth below.
4. Rent/Security Deposit.
4.1 Rent.
(a) Tenant shall pay to Landlord annual rent for the Premises in the
amounts set forth below under the heading "Annual Rent." As long as Tenant is
not in default hereunder, rent may be paid in equal monthly installments in the
amounts set forth below under the heading "Monthly Rent," as adjusted by
Subsection 4.1(b), in advance, on the first day of each month of each Lease Year
during the term hereof, except the first installment of rent which shall be paid
upon execution of the Lease by Tenant. Rent shall be prorated if the term does
not commence on the first day of a calendar month or expire on the last day of a
calendar month. Rent shall be paid to Reynolds Metals Development Company, 201
S. Orange Ave., Suite 1210, Orlando, Florida 32801.
<TABLE>
<CAPTION>
Lease Year Annual Rent Monthly Rent
---------- ----------- ------------
<S> <C> <C>
From the Commencement
Date to June 30, 1999 $257,454.40 $21,454.53
July 1, 1999 to June 30, 2000 $257,454.40 $21,454.53
July 1, 2000 to June 30, 2001 $257,454.40 $21,454.53
July 1, 2001 to June 30, 2002 $288,348.53 $24,029.08
July 1, 2002 to June 30, 2003 $296,999.40 $24,749.95
July 1, 2003 to June 30, 2004 $305,909.38 $25,492.45
July 1, 2004 to June 30, 2005 $315,086.66 $26,257.22
July 1, 2005 to June 30, 2006 $324,539.26 $27,044.94
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C> <C>
July 1, 2006 to May 31, 2007 $334,275.44 $27,856.29
</TABLE>
(b) The term "Lease Year", as used herein, (i) shall mean the periods
set forth above in subsection (a) hereof, and (ii) in the event the Lease
expires or terminates on a date other than the date set forth herein, then the
term "Lease Year" shall also mean the period from the end of the preceding Lease
Year to the date of said expiration or termination of this Lease.
(c) Tenant agrees that any adjustments to the base Monthly Rent and
other sums due Landlord from Tenant under the terms of this Lease shall be
considered as additional rent from Tenant (the "Additional Rent"). As used
herein the term "Rent" shall include the Monthly Rent, Additional Rent and such
other payments as are set forth herein.
(d) It is understood and agreed that Tenant's obligation to pay the
Additional Rent shall, for the purposes of the default provision hereof, entitle
Landlord to all remedies provided herein and at law or equity on account of
Tenant's failure to pay rent. Any delay or failure of Landlord in computing or
billing for Additional Rent shall not constitute a waiver or in any way impair
the continuing obligation of the Tenant to pay such Additional Rents. Any
statement of Additional Rent sent by Landlord to Tenant shall be conclusively
binding upon Tenant unless, within thirty (30) days after such Statement is
sent, Tenant shall send a written notice to Landlord objecting to such Statement
and specifying the respects in which such Statement is claimed to be incorrect.
If such notice is sent and the parties are unable to resolve the issues, either
party hereto may refer the matter to a reputable independent firm of a certified
arbitrator selected by mutual agreement between Landlord and Tenant, and the
decision of said arbitrator shall be conclusively binding upon said parties. The
fees and expenses of the arbitrator shall be borne by the unsuccessful party
unless both parties are unsuccessful, then said expenses shall be apportioned
between the parties by the accountants based upon the degree of success of each
party.
4.2 Security Deposit. Tenant shall deposit with Landlord upon execution
hereof $44,805.60 as security for Tenant's faithful performance of Tenant's
obligations hereunder (the "Security Deposit"). If Tenant fails to pay rent or
other charges due hereunder, or otherwise defaults with respect to any provision
of this Lease, Landlord may use, apply or retain all or any portion of the
Security Deposit for the payment of any rent or other charge in default or for
the payment of any other sum to which Landlord may become obligated by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may suffer thereby. If Landlord so uses or applies all or any portion
of the Security Deposit, Tenant shall within ten (10) days after written demand
therefore, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to the full amount hereinabove stated and Tenant's failure to
do so shall be a material breach of this Lease. Landlord shall keep
<PAGE> 4
said deposit separate from its general accounts, in an interest bearing account.
Interest accumulated on such account during each Lease Year shall be paid to
Tenant by Landlord following the end of such Lease Year. If Tenant performs all
of Tenant's obligations hereunder, the Security Deposit, or so much thereof as
has not theretofore been applied by Landlord, shall be returned without payment
of other increment for its use to Tenant (or Tenant's assignee if so directed in
writing by Tenant) at the expiration of the term hereof, and after Tenant has
vacated the Premises No trust relationship is created herein between Landlord
and Tenant with respect to the Security Deposit.
5. Use.
5.1 Use. Tenant shall use the Premises for preparation of pharmaceuticals
so-called "Clean-Room(s)", offices, laboratory, warehouse and shipping and uses
incidental thereto and for no other purposes, and Tenant further agrees to use
the entire Premises as herein provided. Tenant agrees not to store any material,
waste or other products outside the Premises in any adjoining area. Landlord
shall provide a dumpster for Tenant's use for waste paper products only. Under
no circumstances shall such dumpster be used by Tenant for disposal of
pharmaceuticals, medical products, controlled substances or other related
products. Tenant further agrees that it will not store or dispose of hazardous
materials in or about the Premises. For purposes of this Lease, "hazardous
materials" includes any hazardous, toxic or dangerous waste, substance or
material defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation and Liability Act, any so-called "superfund" of
"superlien" law, or any other federal, state or local statute, law ordinance,
code, rule, regulation, consent agreement or other requirement of any
governmental authority regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous or toxic or dangerous waste. This
restriction shall not prohibit the use, preparation, disposal or other handling
of pharmaceuticals, medical products, controlled substances or other related
products. Tenant shall dispose, handle, store and otherwise deal with said
products in compliance with any and all regulations, law, ordinances and other
governmental requirements related thereto. Tenant shall defend, indemnify and
save Landlord harmless from all costs and expenses (including consequential
damages) asserted or proven against Landlord by any party as a result of
Tenant's use, storage or disposal of hazardous materials (as defined above),
pharmaceuticals, medical products or controlled substances on the premises. The
foregoing indemnity shall be a recourse obligation of Tenant, which shall
survive termination, or expiration of the lease. In the event that any activity
of the Tenant causes an increase in the insurance as a whole, then Tenant shall
pay this additional cost of insurance as assessed by Landlord's insurer, which
determination shall be conclusive and binding upon tenant.
-4-
<PAGE> 5
5.2 Compliance with Law. Tenant shall, at Tenant's expense, comply promptly
with all applicable statutes, ordinances, rules, regulations, orders, permits,
covenants and restrictions of record, and requirements in effect during the term
or any part of the term hereof, regulating the use or condition of the Premises,
parking, or Common Areas, including but not limited to, environmental matters
and employee health and safety. Tenant shall not use nor permit the use of the
Premises in any manner that will tend to create waste or a nuisance or, if there
shall be more than one tenant in the building containing the Premises, shall
tend to disturb such tenants.
5.3 Condition of Premises. Landlord shall deliver the Premises and
Improvements completed in good and workmanlike manner, in compliance with the
Plans and Specifications and all applicable zoning, municipal, county and state
laws, ordinances and regulations governing and regulating the use and condition
of the Premises and any covenants or restrictions of record. Tenant accepts this
Lease subject thereto and to all matters disclosed thereby. Tenant acknowledges
that neither Landlord nor Landlord's agent has made any representation or
warranty as to the present or future suitability of the Premises for the conduct
of Tenant's business.
5.4 Common Areas. All areas and facilities that Landlord shall from time to
time designate as being for the mutual use of Tenant, its customers, employees
and other tenants, including but not limited to all parking areas, sidewalks,
driveways, roads and landscaped areas located on the real property on which the
Premises are located and in the park of which the Premises are a part, shall be
known as the "Common Areas". Tenant and its employees, customers and invitees
shall have the non-exclusive right to use Common Areas together with Landlord
and the other tenants of the building containing the Premises, their customers,
employees and guests and, subject to such reasonable rules and regulations
governing the use of the Common Areas as Landlord may from time to time
prescribe, such rules specifically to include but are not limited to parking
rules. Tenant shall not use the Common Areas for storage without the prior
written consent of Landlord or take any action, which would interfere with the
rights of other persons to use the Common Areas. Landlord may temporarily close
any part of the Common Areas for such period of time as is reasonably necessary
to make repairs or alterations to the Common Areas or the building located on
the real property of which the Premises are a part.
6. Maintenance, Repairs and Alterations.
6.1 Tenant's Obligations.
(a) Tenant, at Tenant's expense, shall keep in good order, condition
and repair the nonstructural portions of the Premises and every part thereof,
including by way of illustration, all plumbing, heating, air conditioning,
ventilation, electrical and lighting facilities and equipment located within the
Premises, interior surfaces of
-5-
<PAGE> 6
exterior walls (including but not limited to damage to such surfaces caused by
etching or staining from spilled or leaked materials), ceilings, windows, doors
and plate glass and Tenant's signs located on or about the Premises. Tenant
shall be obligated to make the repairs required hereunder whether or not such
portion of the Premises requiring repair, or the means of repairing the same are
reasonably or readily accessible to Tenant, and whether or not the need for such
repairs occurs as a result of Tenant's use, any prior use, the elements, or the
age of such portion of the Premises All glass, both interior and exterior, is
the sole risk of Tenant and Tenant agrees to replace at Tenant's own expense any
glass broken during the term of this Lease and Tenant agrees to insure and to
keep insured all plate glass in the Premises and to furnish the Landlord with
certification of said insurance. In the event replacement is necessary, Tenant
agrees to use such insurance for the replacement of any broken glass. The term
"repair" shall be deemed to include replacements. In addition to Tenant's
obligations set forth herein, Tenant shall, at its expense, repair and replace
any and all portions of the Premises, structural and nonstructural, or any
landscaping, damaged by Tenant's acts or omissions or the acts or omissions of
Tenant's employees, agents, contractors or any others for whom Tenant may be
responsible.
(b) If Tenant fails to perform Tenant's obligations under this
section 6.1 within a reasonable time after receipt of written notice of the need
for such repairs, Landlord may at Landlord's option enter upon the Premises
(except in the case of emergency, in which case no notice shall be required),
perform such obligations on Tenant's behalf and put the Premises in good order,
condition and repair, and the reasonable cost thereof shall be due and payable
as additional rent to Landlord, together with Tenant's next rental installment.
(c) On the last day of the term thereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in the same
condition as received, ordinary wear and tear excepted, and the Premises shall
be delivered to Landlord clean, uncontaminated and free of debris. Tenant shall
remove its trade fixtures, furnishings and equipment from the Premises and shall
repair any damage to the Premises occasioned by the installation or removal of
its trade fixtures, furnishings and equipment. Tenant shall have the right to
remove its Clean Room(s) and all equipment related thereto, provided that Tenant
repairs any damage to the Premises occasioned by the installation or removal
thereof and surrenders and delivers the Premises as provided above in this
subsection (c).
6.2 Landlord's Obligations. Landlord, at Landlord's expense, shall keep in
good order, condition and repair, all of the structural portions of the
Premises, including, without limiting the generality of the foregoing, the roof,
the exterior walls and the foundation of the Premises. Landlord shall repair and
replace if necessary any latent or other defects in the Premises which arose
during, or which are attributable to, construction of the Premises; and Landlord
shall maintain the Common Areas as
-6-
<PAGE> 7
described in section 5.4. Landlord shall have no obligation to make repairs
under this subsection 6.2 until a reasonable time after receipt of written
notice of the need for such repairs.
6.3 Common Area Maintenance.
(a) Each month, Tenant shall pay to Landlord, in addition to the rent
due on the Premises, Tenant's Share (defined below) of the cost of Common Area
maintenance for the Premises. Common Area maintenance costs shall include all
expenses reasonably incurred and paid by Landlord in operating, managing and
maintaining the Common Areas of the Premises including, without limiting the
generality of the foregoing, painting and cleaning of paved and unpaved
surfaces, lighting, exterior window cleaning, landscaping, management, signage,
trash collection and other similar items, whether incurred by Landlord directly,
through the Airport Commerce Center Property Owner's Association, Inc. by virtue
of the Declaration of Covenants, Conditions and Restriction therefore or any
owner's association created for the business park of which the Premises are a
part.
(b) "Tenant's Share" shall be a fraction, the numerator of which
shall be Tenant's leased spaced (40,544 square feet) and the denominator of
which shall be the total leasable space in the building of which the Premises
are a part (81,008 square feet) or 50 percent (50%); provided, however, that if
any charges relate to Airport Commerce Center as a whole, Tenant's share shall
be adjusted to reflect its pro-rata share of such costs.
(c) During the calendar year 1998, the Tenant's Share of Common Area
maintenance and insurance real property tax, in the case of such insurance and
real property tax as provided in Sections 7 and 10 of this Lease, shall be $.60
per square foot of leased space prorated based upon the portion of the calendar
year 1998 that this Lease is in effect. Tenant's Share of Common Area
maintenance, insurance and real property tax shall be adjusted annually
thereafter pursuant to Subsection 6.3(b) above, provided, however, that such
Tenant's Share in calendar year 1999 shall be $1.05 per square foot; and,
provided further that beginning with calendar year 2000 Tenant's Share of Common
Area maintenance (expressly excluding insurance and real property tax) shall
not increase more than the lesser of (a) Tenants pro-rata share of actual
operating charges, or (b) an average of five percent (5%) annually determined on
a cumulative basis. Landlord shall prepare and submit to Tenant a statement
reflecting the Common Area expenses incurred during the prior year and the
projected Common Area expenses expected to be incurred during the current year,
at which time the monthly amount to be paid by Tenant hereunder shall be
adjusted accordingly in order to pay any deficiency for the previous year
together with any increase or decrease in the projected Common Area expenses
expected to be incurred during the current year
-7-
<PAGE> 8
(d) Landlord, at Landlord's option or upon Tenant's request, may
provide Tenant with a monthly written statement of Tenant's Share of the Common
Area Maintenance costs.
6.4 Alterations and Additions.
(a) Tenant shall not make any alterations, improvements or additions
in, on or about the Premises without Landlord's prior written consent which
consent shall not be unreasonably withheld, delayed or conditioned.
(b) Any alterations, improvements or additions in the Premises that
Tenant shall desire to make shall be presented to Landlord in written form with
proposed detailed plans prepared by a professional architect or engineer. If
Landlord shall give its consent, the consent shall be deemed conditioned upon
Tenant acquiring a permit to do so from appropriate governmental agencies, if
required, furnishing a copy thereof to Landlord prior to the commencement of the
work and complying with all conditions of said permit in a prompt and
expeditious manner.
(c) Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use in the Premises, which claims are or
may be secured by any mechanics' or materialmen's lien against the Premises or
any interest therein. Tenant shall give Landlord not less than ten (10) days'
notice prior to the commencement of any such work in the Premise and Landlord
shall have the right to post notices of nonresponsibility in or on the Premises
as provided by law. If Tenant shall, in good faith, contest the validity of any
such lien, claim or demand, then Tenant shall, at its sole expense, defend
itself and Landlord against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Landlord or the Premises. Landlord may, at its option, require Tenant to furnish
to Landlord a surety bond reasonably satisfactory to Landlord in an amount equal
to 100% of the amount of such contested lien, claim or demand indemnifying
Landlord against liability for the same and holding the Premises free from the
effect of such lien or claim.
(d) Unless Landlord requires their removal, all alterations,
improvements and additions which may be made on the Premises, shall become the
property of Landlord and remain upon and be surrendered with the Premises at the
expiration of the term. Notwithstanding the provisions of this section 6.4,
Tenant's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises,
shall remain the property of Tenant and may be removed by Tenant subject to the
provisions of subsection 6.1(c).
7. Insurance; Indemnity.
-8-
<PAGE> 9
7.1 Liability Insurance. Tenant shall, at Tenant's expense, obtain and keep
in force during the term of this Lease, comprehensive general liability
insurance with a combined single limit of not less than $1,000,000.00 per
occurrence for bodily injury and property damage insuring both Landlord and
Tenant against liability arising out of Tenant's use, occupancy and maintenance
of the Premises and all other areas appurtenant thereto. Tenant shall deliver to
Landlord a certificate of insurance required under this subsection, which policy
shall expressly name Landlord as an insured. No such policy shall be cancelable
or subject to reduction in coverage except after thirty (30) days' prior written
notice to Landlord.
7.2 Property Insurance. Landlord agrees that it will keep in force during
the term of this Lease insurance covering loss or damage to the Premises (but
not to Tenant's trade fixtures, furnishings, personal property or improvements)
providing protection against all perils included within the classification of
fire, lightning and extended coverage. Tenant shall pay "Tenant's Share" of the
cost of such insurance as determined under section 6.3.
7.3 Waiver of Subrogation. Insofar as the following provision may be
effective without invalidating insurance coverage, Tenant and Landlord each
hereby release and relieve the other, and waive their entire right of recovery
against the other for loss or damage arising out of or incident to the perils
insured against under this section 7, which perils occur in, on or about the
Premises, whether due to the negligence of Landlord or Tenant or their agents,
employees, contractors and/or invitees, but only to the extent that such loss or
damage is actually covered by insurance, and only to the extent that the insured
party has received proceeds of insurance therefore.
7.4 Indemnity. Tenant agrees to pay, and to defend, indemnify and save
harmless Landlord from and against any and all liabilities, losses, damages,
costs, expenses (including reasonable attorneys' fees) in connection with any
injury to, or the death of, any person in or on the Premises or any damage to or
loss of property on the Premises, except any such liabilities, losses, damages,
costs, or expenses arising out of the negligence or willful act of Landlord or
any third parties not doing business with, or otherwise invitees of, or under
the control of, Tenant, their servants, agents or employees. If any action or
proceeding is brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord shall defend the same at Tenant's expense by counsel
mutually satisfactory to Landlord and Tenant. The counsel assigned by insurance
carrier is preapproved as acceptable to both parties.
7.5 Exemption of Landlord From Liability. Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of
-9-
<PAGE> 10
Tenant, Tenant's employees, invitees, customers, or any other person in or about
the Premises, nor shall Landlord be liable for injury to the person of Tenant,
Tenant's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, stream, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Tenant except when such damage or injury is caused by Landlord's negligence or
that of its servants, agents or employees. Landlord shall not be liable for any
damages arising from any act or neglect of any other tenant, if any, of the
building in which the Premises are located, unless Landlord has actual notice or
knowledge of same and fails to use efforts determined by Landlord in its sole
and absolute discretion to be reasonable to prevent or restrain the wrongful act
or omission of said other tenant.
8. Damage or Destruction.
8.1 Definitions.
(a) "Partial Damage" means damage or destruction to the building of
which the Premises are a part to the extent that the cost of repair is less than
fifty percent (50%) of the fair market value of the building immediately prior
to such damage or destruction.
(b) "Total Destruction" means damage or destruction to the building
of which the Premises are a part to the extent that the cost of repair is fifty
percent (50%) or more of the fair market value of the building immediately prior
to such damage or destruction or destruction of the "Clean Room(s)" such that
they cannot reasonably be repaired or replaced within thirty (30) days of such
destruction.
8.2 Partial Damage. If at any time during the term of this Lease
there is damage which falls within the classification of Partial Damage,
Landlord may, at Landlord's option, either (i) repair such damage, in which
event this Lease shall continue in full force and effect, or (ii) give written
notice to Tenant within thirty (30) days after the date of the occurrence of
such damage of landlord's intention TO terminate this Lease, which termination
shall be effective as of the date of the occurrence of such damage. In the event
that Landlord elects to rebuild or repair, Landlord shall commence same as soon
as it determines in its sole and absolute discretion it is reasonably
practicable to do so and shall diligently pursue same to completion.
-10-
<PAGE> 11
8.3 Total Destruction. If at any time during the term of this Lease there
is damage which falls into the classification of Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
8.4 Abatement of Rent. If Landlord repairs or restores the Premises
pursuant to the provisions of this section 8, the rent payable hereunder
(including "Additional Rent") for the period during which such damage, repair or
restoration continues shall be abated in proportion to the degree to which
Tenant's use of the Premises is impaired. Except for abatement of rent, if any,
Tenant shall have no claim against Landlord as a result of any such damage.
Furthermore, notwithstanding anything above to the contrary, Tenant shall not be
entitled to any rent abatement if the Partial Damage is in any way caused by
Tenant.
9. Condemnation.
If the Premises or any portion thereof of the building or other areas
appurtenant to the Premises are taken under the power of eminent domain, or sold
under the threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to part so taken as of the date
the condemning authority takes title or possession, whichever first occurs. If
in the reasonable opinion of Tenant, the portion of the Premises taken by
condemnation materially adversely affects Tenant's operations on the Premises,
Tenant may, at Tenant's option, to be exercised in writing only within ten (10)
days after Landlord shall have given Tenant written notice of such taking (or in
the absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. Landlord shall also have an option to terminate
this Lease by notice to Tenant given within the time limits set forth above if
in Landlord's reasonable opinion, it would not be economically feasible to
continue leasing the Premises to Tenant as a result of such condemnation. If
this Lease is not terminated in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the rent shall be reduced in the proportion that the square feet of
the Premises which is taken bears to the total square feet of the Premises. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Landlord, whether such award shall be made as
compensation for diminution in value of the leasehold, for the taking of the
fee, or as severance damages; provided, however, that Tenant shall be entitled
to any award made specifically for loss of or damage to Tenant's trade fixtures
and removable personal property. In the event that this Lease is not terminated
by reason of such condemnation, Landlord shall, at Landlord's expense, promptly
repair any damage to the Premises caused by such condemnation.
-11-
<PAGE> 12
10. Taxes.
10.1 Payment of Real Property Taxes. Each month, Tenant shall pay Tenant's
Share of the real property taxes applicable to the Premises during the term of
this Lease. "Tenant's Share" shall be calculated as set forth in Section 6.3(b).
10.2 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Premises by any authority have the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Landlord in the
Premises or in the real property of which the Premises are a part, as against
Landlord's right to rent or other income therefrom, and as against Landlord's
business of leasing the Premises. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee levy, assessment or charge hereinabove
included within the definition of "real property tax", or (ii) the nature of
which was hereinbefore included within the definition of "real property tax", or
(iii) which is imposed by reason of this transaction or any modifications or
changes hereto.
10.3 Joint Assessment. If the Premises are not separately assessed,
Tenant's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Landlord from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available, and Landlord's reasonable determination thereof, in good
faith shall be conclusive.
10.4 Personal Property Taxes.
(a) Tenant shall pay, prior to delinquency, all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises. When possible, Tenant
shall cause said fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of
Landlord.
(b) If any of the Tenant's personal property shall be assessed with
the Landlord's real property, Tenant shall pay Landlord the taxes attributable
to Tenant within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Tenant's property.
-12-
<PAGE> 13
10.5 Sales and Use Tax. In addition to the annual rent required hereunder,
Tenant shall also be solely responsible for all sales tax applicable thereon, or
applicable to any other charges or payments due hereunder.
11. Utilities and Services.
Tenant shall pay for all gas, heat, light, power, telephone and other
utilities and services supplied to the Premises, together with any taxes
thereon. If any such utilities are not separately metered, Tenant shall pay a
reasonable portion of the charges for utilities jointly metered with other
premises. Tenant shall provide, at its expense, all janitorial and security
services to the Premises.
12. Assignment and Subletting.
12.1 Landlord's Consent Required. Tenant shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the Premises,
without Landlord's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, provided (i) such assignment is
to an entity/individual(s) whose financial integrity is at least equal to that
of Tenant; (ii) where said assignee has demonstrated prior experience in the
management and operation of its business in a similar setting and of the same
magnitude; and (iii) proof thereof satisfactory to Landlord has been delivered
to Landlord at least ten (10) days prior to the effective date of any such
transfer. Any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease. Any sale, assignment or other transfer of controlling stock interest
in Tenant shall constitute an "assignment" for purposes hereof.
12.2 No Release of Tenant. Regardless of Landlord's consent, no subletting
or assignment shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay the rent and to perform all other obligations to be
performed by Tenant hereunder. The acceptance of rent by Landlord from any
person shall not be deemed to be a waiver by Landlord of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Tenant or any successor of Tenant, in the performance of any of the terms
hereof, Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against such successor. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant and without obtaining its or their consent thereto and such action shall
not relieve Tenant of liability under this Lease.
-13-
<PAGE> 14
12.3 Attorney's Fees. In the event Tenant shall assign or sublet the
Premises or request the consent of Landlord to any assignment or subletting or
if Tenant shall request the consent of Landlord for any act Tenant proposes to
do, then Tenant shall pay Landlord's reasonable attorney's fees incurred in
connection therewith.
12.4 Landlord's Option to Terminate. Notwithstanding anything contained
herein to the contrary, in the event that at any time during the term of this
Lease Tenant desires to assign this Lease or to sublet all or part of the
Premises, Tenant shall notify Landlord in writing of the terms of the proposed
assignment or subletting and the area so proposed to be sublet and Landlord
shall have the option to terminate this Lease wholly in the event of a proposed
assignment or sublet of the whole Premises, or partially as to the portion of
the Premises proposed to be sublet, upon written notice to Tenant within 45 days
after receipt of notice of Tenant's intention to assign or sublet; provided,
however, that such option to terminate shall not be available to Landlord in the
event Tenant proposes to so sublet for a term not to exceed one (1) year not
more than two (2) times within a Lease term (or any renewal term) and there is a
minimum of six (6) months between any such subtenancies. If Landlord's election
to terminate involves only a portion of the Premises, the rent specified in this
Lease shall be adjusted proportionately on the basis of the number of square
feet retained by Tenant and this Lease shall continue in full force and effect
in all other respects.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three (3) days after Tenant's receipt of
written notice thereof. In the event that Landlord serves Tenant with a notice
to pay rent or quit pursuant to applicable unlawful detainer statutes, such
notice to pay rent or quit shall also constitute the notice required by this
section.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Tenant,
other than described in section 13.1(b) above, where such failure shall continue
for a period of thirty (30) days after written notice thereof from Landlord to
Tenant; provided, however, that if the nature of Tenant's default is such that
more than thirty (30) days are reasonably required for its cure, then Tenant
shall not be deemed to be in default if Tenant commenced such cure within the
30-day period and thereafter diligently prosecutes such cure to completion.
-14-
<PAGE> 15
(d) (i) The making by Tenant of any general arrangement or assignment
for the benefit of creditors; (ii) Tenant becomes a "debtor" as defined in 11
U.S.C. Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Tenant, the same is dismissed within 60 days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where possession is not restored to Tenant within thirty (30) days.
13.2 Remedies. In the event of any such material default or breach by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may otherwise have under Florida law by reason of such default or
breach:
(a) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all reasonable damages
incurred by Landlord by reason of Tenant's default including, but not limited
to, the reasonable cost of recovering possession of the Premises; the reasonable
expense of reletting, including necessary reasonable renovation and alteration
of the Premises, reasonable attorney's fees (including costs), and any
reasonable real estate commission actually paid; the worth at the time of award
by the court having jurisdiction thereof of the amount by which the unpaid rent
for the balance of the term after the time of such award exceeds the amount of
such rental loss for the same period that Tenant proves could be reasonably
avoided; and that portion of the leasing commission paid by Landlord pursuant to
section 14 applicable to the unexpired term of this Lease.
(b) Maintain Tenant's right to possession in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Terminate Tenant's right to possession of the Premises without
terminating this Lease and re-enter and take possession of the Premises, in
which case Landlord shall use reasonable efforts to relet the Premises to
another party on commercially reasonable terms for Tenant's account and Tenant
shall remain liable for all rent and other amounts due under this Lease and not
paid by such other party.
(d) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Tenant under
-15-
<PAGE> 16
the terms of this Lease shall bear interest from the date due at the maximum
rate then allowable by law.
13.3 Default by Landlord. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within a reasonable time, but
in no event later than thirty (30) days after written notice by Tenant to
Landlord and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are required for performance, then Landlord shall not be
in default if Landlord commences performance within such 30-day period and
thereafter diligently prosecutes the same to completion.
13.4 Late Charges. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent and other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within ten (10) days after
such amount shall be due then, without any requirement for notice to Tenant,
Tenant shall pay to Landlord a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of rent, then rent shall
automatically become due and payable quarterly in advance, rather than monthly,
notwithstanding section 4 or any other provision of this Lease to the contrary.
13.5 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installment terms of this Lease, Tenant
shall pay to Landlord, if Landlord shall so request, in addition to any other
payments required under this Lease, a monthly advance installment, payable at
the same time as the monthly rent, as reasonably estimated by Landlord, for real
property tax and insurance expenses on the Premises which are payable by Tenant
under the terms of this Lease. Such fund shall be established to insure payment
when due, before delinquency, of any or all such real property taxes and
insurance premiums. If the amounts paid to Landlord by Tenant under the
provisions of this section are insufficient to discharge the obligations of
Tenant to pay such real property taxes and
-16-
<PAGE> 17
insurance premiums as the same become due, Tenant shall pay to Landlord, upon
Landlord's demand, such additional sums necessary to pay such obligations. All
moneys paid to Landlord under this section may be intermingled with other moneys
of Landlord and shall not bear interest. In the event of a default in the
obligations of Tenant to perform under this Lease, then any balance remaining
from funds paid to Landlord under the provisions of this section may, at the
option of Landlord, be applied to the payment of any monetary default of Tenant
in lieu of being applied to the payment of real property tax and insurance
premiums.
14. Broker's Fee.
Each party represents and warrants to the other that it has not dealt with
any broker, finder or similar agent in connection with any transaction
contemplated hereunder. Each party hereto hereby covenants and agrees to defend,
indemnify, hold harmless and reimburse the other party for, from and against all
claims of any kind of any broker, finder or similar agent purporting to
represent the indemnifying party in connection with any transaction contemplated
hereunder.
15. Estoppel Certificate
(a) Tenant shall at any time upon not less than ten (10) days' prior notice
from Landlord execute, acknowledge and deliver to Landlord a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modifications and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed.
Any prospective purchaser or encumbrancer of the Premises may conclusively rely
upon any such statement.
(b) At Landlord's option, Tenant's failure to deliver such statement within
such time shall be a material default under this Lease or shall be conclusive
upon Tenant (i) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no
uncured defaults in Landlord's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Landlord as a default by Tenant under this Lease.
(c) If Landlord desires to finance, refinance, or sell the Premises or any
part thereof, Tenant hereby agrees to deliver to any lender or purchaser
designated by Landlord copies of such financial information or reports as are
publicly available to public stockholders of Tenant as a publicly traded
corporation; provided, however, that if Tenant is not a publicly traded
corporation it shall deliver such financial statements of Tenant as may be
reasonably required by such lender or purchaser,
-17-
<PAGE> 18
including the past three years' financial statements of Tenant. All such
financial statements shall be received by Landlord and such lender or purchaser
in confidence and shall be used only for the purpose herein set forth.
16. Landlord's Liability.
The term "Landlord" as used herein shall mean only the owner or owners at
the time in question of the fee title or a tenant's interest in a ground lease
of the Premises. In the event of any transfer of such title or interest,
Landlord herein named (and in case of any subsequent transfers, then the
grantor) shall be relieved from and after the date of such transfer of all
liability in respect of Landlord's obligations thereafter to be performed,
provided that any funds in the hands of Landlord or the then grantor at the time
of such transfer, in which Tenant has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by Landlord
shall, subject as aforesaid, be binding on Landlord's successors and assigns,
only during their respective periods of ownership.
17. Severability.
The invalidity of any provision of this Lease as determined by a court of
competent jurisdiction shall in no way affect the validity of any other
provision hereof.
18. Interest on Past-Due Obligations.
Except as expressly herein provided, any amount due to Landlord not paid
when due shall bear interest at the rate of ten (10%) percent per annum from the
date due. Payment of such interest shall not excuse or cure any default by
Tenant under this Lease; provided, however, that interest shall not be payable
on late charges incurred by Tenant nor on any amounts upon which late charges
are paid by Tenant.
19. Additional Rent.
Any monetary obligations of Tenant to Landlord under the terms of this
Lease shall be deemed to be Additional Rent.
20. Incorporation of Prior Agreements; Amendments.
This Lease contains all agreements of the parties with respect to any
matter mentioned herein. No prior agreement or understanding pertaining to any
such matter shall be effective. This Lease may be modified in writing only and
signed by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Tenant hereby acknowledges that neither the real
estate broker listed in section 14 hereof nor any cooperating broker on this
transaction nor the Landlord or any
-18-
<PAGE> 19
employees or agents of any of said persons has made any oral or written
warranties or representations to Tenant relative to the condition or use by
Tenant of said Premises.
21. Notices.
Notices shall be in writing and shall be delivered to the following address
(es) of the party to be notified:
If to Landlord: Reynolds Metals Development Company
6601 West Broad Street
Richmond, Virginia 23230
Attn: Corporate Secretary
with copies to: Reynolds Metals Development Company
201 South Orange Avenue
Suite 1210
Orlando, Florida 32801
Attn: L. Daniel Libutti
and
Roberts, Carroll, Feldstein & Peirce
10 Weybosset Street
Providence, Rhode Island 02903
Attn: Edward D. Feldstein
If to Tenant: After the Commencement Date:
ROCAP, a Division of Sabratek Corporation
8350 S. Parkline Boulevard
Orlando, Florida
Attn: John H. Hamer
Vice President
Prior to the Commencement Date:
ROCAP, a Division of Sabratek Corporation
1629 Prime Court, Building 100
Orlando, Florida 32809
Attn: John H. Hamer
Vice President
with a copy to: Kenneth A. Cossingham, Esq.
Cossingham Law Office, P.C.
800 Turnpike Street
-19-
<PAGE> 20
Suite 305
Jefferson Park
North Andover, Massachusetts 01845
A notice shall be delivered by: (a) prepaid U.S. express, registered, or
certified mail or prepaid express delivery service; (b) hand delivery during
regular business hours; or (c) telex or telecopy with an original, signed copy
of the notice delivered in the manner described in (a) or (b). The notifying
party, with the other party's cooperation, shall obtain a receipt evidencing
delivery. A notice shall be effective upon receipt or refusal to accept receipt,
except that a telex or telecopy notice shall be effective upon confirmation of
receipt by the receiving party. Any notice provided in a manner not specified in
this Lease shall not be effective unless the parties otherwise agree. A party
may change its address for purposes of this section by giving the other party
notice to that effect. Unless otherwise specified in this Lease, "notice"
includes any communication required or permitted by this Lease.
22. Waivers.
No waiver by Landlord of any provision hereof shall be deemed a waiver of
any other provision hereof or of any subsequent breach by Tenant of the same or
any other provision. Landlord's consent to, or approval of, any act shall not be
deemed to render unnecessary the obtaining of Landlord's consent to or approval
of any subsequent act by Tenant. The acceptance of rent hereunder by Landlord
shall not be a waiver of any preceding breach by Tenant of any provision hereof,
other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.
23. Holding Over.
If Tenant, with Landlord's consent, remains in possession of the Premises
or any part thereof after the expiration of the term hereof, such occupancy
shall be a tenancy from month to month. All provisions of this Lease shall apply
to the holdover period. All options and rights of first refusal, if any, granted
under the terms of this Lease shall be deemed terminated and be of no further
effect during said month-to-month tenancy.
24. Cumulative Remedies.
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
25. Covenants and Conditions.
-20-
<PAGE> 21
Each provision of this Lease performable by Tenant shall be deemed both a
covenant and condition.
26. Binding Effect; Choice of Law.
Subject to any provision hereof restricting assignment or subletting by
Tenant, this Lease shall bind the parties, their personal representatives,
successors and assigns. The laws of the State wherein the Premises are located
shall govern this Lease.
27. Subordination.
(a) This Lease, at Landlord's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any advances made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. If any mortgagee, trustee
or ground landlord shall elect to have this Lease prior to the lien of its
mortgage, deed of trust or ground lease, and shall give written notice thereof
to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or
ground lease, whether this Lease is dated prior or subsequent to the date of
said mortgage, deed of trust or ground lease or the date of recording thereof.
(b) Tenant agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease subordinate to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Such documents
shall provide that such security interest holder or mortgagee shall honor the
obligations of this Lease in the event that said security interest holder or
mortgagee takes possession of the land and/or the building of which the Premises
is a part. Tenant's failure to execute such documents within ten days after
written demand shall constitute a material default by Tenant hereunder. Tenant
is also granted the right at Tenant's expense to record notice of this Lease in
the public record.
28. Attorney's Fees.
If either party named herein brings an action to enforce the terms hereof
or declare rights hereunder, the prevailing party in any such action, on trial
or appeal, shall be entitled to his costs and reasonable attorney's fees,
including all appeals, to be paid by the losing party as fixed by the court.
29. Landlord's Access.
Landlord and Landlord's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, showing the same to
-21-
<PAGE> 22
prospective purchasers, tenants (within one hundred eighty (180) days of
expiration of a term provided the same has not been validly extended) and
lenders and making such alterations, repairs, improvements or additions to the
Premises or building of which they are a part as Landlord may reasonably deem
necessary or desirable. All entry except for emergency purposes, shall be at
reasonable times with reasonable notice and in a manner which does not interfere
with Tenant's business operations. Landlord's right to inspect the Premises
includes, but is not limited to, the right to take samples and make such
environmental tests as Landlord may reasonably deem appropriate from time to
time. Landlord shall give reasonable advance notice before entering the
Premises. Landlord shall have the right to unlimited access to the fire
monitoring system, security panel, roof hatch and ladder on the Premises,
subject only to providing reasonable notice to Tenant. Notwithstanding the
foregoing, no notice shall be required hereunder to enter the Premises in the
case of an emergency. Landlord may at any time, place on or about the Premises
any ordinary "For Sale" signs and Landlord may at any time during the last 180
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs, all without rebate of rent or liability to Tenant. Notwithstanding the
foregoing, the parties acknowledge that Tenant may have on the Premises certain
areas containing certain drugs and medical supplies and that Tenant is required
by law to restrict access to said areas. The parties further acknowledge that
Tenant is required to restrict access to so-called Clean Room(s) in order to
maintain the integrity and standards thereof. Landlord's right of access is
subject to and Landlord shall honor said restrictions.
30. Auctions.
Tenant shall not conduct, nor permit to be conducted, whether voluntarily
or involuntarily, any auction upon the Premises without first having obtained
Landlord's prior written consent. Notwithstanding anything to the contrary in
this Lease, Landlord shall not be obligated to exercise any standard of
reasonableness in determining whether to grant such consent.
31. Signs.
Any and all signs placed on the exterior of the Premises, including loading
and unloading signs, name signs and number signs, shall be approved by the
Landlord (which approval shall not be unreasonably withheld, delayed or
conditioned) prior to Tenant's expense and cost and shall be in such form, style
and color as to conform to the standard used throughout the Airport Commerce
Center. Tenant is expressly prohibited from displaying any signage not
authorized by Landlord.
32. Merger.
-22-
<PAGE> 23
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, or a termination by Landlord, shall not work a merger, and
shall, at the option of Landlord, terminate all or any existing subtenancies or
may, at the option of Landlord, operate as an assignment to Landlord of any or
all such subtenancies.
33. Intentionally deleted.
34. Quiet Possession.
Upon Tenant paying the rent for the Premises and observing and performing
all of the covenants, conditions and provisions on Tenant's part to be observed
and performed hereunder, Tenant shall have quiet possession of the Premises
subject to all of the provisions of this Lease. Landlord represents and warrants
to Tenant that the individuals executing this Lease on behalf of Landlord are
fully authorized and legally capable of executing this Lease on behalf of
Landlord and that such execution is binding upon all parties holding an
ownership interest in the Premises.
35. Multiple Tenant Building.
Tenant agrees that it will abide by, keep and observe all reasonable rules
and regulations which Landlord may make from time to time for the management,
safety, care, and cleanliness of the building in which the Premises are located
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building in
which the Premises are located. The violations of such rules and regulations
shall be deemed a material breach of this Lease by Tenant, provided that
Landlord provides notice of such violation to Tenant and provided that, given a
reasonable period of time to cure said violation or to come into compliance,
Tenant has failed, refused or neglected to do so.
36. Security Measures.
Tenant hereby acknowledges that the rental payable to Landlord hereunder
does not include the cost of guard service or other security measures, and that
Landlord shall have no obligation whatsoever to provide same. Tenant assumes all
responsibility for the protection of Tenant, its agents and invitees, from acts
of third parties.
37. Easements.
Landlord reserves to itself the right, from time to time, to grant such
reasonable easements, rights, and dedications that Landlord reasonably deems
necessary or desirable, and to cause the recordation of site plans, parcel maps,
restrictions and
-23-
<PAGE> 24
similar instruments so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Tenant. Tenant shall sign any of the aforementioned documents upon request of
Landlord and failure to do so shall constitute a material breach of this Lease.
38. Performance Under Protest.
If at any time a dispute shall arise as to any amount or sum of money to be
paid by one party to the other under the provisions hereof, the party against
whom the obligation to pay the money is asserted shall have the right to make
payment "under protest" and such payment shall not be regarded as voluntary
payment, and there shall survive the right on the part of said party to
institute a suit for recovery of such sum. If it shall be adjudged that there
was no legal obligation on the part of said party to such sum or any part
thereof, said party shall be entitled to recover such sum or so much thereof as
it was not legally required to pay under the provisions of this Lease.
39. Authority.
If Tenant is a corporation, trust or general or limited partnership, each
individual executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of
said entity. If Tenant is a corporation, trust or partnership, tenant shall,
within thirty (30) days after execution of this Lease, deliver to Landlord
evidence of such authority satisfactory to Landlord.
40. Survival.
Each term, agreement, obligation or provision of this Lease to be performed
by Tenant shall be construed to be both a covenant and a condition, all of which
shall survive the expiration or termination of this Lease and any renewals or
extensions of this Lease.
41. Conflict.
Any conflict between the typewritten provisions of this Lease and the
handwritten provisions shall be controlled by the handwritten provisions.
42. Abandonment.
If Tenant shall abandon or vacate the Premises before the end of the term
of this Lease, Landlord may, at its option, cancel this Lease, or Landlord may
enter said premises as the agent of Tenant, by force or otherwise, with or
without notice, without being liable in any way therefore, and relet the
Premises with or without any furniture
-24-
<PAGE> 25
or equipment that may be therein, as the agent of Tenant, at such price and upon
such terms and for such duration of time as Landlord may in its reasonable
discretion determine, and receive the rent therefore, applying the same to the
payment of the rent due by these presents, and if the full rental herein
provided shall not be realized by Landlord over and above the expenses to
Landlord in such reletting, Tenant shall pay any deficiency.
43. Abandonment of Fixtures.
It is understood and agreed that any merchandise, fixtures, furniture or
equipment left in the Premises when Tenant vacates shall be deemed to have been
abandoned by Tenant and by such abandonment Tenant automatically relinquishes
any right or interest therein. Landlord is authorized to sell, dispose of or
destroy same. Tenant hereby irrevocably appoints Landlord its agent for this
purpose.
44. Landlord's Improvements.
Landlord agrees to make the Improvements in good and workmanlike manner,
and in compliance with codes, law and the Plans and Specifications. Landlord
will not be liable for, and Tenant expressly assumes responsibility for, any
additional costs of finishing the Improvements resulting from changes by the
Tenant to the Improvements. By signing hereunder, Tenant expressly acknowledges
that no provision herein requires Landlord or Tenant to further improve the
Premises leased hereby and that no other agreement between Landlord and Tenant
requiring such further improvements exists.
45. Radon Gas.
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.
46. Generator and Compressor.
Subject to Landlord's prior written consent, which consent shall not be
unreasonably withheld, Tenant may install an emergency generator and air
compressor. Tenant shall have the maintenance and repair responsibility
therefor. Unless otherwise determined by Landlord, upon termination of this
Lease, Tenant shall remove said generator and compressor and return the area
where they were installed to its condition prior to installation.
47. Right of First Refusal.
-25-
<PAGE> 26
Landlord grants Tenant a Right of First Refusal on the bays 111-120
adjacent to the Premises, subject, however, to the lease of Suite (bay) 119,
comprising approximately 4,122 square feet, and the lease of Suite (bay) 118,
comprising approximately 4,047 square feet which are currently being negotiated.
Following notice by Landlord to Tenant of any proposed tenancy therefor, Tenant
shall have five (5) business days to deliver written notice to Landlord of the
exercise of such right, otherwise such exercise and right shall be deemed to
have been waived.
WITNESS, the parties hereto have executed this Lease on the dates specified
immediately below their respective signatures.
Landlord:
REYNOLDS METALS DEVELOPMENT
COMPANY, a Delaware corporation
[SIGNATURE] By: /s/ L. Daniel Libutti
- ----------------------- ----------------------------------
Witness L. Daniel Libutti,Vice president
[SIGNATURE] Date: 6/17/98
- ----------------------- -------------------------------------
Witness
Tenant:
ROCAP, a Division of Sabratek Corporation,
a Delaware corporation
[SIGNATURE] By: [SIGNATURE]
- ----------------------- ----------------------------------
Witness
[SIGNATURE] Title:
- ----------------------- -------------------------------
Witness
Date: 6/16/98
----------------------------------
-26-
<PAGE> 27
EXHIBIT "A"
Lot 3, Airport Commerce Center Replat, as recorded in Plat Book 20, at Pages 91
and 92, of the Public Records of Orange County, Florida.
<PAGE> 28
EXHIBIT "B"
IMPROVEMENTS:
- - Total Area 40,544 - Bays 101 - 110 Office Area 5,862 square feet Warehouse
Area 34,682 square feet.
- - Building to comply with ADA requirements.
- - Provide 2 coats of Ashford formula floor hardener/sealer over approximately
34,682 square feet.
- - Provide a plastic laminate base cabinet in the break room.
- - Provide 10 insulated sectional overhead doors.
- - Seventy-Four (74) foot of Horizontal blinds at $300 Value for office
windows.
- - Landlord approval only (no expense to landlord) for emergency generator,
compactor and air compressor.
- - Provide 22-3070 hollow metal doorframes (knockdown type), 22-3070 paint
grade birch doors, 22 - passage sets and hinges.
- - Provide a 6" 1 hour rated tenant-demising wall to separate ROCAPs' space
from the adjacent tenant. Provide metal framing and drywall necessary to
construct the interior 5,862 s.f. Office walls. All interior walls will be
constructed to the underside of the acoustical ceiling. Perimeter tilt wall
panels will be furred out and insulated with 4' by 8' insulation board.
Painted plywood will cover the insulation from the floor to eight feet high
in the warehouse.
- - Interior finishes in the office area to consist of 2 x 4 acoustical
ceilings, painting, carpeting at $12 p/s/y., and vinyl base per attached
plan. Note that the toilet will have VCT flooring and vinyl base. No
finishes will be provided in the warehouse area.
- - 20 fire extinguishers will be provided.
- - Provide 5 edge of dock levelers (McQuire or Similar) and 5 dock seals.
<PAGE> 29
Rocap
Exhibit "B"
Page 2
- - Provide air conditioning equipment as designed and sealed by a mechanical
engineer's specifications, with value engineering as to a specific
manufacturer, to maintain the space at 40% -60% humidity for a temperature
range of 59 degrees - 86 degrees F.
- - Provide 8 toilet fixtures for 4 toilet rooms.
- - The current fire sprinkler system is designed for Class III general storage
for heights of 20' (no rack sprinklers are included). The current system
will be modified to accommodate the tenant build out in the office area
only.
- - Provide a 800 AMP at 480 volt 3-phase electrical service to a central point
on the exterior of the building. The service provided will allow for 5 bays
to have 200 amps of power and 1 bay to have 400 amps of power. The new
distribution panel will have provisions for breakers to serve the tenant's
sub panels, exclusive of specialty equipment, i.e. clean room, generator
etc. Receptacles and 2x4 lay in light fixtures are included for the office
area. The warehouse area will be provided with convenience receptacles and
lighting (75' candles at floor).
- - A basic fire alarm system will be provided to meet necessary life safety
codes.
- - Note that no provisions are included for a clean room.
- - Outlets for telephones.
- - Provide power in breakroom to handle refrigerator, microwave, toaster oven,
and two vending machines.
- - No lockers.
<PAGE> 30
Reynolds Metals Development
Company
6601 West Broad Street
Richmond, Virginia 23230
June 18, 1998
ROCAP, a Division of Sabratek Corporation
1629 Prime Court, Building 100
Orlando, Florida 32809
Attn: John H. Hamer, Vice President
Gentlemen:
This letter is intended to supplement the lease between us dated June 18,
1998 (the "Lease"). Pursuant to Sections 2 and 44 of the Lease the Landlord is
to complete certain Improvements which are set forth in Exhibit "B" of the Lease
in compliance with Plans and Specifications which are set forth in Exhibit "C"
of the Lease.
You have indicated that you would prefer that the Landlord use A.K. Holcomb
Construction, Inc. as the contractor to complete the Improvements. Based upon
your request, the Landlord is willing to so proceed, with the understanding that
the Landlord's obligation to pay for the Improvements shall be capped at twelve
dollars ($12.00) per square foot of the Premises or $486,528 with the Tenant
expressly assuming the obligation to pay for all expenses incurred in completing
the Improvements in excess of this amount, including but not limited to,
construction costs and fees for design or otherwise. This letter agreement shall
apply only to the Premises and Improvements as defined in the Lease and not to
any other space which Tenant may lease from Landlord pursuant to Tenant's right
of first refusal or otherwise.
<PAGE> 31
ROCAP
June 18, 1998
Page 2
Please evidence your agreement by signing in the space provided below and
having two people witness your signature.
Witnesses Reynolds Metals Development
Company
[SIGNATURE] By: /s/ L. Daniel Libutti
- ----------------------- ----------------------------------
L. Daniel Libutti,Vice president
[SIGNATURE] Date: 6/17/98
- ----------------------- --------------------------------
ACCEPTED AND AGREED TO BY:
Witnesses ROCAP, a Division of Sabratek Corporation
[SIGNATURE] By: [SIGNATURE]
- ----------------------- ----------------------------------
Its duly authorized representative
[SIGNATURE]
- -----------------------
<PAGE> 32
Reynolds Metals Development
Company
6601 West Broad Street
Richmond, Virginia 23230
June 17, 1998
ROCAP, a Division of Sabratek Corporation
1629 Prime Court, Building 100
Orlando, Florida 32809
Attn: John H. Hamer, Vice President
Gentlemen:
This letter is intended to supplement the lease between us dated June 17th,
1998 (the "Lease"). Pursuant to Sections 2 and 44 of the Lease the Landlord is
to complete certain Improvements which are set forth in Exhibit "B" of the Lease
in compliance with Plans and Specifications which are set forth in Exhibit "C"
of the Lease. It is hereby agreed that the Landlord is only required at its
expense to complete the Improvements as defined in Exhibit "B" of the Lease. To
the extent that the Plans and Specifications contained in Exhibit "C" require
any work in excess of what is required in Exhibit "B", you expressly assume
responsibility for the expense of performing any such additional work.
Witnesses Reynolds Metals Development
Company
/s/ By: /s/ L. Daniel Libutti
- ------------------------ --------------------------------
/s/ L. Daniel Libutti
- ------------------------ Its Vice President
<PAGE> 33
ROCAP
June 15, 1998
Page 2
ACCEPTED AND AGREED TO BY:
Witnesses ROCAP, a Division of Sabratek
Corporation
[SIGNATURE] By: /s/
- ------------------------ -----------------------------
Its duly authorized representative
[SIGNATURE]
- ------------------------
CC: Kenneth A. Cossingham, Esq.
Cossingham Law Office, P.C.
800 Turnpike Street, Suite 305
Jefferson Park
North Andover, Massachusetts 01845
Edward D. Feldstein
Roberts, Carroll, Feldstein & Peirce
Ten Weybosset Street
Providence, Rhode Island 02903
<PAGE> 34
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE dated as of July 8, 1998, is made between REYNOLDS
METALS DEVELOPMENT COMPANY, a Delaware Corporation ("Landlord") and ROCAP, a
division of Sabratek Corporation, a Delaware corporation ("Tenant").
WHEREAS, Landlord and Tenant entered into that certain Airport Commerce
Center Net Industrial Lease dated June 18, 1998 as amended by two letter
agreements (the "Lease"); and
WHEREAS, the parties wish to modify and/or add to the terms of the Lease;
NOW, THEREFORE, for mutual and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. Section 2 of the Lease shall be modified to reflect that the Premises
comprise approximately 73,135 square feet.
2. Section 4.1(a) shall be deleted in its entirety and the following
shall be inserted in its place:
(a) Tenant shall pay to Landlord the total of the annual rent for
Suites 101 to 110 and for Suites 111 to 118 for the Premises in the amounts set
forth below under the heading "Annual Rent" for Suites 101 to 110 and for Suites
111 to 118. As long as Tenant is not in default hereunder, rent may be paid in
equal monthly installments in the total of the amounts set forth below under the
heading "Monthly Rent," for Suites 101 to 110 and for Suites 111 to 118, as
adjusted by Subsection 4.1(b), in advance, on the first day of each month of
each Lease Year during the term hereof, except the first installment of rent
which shall be paid upon execution of the lease by Tenant. Rent shall be
prorated if the term does not commence on the first day of a calendar month or
expire on the last day of a calendar month. Rent shall be paid to Reynolds
Metals Development Company, 201 S. Orange Ave., Suite 1210, Orlando, Florida
32801.
<PAGE> 35
RENT FOR SUITES 101 to 110
----------------------------
Lease Year Annual Rent Monthly Rent
---------- ------------- ------------
From the Commencement
Date to June 30, 1999 $257,454.40 $21,454.53
July 1, 1999 to June 30, 2000 $257,454.40 $21,454.53
July 1, 2000 to June 30, 2001 $257,454.40 $21,454.53
July 1, 2001 to June 30, 2002 $288,348.53 $24,029.08
July 1, 2002 to June 30, 2003 $296,999.40 $24,749.95
July 1, 2003 to June 30, 2004 $305,909.38 $25,492.45
July 1, 2004 to June 30, 2005 $315,086.66 $26,257.22
July 1, 2005 to June 30, 2006 $324,539.26 $27,044.94
July 1, 2006 to May 31, 2007 $334,275.44 $27,856.29
RENT FOR SUITES 111 to 118
--------------------------------
Lease Year Annual Rent Monthly Rent
---------- ------------- ------------
From the Commencement
Date to June 30, 1999 $223,574.26 $18,631.19
July 1, 1999 to June 30, 2000 $223,574.26 $18,631.19
July 1, 2000 to June 30, 2001 $223,574.26 $18,631.19
July 1, 2001 to June 30, 2002 $250,403.17 $20,866.93
July 1, 2002 to June 30, 2003 $257,915.27 $21,492.94
July 1, 2003 to June 30, 2004 $265,652.72 $22,137.73
July 1, 2004 to June 30, 2005 $273,622.31 $22,801.86
July 1, 2005 to June 30, 2006 $281,830.98 $23,485.91
July 1, 2006 to May 31, 2007 $290,285.90 $24,190.49
3. Section 4.2 shall be modified to delete the first sentence thereof and
insert the following in its place:
"Tenant shall deposit with Landlord upon execution hereof a total of
$44,805.60 with respect to Suites 101 to 110 and $37,262.38 with respect to
Suites 111 to 118 as security for Tenant's faithful performance of Tenant's
obligations hereunder (the "Security Deposit")."
4. Section 6.3(b) shall be deleted in its entirety and the following shall
be inserted in its place:
"(b) "Tenant's Share" shall be a fraction, the numerator of which shall be
Tenant's total leased spaced (73,135 square feet) and the denominator of
which shall be the total leasable space in the building of which the
Premises are a part (81,008 square feet) or 90.28 percent (90.28%);
provided, however, that if any
-2-
<PAGE> 36
charges relate to Airport Commerce Center as a whole, Tenant's share shall
be adjusted to reflect its equitable share of such costs."
5. Section 44 shall be amended to add the following at the end of that
section:
"Notwithstanding anything in this Lease to the contrary, the Landlord's
obligation to pay for the Improvements shall be capped at twelve dollars
($12.00) per square foot of the Premises, with the Tenant expressly
assuming the obligation to pay for all expenses incurred in completing the
Improvements in excess of this amount, including but not limited to,
construction costs and fees for design or otherwise."
6. Section 47 shall be deleted in its entirety.
7. The text of Exhibit A shall be deleted in its entirety and the following
shall be inserted in its place:
"Suites 101 to 118, comprising approximately 73,135 square feet, of the
Airport Commerce Center, Lot 3, Airport Commerce Center Replat, as recorded
in Plat book 20, at pages 91 and 92 of the Public Records of Orange County,
Florida."
8. Exhibit C shall be amended to add the attached Plans and Specifications
for Suites 111 to 118.
9. This Amendment to Lease, together with the Lease constitute the entire
agreement between the parties hereto and supersedes any prior agreements,
written or oral. This Amendment may be amended, supplemented, modified or
discharged only upon agreement in writing executed by both parties. All the
terms of the Lease not specifically amended by the terms of this Amendment to
Lease shall remain in full force and effect. In the event of any conflict
between the terms of the Lease and the terms of this Amendment to Lease, the
terms of this Amendment shall control.
-3-
<PAGE> 37
WITNESS, the parties hereto have executed this Amendment to Lease on the
dates specified immediately below their respective signatures.
Landlord:
REYNOLDS METALS DEVELOPMENT
COMPANY, a Delaware corporation
/s/ By: /s/ L. Daniel Libutti
- ---------------------------- ----------------------------------
Witness L. Daniel Libutti, Vice President
/s/ Date: June 22, 1998
- ---------------------------- ----------------------------------
Witness
Tenant:
ROCAP, a division of Sabratek Corporation,
a Delaware corporation
/s/ Patricia A. Yakina By: /s/
- ---------------------------- ----------------------------------
Witness
Title: President
--------------------------------
/s/ Date: July 6, 1998
- ---------------------------- ---------------------------------
Witness
-4-
<PAGE> 38
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE, dated as of July 27, 1998, is made between
REYNOLDS METALS DEVELOPMENT COMPANY, a Delaware Corporation ("Landlord") and
ROCAP, a division of Sabratek Corporation, a Delaware corporation ("Tenant").
WHEREAS, Landlord and Tenant entered into that certain Airport Commerce
Center Net Industrial Lease dated June 18, 1998 as amended by a letter agreement
dated June 17, 1998, a letter agreement dated June 18, 1998 and an Amendment to
Lease dated as of July 8, 1998 (the "Lease"); and
WHEREAS, the parties wish to modify and/or add to the terms of the Lease;
NOW, THEREFORE, for mutual and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. Section 2 of the Lease shall be modified to provide that the Premises
comprise approximately 81,088 square feet.
2. Section 3.2 shall be deleted in its entirety and the following shall be
substituted in its place:
3.2 Delay in Completion of Improvements. Landlord will take all steps
reasonably necessary in order to ensure that the Improvements are completed
no later than September 1, 1998; however, if the completion of the
Improvements shall be delayed due to (a) any act or omission of the Tenant
or any of its employees, agents or contractors (including, but not limited
to (i) any delays due to changes in or additions to the Improvements, or
(ii) any delays by Tenant in
<PAGE> 39
the submission of plans, drawings, specification, or other information or
in approving drawings or in giving any authorizations or approvals); (b)
any delays beyond control of Landlord including, but not limited to,
strikes, lockouts, civil commotion, warlike conditions, invasion,
rebellion, hostility, inclement weather, inability to obtain material or
services and acts of God; or (c) any delays caused by governmental
regulations or controls, Landlord shall not be subject to any liability
therefore, nor shall such failure affect the validity of the Lease or the
obligations of Tenant hereunder, but in such case, Tenant shall not be
obligated to pay rent until the earlier of Landlord's completion of the
Premises and Improvements, as defined in Exhibit B, or September 15, 1998.
Landlord shall keep Tenant informed of the status and progress of said
construction. Notwithstanding anything in this Lease to the contrary and
regardless of whether the Improvements have been completed on Suites 111 to
120, in the event that (i) the Landlord completes and delivers the
Improvements on Suites 101 to 110 or (ii) the Tenant takes possession of
all or any part of Suites 101 to 110 prior to September 15, 1998 and prior
to such completion or delivery, then Tenant shall pay to Landlord the rent
designated in section 4.1 for said Suites beginning on the date that
Landlord surrenders possession.
3. Section 4.1(a) shall be deleted in its entirety and the following shall
be inserted in its place:
(a) Tenant shall pay to Landlord the total of the annual rent for
Suites 101 to 110 and for Suites 111 to 120 for the Premises in the amounts set
forth below under the heading "Annual Rent" for Suites 101 to 110 and for Suites
111 to 120. As long as Tenant is not in default hereunder, rent may be paid in
equal monthly installments in the total of the amounts set forth below under the
heading "Monthly Rent," for Suites 101 to 110 and for Suites 111 to 120, as
adjusted by Subsection 4.1(b), in advance, on the first day of each month of
each Lease Year during the term hereof, except the first installment of rent
which shall be paid upon execution of the Lease by Tenant. Rent shall be
prorated if the term does not commence on the first day of a calendar month or
expire on the last day of a calendar month. Rent shall be paid to Reynolds
Metals Development Company, 201 S. Orange Ave., Suite 1210, Orlando, Florida
32801.
<TABLE>
<CAPTION>
RENT FOR SUITES 101 to 110
Lease Year Annual Rent Monthly Rent
- ---------- ----------- ------------
<S> <C> <C>
From the Commencement
Date to June 30, 1999 $257,454.40 $21,454.53
July 1, 1999 to June 30, 2000 $257,454.40 $21,454.53
</TABLE>
-2-
<PAGE> 40
<TABLE>
<S> <C> <C>
July 1, 2000 to June 30, 2001 $257,454.40 $21,454.53
July 1, 2001 to June 30, 2002 $288,348.53 $24,029.08
July 1, 2002 to June 30, 2003 $296,999.40 $24,749.95
July 1, 2003 to June 30, 2004 $305,909.38 $25,492.45
July 1, 2004 to June 30, 2005 $315,086.66 $26,257.22
July 1, 2005 to June 30, 2006 $324,539.26 $27,044.94
July 1, 2006 to May 31, 2007 $334,275.44 $27,856.29
</TABLE>
<TABLE>
<CAPTION>
RENT FOR SUITES 111 to 120
Lease Year Annual Rent Monthly Rent
- ---------- ----------- -------------
<S> <C> <C>
From the Commencement
Date to June 30, 1999 $278,131.84 $23,177.65
July 1, 1999 to June 30, 2000 $278,131.84 $23,177.65
July 1, 2000 to June 30, 2001 $278,131.84 $23,177.65
July 1, 2001 to June 30, 2002 $311,507.66 $25,958.97
July 1, 2002 to June 30, 2003 $320,852.89 $26,737.74
July 1, 2003 to June 30, 2004 $330,478.48 $27,539.87
July 1, 2004 to June 30, 2005 $340,392.83 $28,366.07
July 1, 2005 to June 30, 2006 $350,604.62 $29,217.05
July 1, 2006 to May 31, 2007 $361,122.76 $30,093.56
</TABLE>
4. Section 4.2 shall be modified to delete the first sentence thereof and
insert the following in its place:
"Tenant shall deposit with Landlord upon execution hereof a total of
$44,805.60 with respect to Suites 101 to 110, plus $37,262.38 with respect
to Suites 111 to 120, as security for Tenant's faithful performance of
Tenant's obligations hereunder (collectively, the "Security Deposit")."
5. Section 6.3(b) shall be deleted in its entirety and the following shall
be inserted in its place:
"(b) "Tenant's Share" shall be a fraction, the numerator of which shall
be Tenant's total leased spaced (81,088 square feet) and the denominator of
which shall be the total leasable space in the building of which the
Premises are a part (81,088 square feet) or 100 percent (100%)."
-3-
<PAGE> 41
6. The text of Exhibit A shall be deleted in its entirety and the following
shall be inserted in its place:
"Suites 101 to 120, comprising approximately 81,088 square feet, of the
Airport Commerce Center, Lot 3, Airport Commerce Center Replat, as recorded
in Plat Book 20, at pages 91 and 92 of the Public Records of Orange County,
Florida."
7. Exhibit C shall be amended to add the attached Plans and Specifications
for Suites 119 and 120.
8. Section 31 is modified to add the following at the end of said Section:
"Landlord authorizes Tenant to place upon the exterior of the Premises a
sign designating the name of the Building comprising the Premises, provided
that such name is approved by Landlord, and provided further that said sign
shall conform to the form, style and color used throughout the Airport
Commerce Center and shall have the prior approval of the Landlord and any
governing bodies of the Airport Commerce Center."
9. This Second Amendment to Lease, together with the Lease constitute the
entire agreement between the parties hereto and supersedes any prior agreements,
written or oral. This Second Amendment may be amended, supplemented, modified or
discharged only upon agreement in writing executed by both parties. All the
terms of the Lease not specifically amended by the terms of this Second
Amendment to Lease shall remain in full force and effect. In the event of any
conflict between the terms of the Lease and the terms of this Second Amendment
to Lease, the terms of this Second Amendment shall control.
-4-
<PAGE> 42
WITNESS, the parties hereto have executed this Second Amendment to Lease on
the dates specified immediately below their respective signatures.
Landlord:
REYNOLDS METALS DEVELOPMENT
COMPANY, a Delaware corporation
/s/ By: /s/ L. Daniel Libutti
- ---------------------------- ----------------------------------
Witness L. Daniel Libutti, Vice President
/s/ Date: July 27, 1998
- ---------------------------- ----------------------------------
Witness
Tenant:
ROCAP, a division of Sabratek Corporation,
a Delaware corporation
/s/ By: /s/
- ---------------------------- ----------------------------------
Witness
Title: President
--------------------------------
/s/ Date: 8/7/98
- ---------------------------- ---------------------------------
Witness
-5-
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (in thousands) $ 2,276 $ 1,627 $ 4,236 $ 2,672
=======================================================
Weighted average common shares
outstanding 10,570,308 9,822,570 10,484,011 9,054,708
=======================================================
Basic income per share $ 0.22 $ 0.17 $ 0.40 $ 0.30
=======================================================
Dilutive effect of options and warrants
outstanding under treasury-stock method 1,068,447 1,067,644 1,196,872 1,139,863
-------------------------------------------------------
11,638,755 10,890,214 11,680,883 10,194,571
=======================================================
Diluted income per share $ 0.20 $ 0.15 $ 0.36 $ 0.26
=======================================================
</TABLE>
-E-1-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 74,073,736
<SECURITIES> 21,632,981
<RECEIVABLES> 21,928,716
<ALLOWANCES> 703,186
<INVENTORY> 20,881,751
<CURRENT-ASSETS> 120,147,189
<PP&E> 5,243,758
<DEPRECIATION> 1,174,079
<TOTAL-ASSETS> 166,086,739
<CURRENT-LIABILITIES> 7,084,960
<BONDS> 85,000,000
0
0
<COMMON> 106,371
<OTHER-SE> 73,038,503
<TOTAL-LIABILITY-AND-EQUITY> 166,086,739
<SALES> 29,373,022
<TOTAL-REVENUES> 31,457,022
<CGS> 13,716,463
<TOTAL-COSTS> 13,706,463
<OTHER-EXPENSES> 11,589,597
<LOSS-PROVISION> 200,415
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,426,331
<INCOME-TAX> 2,190,000
<INCOME-CONTINUING> 4,236,337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,236,337
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.36
</TABLE>
