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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER 1-11831
SABRATEK CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 36-3700639
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8111 NORTH ST. LOUIS AVENUE, SKOKIE, ILLINOIS 60076
(address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (847) 720-2400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
(TITLE OF CLASS)
Common Stock, $.01 Par Value
(TITLE OF CLASS)
Series B Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common stock, par value $.01 per share,
held by non-affiliates based upon the reported last sale price of the common
stock on March 17, 1999 was approximately $132,944,333.25.
As of March 17, 1999, there were 9,875,584 shares of common stock, par
value $.01 per share, outstanding.
The Index to Exhibits appears on page 47.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive 1999 Proxy Statement which will be filed
pursuant to Regulation 14A is incorporated by reference into Part III of this
Annual Report on Form 10-K.
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SABRATEK CORPORATION
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 16
Item 3. Legal Proceedings........................................... 17
Item 4. Submission of Matters to a Vote of Security Holders......... 17
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 18
Item 6. Selected Financial Data..................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 20
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 25
Item 8. Financial Statements and Supplementary Data................. 26
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 44
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 44
Item 11. Executive Compensation...................................... 44
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 44
Item 13. Certain Relationships and Related Transactions.............. 44
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 45
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The following trademarks and service marks appear in this Annual Report:
SABRATEK(R) and its logo, AutoRamp(R), HOMERUN(R), Seamless Delivery System(R),
PumpMaster(R), MediVIEW(R), Sabraset(R), SabSil(R), TCS Total Compliance
System(TM), VHR Virtual Hospital Room(TM), Communicator(TM), Sabratek(TM)
(without logo), 6060 Epidural(TM) and Epidural(TM). Sabratek also has received a
foreign trademark registration for the name SABRATEK(R) and its logo in Japan.
Unitron Medical Communications, Inc. has filed a trademark application for the
term MOON(TM). Stat-Site(R) is a registered trademark of GDS Technology, Inc.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Sabratek develops, produces and markets technologically-advanced,
user-friendly and cost-effective therapeutic and diagnostic medical systems
designed specifically to meet the unique needs of the alternate-site health care
market. Sabratek's multi-therapy infusion and other devices and data management
systems incorporate advanced communications technology which is designed to
reduce provider operating costs while maintaining the integrity and quality of
care. Sabratek's proprietary health care information system provides remote
programming as well as real-time diagnostic and therapeutic data capture
capabilities, allowing caregivers to monitor patient compliance more effectively
and allowing providers to develop outcome analyses and optimal clinical
protocols. Sabratek has designed its integrated hardware and software system to
permit health care providers to achieve cost-effective movement of patients
along the continuum of alternate-site health care settings.
Sabratek has begun to expand its product line beyond infusion therapy to
become a leading developer and marketer of a variety of interactive therapeutic
and diagnostic medical systems for the delivery of high-quality, cost-effective
health care in alternate sites. Sabratek believes that its current and future
products and related software facilitate the ability of alternate-site providers
to create a "virtual" hospital room, thereby affording the delivery of a wide
range of care previously provided primarily in an acute-care setting. The
majority of Sabratek's revenues have historically been derived from the sale of
its multi-therapy infusion pumps and related disposable supplies. Since August,
1996, Sabratek has commercially introduced MediVIEW, PumpMaster, pre-filled
saline and heparin flush syringe products which further Sabratek's strategy of
creating a virtual hospital room. Sabratek has also introduced StatSite, the
point of care diagnostic testing device and related disposable test cards it
licenses from GDS Technology, Inc., and the continuous, real-time monitoring and
reporting software which is a component of MOON (Medically Oriented Operating
Network) which Sabratek licenses from Unitron Medical Communications, Inc.
RECENT DEVELOPMENTS
On November 24, 1998, Sabratek announced that it had suspended distribution
of its Rocap pre-filled flush syringe product line. Sabratek also announced that
it would submit new 510(k) applications to the United States Food and Drug
Administration (the "FDA") for the Rocap pre-filled flush syringe products and
that new management was in place at Rocap for both operations and regulatory
affairs. Sabratek has submitted the new 510(k) applications, but they have not
been cleared by the FDA to date. Sabratek will not be able to resume
distribution of its Rocap product line until its 510(k) applications are cleared
and other issues relating to its production processes previously noted by the
FDA are resolved. Sabratek can give no assurances as to when the FDA clearances
and resolution will be obtained. Although Sabratek continues to believe that it
will be allowed to resume distribution of its Rocap product line, in the event
that there are substantial delays in obtaining, or it is unable to obtain, the
required FDA clearances and resolution, Sabratek could incur a material write
down of assets and its future profitability could be materially affected.
In August, 1998, Sabratek designated the relative rights and preferences of
a new Class of Series B Preferred Stock and adopted a Shareholder Rights Plan.
Pursuant to such Plan, Sabratek's Board of Directors declared a dividend of one
right for each share of Sabratek's common stock outstanding on September 4,
1998. Each right gives the holder thereof the opportunity to purchase one
one-hundredth of one share of Sabratek's new authorized Series B Preferred Stock
at a price of $150 (as adjusted from time to time) upon the occurrences of
events specified in the Plan. The Plan can be rescinded at the discretion of
Sabratek's Board of Directors.
Sabratek was served with a complaint on January 27, 1999, alleging that
Sabratek and seven officers and former officers violated Sections 10(b) (and
Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of
1934, as more fully described in Item 3 "Legal Proceedings."
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In April, 1998, Sabratek sold in an institutional private placement, 6%
convertible Notes in an aggregate principal amount of $85,000,000, as more fully
described in Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
CHANGING HEALTH CARE ENVIRONMENT
The increase in health care costs at a rate significantly higher than that
of overall inflation has caused managed care companies, indemnity insurers,
employers, governmental agencies and other payors to employ a variety of
strategies designed to contain health care expenditures. These cost-containment
strategies aim to reduce the cost of health care services, as well as the amount
of health care services utilized. Payors are shifting away from traditional
fee-for-service based payment plans and moving towards managed care plans in an
effort to deliver quality health care services more cost-effectively. In
particular, cost-containment measures, including increased utilization review
and case management, have caused many health care providers to move patients
from the higher-cost hospital setting to lower-cost alternate sites.
The alternate-site health care industry, which includes the delivery of
skilled nursing services, intravenous infusion, respiratory therapy, physical
therapy and pharmaceutical therapies in the home, long-term care facilities,
physicians' offices and outpatient centers, has grown significantly during the
past decade. According to a report entitled "National Health Expenditure
Projections, 1994-2005" published in the summer of 1995 by Health Care Finance
Administration of the United States Department of Health and Human Services
("HCFA"), total expenditures for home health care, which constitutes a
significant component of alternate-site health care, increased from
approximately $11.1 billion in 1990 to approximately $24.2 billion in 1994 and
is projected to reach $45.9 billion in 2000. Since the early 1980s, the
provision of acute and chronic care for serious illnesses outside the hospital
has been recognized as a critical component of health care cost containment
because the delivery of various therapies in an alternate-site setting is more
cost-effective than the delivery of these same therapies in an acute-care
hospital setting. Sabratek believes that the alternate-site health care industry
will continue to benefit from cost-containment measures which governmental and
private payors have employed to reduce hospital admissions and length of stays
in hospitals. Sabratek believes that these cost-containment measures will
continue the increase in the use of alternate-site health care due to its
significantly lower cost when compared to similar care provided in traditional
acute health care settings. In addition to cost savings, the alternate-site
health care industry should continue to benefit from advances in medical
technology which have facilitated the provision of sophisticated care outside
the hospital. Many disease states, including pulmonary diseases, neurological
conditions, infectious diseases, digestive disorders, AIDS-related symptoms,
various forms of cancer and related medical conditions including pain and
nausea, are now being treated in alternate-site settings, including the home.
Growth in alternate-site health care has also been facilitated by the increased
acceptance of alternate-site health care by physicians, caregivers and patients.
The American Medical Association Council on Scientific Affairs and the American
Medical Association Council on Medical Education have recommended that training
in the principles and practice of home health care be incorporated into the
undergraduate, graduate and continuing education of physicians. Also
contributing to the growth of the alternate-site health care industry is the
increase in the over-65 population, which has a higher incidence of illness and
disability.
A significant component of alternate-site health care is infusion therapy,
which involves the administration of fluid intravenously at a regulated rate and
volume. Alternate-site infusion therapy has historically been the fastest
growing segment of the alternate-site health care market. Infusion therapy is
used in a wide range of applications including nutrition therapy, pain
management, delivery of antibiotics, pregnancy and obstetrical therapies,
chemotherapy, cardiovascular therapy and immunosuppressive therapy. These
therapies generally require the use of specialized infusion pumps to deliver
precise dosages of fluids including nutrients, parenteral solutions,
anti-infectives, chemotherapeutic agents, narcotic analgesics and a variety of
other drugs.
Due to the shift by managed care payors toward capitated payment
arrangements, providers of infusion therapy are being forced to reduce costs to
maintain profitability, while at the same time maintaining the quality of care.
The costs associated with providing infusion therapy are composed of three
general components: capital equipment, supplies and labor. Traditionally,
providers of infusion therapy needed to purchase multiple types of infusion
pumps and related back-up inventory because most pumps delivered only
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one type of therapy. The need to purchase several single therapy pumps also
resulted in increased labor training costs because of the need to train
caregivers in multiple programming protocols. The delivery of infusion therapy
requires a substantial amount of non-clinical nursing time. We believe that
reducing the labor costs associated with delivering infusion therapy is critical
for alternate-site health care providers to achieve operating efficiencies.
According to a 1992 study of the home infusion therapy industry published by The
National Alliance for Infusion Therapy (the "NAIT Study"), nurses spent an
average of 3.1 hours per home visit, of which approximately 64 minutes, or 35%,
was spent traveling to and from the patient's home, 56 minutes, or 30%, was
spent documenting clinical observations as well as coordinating care and the
balance was spent on tasks performed during personal contact with the patient,
including documentation. The NAIT Study also shows that training is required for
patients not only at the start of therapy but also over time as the therapy of
an individual patient changes. The NAIT Study indicates that during these home
visits, a significant amount of nursing time is required to ensure that patients
are complying with the prescribed therapy. Compliance is important since it can
prevent patients from having to re-enter the costly hospital setting thereby
generating unnecessary incremental expenses and health risks as a result of
failure to adhere to their prescribed therapies, whether intentionally or
unintentionally. We believe that products and technology which reduce the cost
of providing infusion therapy, especially the labor component, will be
attractive to health care payors and providers in general and providers of
infusion therapy in particular.
PRODUCTS AND SERVICES
SABRATEK'S SEAMLESS DELIVERY SYSTEM. Sabratek's software-based infusion
devices, related interactive information system and pump testing device are
designed to provide both health care professionals and patients with ease of use
and a smooth transition throughout the health care delivery spectrum. Sabratek's
SEAMLESS DELIVERY SYSTEM product design is Sabratek's strategic response to the
need to achieve cost-effective movement of patients from a hospital setting to
an alternate-site setting, and among the various stages in alternate-site care,
from sub-acute to home care, with maximum ease of transition. The SEAMLESS
DELIVERY SYSTEM maximizes the similarities between Sabratek's stationary and
ambulatory infusion devices and is intended to allow both patients and health
care providers to use both types of infusion devices interchangeably, as the
specific setting or therapy dictates, and with greater ease. This ability
reduces the amount of time health care professionals must spend training on
multiple operating systems as well as administering and monitoring therapies. In
addition, Sabratek's infusion devices have the flexibility to provide multiple
therapies which allows providers to minimize their equipment inventories.
Sabratek's infusion devices intravenously deliver therapeutic agents to address
treatments for a wide variety of conditions, including, among others, antibiotic
therapy for viral or bacterial infections, chemotherapy for cancer, pain
management for chronic pain, clotting agents for hemophilia and various
therapies for pregnancy and obstetrics. Sabratek has received 510(k) approval
for a 4040 Stationary Pump designed for the acute-care setting.
The following table summarizes information with respect to Sabratek's
products and services:
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PRODUCT DESCRIPTION STATUS
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INFUSION PUMPS
3030 Stationary Pump....... Stationary, multi-therapy Commercially available since
infusion device 1992(1)(2)(3)
6060 Ambulatory Pump....... Ambulatory, multi-therapy Commercially available since
infusion device 1995(1)(2)(4)
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PRODUCT DESCRIPTION STATUS
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INFUSION SUPPLIES
3030 Infusion Sets......... Non-proprietary, disposable Commercially available since
tubing sets for use with 3030 1992
Stationary Pump
6060 Infusion Sets......... Proprietary, disposable Commercially available since
tubing sets for use with 6060 1995(1)(2)(3)
Ambulatory Pump
Pre-filled Syringe
Products................ Pre-filled I.V. tubing flush Commercially available since
syringes 1996(2); commercial
distribution has been halted
pending receipt of 510(k)
clearance
INTERACTIVE PROGRAMMING AND MONITORING SOFTWARE
MediVIEW................... Proprietary, PC-based Commercially available since
software that allows remote 1996
and real-time programming,
monitoring, data capture and
reporting
AUTOMATIC DIAGNOSTIC TESTING DEVICE
PumpMaster................. Proprietary, portable, Commercially available since
automatic diagnostic device 1996(2)
for the testing of Sabratek
infusion pumps
MONITORING DEVICES
WHOLE BLOOD MONITOR
Stat-Site System and
related disposables..... Provides point-of-care Licensed from GDS;
results from a single drop of Commercially available since
blood 1992
VITAL SIGNS MONITOR
APM (Ambulatory Patient
Monitor) 2000........... Ambulatory instrument that 510(k) clearance received;
measures heart and date of commercial
respiratory rates, distribution not yet
temperature, and pulse determined
oxymetry
BASE STATION COMMUNICATIONS DEVICE
VHR Communicator........... Smart communications device 510(k) clearance received;
which (a) receives and date of commercial
interprets data from IV distribution not yet
pumps, vital signs monitors, determined
blood-testing devices and
other devices and (b)
transmits the patient data to
a remote database which is
accessible by the patient's
health care providers
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PRODUCT DESCRIPTION STATUS
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INFORMATION SYSTEMS
CLINICAL PATIENT INFORMATION MANAGEMENT SYSTEM
MOON (Medically Oriented
Operating Network)...... A wide area network that Licensed from Unitron
electronically links multiple
health care locations,
creating secure Electronic
Medical Records through its
intranet
HealthMagic, Inc........... Developer of innovative Acquired rights to
information management tools HealthMagic's software
that feature intranet applications and related
technology which allows documentation in November,
medical staff personnel 1998
access to key medical
information regardless of
their location through the
use of (a) a web-based
application system; (b) a
system designed to assist in
the development of
personalized patient care
plans and on-line patient
educational materials; and
(c) a self-managed healthcare
record which enables
consumers to track and input
key medical information
CONSULTING AND UTILIZATION REVIEW SERVICES
CMS Healthcare, Inc........ Physician-based utilization Acquired in July, 1998
review and utilization
management services,
primarily for the behavioral
health sector and consulting
services to assist health
plans assess benefit
coverages, fee schedules and
network access
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(1) Patent(s) issued in the United States.
(2) United States and/or foreign patents pending.
(3) Foreign patent issued.
(4) U.S. patent allowed.
SABRATEK 3030 -- STATIONARY MULTI-THERAPY INFUSION PUMP. Sabratek's 3030
Stationary Pump is an electromechanical, volumetric infusion device that is able
to deliver a wide variety of infusion therapies including, among others,
chemotherapy, antibiotics, circadian rhythms and total parenteral nutrition
under three standard and one custom delivery modes. The 3030 Stationary Pump
incorporates multiple language capabilities, remote communications and
pre-programming capabilities, a state-of-the-art ergonomic design and a
relatively easy-to-learn programming format. The 3030 Stationary Pump operates
with leading brands of disposable tubing as well as Sabratek's own line of
non-proprietary disposable tubing. The 3030 Stationary Pump has the ability to
work in conjunction with the MediVIEW software.
SABRATEK 6060/HOMERUN -- AMBULATORY MULTI-THERAPY INFUSION PUMP. Sabratek's
6060 Ambulatory Pump weighs approximately 13 ounces and can be worn discreetly
by a patient. The 6060 Ambulatory Pump was designed as a complementary product
to the 3030 Stationary Pump and, when combined with the use of
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the 3030 Stationary Pump, provides a seamless transition between the bed and an
ambulatory state, or vice versa, with minimal additional training. The 6060
Ambulatory Pump has delivery capabilities and a programming format that are
similar to the 3030 Stationary Pump, with the addition of a pre-programmed
capability to deliver pain management infusion therapy. The 6060 Ambulatory Pump
also has the ability to work in conjunction with the MediVIEW software and
utilizes a proprietary disposable tubing set.
DISPOSABLE INFUSION SUPPLIES. Sabratek sells non-proprietary disposable
tubing sets for use with the 3030 Stationary Pump and proprietary disposable
tubing sets for use exclusively with the 6060 Ambulatory Pump. Through its Rocap
operation, Sabratek offers pre-filled syringe products. The pre-filled syringe
products serve as a flush for the infusion therapy tubes.
MEDIVIEW -- REMOTE PROGRAMMING, MONITORING AND DATA CAPTURE AND REPORTING
SOFTWARE SYSTEM. MediVIEW is a proprietary software system designed to allow
providers to program and monitor Sabratek's infusion pumps and capture data for
reporting and clinical purposes from remote locations over standard telephone
lines. Sabratek has designed MediVIEW to enable alternate-site health care
providers using the 3030 Stationary Pump and 6060 Ambulatory Pump combined with
MediVIEW to: (a) remotely monitor and program Sabratek's pumps on a real-time
basis, (b) receive instantaneous notification of alarm activation and
immediately respond from the provider's physical location, (c) automatically
record and "package" data regarding the outcomes of actual therapy courses for
specific case management and clinical as well as administrative/reimbursement
purposes, and (d) develop a proprietary clinical protocol and outcomes database
useful to managed care providers. In addition, patients who receive therapy on
Sabratek's infusion products should derive greater comfort because their
providers will be able to monitor their therapies on a real-time basis. The
first release of MediVIEW became commercially available in the third quarter of
1996.
PUMPMASTER -- PORTABLE, AUTOMATIC DIAGNOSTIC DEVICE FOR THE TESTING OF
SABRATEK INFUSION PUMPS. The PumpMaster is a portable device designed to enable
providers to perform on-site diagnostic tests on Sabratek's infusion devices.
Suggested standards adopted by the Joint Commission for the Accreditation of
Healthcare Organizations ("JCAHO"), an industry group which promulgates
standards relating to the provision of alternate-site health care, require the
performance of every infusion pump to be re-certified on the earlier of the date
on which the pump is provided to a new patient for their use or the date which
is 12 months from the date of the last certification. Sabratek believes that it
is not cost-efficient for providers to maintain in-house bio-medical engineering
resources on a branch level to perform pump re-certification. Instead, providers
typically ship their pumps for remote-site testing and, as a result, are
required to maintain costly back-up pump inventory. The PumpMaster is intended
to obviate incremental capital expenditure outlays as well as eliminate the cost
of outside infusion pump testing. The PumpMaster is designed to conduct
automatically, in approximately ten minutes, all tests typically performed as
part of JCAHO re-certification. PumpMaster became commercially available in the
fourth quarter of 1996.
MONITORING DEVICES
WHOLE BLOOD MONITORING SYSTEM
STAT-SITE SYSTEM. In August, 1997, Sabratek entered into a licensing
agreement with GDS Technology, Inc., a privately held company which has
developed the Stat-Site System. (See "Strategic Partnerships" for more detail on
Sabratek's relationship with GDS). The Stat-Site System is a portable,
hand-held, multi-analyte system which provides accurate and immediate
point-of-care diagnostic blood testing. Designed to be simple and user friendly,
the Stat-Site System is intended to be used by patients without assistance from
their health care professionals. The Stat-Site System is composed of a hand-held
reflectance photometer and dry reagent test cards for different analytes/tests.
To operate, a patient loads the appropriate test card into the hand-held
Stat-Site analyzer and applies a drop of whole blood directly to the card. The
patented, multi-layered membrane automatically separates blood cells from the
whole blood sample and delivers immediate, laboratory quality, plasma-equivalent
results to the patient within two to three minutes permitting immediate
initiation of appropriate therapy. This system represents an alternative to
traditional laboratories, which may take hours or even days to process the
tests, for home healthcare, as well as physician offices, hospital emergency
rooms and intensive care units, outpatient clinics and other remote healthcare
facilities. In addition
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to the benefits associated with speed and convenience, another advantage of the
Stat-Site System is that it is the only point of care system that allows
multiple specialized quantitative tests focused on measuring a single blood
level. Competitive systems either (a) require more comprehensive testing
consistent with a complete blood work-up or (b) allow single testing, but only
on a qualitative basis.
The Stat-Site System currently has 510(k) approved tests commercially
available in the US for blood ketone and blood glucose, for diabetes;
hemoglobin, for testing anemia; and acetaminophen, for detecting acetaminophen
overdose which may lead to permanent liver damage. One additional test is
currently marketed internationally for bilirubin, for the diagnosis and
monitoring of neonatal hyperbilirubinemia. The Stat-Site System utilizes a
unique blood separation technology which enables the expeditious development of
new tests, generally 6-9 months versus 18-36 months for competitive systems.
Test cards are disposable and designed for a safe, individual, one-time use. The
system has been commercially available since 1992. The system has a
communications port which will allow connectivity to Sabratek's VHR Communicator
base station. This will enable results to be transmitted electronically to
providers for immediate review to adjust treatment or to address a potentially
acute episode. The information will also be stored in the patient's electronic
medical record through the MOON system. Sabratek can give no assurance as to the
extent to which Stat-Site will gain market acceptance.
VITAL SIGNS MONITOR
APM (AMBULATORY PATIENT MONITOR) 2000. Sabratek's vital signs monitor
monitors a patient's core body temperature, heart rate, pulse, pulse oximetry,
respiratory rate, among other vital signs. Like Sabratek's infusion pumps and
other monitoring devices, the APM 2000 is small, cost-effective, user-friendly
and has remote telecommunications capabilities. Sabratek received 510(k)
approval for the APM 2000 in 1998. The APM 2000 has a communications port which
allows connectivity to Sabratek's VHR Communicator base station. Like the
Stat-Site system, this enables results to be transmitted electronically to
providers for immediate review to adjust treatment or to address a potentially
acute episode. The information can also be stored in the patient's electronic
medical record through the MOON system. Because Sabratek has not begun actively
marketing this product, Sabratek cannot predict the extent to which this product
will contribute to revenues or income.
BASE STATION COMMUNICATIONS DEVICE
VHR (VIRTUAL HOSPITAL ROOM) COMMUNICATOR. The base station is an
interactive, miniature computer with eight communications ports for a
patient/health care provider to plug in the various devices needed to monitor a
patient's health. The VHR Communicator is a "smart" device with intelligence
which enables it to interpret data. For example, the device will be able to
assess whether the received patient data needs to be forwarded to the care team
or simply stored for future use. Additionally, the base station can notify
caregivers of episodes of non-compliance. In addition to receiving quantitative
physiological data, the device has the capability to obtain and store
qualitative "quality-of-life" feedback from patients. This is accomplished
through the device's screen and keypad which enables interactive patient
functions. Sabratek received 510(k) approval for the VHR Communicator in 1998.
Because Sabratek has not begun actively marketing this product, Sabratek cannot
predict the extent to which this product will contribute to revenues or income.
INFORMATION SYSTEMS
CLINICAL PATIENT MANAGEMENT SYSTEM
MOON (MEDICALLY ORIENTED OPERATING NETWORK). In July 1997, Sabratek entered
into a licensing agreement with Unitron Medical Communications, Inc. doing
business as MOON Communications, a privately held company which has developed
MOON, a proprietary clinical patient information management network. (See
"Strategic Partnerships" for more detail on Sabratek's relationship with
Unitron). MOON provides for continuous, real-time monitoring and reporting on
clinical patient information from any site, including the patient's home.
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Unlike in an acute care setting, patients in the alternate site health care
environment are often not in close physical proximity to their health care
providers. As a result, patient information from the point of care is often
communicated to the health care provider in a less timely and less complete
manner. In addition, physicians generally are less able to monitor the patient,
including compliance with prescribed therapy and the management of care
delivered by other providers. The goal of MOON is to enable health care
providers to more effectively treat higher acuity patients in an alternate site
health care setting by maintaining the provider's ability to direct the
patient's care, monitor compliance with prescribed therapies and have access to
timely clinical information. MOON is designed to enable the provider to reduce
the need for on-site visits without compromising the quality of patient care.
MOON allows caregivers to input patient information into a data repository
which is immediately available to other providers, including physicians.
Sabratek's interactive medical devices will transmit patient information
directly to MOON without human interaction. The immediate availability of
patient information is a significant improvement over the current paper-based
reporting system which often lags two or more weeks behind the initial
collection of the information. MOON allows providers immediate access to patient
information. Additionally, the individual health care provider tracking
information is useful to payors and the agencies/companies managing the
provider. Sabratek intends to combine its proprietary MediVIEW medical device
management and telemedicine software with MOON. MOON is currently in operation
in the Tampa Bay market, with a market-by-market rollout expected to be launched
in 1999. Because Sabratek has not begun actively marketing this product,
Sabratek cannot predict the extent to which this product will contribute to
revenues or income.
HEALTHMAGIC, INC. Sabratek entered into a Software License and Marketing
Agreement with HealthMagic, Inc. in November, 1998. HealthMagic is a developer
of innovative information management tools that feature intranet technology
which provides medical staff personnel access to key medical information
regardless of their location. HealthMagic has developed several software
applications including: (a) a web-based application that enables homecare
companies to mass distribute all of their policies, procedures and legal
requirements; (b) a system designed for individual homecare agencies or a large
network of agencies, assisting in the development of personalized patient care
plans and on-line patient educational materials and (c) a self-managed
healthcare record which enables consumers to track, input key information and
manage all of their healthcare interactions.
CONSULTING AND UTILIZATION REVIEW SERVICES
CMS HEALTHCARE, INC. Sabratek acquired CMS Healthcare, Inc. in July 1998.
CMS Healthcare is a consulting company that focuses on the provision of
utilization review and utilization management services, primarily for the
behavioral health sector. These utilization review services include the review
of plans of care, peer-to-peer review, and the review of care provided for the
determination of medical necessity as part of the claim approval process.
CMS Healthcare also provides traditional consulting services particularly
in assisting health plans to assess benefit coverages, fee schedules and network
access. These consulting services have primarily focused on behavioral health
although CMS Healthcare is expanding its service offering to other disciplines.
CMS Healthcare also provides quality review services which assist health plans
in assessing and documenting quality of care, including patient and provider
satisfaction. These reviews are conducted using focus groups and data collection
and review.
CMS Healthcare's customer base totals approximately 35 clients. The
services are provided on a fee for service basis although Sabratek has been
exploring opportunities to participate in capitated agreements.
STRATEGIC PARTNERSHIPS
UNITRON MEDICAL COMMUNICATIONS, INC. DOING BUSINESS AS MOON
COMMUNICATIONS. In July, 1997, Sabratek entered into a licensing agreement with
Unitron Medical Communications, Inc. doing business as MOON Communications, a
privately held company which has developed MOON, a proprietary clinical patient
information management network which is more fully described in the Information
Systems section of
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this Business section. Under the terms of this agreement, Sabratek has paid
Unitron $7 million for a 15-year technology license for use of the continuous,
real-time monitoring and reporting software which is a component of MOON.
Sabratek also entered into an option agreement with MOON Communications
stockholders which, as renegotiated in January, 1999, gives Sabratek the right
to purchase MOON Communications for approximately $14.8 million on or before
July 15, 1999. Under some circumstances, MOON Communications stockholders have
the right to induce the purchase after July 15, 1999. Further, in January 1998,
Sabratek entered into an Exclusive Sales and Marketing Agreement with Unitron,
whereby Sabratek acquired certain rights to access Unitron's customer database
in exchange for the payment of an aggregate of $2.7 million by Sabratek over the
course of 1998. In addition, in October, 1998, Sabratek entered into a Standby
Senior Credit Facility with MOON whereby Sabratek, at its sole discretion, may
lend up to $10 million at an interest rate of 8% per annum.
GDS. In August, 1997, Sabratek entered into a supply and distribution
agreement with GDS Technology, Inc., a privately held medical device company.
Under the terms of this agreement, as amended, Sabratek has paid GDS $6.5
million for the 10-year exclusive rights to diagnostic products, including the
GDS Stat-Site point of care diagnostic testing device and related disposable
tests for use in the alternate site health care market. Sabratek also entered
into an option agreement with the GDS stockholders which gives Sabratek the
right to purchase the assets or the outstanding common stock of GDS for
approximately $5 million based on 1998 operating results of GDS. The GDS
stockholders have the right, exercisable no earlier than the second quarter of
1999, to require Sabratek to purchase their shares of GDS. GDS manufactures bulk
and specific enzymes and reagents for the diagnostic testing industry, as well
as Stat-Site, a unique test system for the point of care market. GDS has 510(k)
approval for its Stat-Site device and a limited number of tests. The Stat-Site
system provides immediate availability of critical information which can be used
for diagnosis or monitoring the efficacy of a patient's drug therapy. For
numerous disease states, this information is important to determine the regimen
of care.
Sabratek intends to integrate the GDS Stat-Site system and the data that it
provides with its other medical devices as part of the virtual hospital room to
enhance its capabilities to serve the alternate-site health care market.
COLLABORATIONS IN HEALTHCARE, LLC. Collaborations in Healthcare, LLC
provides consulting services for supply chain management for integrated delivery
networks. In November, 1998, Sabratek entered into a Standby Senior Credit
Facility, which matures on November 23, 2001, with Collaborations in Healthcare,
LLC whereby Sabratek may lend up to $4 million at an interest rate of 8% per
annum. The parties also entered into a Unit Option Agreement whereby Sabratek
will have a five year option to purchase Collaborations in Healthcare, LLC on or
before November 23, 2003. The purchase price under the Unit Option Agreement
will be up to $4 million plus an earnout based upon a multiple of earnings of
Collaborations in Healthcare, LLC for the period between July 1999 and December
1999, with a maximum earnout of $15 million.
HEALTHMAGIC, INC. In November, 1998, Sabratek entered into a Software
License and Marketing Agreement with HealthMagic, Inc., a developer of
innovative management tools that feature intranet technology, which provides
medical staff access to key medical information regardless of their location.
Under the terms of the Agreement, Sabratek has paid a license fee of $10 million
for the exclusive rights of certain software applications and related
documentation. The Agreement has a stated term of 99 years, however, the license
fee will be amortized over the economic life of the software. In addition,
Sabratek received a Stock Purchase Warrant from HealthMagic for 448,057 shares,
representing 11.11% of the issued and outstanding common stock of HealthMagic,
at an exercise price of $11.15. The warrant expires November 18, 2005.
ACQUISITIONS
CMS HEALTHCARE. In July 1998, Sabratek purchased all of the outstanding
common stock of CMS Healthcare, which provides utilization review and
utilization management services, for $160,000 in cash. In addition, the
stockholders of CMS Healthcare are entitled to an earnout based upon a multiple
of earnings of CMS Healthcare for the period between July 1999 and December
1999.
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SALES AND MARKETING
Sabratek sells its products to a diverse group of customers in the
alternate-site health care industry including sub-acute skilled nursing care
facilities, pharmacy providers, home health care providers, physicians' offices,
clinics, surgery centers and long-term care facilities. This group of customers
ranges in size from national and regional chains to local independent operators.
Sabratek's products are also sold to hospitals, particularly for pain management
and I.V. line flushing. Key decision makers include nursing, pharmacy,
purchasing and bio-medical departments, as well as physicians.
As of December 31, 1998, Sabratek's domestic sales force consisted of 38
direct sales professionals, 14 clinical support staff members and 3 full-time
sales consultants who work closely with a network of domestic distributors each
of whom covers an exclusive geographic territory. In limited geographic areas,
the distributors are directly involved in sales and implementation; in others,
the distributors act as support to the new client implementation process.
Sabratek's distributors have been selected for their experience in and focus on
the infusion therapy market, coverage of specific geographical areas, product
sales support and regional dominance. Sabratek's sales management team trains
the sales personnel of each of the distributors and provides them with all
product information and other relevant field literature. In addition, Sabratek's
direct sales representatives sell and coordinate and manage national account
activity. Sabratek's marketing and sales efforts are supported by telemarketing,
direct mailing, product and clinical inservicing, advertising in trade journals,
new product literature and attendance at trade shows. Sabratek believes that its
existing sales force and distribution network provide the necessary
infrastructure to market its current products and those under development.
Sabratek has also entered into distribution agreements with distributors in
South America, Europe, the Middle East, Asia and Africa. For the year ended
December 31, 1998, international sales accounted for approximately 4% of
Sabratek's total sales. For the year ended December 31, 1997, international
sales accounted for approximately 3% of Sabratek's total sales. For the year
ended December 31, 1996, international sales accounted for approximately 9% of
Sabratek's total sales. Sabratek perceives the international marketplace as a
potential area for future growth. Sabratek has distribution agreements in Japan,
Germany, France and the U.K., which it believes are among the largest
international markets for infusion systems. Sabratek has received regulatory
approval in Japan and currently markets there. Sabratek commenced marketing
efforts in EEC countries in July 1998 upon receipt of regulatory approval.
Currently, all of Sabratek's international sales are invoiced and paid in U.S.
dollars.
Sabratek has enhanced its domestic sales effort through an affiliation with
Americorp Financial, Inc. to provide leasing services to Sabratek's domestic
customers. Americorp has licensed the name "Sabratek Credit Corporation" from
Sabratek and offers financing for the acquisition of Sabratek products under
both capital and operating leases. However, Sabratek can give no assurances that
the existing sales force will be adequate to market an expanded product line.
RESEARCH AND DEVELOPMENT
Sabratek is committed to continued product innovation. For the year ended
December 31, 1998, Sabratek invested approximately $2.7 million in research and
development. For the year ended December 31, 1997, Sabratek invested
approximately $1.8 million in research and development. For the year ended
December 31, 1996, Sabratek invested approximately $1.0 million in research and
development. Sabratek's research and development effort is supported by a staff
of 18 electrical, mechanical, software and chemical engineers who have extensive
experience in the design and development of electromechanical infusion therapy
devices, other medical instrumentation and software. Sabratek's engineering team
closely coordinates its design activities with Sabratek's sales and marketing
team. This group solicits extensive pre-design focus group input from
constituencies that use or are impacted by the use of Sabratek's products, but
who may possess a host of different strategic, economic and other objectives.
Sabratek's research and development program is focused on both new product
development and enhancements of existing products. Sabratek's product
development efforts include advancements in infusion therapy, interactive
software systems, vital signs monitoring, and device communications and
integration.
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Sabratek's product development strategy is based on developing product platforms
that have the flexibility to be configured to respond to a variety of customer
requirements. Sabratek's product enhancement efforts are based on the input
received from customers after the initial introduction of its products and focus
on addressing customers' needs in a more cost-effective and comprehensive way.
ASSEMBLY AND MANUFACTURING
Sabratek currently assembles all of its infusion devices at its facility in
Skokie, Illinois in an effort to ensure production quality and control its
costs. Sabratek outsources the manufacture of some sub-systems used in its
infusion systems. In addition, disposable tubing sets sold by Sabratek are
manufactured by contract manufacturers. Sabratek believes its mix of in-house
assembly and contract manufacturing is the most cost-effective means of
producing its products.
Sabratek's production process for its infusion devices consists of
assembling major sub-systems as well as the assembly of both standard and custom
components. The standard components can be obtained from a number of sources.
The custom components are produced by both Sabratek as well as by
sub-contractors and, in all cases, competitive back-up supply sources exist.
Sabratek believes that, due to volume discounts, the unit cost of both standard
and custom components will decrease as production volumes increase.
Disposable tubing sets are manufactured to Sabratek's specifications by
third parties in a clean room environment under stringent quality control
procedures covering assembly, storage and sterilization. Set production consists
of the assembly of both standard and custom components. The plastic custom
components are manufactured by a sub-contractor using molds supplied by
Sabratek. Sabratek uses more than one manufacturer for the production of its
disposable tubing sets.
Sabratek's Rocap operation manufactures pre-filled I.V. tubing flush
syringes at its facilities in Woburn, Massachusetts and Orlando, Florida.
Competitive back-up sources exist for all of the components used in the
production of Rocap's products.
QUALITY ASSURANCE
Sabratek maintains a comprehensive quality assurance program. The quality
assurance program begins with the components and other materials Sabratek
purchases from vendors. Vendors are required to supply materials which meet
stated specifications. Sabratek monitors vendors' compliance with the stated
specifications through a program of on-site surveys, audits and product testing.
Sabratek also employs quality assurance procedures during its on-site
manufacturing and assembly process in an effort to ensure that finished products
meet the standards set by Sabratek. All finished products are tested by
Sabratek's separate quality assurance department to ensure that Sabratek
maintains its quality standards. Finally, Sabratek maintains a post-sale
performance monitoring program.
Sabratek provides its customers a standard one-year warranty on the 3030
Stationary Pump, the 6060 Ambulatory Pump and the PumpMaster. To provide further
product support, Sabratek has established an in-house capability for repair,
maintenance and upgrade of its products. The repair and maintenance function
utilizes full-time technical personnel as well as on-going support from
temporary and production personnel as required to service infusion devices.
Sabratek believes the service and maintenance of its infusion devices require
minimal manpower due to the modularity of the devices' sub-systems, sound
quality control procedures and the service capabilities of distributors.
As part of its quality program, Sabratek provides its customers with
extensive in-service and training in the use of its products. This is provided
by both Sabratek's sales force and its distributors.
INTELLECTUAL PROPERTY
One United States patent and one Australian patent have been issued for the
3030 Stationary Pump. In addition, two foreign patents are pending for the 3030
Stationary Pump. For the 6060 Ambulatory Pump, eight United States patents have
been issued. One United States and one German patent have been issued and one
Japanese patent has been allowed for the 6060 Infusion Set and United States and
foreign patents are
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pending on this project. Sabratek also has United States and Foreign patents
pending for PumpMaster. There are United States patents pending with respect to
the pre-filled syringe products, the APM 2000, the VHR Communicator and
MediVIEW. Sabratek also requires each of its employees, consultants and advisors
to agree in writing to keep its proprietary information confidential and to
assign all inventions relating to Sabratek's business to Sabratek. There can be
no assurance that any unprotected information will not also be developed by
others.
Sabratek has registered or applied to register the following trademarks:
SABRATEK(R) and its logo, AutoRamp(R), HOMERUN(R), SEAMLESS DELIVERY SYSTEM(R),
PumpMaster(R), MediVIEW(R), Sabraset(R), SabSil(R), TCS Total Compliance
System(TM), VHR Virtual Hospital Room(TM), Communicator(TM), Sabratek(TM)
(without logo), 6060 Epidural(TM) and Epidural(TM). Sabratek has also received a
foreign trademark registration for the name SABRATEK(R) and its logo in Japan.
Unitron has filed a trademark application for the term MOON(TM) which appears
herein. Stat-Site(R), which appears herein, is a registered trademark of GDS
Technology, Inc.
COMPETITION
Sabratek faces substantial competition. At the present time, Sabratek
considers its primary competitors to be other marketers of infusion pumps.
Sabratek believes there are several major competitors marketing infusion pump
devices, including, but not limited to: Abbott Laboratories; Alaris Medical,
Inc.; Baxter International Inc.; I-Flow Corp.; B. Braun/McGaw, Inc., an indirect
subsidiary of B. Braun Melsungen AG; and SIMS Deltec, a unit of Smiths
Industries Medical Systems.
Despite the greater size and market share of its competitors, Sabratek
believes that its products compete favorably against the products offered by its
competitors. Sabratek has designed its stationary and ambulatory pump products
to offer cost efficient and convenient transferability of training/operational
procedures and functions. Unlike manufacturers that offer only a stationary or
an ambulatory pump, or offer both but whose products lack operational
integration, Sabratek's SEAMLESS DELIVERY SYSTEM(R) product design provides
health care providers with product standardization which Sabratek believes to be
critical in achieving optimum operating efficiencies. Sabratek believes that its
products also compete favorably with the products of larger, more established
companies on the basis of other advanced product features.
REIMBURSEMENT
Sabratek's current products are generally purchased by health care
providers who are reimbursed by third-party payors, including indemnity
insurance companies, managed care organizations and government agencies. These
health care providers recover the cost of purchasing Sabratek's products through
reimbursement for services provided using Sabratek's products. A recent trend is
for providers to contract for services on a capitated basis. Under those
contracts, providers receive a fixed fee for providing service to patients. In
those situations, the providers' profit or loss on the contract is dependent
upon managing its costs.
HCFA coordinates a system of reimbursement for outpatient hospital
procedures, physician office procedures and devices used in conjunction with
such procedures. Under this system, HCFA determines coverage eligibility, issues
coverage instructions and assigns billing codes called the HCFA Common
Procedures Coding System ("HCPCS") for these procedures and devices under
Medicare and Medicaid. HCFA has established HCPCS billing codes for infusion
devices. Moreover, the HCPCS system is referenced by most third-party payors,
including Medicare and Medicaid, insurance companies and health maintenance
organizations, thereby standardizing coverage identification and billing
identification across a broad spectrum of payor plans. When the use of
FDA-approved infusion devices is prescribed by a physician and determined to be
reasonable and necessary in the treatment of illness, this use is generally
reimbursable under Medicare and Medicaid. Reimbursement by other third-party
payors is dependent upon the coverage provided under the applicable plan.
GOVERNMENT REGULATION
The medical devices and supplies manufactured and marketed by Sabratek are
subject to regulation by the FDA and, in some instances, by state and foreign
authorities. Pursuant to the Federal Food Drug and
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Cosmetic Act ("FFDCA") and the regulations promulgated thereunder, the FDA
regulates the clinical testing, development, manufacture, packaging, labeling,
distribution and promotion of medical devices and supplies.
The FFDCA classifies medical devices intended for human use into three
categories, Classes I, II and III, on the basis of the controls deemed necessary
by the FDA to reasonably assure their safety and effectiveness. Class I devices
are required to comply with general controls regarding such matters as labeling,
premarket notification and adherence to good manufacturing practice
requirements. Class II devices are required to comply with general and special
controls regarding such matters as performance standards, postmarket
surveillance, patient registries, and FDA guidelines. Generally, Class III
devices are those which must receive premarket approval from the FDA to ensure
their safety and effectiveness. Examples of Class III devices include
life-sustaining, life-supporting and implantable devices, or new devices which
have not been found substantially equivalent to legally marketed devices.
Electronic infusion devices and disposable tubing sets are classified by the FDA
as Class II medical devices.
If a new Class II medical device is substantially equivalent to a medical
device already legally marketed in the United States, and the marketed service
did not require Class III premarket approval, the FDA requirements may be
satisfied through a procedure known as a "510(k) Submission," in which the
applicant provides product information supporting its claim of substantial
equivalency. "Substantial equivalence" means that a device has the same intended
use and the same technological characteristics as the legally marketed device,
or the same intended use and different technological characteristics, provided
that it can be demonstrated that the device is as safe and effective as the
legally marketed device, and does not raise different questions regarding safety
and effectiveness.
Commercial distribution of a device for which a 510(k) Submission is
required can begin only after the FDA issues an order finding the device to be
substantially equivalent to a legally marketed device. The FDA has recently been
requiring a more rigorous demonstration of substantial equivalence than in the
past. This may include a requirement for clinical testing of the device. It
generally takes four months from submission to obtain a 510(k) clearance based
on average 510(k) review times for the fiscal year 1998, but it may take longer.
The FDA may determine that a proposed device is not substantially equivalent to
a legally marketed device, in which case a "PMA" or "premarket approval" will be
required. Alternatively, the FDA may require additional information before a
substantial equivalence determination can be made, in which case data from
safety and effectiveness tests, including clinical tests, may be required. The
process for preparing and obtaining FDA approval of a PMA is generally much more
elaborate, time-consuming and expensive than the process of preparing and
obtaining FDA clearance of a 510(k) Submission and would require Sabratek, among
other things, to conduct preclinical and clinical trials to demonstrate the
safety and effectiveness of the proposed device. A not substantially equivalent
determination or a request for additional information could significantly delay
the market introduction of new products that fall into this category.
Sabratek received 510(k) clearance to begin marketing the 3030 Stationary
Pump in the United States in May, 1992. Sabratek received 510(k) clearance for
the disposable tubing sets for use with the 3030 Stationary Pump in March, 1995.
In July, 1994, the FDA cleared the 510(k) Submission for the 6060 Ambulatory
Pump and disposable tubing sets for use with the 6060 Ambulatory Pump. In June,
1996, Sabratek received 510(k) clearance for the MediVIEW software system for
use with the 3030 Stationary Pump.
Sabratek believes that its 510(k) clearance for the 6060 Ambulatory Pump
covers the MediVIEW software system used with the 6060 Ambulatory Pump such that
Sabratek can market the MediVIEW software with the 6060 Ambulatory Pump in the
United States. However, there can be no assurance that the FDA would agree with
Sabratek's determination. If in the future the FDA concluded that the MediVIEW
software system for use with the 6060 Ambulatory Pump required a new 510(k)
Submission, the FDA could prohibit Sabratek from marketing the MediVIEW software
system for this use until Sabratek files a new 510(k) Submission and obtains
clearance from the FDA. The FDA could also take regulatory action against
Sabratek for any prior distribution of the MediVIEW software system with the
6060 Ambulatory Pump.
The PumpMaster is a hardware and software system designed to perform
diagnostic tests on Sabratek's infusion pumps. Sabratek has determined that the
PumpMaster does not qualify for regulation as a medical
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device. There can be no assurance that the FDA will agree with Sabratek's
determination in this regard. If the FDA were to determine that the PumpMaster
is a medical device, it could suspend its commercial distribution until a 510(k)
Submission covering the PumpMaster has been filed by Sabratek and cleared by the
FDA and other medical device regulatory requirements have been met. The FDA
could also take regulatory action against Sabratek based on its prior
distribution of the uncleared product.
The FFDCA requires the filing of a new 510(k) Submission when, among other
things, there is a major change or modification in the intended use of the
device, or a change or modification, including product enhancements, to a
legally marketed device that could significantly affect its safety or
effectiveness. A device manufacturer is responsible for making the initial
determination as to whether a proposed change to a cleared device or to its
intended use necessitates the filing of a new 510(k) Submission. Sabratek has
made some enhancements to its currently marketed products without filing 510(k)
Submissions. There can be no assurance that the FDA would agree with Sabratek's
determinations that these enhancements do not require a 510(k) Submission and
would not require 510(k) clearance before further distribution. Likewise, if
Sabratek determines that any modifications that it may make to its cleared
devices in the future do not require a new 510(k) Submission, there can be no
assurance that the FDA would agree with Sabratek's determinations and would not
require a new 510(k) Submission for any future modifications made to a cleared
device. If the FDA requires Sabratek to file a new 510(k) Submission for any
modification to the device, Sabratek may be prohibited from marketing the device
as modified until it obtains clearance from the FDA. There can be no assurance
that Sabratek will obtain 510(k) clearance on a timely basis, if at all, for any
device modification for which it files a future 510(k) Submission. If 510(k)
clearance is granted, there can be no assurance that it will not contain
significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use.
Sabratek's Rocap establishments are registered with the FDA as a device
manufacturer, and its products are required to be manufactured according to the
Quality System Regulation which imposes process, procedure and documentation
requirements upon Sabratek with respect to design, manufacturing and quality
assurance activities. Based on the FDA's determination that the Rocap
operation's pre-filled flush syringe products are to be regulated as medical
devices, the Rocap establishments do not need to maintain their registrations
with the FDA as a drug manufacturer and repackager. The products manufactured by
Rocap contain components that are purchased from other manufacturers, which have
received FDA approvals for the components as drugs. There can be no assurance
that the suppliers of these components will be able to maintain their approvals.
If such approvals were lost, Sabratek could have to revise pending or resubmit
new 510(k) Submissions for the Rocap products and obtain FDA clearance before
marketing.
Sabratek intends to develop new products for the future. Sabratek's new
products, including new applications for existing products, may qualify as
devices that require FDA 510(k) clearance or PMA prior to marketing. There can
be no assurance that market clearance of future products or product applications
will be forthcoming in a timely manner, if at all, or that the FDA's clearance
or approval of future products or product applications will not contain
significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use. If in the future the FDA
concludes that current, modified or new products manufactured and distributed by
Sabratek require that the products be relabeled, require 510(k) clearance,
require new drug approval, or other regulatory approval, the FDA could prohibit
Sabratek from manufacturing and/or distributing these products until Sabratek
took the necessary regulatory steps, made the necessary submissions and obtained
any required clearances or approvals. The FDA could also take regulatory action
against Sabratek for the manufacture and/or distribution of such products.
In October, 1996, Sabratek learned of a defect in a software feature of
some of the 6060 Ambulatory Pumps. Sabratek initiated a recall of these units to
correct the problem with an upgrade of the software. As recommended by FDA
guidelines, Sabratek notified the FDA of the recall and has updated the FDA of
the progress of the recall, which is now closed. The FDA reported this recall in
the January 15, 1997 issue of the FDA Enforcement Report. The FDA classified
Sabratek's recall as a Class II recall, which is defined as a situation in which
the use of a violative product may cause temporary or medically reversible
adverse health consequences or where the probability of serious adverse health
consequences is remote.
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Any products manufactured or distributed by Sabratek for which it has
received FDA 510(k) clearances continue to be regulated by the FDA. Device
manufacturers are required to register their establishments and list their
devices with the FDA, and are subject to periodic inspections by the FDA and
certain state agencies. The FFDCA requires devices to be manufactured in
compliance with current good manufacturing practices (implemented under the
Quality System Regulation). Sabratek believes that its manufacturing and quality
assurance procedures substantially conform to the requirements of the Quality
System Regulation. However, there can be no assurance that the FDA would concur
with Sabratek's determination in this regard or that Sabratek will be able to
maintain substantial compliance with the Quality System Regulation.
In addition, the Medical Device Reporting regulation obligates Sabratek to
inform the FDA whenever information reasonably suggests that one of its devices
may have caused or contributed to death or serious injury, or that one of its
devices has malfunctioned and, if the malfunction were to recur, the device or a
similar Sabratek device would be likely to cause or contribute to a death or
serious injury. There can be no assurance that the FDA would agree with
Sabratek's determinations as to whether particular incidents meet the threshold
for Medical Device Reporting.
Labeling and promotion activities are regulated by the FDA and may be
regulated by the Federal Trade Commission. The FDA actively enforces statutes
and regulations prohibiting marketing of products for unapproved or uncleared
uses.
If, as a result of FDA inspections, Medical Device Reporting reports or
information derived from any other source, the FDA believes Sabratek is not in
compliance with the applicable statutory law or regulations, the FDA can: refuse
to clear pending 510(k) Submissions until specified conditions; possibly
withdraw previously cleared 510(k) Submissions; require notification to users
regarding newly found unreasonable risks; request repair, refund or replacement
of faulty devices; require corrective advertisements, recalls or marketing
suspension; impose civil penalties; or institute legal proceedings to detain or
seize products, enjoin future violations, or seek criminal penalties against
Sabratek, its officers or employees. Civil penalties for FFDCA violations may be
assessed by the FDA in lieu of or in addition to instituting legal action. Civil
penalties may range up to $15,000 per violation for violations of the FFDCA, and
a maximum of $1,000,000 per proceeding. Civil penalties may not be imposed for
good manufacturing practice violations, unless the violations involve a
significant or knowing departure from the requirements of the FFDCA or a risk to
public health. The FDA provides manufacturers with an opportunity to be heard
prior to the assessment of civil penalties. If civil penalties are assessed,
judicial review is available.
Sabratek exports, or intends to export, its 510(k)-cleared products to
Europe, Japan and other foreign countries. Exports of products that have market
clearance from the FDA in the United States do not require FDA authorization for
export. However, foreign countries often require, among other things, an FDA
Certificate to Foreign Government verifying that the product complies with
specified FFDCA requirements. To obtain a Certificate to Foreign Government, the
device manufacturer must certify to the FDA that certain FFDCA requirements have
been met. The FDA may refuse to issue a Certificate to Foreign Government if
significant outstanding good manufacturing practice violations exist.
International sales of medical devices are regulated by each country in
which the products are sold. The regulatory review process varies from country
to country. Many countries also impose product standards, packaging and labeling
requirements, and import restrictions on devices. In addition, each country has
its own tariff regulations, duties and tax requirements. Sabratek plans to use
its distributors to assist in obtaining any necessary foreign governmental and
regulatory approvals. Sabratek has received approval to market its products in
Japan as well as in the European community, and Sabratek currently sells its
products in Japan and the European community.
Sabratek has received Underwriters Laboratory, Inc. product recognition
under UL 544, Standard for Medical and Dental Equipment and UL 2601, General
Requirements for Safety for Mechanical Electrical Equipment as well as product
recognition under Canadian National Standard C22.2 through cUL for both the 3030
Stationary Pump and the 6060 Ambulatory Pump. Sabratek must undergo quarterly
inspections by Underwriters Laboratory, Inc. to maintain UL status. In May,
1998, Sabratek obtained ISO 9003 certification and is in the process of
qualifying for ISO 9001 certification.
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Sabratek and its products are also regulated under a variety of state and
local laws in those states or localities where its products are or will be
marketed.
Manufacturers are also regulated under numerous federal, state and local
laws relating to the following matters: safe working conditions, manufacturing
practices, environmental protection, fire hazard control and disposal of
hazardous or potentially hazardous substances. There can be no assurance that
Sabratek will not be required to incur significant costs to comply with these
laws and regulations.
For a discussion of regulatory status of the Rocap product line, see
"Business -- Recent Developments."
PRODUCT LIABILITY INSURANCE
Sabratek faces an inherent business risk of exposure to product liability
claims in the event that the use of its products is alleged to have resulted in
adverse effects. Sabratek maintains product liability insurance with coverage of
$20 million per claim, with an annual aggregate policy limit of $20 million.
There can be no assurance that liability claims will not exceed the coverage
limits of these policies or that these policies will continue to be available on
commercially acceptable terms, if at all.
EMPLOYEES
As of December 31, 1998, Sabratek and its subsidiaries employed
approximately 382 persons full-time, including 240 in manufacturing and
operations, 53 in sales, marketing and clinical support, 18 in research and
development, 37 in administration, and 34 in regulatory affairs/quality
assurance.
Sabratek has entered into employee non-disclosure and non-competition
agreements with each of its full-time employees that (a) prohibit disclosure of
confidential information to anyone outside of Sabratek both during and
subsequent to employment, (b) require disclosure to Sabratek of ideas,
discoveries or inventions relating to or resulting from the employee's work for
Sabratek and assignment to Sabratek of all proprietary rights to these ideas,
discoveries or inventions, and (c) limit competition with Sabratek's business by
the employee for a maximum period of one year following termination of their
employment.
ITEM 2. PROPERTIES
Sabratek occupies approximately 84,760 square feet of development,
production, warehouse and administrative space in Skokie, Illinois. The facility
lease runs through July 30, 2003. At the expiration of the lease, Sabratek has
the option to renew the lease for one three-year period. The current annual
lease rate for this space is approximately $402,610. The annual lease rate may
increase after the 3rd year of the lease. Sabratek may be required to lease
additional space in the future and believes that the space will be readily
available at reasonable rates.
Sabratek's Rocap operation occupies approximately 7,900 square feet of
production, warehouse and administrative space at two facilities in Woburn,
Massachusetts. The lease terms end July 31, 2000 and August 1, 2000. The current
annual lease rate in aggregate is approximately $64,000. The Rocap operation
also occupies approximately 14,400 square feet of production, warehouse and
administrative space at one facility in Orlando, Florida. The lease expires in
2007. The current annual base lease rate is approximately $104,400. The Rocap
operation also occupies approximately 81,088 square feet of production,
warehouse and administrative space in Orlando, Florida. The facility lease runs
through 2007. The current annual lease rate for this space is approximately
$535,586. Sabratek intends to continue to operate the Rocap operation's current
business from its existing facilities but may need to lease additional space
based upon the planned expansion of the Rocap operation business.
CMS Healthcare, Inc. occupies approximately 2,271 square feet of
administration space in Tampa Bay, Florida. The lease term runs through July 31,
2001. The current annual lease rate for this space is approximately $32,930.
16
<PAGE> 19
ITEM 3. LEGAL PROCEEDINGS
On February 5, 1997, SIMS Deltec filed a complaint in the United States
District Court for the District of Minnesota alleging that Sabratek's
manufacture, use and/or sale of the MediVIEW software in conjunction with its
infusion pumps infringes on a patent entitled "Systems and Methods of
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. Subsequently, SIMS Deltec filed 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 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.
Sabratek 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 Sabratek's business,
financial position and results of operations.
In addition, on June 27, 1997, Sabratek filed a complaint against SIMS
Deltec which is currently pending in the United States District Court for the
District of Minnesota 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.
Sabratek was served with a complaint on January 27, 1999, alleging that
Sabratek and seven officers and former officers violated Sections 10(b) (and
Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of
1934. The complaint alleges that defendants issued a series of false and
misleading statements concerning Sabratek's business, its products and its
prospects for future profitability.
The complaint seeks to recover damages on behalf of all persons who
purchased shares of Sabratek's common stock between January 13, 1998 and
November 24, 1998, although no court has determined that these persons
constitute a proper class. The complaint was filed in the United States District
Court for the Northern District of Illinois (Chu v. Sabratek Corporation, et
al., Docket No. 99 C 0351). Neither Sabratek nor the individual defendants have
yet responded to the complaint, but all parties intend to vigorously defend
against the allegations contained in the complaint. Protracted litigation or an
adverse outcome in this matter could have a material adverse impact on
Sabratek's business, financial position and results of operations.
Sabratek is also a party to routine litigation in the ordinary course of
business, none of which, if determined adversely to Sabratek, would individually
or in the aggregate have a material adverse effect on Sabratek.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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<PAGE> 20
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Sabratek completed its initial public offering in June, 1996 at a price per
share of $10.00. Since June 21, 1996, Sabratek's common stock has traded on the
Nasdaq National Market under the symbol "SBTK". The following table identifies,
for the periods indicated, the high and low reported sale prices of shares of
the common stock as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C> <C>
1996
Second Quarter (from June 21, 1996)......................... $12 $10
Third Quarter............................................... $16 1/2 $ 7 3/4
Fourth Quarter.............................................. $16 3/4 $13
1997
First Quarter............................................... $29 1/8 $15 1/4
Second Quarter.............................................. $31 3/8 $17 3/4
Third Quarter............................................... $39 1/4 $25
Fourth Quarter.............................................. $38 11/16 $23
1998
First Quarter............................................... $36 $28
Second Quarter.............................................. $36 1/8 $22 1/2
Third Quarter............................................... $27 3/4 $16 3/8
Fourth Quarter.............................................. $34 1/4 $13
1999
First Quarter (through March 17, 1999)...................... $25 1/2 $14 3/8
</TABLE>
As of March 17, 1999 there were 159 holders of record of Sabratek's common
stock.
Sabratek has never paid a cash dividend and does not anticipate the payment
of cash dividends in the foreseeable future as earnings are expected to be
retained to finance Sabratek's growth. Declaration of dividends in the future
will remain within the discretion of Sabratek's Board of Directors, which will
review its dividend policy from time to time.
During the fourth quarter of 1998, Sabratek issued 11,076 shares of common
stock upon the exercise of warrants not covered by a registration statement.
Sabratek received proceeds of approximately $52,722 upon the exercise of these
warrants. All these issuances of common stock were exempt from registration
pursuant to Section 4(2) of the Securities Act.
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<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data with respect to Sabratek's statements of
operations for each of the years in the five year period ended December 31, 1998
and the balance sheet data as of December 31, 1998, 1997, 1996, 1995 and 1994
are derived from Sabratek's audited financial statements. The financial data for
Sabratek should be read in conjunction with Sabratek's Financial Statements and
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................... $ 66,910 $43,058 $ 17,696 $ 4,040 $ 3,315
Cost of sales............................... 29,966 18,720 8,748 2,902 2,481
Provision for inventory reserve............. 2,116 -- -- -- --
-------- ------- -------- -------- -------
Gross margin................................ 34,828 24,338 8,948 1,138 834
Selling, general and administrative
expenses.................................. 26,248 18,256 8,474 6,874 4,108
-------- ------- -------- -------- -------
Operating income (loss)..................... 8,580 6,082 474 (5,736) (3,274)
Interest expense............................ (3,623) (45) (319) (222) (260)
Other income (expense), including interest
income.................................... 3,402 1,209 615 (78) (21)
Stock appreciation rights(1)................ -- -- (1,628) -- --
Provision for income taxes.................. 3,487 -- -- -- --
-------- ------- -------- -------- -------
Net income (loss)........................... $ 4,872 $ 7,246 $ (858) $ (6,036) $(3,555)
======== ======= ======== ======== =======
Basic income (loss) per share............... $ 0.47 $ 0.75 $ (0.17) $ (3.72) $ --
======== ======= ======== ======== =======
Basic weighted average shares
outstanding(2)............................ 10,316 9,614 5,143 1,622 --
======== ======= ======== ======== =======
Diluted income (loss) per share............. $ 0.47 $ 0.67 $ (0.17) $ (3.72) $ --
======== ======= ======== ======== =======
Diluted weighted average shares
outstanding(2)............................ 11,146 10,895 5,143 1,622 --
======== ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 70,969 $48,156 $ 24,587 $ (1,101) $ 999
Total assets................................ 152,679 71,167 32,951 4,179 3,338
Short-term debt (including current portion
of long term obligations)(3).............. 33 25 303 775 91
Debt and Long-term obligations.............. 85,216 264 24 2,512 464
Accumulated deficit......................... (2,192) (7,064) (14,310) (13,452) (7,416)
Total stockholders' equity (deficit)........ 58,029 64,415 28,650 (2,821) 1,151
</TABLE>
- -------------------------
(1) For the year ended December 31, 1996, a non-recurring charge in the amount
of approximately $1.6 million was recorded to recognize obligations under
certain stock appreciation rights in connection with Sabratek's June 1996
initial public offering.
(2) See Note (2) to the Financial Statements for an explanation of the
calculation of weighted average shares outstanding.
(3) Includes capital lease obligations.
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<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
Sabratek'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, Sabratek 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. Sabratek has six years of operating history and experienced
significant operating losses from its inception through mid-1996. Upon receiving
FDA clearance for the 3030 Stationary Pump in mid-1992, Sabratek 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, Sabratek continued to fund the research, development
and regulatory clearance activities of other device and software products.
Sabratek 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, Sabratek 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, Sabratek acquired substantially all the assets of Rocap which
produces and markets pre-packaged injectable prescription pharmaceuticals and
pre-filled flush syringes. In addition, Sabratek derives revenues from the
servicing of products, sale of accessories, extended warranties and consulting
services.
Sabratek sells its products both directly to alternate-site and acute-care
providers, as well as to third-party distributors. Sabratek's distributors and
customers may purchase several months of inventory at any one time which may
cause fluctuations in quarterly revenues. Sabratek also markets and sells its
products internationally and, as a result, its revenues may be affected by the
strength of the U.S. dollar compared to other currencies. 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 Sabratek.
In November 1998, Sabratek announced that it had suspended distribution of
its Rocap pre-filled flush syringe product line. Sabratek also announced that it
would submit new 510(k) applications to the FDA for the Rocap pre- filled flush
syringe products and that new management was in place at Rocap for both
operations and regulatory affairs. Sabratek has submitted the new 510(k)
applications, but they have not been approved by the FDA. The suspension had a
material adverse effect on revenues and operating results for the fourth quarter
of 1998.
Sabratek has entered into a number of strategic partnerships, including
Unitron, GDS, Collaborations in Healthcare, LLC and HealthMagic, 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
YEARS ENDED DECEMBER 31, 1998 AND 1997
NET SALES. Net sales increased $23.8 million to $66.9 million for the year
ended December 31, 1998 as compared to $43.1 million for the year ended December
31, 1997, an increase of 55%. The increase is attributable to several factors;
incremental unit sales volume of the 3030 Stationary Pump and 6060 Ambulatory
Pump and their respective disposables into the alternate-site health care market
including national homecare companies, an increase in the average per unit
selling price due to a higher ratio of direct sales versus dealer sales, an
increase in unit sales volume of the Rocap pre-filled flush syringe product
line, the addition of the MediVIEW and PumpMaster products, an increase in unit
sales volume of certain licensed products from GDS Technology, Inc., and the
addition of revenues from marketing and clinical consulting services.
20
<PAGE> 23
COST OF SALES. Cost of sales increased $11.3 million to $30.0 million for
the year ended December 31, 1998, as compared to $18.7 million for the year
ended December 31, 1997, an increase of 60%. The increase 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
increased unit sales volume of the Rocap pre-filled flush syringe product line.
Indirect overhead costs relating to the expansion of production capacity have
also contributed to the increase.
PROVISION FOR INVENTORY RESERVE. An inventory reserve of $2.1 million was
recorded as of December 31, 1998 to provide an allowance for the Rocap
pre-filled flush syringe finished goods inventory on hand as of December 31,
1998 in the event Sabratek cannot distribute any or portions of the inventory.
No inventory reserve was recorded as of December 31, 1997.
GROSS MARGIN. Gross margin increased $10.5 million to $34.8 million for the
year ended December 31, 1998 as compared to $24.3 million for the year ended
December 31, 1997, an increase of 43%. Excluding the provision for inventory
reserve, gross margin increased $12.6 million to $36.9 million for the year
ended December 31, 1998 as compared to $24.3 million for the year ended December
31, 1997, an increase of 52%. The increase is due primarily to the incremental
unit sales volume and per unit contribution thereon. The increase in gross
margin was off-set by increased indirect overhead costs relating to the
expansion of production capacity and fixed overhead costs relating to the Rocap
product line during a period of time in 1998 in which Rocap product sales were
suspended. Gross margin as a percent of sales decreased to 52% for the year
ended December 31, 1998 as compared to 57% for the year ended December 31, 1997.
The decrease in gross margin as a percent of net sales resulted from a greater
mix of Rocap products sold during the year, which are sold at a lower margin,
and the suspension of sales of the Rocap product line as discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $7.9 million to $26.2 million for the year
ended December 31, 1998 as compared to $18.3 million for the year ended December
31, 1997, an increase of 44%. The increase is due primarily to the expansion of
Sabratek's direct sales force and clinical support staff and the associated
travel thereby, as well as, greater aggregate commissions paid in conjunction
with higher net sales. Contributing also to the increase for the year ended
December 31, 1998 was the addition of administrative and management personnel,
the relocation and expansion of Sabratek's main facility in Illinois, and
additional regulatory expenses relating to the Rocap product line. Selling,
general and administrative expenses as a percent of net sales decreased to 39%
for the year ended December 31, 1998 as compared to 42% for the year ended
December 31, 1997.
OPERATING INCOME. Operating income increased $2.5 million to $8.6 million
for the year ended December 31, 1998 as compared to $6.1 million for the year
ended December 31, 1997, an increase of 41%. Excluding the provision for
inventory reserve, operating income increased $4.6 million to $10.7 million for
the year ended December 31, 1998 as compared to $6.1 million for the year ended
December 31, 1997, an increase of 76%. Operating income as a percent of sales
decreased to 13% for the year ended December 31, 1998 as compared to 14% for the
year ended December 31, 1997. Excluding the provision for inventory reserve,
operating income as a percent of net sales increased to 16% for the year ended
December 31, 1998. 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, but was significantly off-set by the
provision for inventory reserve.
INTEREST INCOME. Interest income increased $2.2 million to $3.4 million for
the year ended December 31, 1998 as compared to $1.2 million for the year ended
December 31, 1997, an increase of 174%. The increase is attributable to a higher
average balance of cash available for investment as compared to that of the year
ended December 31, 1997. In April 1998, Sabratek sold 6% convertible notes which
resulted in net proceeds of approximately $82.1 million. Sabratek completed a
secondary public offering in April, 1997 which resulted in net proceeds to
Sabratek of approximately $21.6 million.
INTEREST EXPENSE. Interest expense increased to $3.6 million for the year
ended December 31, 1998 as compared to $45,000 for the year ended December 31,
1997, an increase of 7,951%. The increase for the year ended December 31, 1998
is attributable to the sale of 6% convertible debt in April, 1998 for the
principal
21
<PAGE> 24
amount of $85.0 million. Interest expense for the year ended December 31, 1997
applies to capital lease obligations and borrowings collateralized by a certain
customer receivable.
PROVISION FOR INCOME TAXES. A provision for income taxes of $3.5 million
has been recorded for the year ended December 31, 1998 to reflect the tax
benefit of compensation expense recognized for tax purposes resulting from the
exercise of stock options. Due to utilization of available net operating loss
carryforwards, Sabratek did not incur any federal or state income tax liability
for the year ended December 31, 1997. Utilization of remaining net operating
loss carryforwards depends on future earnings and will be subject to annual
limitations as a result of changes that have occurred in Sabratek's ownership.
NET INCOME. Net income decreased $2.3 million to $4.9 million for the year
ended December 31, 1998 as compared to $7.2 million for the year ended December
31, 1997, a decrease of 33%. The decrease in net income is attributable to
income tax provided for the year ended December 31, 1998 which was not provided
for the year ended December 31, 1997. An effective tax rate for 1997 was not
recorded due to the utilization of available net operating loss carryforwards as
discussed above. Also contributing to the decrease is the provision for
inventory reserve recorded for the year ended December 31, 1998.
YEARS ENDED DECEMBER 31, 1997 AND 1996
NET SALES. Net sales increased $25.4 million to $43.1 million for the year
ended December 31, 1997 as compared to $17.7 million for the year ended December
31, 1996, an increase of 143%. The increase is attributable to several factors;
incremental unit sales volume of the 3030 Stationary Pump and 6060 Ambulatory
Pump and their respective disposables into the alternate-site health care market
including national homecare companies, an increase in the average per unit
selling price due to a higher ratio of direct sales versus dealer sales, the
addition of the Rocap product line of pre-filled flush syringes in February,
1997, the addition of the MediVIEW and PumpMaster products, and the addition of
certain licensed products from GDS Technology, Inc.
COST OF SALES. Cost of sales increased $10.0 million to $18.7 million for
the year ended December 31, 1997, as compared to $8.7 million for the year ended
December 31, 1996, an increase of 114%. The increase is primarily attributable
to direct product costs associated with incremental unit sales volume of the
3030 and 6060 infusion pumps and related disposables, the addition of the Rocap
product line and an increase in costs relating to the expansion of production
capacity.
GROSS MARGIN. Gross margin increased $15.4 million to $24.3 million for the
year ended December 31, 1997 as compared to $8.9 million for the year ended
December 31, 1996, an increase of 172%. The increase is due primarily to the
incremental unit sales volume and per unit contribution thereon, including the
economies of scale realized by allocating fixed manufacturing costs over a
greater number of units. Also contributing to the increase were higher average
pricing levels, a more favorable product mix of the 6060 Ambulatory Pump units
to 3030 Stationary Pump units, and the addition of the Rocap product line. Gross
margin as a percent of net sales increased to 57% for the year ended December
31, 1997 as compared to 51% for the year ended December 31, 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $9.8 million to $18.3 million for the year
ended December 31, 1997 as compared to $8.5 million for the year ended December
31, 1996, an increase of 115%. The increase is due primarily to the expansion of
Sabratek's direct sales force and clinical support staff and the associated
travel thereby, as well as, greater aggregate commissions paid in conjunction
with higher net sales. Contributing also to the increase for the year ended
December 31, 1997 was the assumption of expenses relating to the Rocap product
line, the addition of administrative and management personnel, as well as the
expansion of the Niles, Illinois facility. Expenses relating to SIMS Deltec,
Inc. litigation were approximately $737,000 for the year ended December 31,
1997. Selling, general and administrative expenses as a percent of net sales
decreased to 42% for the year ended December 31, 1997 as compared to 48% for the
year ended December 31, 1996.
OPERATING INCOME. Operating income increased to $6.1 million for the year
ended December 31, 1997 as compared to $474,000 for the year ended December 31,
1996, an increase of 1,183%. Operating income as a
22
<PAGE> 25
percent of net sales increased to 14% for the year ended December 31, 1997 as
compared to 3% for the year ended December 31, 1996. 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.
INTEREST INCOME. Interest income increased to $1.2 million for the year
ended December 31, 1997 as compared to $617,000 for the year ended December 31,
1996, an increase of 101%. The increase is attributable to a higher average
balance of cash available for investment as compared to that of the year ended
December 31, 1996. Sabratek completed a secondary public offering in April, 1997
which resulted in net proceeds to Sabratek of approximately $21.6 million. In
June, 1996, Sabratek completed an initial public offering which resulted in net
proceeds to Sabratek of approximately $26.8 million.
INTEREST EXPENSE. Interest expense decreased to $45,000 for the year ended
December 31, 1997 as compared to $319,000 for the year ended December 31, 1996,
a decrease of 86%. The decrease for the year ended December 31, 1997 is
primarily attributable to the conversion and elimination of all convertible debt
outstanding at Sabratek's initial public offering in June, 1996. Interest
expense for the year ended December 31, 1997 applies to capital lease
obligations and borrowings collateralized by a certain customer receivable.
STOCK APPRECIATION RIGHTS EXPENSE. No stock appreciation rights expense is
recorded for the year ended December 31, 1997 as compared to $1.6 million for
the year ended December 31, 1996. The stock appreciation rights expense for the
year ended December 31, 1996 was non-recurring.
PROVISION FOR INCOME TAXES. Due to net operating loss carryforwards
sufficient enough to offset pretax income, Sabratek did not incur any federal or
state income tax liability for the year ended December 31, 1997. Due to net
losses for the year ended December 31, 1996, Sabratek did not incur any federal
or state income tax liability for the period. Utilization of remaining net
operating loss carryforwards depends on future earnings and will be subject to
annual limitations as a result of changes that have occurred in Sabratek's
ownership.
NET INCOME. Net income was $7.2 million for the year ended December 31,
1997 as compared to a net loss of $858,000 for the year ended December 31, 1996.
Net income for the year ended December 31, 1997 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 net income
for the year ended December 31, 1997 was the increase in interest income due to
the investment of excess cash. Additionally, the year ended December 31, 1996
included the non-recurring charge for stock appreciation rights of $1.6 million.
LIQUIDITY AND CAPITAL RESOURCES
In April, 1998, Sabratek completed an institutional private placement 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 Sabratek's common stock at a conversion price of $40.46 anytime
at the option of the noteholders. Sabratek may redeem the notes at anytime after
April 18, 2001. Net proceeds to Sabratek were approximately $82.1 million and
such proceeds were used to purchase investment grade securities.
As of December 31, 1998, Sabratek had approximately $58.1 million in cash,
cash equivalents, and investments in marketable securities, and had net working
capital of approximately $71.0 million. During 1998, approximately $19.3 million
was used to purchase outstanding common stock of Sabratek pursuant to a
repurchase program approved by Sabratek's Board of Directors. In March, 1997,
Sabratek entered into a two-year credit agreement with a financial institution
with up to $9.5 million of available borrowing. As of February 28, 1999, no
borrowing had occurred under the credit agreement.
Sabratek used cash in its operations of approximately $3.9 million for the
year ended December 31, 1998. Cash used in operations for the period was 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, Sabratek entered into strategic
partnerships with Unitron and GDS and has paid cash license fees of $15.9
million as of December 31, 1998, in aggregate. Should an acquisition
23
<PAGE> 26
consummate under the terms of the respective agreements, such acquisitions may
require additional outlays of cash. In November, 1998, Sabratek entered into a
Software License and Marketing Agreement with HealthMagic, Inc. whereby Sabratek
paid license fees of $10.0 million.
In October, 1998, Sabratek entered into a Standby Senior Credit Facility
with Unitron whereby Sabratek, at its sole discretion, may lend up to $10.0
million at an interest rate of 8% per annum. As of December 31, 1998, Sabratek
had advanced $3.1 million. The facility matures on October 15, 2003.
In November, 1998, Sabratek entered into a Standby Senior Credit Facility
with Collaborations in Healthcare, LLC whereby Sabratek may lend up to $4.0
million at an interest rate of 8% per annum. As of December 31, 1998, Sabratek
had advanced $1.8 million. The facility matures on November 23, 2001.
Simultaneously, the parties entered into a Unit Option Agreement whereby
Sabratek has the right to acquire Collaborations in Healthcare, LLC. If such
right is exercised, the acquisition may require additional outlays of cash.
In September, 1997, Sabratek initiated a hedging program through the use of
forward contracts to minimize foreign currency fluctuation exposure. As of
December 31, 1998, the remaining aggregate U.S. dollar amount of the forward
contracts was $1.0 million, and such contracts mature at various dates through
July, 1999.
Sabratek has the right to acquire the assets or stock of Unitron, GDS, and
Collaborations in Healthcare, LLC. Although it is not obligated to do so,
Sabratek may use cash to consummate such acquisitions. If Sabratek uses its cash
reserves to consummate these or other as yet unidentified acquisitions it will
reduce its liquidity. Although Sabratek cannot predict the effect of the
uncertainties listed below, Sabratek does not currently expect the use of its
cash reserves in connection with acquisitions to have an adverse effect on the
results of its operations.
Future liquidity and capital resources could be adversely influenced by
certain factors including Sabratek's dependence on a relatively new customer
base, regulatory or legislative changes pertaining to health care, product
liability exposure regarding diagnosis and the delivery of medication,
dependence on future product development, continued disruption of distribution
of the Rocap product line, pending litigation and others. There can be no
assurance that Sabratek will not require additional financing and may, in the
future, seek additional funds through bank facilities, debt or equity offerings
and to the extent such additional financing is not available, Sabratek could
suffer material adverse effects to its financial position and the results of its
operations.
YEAR 2000 STATUS
Since their inception, all of Sabratek's products, including software, have
been developed with consideration for the millennium change. Additionally, the
products have undergone specific year 2000 date testing to verify and validate
compliance. Although Sabratek knows of no problems in this regard, due to the
ability of certain of Sabratek's products to interact with other devices or
software, Sabratek can give no assurance that the performance of its products
could not be directly and indirectly affected by non-compliant products of a
third party.
Sabratek has made inquiry of its material strategic partners and has
received representation that the devices and software that Sabratek currently
licenses from third parties have been determined to be year 2000 compliant.
Sabratek continues the process of verifying that its suppliers and other
electronically date sensitive equipment will not experience year 2000 problems
that could have a material adverse effect on Sabratek. The cost to Sabratek to
assess and prepare for the year 2000 is estimated to be less than $100,000.
Sabratek has assessed its systems and believes them to be year 2000
compliant. Sabratek will continue to assess its year 2000 exposure, including
systems of third parties on which Sabratek relies. If Sabratek's management
becomes aware of non-compliant systems that will adversely affect Sabratek or
its products, it will develop an action plan and assess the resources necessary
to resolve such problem.
24
<PAGE> 27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Sabratek's investment portfolio is exposed to market risk as it relates to
interest rates. Investments are comprised of certificates of deposit, commercial
paper, U.S. Treasury securities, asset backed securities, and money market
accounts. Only high credit quality issuers are used and exposure to any one
issuer is limited by policy. Maturities and average lives are lattered up to a
maximum term of three years. These investments are considered available for sale
and are recorded on the balance sheet at fair value.
Sabratek uses forward currency exchange contracts to hedge foreign currency
exposures for a certain supplier. The contracts mature on various dates and may
have maturities up to one year. Such contracts are executed by a major financial
institution whereby risk of credit loss is minimized.
The following table summarizes those instruments subject to market risk:
<TABLE>
<CAPTION>
FAIR VALUE
----------
<S> <C>
Fixed income securities maturing in 1999.................... $ 6,058,200
Fixed income securities maturing in 2000.................... 8,125,500
Variable rate securities maturing in 2000................... 4,005,600
Fixed income, asset backed securities (weighted average
duration of 1.2 years).................................... 10,693,493
Variable rate demand notes, money market accounts, demand
deposits, and overnight repurchase obligations............ 29,169,606
Forward currency exchange contracts, contract amount in U.S.
dollars is $994,627 in aggregate.......................... 17,397
</TABLE>
25
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Sabratek Corporation:
We have audited the accompanying consolidated balance sheets of Sabratek
Corporation as of December 31, 1998 and 1997, and the related consolidated
statements of operations, comprehensive income (loss), stockholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material aspects, the financial position of Sabratek
Corporation as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1998 in conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Chicago, Illinois
March 12, 1999
26
<PAGE> 29
SABRATEK CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 29,169,606 $19,598,203
Investments in marketable securities, short term.......... 6,058,200 5,004,390
Receivables:
Trade, net of allowance for doubtful accounts of
$835,600 at December 31, 1998 and $502,772 at December
31, 1997, respectively................................ 19,386,099 15,293,268
Other................................................... 499,506 207,960
------------ -----------
Total receivables.................................... 19,885,605 15,501,228
------------ -----------
Inventories............................................... 23,972,726 13,718,459
Prepaids.................................................. 1,315,795 821,107
------------ -----------
Total current assets........................................ 80,401,932 54,643,387
------------ -----------
Property, plant and equipment, net.......................... 7,618,430 3,546,286
Notes receivable............................................ 6,548,435 233,334
Goodwill, net............................................... 4,298,285 4,341,602
Intangibles, net............................................ 28,065,367 8,301,881
Investments in marketable securities........................ 22,824,593 --
Other....................................................... 2,921,564 100,444
------------ -----------
$152,678,606 $71,166,934
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt, including current portion of capital
lease obligations....................................... $ 33,461 $ 24,628
Account payable........................................... 6,969,457 3,718,042
Payroll and commissions................................... 524,802 2,039,275
Warranty.................................................. 335,655 303,655
Accrued interest expense.................................. 1,062,500 --
Accrued expenses.......................................... 473,077 299,979
Other..................................................... 34,423 102,184
------------ -----------
Total current liabilities................................... 9,433,375 6,487,763
------------ -----------
Debt........................................................ 85,000,000 --
Other long term obligations................................. 215,854 264,383
------------ -----------
Total liabilities........................................... 94,649,229 6,752,146
------------ -----------
Commitments and contingencies...............................
Stockholders' equity:
Preferred stock, par value $.01; 200,000 authorized, 0
issued and outstanding.................................. -- --
Common stock, par value $.01; 25,000,000 authorized,
10,868,046 issued, 9,868,046 outstanding at December 31,
1998, 10,325,280 issued and outstanding at December 31,
1997.................................................... 108,680 103,253
Additional paid-in capital................................ 79,220,252 71,343,925
Treasury stock, 1,000,000 shares at cost.................. (19,339,901) --
Deferred compensation..................................... -- (12,408)
Accumulated other comprehensive income.................... 232,235 43,521
Accumulated deficit....................................... (2,191,889) (7,063,503)
------------ -----------
Total stockholders' equity.................................. 58,029,377 64,414,788
------------ -----------
$152,678,606 $71,166,934
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 30
SABRATEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales............................................. $66,909,605 $43,058,601 $17,696,786
Cost of sales......................................... 29,965,645 18,719,987 8,748,364
Provision for inventory reserve....................... 2,116,048 -- --
----------- ----------- -----------
Gross margin.......................................... 34,827,912 24,338,614 8,948,422
Selling, general and administrative expenses.......... 26,247,705 18,256,249 8,474,408
----------- ----------- -----------
Operating income (loss)............................... 8,580,207 6,082,365 474,014
Other income (expenses):
Interest income..................................... 3,401,632 1,240,766 617,157
Interest expense.................................... (3,623,175) (44,891) (318,557)
Stock appreciation rights........................... -- -- (1,628,463)
Other............................................... -- -- (2,267)
----------- ----------- -----------
Net income (loss) before taxes........................ $ 8,358,664 $ 7,246,457 $ (858,116)
----------- ----------- -----------
Provision for income taxes.......................... 3,487,050 -- --
----------- ----------- -----------
Net income (loss)..................................... $ 4,871,614 $ 7,246,457 $ (858,116)
=========== =========== ===========
Basic income (loss) per share......................... $ 0.47 $ 0.75 $ (0.17)
=========== =========== ===========
Basic weighted average shares outstanding............. 10,316,418 9,614,278 5,142,763
=========== =========== ===========
Diluted income (loss) per share....................... $ 0.44 $ 0.67 $ (0.17)
=========== =========== ===========
Diluted weighted average shares outstanding........... 11,145,926 10,894,615 5,142,763
=========== =========== ===========
</TABLE>
SABRATEK CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (loss)......................................... $4,871,614 $7,246,457 $(858,116)
Other comprehensive income, net of tax:
Unrealized holding gains arising during period....... 246,559 44,562 4,140
less: reclassification adjustment for gains included
in net income (loss)............................... (57,845) (5,181) --
---------- ---------- ---------
Other comprehensive income.............................. $ 188,714 $ 39,381 $ 4,140
---------- ---------- ---------
Comprehensive income (loss)............................... $5,060,328 $7,285,838 $(862,256)
========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE> 31
SABRATEK CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
PREFERRED COMMON ADDITIONAL
--------------------- --------------------- PAID-IN NOTE DEFERRED TREASURY
DESCRIPTION SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION STOCK
----------- ------ ------ ------ ------ ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................... 1,768,129 $17,681 1,718,458 $ 17,185 $10,708,671 $(112,500) $ -- $ --
Issuance of common
shares, net of offering
costs of 1,562,932...... -- -- 3,042,245 30,422 26,783,907 -- -- --
Issuance of common shares
for services............ -- -- 124,488 1,245 591,255 -- -- --
Conversion of long-term
debentures.............. -- -- 1,331,162 13,312 3,992,662 -- -- --
Conversion of preferred
stock................... (1,768,129) (17,861) 1,838,113 18,381 (700) -- -- --
Exercise of warrants and
options................. -- -- 142,515 1,425 668,702 -- -- --
Settlement of note
receivable.............. -- -- -- -- -- 112,500 -- --
Issuance of warrant...... -- -- -- -- 127,000 -- -- --
Deferred compensation,
net..................... -- -- -- -- 19,853 -- (17,371) --
Other comprehensive
income.................. -- -- -- -- -- -- -- --
Net Loss................. -- -- -- -- -- -- -- --
----------- ------- ---------- -------- ----------- --------- -------- ------------
Balance at December 31,
1996.................... -- -- 8,196,981 81,970 42,891,350 -- (17,371) --
Issuance of common stock,
purchase of Rocap....... -- -- 131,593 1,316 2,898,665 -- -- --
Issuance of common stock,
net of offering costs
(of $1,666,491)......... -- -- 1,291,486 12,915 21,567,342 -- -- --
Exercise of warrants and
options................. -- -- 703,889 7,039 3,957,448 -- -- --
Issue common stock, Stock
Purchase Plan........... -- -- 1,331 13 29,120 -- -- --
Deferred compensation,
stock options........... -- -- -- -- -- -- 4,963 --
Other comprehensive
income.................. -- -- -- -- -- -- -- --
Net income............... -- -- -- -- -- -- -- --
----------- ------- ---------- -------- ----------- --------- -------- ------------
Balance at December 31,
1997.................... -- -- 10,325,280 103,253 71,343,925 -- (12,408) --
Repurchase of common
stock................... -- -- -- -- -- -- -- (19,339,901)
Other comprehensive
income.................. -- -- -- -- -- -- -- --
Exercise of warrants..... -- -- 248,573 2,485 1,139,401 -- -- --
Exercise of stock
options................. -- -- 281,990 2,820 2,996,056 -- -- --
Issue common stock, Stock
Purchase Plan........... -- -- 12,203 122 266,228 -- -- --
Forfeiture of deferred
compensation, stock
options................. -- -- -- -- (12,408) -- 12,408 --
Tax benefit from exercise
of stock options........ -- -- -- -- 3,487,050 -- -- --
Net income............... -- -- -- -- -- -- -- --
----------- ------- ---------- -------- ----------- --------- -------- ------------
Balance at December 31,
1998.................... -- -- 10,868,046 $108,680 $79,220,252 $ -- $ -- $(19,339,901)
=========== ======= ========== ======== =========== ========= ======== ============
<CAPTION>
ACCUMULATED TOTAL
OTHER STOCKHOLDERS
COMPREHENSIVE ACCUMULATED EQUITY
DESCRIPTION INCOME DEFICIT (DEFICIT)
----------- ------------- ----------- ------------
<S> <C> <C> <C>
Balance at December 31,
1995.................... $ -- $(13,451,844) $ (2,820,807)
Issuance of common
shares, net of offering
costs of 1,562,932...... -- -- 26,814,329
Issuance of common shares
for services............ -- -- 592,500
Conversion of long-term
debentures.............. -- -- 4,005,974
Conversion of preferred
stock................... -- -- --
Exercise of warrants and
options................. -- -- 670,127
Settlement of note
receivable.............. -- -- 112,500
Issuance of warrant...... -- -- 127,000
Deferred compensation,
net..................... -- -- 2,482
Other comprehensive
income.................. 4,140 -- 4,140
Net Loss................. -- (858,116) (858,116)
-------- ------------ ------------
Balance at December 31,
1996.................... 4,140 (14,309,960) 28,650,129
Issuance of common stock,
purchase of Rocap....... -- -- 2,899,981
Issuance of common stock,
net of offering costs
(of $1,666,491)......... -- -- 21,580,257
Exercise of warrants and
options................. -- -- 3,964,487
Issue common stock, Stock
Purchase Plan........... -- -- 29,133
Deferred compensation,
stock options........... -- -- 4,963
Other comprehensive
income.................. 39,381 -- 39,381
Net income............... -- 7,246,457 7,246,457
-------- ------------ ------------
Balance at December 31,
1997.................... 43,521 (7,063,503) 64,414,788
Repurchase of common
stock................... -- -- (19,339,901)
Other comprehensive
income.................. 188,714 -- 188,714
Exercise of warrants..... -- -- 1,141,886
Exercise of stock
options................. -- -- 2,998,876
Issue common stock, Stock
Purchase Plan........... -- -- 266,350
Forfeiture of deferred
compensation, stock
options................. -- -- --
Tax benefit from exercise
of stock options........ -- -- 3,487,050
Net income............... -- 4,871,614 4,871,614
-------- ------------ ------------
Balance at December 31,
1998.................... $232,235 $(2,191,889) $ 58,029,377
======== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 32
SABRATEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ 4,871,614 $ 7,246,457 $ (858,116)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization.................. 2,736,167 1,174,186 402,953
Deferred compensation.......................... -- 4,963 2,482
Expenses paid with equity issuances............ -- -- 967,051
Stock appreciation rights expense.............. -- -- 1,628,463
Tax benefit from exercise of stock options..... 3,487,050 -- --
Provision for bad debts........................ 332,828 296,621 70,682
Changes in assets and liabilities:
Receivables.................................. (4,378,374) (6,836,950) (7,045,498)
Notes receivables............................ (1,503,776) -- --
Inventories.................................. (10,254,267) (8,656,281) (3,223,590)
Prepaid and other............................ (1,987,586) (492,203) (544,268)
Accounts payable............................. 3,191,643 812,180 (129,847)
Accrued liabilities.......................... (419,973) 1,082,823 848,119
Other........................................ 130,109 (68,406) (297,543)
Long term obligation......................... (163,345) 257,777 --
------------ ------------ -----------
Net cash used in operating activities............... (3,957,910) (5,178,833) (8,179,112)
------------ ------------ -----------
Cash flows from investing activities:
Purchases of property, plant and equipment........ (4,928,382) (2,077,603) (1,275,221)
Issuance of notes receivable...................... (4,811,325) -- (200,000)
Purchase of intangibles........................... (19,875,704) (8,447,648) (42,203)
Purchase of marketable securities................. (27,685,689) (3,924,994) (6,359,146)
Sale and maturity of marketable securities........ 3,996,000 5,323,271 --
Purchase of CMS Inc., net of cash................. (239,804) -- --
Purchase of Rocap assets, net of cash............. -- (1,620,536) --
------------ ------------ -----------
Net cash used in investing activities............... (53,544,904) (10,747,510) (7,876,570)
------------ ------------ -----------
Cash flows from financing activities:
Proceeds from issuance of debt.................... -- -- 1,757,313
Repayment of debt................................. (18,761) (371,013) (974,221)
Proceeds from issuance of long term debt.......... 82,056,527 -- --
Payment of stock appreciation rights.............. -- -- (1,628,463)
Payments of capital leases, net................... (30,760) (125,136) (144,612)
Proceeds from exercise of stock options and
warrants....................................... 4,407,112 3,964,487 --
Proceeds from issuances of common stock, net...... -- 21,609,390 27,484,456
Purchase of treasury stock........................ (19,339,901) -- --
------------ ------------ -----------
Net cash provided by financing activities........... 67,074,217 25,077,728 26,494,473
------------ ------------ -----------
Increase in cash and cash equivalents............... 9,571,403 9,151,385 10,438,791
Cash and cash equivalents at beginning of year...... 19,598,203 10,446,818 8,027
------------ ------------ -----------
Cash and cash equivalents at end of year............ $ 29,169,606 $ 19,598,203 $10,446,818
============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 33
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS
Sabratek Corporation designs, manufactures and markets programmable
electronic intravenous infusion pumps, disposable intravenous administration
sets, integrated software, and related accessories, as well as pre-filled flush
syringes. Sales of the products are made through distributors as well as
Sabratek's own representatives. Sabratek operates in one industry segment and
all assets are located in the United States.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
Subsidiaries of Sabratek have been consolidated into the financial
statements and all intercompany entries have been eliminated. Sabratek's
subsidiaries include CMS Healthcare, Inc. and Sabratek Foreign Sales Corp.
(b) Cash and Cash Equivalents
Cash and cash equivalents represent funds in demand deposit accounts, money
market accounts, commercial paper, certificates of deposit, short-term bond
mutual funds, and U.S. Treasury securities to the extent they mature within 90
days from date of purchase.
(c) Investments in Marketable Securities
Investments in marketable securities are classified as available-for-sale
and are reported at fair market value. Unrealized gains on available-for-sale
securities are excluded from earnings and are reported as a separate component
of stockholders' equity until realized.
(d) Inventories
Inventories are stated at the lower of cost or net realizable value. Cost
is determined under the first-in, first-out ("FIFO") method.
(e) Long-lived Assets
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Expenditures for maintenance and repairs are
charged to expense as incurred. Depreciation and amortization is provided on a
straight-line basis over the estimated useful lives. The estimated useful lives
of the machinery and equipment range from 3 to 5 years. The estimated useful
lives of office furniture, fixtures and equipment is 7 years. Leasehold
improvements are amortized over the shorter of the assets' useful lives or the
life of the lease.
Intangible assets consist of licenses and marketing rights and are being
amortized over the life of the respective agreements using the straight-line
method ranging from 10 to 15 years. Goodwill represents the excess of purchase
price over the estimated fair value of net tangible assets acquired and is being
amortized over 15 years using the straight-line method. Patent costs are
amortized over 16 years.
Sabratek has assessed that no permanent impairment of the value of the
long-lived assets has occurred. Such assessment includes consideration of
possible obsolescence, demand, new technology, competition, and other pertinent
economic factors and trends that may have an impact on the value or remaining
lives of the assets. Long-lived assets are reviewed for impairment in value
based upon undiscounted future cash flows, and appropriate losses are recognized
whenever the carrying amount of an asset may not be recovered.
31
<PAGE> 34
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Warranty
Accruals for estimated warranty costs are recorded at the time of sale and
periodically adjusted to reflect actual experience.
(g) Revenue Recognition
Revenues are recognized when products are shipped with allowances for
discounts, estimated warranty costs and estimated returns recorded at the time
of sale. Revenues from marketing and clinical consulting services are recorded
when earned and as the related costs are incurred. Revenues from licenses are
recorded on a straightline basis over the license term.
(h) Research and Development
Research and development costs are expensed as incurred. Research and
development costs amounted to $2,731,393, $1,812,576 and $969,059 in 1998, 1997
and 1996, respectively.
(i) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(j) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(k) Computation of Net Income Per Share and Net Loss Per Share
The reconciliation between basic and diluted income (loss) per share for
the years ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998
--------------------------------------
INCOME (LOSS) SHARES PER SHARE
------------- ------ ---------
<S> <C> <C> <C>
Basic income per share
Net income................................. $4,871,614 10,316,418 $ 0.47
Effect of dilutive securities.............. -- 829,508 --
---------- ---------- ------
Diluted income per share..................... $4,871,614 11,145,926 $ 0.44
========== ========== ======
</TABLE>
32
<PAGE> 35
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997
----------------------------------
INCOME (LOSS) SHARES PER SHARE
------------- ------ ---------
<S> <C> <C> <C>
Basic income per share
Net income................................. $7,246,457 9,614,278 $ 0.75
Effect of dilutive securities.............. -- 1,280,337 --
---------- ------ ------
Diluted income per share..................... $7,246,457 10,894,615 $ 0.67
========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------------------
INCOME (LOSS) SHARES PER SHARE
------------- ------ ---------
<S> <C> <C> <C>
Basic (loss) per share
Net (loss)................................. $ (858,116) 5,142,763 $(0.17)
Effect of dilutive securities.............. -- -- --
---------- ------ ------
Diluted (loss) per share..................... $ (858,116) 5,142,763 $(0.17)
========== ====== ======
</TABLE>
Certain options and warrants outstanding were not included in the
computation of diluted income (loss) per share because they were antidilutive.
These options and warrants may have a dilutive effect in future years. The
convertible debentures have been determined to be antidilutive and therefore are
not reflected in the above table.
(l) Financial Instruments
Sabratek enters into forward currency exchange contracts ("Forwards") in
the regular course of business to minimize its exposure against raw material
purchases denominated in a foreign currency. Forward exchange contracts related
to raw material and fixed asset purchases are recognized as adjustments to the
bases of the underlying assets. The Forwards are not used by Sabratek for
trading or speculative purposes. At December 31, 1998 and December 31, 1997,
Sabratek had Forwards outstanding to purchase foreign currency at a contracted
amount of $994,627 and $2,603,412, respectively. The spot rate at December 31,
1998 and December 31, 1997, would require Sabratek to exchange $1,012,024 and
$2,528,046, respectively for such currency.
(3) INVESTMENTS IN MARKETABLE SECURITIES
The following table summarizes short-term and long-term investments in
marketable securities as of December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Maturing in less than one year....................... $ 6,058,200 $5,004,390
Maturing in one to two years......................... 22,824,593 --
----------- ----------
Total................................................ $28,882,793 $5,004,390
=========== ==========
</TABLE>
Investments in marketable securities are comprised of certificates of
deposit, commercial paper, U.S. Treasury securities and asset backed securities.
These securities are classified as available-for-sale and are reported at fair
market value. At December 31, 1998 and 1997, unrealized gains of $232,235 and
$43,521 respectively, were recorded in stockholders' equity.
33
<PAGE> 36
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVENTORIES
Inventories at December 31 are as follows with 1998 shown net of the
provision for inventory reserve:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Raw materials....................................... $ 9,532,192 $ 7,391,756
Work-in-process..................................... 4,944,983 2,497,298
Finished goods...................................... 9,495,551 3,829,405
----------- -----------
$23,972,726 $13,718,459
=========== ===========
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including capital leases, at December 31 is
as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Machinery and equipment............................. $ 5,015,406 $ 2,787,279
Furniture and fixtures.............................. 2,594,210 1,341,200
Leasehold improvements.............................. 2,176,143 591,886
----------- -----------
9,785,759 4,720,365
Less accumulated depreciation....................... 2,167,329 1,174,079
----------- -----------
$ 7,618,430 $ 3,546,286
=========== ===========
</TABLE>
Depreciation expense for years ended December 31, 1998, 1997 and 1996
amounted to $993,250, $538,672 and $402,337, respectively.
(6) NOTES RECEIVABLE
In October, 1998, Sabratek entered into a Standby Senior Credit Facility
with Unitron whereby Sabratek, at its sole discretion, may lend up to
$10,000,000 at an interest rate of 8% per annum. As of December 31, 1998,
Sabratek was owed $3,066,203 under the facility which matures on October 15,
2003. In addition, Sabratek was owed $701,334 and $233,334 as of December 31,
1998 and 1997, respectively, for rights to certain products granted under a
2-year license agreement to Unitron. Amounts due under the license agreement
must be satisfied in cash or execution of a promissory note bearing interest at
the prime lending rate no later than June 30, 2000.
In November, 1998, Sabratek entered into a Standby Senior Credit Facility
with Collaborations in Healthcare, LLC whereby Sabratek may lend up to
$4,000,000 at an interest rate of 8% per annum. As of December 31, 1998,
Sabratek was owed $1,803,023 under the facility which matures on November 23,
2001. Simultaneously, the parties entered into a Unit Option Agreement whereby
Sabratek has the right to acquire Collaborations in Healthcare, LLC on or before
November 23, 2003, for cash or common stock of Sabratek, at a purchase price
formula set forth in the Unit Option Agreement.
As of December 31, 1998, Sabratek was owed $977,875 by GDS for amounts
payable to Sabratek pursuant to the Exclusive Supply and Distribution Agreement
entered into in August 1997. No amounts were owed to Sabratek by GDS under this
agreement as of December 31, 1997.
(7) GOODWILL
On July 23, 1998, Sabratek purchased all of the outstanding common stock of
CMS Healthcare, Inc. ("CMS"), a Florida corporation, which provides utilization
review services. Sabratek paid $239,804 in cash and fees, net of cash acquired,
for all of the outstanding common stock of CMS. The acquisition was
34
<PAGE> 37
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounted for as a purchase and has resulted in $263,675 in goodwill as of
December 31, 1998. Operating results from the date of acquisition are included
in the consolidated financial statements. Sabratek could be obligated to make
additional payments to the former stockholders of CMS pursuant to an earnout
formula on pre-tax earnings over a specified period of time.
On February 25, 1997, Sabratek purchased substantially all of the assets of
Rocap, Inc., a Massachusetts corporation, which produces pre-filled flush
syringes. Sabratek issued 131,593 shares of common stock, cash and assumed
liabilities for a total purchase price of $5,452,939. The acquisition was
accounted for as a purchase and has resulted in $4,592,262 of goodwill.
Accumulated amortization of goodwill was $577,652 and $248,160 at December
31, 1998 and 1997, respectively.
(8) INTANGIBLES
In November, 1998, Sabratek entered into a Software License and Marketing
Agreement with HealthMagic, Inc. Under the terms of the agreement, Sabratek has
paid a cash license fee of $10,000,000 for the exclusive rights to certain
software applications and related documentation. The agreement has a stated term
of 99 years, however, the license fee will be amortized over an estimated
economic life of 10 years. In addition, Sabratek received a Stock Purchase
Warrant from HealthMagic, Inc. for 448,507 shares, representing 11.11% of the
issued and outstanding common stock of HealthMagic, Inc., at an exercise price
of $11.15. The warrant expires November 18, 2005.
In August 1997, Sabratek entered into a supply and distribution agreement
with GDS. Under the terms of the agreement, as amended, Sabratek has paid
$6,501,925 for the 10-year exclusive rights to certain products. Sabratek also
entered into an option agreement with GDS's stockholders which gives Sabratek
the right to purchase the outstanding common stock of GDS in the future. Under
certain circumstances, GDS's stockholders have the right, no earlier than the
second quarter of 1999, to induce the stock purchase option.
In July 1997, Sabratek entered into a license agreement with Unitron
Medical Communications, Inc., a Florida corporation, doing business as MOON
Communications ("MOON"). Under the terms of the agreement, Sabratek has paid
$7,000,000 for a 15-year technology license. Sabratek also entered into an
agreement with MOON's stockholders which, as renegotiated in January 1999, gives
Sabratek the right to purchase MOON on or before July 15, 1999. Under certain
circumstances, MOON stockholders have the right to induce the purchase after
July 15, 1999. In January, 1998, Sabratek entered into an Exclusive Sales and
Marketing Agreement whereby Sabratek acquired certain rights to Unitron's
customer database for payments of $2,700,000 made by Sabratek during 1998.
The following table summarizes intangibles at December 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Prepaid licenses and marketing rights................ $29,507,155 $8,633,951
Patent costs......................................... 55,284 55,284
----------- ----------
Less accumulated amortization........................ 1,497,073 387,354
----------- ----------
$28,065,367 $8,301,881
=========== ==========
</TABLE>
(9) CONVERTIBLE DEBENTURES
In April, 1998, Sabratek sold in an institutional 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 15 and October 15 of each year, and commenced on October 15,
1998. The Notes are convertible at any time prior to maturity at the option of
the holder into
35
<PAGE> 38
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares of common stock of Sabratek at a conversion price of $40.46 per share.
Sabratek may redeem the Notes, in whole or in part, at any time after April 18,
2001.
(10) CAPITAL STOCK TRANSACTIONS
During September, 1998, Sabratek purchased 1,000,000 shares of its
outstanding common stock at an aggregate price of $19,339,901, pursuant to a
repurchase program adopted by Sabratek's Board of Directors. The shares are
reported at cost as treasury stock on the Balance Sheet.
In August, 1998, Sabratek designated the relative rights and preferences of
a new Class of Series B Preferred Stock and adopted a Shareholder Rights Plan.
Pursuant to such Plan, Sabratek's Board of Directors declared a dividend of one
right for each share of Sabratek's common stock outstanding on September 4,
1998. Each right gives the holder thereof the opportunity to purchase one
one-hundredth of one share of Sabratek's new authorized Series B Preferred Stock
at a price of $150 (as adjusted from time to time) upon the occurrences of
certain events specified in the Plan. The Plan can be rescinded at the
discretion of Sabratek's Board of Directors.
In April, 1997, Sabratek completed an underwritten public offering of
1,291,486 primary shares of common stock and 176,574 shares of common stock by
and for the account of existing stockholders at a price to the public of $18.00
per share. Net proceeds to Sabratek were $21,580,257.
In June, 1996, Sabratek completed an underwritten initial public offering
of 2,785,000 shares of common stock, par value $0.01, at a price of $10.00 per
share, with proceeds to Sabratek of $26,737,500 after underwriters' discounts
and commissions.
In March, 1996, Sabratek issued 167,245 shares of common stock at a per
share price of approximately $9.80, resulting in gross proceeds to Sabratek of
$1,639,761.
In April, 1996, Sabratek executed a 1-for-3.173 reverse stock split of its
Common Stock and Series A convertible preferred stock. All references in the
financial statements to share and per share data retroactively reflect the
reverse stock split. Also in April, Sabratek filed a Restated Certificate of
Incorporation authorizing an increase in the number of authorized shares of
common stock to 25,000,000, $0.01 par value, and preferred stock to 12,500,000,
$0.01 par value. In October, 1996, Sabratek filed a Certificate of Elimination
to rescind its Preferred Stock Certificate of Designation.
36
<PAGE> 39
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table of warrants gives effect to the 1996 anti-dilution
adjustment on the conversion of preferred stock warrants to common stock
warrants. The anti-dilution adjustment resulted in 19,849 additional shares of
common stock issuable upon the exercise of certain warrants and changed the
exercise price from $4.76 to $4.55.
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
-------------------- --------------------
NUMBER AVERAGE NUMBER AVERAGE
OF SHARES PRICE OF SHARES PRICE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1995......................... 451,348 4.55 152,698 4.71
Converted to Common.................................... (451,348) 4.55 451,348 4.55
Issued................................................. -- -- 50,000 13.00
Exercised.............................................. -- -- (86,537) 4.57
-------- --------
Outstanding at December 31, 1996......................... -- -- 567,509 5.33
Granted................................................ -- -- --
Exercised.............................................. -- -- (205,315) 4.54
Expired................................................ -- -- (1,554) 4.55
-------- --------
Outstanding at December 31, 1997......................... -- -- 360,640 5.79
Granted................................................ -- -- -- --
Exercised.............................................. -- -- (248,573) 4.59
Expired................................................ -- -- -- --
-------- --------
Outstanding at December 31, 1998......................... -- -- 112,067 8.44
======== ========
</TABLE>
(11) STOCK OPTION PLAN
Sabratek adopted the Amended and Restated 1993 Stock Option Plan (the Stock
Option Plan) which provided for the granting of stock options to certain
employees, non-employee consultants, and directors of Sabratek. Options vest
over various periods as defined in the agreements and expire as determined by
the Board on an individual basis, but not to exceed 10 years. At December 31,
1998, 3,800,000 shares of common stock were reserved for issuance on the
exercise of stock options.
Sabratek applies APB Opinion No. 25 and related interpretations in
accounting for its Stock Option Plan. Accordingly, no compensation cost has been
recorded. Had compensation cost for Sabratek's Stock Option Plan been determined
consistent with FASB Statement No. 123, Sabratek's net income (loss) and income
(loss) per share would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) As reported.................... $ 4,871,614 $ 7,246,457 $ (858,116)
Pro forma...................... $(3,928,099) $(1,260,755) $(2,205,953)
Net income (loss) per
share diluted As reported.................... $ 0.44 $ 0.67 $(0.17)
Pro forma...................... $(0.38) $(0.13) $(0.39)
</TABLE>
Pro forma net income (loss) and income (loss) per share reflect only
options granted since January 1, 1995. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not reflected in the
pro forma net loss amounts presented above because compensation cost is
reflected over the options' vesting period of up to 4 years and compensation
cost for options granted prior to January 1, 1995 is not considered.
37
<PAGE> 40
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The compensation cost of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1998, 1997 and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dividend yield.............................................. 0% 0% 0%
Volatility.................................................. 79% 63% 67%
Risk-free interest rate..................................... 6% 6% 7%
Expected term in years...................................... 5.5 5.7 4.2
</TABLE>
A summary of the status of Sabratek's Stock Option Plan as of December 31,
1998, 1997 and 1996 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Outstanding at December 31, 1995....................... 732,636 4.78
Granted.............................................. 581,590 7.10
Exercised............................................ (55,978) 4.90
Expired.............................................. (2,994) 5.29
---------
Outstanding at December 31, 1996....................... 1,255,254 5.85
Granted.............................................. 1,752,404 22.73
Exercised............................................ (498,574) 6.08
Expired.............................................. (6,853) 11.01
---------
Outstanding at December 31, 1997....................... 2,502,231 17.60
Granted.............................................. 378,200 22.84
Exercised............................................ (281,990) 10.63
Expired.............................................. (208,196) 20.49
---------
Outstanding at December 31, 1998....................... 2,390,245 19.00
</TABLE>
The per share weighted average fair value of options granted was $15.51,
$14.00 and $4.11 in 1998, 1997, and 1996, respectively.
The following table summarizes information about stock options outstanding
as of December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------
WEIGHTED-AVG. OPTIONS EXERCISABLE
REMAINING -----------------------------
NUMBER CONTRACTUAL WEIGHTED-AVG. NUMBER WEIGHTED-AVG.
RANGE OF EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------------------------ ----------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 4.76........................... 417,634 6.7 $ 4.76 191,132 $ 4.76
$ 8.375 to 17.00................. 129,716 7.6 9.80 72,783 9.28
$21.00 to 23.3125................ 1,517,758 8.7 22.10 362,394 22.08
$24.00 to 32.50.................. 325,137 8.8 26.55 143,143 28.05
--------- -------
$ 4.76 to 32.50.................. 2,390,245 8.3 19.00 769,452 17.68
========= =======
</TABLE>
(12) EMPLOYEE BENEFIT PLANS
Sabratek implemented a defined contribution plan during 1995 pursuant to
section 401(k) of the Internal Revenue Code, whereby participants may contribute
up to 15 percent of compensation, but not in excess of the maximum allowed under
the Code. The plan includes a discretionary employer matching contribution
38
<PAGE> 41
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
program as determined by the Board of Directors. In 1998, Sabratek contributed
$105,514 to the plan participants' accounts. In 1997 and 1996, no matching
contributions were made to plan participants' accounts.
Sabratek adopted the Sabratek Corporation Employee Stock Purchase Plan
during 1997 whereby employees, after 90 days of service, can contribute up to
10% of compensation to the purchase of Sabratek stock. The stock is purchased
quarterly at a price equal to 85% of the lower of, the closing price on either
the first or the last trading day of the quarter. There have been 150,000 shares
designated for this plan and 13,534 shares have been issued as of December 31,
1998.
In August, 1998, Sabratek established a non-qualified deferred compensation
plan for qualifying officers whereby Sabratek and the participant contractually
agree to pay a pre-determined portion of the participant's salary or bonus on a
pre-determined future date or schedule of dates. As of December 31, 1998,
$63,413 in officers' compensation had been deferred under the plan.
(13) STOCK APPRECIATION RIGHTS
In July, 1996, Sabratek paid, in full, stock appreciation rights totaling
$1,628,463 in aggregate, which were issued pursuant to three separate agreements
during 1995. The agreements provided for a maximum appreciation of $4.76 per
share and required payment at the time of certain qualifying events, or upon
demand of the holder. The obligation created with respect to the agreements
resulted in a non-recurring charge to other income (expenses) in the Statement
of Operations for 1996.
(14) INCOME TAXES
Total income tax expense for the years ended December 31, 1998, 1997 and
1996 was allocated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations...................... $ -- $-- $--
Stockholder's equity, for compensation expense for tax
purposes in excess of amounts recognized for
financial reporting purposes......................... 3,487,050 -- --
---------- -- --
$3,487,050 $ $
========== == ==
</TABLE>
There is no current or deferred tax expense for the years ended December
31, 1998, 1997 and 1996. Sabratek utilized net operating loss carryforwards in
1998 and 1997 and was in a loss position in 1996. The deferred tax consequences
of temporary differences in reporting items for financial statement and income
tax purposes are recognized, if appropriate. Realization of the future tax
benefits is dependent on many factors, including Sabratek's ability to generate
taxable income within the allowable net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to the
valuation allowance for
39
<PAGE> 42
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial reporting purposes. The income tax effect of temporary differences
comprising the deferred tax assets and deferred tax liabilities at December 31,
is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...... $ 3,963,000 $ 5,918,000 $ 5,443,000
Research and development credit
carryforwards...................... 336,000 230,000 192,000
Minimum tax credit carryforwards...... 121,000 -- --
Inventory reserve..................... 884,000 -- --
Other................................. 426,000 409,000 216,000
----------- ----------- -----------
5,730,000 6,557,000 5,851,000
Less: Valuation allowance............. (5,730,000) (6,557,000) (5,851,000)
----------- ----------- -----------
Net deferred taxes.................... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
A deferred tax asset stemming from Sabratek's net operating loss
carryforward, research and development credit carryforward, and other accruals
has been reduced by a valuation account to zero due to uncertainties regarding
the utilization of the deferred assets. The deferred tax asset and the
corresponding valuation allowance were approximately $5,730,000 and $6,557,000
at December 31, 1998 and 1997, respectively. The valuation allowance was
decreased by $827,000 in 1998 and increased by $706,000 in 1997.
A reconciliation between the statutory federal income tax rate and the
effective tax expense for each of the three years ended December 31 follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)............... $ 2,842,000 $ 2,536,000 $(300,000)
Stock option activity................................... (1,737,000) (3,749,000) (349,000)
Increase (decrease) in valuation allowance.............. (827,000) 706,000 649,000
State income taxes, net of federal benefit.............. 185,000 507,000 --
Credit generation....................................... (56,000) -- --
Other................................................... (407,000) -- --
----------- ----------- ---------
Income tax expense...................................... $ -- $ -- $ --
=========== =========== =========
</TABLE>
Previous sales of Sabratek's common stock have resulted in an ownership
change for Sabratek, as defined for tax purposes. As a result, an annual
limitation exists on the utilization of the net operating loss carryforwards and
credit carryforwards. This limitation may cause a portion of the existing net
operating loss and credit carryforwards to expire prior to utilization.
The net operating loss and research and development credit carryforwards
will expire as follows:
<TABLE>
<CAPTION>
NET RESEARCH
OPERATING AND
LOSS DEVELOPMENT
--------- -----------
<S> <C> <C>
2007................................................... -- 2,000
2008................................................... 1,616,000 47,000
2009................................................... 2,838,000 53,000
2010................................................... 2,551,000 63,000
2011................................................... 1,365,000 23,000
2012................................................... 1,118,000 92,000
2018................................................... -- 56,000
---------- --------
Total.................................................. $9,488,000 $336,000
========== ========
</TABLE>
40
<PAGE> 43
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for interest......... $2,560,676 $44,891 $133,103
</TABLE>
In conjunction with the CMS Healthcare, Inc. purchase in July 1998,
Sabratek paid $239,804 in net cash and fees for all of the outstanding common
stock.
In conjunction with the Rocap asset purchase in February 1997, Sabratek
issued 131,593 shares of common stock with a market value of $2,899,981 and
assumed liabilities of $1,120,396.
In August 1997, Sabratek utilized an outstanding note receivable from GDS
for $200,000 as part of its consideration paid for prepaid license fees.
In 1996, 124,488 shares of common stock were issued in satisfaction of
accrued obligations in the amount of $592,500 for services rendered in 1995.
In 1996, 1,331,451 shares of common stock were issued in exchange for the
retirement of $3,597,793 in long-term debt principal and $364,210 in accrued
interest on long-term debt. The number of shares issued included the conversion
premium originally provided for in the debt instruments.
Capital lease obligations of $116,409 and $11,547 were incurred in 1998 and
1997, respectively when Sabratek entered into leases primarily for machinery,
equipment, furniture and fixtures.
(16) RELATED PARTIES
Sabratek is affiliated through common ownership with Dak-Tech Ltd., an
Israeli company. Dak-Tech Ltd. provides Sabratek with manufactured components.
Two officers of Sabratek own in aggregate 67% of the Dak-Tech Ltd. stock.
Amounts included as cost of sales from these purchases were $1,064,464,
$521,248, and $384,800 for the years ended December 31, 1998, 1997 and 1996,
respectively. At December 31, 1998 and 1997, Sabratek was indebted to Dak-Tech
Ltd. for receipts of various inventory components in the amount of $1,929 and
$26,701, respectively.
During 1996, Sabratek forgave the repayment of a loan, interest on the loan
and certain advances to a stockholder who is an officer of Sabratek totaling
$336,939, in aggregate.
(17) BUSINESS AND CREDIT CONCENTRATIONS
As of December 31, 1998 and 1997, individual customers representing at
least 10% of total receivables accounted for $4,715,107 or 24% (two customers)
and $4,272,876 or 28% (two customers) of total accounts receivable,
respectively. Aggregate sales to individual customers representing at least 10%
of total sales amounted to $16,985,379 (two customers) and $20,018,557 (two
customers), for the years ended December 31, 1998 and 1997, respectively.
Sabratek's customers are based throughout the world with 4%, 3% and 9% of
sales to international markets for the years ended December 31, 1998, 1997 and
1996, respectively. Customers are not concentrated in any specific geographic
location. The customer base is very specific, however, to the health care
industry as Sabratek's products are used primarily by hospitals and
alternate-site healthcare settings such as nursing homes, home health care
companies, long-term care facilities and clinics.
41
<PAGE> 44
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of Sabratek's financial instruments is as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................ 29,169,606 $29,169,606 $19,598,203 $19,598,203
Marketable securities.................... 28,882,793 28,882,793 5,004,390 5,004,390
---------- ----------- ----------- -----------
Liabilities:
Convertible debentures................... 85,000,000 58,420,500 -- --
---------- ----------- ----------- -----------
Off-balance sheet financial instruments:
Forward currency exchange contracts...... -- 17,397 -- (75,366)
---------- ----------- ----------- -----------
</TABLE>
Fair values were determined as follows:
Cash and cash equivalents approximate fair value because of the short
maturity of these instruments. Marketable securities are based on quoted market
prices for these or similar instruments and are considered available-for-sale.
Convertible debentures are estimated based on the quoted market price. Forward
currency exchange contracts are estimated based on the spot rate of the
respective currency.
(19) COMMITMENTS AND CONTINGENCIES
In March 1997, Sabratek entered into a bank credit agreement which matures
in April, 1999, and provides for up to $9,500,000 of available borrowing at the
bank's prime rate. As of December 31, 1998, no funds have been borrowed under
the agreement.
Sabratek leases its facilities under non-cancelable operating lease
arrangements. Rent expense charged to operations for the years ended December
31, 1998, 1997 and 1996 amounted to $671,532, $404,703, and $221,035,
respectively.
At December 31, 1998 minimum lease commitments under operating leases that
have initial or remaining non-cancelable terms in excess of one year were as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
1999...................................................... $1,324,041
2000...................................................... 1,100,291
2001...................................................... 1,080,891
2002...................................................... 1,106,341
2003...................................................... 866,920
----------
Total minimum lease payments................................ $5,478,484
==========
</TABLE>
On February 5, 1997, SIMS Deltec filed a complaint in the United States
District Court for the District of Minnesota alleging that Sabratek's
manufacture, use and/or sale of the MediVIEW software in conjunction with its
infusion pumps infringes on a patent entitled "Systems and Methods of
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. Subsequently, SIMS Deltec filed 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
42
<PAGE> 45
SABRATEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
manufacture and sale of the MediVIEW 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. Sabratek
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 Sabratek's business,
financial position and results of operations.
In addition, on June 27, 1997, Sabratek filed a complaint against SIMS
Deltec which is currently pending in the United States District Court for the
District of Minnesota 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.
Sabratek was served with a complaint on January 27, 1999, alleging that
Sabratek and seven officers and former officers violated Sections 10(b) (and
Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of
1934. The complaint alleges that defendants issued a series of false and
misleading statements concerning Sabratek's business, its products and its
prospects for future profitability.
The complaint seeks to recover damages on behalf of all persons who
purchased shares of Sabratek's common stock between January 13, 1998 and
November 24, 1998, although no court has determined that these persons
constitute a proper class. The complaint was filed in the United States District
Court for the Northern District of Illinois (Chu v. Sabratek Corporation, et
al., Docket No. 99 C 0351). Neither Sabratek nor the individual defendants have
yet responded to the complaint, but all parties intend to vigorously defend
against the allegations contained in the complaint. Protracted litigation or an
adverse outcome in this matter could have a material adverse impact on
Sabratek's business, financial position and results of operations.
It is the position of management based on a review, including review by
outside counsel, that it is not possible to estimate the amount of loss, if any,
that might result from the resolution of the above proceedings in an adverse
manner. Accordingly, no provision for these proceedings has been included in the
consolidated financial statements. Sabratek is also a party to routine
litigation in the ordinary course of business, none of which, if determined
adversely to Sabratek, would individually or in the aggregate have a material
adverse effect on Sabratek.
43
<PAGE> 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section of Sabratek's Proxy Statement dated in 1999 entitled "Election
of Directors" is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The section of the Proxy Statement dated in 1999 entitled "Executive
Compensation" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section of the Proxy Statement dated in 1999 entitled "Security
Ownership of Certain Beneficial Owners and Management" is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section of the Proxy Statement dated in 1999 entitled "Certain
Relationships and Related Transactions" is incorporated herein by reference.
44
<PAGE> 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits
(a)(1) and (2). Sabratek's audited financial statements are included
herewith as Item 8 beginning on page 27.
(a)(3) and (c). Sabratek filed a Current Report on Form 8-K with the SEC on
November 24, 1998.
Exhibits, numbered in accordance with Item 601 of
Regulation S-K.
<TABLE>
<CAPTION>
INCORPORATION
EXHIBIT BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENTS (IF APPLICABLE)
- ------- ------------------------ ---------------
<C> <S> <C>
3.1 Articles of Incorporation, Rights Agreement, Certificate of +
Designations
3.2 Amended and Restated By-laws
4.1 Indenture, dated April 14, 1998 by and between the Company ++++++
and LaSalle National Bank, as Trustee
4.2 Rights Agreement, dated August 20, 1998 by and between the +++++++
Company and LaSalle National Bank, as the Rights Agent
10.1 Agreement with Americorp Financial, Inc. re: Leasing +
Services, dated March 22, 1995
10.1.1 Amendment, dated September 16, 1996, to Agreement with +++
Americorp Financial, Inc.
10.2 Intentionally Omitted
10.3 Intentionally Omitted
10.4 Intentionally Omitted
10.5 Intentionally Omitted
10.6 Intentionally Omitted
10.7 Intentionally Omitted
10.8 Intentionally Omitted
10.9 Intentionally Omitted
10.10 Intentionally Omitted
10.11 Intentionally Omitted
10.12 Intentionally Omitted
10.13 Pump Contract with Chartwell Home Therapies, dated November +
22, 1993
10.14 Sales Agreement with Pharmacy Corporation of America, dated +
March 17, 1995
10.15 Sales & Marketing Agreement with Alpha Group, dated November +
6, 1995
10.16 Intentionally Omitted
10.17 Intentionally Omitted
10.18 Intentionally Omitted
10.19 Intentionally Omitted
10.20 Intentionally Omitted
10.21 Intentionally Omitted
10.22 Intentionally Omitted
10.23 Intentionally Omitted
</TABLE>
45
<PAGE> 48
<TABLE>
<CAPTION>
INCORPORATION
EXHIBIT BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENTS (IF APPLICABLE)
- ------- ------------------------ ---------------
<C> <S> <C>
10.24 Intentionally Omitted
10.25 Intentionally Omitted
10.26 Stock Option Plan +
10.27 Lease for Real Property located at 5601 West Howard, Niles, +
Illinois, dated as of May 31, 1994
10.27.1 Amendment, dated October 30, 1996, to Lease for Real +++
Property located at 5601 West Howard, Niles, Illinois
10.28 Employment Agreement for K. Shan Padda
10.29 Intentionally Omitted
10.30 Asset Purchase Agreement, dated February 25, 1997, by and ++
among Sabratek Corporation; Rocap, Inc. and Elliott Mandell
10.31 Employment Agreement for Stephen L. Holden
10.32 Employment Agreement for Elliott Mandell
10.33 Lease Agreement for property located at 11 Sixth Road, ++++
Woburn, Massachusetts, dated February 1, 1997
10.34 Lease Agreement for property located at 5 Constitution Way, ++++
Woburn, Massachusetts, dated June 26, 1995
10.35 Lease Agreement for property located at 1629 Prime 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
10.37 Credit Agreement, dated as of March 26, 1997, by and between ++++++
the Company as Borrower and LaSalle National Bank (formerly
known as LaSalle Bank NI) as Lender
10.38 Long Term Incentive Compensation Plan +++++++++
10.39 Lease Agreement for property located at 8111 North St. +++++++++
Louis, Skokie, Illinois, dated May 15, 1998
10.40 Employment Agreement for Doron C. Levitas
10.41 Employment Agreement for Scott Skooglund
10.42 Employment Agreement for Joseph P. Moser
10.43 Employment Agreement for Vincent J. Capponi
10.44 Employment Agreement for Tuan Bui
10.45 Employment Agreement for Stephan C. Beal
10.46 Employment Agreement for Stephen L. Axel
10.47 Employment Agreement for Paul S. Jurewicz
10.48 Employment Agreement for Mary Beth Blue
10.49 Employment Agreement for Steven J. Richard
11.1 Statement re: computation of per share earnings
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
INCORPORATION
EXHIBIT BY REFERENCE
NUMBER DESCRIPTION OF DOCUMENTS (IF APPLICABLE)
- ------- ------------------------ ---------------
<C> <S> <C>
21 List of Subsidiaries
23 Consent of KPMG LLP
27 Financial Data Schedule
</TABLE>
- -------------------------
+ Incorporated by reference to Sabratek's Registration Statement on
Form S-1, declared effective by the SEC on June 21, 1996 (File No.
333-3866).
++ Incorporated by reference to Sabratek's Current Report on Form 8-K
filed with the SEC on March 11, 1997.
+++ Incorporated by reference to Sabratek's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the SEC on
March 31, 1997.
++++ Incorporated by reference to Sabratek's Registration Statement on
Form S-1, declared effective by the SEC on April 4, 1997 (File No.
333-23437).
+++++ Incorporated by reference to Sabratek's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 filed with the SEC on May 15,
1997.
++++++ Incorporated by reference to Sabratek's Registration Statement on Form
S-3 declared effective by the SEC on July 14, 1998.
+++++++ Incorporated by reference to Sabratek's Current Report on Form 8-K
filed with the SEC on August 25, 1998.
++++++++ Incorporated by reference to Sabratek's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998 filed with the SEC on August 14,
1998.
+++++++++ Incorporated by reference to Sabratek's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998 filed with the SEC on
November 16, 1998.
(b) Reports on Form 8-K
Sabratek filed a Current Report on Form 8-K on November 24, 1998 announcing
the suspended distribution of its Rocap flush product line due to discussions
and meetings with the Food and Drug Administration.
47
<PAGE> 50
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) 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
By: /s/ K. SHAN PADDA
-----------------------------------
Chairman and Chief Executive Officer
March 25, 1999
-----------------------------------
(Date)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ K. SHAN PADDA Chairman of the Board, Chief Executive
- --------------------------------------------- Officer and Director
K. Shan Padda
/s/ DORON C. LEVITAS Vice Chairman of the Board, Chief
- --------------------------------------------- Administrative Officer, Vice
Doron C. Levitas President -- International Operations,
Secretary and Director
/s/ STEPHEN L. HOLDEN President and Treasurer
- ---------------------------------------------
Stephen L. Holden
/s/ PAUL S. JUREWICZ Senior Vice President and Chief Financial
- --------------------------------------------- Officer
Paul S. Jurewicz
/s/ SCOTT SKOOGLUND Vice President -- Finance and Assistant
- --------------------------------------------- Secretary, Principal Accounting Officer
Scott Skooglund
/s/ WILLIAM D. LAUTMAN Director
- ---------------------------------------------
William D. Lautman
/s/ L. PETER SMITH Director
- ---------------------------------------------
L. Peter Smith
/s/ FRANCIS V. COOK, M.D. Director
- ---------------------------------------------
Francis V. Cook, M.D.
/s/ EDSON W. SPENCER, JR. Director
- ---------------------------------------------
Edson W. Spencer, Jr.
/s/ MARVIN SAMSON Director
- ---------------------------------------------
Marvin Samson
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WILLIAM H. LOMICKA Director
- ---------------------------------------------
William H. Lomicka
/s/ MARK LAMPERT Director
- ---------------------------------------------
Mark Lampert
</TABLE>
49
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
SABRATEK CORPORATION
A Delaware Corporation
(the "Corporation")
Revised February 10, 1996
ARTICLE I.
----------
OFFICES
-------
Section 1. Registered Office. The registered office of the Corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle, State of Delaware. The name of the Corporation's registered agent at
such address shall be The Corporation Trust Company.
Section 2. Other Office. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II.
-----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Annual Meeting. An annual meeting of the
stockholders shall be held for the purpose of electing directors and conducting
such other business as may come before the meeting. The date, time and place of
the annual meeting shall be determined by resolution of the Board of Directors.
At each annual meeting, the stockholders entitled to vote shall elect a
<PAGE> 2
Board of Directors and they may transact such other business as shall be stated
in the notice of the meeting.
Section 2. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chief Executive Officer or
the Chairman or a Vice-Chairman of the Board and shall be called by the Chief
Executive Officer or Secretary at the request in writing of stockholders owning
a majority in the amount of the entire capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 3. Notice. Written or printed notice of every annual or special
meeting of the stockholders, stating the place, date, time, and, in the case of
special meetings, the purpose or purposes, of such meeting, shall be given to
each stockholder entitled to vote at such meeting not less than ten, nor more
than sixty, days before the date of the meeting. All such notices shall be
delivered, either personally or by mail, and if mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to the
stockholder at his or her address at it appears on the records of the
Corporation, with postage prepaid.
Section 4. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes, or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
- 2 -
<PAGE> 3
Section 5. Stockholder's List. The officer having charge of the stock
ledger of the Corporation shall make, at least ten days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, specifying the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders except as
otherwise provided by statute or by the Certificate of Incorporation. If a
quorum is present, the holders of the shares present in person or represented by
proxy at the meeting, and entitled to vote thereat, shall have the power, by the
affirmative vote of the holders of a majority of such shares, to adjourn the
meeting to another time and/or place. Unless the adjournment is for more than
thirty days or unless a new record date is set for the adjourned meeting, no
notice of the adjourned meeting need be given to any stockholder provided that
the time and place of the adjourned meeting were announced at the meeting at
which the adjournment was taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original meeting.
- 3 -
<PAGE> 4
Section 7. Vote Required. When a quorum is present or represented at
any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provisions of an applicable statute or of the Certificate of Incorporation a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 8. Voting Rights. Every stockholder shall at every meeting of
the stockholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, except that no
proxy shall be voted after three years from its date, unless such proxy provides
for a longer period.
Section 9. Informal Action. Except as may otherwise be provided in the
certificate of incorporation, as amended any action required to be taken at any
annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting and without a vote if consents in writing, setting forth
the action so taken, shall be signed by the holders (on the record date fixed as
hereinafter provided) of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
- 4 -
<PAGE> 5
consented in writing. Any action taken pursuant to such written consent of the
stockholders shall have the same force and effect as if taken by the
stockholders at a meeting thereof.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of Directors
("Board") may fix a record date. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent shall make a
written request to the Board to fix a record date. The Board shall promptly,
but in all events within ten days after the date on which such a request is
received, adopt a resolution fixing the record date, which record date shall not
precede, or be more than ten days after, the date upon which the resolution
fixing the record date is adopted by the Board. If no record date has been
fixed by the Board within ten days of the date on which such a request is
received, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
is required by applicable law, shall be the first date on which a signed written
Consent (as hereinafter defined) setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the books in which proceedings of
stockholders' meetings are recorded, to the attention of the Secretary of the
Corporation. Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board and
prior action by the Board is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board adopts the resolution taking such prior action.
- 5 -
<PAGE> 6
In the event of the delivery to the Corporation of a written consent or
consents purporting to authorize or take corporate action and/or related
revocations (each such written consent and any revocation thereof being referred
to in this Section 9 as a "Consent"), the Secretary of the Corporation shall
provide for the safekeeping of such Consents and shall as soon as practicable
thereafter conduct such reasonable investigation as he or she deems necessary or
appropriate for the purpose of ascertaining the validity of such Consents and
all matters incident thereto, including without limitation whether the holders
of shares having the requisite voting power to authorize or take the action
specified in the Consents have given consent; provided, however, that if the
corporate action to which the Consents relate is the removal or election of one
or more members of the Board, the Secretary of the Corporation shall designate
an independent, qualified inspector with respect to such Consents and such
inspector shall discharge the functions of the Secretary of the Corporation
under this Section 9. If after such investigation the Secretary or the
inspector (as the case may be) shall determine that any action purportedly taken
by such Consents has been validly taken, that fact shall be certified in the
records of the Corporation kept for the purpose of recording the proceedings of
meetings of the stockholders and the Consents shall be filed with such records.
In conducting the investigation required by this Section 9, the Secretary or the
inspector may, at the expense of the Corporation, retain to assist them special
legal counsel and any other necessary or appropriate professional advisors, and
such other personnel as the Secretary or such inspector, as the case may be, may
deem necessary or appropriate.
- 6 -
<PAGE> 7
ARTICLE III.
------------
DIRECTORS
---------
Section 1. Number, Election and Term of Office. The number of directors
which shall constitute the whole board shall be nine (9). The directors shall
be divided into three (3) classes. Each class shall consist of three (3)
directors. The term of office of the first class shall expire on the day of the
next annual election of directors of the Corporation; the term of office of the
second class shall expire one year thereafter; and that of the third class two
(2) years thereafter. At each annual election after such classification, the
directors of each class whose term expires on the day of such election shall be
elected for a term of three (3) years.
Section 2. Management By Board of Directors. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by statute, or by Certificate of Incorporation, or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 3. Removal. Any director or the entire Board of Directors may
be removed at any time, with or without cause, by the holders of two-thirds
(2/3) of the shares of stock of the Corporation then entitled to vote at an
election of directors, except as otherwise provided by statute.
Section 4. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office though less than a quorum, and
each director so chosen shall hold office until the next annual
- 7 -
<PAGE> 8
election or until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
Board of Directors shall be held without other notice than this Bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by the board.
Special meetings of the Board of Directors may be called by or at the request of
the Chief Executive Officer or the Chairman or the Vice-Chairman of the Board on
at least twenty-four hours' notice to each director, either personally, by
telephone, by mail, or by telegraph or telephonic facsimile transmission.
Whenever any notice is required to be given under the provisions of the
statutes, or of the Certificate of Incorporation or of these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
Section 7. Quorum. A majority of the total number of directors shall
constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
- 8 -
<PAGE> 9
Section 8. Committees. The Board of Directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation, which
to the extent provided in such resolution shall have and may exercise the powers
of the Board of Directors in the management and affairs of the Corporation
except as otherwise limited by statute. The Board of Directors may designate
one or more directors as alternate members of any committee. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required. The Compensation Committee shall consist of three directors, a
majority of which shall be "outside" directors (not persons who are management
of the Corporation), one of whom will be a representative of Marsam
Pharmaceuticals, Inc., for so long as Marsam owns any of the Corporation's
Series A Preferred Stock.
Section 9. Committee Rules. Each committee of the Board of Directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by the resolution of the Board
of Directors designating such committee, but in all cases the presence of at
least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that members alternate, if
alternates are designated by the Board of Directors as provided in Section 8 of
this Article III, of such committee is/are absent or disqualified, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
- 9 -
<PAGE> 10
another member of the Board of Directors to act at the meeting in place of any
such absent or disqualified members.
Section 10. Informal Action. Any action permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 11. Participation by Conference Telephone. Directors of the
Corporation may participate in a meeting of the Board of Directors or any
committee thereof by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such a manner shall constitute presence in
person at such meeting.
Section 12. Compensation. The directors may be paid for expenses of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of committees
designated by the Board of Directors may be allowed like compensation for
attending committee meetings.
- 10 -
<PAGE> 11
ARTICLE IV.
-----------
OFFICERS
--------
Section 1. Number. The officers of the Corporation shall be chosen by
the Board of Directors and shall include a Chief Executive Officer, a President,
a Secretary and a Treasurer. The Board of Directors may also choose a Chairman
and a Vice-Chairman of the Board of Directors (who must be a member or members
of the Board of Directors), a Chief Operating Officer, and one or more Vice
Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Any
number of offices or functions of those offices may be held or exercised by the
same person unless the certificate of incorporation or the bylaws otherwise
provide.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Directors. Each
officer shall hold office until the next annual meeting of the Board of
Directors or until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but such
removal shall be without prejudice of the contract rights, if any, of the person
so removed.
- 11 -
<PAGE> 12
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term by a majority vote of the
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the Board of Directors, and no officer shall be prevented from receiving such
compensation by virtue of the fact that he is also a director of the
Corporation.
Section 6. Chairman or Vice-Chairman of the Board of Directors. The
Chairman of the Board shall preside at all meetings of the Board of Directors
and the stockholders and shall have such other powers and perform such
additional duties as may from time to time be assigned by the Board of
Directors. In the absence or disability of the Chairman of the Board, the
Vice-Chairman shall exercise all the powers and discharge all the duties of the
Chairman of the Board. In the absence or disability of the Chief Executive
Officer, the Chairman of the Board shall exercise all the powers and discharge
all the duties of the Chief Executive Officer.
Section 7. The Chief Executive Officer. The Chief Executive Officer of
the Corporation shall have general active management of the business of the
Corporation shall see that all orders and resolutions of the Board of Directors
are carried into effect, and may sign and deliver in the name of the Corporation
any deeds, mortgages, bonds, contracts or other instruments pertaining to the
business of the Corporation, except in cases in which the authority to sign and
deliver is required by law to be exercised by another person or is expressly
delegated by the Certificate of Incorporation,
- 12 -
<PAGE> 13
these bylaws or the Board of Directors exclusively to some other officer or
agent of the Corporation. In addition to the general responsibilities incident
to the office of Chief Executive Officer, he or she shall have such other powers
and perform such additional duties as may from time to time be assigned by the
Board of Directors. Except as otherwise prescribed by these bylaws or the Board
of Directors, the Chief Executive Officer shall prescribe the duties of other
officers.
Section 8. The President. The President shall in the absence or
disability of the Chief Executive Officer and the Chairman and the Vice-Chairmen
of the Board perform the duties and exercise the powers of the Chief Executive
Officer and shall perform such other duties and have such other powers as the
Board of Directors or the Chief Executive Officer may from time to time
prescribe.
Section 9. Chief Operating Officer. The Chief Operating Officer shall
in the absence or disability of the President perform the duties and exercise
the powers of the President and shall perform such other duties and have such
other powers as the Board of Directors or the President may from time to time
prescribe.
Section 10. The Vice President. The Vice President, if any, or if there
shall be more than one, the Vice Presidents in the order determined by the Board
of Directors, shall in the absence or disability of the President perform the
duties and exercise the powers of the President and shall perform such other
duties and have such other powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe.
- 13 -
<PAGE> 14
Section 10. The Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors; perform such other duties as may be
prescribed by the Board of Directors or Chief Executive Officer under whose
supervision he or she shall be. The Assistant Secretary, if any, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors, shall in the absence or disability of the Secretary perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors or Chief Executive
Officer may from time to time prescribe.
Section 11. The Treasurer and Assistant Treasurer. The Treasurer shall
be the chief financial officer of the Corporation. The Treasurer shall have the
custody of the corporate funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation;
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors; shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements; and shall
render to the Chief Executive Officer and the Board of Directors at its regular
meetings, or when the Board of Directors so requires, an account of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond (which shall be renewed every six years) in such sums and
with such surety or sureties as shall be
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satisfactory to the Board of Directors for the faithful performance of the
duties of the office of Treasurer and for the restoration to the Corporation, in
case of death, resignation, retirement or removal from office, of all books,
papers, vouchers, money, and other property of whatever kind in the possession
or under the control of the Treasurer belonging to the Corporation. The
Assistant Treasurer, if any, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board of Directors, shall in the
absence or disability of the Treasurer perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the Board of Directors.
ARTICLE V.
----------
CERTIFICATE OF STOCK
--------------------
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by
(i) the Chairman of the Board of Directors, the Chief Executive Officer and (ii)
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by him or
her in the Corporation. Where a certificate is signed (1) by a transfer agent
or an assistant transfer agent, other than the Corporation or its employee or
(2) by a registrar, other than the
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Corporation or its employee, any other signature on the certificate may be
facsimile. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
Corporation.
Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 3. Fixing a Record Date. The Board of Directors may fix in
advance not more than sixty nor less than ten days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or
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conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote at, any such meeting, and
any adjournment thereof, or entitled to receive payment of any such dividend, or
entitled to any such allotment of rights, or entitled to exercise the rights in
respect to any such change, conversion, or exchange of capital stock, or
entitled to give such consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payments of such dividend, or to receive such allotment
or rights, or to exercise such rights, or to give such consents, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid. If no record date is fixed, the
time for determining stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. The time for determining stockholders for any other purpose shall be at
the close of business on the date on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest
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<PAGE> 18
in such share or shares on the part of the other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
Section 5. Stock Certificates and Legend. If the Corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, provided that, except as otherwise provided in Section 202 of the
General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
ARTICLE VI.
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation. Before
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<PAGE> 19
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for such other purpose as the directors
shall think in the best interest of the Corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Seal. The Corporation shall not have a corporate seal.
Section 5. Securities Owned by Corporation. Voting securities in any
other corporation held by the Corporation shall be voted by the Chief Executive
Officer, unless the Board of Directors specifically confers authority to vote
with respect thereto, which may be general or confined to specific instances,
upon some other person or officer. Any person authorized to vote securities
shall have the power to appoint proxies, with general power of substitution.
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<PAGE> 20
ARTICLE VII.
------------
AMENDMENTS
----------
These Bylaws may be adopted, amended, altered or repealed at any meeting of the
Board of Directors by majority vote. The fact that the power to adopt, amend,
alter or repeal the Bylaws has beet conferred upon the Board of Directors shall
not divest the stockholders of the same powers.
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<PAGE> 1
EXHIBIT 10.28
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and K. Shan Padda ("Padda").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Padda and to set forth in
this Agreement the obligations and duties of both Sabratek and Padda; and
WHEREAS, Sabratek wishes to assure itself of the services of Padda for the
period hereinafter provided, and Padda is willing to be employed by Sabratek for
said period, upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Padda (individually a "Party" and
together the "Parties") agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Padda pursuant
to Section 14 below or, in the event that no such person is named who survives
Padda, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Padda being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Padda to discharge
faithfully the responsibilities of his position that the Board in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Padda of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or consolidation
of Sabratek if the stockholders immediately before such merger or consolidation
do not, as a result of such merger or consolidation, own, directly or
indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Padda, as determined under the long-term disability plan of
Sabratek covering Padda, or if no such plan exists, Padda's failure (i) to
perform substantially his material duties under this Agreement for a period of
six consecutive months, or for an aggregate of 270 days during any 12-month
period, and
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(ii) to return to the performance of his duties within 30 days after receiving
written notice of termination
(h) "SALARY" shall mean the annual salary provided for in Section
3 below, as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF PADDA. Sabratek hereby continues to employ Padda, and
Padda hereby accepts continued employment with Sabratek, in the positions and
with the duties and responsibilities set forth below and upon such other terms
and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 2003; provided, however, that at the
end of each 12-month period after September 27, 2000 (unless either Party gives
six months' written notice to the other that the Term shall not continue), the
Term shall thereafter automatically extend for an additional 12-month period
(with the result that, in the absence of such notice, the Term shall never be
less than three years in length), unless the Term is sooner terminated as
provided in Section 9 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder, Padda
shall be employed as Chief Executive Officer, reporting to the full Board. In
his capacity as Chief Executive Officer, Padda shall have the customary powers,
responsibilities and authorities of chief executive
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officers of corporations of the size, type and nature of Sabratek including,
without limitation, authority, in conjunction with the Board as appropriate, to
hire and terminate other employees of Sabratek.
(ii) During the Term of Employment, Sabratek shall use its best efforts
to secure the election of Padda to the Board and to the chairmanship thereof.
(d) TIME AND EFFORT.
(i) Padda agrees to devote his best efforts and abilities, and such of
his business time and attention as is reasonably necessary, to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Padda from
(A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Padda shall receive from Sabratek a Salary, payable in accordance with the
regular payroll practices of Sabratek, in a minimum amount of $250,000. During
the Term the Committee shall review his Salary no less often than once each
Year, commencing January 1, 2000. On the basis of any such review, the Committee
may in its sole discretion increase Padda's Salary accordingly. The term
"Salary" as used in this Agreement shall refer to his Salary at any time as so
adjusted.
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4. BONUSES.
(a) ANNUAL BONUS. Padda shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 60% of his Salary if he achieves 100% of specified performance objectives,
or (ii) less than 70% of his Salary if he achieves 120% of specified performance
objectives for any Year. The performance objectives shall be determined and
approved at the beginning of each Year by the Committee and agreed to by Padda.
(b) SPECIAL BONUS. Padda shall be eligible to receive additional bonuses
during the Term. The Committee shall determine, in its discretion, the occasion
for payment, and the amount, of any such bonus.
5. LONG-TERM INCENTIVE COMPENSATION.
During the Term, Padda shall be entitled to participate in Sabratek's
Long-Term Incentive Compensation Plan (the "LTIP"), a copy of which is attached
hereto as Attachment I, and receive awards thereunder in accordance with its
terms.
6. EQUITY OPPORTUNITY.
During the Term, Padda shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Committee, under and in accordance with the
terms of applicable plans of Sabratek and related option and award agreements.
7. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Padda shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in
performing services under this Agreement, upon his submission of such accounts
and records as may be reasonably required by Sabratek. In
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addition, Padda shall be entitled to payment by Sabratek of all reasonable costs
and expenses, including attorneys' and consultants' fees and disbursements,
incurred by him in connection with adoption of this Agreement and any related
compensatory arrangements that Sabratek adopts solely for his benefit.
8. EMPLOYEE BENEFIT PLANS.
During the Term Padda shall be entitled to all benefits specifically
established for him, including, but not limited to, a $900 per month housing
allowance, and to participate in all employee benefit plans and programs made
available to Sabratek's senior executives or to its employees generally, as such
plans or programs may be in effect from time to time, including, without
limitation, pension and other retirement plans, profit-sharing plans, savings
and similar plans, group life insurance, accidental death and dismemberment
insurance, travel accident insurance, hospitalization insurance, surgical
insurance, major and excess major medical insurance, dental insurance,
short-term and long-term disability insurance, sick leave (including salary
continuation arrangements), holidays, vacation and any other employee benefit
plans or programs that may be sponsored by Sabratek from time to time, including
plans that supplement the above-listed types of plans, whether funded or
unfunded.
9. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Padda may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Padda's entitlement shall be as the Parties mutually agree.
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(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Padda's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any annual or special bonus awarded but not yet paid to him;
(iv) any deferred compensation payable under any deferred
compensation plan of Sabratek;
(v) any other compensation or benefits, including without limitation
long-term incentive compensation described in Section 5 above, benefits under
equity grants and awards described in Section 6 above and employee benefits
under plans described in Section 8 above, that have vested through the date of
termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan; and
(vi) reimbursement in accordance with Section 7 above of any business
expenses incurred by Padda through the date of termination but not yet paid to
him.
(c) TERMINATION DUE TO DEATH. In the event that Padda's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 9(b), to:
(i) Padda's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
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(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek
or Padda may terminate Padda's employment. If Padda's employment is terminated
due to Disability, he shall be entitled, in addition to the compensation and
benefits specified in Section 9(b), to a prorated annual bonus for the Year in
which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Padda's
employment hereunder for Cause only upon written notice to Padda not less than
45 days prior to any intended termination date, which notice shall specify the
grounds for such termination in reasonable detail. Cause shall in no event be
deemed to exist except upon a finding reflected in a resolution approved by a
majority (excluding Padda) of the members of the Board (whose findings shall not
be binding upon or entitled to any deference by any court, arbitrator or other
decision-maker ruling on this Agreement). Upon receipt of such notice, Padda
(and his counsel) shall have 30 days to present to the Board his position
regarding any dispute relating to the existence of such Cause. Unless rescinded
by the Board, termination shall be effective on the date specified in the
original notice.
In the event that Padda's employment is terminated for Cause, he shall be
entitled only to the compensation and benefits specified in Section 9(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: (A) termination of Padda's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Padda voluntarily, or (iii) by
mutual agreement of Padda and Sabratek; or (B) Sabratek changes the primary
employment location of Padda to a place that is outside the
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Chicago metropolitan area. Sabratek shall provide Padda ten days' prior written
notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Padda's employment without
Cause, he shall be entitled, and Sabratek shall set aside in escrow pursuant to
the provisions of Section 9(i)(ii) (without regard to Subsection (A) through (D)
thereof) an amount sufficient to pay, in addition to the compensation and
benefits specified in Section 9(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for the longer of the remainder of the Term or three years; and
(B) a prorated annual bonus for any partial year and an annual bonus
for each remaining Year of the Term equal to the average of the three highest
annual bonuses awarded to him during the five Years preceding the Year of
termination, such bonus to be paid at the same time annual bonuses are
regularly paid; and
(C) continued coverage under the health program maintained by Sabratek
for the remainder of the Term; and
(D) the Cumulative Unit Value (as defined in and calculated under the
LTIP) for each unit awarded under the LTIP prior to the date of termination to
be paid in accordance with the terms thereof; and
(E) notwithstanding anything in this Section 9(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Padda takes any action which
would fall within the definition of "Restrictive Covenant" as provided in
Section 12(a) hereof, whether or not such action occurs within the Restrictive
Period (as defined in Section 12(a) hereof).
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(g) VOLUNTARY TERMINATION BY PADDA. Padda shall have the right, upon 60
days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 9(e).
(h) NOTICE THAT THE TERM SHALL NOT RENEW. In the event that either Party
notifies the other that the Employment Term shall not renew pursuant to the
terms of Section 2(b) above, Padda shall continue to render services to Sabratek
through the end of the Term as in effect on the date of delivery of such notice,
unless: (A) the non-renewal decision was made by Sabratek, in which case, the
Committee or Padda may elect to treat the notice as a termination without Cause
of Padda's employment; or (B) the non-renewal decision was made by Padda, in
which case, the Committee may elect to treat the notice as a voluntary
termination of employment by Padda.
(i) CHANGE IN CONTROL. (i) Notwithstanding anything to the contrary in this
Section 9, if, within twelve months following a Change in Control (A) Padda's
employment is terminated for any reason other than death or Disability, or (B)
Padda terminates his employment, he shall be entitled to the compensation and
benefits provided in Sections 9(b) and 9(f)(ii), including, but not limited to,
any other compensation or benefits, including the Maximum Cumulative Unit Value
(as defined in the LTIP) for each unit awarded under the LTIP to the date of
termination, benefits under equity grants and awards described in Section 6
above and employee benefits under plans described
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in Section 8 above, that have vested through the date of termination or to which
he may then be entitled in accordance with the applicable terms and conditions
of each grant, award or plan.
(ii) Immediately upon: (A) the filing by a third-party with the United
States Securities and Exchange Commission of any proxy or tender offer material
evidencing an intent to gain control of the Company; (B) the mailing of a proxy
statement by the Company to shareholders requesting an affirmative vote
regarding a Change in Control; or (C) the receipt of information by the Company
that 40 percent or more of its outstanding common stock has been acquired by any
person (as defined under the 1934 Act), the Company shall contribute to an
irrevocable grantor trust (a "Rabbi Trust") an amount sufficient to enable all
potential amounts due to Padda under this Section to be paid. The Company shall
provide Padda with a certification of the payment to such trust of all such
amounts. All such amounts which are due to Padda shall be paid using the assets
of said trust except to the extent its terms preclude such payment, in which
event payment shall be made by the Company from its own funds, or unless the
Company elects to pay any or all such amounts from its own funds.
10. PARACHUTES.
(a) APPLICATION. If all, or any portion, of the payments provided under
this Agreement, and/or any other payments and benefits that Padda receives or is
entitled to receive from Sabratek, including, but not limited to, amounts
generated from the exercise and sale of options granted to Padda, constitutes an
excess "parachute payment" within the meaning of Section 280G(b) of the Code,
whether or not under an existing plan, arrangement or other agreement (each such
parachute payment, a "Parachute Payment") and will result in the imposition on
Padda of an excise tax under Section 4999 of the Code, then, in addition to any
other benefits to which Padda is entitled under this
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Agreement, Sabratek shall pay him an amount in cash equal to the sum of the
excise taxes payable by him by reason of receiving such Parachute Payments, plus
the amount necessary to put him in the same after-tax position (taking into
account any and all applicable federal, state and local excise, income or other
taxes at the highest possible applicable rates on such Parachute Payments
(including without limitation any payments under this Section 10) as if no
excise taxes had been imposed with respect to Parachute Payments (the "Parachute
Gross-up").
(b) COMPUTATION. The amount of any payment under this Section 10 shall be
computed by Sabratek's certified public accounting firm in consultation with
legal counsel acceptable to Padda. Padda and Sabratek shall provide the
accounting firm with all information that it reasonably deems necessary in order
to compute the Parachute Gross-up. The cost and expenses of the accounting firm
retained to perform the computations shall be borne by Sabratek.
(c) PAYMENT. In any event, Sabratek shall pay to Padda, or pay on his
behalf, the Parachute Gross-up as computed by the accounting firm by the time
any taxes payable by him as a result of the Parachute Payments become due.
In the event that the Internal Revenue Service ("IRS") determines that the
amount of excise taxes thereon initially paid was insufficient to discharge
Padda's excise tax liability, Sabratek shall make additional payments to him as
may be necessary to reimburse him for discharging the full liability.
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11. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Padda hereby acknowledges that as a result of his employment with
Sabratek he has produced and had access to, and may hereafter produce and have
access to, material, records, data, trade secrets, inventions and information
not generally available to the public (collectively, "Confidential Information")
regarding Sabratek and that any such Confidential Information is the exclusive
property of Sabratek.
(ii) Accordingly, Padda hereby agrees that, during and subsequent to the
Term, he shall hold in confidence and not directly or indirectly disclose, use,
copy or make lists of any such Confidential Information, except to the extent
that such information is or thereafter becomes lawfully available from public
sources, or such disclosure is authorized in writing by Sabratek, required by a
law or any competent administrative agency or judicial authority, or otherwise
as reasonably necessary or appropriate in connection with performance by Padda
of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Padda prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent. Upon termination of Padda's
employment with Sabratek for any reason, he shall promptly deliver to Sabratek
all such items that are then in his possession or control.
(c) DUTY OF LOYALTY. Padda hereby agrees to abide by Sabratek's reasonable
policies, as in effect from time to time, respecting avoidance of interests
conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Padda is found to be in
violation of Section 11(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 13 below.
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12. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Padda hereby agrees that, except with the express
prior written consent of Sabratek, for a period of one year after termination of
his employment with Sabratek for any reason (the "Restrictive Period"), he will
not directly or indirectly compete with the business of Sabratek as conducted on
the date of such termination, including, but not by way of limitation, by (i)
directly or indirectly owning, managing, operating, controlling, financing, (ii)
directly or indirectly serving as an employee, officer or director of or
consultant to, or (iii) soliciting or inducing, or attempting to solicit or
induce, any employee or agent of Sabratek to terminate employment with Sabratek
and become employed by, any person, firm, partnership, corporation, trust or
other entity that owns or operates an entity that is engaged in the same or
similar business as Sabratek as conducted on the date of such termination (the
"Restrictive Covenant").
If Padda violates the Restrictive Covenant and Sabratek brings legal action
for injunctive or other relief, Sabratek shall not, as a result of the time
involved in obtaining such relief, be deprived of the benefit of the full period
of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall be
deemed to endure for the period specified in this Section 12(a), computed from
the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Padda.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 12(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Padda's employment without Cause, as
provided in Section 9(f) above; or
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(ii) prohibit Padda from owning directly or indirectly capital stock or
similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Padda is found to be in
violation of Section 12(a) above, Sabratek shall be entitled to relief as
provided in Section 13 below.
13. REMEDIES/SANCTIONS.
Padda hereby acknowledges that the restrictions contained in Sections 11
(a), (b) and (c) and 12(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Padda in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such violation by Padda and any and all
persons directly or indirectly acting for or with him, as the case may be.
14. BENEFICIARIES/REFERENCES.
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Padda shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Padda's death, or of a
judicial determination of his incompetence, reference in this Agreement to Padda
shall be deemed to refer, as appropriate, to his Beneficiary, estate or other
legal representative.
15. WITHHOLDING TAXES.
All payments to Padda or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
16. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Padda,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Padda to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Padda as provided above and maintain such liability insurance coverage for him
after the Term for any claims that may be made against him with respect to his
service as a director or officer of Sabratek.
17. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Padda's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
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18. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Padda) and
assigns. No rights or obligations of Sabratek under this Agreement may be
assigned or transferred by Sabratek except pursuant to (a) a merger or
consolidation or (b) sale or liquidation of all or substantially all of the
assets of Sabratek, provided that the surviving entity or assignee or transferee
is the successor to all or substantially all of the assets of Sabratek and, in
the case of a sale or other transfer of assets or a merger in which Sabratek is
not the surviving entity, such surviving entity or assignee or transferee agrees
in writing to assume the liabilities, obligations and duties of Sabratek under
this Agreement. Notwithstanding such assignment, Sabratek shall remain liable
and responsible for fulfillment of the terms and conditions of this Agreement;
and provided further, that in no event shall such assignment of this Agreement
adversely affect Padda's right upon a Change in Control, as provided in Section
9(i) above. No rights or obligations of Padda under this Agreement may be
assigned or transferred by him.
19. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
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20. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, including without
limitation, the agreement made and entered into as of January 1, 1996 between
Sabratek and Padda as heretofore amended and supplemented, provided that the
execution of this Agreement shall not adversely affect (i) any award previously
made to Padda under any compensation plan maintained by Sabratek, or (ii) any
statements regarding the vesting of options or other benefits in such prior
agreements. Payments and benefits provided under this Agreement are in lieu of
any payments or other benefits under any severance program or policy of Sabratek
to which Padda would otherwise be entitled.
21. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Padda and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
22. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement
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shall be unaffected thereby and shall remain in full force and effect to the
fullest extent permitted by law.
23. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Padda's employment with Sabratek.
24. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
25. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 11 or 12 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Padda within thirty (30)
miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
26. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Padda pursuant
to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees,
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if any, incurred in contesting any termination of this Agreement by Sabratek or
in seeking to obtain or enforce any right or benefit provided by this Agreement,
shall be paid or reimbursed by Sabratek, provided, however, that if this
Agreement is terminated for Cause or if this Agreement is terminated voluntarily
by Padda other than due to a breach of this Agreement by Sabratek, Sabratek
shall be obligated to pay any of Padda's expenses and legal fees arising
therefrom only if Padda is successful on the merits pursuant to a legal
judgment, arbitration or settlement.
27. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
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If to Padda:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Chairman
FAX: (847) 647-2382
and
K. Shan Padda
1901 North Clybourn, 4th Floor
Chicago, Illinois 60614
28. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
29. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
Sabratek Corporation
By:_____________________________________
Edson W. Spencer, Jr., Chairman
of the Compensation Committee
_____________________________________
K. Shan Padda
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Exhibit 10.31
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Stephen L. Holden ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties") agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 13 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that the Board in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is defined
in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act")) of beneficial ownership (within the meaning of Rule l3d-3
promulgated under the 1934 Act) of 40 percent or more of the combined voting
power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the Board
cease for any reason to constitute a majority of the Board, unless the election,
or nomination for election by the stockholders of Sabratek, of any new director
or directors was approved by a vote of a majority of the Board, in which case
such new director or directors shall, for purposes of this Agreement, be
considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or consolidation
of Sabratek if the stockholders immediately before such merger or consolidation
do not, as a result of such merger or consolidation, own, directly or
indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
six consecutive months, or for an aggregate of 270 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 2001; provided, however, that at the
end of each 12-month period after September 27, 1999 (unless either Party gives
three months' written notice to the other that the Term shall not continue), the
Term shall thereafter automatically extend for an additional 12-month period
(with the result that, in the absence of such notice, the Term shall never be
less than two years in length), unless the Term is sooner terminated as provided
in Section 9 below.
(c) TITLES AND DUTIES. Until the date of termination of his employment
hereunder, Employee shall be employed as President and Treasurer, reporting to
the Chief Executive Officer. In his capacity as President and Treasurer,
Employee shall have the customary powers,
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responsibilities and authorities of president and treasurer of corporations of
the size, type and nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $200,000.
During the Term the Chief Executive Officer shall review his Salary no less
often than once each Year, commencing January 1, 1999. On the basis of any such
review, the Chief Executive Officer may in its sole discretion adjust Employee's
Salary accordingly. The term "Salary" as used in this Agreement shall refer to
his Salary at any time as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 40% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 50% of his Salary if he achieves
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100% of specified performance objectives, or (iii) less than 60% of his Salary
if he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer shall determine, in its discretion,
the occasion for payment, and the amount, of any such bonus.
5. LONG-TERM INCENTIVE COMPENSATION.
During the Term, Employee shall be entitled to participate in Sabratek's
Long-Term Incentive Compensation Plan (the "LTIP"), a copy of which is attached
hereto as Attachment I, and receive awards thereunder in accordance with its
terms.
6. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer, under and in
accordance with the terms of applicable plans of Sabratek and related option and
award agreements.
7. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek. In addition, Employee shall be
entitled to payment by Sabratek of all reasonable costs and expenses, including
attorneys' and consultants' fees and disbursements, incurred by him in
connection with
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adoption of this Agreement and any related compensatory arrangements that
Sabratek adopts solely for his benefit.
8. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel accident insurance,
hospitalization insurance, surgical insurance, major and excess major medical
insurance, dental insurance, short-term and long-term disability insurance, sick
leave (including salary continuation arrangements), holidays, vacation and any
other employee benefit plans or programs that may be sponsored by Sabratek from
time to time, including plans that supplement the above-listed types of plans,
whether funded or unfunded.
9. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may
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be, shall be entitled to receive (in addition to payments and benefits under,
and except as specifically provided in, subsections (c) through (h) below, as
applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any annual or special bonus awarded but not yet paid to him;
(iv) any deferred compensation payable under any deferred compensation
plan of Sabratek;
(v) any other compensation or benefits, including without limitation
long-term incentive compensation described in Section 5 above, benefits under
equity grants and awards described in Section 6 above and employee benefits
under plans described in Section 8 above, that have vested through the date of
termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan; and
(vi) reimbursement in accordance with Section 7 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 9(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
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(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 9(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 45 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have 30 days to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 9(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: (A) termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek; or (B) Sabratek changes the primary
employment location of Employee to a place that is outside of the Chicago
metropolitan area. Sabratek shall provide Employee ten days' prior written
notice of termination by it without Cause.
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(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 9(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for the longer of the remainder of the Term or two years; and
(B) a prorated annual bonus for any partial year and an annual bonus
for each remaining Year of the Term equal to the average of the three highest
annual bonuses awarded to him during the five Years preceding the Year of
termination, such bonuses to be paid at the same time annual bonuses are
regularly paid; and
(C) continued coverage under the health program maintained by Sabratek
for the remainder of the Term; and
(D) the Cumulative Unit Value (as defined in and calculated under the
LTIP) for each unit awarded under the LTIP prior to the date of termination to
be paid in accordance with the terms thereof; and
(E) notwithstanding anything in this Section 9(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive Covenant" as provided in
Section 12(a) hereof, whether or not such action occurs within the Restrictive
Period (as defined in Section 12(a) hereof).
(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
60 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall
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terminate as of the date stated in such notice, and he shall be entitled to
receive compensation and benefits as if Sabratek had terminated his employment
for Cause, as provided in Section 9(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or Employee may elect to
treat the notice as a termination without Cause of Employee's employment; or (B)
the non-renewal decision was made by Employee, in which case, the Chief
Executive Officer may elect to treat the notice as a voluntary termination of
employment by Employee.
(i) CHANGE IN CONTROL. (i) Notwithstanding anything to the contrary in
this Section 9, if, within twelve months following a Change in Control (A)
Employee's employment is terminated for any reason other than death or
Disability, or (B) Employee terminates his employment, he shall be entitled to
the compensation and benefits provided in Sections 9(b) and 9(f)(ii), including,
but not limited to, any other compensation or benefits, including the Maximum
Cumulative Unit Value (as defined in the LTIP) for each unit awarded under the
LTIP to the date of termination, benefits under equity grants and awards
described in Section 6 above and employee benefits under plans described in
Section 8 above, that have vested through the date of termination or to which he
may then be entitled in accordance with the applicable terms and conditions of
each grant, award or plan.
(ii) Immediately upon: (A) the filing by a third-party with the United
States Securities and Exchange Commission of any proxy or tender offer material
evidencing an intent to
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gain control of the Company; (B) the mailing of a proxy statement by the Company
to shareholders requesting an affirmative vote regarding a Change in Control; or
(C) the receipt of information by the Company that 40 percent or more of its
outstanding common stock has been acquired by any person (as defined under the
1934 Act), the Company shall contribute to an irrevocable grantor trust (a
"Rabbi Trust") an amount sufficient to enable all potential amounts due to
Employee under this Section to be paid. The Company shall provide Employee with
a certification of the payment to such trust of all such amounts. All such
amounts which are due to Employee shall be paid using the assets of said trust
except to the extent its terms preclude such payment, in which event payment
shall be made by the Company from its own funds, or unless the Company elects to
pay any or all such amounts from its own funds.
10. PARACHUTES.
(a) APPLICATION. If all, or any portion, of the payments provided under
this Agreement, and/or any other payments and benefits that Employee receives or
is entitled to receive from Sabratek, including, but not limited to, amounts
generated from the exercise and sale of options granted to Employee, constitutes
an excess "parachute payment" within the meaning of Section 280G(b) of the Code,
whether or not under an existing plan, arrangement or other agreement (each such
parachute payment, a "Parachute Payment") and will result in the imposition on
Employee of an excise tax under Section 4999 of the Code, then, in addition to
any other benefits to which Employee is entitled under this Agreement, Sabratek
shall pay him an amount in cash equal to the sum of the excise taxes payable by
him by reason of receiving such Parachute Payments, plus the amount necessary to
put him in the same after-tax position (taking into account any and all
applicable federal, state and local excise, income or other taxes at the highest
possible applicable
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rates on such Parachute Payments (including without limitation any payments
under this Section 10) as if no excise taxes had been imposed with respect to
Parachute Payments (the "Parachute Gross-up").
(b) COMPUTATION. The amount of any payment under this Section 10 shall be
computed by Sabratek's certified public accounting firm in consultation with
legal counsel acceptable to Employee. Employee and Sabratek shall provide the
accounting firm with all information that it reasonably deems necessary in order
to compute the Parachute Gross-up. The cost and expenses of the accounting firm
retained to perform the computations shall be borne by Sabratek.
(c) PAYMENT. In any event, Sabratek shall pay to Employee, or pay on his
behalf, the Parachute Gross-up as computed by the accounting firm by the time
any taxes payable by him as a result of the Parachute Payments become due.
In the event that the Internal Revenue Service ("IRS") determines that the
amount of excise taxes thereon initially paid was insufficient to discharge
Employee's excise tax liability, Sabratek shall make additional payments to him
as may be necessary to reimburse him for discharging the full liability.
11. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
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(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent. Upon termination of Employee's
employment with Sabratek for any reason, he shall promptly deliver to Sabratek
all such items that are then in his possession or control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 13 below.
12. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of one year after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of
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limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 12(a), computed
from the date the relief is granted but reduced by the time between the period
when the Restrictive Period began to run and the date of the first violation of
the Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 12(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause, as
provided in Section 9(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock or
similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 12(a) above, Sabratek shall be entitled to relief as
provided in Section 13 below.
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13. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 11
(a), (b) and (c) and 12(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such violation by Employee and any and all
persons directly or indirectly acting for or with him, as the case may be.
14. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
15. WITHHOLDING TAXES.
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All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
16. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term for any claims that may be made against him with respect to
his service as a director or officer of Sabratek.
17. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
18. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns. No rights or obligations of Sabratek under this Agreement may be
assigned or transferred by Sabratek except pursuant to (a) a merger or
consolidation or (b) sale or liquidation of all or substantially all of the
assets of Sabratek,
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provided that the surviving entity or assignee or transferee is the successor to
all or substantially all of the assets of Sabratek and, in the case of a sale or
other transfer of assets or a merger in which Sabratek is not the surviving
entity, such surviving entity or assignee or transferee agrees in writing to
assume the liabilities, obligations and duties of Sabratek under this Agreement.
Notwithstanding such assignment, Sabratek shall remain liable and responsible
for fulfillment of the terms and conditions of this Agreement; and provided
further, that in no event shall such assignment of this Agreement adversely
affect Employee's right upon a Change in Control, as provided in Section 9(i)
above. No rights or obligations of Employee under this Agreement may be assigned
or transferred by him.
19. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
20. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, including without
limitation, the agreement made and entered into as of July 2, 1998, between
Sabratek and Employee as heretofore amended and supplemented, provided that the
execution of this Agreement shall not adversely affect (i) any award previously
made to Employee
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under any compensation plan maintained by Sabratek, or (ii) any statements
regarding the vesting of options or other benefits in such prior agreements.
Payments and benefits provided under this Agreement are in lieu of any payments
or other benefits under any severance program or policy of Sabratek to which
Employee would otherwise be entitled.
21. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
22. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
23. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
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24. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
25. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 11 or 12 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
26. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek,
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Sabratek shall be obligated to pay any of Employee's expenses and legal fees
arising therefrom only if Employee is successful on the merits pursuant to a
legal judgment, arbitration or settlement.
27. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Chairman
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Stephen L. Holden
FAX: (847) 647-2382
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and
Stephen L. Holden
395 Carlisle Avenue
Deerfield, Illinois 60015
28. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
29. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:___________________________________
K. Shan Padda, Chairman
and Chief Executive Officer
___________________________________
Stephen L. Holden
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EXHIBIT 10.32
SABRATEK CORPORATION
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of February 25, 1997, between Sabratek
Corporation, a Delaware corporation, ("Sabratek"), and Elliott R. Mandell
("Executive").
Pursuant to an Asset Purchase Agreement (the "Purchase Agreement")
among Sabratek, Executive and Rocap, Inc., a Massachusetts corporation
("Rocap"), Sabratek will acquire the assets of Rocap and will operate the
business currently operated by Rocap (the "Business") from and after the closing
under the Purchase Agreement through a new subsidiary of Sabratek or as a
division of Sabratek (either, the "Company").
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in paragraph 5 hereof (the "Employment Period").
2. Position and Duties:
(a) During the Employment Period, Executive shall serve as the
President of the Business and shall have the normal duties, responsibilities and
authority of the President of the Business, subject to the power of the
Company's board of directors (the "Board") or the Company's Chief Executive
Officer (the "CEO") to expand or limit such duties, responsibilities and
authority and to override actions of the Executive. The responsibilities and
authority of Executive shall be sufficient to enable Executive to accomplish the
goals of the Company set forth in paragraph 5(e).
(b) Executive shall report directly to the CEO, shall also have a
reporting relationship to the Company's President and shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
<PAGE> 2
3. Base Salary and Benefits.
(a) During the Employment Period, Executive's base salary shall be
$150,000 per annum or such higher rate as the CEO may designate from time to
time (the "Base Salary"), which salary shall be payable in regular installments
in accordance with the Company's general payroll practices and shall be subject
to customary withholding. The Executive's base salary level shall be reviewed
annually by the CEO, and Executive shall be eligible for performance based
increases on the same basis as other senior executives of Sabratek. In addition,
during the Employment Period, Executive shall be eligible to participate in all
of the Company's employee benefit programs.
(b) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(c) In addition to the Base Salary, the CEO (with ratification of
the Board or a committee thereof) may award a cash or stock bonus or options to
purchase Sabratek common stock to Executive following the end of each fiscal
year during the Employment Period based upon Executive's performance and the
Company's operating results during such year.
4. Stock Options.
(a) As of the date of this Agreement, Executive is hereby granted
options to acquire 100,000 shares of Sabratek's common stock (the "Base
Options") pursuant to Sabratek's Amended and Restated 1993 Stock Option Plan
(the "Option Plan"). The Base Options shall have a 10-year term and shall have
an exercise price per share equal to the closing sales price for the Sabratek
common stock on the trading day prior to the date of grant. Subject to the
provisions of this paragraph 4, the Base Options shall vest and become
exercisable by Executive as follows: (i) Base Options to Purchase 40,000 shares
shall be fully vested and exercisable at the date hereof; (ii) Base Options to
purchase 30,000 shares shall vest and become exercisable on the first
anniversary of the date hereof; (iii) Base Options to purchase 20,000 shares
shall vest and become exercisable on the second anniversary of the date hereof;
and (iv) Base Options to purchase 10,000 shares shall vest and become
exercisable on the third anniversary of the date hereof.
(b) In addition, as of the date of this Agreement, Executive is also
hereby granted additional options to acquire 100,000 shares of Sabratek's common
stock (the "Additional Options") pursuant to the Option Plan. The Additional
Options shall have a 10-year term and shall have an exercise price per share
equal to the closing sales price for the Sabratek common stock on the trading
day prior to the date of grant. Subject to the provisions of this paragraph 4,
the Additional Options shall vest and become exercisable by Executive as
follows: (i) Additional Options to purchase 50,000 shares shall vest and become
exercisable on the first anniversary of the date hereof; (ii) Additional Options
to purchase 25,000 shares shall vest and become exercisable on the second
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anniversary of the date hereof; and (iii) Additional Options to purchase 25,000
shares shall vest and become exercisable on the third anniversary of the date
hereof.
(c) If the Employment Period is terminated by the Company for Cause
(as defined below) or is terminated because of the death or permanent disability
or incapacity (which shall mean the inability on a permanent basis to carry out
the duties and responsibilities of the position on an effective basis due to
casualty, illness, injury, or other impairment of mental, physical or emotional
faculties, as determined by the CEO exercising reasonable judgment) of
Executive, (i) all unvested Base Options will immediately vest and become
exercisable and (ii) all unvested Additional Options will immediately be
forfeited to the Company and Executive will have no further rights in respect
thereof.
(d) If the Employment Period is terminated by the Company without
Cause or in the event of a Sabratek Change of Control (as defined below), all
unvested Base Options and all unvested Additional Options will immediately vest
and become exercisable.
(e) If the Employment Period is terminated by the resignation of
Executive, all unvested Base Options and all unvested Additional Options will
immediately be forfeited to the Company and Executive will have no further
rights in respect thereof.
(f) Following termination of the Employment Period for any reason,
all vested Base Options and vested Additional Options shall be exercisable by
Executive (or his executor, administrator or other legal representative) for a
period of 60 days from the date of termination.
(g) At the time of the grant of the Base Options and Additional
Options, Executive shall be issued an option grant letter in the form
customarily used by the Company for option grants made under the Option Plan,
and the Base Options and the Additional Options shall be subject to the terms
and conditions of the Option Plan in addition to the terms set forth in this
Agreement.
(h) If Executive is still employed with the Company on March 31,
2000, at the election of Executive and upon the written request of Executive
made within ten days following such date (or if the Employment Period is
terminated by the Company without Cause prior thereto, within ten days
following such termination), the Company shall repurchase from Executive all
vested and unexercised Base Options held by Executive for a purchase price equal
to $18.00 per Base Option. Such purchase price (net of any required tax
withholding) shall be payable by the delivery of a cashiers or certified check
payable to Executive or wire transfer of immediately available funds to an
account designated by Executive. From and after such payment, Executive shall
have no further rights with respect to such Base Options.
(i) For purposes of this paragraph 4, a "Sabratek Change of Control"
shall be deemed to occur upon (i) the sale of all or substantially all of the
assets of Sabratek, (ii) a merger or consolidation of Sabratek with another
corporation, or an exchange of the securities of Sabratek for the securities of
another corporation, with the result that the shareholders of Sabratek
immediately before such merger, consolidation or exchange own less than a
majority of the
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outstanding voting securities of the surviving corporation of such merger or
consolidation, or of the corporation in which such shareholders own securities
as a result of and following such exchange, immediately after such merger,
consolidation or exchange, (iii) the acquisition by any person or group (within
the meaning of Section 13(d) under the Securities Exchange Act of 1934, as
amended) of a majority of the outstanding common stock of Sabratek in one or a
series of related transactions, or (iv) the failure of K. Shan Padda to serve
as either an executive officer or director of Sabratek. Notwithstanding the
foregoing, a change of control shall not be deemed to occur as a result of any
of the foregoing transactions if the corporate existence of Sabratek is not
affected by such transaction and Sabratek's chief executive officer and
directors retain their positions with Sabratek (and constitute at least a
majority of the board of directors) following the transaction.
5. Term.
(a) Unless renewed by the mutual agreement of the Company and
Executive, the Employment Period shall end on the third anniversary of the date
of this Agreement, provided that (i) the Employment Period shall terminate
prior to such date upon Executive's resignation, death or permanent disability
or incapacity (which shall mean the inability on a permanent basis to carry out
the duties and responsibilities of the position on an effective basis due to
casualty, illness, injury, or other impairment of mental, physical or emotional
faculties, as determined by the CEO exercising reasonable judgment) and (ii)
the Employment Period may be terminated by the Company at any time prior to
such date for Cause (as defined below) or without Cause by delivery of notice
to Executive of such termination.
(b) If the Employment Period is terminated by the Company without
Cause prior to the third anniversary of the date of this Agreement, Executive
shall be entitled to receive his Base Salary through such third anniversary,
provided that Executive shall be entitled to such continuation of his Base
Salary if and only if Executive has not breached in any material respect the
provisions of paragraphs 6 through 10 hereof. The amounts payable pursuant to
this paragraph 5(b) shall be reduced by the amount of any compensation
Executive receives with respect to any other employment during the period prior
to the third anniversary hereof.
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to paragraph 5(a)(i) above, Executive shall be
entitled to receive his Base Salary through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses
hereunder (if any) which accrue after the termination of the Employment period
shall cease upon such termination.
(e) For purposes of this Agreement, "Cause" shall mean (i) a
material breach of this Agreement by Executive, (ii) a material breach of
Executive's duty of loyalty to Sabratek or any of its subsidiaries or any act
of dishonesty or fraud with respect to Sabratek or any of its subsidiaries,
(iii) the commission of Executive of a felony, a crime involving moral
turpitude or other act or omission causing material harm to the standing and
reputation of Sabratek and its subsidiaries, (iv) Executive's continued failure
to perform his duties as directed by the Board or the CEO as contemplated by
this Agreement or (v) Executive's substandard performance. For the purposes of
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this Agreement, "substandard performance" shall mean the failure of Executive
to use reasonable efforts (i) to cause (A) the present facility of the Business
to reach full production capacity on or before September 1, 1997 and (B) the
construction of eight additional new facilities (or such lesser number mutually
agreed to by Executive and the Company) for the Business and the reaching of
full production capacity by such facilities on or before the third anniversary
of the date of this Agreement, or (ii) to cause the Business to be operated so
as to maximize the flush business capacity and control costs without impact
upon product quality or safety, in each case as determined by the CEO as
provided herein. For purposes of the preceding sentence, "full production
capacity" shall mean the capability of producing at an average weekly
production level of at least 400,000 flush product units. The CEO shall give
Executive written notice of the CEO's concern over Executive's performance, and
Executive shall have 15 days to prepare for a meeting with the CEO, at which
time Executive may present any information on market competitive conditions and
any other factors bearing upon his performance. In assessing Executive's
performance, the CEO shall give due consideration to the overall industry
experience, competitive factors and other factors identified by Executive
bearing on his performance in assessing Executive's performance. After due
consideration of these factors, if the CEO determines in good faith that
Executive has failed to meet the foregoing standards regarding substandard
performance, the CEO may provide Executive a notice of termination for cause,
which notice shall be effective 45 days after delivery to Executive, during
which period Executive shall have the opportunity to cure such substandard
performance. Prior to the expiration of such 45 day period, Executive shall
have the right to meet with CEO and present any information regarding the cure
of such substandard performance, and unless the CEO determines as a result of
such meeting that the substandard performance no loner exists, the notice of
termination for cause shall become effective at the end of such 45 day period.
The parties agree that the Executive's obligation is to use reasonable efforts
to accomplish the production goals identified above and that the achievement of
sales of flush products in a sufficient amount to utilize such production is
not a component to be analyzed in measuring Executive's performance for this
purpose.
(f) The Company may offset any amounts Executive owes it or its
subsidiaries against any amounts it owes Executive hereunder, provided that the
Company shall have no such right of offset in respect of any amounts owed to
it (or alleged to be owed to it) as a result of the breach (or alleged breach)
by Executive of any representation or warranty made by Executive in the
Purchase Agreement.
6. Confidential Information. Executive acknowledges that the
information, observations and data obtained by him while employed by Sabratek
and its subsidiaries (including those obtained while employed by Rocap prior to
the date of this Agreement and the acquisition of Rocap's assets by the
Company) concerning the business or affairs of Sabratek (including the Business)
or any subsidiary of Sabratek ("Confidential Information") are the property of
Sabratek or such subsidiary. Therefore, Executive agrees that he shall not
disclose to any unauthorized person or use for his own purposes any
Confidential Information without the prior written consent of the CEO, unless
and to the extent that the aforementioned matters become generally known to and
available for use by the public other than as a result of Executive's acts or
omissions. Executive shall deliver to Sabratek at the termination of the
Employment Period, or at any other time Sabratek may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software
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and other documents and data (and copies thereof) relating to the Confidential
Information, Work Product (as defined below) or the business of Sabratek or any
subsidiary of Sabratek which he may then possess or have under his control.
7. Inventions and Patents. Executive acknowledges that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to Sabratek's or any of its subsidiaries' actual or
anticipated business, research and development or existing or future products or
services and which are conceived, developed or made by Executive while employed
by Sabratek and its subsidiaries, or by Rocap ("Work Product") belong to
Sabratek or such subsidiary. Executive shall promptly disclose such Work Product
to the CEO and perform all actions reasonably requested by the CEO (whether
during or after the Employment Period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
8. Non-Compete. In further consideration of the compensation to be
paid to Executive hereunder, Executive acknowledges that in the course of his
employment with the Sabratek or any of its subsidiaries he shall become
familiar, and during his employment with Rocap he has become familiar, with the
trade secrets of the Business and with other Confidential Information concerning
Sabratek and its predecessors and its subsidiaries and that his services have
been and shall be of special, unique and extraordinary value to Rocap and to
Sabratek and its subsidiaries. Therefore, Executive agrees that, during the
Employment Period and until the later of (i) the third anniversary of the date
of this Agreement and (ii) the first anniversary of the expiration of the
Employment Period (the "Non-Compete Period"), he shall not directly or
indirectly own any interest in, manage, control, participate in, consult with,
render services for, or in any manner engage in any business competing with the
businesses of Sabratek or its subsidiaries, as the businesses of Sabratek and
its subsidiaries exist or are in process on the date of the termination of
Executive's employment, within any geographical area in which Sabratek or its
subsidiaries engage or plan to engage in such businesses. Nothing herein shall
prohibit Executive from (i) employment as a pharmacist in a retail pharmacy
business or in a pharmacy business maintained as part of a hospital, health
maintenance organization or other similar entity providing health services to
the public where such pharmacy business is only serving such entity providing
health services or (ii) being a passive owner of not more than 2% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as Executive has no active participation in the business of such
corporation.
9. Non-Solicitation. During the Employment Period and until the
later of (i) the third anniversary of the date of this Agreement and (ii) the
first anniversary of the expiration of the Employment Period (the
"Non-Solicitation Period"), Executive shall not directly or indirectly through
another entity (i) induce or attempt to induce any employee of Sabratek or any
of its subsidiaries (including the Company) to leave the employ of Sabratek or
such subsidiary, or in any way interfere with the relationship between Sabratek
or any such subsidiary and any employee thereof, or (ii) induce or attempt to
induce any customer, supplier, licensee, licensor, franchisee or other business
relation of Sabratek or any such subsidiary to cease doing business
with Sabratek or such subsidiary, or in any way interfere with the
relationship between any such customer, supplier,
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licensee or business relation and Sabratek or any such subsidiary (including,
without limitation, making any negative statements or communications about
Sabratek or its subsidiaries).
10. Enforcement. If, at the time of enforcement of paragraph 6, 7,
8 or 9 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. Because
Executive's services are unique and because Executive has access to Confidential
Information and Work Product, the parties hereto agree that money damages would
not be an adequate remedy for any breach of this Agreement. Therefore, in the
event a breach or threatened breach of this Agreement, Sabratek or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security). In addition, in the event of an alleged breach or violation by
Executive of paragraph 9 and/or 10, the Non-Compete Period and/or
Non-Solicitation Period, as applicable, shall be tolled until such breach or
violation has been duly cured. Executive agrees that the restrictions contained
in paragraphs 9 and 10 are reasonable.
11. Executive's Representations. Executive hereby represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
12. Survival. Paragraphs 7 through 10 and paragraphs 12 through 20
shall survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
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13. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class
mail, return receipt requested, to the recipient at the address below indicated:
Notices to Executive: Elliott R. Mandell
91 Fuller Street
North Andover, MA 01845
with a copy to: Kenneth A. Cossingham, Esq.
Cossingham Law Office, P.C.
800 Turnpike Street
Suite 305
North Andover, MA 01845
Notices to Sabratek: Sabratek Corporation
5601 West Howard Street
Niles, IL 60714
Attn: Chief Executive Officer
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Alan G. Berkshire
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice in accordance with this
paragraph to the sending party. Any notice under this Agreement shall be deemed
to have been given when so delivered or mailed.
14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
15. Complete Agreement. This Agreement, the Purchase Agreement,
those documents expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or representations by
or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
16. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction shall be applied
against any party.
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<PAGE> 9
17. Counterparts. This Agreement may be executive in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, Sabratek and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of Sabratek.
19. Choice of Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without giving effect to
any choice of law or conflict of law rules or provisions (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
20. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of Sabratek and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SABRATEK CORPORATION
By /s/ Elliott R. Mandell
-----------------------------
Its SVP and CEO
----------------------------
--------------------------------
ELLIOTT R. MANDELL
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SABRATEK CORPORATION
By
------------------------------
Its
-----------------------------
/S/ Elliott R. Mandell
--------------------------------
ELLIOTT R. MANDELL
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<PAGE> 1
Exhibit 10.40
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Doron C. Levitas ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 14 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that the Board in
good faith determines is extremely detrimental to the current and
future interests of Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended (the "1934 Act")) of beneficial ownership
(within the meaning of Rule l3d-3 promulgated under the 1934 Act)
of 40 percent or more of the combined voting power of the then
outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board,
unless the election, or nomination for election by the
stockholders of Sabratek, of any new director or directors was
approved by a vote of a majority of the Board, in which case such
new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or consolidation
of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation,
own, directly or indirectly, more than 60 percent of the combined
voting power of the then outstanding voting securities of the entity
resulting from such merger or consolidation in substantially the same
proportion as their ownership of the combined voting power of the
voting securities of Sabratek outstanding immediately before such
merger or consolidation; or (B) a complete liquidation or
dissolution, or an agreement for the sale or other disposition, of
all or substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
six consecutive months, or for an aggregate of 270 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 2001; provided, however, that at the
end of each 12-month period after September 27, 1999 (unless either Party gives
three months' written notice to the other that the Term shall not continue), the
Term shall thereafter automatically extend for an additional 12-month period
(with the result that, in the absence of such notice, the Term shall never be
less than two years in length), unless the Term is sooner terminated as provided
in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder, Employee
shall be employed as Vice President of International Operations, Chief
Administrative Officer and
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Secretary, reporting to the Chief Executive Officer or his designee. In his
capacity as Vice President of International Operations, Chief Administrative
Officer and Secretary, Employee shall have the customary powers,
responsibilities and authorities of vice president of international operations,
chief administrative officer and secretary of corporations of the size, type
and nature of Sabratek.
(ii) During the Term of Employment, Sabratek shall uses its best efforts to
secure the election of Employee to the Board and to the vice-chairmanship
thereof.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee from
(A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $145,000.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion adjust Employee's Salary accordingly. The term "Salary" as used
in this Agreement shall refer to his Salary at any time as so adjusted.
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4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 30% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 40% of his Salary if he achieves 100% of specified performance
objectives, or (iii) less than 50% of his Salary if he achieves 120% of
specified performance objectives for any Year. The performance objectives shall
be determined and approved at the beginning of each Year by the Chief Executive
Officer or his designee and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer or his designee shall determine, in
its discretion, the occasion for payment, and the amount, of any such bonus.
5. LONG-TERM INCENTIVE COMPENSATION.
During the Term, Employee shall be entitled to participate in Sabratek's
Long-Term Incentive Compensation Plan (the "LTIP"), a copy of which is attached
hereto as Attachment I, and receive awards thereunder in accordance with its
terms.
6. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
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7. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek. In addition, Employee shall be
entitled to payment by Sabratek of all reasonable costs and expenses, including
attorneys' and consultants' fees and disbursements, incurred by him in
connection with adoption of this Agreement and any related compensatory
arrangements that Sabratek adopts solely for his benefit.
8. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel accident insurance,
hospitalization insurance, surgical insurance, major and excess major medical
insurance, dental insurance, short-term and long-term disability insurance, sick
leave (including salary continuation arrangements), holidays, vacation and any
other employee benefit plans or programs that may be sponsored by Sabratek from
time to time, including plans that supplement the above-listed types of plans,
whether funded or unfunded.
9. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be
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the same as if Sabratek had terminated his employment for Cause. The Parties may
terminate this Agreement by mutual agreement at any time. If they do so,
Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any annual or special bonus awarded but not yet paid to him;
(iv) any deferred compensation payable under any deferred compensation
plan of Sabratek;
(v) any other compensation or benefits, including without limitation
long-term incentive compensation described in Section 5 above, benefits under
equity grants and awards described in Section 6 above and employee benefits
under plans described in Section 8 above, that have vested through the date of
termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan; and
(vi) reimbursement in accordance with Section 7 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 9(b), to:
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(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 9(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 45 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have 30 days to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 9(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: (A) termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek; or (B) Sabratek changes the primary
employment location of Employee to a place that is
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outside of the Chicago metropolitan area. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 9(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for the longer of the remainder of the Term or two years; and
(B) a prorated annual bonus for any partial year and an annual
bonus for each remaining Year of the Term equal to the average of the three
highest annual bonuses awarded to him during the five Years preceding the Year
of termination, such bonuses to be paid at the same time annual bonuses are
regularly paid; and
(C) continued coverage under the health program maintained by
Sabratek for the remainder of the Term; and
(D) the Cumulative Unit Value (as defined in and calculated under
the LTIP) for each unit awarded under the LTIP prior to the date of termination
to be paid in accordance with the terms thereof; and
(E) notwithstanding anything in this Section 9(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive Covenant" as provided in
Section 12(a) hereof, whether or not such action occurs within the Restrictive
Period (as defined in Section 12(a) hereof).
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(G) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
60 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 9(e).
(H) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or his designee or Employee
may elect to treat the notice as a termination without Cause of Employee's
employment; or (B) the non-renewal decision was made by Employee, in which case,
the Chief Executive Officer or his designee may elect to treat the notice as a
voluntary termination of employment by Employee.
(I) CHANGE IN CONTROL. (I) Notwithstanding anything to the contrary in this
Section 9, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than death or Disability, or (B)
Employee terminates his employment, he shall be entitled to the compensation and
benefits provided in Sections 9(b) and 9(f)(ii), including, but not limited to,
any other compensation or benefits, including the Maximum Cumulative Unit Value
(as defined in the LTIP) for each unit awarded under the LTIP to the date of
termination, benefits under equity grants and awards described in Section 6
above and employee benefits under plans
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described in Section 8 above, that have vested through the date of termination
or to which he may then be entitled in accordance with the applicable terms and
conditions of each grant, award or plan.
(II) Immediately upon: (A) the filing by a third-party with the United
States Securities and Exchange Commission of any proxy or tender offer material
evidencing an intent to gain control of the Company; (B) the mailing of a proxy
statement by the Company to shareholders requesting an affirmative vote
regarding a Change in Control; or (C) the receipt of information by the Company
that 40 percent or more of its outstanding common stock has been acquired by any
person (as defined under the 1934 Act), the Company shall contribute to an
irrevocable grantor trust (a "Rabbi Trust") an amount sufficient to enable all
potential amounts due to Employee under this Section to be paid. The Company
shall provide Employee with a certification of the payment to such trust of all
such amounts. All such amounts which are due to Employee shall be paid using the
assets of said trust except to the extent its terms preclude such payment, in
which event payment shall be made by the Company from its own funds, or unless
the Company elects to pay any or all such amounts from its own funds.
10. PARACHUTES.
(a) APPLICATION. If all, or any portion, of the payments provided under
this Agreement, and/or any other payments and benefits that Employee receives or
is entitled to receive from Sabratek, including, but not limited to, amounts
generated from the exercise and sale of options granted to Employee, constitutes
an excess "parachute payment" within the meaning of Section 280G(b) of the Code,
whether or not under an existing plan, arrangement or other agreement (each such
parachute payment, a "Parachute Payment") and will result in the imposition on
Employee of an excise tax under Section 4999 of the Code, then, in addition to
any other benefits to which
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Employee is entitled under this Agreement, Sabratek shall pay him an amount in
cash equal to the sum of the excise taxes payable by him by reason of receiving
such Parachute Payments, plus the amount necessary to put him in the same
after-tax position (taking into account any and all applicable federal, state
and local excise, income or other taxes at the highest possible applicable rates
on such Parachute Payments (including without limitation any payments under this
Section 10) as if no excise taxes had been imposed with respect to Parachute
Payments (the "Parachute Gross-up").
(b) COMPUTATION. The amount of any payment under this Section 10 shall be
computed by Sabratek's certified public accounting firm in consultation with
legal counsel acceptable to Employee. Employee and Sabratek shall provide the
accounting firm with all information that it reasonably deems necessary in order
to compute the Parachute Gross-up. The cost and expenses of the accounting firm
retained to perform the computations shall be borne by Sabratek.
(c) PAYMENT. In any event, Sabratek shall pay to Employee, or pay on his
behalf, the Parachute Gross-up as computed by the accounting firm by the time
any taxes payable by him as a result of the Parachute Payments become due.
In the event that the Internal Revenue Service ("IRS") determines that the
amount of excise taxes thereon initially paid was insufficient to discharge
Employee's excise tax liability, Sabratek shall make additional payments to him
as may be necessary to reimburse him for discharging the full liability.
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11. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent
to the Term, he shall hold in confidence and not directly or indirectly
disclose, use, copy or make lists of any such Confidential Information, except
to the extent that such information is or thereafter becomes lawfully available
from public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent. Upon termination of Employee's
employment with Sabratek for any reason, he shall promptly deliver to Sabratek
all such items that are then in his possession or control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
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(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 13 below.
12. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of one year after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 12(a), computed
from the date the relief is granted but reduced by the time between the period
when the Restrictive Period began to run and the date of the first violation of
the Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 12(a),
the Restrictive Covenant shall not:
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(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 9(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 12(a) above, Sabratek shall be entitled to relief as
provided in Section 13 below.
13. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 11
(a), (b) and (c) and 12(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such violation by Employee and any and all
persons directly or indirectly acting for or with him, as the case may be.
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14. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
15. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
16. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term for any claims that may be made against him with respect to
his service as a director or officer of Sabratek.
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17. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
18. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns. No rights or obligations of Sabratek under this Agreement may be
assigned or transferred by Sabratek except pursuant to (a) a merger or
consolidation or (b) sale or liquidation of all or substantially all of the
assets of Sabratek, provided that the surviving entity or assignee or transferee
is the successor to all or substantially all of the assets of Sabratek and, in
the case of a sale or other transfer of assets or a merger in which Sabratek is
not the surviving entity, such surviving entity or assignee or transferee agrees
in writing to assume the liabilities, obligations and duties of Sabratek under
this Agreement. Notwithstanding such assignment, Sabratek shall remain liable
and responsible for fulfillment of the terms and conditions of this Agreement;
and provided further, that in no event shall such assignment of this Agreement
adversely affect Employee's right upon a Change in Control, as provided in
Section 9(i) above. No rights or obligations of Employee under this Agreement
may be assigned or transferred by him.
19. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm
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or organization. Sabratek represents and warrants that this Agreement has been
duly authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
20. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, provided that the
execution of this Agreement shall not adversely affect (i) any award previously
made to Employee under any compensation plan maintained by Sabratek, or (ii) any
statements regarding the vesting of options or other benefits in such prior
agreements. Payments and benefits provided under this Agreement are in lieu of
any payments or other benefits under any severance program or policy of Sabratek
to which Employee would otherwise be entitled.
21. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
22. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement
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shall be unaffected thereby and shall remain in full force and effect to the
fullest extent permitted by law.
23. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
24. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
25. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 11 or 12 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
26. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and
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fees, if any, incurred in contesting any termination of this Agreement by
Sabratek or in seeking to obtain or enforce any right or benefit provided by
this Agreement, shall be paid or reimbursed by Sabratek, provided, however, that
if this Agreement is terminated for Cause or if this Agreement is terminated
voluntarily by Employee other than due to a breach of this Agreement by
Sabratek, Sabratek shall be obligated to pay any of Employee's expenses and
legal fees arising therefrom only if Employee is successful on the merits
pursuant to a legal judgment, arbitration or settlement.
27. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
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If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Doron C. Levitas
FAX: (847) 647-2382
and
Doron C. Levitas
1817 North Wolcott
Chicago, Illinois 60622
28. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
29. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:_______________________________________
K. Shan Padda, Chairman
and Chief Executive Officer
_______________________________________
Doron C. Levitas
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Exhibit 10.41
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Scott Skooglund ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder, Employee
shall be employed as Vice President of Finance, reporting to the President or
his designee. In his capacity
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as Vice President of Finance, Employee shall have the customary powers,
responsibilities and authorities of vice president of finance of corporations of
the size, type and nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $100,000.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion increase Employee's Salary accordingly. The term "Salary" as
used in this Agreement shall refer to his Salary at any time as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 10% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 20% of his Salary if he achieves
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100% of specified performance objectives, or (iii) less than 30% of his Salary
if he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer or his designee and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer or his designee shall determine, in
its discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel
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accident insurance, hospitalization insurance, surgical insurance, major and
excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation and any other employee benefit plans or programs that may be
sponsored by Sabratek from time to time, including plans that supplement the
above-listed types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred compensation
plan of Sabratek;
(iv) any other compensation or benefits, including without limitation,
benefits under equity grants and awards described in Section 5 above and
employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may
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then be entitled in accordance with the applicable terms and conditions of each
grant, award or plan; and
(v) reimbursement in accordance with Section 6 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
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In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of six months following the date of termination, such
salary to be paid on Sabratek's normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated,
such bonus to be paid at the same time annual bonuses are regularly paid by
Sabratek; and
(C) continued coverage under the health program maintained by
Sabratek for a period of six months; and
(D) notwithstanding anything in this Section 8(f) to the
contrary, Sabratek shall have no further obligation to make any salary or bonus
payments for any period following the first date on which Employee takes any
action which would fall within the definition of "Restrictive
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Covenant" as provided in Section 10(a) hereof, whether or not such action occurs
within the Restrictive Period (as defined in Section 10(a) hereof).
(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
30 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or his designee or Employee
may elect to treat the notice as a termination without Cause of Employee's
employment; or (B) the non-renewal decision was made by Employee, in which case,
the Chief Executive Officer or his designee may elect to treat the notice as a
voluntary termination of employment by Employee.
(i) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee
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benefits under plans described in Section 7 above, that have vested through the
date of termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan, provided that the
term during which Employee is entitled to continue receiving his salary pursuant
to Section 8(f)(ii)(A) hereof shall increase from six months to one year.
9. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent
to the Term, he shall hold in confidence and not directly or indirectly
disclose, use, copy or make lists of any such Confidential Information, except
to the extent that such information is or thereafter becomes lawfully available
from public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent.
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Upon termination of Employee's employment with Sabratek for any reason, he shall
promptly deliver to Sabratek all such items that are then in his possession or
control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of six months after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from
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the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital
stock or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 9
(a), (b) and (c) and 10(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other
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rights, remedies or damages available to Sabratek under this Agreement or
otherwise at law or in equity, shall be entitled to preliminary and permanent
injunctive relief to prevent or restrain any such violation by Employee and any
and all persons directly or indirectly acting for or with him, as the case may
be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term
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for any claims that may be made against him with respect to his service as a
director or officer of Sabratek.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, between Sabratek and
Employee, provided that the execution of this Agreement shall not adversely
affect (i) any award previously made to Employee under any compensation plan
maintained by Sabratek, or (ii) any statements regarding the vesting of options
or other benefits in
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such prior agreements. Payments and benefits provided under this Agreement are
in lieu of any payments or other benefits under any severance program or policy
of Sabratek to which Employee would otherwise be entitled.
19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
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23. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 10 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek, Sabratek shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
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25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Scott Skooglund
FAX: (847) 647-2382
and
Scott Skooglund
6504 Greene Road
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Woodridge, Illinois 60517
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:_____________________________________
Stephen L. Holden, President
_____________________________________
Scott Skooglund
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EXHIBIT 10.42
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Joseph P. Moser ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder,
Employee shall be employed as Vice President of Engineering, reporting to the
Chief Operating Officer or his designee. In his capacity as Vice President of
Engineering, Employee shall have the customary
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powers, responsibilities and authorities of a vice president of engineering of
corporations of the size, type and nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs
of Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $102,000.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion increase Employee's Salary accordingly. The term "Salary" as
used in this Agreement shall refer to his Salary at any time as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 5% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 10% of his Salary if he achieves
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100% of specified performance objectives, or (iii) less than 20% of his Salary
if he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer or his designee and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer or his designee shall determine, in
its discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel
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accident insurance, hospitalization insurance, surgical insurance, major and
excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation and any other employee benefit plans or programs that may be
sponsored by Sabratek from time to time, including plans that supplement the
above-listed types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of Sabratek;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may
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then be entitled in accordance with the applicable terms and conditions of each
grant, award or plan; and
(v) reimbursement in accordance with Section 6 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
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In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(a) his Salary, at the rate in effect immediately before such termination,
for a period of six months following the date of termination, such salary to be
paid on Sabratek's normal payroll schedule; and
(b) a prorated annual bonus for the year in which terminated, such bonus to
be paid at the same time annual bonuses are regularly paid by Sabratek; and
(c) continued coverage under the health program maintained by Sabratek for
a period of six months; and
(d) notwithstanding anything in this Section 8(f) to the contrary, Sabratek
shall have no further obligation to make any salary or bonus payments for any
period following the first date on which Employee takes any action which would
fall within the definition of "Restrictive
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Covenant" as provided in Section 10(a) hereof, whether or not such action occurs
within the Restrictive Period (as defined in Section 10(a) hereof).
(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
30 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or his designee or Employee
may elect to treat the notice as a termination without Cause of Employee's
employment; or (B) the non-renewal decision was made by Employee, in which case,
the Chief Executive Officer or his designee may elect to treat the notice as a
voluntary termination of employment by Employee.
(i) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee
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benefits under plans described in Section 7 above, that have vested through the
date of termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan, provided that the
term during which Employee is entitled to continue receiving his salary pursuant
to Section 8(f)(ii)(A) hereof shall increase from six months to one year.
9. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent.
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Upon termination of Employee's employment with Sabratek for any reason, he shall
promptly deliver to Sabratek all such items that are then in his possession or
control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of six months after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from
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the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 9
(a), (b) and (c) and 10(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
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remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such violation by Employee and any and all
persons directly or indirectly acting for or with him, as the case may be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term
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for any claims that may be made against him with respect to his service as a
director or officer of Sabratek.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, between Sabratek and
Employee, provided that the execution of this Agreement shall not adversely
affect (i) any award previously made to Employee under any compensation plan
maintained by Sabratek, or (ii) any statements regarding the vesting of options
or other benefits in
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such prior agreements. Payments and benefits provided under this Agreement are
in lieu of any payments or other benefits under any severance program or policy
of Sabratek to which Employee would otherwise be entitled.
19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
23. ARBITRATION.
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Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 11 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek, Sabratek shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
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25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Joseph P. Moser
FAX: (847) 647-2382
and
Joseph P. Moser
25 W 741 Marshall Lane
Wheaton, Illinois 60188
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26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:__________________________________________
Stephen L. Holden, President
__________________________________________
Joseph P. Moser
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EXHIBIT 10.43
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Vincent J. Capponi ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee
for the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties") agree as follows:
<PAGE> 2
1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because 40 percent or more of the combined voting power of the
then outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained for
employees of Sabratek, or (ii) any corporation that, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of Sabratek in
the same proportion as their ownership of stock of Sabratek immediately prior to
such acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3
below, as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES. Until the date of termination of his employment
hereunder, Employee shall be employed as Vice President and Chief Operating
Officer, reporting to the Chief Executive Officer or his designee. In his
capacity as Vice President and Chief Operating Officer,
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<PAGE> 5
Employee shall have the customary powers, responsibilities and authorities of
vice president and chief operating officer of corporations of the size, type and
nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $175,000.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion increase Employee's Salary accordingly. The term "Salary" as
used in this Agreement shall refer to his Salary at any time as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 40% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 50% of his Salary if he achieves
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100% of specified performance objectives, or (iii) less than 60% of his Salary
if he achieves 120% of specified performance objectives for any Year.
The performance objectives shall be determined and approved at the beginning of
each Year by the Chief Executive Officer or his designee and agreed to by
Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional
bonuses during the Term. The Chief Executive Officer or his designee shall
determine, in its discretion, the occasion for payment, and the amount, of any
such bonus.
5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel
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<PAGE> 7
accident insurance, hospitalization insurance, surgical insurance, major and
excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation and any other employee benefit plans or programs that may be
sponsored by Sabratek from time to time, including plans that supplement the
above-listed types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT.
Employee may terminate his employment voluntarily at any time. If he does so,
his entitlement hereunder shall be the same as if Sabratek had terminated his
employment for Cause. The Parties may terminate this Agreement by mutual
agreement at any time. If they do so, Employee's entitlement shall be as the
Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the
event of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred compensation
plan of Sabratek;
(iv) any other compensation or benefits, including without limitation,
benefits under equity grants and awards described in Section 5 above and
employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may
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<PAGE> 8
then be entitled in accordance with the applicable terms and conditions of each
grant, award or plan; and
(v) reimbursement in accordance with Section 6 above of any
business expenses incurred by Employee through the date of termination but not
yet paid to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment
is terminated due to his death, his Beneficiary shall be entitled, in addition
to the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
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<PAGE> 9
In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before
such termination, for a period of one year following the date of termination,
such salary to be paid on Sabratek's normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated, such
bonus to be paid at such time annual bonuses are regularly paid by Sabratek; and
(C) continued coverage under the health program maintained by
Sabratek for a period of one year; and
(D) notwithstanding anything in this Section 8(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive
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<PAGE> 10
Covenant" as provided in Section 10(a) hereof, whether or not such action occurs
within the Restrictive Period (as defined in Section 10(a) hereof).
(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right,
upon 30 days' prior written notice, voluntarily to terminate his employment. If
he exercises this right, his employment shall cease and the Term shall terminate
as of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or his designee or Employee
may elect to treat the notice as a termination without Cause of Employee's
employment; or (B) the non-renewal decision was made by Employee, in which case,
the Chief Executive Officer or his designee may elect to treat the notice as a
voluntary termination of employment by Employee.
(i) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee
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benefits under plans described in Section 7 above, that have vested through the
date of termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan, provided that the
period during which Employee shall continue receiving his salary pursuant to
Section 8(f)(ii)(A) hereof shall increase from one year to two years.
9. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent.
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Upon termination of Employee's employment with Sabratek for any reason, he shall
promptly deliver to Sabratek all such items that are then in his possession or
control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of one year after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from
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the date the relief is granted but reduced by the time between the period
when the Restrictive Period began to run and the date of the first violation of
the Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 10(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 9
(a), (b) and (c) and 10(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other
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rights, remedies or damages available to Sabratek under this Agreement or
otherwise at law or in equity, shall be entitled to preliminary and permanent
injunctive relief to prevent or restrain any such violation by Employee and any
and all persons directly or indirectly acting for or with him, as the case may
be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term
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for any claims that may be made against him with respect to his service as a
director or officer of Sabratek.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, including without
limitation, the agreement made and entered into as of June 18, 1996, between
Sabratek and Employee as heretofore amended and supplemented, provided that the
execution of this Agreement shall not adversely (i) affect any award previously
made to Employee
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under any compensation plan maintained by Sabratek, or (ii) any statements
regarding the vesting of options or other benefits in such prior agreements.
Payments and benefits provided under this Agreement are in lieu of any payments
or other benefits under any severance program or policy of Sabratek to which
Employee would otherwise be entitled.
19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21.SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
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22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
23. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 11 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator=s award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek,
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Sabratek shall be obligated to pay any of Employee's expenses and legal fees
arising therefrom only if Employee is successful on the merits pursuant to a
legal judgment, arbitration or settlement.
25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of :
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Vincent J. Capponi
FAX: (847) 647-2382
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and
Vincent J. Capponi
728 Elmwood Avenue
Evanston, Illinois 60202
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By: -------------------------------
K. Shan Padda, Chairman
and Chief Executive Officer
-------------------------------
Vincent J. Capponi
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EXHIBIT 10.44
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Tuan Bui ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder, Employee
shall be employed as Vice President of Research and Development, reporting to
the Chief Operating Officer or his designee. In his capacity as Vice President
of Research and Development, Employee
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shall have the customary powers, responsibilities and authorities of vice
president of research and development of corporations of the size, type and
nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $125,000.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion increase Employee's Salary accordingly. The term "Salary" as
used in this Agreement shall refer to his Salary at any time as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 10% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 20% of his Salary if he achieves
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100% of specified performance objectives, or (iii) less than 30% of his Salary
if he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer or his designee and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer or his designee shall determine, in
its discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel
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accident insurance, hospitalization insurance, surgical insurance, major and
excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation and any other employee benefit plans or programs that may be
sponsored by Sabratek from time to time, including plans that supplement the
above-listed types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of Sabratek;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may
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then be entitled in accordance with the applicable terms and conditions of each
grant, award or plan; and
(v) reimbursement in accordance with Section 6 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
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In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of six months following the date of termination, such
salary to be paid on Sabratek's normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated, such
bonus to be paid at the same time annual bonuses are regularly paid by Sabratek;
and
(C) continued coverage under the health program maintained by
Sabratek for a period of six months; and
(D) notwithstanding anything in this Section 8(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive
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Covenant" as provided in Section 10(a) hereof, whether or not such action occurs
within the Restrictive Period (as defined in Section 10(a) hereof).
(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
30 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, (1) the Chief Executive Officer or his designee or
Employee may elect to treat the notice as a termination without Cause of
Employee's employment, or (2) Employee may elect to treat the notice as
termination for Cause; or (B) the non-renewal decision was made by Employee, in
which case, the Chief Executive Officer or his designee may elect to treat the
notice as a voluntary termination of employment by Employee.
(i) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee
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benefits under plans described in Section 7 above, that have vested through the
date of termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan, provided that the
term during which Employee is entitled to continue receiving his salary pursuant
to Section 8(f)(ii)(A) hereof shall increase from six moths to one year.
9. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent.
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Upon termination of Employee's employment with Sabratek for any reason, he shall
promptly deliver to Sabratek all such items that are then in his possession or
control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of six months after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from
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the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 9
(a), (b) and (c) and 10(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
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remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such violation by Employee and any and all
persons directly or indirectly acting for or with him, as the case may be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term
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for any claims that may be made against him with respect to his service as a
director or officer of Sabratek.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, between Sabratek and
Employee, provided that the execution of this Agreement shall not adversely
affect (i) any award previously made to Employee under any compensation plan
maintained by Sabratek, or (ii) any statements regarding the vesting of options
or other benefits in
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such prior agreements. Payments and benefits provided under this Agreement are
in lieu of any payments or other benefits under any severance program or policy
of Sabratek to which Employee would otherwise be entitled.
19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
23. ARBITRATION.
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Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 11 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek, Sabratek shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
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25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Tuan Bui
FAX: (847) 647-2382
and
Tuan Bui
14436 Greenfield Court
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Green Oaks, Illinois 60048
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:_______________________________________
Vincent J. Capponi, Chief Operating
Officer
________________________________________
Tuan Bui
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EXHIBIT 10.45
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Stephan C. Beal ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary and commissions provided for in
Section 3 below, as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder, Employee
shall be employed as Vice President of Sales, reporting to the President or his
designee. In his capacity
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as Vice President of Sales, Employee shall have the customary powers,
responsibilities and authorities of vice president of sales of corporations of
the size, type and nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
(a) BASE SALARY. Employee shall receive from Sabratek a Base Salary,
payable in accordance with the regular payroll practices of Sabratek, in a
minimum amount of $100,000. During the Term the Chief Executive Officer or his
designee shall review his Base Salary no less often than once each Year,
commencing January 1, 1999. On the basis of any such review, the Chief Executive
Officer or his designee may in its sole discretion increase Employee's Base
Salary accordingly.
(b) COMMISSIONS. In addition to the Base Salary provided for above,
Employee shall be entitled to receive Commissions related to the sales of
Sabratek's products according to a commission plan determined and approved at
the beginning of each year by the Chief Executive Officer or his designee and
agreed to by Employee. The terms "Base Salary" and "Commissions"
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as used in this Agreement shall refer to his Base Salary and Commissions at any
time as so adjusted and the term "Salary" shall mean the combination of such
Base Salary and Commissions as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 5% of his Base Salary if he achieves 80% of specified performance
objectives, (ii) less than 10% of his Base Salary if he achieves 100% of
specified performance objectives, or (iii) less than 20% of his Base Salary if
he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer or his designee and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer or his designee shall determine, in
its discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
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6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel accident insurance,
hospitalization insurance, surgical insurance, major and excess major medical
insurance, dental insurance, short-term and long-term disability insurance, sick
leave (including Salary continuation arrangements), holidays, vacation and any
other employee benefit plans or programs that may be sponsored by Sabratek from
time to time, including plans that supplement the above-listed types of plans,
whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(A) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
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(B) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of Sabratek;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan; and
(v) reimbursement in accordance with Section 6 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(C) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 8(b), to:
(i) Employee's Base Salary, at the rate in effect immediately before
such termination, payable through the end of the month in which the proceeds of
his life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
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(D) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(E) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
(F) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
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(A) his Base Salary, at the rate in effect immediately before such
termination, for a period of six months following the date of termination and
Commissions in an amount equal to six times the monthly average of the
Commissions earned by Employee for the 18 months preceding the month in which
his employment is terminated, such amounts to be paid on Sabratek's normal
payroll schedule; and
(B) a prorated annual bonus for the year in which terminated, such
bonus to be paid at the same time annual bonuses are regularly paid by Sabratek;
and
(C) continued coverage under the health program maintained by
Sabratek for a period of six months; and
(D) notwithstanding anything in this Section 8(f) to the contrary,
Sabratek shall have no further obligation to make any Salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive Covenant" as provided in
Section 10(a) hereof, whether or not such action occurs within the Restrictive
Period (as defined in Section 10(a) hereof).
(G) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
30 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(H) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in
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effect on the date of delivery of such notice, unless: (A) the non-renewal
decision was made by Sabratek, in which case, the Chief Executive Officer or his
designee or Employee may elect to treat the notice as a termination without
Cause of Employee's employment; or (B) the non-renewal decision was made by
Employee, in which case, the Chief Executive Officer or his designee may elect
to treat the notice as a voluntary termination of employment by Employee.
(I) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee benefits under plans described in Section 7 above, that have
vested through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan, provided that the term during which Employee is entitled to continue
receiving his Base Salary and Commissions pursuant to Section 8(f)(ii)(A) hereof
shall increase from six months to one year.
9. CONFIDENTIALITY AND LOYALTY.
(A) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public
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(collectively, "Confidential Information") regarding Sabratek and that any such
Confidential Information is the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(B) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent. Upon termination of Employee's
employment with Sabratek for any reason, he shall promptly deliver to Sabratek
all such items that are then in his possession or control.
(C) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(D) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(A) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of six months after
termination of his employment with
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Sabratek for any reason (the "Restrictive Period"), he will not directly or
indirectly compete with the business of Sabratek as conducted on the date of
such termination, including, but not by way of limitation, by (i) directly or
indirectly owning, managing, operating, controlling, financing, (ii) directly or
indirectly serving as an employee, officer or director of or consultant to, or
(iii) soliciting or inducing, or attempting to solicit or induce, any employee
or agent of Sabratek to terminate employment with Sabratek and become employed
by, any person, firm, partnership, corporation, trust or other entity that owns
or operates an entity that is engaged in the same or similar business as
Sabratek as conducted on the date of such termination (the "Restrictive
Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from the date the relief is granted but reduced by the time between the period
when the Restrictive Period began to run and the date of the first violation of
the Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
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(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections
9(a), (b) and (c) and 10(a) above are reasonable and necessary for the
protection of the legitimate business interests of Sabratek, for which monetary
damages alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such violation by Employee and any and all
persons directly or indirectly acting for or with him, as the case may be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's
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death, or of a judicial determination of his incompetence, reference in this
Agreement to Employee shall be deemed to refer, as appropriate, to his
Beneficiary, estate or other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term for any claims that may be made against him with respect to
his service as a director or officer of Sabratek.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
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16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, between Sabratek and
Employee, provided that the execution of this Agreement shall not adversely
affect (i) any award previously made to Employee under any compensation plan
maintained by Sabratek, or (ii) any statements regarding the vesting of options
or other benefits in such prior agreements. Payments and benefits provided under
this Agreement are in lieu of any payments or other benefits under any severance
program or policy of Sabratek to which Employee would otherwise be entitled.
19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either
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Party of any breach by the other Party of any condition or provision contained
in this Agreement to be performed by such other Party shall be deemed a waiver
of a similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Party to be
charged with the waiver. No delay by either Party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
23. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 11 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office
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of Sabratek, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that the Executive shall be
entitled to seek specific performance of his right to be paid through the date
of termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek, Sabratek shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
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If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Stephan C. Beal
FAX: (847) 647-2382
and
Stephan C. Beal
33 Barstow Avenue
Norwell, MA 02061
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
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27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:_________________________________________
Stephen L. Holden, President
_________________________________________
Stephan C. Beal
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EXHIBIT 10.46
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Stephen L. Axel ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties") agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder,
Employee shall be employed as Vice President of Marketing, reporting to the
President or his designee. In his capacity as Vice President of Marketing,
Employee shall have the customary powers, responsibilities
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<PAGE> 5
and authorities of vice president of marketing of corporations of the size,
type and nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $120,000.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion increase Employee's Salary accordingly. The term "Salary" as
used in this Agreement shall refer to his Salary at any time as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 10% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 20% of his Salary if he achieves
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<PAGE> 6
100% of specified performance objectives, or (iii) less than 30% of his Salary
if he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer or his designee and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer or his designee shall determine, in
its discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel
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<PAGE> 7
accident insurance, hospitalization insurance, surgical insurance, major and
excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation and any other employee benefit plans or programs that may be
sponsored by Sabratek from time to time, including plans that supplement the
above-listed types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of Sabratek;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may
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then be entitled in accordance with the applicable terms and conditions of each
grant, award or plan; and
(v) reimbursement in accordance with Section 6 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
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In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of six months following the date of termination, such
salary to be paid on Sabratek's normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated, such
bonus to be paid at the same time annual bonuses are regularly paid by Sabratek;
and
(C) continued coverage under the health program maintained by
Sabratek for a period of six months; and
(D) notwithstanding anything in this Section 8(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive
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Covenant" as provided in Section 10(a) hereof, whether or not such action occurs
within the Restrictive Period (as defined in Section 10(a) hereof).
(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
60 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or his designee or Employee
may elect to treat the notice as a termination without Cause of Employee's
employment; or (B) the non-renewal decision was made by Employee, in which case,
the Chief Executive Officer or his designee may elect to treat the notice as a
voluntary termination of employment by Employee.
(i) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee
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benefits under plans described in Section 7 above, that have vested through the
date of termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan, provided that the
term during which Employee is entitled to continue receiving his salary pursuant
to Section 8(f)(ii)(A) hereof shall increase from six months to one year.
9. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent.
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Upon termination of Employee's employment with Sabratek for any reason, he shall
promptly deliver to Sabratek all such items that are then in his possession or
control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of six months after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from
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the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 9
(a), (b) and (c) and 10(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other
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rights, remedies or damages available to Sabratek under this Agreement or
otherwise at law or in equity, shall be entitled to preliminary and permanent
injunctive relief to prevent or restrain any such violation by Employee and any
and all persons directly or indirectly acting for or with him, as the case may
be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term
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for any claims that may be made against him with respect to his service as a
director or officer of Sabratek.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, between Sabratek and
Employee, provided that the execution of this Agreement shall not adversely
affect (i) any award previously made to Employee under any compensation plan
maintained by Sabratek, or (ii) any statements regarding the vesting of options
or other benefits in
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such prior agreements. Payments and benefits provided under this Agreement are
in lieu of any payments or other benefits under any severance program or policy
of Sabratek to which Employee would otherwise be entitled.
19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
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23. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 11 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek, Sabratek shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
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25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Stephen L. Axel
FAX: (847) 647-2382
and
Stephen L. Axel
319 Lakeview Court
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Deerfield, Illinois 60015
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:______________________________________
Stephen L. Holden, President
______________________________________
Stephen L. Axel
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Exhibit 10.47
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Paul S. Jurewicz ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder, Employee
shall be employed as Senior Vice President and Chief Financial Officer,
reporting to the President or his designee. In his capacity as Senior Vice
President and Chief Financial Officer, Employee shall have
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the customary powers, responsibilities and authorities of senior vice president
and chief financial officer of corporations of the size, type and nature of
Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $175,000.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion increase Employee's Salary accordingly. The term "Salary" as
used in this Agreement shall refer to his Salary at any time as so adjusted.
4. BONUSES.
(a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus for
each Year or portion thereof during the Term, which bonus shall not be (i) less
than 20% of his Salary if he achieves 80% of specified performance objectives,
(ii) less than 30% of his Salary if he achieves
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100% of specified performance objectives, or (iii) less than 40% of his Salary
if he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer or his designee and agreed to by Employee.
(b) SPECIAL BONUS. Employee shall be eligible to receive additional bonuses
during the Term. The Chief Executive Officer or his designee shall determine, in
its discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel
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accident insurance, hospitalization insurance, surgical insurance, major and
excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation and any other employee benefit plans or programs that may be
sponsored by Sabratek from time to time, including plans that supplement the
above-listed types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of Sabratek;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may
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then be entitled in accordance with the applicable terms and conditions of each
grant, award or plan; and
(v) reimbursement in accordance with Section 6 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
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In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of one year following the date of termination, such
salary to be paid on Sabratek's normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated, such
bonus to be paid at such time annual bonuses are regularly paid by Sabratek; and
(C) continued coverage under the health program maintained by
Sabratek for a period of one year; and
(E) notwithstanding anything in this Section 8(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive
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Covenant" as provided in Section 10(a) hereof, whether or not such action occurs
within the Restrictive Period (as defined in Section 10(a) hereof).
(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
30 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or his designee or Employee
may elect to treat the notice as a termination without Cause of Employee's
employment; or (B) the non-renewal decision was made by Employee, in which case,
the Chief Executive Officer or his designee may elect to treat the notice as a
voluntary termination of employment by Employee.
(i) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee
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benefits under plans described in Section 7 above, that have vested through the
date of termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan, provided that the
period during which Employee shall continue receiving his salary pursuant to
Section 8(f)(ii)(A) hereof shall increase from one year to two years.
9. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent.
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Upon termination of Employee's employment with Sabratek for any reason, he shall
promptly deliver to Sabratek all such items that are then in his possession or
control.
(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of one year after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from
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the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 9
(a), (b) and (c) and 10(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other
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rights, remedies or damages available to Sabratek under this Agreement or
otherwise at law or in equity, shall be entitled to preliminary and permanent
injunctive relief to prevent or restrain any such violation by Employee and any
and all persons directly or indirectly acting for or with him, as the case may
be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term
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for any claims that may be made against him with respect to his service as a
director or officer of Sabratek.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, including without
limitation, the agreement made and entered into as of July 6, 1998, between
Sabratek and Employee as heretofore amended and supplemented, provided that the
execution of this Agreement shall not adversely affect (i) any award previously
made to Employee
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under any compensation plan maintained by Sabratek, or (ii) any statements
regarding the vesting of options or other benefits in such prior agreements.
Payments and benefits provided under this Agreement are in lieu of any payments
or other benefits under any severance program or policy of Sabratek to which
Employee would otherwise be entitled.
19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
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22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
23. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 11 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek,
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Sabratek shall be obligated to pay any of Employee's expenses and legal fees
arising therefrom only if Employee is successful on the merits pursuant to a
legal judgment, arbitration or settlement.
25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Paul S. Jurewicz
FAX: (847) 647-2382
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and
Paul S. Jurewicz
2261 Churchill
Libertyville, Illinois 60048
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:_________________________________________
Stephen L. Holden, President
_________________________________________
Paul S. Jurewicz
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EXHIBIT 10.48
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Mary Beth Blue ("Employee").
WITNESSETH:
WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and
WHEREAS, Sabratek wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:
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1. DEFINITIONS.
(a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "BOARD" shall mean the Board of Directors of Sabratek.
(c) "CAUSE" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that Sabratek in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or
(iii) a material breach by Employee of any provision of this Agreement.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or
(ii) The individuals who, as of the date hereof, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of Sabratek, of any new
director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Agreement,
be considered as a member or members of the Board; or
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(iii) Approval by stockholders of Sabratek of (A) a merger or
consolidation of Sabratek if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of Sabratek outstanding
immediately before such merger or consolidation; or (B) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained for employees of
Sabratek, or (ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of Sabratek in the same
proportion as their ownership of stock of Sabratek immediately prior to such
acquisition.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board.
(g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) to
perform substantially his material duties under this Agreement for a period of
three consecutive months, or for an aggregate of 135 days during any 12-
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<PAGE> 4
month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.
(h) "SALARY" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(i) "TERM OF EMPLOYMENT" OR "TERM" shall mean the period specified in
Section 2(b) below.
(j) "YEAR" shall mean the calendar year, which is the fiscal year of
Sabratek.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ Employee,
and Employee hereby accepts continued employment with Sabratek, in the positions
and with the duties and responsibilities set forth below and upon such other
terms and conditions as are hereinafter stated.
(b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the date
hereof and shall terminate on September 27, 1999; provided, however, that unless
either Party gives three months' written notice to the other that the Term shall
not continue past September 27, 1999 or any subsequent 12-month period for which
the Term has previously been extended, the Term shall thereafter automatically
extend for an additional 12-month period, unless the Term is sooner terminated
as provided in Section 8 below.
(c) TITLES AND DUTIES.
(i) Until the date of termination of his employment hereunder,
Employee shall be employed as Director of Clinical Services, reporting to the
President or his designee. In his capacity as Director of Clinical Services,
Employee shall have the customary powers, responsibilities
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<PAGE> 5
and authorities of a director of clinical services of corporations of the size,
type and nature of Sabratek.
(d) TIME AND EFFORT.
(i) Employee agrees to devote his full business time to the affairs of
Sabratek in order to carry out his duties and responsibilities under this
Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c).
3. SALARY.
Employee shall receive from Sabratek a Salary, payable in accordance with
the regular payroll practices of Sabratek, in a minimum amount of $100,625.
During the Term the Chief Executive Officer or his designee shall review his
Salary no less often than once each Year, commencing January 1, 1999. On the
basis of any such review, the Chief Executive Officer or his designee may in its
sole discretion increase Employee's Salary accordingly. The term "Salary" as
used in this Agreement shall refer to his Salary at any time as so adjusted.
4. BONUSES.
Employee shall be eligible to receive additional bonuses during the Term.
The Chief Executive Officer or his designee shall determine, in its discretion,
the occasion for payment, and the amount, of any such bonus.
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5. EQUITY OPPORTUNITY.
During the Term, Employee shall be eligible to receive grants of options to
purchase shares of Sabratek's stock and awards of shares of Sabratek's stock,
either or both as determined by the Chief Executive Officer or his designee,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek.
7. EMPLOYEE BENEFIT PLANS.
During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel accident insurance,
hospitalization insurance, surgical insurance, major and excess major medical
insurance, dental insurance, short-term and long-term disability insurance, sick
leave (including salary continuation arrangements), holidays, vacation and any
other employee benefit plans or programs that may be sponsored by Sabratek from
time to time, including plans that supplement the above-listed types of plans,
whether funded or unfunded.
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8. TERMINATION OF EMPLOYMENT.
(a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee may
terminate his employment voluntarily at any time. If he does so, his entitlement
hereunder shall be the same as if Sabratek had terminated his employment for
Cause. The Parties may terminate this Agreement by mutual agreement at any time.
If they do so, Employee's entitlement shall be as the Parties mutually agree.
(b) GENERAL. Notwithstanding anything to the contrary herein, in the event
of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to Sabratek's
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of Sabratek;
(iv) any other compensation or benefits, including without limitation,
benefits under equity grants and awards described in Section 5 above and
employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan; and
(v) reimbursement in accordance with Section 6 above of any business
expenses incurred by Employee through the date of termination but not yet paid
to him.
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(c) TERMINATION DUE TO DEATH. In the event that Employee's employment is
terminated due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before such
termination, payable through the end of the month in which the proceeds of his
life insurance under Sabratek's group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death occurs.
(d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the Chief
Executive Officer his position regarding any dispute relating to the existence
of such Cause. Unless rescinded by the Chief Executive Officer, termination
shall be effective on the date specified in the original notice.
In the event that Employee's employment is terminated for Cause, he shall
be entitled only to the compensation and benefits specified in Section 8(b).
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(f) TERMINATION WITHOUT CAUSE.
(i) Termination without Cause shall mean: termination of Employee's
employment by Sabratek and shall include any reason for termination other than
(i) due to death, Disability or Cause, (ii) by Employee voluntarily, or (iii) by
mutual agreement of Employee and Sabratek. Sabratek shall provide Employee ten
days' prior written notice of termination by it without Cause.
(ii) In the event of termination by Sabratek of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of six months following the date of termination, such
salary to be paid on Sabratek's normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated, such
bonus to be paid at the same time annual bonuses are regularly paid by Sabratek;
and
(C) continued coverage under the health program maintained by
Sabratek for a period of six months; and
(D) notwithstanding anything in this Section 8(f) to the contrary,
Sabratek shall have no further obligation to make any salary or bonus payments
for any period following the first date on which Employee takes any action which
would fall within the definition of "Restrictive Covenant" as provided in
Section 10(a) hereof, whether or not such action occurs within the Restrictive
Period (as defined in Section 10(a) hereof).
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(g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right, upon
30 days' prior written notice, voluntarily to terminate his employment. If he
exercises this right, his employment shall cease and the Term shall terminate as
of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if Sabratek had terminated his employment for
Cause, as provided in Section 8(e).
(h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, the Chief Executive Officer or his designee or Employee
may elect to treat the notice as a termination without Cause of Employee's
employment; or (B) the non-renewal decision was made by Employee, in which case,
the Chief Executive Officer or his designee may elect to treat the notice as a
voluntary termination of employment by Employee.
(i) CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii), including, but not limited to, any other
compensation or benefits under equity grants and awards described in Section 5
above and employee benefits under plans described in Section 7 above, that have
vested through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each
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grant, award or plan, provided that the term during which Employee is entitled
to continue receiving his salary pursuant to Section 8(f)(ii)(A) hereof shall
increase from six months to one year.
9. CONFIDENTIALITY AND LOYALTY.
(a) GENERAL.
(i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.
(ii) Accordingly, Employee hereby agrees that, during and subsequent to
the Term, he shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by Sabratek,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by Employee of his duties hereunder.
(b) RETURN OF DOCUMENTS. All records, files, documents and other materials
or copies thereof relating to Sabratek's business that Employee prepares or uses
shall be and remain the sole property of Sabratek and shall not be removed from
Sabratek's premises without its written consent. Upon termination of Employee's
employment with Sabratek for any reason, he shall promptly deliver to Sabratek
all such items that are then in his possession or control.
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(c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.
(d) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 9(a), (b) or (c), Sabratek shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of six months after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 10(a), computed
from the date the relief is granted but reduced by the time between the period
when the Restrictive Period began to run and the date of the first violation of
the Restrictive Covenant by Employee.
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(b) EXCEPTIONS. Notwithstanding anything to the contrary in Section 10(a),
the Restrictive Covenant shall not:
(i) apply if Sabratek terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital stock
or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.
(c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 11(a) above, Sabratek shall be entitled to relief as
provided in Section 11 below.
11. REMEDIES/SANCTIONS.
Employee hereby acknowledges that the restrictions contained in Sections 9
(a), (b) and (c) and 10(a) above are reasonable and necessary for the protection
of the legitimate business interests of Sabratek, for which monetary damages
alone may not provide an adequate remedy, that any violation of these
restrictions would cause substantial injury to Sabratek and such interests, that
Sabratek would not have entered into this Agreement without receiving the
additional consideration offered by Employee in binding himself to these
restrictions and that such restrictions were a material inducement to Sabratek
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such
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violation by Employee and any and all persons directly or indirectly acting for
or with him, as the case may be.
12. BENEFICIARIES/REFERENCES.
Employee shall be entitled to select (and change, to the extent permitted
under any applicable law) a Beneficiary or Beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.
13. WITHHOLDING TAXES.
All payments to Employee or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Sabratek's indemnification of Employee,
and Sabratek shall indemnify him to the fullest extent permitted by applicable
law consistent with Sabratek's Certificate of Incorporation and By-Laws as in
effect at the beginning of the Term, with respect to any action or failure to
act on his part while he is an officer, director or employee of Sabratek.
Sabratek shall cause Employee to be covered at all times by directors' and
officers' liability insurance on terms no less favorable than the directors' and
officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term for any claims that may be made against him with respect to
his service as a director or officer of Sabratek.
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15. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Employee's
entitlement to participate fully in compensation, employee benefit and other
plans of Sabratek in which senior executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns.
17. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
18. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, between Sabratek and
Employee, provided that the execution of this Agreement shall not adversely
affect (i) any award previously made to Employee under any compensation plan
maintained by Sabratek, or (ii) any statements regarding the vesting of options
or other benefits in such prior agreements. Payments and benefits provided under
this Agreement are in lieu of any payments or other benefits under any severance
program or policy of Sabratek to which Employee would otherwise be entitled.
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19. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
20. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Employee's employment with Sabratek.
22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.
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23. ARBITRATION.
Any dispute or controversy other than a dispute or controversy arising
under Sections 9 or 11 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES.
All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek, Sabratek shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
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25. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of:
If to Sabratek or the Board:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
FAX: (847) 647-2382
with a copy to:
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
Attention: David S. Guin
PHONE: (312) 750-3501
FAX: (312) 750-8600
If to Employee:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Mary Beth Blue
FAX: (847) 647-2382
and
Mary Beth Blue
18506 Paloma Wood
San Antonio, Texas 78259
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26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.
SABRATEK CORPORATION
By:_____________________________________
Stephen L. Holden, President
____________________________________
Mary Beth Blue
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EXHIBIT 10.49
SABRATEK CORPORATION
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of February 25, 1997, between Sabratek
Corporation, a Delaware corporation ("Sabratek"), and Steven J. Richard
("Executive").
Pursuant to an Asset Purchase Agreement (the "Purchase Agreement") among
Sabratek, Elliot R. Mandell and Rocap, Inc., a Massachusetts corporation
("Rocap"), Sabratek will acquire the assets of Rocap and will operate the
business currently operated by Rocap (the "Business") from and after the closing
under the Purchase Agreement through a new subsidiary of Sabratek or as a
division of Sabratek (either, the "Company").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive hereby
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date hereof and ending as
provided in paragraph 5 hereof (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the Vice
President of Operations of the Business and shall have the duties and
responsibilities delegated to Executive by the Company's board of directors (the
"Board") or the Company's Chief Executive Officer (the "CEO") or the Company's
President (the "President").
(b) Executive shall report directly to the President (or to another senior
executive of the Business designated by the President) and shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
3. Base Salary and Benefits.
(a) During the Employment Period, Executive's base salary shall be $100,000
per annum or such higher rate as the CEO may designate from time to time (the
"Base Salary"), which salary shall be payable in regular installments in
accordance with the Company's general payroll
<PAGE> 2
practices and shall be subject to customary withholding. The Executive's base
salary level shall be reviewed annually, and Executive shall be eligible for
performance based increases on the same basis as other employees of Sabratek.
In addition, during the Employment Period, Executive shall be eligible to
participate in all of the Company's employee benefit programs.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, Executive may be awarded a cash or
stock bonus or options to purchase Sabratek common stock following the end of
each fiscal year during the Employment Period based upon Executive's performance
and the Company's operating results during each year.
4. Stock Options.
(a) As of the date of this Agreement, Executive is hereby granted options
to acquire 20,000 shares of Sabratek's common stock (the "Options") pursuant to
Sabratek's Amended and Restated 1993 Stock Option Plan (the "Option Plan"). The
Options shall have a 10-year term and shall have an exercise price per share
equal to the closing sales price for the Sabratek common stock on the trading
day prior to the date of grant. Subject to the provisions of this paragraph 4,
the Options shall vest and become exercisable by Executive as follows: (i)
Options to purchase 2,000 shares shall be fully vested and exercisable at the
date hereof; (ii) Options to purchase 4,500 shares shall vest and become
exercisable on the first anniversary of the date hereof; (iii) Options to
purchase 4,500 shares shall vest and become exercisable on the second
anniversary of the date hereof; (iv) Options to purchase 4,500 shares shall vest
and become exercisable on the third anniversary of the date hereof; and (v)
Options to purchase 4,500 shares shall vest and become exercisable on the fourth
anniversary of the date hereof.
(b) If the Employment Period is terminated by the Company for Cause (as
defined below), all unvested Options will immediately be forfeited to the
Company and Executive will have no further rights in respect thereof.
(c) If the Employment Period is terminated by the Company without Cause,
or if the Employment Period is terminated because of the death or permanent
disability or incapacity (which shall mean the inability on a permanent basis to
carry out the duties and responsibilities of the position on an effective basis
due to casualty, illness, injury, or other impairment of mental, physical or
emotional faculties, as determined by the President or CEO exercising reasonable
judgement) of Executive, the unvested Options that are scheduled to vest on the
next anniversary of the date hereof under paragraph 4(a) will immediately vest
and become exercisable and all other unvested Options will immediately be
forfeited to the Company and Executive will have no further rights in respect
thereof.
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(d) In the event of a Sabratek Change of Control (as defined below), all
unvested Options will immediately vest and become exercisable.
(e) If the Employment Period is terminated by the resignation of Executive,
all unvested Options will immediately be forfeited to the Company and Executive
will have no further rights in respect thereof.
(f) Following termination of the Employment Period for any reason, all
vested Options shall be exercisable by Executive (or his executor, administrator
or other legal representative) for a period of 60 days from the date of
termination.
(g) At the time of the grant of the Options, Executive shall be issued an
option grant letter in the form customarily used by the Company for option
grants made under the Option Plan, and the Options shall be subject to the terms
and conditions of the Option Plan in addition to the terms set forth in this
Agreement.
(h) For purposes of this paragraph 4, a "Sabratek Change of Control" shall
be deemed to occur upon (i) the sale of all or substantially all of the assets
of Sabratek, (ii) a merger or consolidation of Sabratek with another
corporation, or an exchange of the securities of Sabratek for the securities of
another corporation, with the result that the shareholders of Sabratek
immediately before such merger, consolidation or exchange own less than a
majority of the outstanding voting securities of the surviving corporation of
such merger or consolidation, or of the corporation in which such shareholders
own securities as a result of and following such exchange, immediately after
such merger, consolidation or exchange, or (iii) the acquisition by any person
or group (within the meaning of Section 13(d) under the Securities Exchange Act
of 1934, as amended) of a majority of the outstanding common stock of Sabratek
in one or a series of related transactions. Notwithstanding the foregoing, a
change of control shall not be deemed to occur as a result of any of the
foregoing transactions if the corporate existence of Sabratek is not affected by
such transaction and Sabratek's chief executive officer and directors retain
their positions with Sabratek (and constitute at least a majority of the board
of directors) following the transaction.
5. Term.
(a) The Employment Period shall terminate upon the date of Executive's
resignation, death or permanent disability or incapacity (which shall mean the
inability on a permanent basis to carry out the duties and responsibilities of
the position on an effective basis due to casualty, illness, injury, or other
impairment of mental, physical or emotional faculties, as determined by the
President or CEO exercising reasonable judgement), and the Employment Period may
be terminated by the Company at any time prior to such date for Cause (as
defined below) or without Cause by delivery of notice to Executive of such
termination.
(b) If the Employment Period is terminated by the Company without Cause,
Executive shall be entitled to receive his Base Salary (i) through the second
anniversary of the date of this Agreement, in the event such termination occurs
prior to the first anniversary of the date hereof or (ii) for one year following
such termination, in the event such termination occurs on or
- 3 -
<PAGE> 4
after the first anniversary of the date hereof, provided that Executive shall be
entitled to such continuation of his Base Salary if and only if Executive has
not breached in any material respect the provisions of paragraphs 6 through 10
hereof. In the event that Executive is terminated without Cause by the Company,
the company shall pay the reasonable relocation expenses of Executive to
relocate his family to the Commonwealth of Massachusetts, if Executive's
principal place of business is in any other state at the time of such
termination. The amounts payable pursuant to this paragraph 5(b) shall be
reduced by the amount of any compensation Executive receives with respect to any
other employment during such Base Salary continuation period.
(c) If the Employment Period is terminated by the Company for Cause or is
terminated by the Executive's resignation, death, or disability pursuant to
paragraph 5(a) above, Executive shall be entitled to receive his Base Salary
through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses hereunder (if
any) which accrue after the termination of the Employment Period shall cease
upon such termination.
(e) For purposes of this Agreement, "Cause" shall mean (i) a material
breach of this Agreement by Executive, (ii) a material breach of Executive's
duty of loyalty to Sabratek or any of its subsidiaries or any act of dishonesty
or fraud with respect to Sabratek or any of its subsidiaries, (iii) the
commission by Executive of a felony, a crime involving moral turpitude or other
act or omission causing material harm to the standing and reputation of Sabratek
and its subsidiaries, or (iv) Executive's continued failure to perform his
duties as directed by the Board or the President or CEO as contemplated by this
Agreement.
(f) The Company may offset any amounts Executive owes it or its
subsidiaries against any amounts it owes Executive hereunder.
6. Confidential Information. Executive acknowledges that the information,
observations and data obtained by him while employed by Sabratek and its
subsidiaries (including those obtained while employed by Rocap prior to the date
of this Agreement and the acquisition of Rocap's assets by the Company)
concerning the business or affairs of Sabratek (including the Business) or any
subsidiary of Sabratek ("Confidential Information") are the property of Sabratek
or such subsidiary. Therefore, Executive agrees that he shall not disclose to
any unauthorized person or use for his own purposes any Confidential Information
without the prior written consent of the President or CEO, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions.
Executive shall deliver to Sabratek at the termination of the Employment Period,
or at any other time Sabratek may request, all memoranda, notes, plans, records,
reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information, Work Product (as
defined below) or the business of Sabratek or any subsidiary of Sabratek which
he may then possess or have under his control.
7. Inventions and Patents. Executive acknowledges that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable) which
relates to Sabratek's or any of its
- 4 -
<PAGE> 5
subsidiaries' actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by Executive while employed by Sabratek and its subsidiaries, or by Rocap
("Work Product") belong to Sabratek or such subsidiary. Executive shall promptly
disclose such Work Product to the President or CEO and perform all actions
reasonably requested by the President or CEO (whether during or after the
Employment Period) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments).
8. Non-Compete. In further consideration of the compensation to be
paid to Executive hereunder, Executive acknowledges that in the course of his
employment with the Sabratek or any of its subsidiaries he shall become
familiar, and during his employment with Rocap he has become familiar, with the
trade secrets of the Business and with other Confidential Information concerning
Sabratek and its predecessors and its subsidiaries and that his services have
been and shall be of special, unique and extraordinary value to Rocap and to
Sabratek and its subsidiaries. Therefore, Executive agrees that, during the
Employment Period and until the later of (i) the second anniversary of the date
of this Agreement and (ii) the first anniversary of the expiration of the
Employment Period (the "Non-Compete Period"), he shall not directly or
indirectly own any interest in, manage, control, participate in, consult with,
render services for, or in any manner engage in any business competing with the
businesses of Sabratek or its subsidiaries, as the businesses of Sabratek and
its subsidiaries exist or are in process on the date of the termination of
Executive's employment, within any geographical area in which Sabratek or its
subsidiaries engage or plan to engage in such businesses. Nothing herein shall
prohibit Executive from (i) employment as a pharmacist in a retail pharmacy
business or in a pharmacy business maintained as part of a hospital, health
maintenance organization or other similar entity providing health services to
the public where such pharmacy business is only serving such entity providing
health services or (ii) being a passive owner of not more than 2% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as Executive has no active participation in the business of such
corporation.
9. Non-Solicitation During the Employment Period and until the
later of (i) the second anniversary of the date of this Agreement and (ii) the
first anniversary of the expiration of the Employment Period (the
"Non-Solicitation Period"), Executive shall not directly or indirectly through
another entity (i) induce or attempt to induce any employee of Sabratek or any
of its subsidiaries (including the Company) to leave the employ of Sabratek or
such subsidiary, or in any way interfere with the relationship between Sabratek
or any such subsidiary and any employee thereof, or (ii) induce or attempt to
induce any customer, supplier, licensee, licensor, franchisee or other business
relation of Sabratek or any such subsidiary to cease doing business with
Sabratek or such subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and Sabratek
or any such subsidiary (including, without limitation, making any negative
statements or communications about Sabratek or its subsidiaries).
10. Enforcement. If, at the time of enforcement of paragraph 6, 7, 8
or 9 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. Because
5
<PAGE> 6
Executive's services are unique and because Executive has access to Confidential
Information and Work Product, the parties hereto agree that money damages would
not be an adequate remedy for any breach of this Agreement. Therefore, in the
event a breach of threatened breach of this Agreement, Sabratek or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdictions for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security). In addition, in the event of an alleged breach or violation by
Executive of paragraph 9 and/or 10, the Non-Compete Period and/or
Non-Solicitation Period, as applicable, shall be tolled until such breach or
violation has been duly cured. Executive agrees that the restrictions contained
in paragraphs 9 and 10 are reasonable.
11. Executive's Representations. Executive hereby represents and warrants
to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall
be the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under his
Agreement and that he fully understands the terms and conditions contained
herein.
12. Survival. Paragraphs 7 through 10 and paragraphs 12 through 20 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
13. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
Notices to Executive: Steven J. Richard
5 Constitution Way
Woburn, MA 01940
with a copy to: Kenneth A. Cossingham, Esq.
Cossingham Law Office, P.C.
800 Turnpike Street
Suite 305
North Andover, MA 01845
Notices to Sabratek: Sabratek Corporation
5601 West Howard Street
Niles, IL 60714
Attn: Chief Executive Officer
- 6 -
<PAGE> 7
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Alan G. Berkshire
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice in accordance with this
paragraph to the sending party. Any notice under this Agreement shall be deemed
to have been given when so delivered or mailed.
14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
15. Complete Agreement. This Agreement, the Purchase Agreement,
those documents expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or representations by
or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
16. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
17. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, Sabratek and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of Sabratek.
19. Choice of Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the state of Illinois, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the state of Illinois or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the state of Illinois.
<PAGE> 8
20. Amendment and Waiver. The provisions of this Agreement may be amended
or waived only with the prior written consent of Sabratek and Executive, and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
* * * * *
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SABRATEK CORPORATION
By /s/ Stephen L. Holden
----------------------
Its SVP and CFO
----------------------
-------------------------
STEVEN J. RICHARD
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SABRATEK CORPORATION
By
----------------------
Its
----------------------
/s/ Steven J. Richard
-------------------------
STEVEN J. RICHARD
- 10 -
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE COMPUTATION OF SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $4,871,614 $7,246,457 ($858,116)
Weighted average common
shares outstanding 10,316,418 9,614,278 5,142,763
Basic income (loss) per $0.47 $0.75 ($0.17)
share
Dilutive effect of
options and warrants 829,508 1,280,337 -
outstanding under
treasury stock method
11,145,926 10,894,615 5,142,763
Diluted income (loss) per $0.44 $0.67 ($0.17)
share
</TABLE>
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
Sabratek Foreign Sales Corp., a corporation domiciled in the U.S. Virgin
Islands.
CMS Healthcare, Inc., a corporation organized under the laws of the State of
Florida.
<PAGE> 1
EXHIBIT 23
CONSENT OF KPMG LLP
The Board of Directors
Sabratek Corporation:
We consent to incorporation by reference in the registration statements on Form
S-3 (No.333-31891) and on Form S-8 (Nos. 333-13315, 333-31495 and 333-31503)of
Sabratek Corporation of our report dated March 12, 1999, relating to the
consolidated balance sheets of Sabratek Corporation as of December 31, 1998 and
1997, and the related consolidated statements of operations, comprehensive
income (loss), stockholders' equity (deficit) and cash flows for each of the
years in the three-year period ended December 31, 1998, which report appears in
the December 31, 1998 annual report on Form 10-K of Sabratek Corporation.
/s/ KPMG LLP
Chicago, Illinois
March 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 29,169,606
<SECURITIES> 6,058,200
<RECEIVABLES> 20,221,699
<ALLOWANCES> 835,600
<INVENTORY> 23,972,726
<CURRENT-ASSETS> 80,401,932
<PP&E> 9,785,759
<DEPRECIATION> 2,167,329
<TOTAL-ASSETS> 152,678,606
<CURRENT-LIABILITIES> 9,433,375
<BONDS> 85,000,000
0
0
<COMMON> 108,680
<OTHER-SE> 58,029,377
<TOTAL-LIABILITY-AND-EQUITY> 152,678,606
<SALES> 63,565,732
<TOTAL-REVENUES> 66,909,605
<CGS> 29,965,645
<TOTAL-COSTS> 32,081,693
<OTHER-EXPENSES> 26,247,705
<LOSS-PROVISION> 332,828
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,358,664
<INCOME-TAX> 3,487,050
<INCOME-CONTINUING> 4,871,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,871,614
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.44
</TABLE>
