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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) July 9, 1999
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SABRATEK CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-11831 36-3700639
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
8111 North St. Louis, Skokie, Illinois 60076
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(Address of Principal Executive Offices) (Zip Code)
(847) 720-2400
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS.
(a) On July 9, 1999, Sabratek Corporation, a Delaware corporation,
consummated a transaction in which it acquired all of the issued and outstanding
capital stock of GDS Technology, Inc., an Indiana corporation, in exchange for
216,949 shares of Sabratek common stock. Sabratek acquired the GDS stock under
the terms of a Stock Option Agreement, dated as of August 29, 1997, by and among
Sabratek, GDS and those GDS shareholders who executed the Stock Option
Agreement. The purchase price was determined in accordance with the formula
contained in the Stock Option Agreement. In addition, Sabratek also agreed to
assume, and has repaid substantially all of, GDS's corporate debt in the
aggregate amount of approximately $765,000.
In connection with the transaction, Sabratek also entered into a
Registration Rights Agreement in which Sabratek agreed to file a registration
statement registering the resale by the former GDS shareholders of all 216,949
shares of Sabratek common stock issued to them. In the event that the
registration statement is not declared effective by the Securities Exchange
Commission by September 7, 1999, Sabratek has an obligation to offer to redeem
all of the shares of its common stock which it issued to the former shareholders
of GDS. Under the terms of the stock option agreement, the redemption price for
the shares which Sabratek may be required to redeem will be $23.04 per share
Prior to the acquisition, Sabratek and GDS were associated through a
Supply and Distribution Agreement, dated August 29, 1997. Under the terms of the
Supply and Distribution Agreement, Sabratek acquired the exclusive rights to
diagnostic products assembled and owned by GDS, including the GDS Stat-Site
point of care diagnostic testing device and related disposable tests for use in
the alternate site health care market.
(b) As part of its acquisition of GDS, Sabratek acquired (i) office space
subject to existing leases, (ii) furniture, (iii) fixtures, (iv) equipment and
(v) rights to intellectual property (together, the "Property"). Sabratek intends
to use the Property for the same purposes and in the same manner as it was used
by GDS prior to this acquisition.
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ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
4.6 Registration Rights Agreements, dated as of August
29, 1997, by and among Sabratek Corporation and the
holders of shares of common stock issued GDS
Technology, Inc.
10.60 Stock Option Agreement, dated as of August 29, 1997,
by and among Sabratek Corporation, GDS Technology,
Inc. and holders of common stock issued by GDS
Technology, Inc. (Sabratek hereby agrees to furnish
supplementally to the Securities and Exchange
Commission upon request a copy of any omitted
schedule or exhibit, all of which are listed in the
table of contents to the Stock Option Agreement.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 21, 1999 By: \s\ Stephen L. Holden
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Stephen L. Holden, President
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REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of August 29, 1997, between
Sabratek Corporation, a Delaware corporation (the "Company"), and the holders of
common stock of GDS Technology, Inc., an Indiana corporation ("GDS"), who are
signatories hereto (the "GDS Shareholders").
The Company, GDS and the GDS Shareholders are parties to a
Stock Option Agreement of even date herewith (the "Option Agreement"). Pursuant
to the Option Agreement, Sabratek has the right to purchase all of the common
stock of GDS held by the GDS Shareholders in exchange for the issuance to the
GDS Shareholders of shares of common stock of Sabratek (the "Call Option"), and
the GDS Shareholders have the right, assuming no exercise of the Call Option, to
require Sabratek to purchase all of the common stock of GDS held by the GDS
Shareholders in exchange for the issuance to the GDS Shareholders of shares of
common stock of Sabratek (the "Put Option"). The issuance of Sabratek common
stock to the GDS Shareholders pursuant to the Option Agreement will not be
registered under the Securities Act of 1933, as amended (the "Securities Act")
in reliance upon the exemption provided by Section 4(2) thereof. In order to
induce the GDS Shareholders to enter into the Option Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement. Unless
otherwise provided in this Agreement, capitalized terms used herein shall have
the meanings set forth in the Option Agreement. Certain terms are defined in
Paragraph 8.
The parties hereto agree as follows:
1. Shelf Registration.
(a) Upon the exercise of the Call Option or the Put Option
pursuant to the Option Agreement, the Company will use its best efforts to
register under the Securities Act the resale by the GDS Shareholders of any or
all Registrable Securities in a delayed or continuous offering to the extent
permitted by Rule 415 (or any successor rule thereto) promulgated under the
Securities Act (the "Shelf Registration"), subject to Paragraph 2. Such a
Registration Statement shall be on Form S-3 or another appropriate form
permitting registration of such Registrable Securities for resale by the GDS
Shareholders in the manner or manners designated in writing to the Company by
them (including, without limitation, one or more underwritten Offerings). IN the
event the registration of a delayed or continuous offering is not permitted
under the Securities Act, the Company will provide alternative registration
rights under the Securities Act to the holders of Registrable Securities.
(b) The Company shall use its best efforts to keep the Shelf
Registration continuously effective under the Securities Act from the initial
effectiveness thereof until the
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earliest to occur of (A) the date when all Registrable Securities registered
under the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf Registration or (B) the date when counsel to the
Company shall render an opinion addressed to the GDS Shareholders, to the effect
that all remaining Registrable Securities are freely transferable in the open
market without limitations as to volume and without being required to file any
forms or reports with the Securities and Exchange Commission ("SEC") under the
Securities Act or the rules and regulations thereunder by persons other than
affiliates of the Company or (C) the date which is three years (or such shorter
period specified by Rule 144(k) promulgated under the Securities Act or any
successor rule thereto) after the Closing Date (such period being referred to
herein as the "Effectiveness Period").
(c) If the registration statement relating to the Shelf
Registration ceases to be effective for any reason at any time during the
Effectiveness Period, the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in any
event shall within 30 days of such cessation of effectiveness amend such
registration statement in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof, or file an additional
registration statement covering all of the Registrable Securities for an
Offering to be made by the holders on a delayed or continuous basis as permitted
by the rules and regulations under the Securities Act. In the event the
registration of a delayed or continuos offering is not permitted under the
Securities Act, the Company will provide alternative registration rights under
the Securities Act to the holders of Registrable Securities. If an additional
registration statement is filed, the Company shall use its best efforts to cause
such registration statement to be declared effective as soon as practicable
after such filing and to keep such registration statement continuously effective
for the remainder of the Effectiveness Period.
(d) The Company shall pay for all Registration Expenses
associated with a Shelf Registration as set forth in paragraph 5 hereof.
(e) The holders of a majority of the Registrable Securities
initially included in the Shelf Registration shall have the right to select the
investment banker(s) and manager(s), if any, to administer any underwritten
offering pursuant to the Shelf Registration, subject to the Company's approval
of such person(s).
2. Piggyback Registration.
(a) In the event that the Company intends to register at any
time an underwritten offering of Common Stock by the Company and/or Stockholders
of the Company and the Company desires to exercise the rights set forth in
paragraph 3(a), the Company shall offer the GDS Shareholders the right to
include any or all of their Registrable Securities in such registered offering
(a "Piggyback Notice"). The Company shall include in such registration (a
"Piggyback Registration") all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within 20 days after
delivery of the Piggyback Notice. In the event of a Piggyback Registration, the
Company shall process to effectiveness
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such registration as promptly as practicable, subject to the provisions of
Paragraph 2(g).
(b) In any underwritten Piggyback Registration, each holder of
Registrable Securities who has elected to participate pursuant to Paragraph 2(a)
must agree to sell such holder's Registrable Securities on the same basis
provided in the underwriting arrangements approved by the Company and to timely
complete and execute all questionnaires, powers of attorney, indemnities,
holdback agreements, underwriting agreements and other documents required under
the terms of such underwriting arrangements or by the SEC.
(c) If the managing underwriter(s) for a Piggyback
Registration advise the Company in writing that in their opinion the number of
Registrable Securities and other securities, if any, requested to be included in
such offering exceeds the number of Registrable Securities and other securities,
if any, which can be sold in an orderly manner in such offering without
adversely affecting the marketability of the offering, the number of shares the
Company desires to sell and the number of Registrable Securities and other
securities, if any, requested to be included in such offering shall be reduced,
on a pro rata basis, on the basis of the aggregate number of shares desired to
be included by the Company and each such holder.
(d) The Company shall have the right to select the investment
banker(s) and manager(s) to administer any Piggyback Registration.
(e) The Company shall pay for all Registration Expenses
associated with a Piggyback Registration as set forth in paragraph 5 hereof.
(f) A holder who has given notice to the Company under
Paragraph 2(a) requesting inclusion of any Registrable Securities shall have the
right to withdraw its Registrable Securities from the Piggyback Registration,
but only during the time period and on terms agreed upon among the underwriters
for such underwritten offering and the other holders who wish to continue to
register securities under such Piggyback Registration.
(g) Notwithstanding the foregoing, the Company shall, on
written notice to the holders who have given notice to the Company under
Paragraph 2(a), have the right to withdraw any registration statement filed
pursuant to this Paragraph 2 for a Piggyback Registration at any time prior to
the effective date thereof.
3. Holdback Agreements.
(a) The Company shall have the right to require that each
holder of Registrable Securities shall not effect any public sale or
distribution (including sales pursuant to the Shelf Registration or pursuant to
Rule 144) of common stock of the Company during the ten business days prior to,
and the 90-day period beginning on, the effective date of the registration under
the Securities Act of any underwritten offering of Common Stock by the Company
and/or
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stockholders of the Company, unless the managing underwriter(s) for the public
offering otherwise agree. In order to exercise its rights under this Paragraph
3(a), the Company shall provide holders of Registrable Securities (i) the right
to participate in such underwritten offering as provided in paragraph 2 and (ii)
written notice of the estimated effective date of any such registration at least
ten business days prior to such effectiveness. The restrictions of the this
paragraph 3(a) shall apply whether or not a holder of Registrable Securities
elects to participate on a Piggyback Registration or is able to include in such
Piggyback Registration all Registrable Securities desired to be so included. The
Company shall be entitled to exercise its rights under this Paragraph 3(a) not
more than twice during any calendar year.
(b) The Company shall not effect any public sale or
distribution of its common stock, or any securities convertible into or
exchangeable or exercisable for such securities, during the ten business days
prior to and during the 90-day period beginning on the effective date of any
underwritten Piggyback Registration (except as part of such underwritten
registration or an Exempt Registration), unless the managing underwriter(s) for
the Piggyback Registration otherwise agree.
(c) Each holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to the Shelf Registration
or pursuant to Rule 144) of common stock of the Company during the 30-day period
beginning on the date a notice of the type contemplated by Paragraph 4(e) is
delivered to such holder (or such shorter period specified by the Company).
4. Registration Procedures. Whenever any Registrable
Securities are required to be registered pursuant to this Agreement, the Company
shall use its reasonable best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to the counsel selected by the holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period of time set forth in Paragraph
1, as applicable, and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such
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registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its reasonable best efforts to register or qualify
such Registrable Securities under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) promptly notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the existence of facts or the happening
of any event (without necessarily identifying such facts or event to such
sellers) as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
any such seller, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed or
quoted for trading on each securities exchange on which similar securities
issued by the Company are then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities in any underwritten offering of
Registrable Securities;
(i) make available for reasonable inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, such financial and other
records, corporate documents and properties of the Company as are customarily
made available to such persons on a confidential basis by the issuer in
connection with
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a registered public offering of securities similar to the Registrable
Securities, and cause the Company's officers, directors, employees and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of the Company's
first full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or quoted for trading.
(b) In connection with the Shelf Registration or the Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees (not exceeding $25,000 for
each registration) and disbursements of one counsel chosen by the holders of a
majority of the Registrable Securities included in such registration.
6. Indemnification.
(a) The Company agrees to indemnify each holder of Registrable
Securities, its officers and directors and each Person who controls such holder
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the Company by
such holder expressly for use therein or by
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such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the
reasonably Company requests for use in connection with any such registration
statement or prospectus and shall indemnify the Company, its directors and
officers and each Person who controls the Company (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any such failure shall not
relieve the indemnifying party from any other liability which it may have to any
other person. If the indemnifying party gives notice to such indemnified party
of its election to assume and control the defense of such claim, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the indemnified party in connection with
the defense or investigation of the action unless the indemnified party shall
have given the indemnifying party notice of a conflict of interest between the
indemnified party and indemnifying party with respect to such claim. The failure
of an indemnifying party to give notice to the indemnified party of its election
to assume and control the defense of any action for which notice has been given
to the indemnifying party in accordance with this Paragraph within 30 days after
receipt of such notice shall constitute an election by the indemnifying party
not to assume and control the defense of such action. An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of one separate
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counsel for such indemnified parties. No indemnified party shall consent to the
entry of any judgment or enter into any settlement with respect to a claim for
which indemnification may be sought without the prior written consent of the
indemnifying party.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations; Sale
Information. No GDS Shareholder may participate in any registration hereunder
which is underwritten unless such person (i) agrees to sell such person's
securities on the basis provided in any underwriting arrangements approved by
the person or persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements. Promptly following any sale or other transfer
of any Registrable Securities covered by the Shelf Registration, the person
selling or transferring such securities shall promptly notify the Company in
writing thereof, which notice shall specify the amount of securities involved
and the market, if any, on which such sale or transfer occurred.
8. Definitions.
(a) "Exempt Registration" means any registration of securities
by the Company under the Securities Act pursuant to a (i) Registration Statement
on a Form S-8 (or any successor thereto), (ii) Registration Statement on Form
S-4 covering solely securities issued in connection with a business combination
or other transaction specified in Rule 145(a) under the Securities Act, or (iii)
Registration Statement on Form S-3 covering solely securities issued under a
dividend reinvestment program.
(b) "Registrable Securities" means (i) any Sabratek common
stock issued upon exercise of the Call Option or the Put Option pursuant to the
Option Agreement, (ii) any Sabratek common stock issued in connection with a
merger of consolidation of GDS and Sabratek (or a wholly owned subsidiary of
Sabratek) in which the outstanding common stock of GDS is converted into common
stock of Sabratek, or (iii) any Sabratek common stock issued or issuable with
respect to the outstanding Sabratek common stock by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (A)
they have been distributed to the public pursuant to a offering registered under
the Securities Act; (B) sold to the public through a broker, dealer or market
maker in compliance with Rule 144 under the Securities Act (or any similar rule
then in force); or (C) repurchased by the Company or any subsidiary of the
Company.
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9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and holders of at least 50% of the
Registrable Securities.
(e) Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities; provided that
prior to any transfer of Registrable Securities the holder thereof shall obtain
the written acknowledgment and agreement of the transferee to be bound by the
terms of this Agreement..
(f) Severability. If any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction or as a
result of legislative or administrative action, such holding or action shall be
strictly construed and shall not affect the validity of or affect any other
provision of this Agreement.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same
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instrument.
(h) Notices. All notices and other communications must be in
writing and shall be deemed given on the date delivered if delivered in person
or by overnight courier, or on the third (3rd) business day after mailing if
mailed by registered or certified mail, postage prepaid, return receipt
requested, to the persons at the addresses set forth below (or such other
address for a party as shall be specified by like notice):
If to the Company: Sabratek Corporation
5601 West Howard Street
Niles, Illinois 60714
Attention: Stephen Holden
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Alan G. Berkshire
If to the GDS Shareholders: To the address set forth on the
signature page affixed hereto for
each such GDS Shareholder.
with a copy to: GDS Technology, Inc.
25235 Leer Drive
Elkhart, Indiana 46514
Attention: Surendra K. Gupta
and
Barnes & Thornburg
600 1st Source Bank Center
100 North Michigan
South Bend, Indiana 46601
Attention: Nelson J. Vogel, Jr.
(i) Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of Indiana without regard to principles of conflicts of law.
(j) Interpretation. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof. Terms such as "herein", "hereof", and "hereinafter"
refer to this Agreement as a whole and not to the particular sentence or
paragraph where they appear, unless the context otherwise requires.
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Whenever the context requires, references in this Agreement to the singular
number shall include the plural, the plural number shall include the singular
and words denoting gender shall include the masculine, feminine and neuter.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SABRATEK CORPORATION
By: /s/ Stephen Holden
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Its: Senior Vice President & Chief Financial Officer
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GDS SHAREHOLDER
Name:__________________________________
Signature:_____________________________
Title (if applicable):_________________
Address:_______________________________
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<PAGE> 1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into on and as of the
29 day of August, 1997 (the "Effective Date") by and among SABRATEK CORPORATION,
a Delaware corporation ("Sabratek"), GDS TECHNOLOGY, INC., an Indiana
corporation ("GDS"), and such other holders of GDS common stock as become
parties to this Agreement by the execution hereof (collectively, the "GDS
Shareholders").
RECITALS:
A. Sabratek desires to obtain the right to purchase all of the issued
and outstanding shares of common stock of GDS, and the GDS Shareholders are
willing to grant to Sabratek the right to purchase all of the issued and
outstanding shares of common stock of GDS which are owned by the GDS
Shareholders (the "GDS Shares"), subject to and in accordance with the terms and
conditions set forth in this Agreement.
B. The GDS Shareholders desire to obtain from Sabratek the right to
require Sabratek to purchase all of their GDS Shares upon the occurrence of
certain events, and Sabratek is willing to grant such right to the GDS
Shareholders, on and subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, the parties agree as follows:
ARTICLE 1.
CALL OPTION
1.1 GRANT OF CALL OPTION. On the terms and subject to the conditions
set forth in this Agreement, and in consideration of the Put Option (as
hereafter defined) granted to the GDS Shareholders pursuant to ARTICLE 2 hereof,
each of the GDS Shareholders hereby grants to Sabratek an option to purchase
all, but not less than all, of the GDS Shares owned by such GDS Shareholder (the
"Call Option") at the price determined in accordance with ARTICLE 3 hereof.
1.2 TERM OF CALL OPTION. Unless this Agreement is terminated in
accordance with SECTION 9.1 hereof, the Call Option shall be exercisable at any
time during the period (the "Call Option Period") commencing on and as of the
Effective Date and continuing until the thirtieth (30th) day after the later of
(a) the date on which GDS delivers to Sabratek a copy of GDS' audited financial
statements for the fiscal year ending December 31, 1998, certified by an officer
of GDS ("GDS 1998 Audited Financials") and (b) the date on which Sabratek
delivers to GDS Sabratek's 1998 Gross Profits Statement (as defined in SECTION
3.2(C)(III)(B) below) for the fiscal year ending December 31, 1998, which
statements shall be delivered in accordance with the requirements of SECTION
3.2(C)(V) hereof; provided, that if either party exercises the election provided
under SECTION 3.2(C)(IV) hereof, then the Call Option Period shall be extended
as
<PAGE> 2
provided in such Section.
1.3 EXERCISE OF CALL OPTION. The Call Option may be exercised by
Sabratek giving GDS written notice of exercise on any date (the "Call Exercise
Date") on or before the last day of the Call Option Period, copies of which
notice shall be sent concurrently to each GDS Shareholder. Any notice of
exercise of the Call Option shall be irrevocable. Consummation of the purchase
and sale of the GDS Shares (the "Closing," and the day thereof the "Closing
Date") pursuant to the Call Option shall be held within thirty (30) days after
the later of (a) the Call Exercise Date or (b) the date on which the Purchase
Price for the GDS Shares has been determined. The Closing pursuant to exercise
of the Call Option shall be held on such date within the foregoing period as
shall be specified by Sabratek by written notice given to GDS at least ten (10)
days prior to the Closing Date, copies of which notice shall be sent
concurrently to each GDS Shareholder. Immediately following the Closing, the GDS
Shareholders shall have no further rights with respect to their previously-owned
GDS Shares.
1.4 RESTRICTIONS ON TRANSFER OF GDS SHARES.
(a) Transfer Restrictions. Each of the GDS Shareholders
expressly agrees that, prior to termination of this Agreement in accordance with
SECTION 9.1 hereof, such Shareholder will not, without the express prior written
consent of Sabratek:
(i) Directly or indirectly transfer, sell, assign, give,
mortgage, pledge, hypothecate, encumber or otherwise dispose of, or
permit to be sold, assigned, encumbered, attached or otherwise disposed
of, in any manner, the whole or any part of the GDS Shares, or the
certificate or certificates representing the same, or any interest
therein, except as set forth in this Agreement; provided, that a GDS
Shareholder may transfer all, but not less than all, of his or her GDS
Shares without any consideration to a trust solely for such GDS
Shareholder's benefit so long as the transferor of such GDS Shares
obtains and furnishes to Sabratek, prior to any such transfer, a
writing, signed by the proposed transferee trust, expressly
acknowledging that such trust shall be bound by the terms of this
Agreement, that such GDS Shares are subject to the Call Option and the
Put Option, and that, if applicable, such trust shall fully comply with
the provisions of SECTION 5.5 hereof relating to the disposition of
Sabratek Stock (as hereafter defined) received at the Closing.
(ii) Enter into any voting trust, shareholder agreement or
other understanding with any person with respect to the GDS Shares.
Any purported transfer in violation of the foregoing restrictions shall be null
and void. GDS shall not register on its books any transfer or other disposition
of GDS Shares other than in accordance with the terms of this Agreement.
(b) Legend. All certificates representing GDS Shares held by
the GDS Shareholders, and any certificates for GDS Shares issued on or after the
Effective Date in accordance with the terms of this Agreement, shall contain or
be amended to contain substantially the following legend, which shall bind GDS,
the GDS Shareholders and any persons asserting any
<PAGE> 3
interest in the certificates and the GDS Shares they represent:
The shares represented by this certificate and this certificate are
subject to the terms of a certain Stock Option Agreement dated
effective the _________ day of _________________________, 1997 (the
"Option Agreement"), by and among the holder of the shares
represented by this certificate, GDS Technology, Inc. ("GDS"),
certain other shareholders of GDS and Sabratek Corporation, a copy
of which Option Agreement is on file at the principal office of
GDS. Neither this certificate nor the shares evidenced hereby nor
any portion thereof or any interest therein may be offered,
pledged, hypothecated, sold, gifted or otherwise transferred in
violation of said Option Agreement, and any such purported transfer
shall be null, void and of no effect. The shares represented by
this certificate are subject to a Call Option and a Put Option
granted under said Option Agreement.
1.5 OUTSTANDING OPTIONS. GDS hereby agrees to use its best efforts to
amend all options to acquire shares of capital stock of GDS which are
outstanding as of the Effective Date (the "GDS Options") to provide that such
GDS Options shall be exercisable, if at all, only prior to the Closing under
this Agreement and shall expire if not exercised at such time, or to otherwise
cause the GDS Options to be exercised prior to the Closing hereunder.
1.6 DOCUMENTS EVIDENCING GDS SHARES. Upon execution of this Agreement,
each of the GDS Shareholders shall deliver to GDS a certificate or certificates
evidencing all GDS Shares held by such GDS Shareholder, together with a stock
power or stock powers for such certificate(s), duly endorsed in blank for
transfer. Upon receipt of certificates and stock powers evidencing all GDS
Shares owned by the GDS Shareholders, GDS shall: (a) place on each certificate
the legend required under SECTION 1.4 above; (b) hold all such certificates and
stock powers as attorney-in-fact for each such GDS Shareholder pursuant to the
power of attorney granted in SECTION 4.3 of this Agreement until termination of
this Agreement or until the Closing of the exercise of the Call Option or the
Put Option, whichever occurs later; (c) if the Call Option or the Put Option is
exercised in accordance with the terms of this Agreement, deliver such
certificates and stock powers to Sabratek at the Closing against payment by
Sabratek to each of the GDS Shareholders of his or her proportionate share of
the Purchase Price; and (d) upon termination of this Agreement in its entirety
prior to Closing under SECTION 9.1 hereof, promptly issue to each of the GDS
Shareholders a new certificate for all GDS shares owned by such GDS Shareholder,
which certificate shall not bear the legend required by SECTION 1.4.
ARTICLE 2.
PUT OPTION
2.1 GRANT OF PUT OPTION. On the terms and subject to the conditions set
forth in this Agreement, Sabratek hereby grants to the GDS Shareholders the
right to require Sabratek to purchase all, but not less than all, of the GDS
Shares owned by the GDS Shareholders (the "Put
<PAGE> 4
Option") at the price determined in accordance with ARTICLE 3 hereof.
2.2 TERM OF PUT OPTION. The Put Option granted hereunder shall become
exercisable on and as of the first business day immediately following the
expiration of the Call Option Period and shall continue in effect for a period
of thirty (30) days (the "Put Option Period").
2.3 EXERCISE OF PUT OPTION. The Put Option may be exercised during the
Put Option Period by the GDS Shareholders giving Sabratek written notice of
exercise on any date (the "Put Option Exercise Date") on or before the last day
of the Put Option Period. Any notice of exercise of the Put Option shall be
irrevocable. Consummation of the purchase and sale of the GDS Shares (also the
"Closing," and the date thereof, the "Closing Date") pursuant to exercise of the
Put Option shall be held on such date within thirty (30) days after the later of
(a) the Put Exercise Date or (b) the date on which the Purchase Price for the
GDS Shares has been determined. The Closing pursuant to exercise of the Put
Option shall be held on such date within the foregoing period as shall be
specified by Sabratek by written notice given to GDS at least ten (10) days
prior to the Closing Date, copies of which notice shall be sent concurrently to
each GDS Shareholder. Immediately following the Closing, the GDS Shareholders
shall have no further rights with respect to their previously-owned GDS Shares.
2.4 POWER OF ATTORNEY FOR EXERCISE OF PUT OPTION. If one or more GDS
Shareholders owning not less than seventy-five percent (75%) of the GDS Shares
owned by all of the GDS Shareholders elect to exercise the Put Option, then such
election shall be binding on all GDS Shareholders, and each of the other GDS
Shareholders hereby agrees to exercise the Put Option. This provision
constitutes a power of attorney granted to the holder of the greatest number of
votes cast in favor of exercising the Put Option to vote all remaining GDS
Shares to exercise the Put Option and to sign the notice of exercise of the Put
Option on behalf of the remaining GDS Shareholders, and this power or attorney
shall be irrevocable and coupled with an interest from the date of execution of
this Agreement by such GDS Shareholder through the last day of the Put Option
Period. All of the GDS Shareholders will sell all of their GDS Shares to
Sabratek in the event the Put Option is exercised in accordance with this
SECTION 2.4. The power of attorney granted in herein includes all powers
necessary to exercise the Put Option and effectuate a sale of GDS Shares on
behalf of any GDS Shareholder in accordance with the terms of this Section.
ARTICLE 3.
DETERMINATION AND PAYMENT OF PURCHASE PRICE
3.1 PURCHASE PRICE FOR GDS SHARES. The purchase price ("Purchase
Price") to be paid by Sabratek for all of the GDS Shares purchased pursuant to
the Call Option or the Put Option, as the case may be, shall be determined as an
amount equal to (i) the Formula Value of GDS (as determined in accordance with
SECTION 3.2 below), divided by (ii) the total number of all shares of capital
stock of GDS which are issued and outstanding as of the Closing (for this
purpose, treating all shares issuable pursuant to any GDS Option which is
outstanding but unexercised at the Closing and which does not expire by its
terms at or prior to the Closing as issued and outstanding shares), multiplied
by (iii) the number of GDS Shares which are purchased
<PAGE> 5
by Sabratek at the Closing. Each of the GDS Shareholders shall be entitled to
his or her proportionate share of the Purchase Price, based on the number of GDS
Shares being sold by such GDS Shareholder.
3.2 DETERMINATION OF FORMULA VALUE OF GDS.
(a) Exercise by First Review Date. In the event the Call Option
Exercise Date occurs on or prior to that date (the "First Review Date") which is
the thirtieth (30th) day after GDS delivers to Sabratek interim financial
statements of GDS for the six (6) month period ending June 30, 1998, which
statements have been reviewed by GDS' independent certified public accountant,
the Formula Value of GDS shall be Twenty Million Dollars ($20,000,000).
(b) Exercise On or Before Second Review Date. In the event the
Call Option Exercise Date occurs after the First Review Date but on or before
the date (the "Second Review Date") on which GDS delivers to Sabratek the GDS
1998 Audited Financials, the Formula Value of GDS shall be Twenty-Five Million
Dollars ($25,000,000).
(c) Exercise After Second Review Date. In the event the Call
Option Exercise Date occurs after the Second Review Date, or in the event the
Put Option is exercised, the Formula Value of GDS shall be determined in
accordance with the following provisions:
(i) Subject to SECTION 3.2(D), the Formula Value of GDS shall
be an amount equal to the sum of the following, but shall not exceed an
aggregate amount of Thirty-Five Million Dollars ($35,000,000):
(A) Five Million Dollars ($5,000,000); plus
(B) If GDS Adjusted Earnings Before Taxes (as
hereafter defined) for 1998 exceed Three Million Three Hundred
Thirty-Seven Thousand Five Hundred Dollars ($3,337,500) (the
"First Premium Level"), an amount equal to Three and
74531/100000 Dollars ($3.74531) for each One Dollar ($1.00) of
GDS Adjusted Earnings Before Taxes above the First Premium
Level, but not to exceed an additional amount of Five Million
Dollars ($5,000,000); plus
(C) If GDS Adjusted Earnings Before Taxes for 1998
exceed Four Million Six Hundred Seventy-Two Thousand Five
Hundred Dollars ($4,672,500) (the "Second Premium Level"), an
amount equal to Seven and 49063/100000 Dollars ($7.49063) for
each One Dollar ($1.00) of GDS Adjusted Earnings Before Taxes
above the Second Premium Level, but not to exceed an
additional amount of Twenty-Five Million Dollars
($25,000,000).
(ii) The term "GDS Adjusted Earnings Before Taxes" means, for
any applicable fiscal year or other period, an amount equal to the sum
of:
<PAGE> 6
(A) The pre-tax net income of GDS for such fiscal year
or other period computed in accordance with generally accepted
accounting principles applied on a consistent basis; provided,
that any portion of the fees paid or payable to GDS by
Sabratek pursuant to Section 3 of that certain Exclusive
Supply and Distribution Agreement between GDS and Sabratek
dated as of the Effective Date of this Agreement (the
"Distribution Agreement") which is allocable to GDS' income
for the fiscal year or other period at issue under generally
accepted accounting principles shall be excluded in
determining net income; plus
(B) An amount equal to Sabratek's Gross Profits
generated from the sale by Sabratek of products purchased from
GDS (the "GDS Products") under the terms of the Distribution
Agreement during such applicable fiscal year or other period.
For purposes of this SECTION 3.2, the term "Gross Profits"
means an amount equal to: (x) Sabratek's actual net sales from
the sale of GDS Products for the applicable fiscal year or
other period; less (y) Sabratek's total cost of goods sold
attributable to the purchase and resale of GDS Products for
such year or other period; and less (z) Sabratek's sales and
marketing expenses attributable to the sale of GDS Products
during such year or other period; all as computed in
accordance with generally accepted accounting principles
applied on a basis consistent with Sabratek's past practices.
(iii) Unless the Call Option Period is extended
pursuant to SECTION 3.2(C)(IV) below:
(A) The pre-tax net income of GDS to be included in
calculating GDS Adjusted Earnings Before Taxes shall be
determined based on the GDS 1998 Audited Financials; and
(B) The Sabratek Gross Profits to be included in
calculating GDS Adjusted Earnings Before Taxes shall be
determined based on a statement, certified on behalf of
Sabratek by the Chairman of the Board and Chief Financial
Officer of Sabratek (the "Gross Profits Statement"), setting
forth the Gross Profits of Sabratek for the fiscal year ending
December 31, 1998 (including a break-down of Gross Profits
earned for each fiscal quarter thereof) (the "1998 Gross
Profits Statement").
(iv) Notwithstanding anything to the contrary
contained herein, if GDS Adjusted Earnings Before Taxes for fiscal year
1998 are less than Six Million Six Hundred Seventy-Five Thousand
Dollars ($6,675,000), then either Sabratek or GDS, on written notice
given to the other party within fifteen (15) business days
<PAGE> 7
after delivery of both the GDS 1998 Audited Financials and the Sabratek
1998 Gross Profits Statement, may elect to:
(A) Extend the Call Option Period to that date which is
the thirtieth (30th) day after the later of (x) the date on
which GDS delivers to Sabratek a copy of GDS' interim
financial statements for the fiscal quarter ending March 31,
1999, reviewed by GDS' independent certified public accounting
firm ("GDS 1999 First Quarter Financials") and (y) the date on
which Sabratek delivers to GDS a Gross Profits Statement for
the fiscal quarter ending March 31, 1999 (the "1999 First
Quarter Gross Profits Statement"); and
(B) Determine the Formula Value of GDS based on GDS
Adjusted Earnings Before Taxes equal to two (2) times an
amount equal to the sum of: (x) GDS Adjusted Earnings Before
Taxes for the fiscal quarter ending December 31, 1998 (based
on the GDS 1998 Audited Financials and the 1998 Gross Profits
Statement) plus (y) GDS Adjusted Earnings Before Taxes for the
fiscal quarter ending March 31, 1999 (based on the GDS 1999
First Quarter Financials and the Sabratek 1999 First Quarter
Gross Profits Statement).
(v) GDS shall deliver the GDS 1998 Audited Financials
to Sabratek, and Sabratek shall deliver the 1998 Gross Profits
Statement to GDS, by not later than March 31, 1999. If applicable, GDS
shall deliver the GDS 1999 First Quarter Financials to Sabratek, and
Sabratek shall deliver the 1999 First Quarter Gross Profits Statement
to GDS, by not later than May 31, 1999.
(vi) In the event of any dispute between the parties
regarding the amount of GDS net income or Sabratek Gross Profits which
are to be included in determining GDS Adjusted Earnings Before Taxes,
the parties shall refer the matter for resolution to a "Big Six"
independent certified public accounting firm ("Independent CPA") that
is not then serving as outside auditor for either party and which is
mutually acceptable to Sabratek and GDS. The Independent CPA shall
complete its review of all relevant information and render its decision
within ten (10) business days after the matter is submitted for
resolution, and the decision of the Independent CPA shall be final and
binding on both parties. The fees and expenses of the Independent CPA
shall be shared equally by Sabratek and GDS.
(d) Adjustment to Formula Value. Notwithstanding anything to
the contrary contained herein, the Formula Value of GDS (as determined in
accordance with SECTION 3.2(A), (B) OR (C) above, as applicable) shall be
reduced by twenty percent (20%) if, due solely to action taken by GDS during the
period from and after the Effective Date through the Closing, Sabratek is unable
to account for the acquisition of the GDS Shares (the "Acquisition") under the
"pooling of interests" method of accounting in accordance with applicable
opinions and interpretations of the Financial Accounting Standards Board and
accounting releases issued by the United States
<PAGE> 8
Securities and Exchange Commission ("SEC"), as in effect on the date on which
such action was taken by GDS. The Formula Value of GDS shall not be reduced
hereunder in the event the Acquisition does not meet the conditions for
pooling-of-interests accounting for reasons other than, or in addition to,
actions taken by GDS from and after the Effective Date.
3.3 PAYMENT OF PURCHASE PRICE.
(a) Full Payment at Closing. The Purchase Price shall be
payable in full at the Closing. At Sabratek's option, the Purchase Price may be
paid in cash (or other immediately available funds) or in that number of shares
of Sabratek Stock as are equal in value to the Purchase Price, as determined in
accordance with SECTION 3.3(C) below; provided, that all of the GDS Shareholders
shall receive cash in the event that Sabratek, for any reason, is unable to pay
the full amount of the Purchase Price in Sabratek Stock on the Closing Date;
provided further, that Sabratek shall not be required to issue fractional shares
to any of the GDS Shareholders and, at its option, may pay cash in lieu of
issuing a fractional share of Sabratek Stock to any GDS Shareholder otherwise
entitled to receive such fractional share. Notwithstanding the foregoing, in the
event Sabratek fails to deliver the Sabratek Closing Representation in
accordance with the provisions of SECTION 4.4, then the entire amount of the
Purchase Price shall be payable in cash or other immediately available funds.
(b) Sabratek Stock. For purposes of this Agreement, the term
"Sabratek Stock" means shares of voting common stock of Sabratek which, as of
the Closing Date: (i) constitute duly authorized, validly issued, fully-paid and
non-assessable shares of Sabratek's sole class of voting common stock; (ii) have
been listed for trading on the principal securities exchange or other market on
which the common stock of Sabratek is then traded (which is currently the Nasdaq
National Market) (the "Sabratek Principal Market"); and (iii) are covered by the
terms of the Registration Agreement (as hereafter defined).
(c) Value of Sabratek Stock. For purposes of determining the
number of shares of Sabratek Stock to be issued to the GDS Shareholders in
payment of the Purchase Price, if applicable, the value of each share of
Sabratek Stock as of the Closing Date ("Sabratek Value Per Share") shall be
deemed to be the average of the per share closing prices of a share of Sabratek
common stock on the Sabratek Principal Market, as reported in The Wall Street
Journal (Midwest edition), during the thirty (30) Trading Day (as defined below)
period ending on and including the second Trading Day prior to the Closing Date.
As used herein, the term "Trading Day" means any day on which the Sabratek
Principal Market is open for business.
(d) Post-Closing Redemption. Notwithstanding anything to the
contrary contained in this Agreement, in the event that the Registration
Statement required to be filed by Sabratek with the SEC pursuant to paragraph 1
of the Registration Agreement has not been declared effective on or before the
sixtieth (60th) calendar day after the Closing Date, Sabratek shall offer to
redeem from each GDS Shareholder all, but not less than all, shares of Sabratek
Stock issued to such GDS Shareholder at the Closing hereunder for a cash price
per share equal to the Sabratek Value Per Share. In the event Sabratek is
required to make such offer, it shall send written notice thereof to each GDS
Shareholder, at such Shareholder's most recent address shown on Sabratek's stock
records, on or before the seventieth (70th) calendar day after the Closing Date.
Each GDS Shareholder shall have twenty-one (21) calendar days after the date of
<PAGE> 9
such notice within which to accept such offer by tendering to Sabratek all of
such GDS Shareholder's certificates for shares of Sabratek Stock, duly endorsed
for transfer, free and clear of all liens, claims or other encumbrances, against
payment by Sabratek of the price for such shares in cash or other immediately
available funds.
ARTICLE 4.
CLOSING OF PURCHASE AND SALE OF SHARES
4.1 CLOSING. Subject to SECTION 4.4(A) below, the Closing of the
purchase and sale of the GDS Shares pursuant to this Agreement shall take place
on such date (the "Closing Date") as shall be specified by Sabratek in
accordance with SECTION 1.3 or SECTION 2.3, as the case may be. The Closing will
be held at 1:00 p.m. local time on the Closing Date at Barnes & Thornburg, 100
North Michigan Street, South Bend, Indiana or at such other time and place as is
mutually agreed to by Sabratek and GDS.
4.2 DELIVERY OF CERTIFICATES AND PAYMENT FOR SHARES. At the Closing,
Sabratek will deliver to the GDS Shareholders the Purchase Price for the GDS
Shares in accordance with the terms of ARTICLE 3 hereof. The GDS Shareholders
will deliver certificates representing all of the GDS Shares to be sold, duly
endorsed or accompanied by stock powers executed and in form sufficient to vest
title thereto fully in Sabratek, free and clear of all liens, claims and
encumbrances, against delivery by Sabratek of the applicable price for such GDS
Shares. All deliveries made at Closing shall be deemed to be simultaneously
made, and no party shall be obligated to consummate the transactions
contemplated by this Agreement unless and until all deliveries required
hereunder have been fully made. If GDS or any GDS Shareholder fails or refuses
to deliver the certificates for his or her GDS Shares as required under the
terms of this Agreement, then: (a) Sabratek shall deposit such GDS Shareholder's
proportionate share of the Purchase Price with an escrow agent acceptable to
GDS; (b) the escrow agent shall hold the same against delivery by the seller of
his or her duly endorsed certificates for the GDS Shares, with all fees and
other expenses of the escrow agent chargeable to such GDS Shareholder; and (c)
GDS shall adjust its transfer books to reflect the transfer of such GDS
Shareholder's GDS Shares to Sabratek.
4.3 APPOINTMENT OF GDS AS ATTORNEY-IN-FACT. Each of the GDS
Shareholders hereby appoints GDS, through its Secretary or such other officer as
the GDS Board of Directors may designate, as his or her attorney-in-fact to
execute and deliver all such documents or instruments as may be needed to convey
the GDS Shareholder's GDS Shares to Sabratek pursuant to this Agreement if the
GDS Shareholder is not present at the Closing. This power of attorney is coupled
with an interest and does not terminate on the GDS Shareholder's disability or
death, and shall continue in effect through the later of: (a) if this Agreement
terminates in accordance with SECTION 9.1 in its entirety prior to Closing, the
day immediately after this Agreement terminates; or (b) if either the Call
Option or the Put Option is exercised, the day immediately following the Closing
Date.
4.4 ADDITIONAL CLOSING DOCUMENTS.
<PAGE> 10
(a) Sabratek Closing Representation. At Closing, Sabratek
shall deliver to GDS (on behalf of the GDS Shareholders) a written statement,
signed on behalf of Sabratek by the Chairman of the Board and the Chief
Financial Officer of Sabratek and dated as of the Closing Date (the "Sabratek
Closing Representation"), representing and warranting to the GDS Shareholders
that: (i) there have been no material adverse changes in Sabratek's financial
condition, results of operations, assets, liabilities, business or prospects
since the date of Sabratek's last periodic report (10-K, 10-Q or 8-K) filed with
the SEC; and (ii) that certain Registration Rights Agreement among Sabratek, GDS
and the GDS Shareholders dated effective as of the Effective Date of this
Agreement (the "Registration Agreement") is in full force and effect and that
Sabratek has performed all obligations required to be performed under the
Registration Agreement at or prior to the Closing under this Agreement.
Notwithstanding anything to the contrary contained herein, delivery of the
Sabratek Closing Representation shall not be deemed to be a condition to
Closing, but Closing shall proceed with the Purchase Price being payable in cash
as provided under SECTION 3.3(A).
(b) Employment Agreements. At Closing, GDS shall enter into
employment agreements substantially in the forms attached hereto as EXHIBIT A
and EXHIBIT B (collectively, the "Employment Agreements") with Aurora F.
deCastro, the Chief Executive Officer of GDS ("deCastro"), and Surendra K.
Gupta, the President of GDS ("Gupta"), respectively, pursuant to which each of
deCastro and Gupta (collectively, the "Key Officers") shall be employed by GDS
from and after the Closing Date; provided, that GDS shall not have any
obligation (and Sabratek shall have no obligation to cause GDS) to enter into an
Employment Agreement at the Closing with a Key Officer if such Key Officer is
not employed by GDS immediately prior to the Closing. Each of the Key Officers
hereby agrees to execute and deliver his or her respective Employment Agreement
at the Closing.
4.5 TIME. Time is of the essence of the provisions of this Agreement
relating to (a) the Closing Date for the sale and purchase of the GDS Shares in
strict accordance with the time periods set forth in SECTION 1.3 or SECTION 2.3,
as the case may be; (b) the delivery of the required financial statements on or
before the dates set forth in SECTION 3.2(C)(V) hereof, if applicable; and (c)
the payment of the Purchase Price as and when due in accordance with the
provisions of ARTICLE 3 of this Agreement.
ARTICLE 5.
ADDITIONAL AGREEMENTS
5.1 CONDUCT OF GDS BUSINESS.
(a) Specific Restrictions. GDS hereby agrees that, except with
the prior written consent of Sabratek or as expressly provided in this
Agreement, from and after the Effective Date GDS will not:
(i) Construct any new facility;
(ii) Declare or pay any dividend, or make any other
distribution
<PAGE> 11
with respect to its stock, to its shareholders, whether in cash, stock
or other property, or redeem, purchase or otherwise acquire any GDS
common stock or other GDS capital stock;
(iii) Pre-pay or discharge any indebtedness or other
obligations owing by GDS to a Related Party (as hereafter defined) or
any third-party lender other than: (A) the current portion of any
principal payments and interest due to lenders (other than a Related
Party) in accordance with the terms of such indebtedness; (B) the
current portion of principal payments and interest due on Forty
Thousand Dollars ($40,000) principal amount of indebtedness to certain
Related Parties, provided that the interest rate on any such
indebtedness as of January 1, 1997 shall not exceed nine percent (9%)
per annum; (C) past-due patent or license royalties and earned but
unpaid salaries in an aggregate amount of Four Hundred Sixteen Thousand
Dollars ($416,000); and (D) past-due rent owing to GDS Partnership in
the amount of One Hundred Thousand Dollars ($100,000); provided, that
all of the foregoing payments shall be made in such installments as are
agreed to by GDS and Sabratek.
(b) Business in the Ordinary Course. From and after the
Effective Date, GDS shall continue to carry on its business only in the usual,
regular and ordinary course of business, as heretofore conducted, and by way of
amplification and not limitation, GDS will not, without the prior written
consent of Sabratek or as otherwise contemplated by this Agreement or the
Distribution Agreement:
(i) Issue any common stock or other capital stock or
any options, warrants, or other rights to subscribe for or purchase GDS
common stock or any other capital stock or any securities convertible
into or exchangeable for any capital stock of GDS except in accordance
with the GDS Options listed on SCHEDULE 7.2(E)(II) attached hereto (as
such GDS Options may be modified or exercised as contemplated by
SECTION 1.5); or
(ii) Effect a reclassification, recapitalization,
spin-off, split-up, exchange of shares, readjustment or other similar
change in or to any capital stock or otherwise reorganize or
recapitalize; or
(iii) Amend or otherwise change its Articles of
Incorporation as in effect on the Effective Date; or
(iv) Except for routine amendments in the ordinary
course of business consistent with past practices, amend or otherwise
change its Bylaws as in effect on the Effective Date; or
(v) Enter into any new, or modify any existing,
employment agreement or grant any increase in the compensation payable
or to become payable to officers or salaried employees not in
accordance with past custom and practice,
<PAGE> 12
grant any stock options or, except as required by law or contemplated
by this Agreement, adopt or make any change in any bonus, insurance,
pension, or other employee benefit plan, agreement or arrangement made
to, for or with any of such officers or employees; or
(vi) Borrow or agree to borrow any amount of funds,
or directly or indirectly guarantee or agree to guarantee any
obligations of others, except for trade debt incurred in the ordinary
course of business and in accordance with past custom and practice; or
(vii) Enter into or amend any distribution agreement
for the sale and distribution of any products or any other agreement,
contract or commitment involving the expenditure of more than Fifty
Thousand Dollars ($50,000) or which has a term of more than one (1)
year other than confidentiality agreements entered into with customers
of GDS in the ordinary course of business and in accordance with past
custom and practice; or
(viii) Enter into any agreement, contract, commitment
or other transaction with a Related Party or amend or otherwise extend
the term of any existing agreement with a Related Party; or
(ix) Place on any of its assets or properties any
mortgage, pledge, lien, charge, or other encumbrance except for
purchase money security interests granted to the seller of any
equipment purchased by GDS in the ordinary course of business
consistent with past custom and practice or as otherwise permitted
hereunder; or
(x) Merge, consolidate with, purchase substantially
all or any substantial part of the assets of, or otherwise acquire any
interest in, any partnership, corporation, association or other
business organization or division thereof; or
(xi) Sell, lease, license, sublicense or otherwise
dispose of any material intellectual property asset or any material
part of its tangible or intangible assets; or
(xii) Commit any act or fail to do any act which will
cause a breach of any material agreement, contract or commitment and
which will have a material adverse effect, in the aggregate, on GDS'
business, financial condition, assets, liabilities, properties or
earnings; or
(xiii) Except for those capital improvements already
planned for 1997 (build-out of the existing facility and improvements
to the fermentation equipment), make, or make any commitment for, any
capital expenditures exceeding Fifty Thousand Dollars ($50,000) for any
single capital improvement; or
<PAGE> 13
(xiv) Enter into any commitment or agreement to do
any of the things prohibited by this SECTION 5.1(B).
5.2 DISCLOSURE SCHEDULES. From and after the Effective Date, GDS and
the Key Officers shall use their best efforts to update the information set
forth on the schedules attached to and incorporated into this Agreement under
the provisions of SECTION 7.2 (the "Disclosure Schedules") through prompt
written disclosures to Sabratek from time to time prior to the Closing Date, but
such updates shall not be considered in determining satisfaction of the
conditions to Closing set forth in SECTION 6.1(A) or SECTION 6.1(B). Sabratek
shall have the right, during the thirty (30) day period prior to the Closing
Date, to conduct such additional due diligence investigations of GDS' financial
condition and affairs, and the information set forth on the Disclosure
Schedules, as it may deem necessary or advisable to determine whether the
conditions to Closing set forth in SECTION 6.1 hereof have been satisfied.
5.3 FINANCIAL INFORMATION; ACCESS. From and after the Effective Date
GDS shall: (a) promptly deliver to Sabratek copies of all internally-prepared
monthly and quarterly financial statements, as well as its audited year-end
financial statements, including audited year-end financial statements for fiscal
year 1996; and (b) give Sabratek and its authorized representatives full access
to any and all premises, properties, contracts, commitments, books, records, tax
returns and supporting schedules or other documentation, and other information
pertaining to GDS' business as Sabratek may from time to time reasonably
request; provided, that such access shall not unduly disrupt GDS' normal
business activities. GDS covenants that all financial statements provided to
Sabratek pursuant to this SECTION 5.3 will be prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as indicated in any notes thereto) throughout the periods covered thereby and
present fairly the financial position of GDS as of the dates given and the
results of operations and changes in its financial position for the periods then
ended, subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments and any other adjustments described therein and to
any differences in presentation (e.g., lack of footnotes) that normally exist in
unaudited interim financial statements. All documents provided by GDS to
Sabratek hereunder shall be subject to the terms of that certain Confidentiality
Agreement between the parties dated as of August 21, 1996 (the "Confidentiality
Agreement"). If this Agreement is terminated prior to Closing, Sabratek and its
representatives will, upon written request therefor, return to GDS all financial
statements, documents and records (including all copies made thereof) obtained
from GDS at any time in connection with the transactions contemplated hereby.
5.4 SABRATEK OBLIGATIONS. From and after the Effective Date, Sabratek
will promptly deliver to each of the GDS Shareholders copies of all materials
provided generally to its shareholders. Upon written request therefor, Sabratek
will also provide to any GDS Shareholder who so requests copies of all other
documents filed by Sabratek with the SEC. Sabratek further agrees to indemnify,
defend and hold GDS harmless from any Damages (as defined in SECTION 8.2)
relating to any obligation of Sabratek for finders', brokers' or agents' fees in
connection with the transactions contemplated by this Agreement, which
indemnification shall be made in accordance with the procedures set forth in
SECTION 8.2 of this Agreement.
5.5 COVENANTS BY GDS AFFILIATES WITH RESPECT TO SABRATEK STOCK.
<PAGE> 14
(a) Post-Closing Transfer Restriction. Each of the Key
Officers and each other GDS Shareholder who is an officer or director of GDS, or
who owns ten percent (10%) or more of the issued and outstanding shares of GDS
(each a "GDS Affiliate"), hereby expressly agrees that, if Sabratek elects to
issue Sabratek Stock in payment of the Purchase Price, such GDS Affiliate will
not sell, transfer or otherwise dispose of any shares of Sabratek Stock owned by
such GDS Affiliate from and after the Closing Date until such time as financial
statements that include at least thirty (30) days of combined operations of
Sabratek and GDS after the Closing Date shall have been publicly reported;
provided, that Sabratek shall file such report with the SEC within not more than
one hundred fifty (150) days after Closing. The foregoing restriction on
transfers by GDS Affiliates shall be in addition to, and not in lieu of, any
restrictions set forth in the Registration Agreement.
(b) Exception to Restriction. The restriction set forth in
SECTION 5.5(A) shall not apply to a sale, transfer or other disposition of
Sabratek Stock by a GDS Affiliate if, prior to such disposition, the GDS
Affiliate delivers to Sabratek the written opinion of a nationally-recognized
independent public accounting firm to the effect that: (i) the disposition
contemplated by the GDS Affiliate will not cause the Acquisition not to be
treated as a pooling-of-interest transaction for financial, accounting and
regulatory purposes in accordance with generally accepted accounting principles
and the rules and regulations of the SEC governing pooling (the "SEC Pooling
Rules"); or (ii) the disposition contemplated by the GDS Affiliate will not
affect Sabratek's treatment of the Acquisition because the SEC Pooling Rules do
not permit pooling-of-interest accounting.
5.6 COVENANTS WITH RESPECT TO TAX CONSEQUENCES. If Sabratek elects to
pay the Purchase Price in Sabratek Stock, each party shall use its best efforts
to cause the Acquisition to be treated as a reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), so that no gain or
loss will be recognized by the GDS Shareholders upon the exchange of all of
their GDS Shares for Sabratek Stock.
5.7 HSR FILING. If then applicable to the Acquisition, GDS and Sabratek
shall cooperate and shall expeditiously file with the Federal Trade Commission
and the Department of Justice all documents required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and to obtain
early termination of the pre-merger notification waiting period in accordance
with the regulations issued pursuant to the HSR Act.
5.8 GDS PAYMENTS AT CLOSING. At Closing, GDS shall pay in full, in cash
or other immediately available funds, and completely discharge any and all
indebtedness owing by GDS to a Related Party or any third-party lender. If GDS
does not have the cash required to discharge all of the foregoing obligations,
Sabratek agrees to advance to GDS any funds which may be necessary for GDS to
fulfill its obligations hereunder.
5.9 RESTRICTIVE COVENANTS OF KEY OFFICERS.
(a) Non-Compete and Non-Solicitation. Each of the Key Officers
hereby agrees as follows:
<PAGE> 15
(i) For a period of three (3) years from and after
the Closing Date (the "Non-Compete Period"), such Key Officer 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 and
its subsidiaries (including GDS), as the businesses of Sabratek and its
subsidiaries and GDS are conducted on the Effective Date or as they are
conducted during the term of this Agreement within any geographical
area in which Sabratek and its subsidiaries and GDS engage or plan to
engage in such businesses during the term of this Agreement. Nothing
herein shall prohibit a Key Officer from being a passive owner of not
more than two percent (2%) of the outstanding stock of any class of a
corporation which is publicly traded, so long as such Key Officer has
no active participation in the business of such corporation; and
(ii) For a period of three (3) years from and after
the Closing Date (the "Non-Solicitation Period"), such Key Officer
shall not directly or indirectly through another entity (A) induce or
attempt to induce any employee of Sabratek or its subsidiaries
(including GDS) to leave the employ of Sabratek or its subsidiaries
(including GDS), or in any way interfere with the relationship between
Sabratek or any such subsidiary and any employee thereof or (B) induce
or attempt to induce any customer, supplier, licensee, licensor,
franchisee or other business relation of Sabratek or any of its
subsidiaries (including GDS) to cease doing business with Sabratek or
any such subsidiary, or in any way interfere (including, without
limitation, making any negative statements or communications about
Sabratek or any of its subsidiaries [including GDS]) with the
relationship between any such customer, supplier, licensee or business
relation and Sabratek or any of its subsidiaries (including GDS).
(b) Enforcement. If, at the time of enforcement of this
SECTION 5.9, a court holds that the restrictions stated herein are unreasonable
under circumstances then existing, Sabratek and each of the Key Officers agree
that the maximum period, scope, geographical area or other terms reasonable
under such circumstances shall be substituted for the stated period, scope, area
or other terms. Because the services of the Kay Officers are unique and because
each of them has access to confidential information and work product of Sabratek
and its subsidiaries and GDS, Sabratek and each of the Key Officers agree that
money damages would not be an adequate remedy for any breach of this SECTION
5.9. Therefore, in the event of a breach of threatened breach of this SECTION
5.9, Sabratek and its successors and 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 the event of a breach or violation by a Key
Officer of the provisions of SECTION 5.9(A)(I) OR (II), the Non-Compete Period
and/or the Non-Solicitation Period shall be tolled with respect to such Key
Officer as applicable until such breach or violation has been duly cured. Each
of the Key Officers agrees that the restrictions contained in this SECTION 5.9
are reasonable. Notwithstanding anything to the contrary contained herein, in no
event shall a Key Officer be deemed in violation of the covenants
<PAGE> 16
contained in this SECTION 5.9, nor shall any of these covenants be enforceable
against a Key Officer, if GDS or Sabratek, as the case may be, has materially
breached such Key Officer's Employment Agreement and failed to cure such breach
within a reasonable time after notice thereof.
ARTICLE 6.
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATION OF SABRATEK. The obligation of Sabratek to
purchase the GDS Shares upon exercise of the Call Option or the Put Option, as
the case may be, shall be subject to the satisfaction of each of the following
conditions at or before the Closing (unless waived by Sabratek):
(a) Representations and Warranties of GDS Shareholders. The
representations and warranties of the GDS Shareholders set forth in SECTION 7.1
shall be true and correct in all material respects on and as of the Closing Date
as though such representations and warranties had been made on and as of the
Closing Date.
(b) Operational Representations and Covenants. The
representations and warranties of GDS and Key Officers set forth in SECTION 7.2
shall be true and correct in all material respects on and as of the Effective
Date, and GDS and the Key Officers shall have complied in all material respects
with the covenants of GDS and the Key Officers set forth in this Agreement. No
breach or breaches of a representation, warranty or covenant (other than a
deliberate or intentional breach or breaches) will be deemed to be material for
purposes of this SECTION 6.1(B) if the aggregate economic impact of such breach
or breaches has a present value, on and as of the date Sabratek gives notice of
failure of this condition, of less than Five Hundred Thousand Dollars ($500,000)
(calculated using a discount rate equal to the interest rate for six-month
United States Treasury Bills as reported in The Wall Street Journal on the Call
Option Exercise Date or the Put Option Exercise Date, as the case may be). In
addition, no breach or breaches of a representation, warranty or covenant will
be deemed to be material for purposes of this SECTION 6.1(B) if the economic
impact of such breach or breaches is fully reflected in the calculation of the
Formula Value of GDS under SECTION 3.2(C) of this Agreement. Examples
illustrating the determination of whether a breach is material or not within the
meaning of this Section are set forth on EXHIBIT "C" attached hereto.
(c) Performance of this Agreement. GDS and the GDS
Shareholders shall have performed and complied in all material respects with all
other covenants and agreements required by this Agreement to be performed or
complied with by them prior to or on the Closing Date.
(d) Consents, Regulatory Filings and Approvals. All consents,
approvals, licenses and permits, the granting of which are necessary for the
consummation of the transactions contemplated hereby shall have been obtained.
All applicable waiting periods and any extensions thereof under the HSR Act (if
applicable to the Acquisition) shall have expired or otherwise been terminated.
<PAGE> 17
(e) Litigation, Injunctions. No order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby or which would limit or affect Sabratek's
ownership or control of GDS, and there shall not have been threatened, nor shall
there be pending, any action or proceeding by or before any court or
governmental agency or other regulatory or administrative agency or commission,
challenging any of the transactions contemplated by this Agreement.
(f) Change in Law. There shall not have been any material
adverse change in the business or operations of GDS, or the sale of its
products, resulting from any change in law or regulation applicable to GDS or
its products.
(g) Employment Agreements. Each of the Key Officers shall have
executed and delivered his or her respective Employment Agreement as
contemplated by SECTION 4.4(B) of this Agreement.
(h) Resignations of Officers and Directors. Except as
otherwise contemplated by the Employment Agreements or requested in writing by
Sabratek, GDS shall have received the written resignations of all officers and
directors of GDS, effective as of the Closing Date.
(i) Corporate Documents and Records. GDS shall have delivered
to Sabratek: (i) a copy of the Articles of Incorporation of GDS, certified as of
a current date by the Secretary of State of Indiana and as of the Closing Date
on behalf of GDS by an officer of GDS; (ii) a certificate of existence of GDS,
issued as of a current date by the State of Indiana; (iii) a copy of the Bylaws
of GDS, certified on behalf of GDS by the Secretary of GDS as of the Closing
Date; and (iv) all minute books, seals and stock records of GDS.
6.2 CONDITIONS TO OBLIGATIONS OF GDS SHAREHOLDERS. The obligation of
each of the GDS Shareholders to sell their GDS Shares upon exercise of the Call
Option or the Put Option, as the case may be, shall be subject to the
satisfaction of each of the following conditions on or before the Closing
(unless waived in writing by a GDS Shareholder):
(a) Representations and Warranties. The representations and
warranties of Sabratek contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though such
representations and warranties had been made on and as of the Closing Date.
(b) Performance of this Agreement. Sabratek shall have
performed and complied in all material respects with all covenants, conditions
and agreements required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
(c) Consents, Regulatory Filings and Approvals. All consents,
approvals, licenses and permits, the granting of which are necessary for the
consummation of the transactions contemplated hereby shall have been obtained.
All applicable waiting periods and any extensions thereof under the HSR Act (if
applicable to the Acquisition) shall have expired or otherwise been terminated.
<PAGE> 18
(d) Litigation, Injunctions. No order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby, and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any court or
governmental agency or other regulatory or administrative agency or commission,
challenging any of the transactions contemplated by this Agreement.
(e) Employment Agreements. Unless waived by either or both of
the Key Officers, GDS shall have executed and delivered to the Key Officers the
Employment Agreements as contemplated by SECTION 4.4(B) of this Agreement.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES OF GDS SHAREHOLDERS. Each of the GDS
Shareholders, including Key Officers, hereby individually, for himself only and
not for any of the other GDS Shareholders, represents and warrants to Sabratek
that the following statements are true and complete as of the Effective Date:
(a) Execution, Delivery and Validity. Such GDS Shareholder has
full capacity, power and authority to make, execute, deliver, perform and
consummate this Agreement and the other documents and instruments required or
contemplated by this Agreement. This Agreement has been duly executed and
delivered by such GDS Shareholder and constitutes the legal, valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms.
(b) Ownership of Shares. Such GDS Shareholder is the lawful
record and beneficial owner of that number of GDS Shares which is set forth
opposite such Shareholder's name on SCHEDULE 7.1(B) attached hereto and
incorporated herein. Such Shareholder is in possession of certificates
evidencing his ownership of the GDS Shares owned by him, all of which are fully
paid and non-assessable. Such GDS Shareholder has good title to the GDS Shares
owned by him, with no restrictions on voting rights and the other incidents of
record and beneficial ownership, and the absolute right to sell and transfer
such Shares free and clear of all claims, liens, pledges, security interests,
restrictions or encumbrances of any nature whatsoever other than as provided in
that certain Stock Purchase Agreement listed on SCHEDULE 7.1(B), and any rights
thereunder shall terminate on the Closing Date. Except as set forth on SCHEDULE
7.1(B), there are no voting trusts, shareholder agreements or other
understandings between such GDS Shareholder and any other person or entity with
respect to the voting of or any other matters with respect to the GDS Shares
owned by such GDS Shareholder. Upon consummation of the purchase and sale of the
GDS Shares pursuant to this Agreement, such GDS Shareholder will convey to
Sabratek good and marketable title to the GDS Shares owned by such Shareholder,
free and clear of all claims, liens, pledges, security interests, restrictions
or encumbrances of any nature whatsoever.
(c) Investment Representations.
<PAGE> 19
(i) Each GDS Shareholder has received and reviewed a
copy of this Agreement and the offering memorandum relating to this
Agreement, the Distribution Agreement and the other terms and
conditions of the Acquisition (such offering memorandum and all
exhibits and schedules referred to therein or attached thereto,
together and any amendments or supplements thereto is referred to as
the "Memorandum"), including information regarding Sabratek, and has
received or had access to any other information he deems necessary or
appropriate to evaluate the merits and risks of his investment in the
Put Option and his potential investment in Sabratek common stock. Each
GDS Shareholder acknowledges that (A) Sabratek has made available to
him and his purchaser representative, if any, the opportunity to obtain
additional information to verify the accuracy of the information
contained in the Memorandum and to evaluate the merits and risks of the
investments contemplated by this Agreement; and (B) he and his
purchaser representative, if any, have had the opportunity to ask
questions of and receive answers from the officers of Sabratek, or a
person or persons acting on behalf of Sabratek, concerning the terms
and conditions of the offering, the Put Option, the Acquisition, the
Sabratek Stock and the information contained in the Memorandum, and
have received fully satisfactory answers to such questions, and have
had the opportunity to inspect and copy all material documents relating
to the offering.
(ii) Each GDS Shareholder, alone or in connection
with his purchaser representative, if any, has such knowledge and
experience in financial and business matters to enable him to utilize
the information made available to him to evaluate the risks and merits
of his investment in the Put Option and his potential investment in the
Sabratek Stock (together, the "Put Securities"), whether occurring upon
exercise of the Call Option or the Put Option, and to make an informed
decision with respect thereto. Based on the definition set forth on
SCHEDULE 7.1(C)(II) attached hereto, each GDS Shareholder is an
"accredited investor". Each GDS Shareholder who is a natural person is
at least 21 years of age.
(iii) Each GDS Shareholder understands that the Put
Securities have not been registered under the Securities Act, any state
statute governing securities regulation, or other applicable securities
laws, rules and regulations, in reliance upon exemptions therefrom.
Such reliance is in part predicated upon the truth and accuracy of the
representations of the GDS Shareholders contained herein. The
Memorandum has not been reviewed, approved or disapproved by the SEC or
any other federal or state agency, nor has any agency passed upon the
Memorandum's accuracy or adequacy or the merits or value of the Put
Securities or the Purchase Price for the GDS Shares. Each GDS
Shareholder understands that the GDS Shares and the Put Option which
are owned by him must be held until the Closing of the Acquisition or
termination of this Agreement, that his GDS Shares and the Put Option
may not be sold or otherwise transferred by such GDS Shareholder in any
manner, and that this Agreement requires him to surrender his
<PAGE> 20
certificates representing GDS Shares to GDS pending Closing of the
Acquisition or termination of this Agreement.
(iv) The Put Securities are being acquired solely for
each GDS Shareholder's own account for investment and not for the
account of any other person and not with a view to distribution,
assignment or resale to others and no other person has a direct or
indirect beneficial interest in the Put Securities. Each GDS
Shareholder acknowledges that he is not participating, directly or
indirectly, in a distribution of the Put Securities or in the
underwriting of any such distribution or transfer, and, he will not act
in any way that would constitute him to be an underwriter, within the
meaning of the Securities Act.
(v) Each GDS Shareholder acknowledges that he has not
been solicited to acquire the Put Securities by means of general
advertising or general solicitation.
(vi) Each GDS Shareholder represents that no
guarantees or representations have been made to him or his purchaser
representative, if any, regarding the tax treatment of any part of the
offering or of any of the transactions described in the Memorandum.
7.2 REPRESENTATIONS AND WARRANTIES OF GDS AND KEY OFFICERS. GDS
and each of the Key Officers hereby represents and warrants to Sabratek that the
following statements are true and complete as of the Effective Date:
(a) Organization and Existence of GDS. GDS is duly organized
and validly existing under the laws of the State of Indiana, with all requisite
power and authority to own all of its properties and assets and to carry on its
business as it is now being conducted. GDS is duly qualified to do business and
is in good standing in all jurisdictions where the nature of its business makes
such qualification necessary. GDS does not own, directly or indirectly, any
capital stock of any other corporation or any equity, profit sharing,
participation or other interest in any corporation, partnership, joint venture
or other entity.
(b) Execution, Delivery and Validity. GDS has full right,
power and authority to make, execute, deliver, perform and consummate this
Agreement and the other documents and instruments required or contemplated by
this Agreement. The execution, delivery and performance of this Agreement and
all other agreements and instruments contemplated hereby to which GDS is a party
have been duly authorized and approved by the GDS Board of Directors. The
execution, delivery and performance of this Agreement by GDS does not require
the approval of the shareholders of GDS. This Agreement and all other agreements
and instruments contemplated hereby to which GDS is party have been duly and
validly executed and delivered by GDS, and each constitutes the legal, valid and
binding obligations of GDS, enforceable against GDS in accordance with its
terms.
(c) Non-Contravention. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
or compliance with or
<PAGE> 21
fulfillment of the terms and provisions hereof or of any other agreement or
instrument contemplated hereby, do not and will not: (i) conflict with or result
in a breach of any of the provisions of the Articles of Incorporation or By-Laws
of GDS or any agreement among the GDS Shareholders and GDS with respect to the
GDS Shares; (ii) contravene any law, rule or regulation or any order, writ,
award, judgment, decree or other determination which affects or binds any of
GDS, Key Officers or any of their properties; or (iii) except as set forth on
SCHEDULE 7.2(D) hereto, conflict with, result in a breach of, constitute a
default under, or give rise to a right of acceleration, termination or the
imposition of penalties under any contract, deed of trust, mortgage, trust,
lease, governmental or other license, permit or other authorization, contract,
agreement, note or any other agreement, instrument or restriction to which GDS
is a party or by which any of its properties may be affected or bound.
(d) Consents. Except as set forth on SCHEDULE 7.2(D)
hereto, no authorization, consent, approval, permit or license of, or filing or
registration with, any governmental or public body or authority, any lender or
lessor or any other person is required to authorize, or is required in
connection with, the execution, delivery and performance by GDS of this
Agreement or the agreements contemplated hereby.
(e) Capitalization of GDS.
(i) The authorized capital stock of GDS consists of
Five Million (5,000,000) shares of common stock, no par value, of which
Three Million Nine Hundred Twenty-Two Thousand Three Hundred Two
(3,922,302) shares are issued and outstanding and are owned by the
shareholders listed on SCHEDULE 7.1(B). All of the issued and
outstanding shares of GDS common stock have been duly authorized and
are validly issued, fully paid and non-assessable.
(ii) GDS has delivered to Sabratek true and complete
copies of the GDS Options listed on SCHEDULE 7.2(E)(II) attached
hereto, which constitute, as of the Effective Date, all of the issued
and outstanding options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or
commitments that could require GDS to issue, sell or otherwise cause to
become outstanding any additional capital stock of GDS.
(iii) No shares of GDS' capital stock have been
issued in violation of any preemptive rights or any federal or state
securities laws.
(f) GDS Shareholders. The GDS Shareholders who are
parties to this Agreement collectively own at least ninety-four and one-tenth
percent (94.1%) of the issued and outstanding shares of common stock of GDS.
(g) Corporate Records. GDS has delivered to Sabratek true
and complete copies of GDS's Articles of Incorporation and Bylaws as in effect
on the Effective Date. The minute books of GDS, which have been made available
to Sabratek, contain the minutes of all meetings of, and consents to all actions
taken without meetings by, the Board of Directors (and any committee thereof)
and the shareholders of GDS since the formation of GDS.
<PAGE> 22
(h) Financial Statements. GDS has furnished to Sabratek
audited consolidated balance sheets of GDS as of December 31, 1995, December 31,
1994 and December 31, 1993, and the related audited statements of operations,
statements of shareholders' equity and statements of cash flows of GDS for the
fiscal years then ended, together with the respective reports thereon of Coopers
& Lybrand, LLP, GDS' independent public accountants (collectively, the
"Financial Statements"). The Financial Statements accurately reflect the books
and accounts of GDS in all material respects, fairly present the financial
position of GDS as of the dates given and the results of operations of GDS for
the periods indicated, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as
indicated in any notes thereto).
(i) Undisclosed Liabilities. Except as set forth on the
December 31, 1995 balance sheet included in the Financial Statements (the
"Balance Sheet"), or as set forth in SCHEDULE 7.2(I) hereto, GDS has no
liabilities or obligations of any type, nature or description, known or unknown,
asserted or unasserted, direct or indirect, absolute or contingent, other than
those which have been incurred in the ordinary course of business since the date
of the Balance Sheet.
(j) Absence of Certain Changes. Except as set forth on
SCHEDULE 7.2(J) hereto, since December 31, 1995 (the "Balance Sheet Date") there
has not been: (i) any transaction not in the ordinary course of GDS's business;
(ii) any material adverse change in the results of operations, condition
(financial or otherwise), assets, liabilities (whether absolute, accrued,
contingent or otherwise), business or, to the best knowledge of Key Officers,
prospects of GDS taken as a whole; (iii) any damage, destruction or loss,
whether or not covered by insurance, which has had or may have a material and
adverse effect on any of the properties, business or prospects of GDS taken as a
whole; (iv) any mortgage, pledge or subjection to lien, charge or encumbrance of
any kind, except liens for taxes not due, of any of GDS's properties or assets;
(v) any amendment, modification or termination of any material lease, contract
or agreement to which GDS is a party; (vi) any increase in, or commitment to
increase, the compensation payable or to become payable to any officer,
director, employee or agent of GDS, or any bonus payment or similar arrangement
made to or with any of such officers, directors, employees or agents, other than
routine increases made in the ordinary course of business; (vii) any incurrence
or assumption of any liability, except for liabilities incurred in the ordinary
course of business and consistent with past practices; (viii) any alteration in
the manner of keeping the books, accounts or records of GDS, or in the
accounting practices therein reflected; or (ix) any sale or transfer of any of
GDS's assets or any cancellation of any debts or claims other than in the
ordinary course of business.
(k) Related Party Transactions. Except as otherwise set forth
on SCHEDULE 7.2(K), since the Balance Sheet Date, GDS has not been a party to
any transaction (other than employee compensation and other ordinary incidents
of employment) with a person who was, at the time, a Related Party, and GDS
currently has no contractual obligations to any Related Party. "Related Party"
means any present or former officer or director of GDS, any present or former
holder of five percent (5%) or more of the issued and outstanding common stock
of GDS, or any other person who, to the knowledge of Key Officers, at the time
relevant to the determination, is
<PAGE> 23
or was a spouse, child, parent or sibling of any of the aforementioned persons
or is or was a trust or similar entity for the benefit of any of the foregoing
persons. Except as otherwise set forth on SCHEDULE 7.2(K), no property or
interest in any property which is used in the operations of GDS is owned by or
leased or licensed by or to any Related Party.
(l) Litigation. Except as set forth on SCHEDULE 7.2(L) to this
Agreement, there are no actions, suits, claims, audits, investigations, or
proceedings (judicial, administrative or arbitration) pending or, to the best
knowledge of Key Officers, threatened, or any facts known to Key Officers which
could give rise to any actions, suits, claims, investigations or proceedings,
against GDS, whether at law or in equity and whether civil or criminal in
nature, before or by any federal, state, municipal or other court, arbitrator,
governmental department, commission, agency or instrumentality, domestic or
foreign. Nor are there any judgments, decrees or orders of any such court,
arbitrator, governmental department, commission, agency or instrumentality
outstanding against GDS (i) which have, or could reasonably be expected to have,
a material adverse effect on the financial condition, or assets, or liabilities,
or earnings, or results of operations or prospects of the business of GDS, or
(ii) which seek specifically to prohibit, restrict or delay consummation of the
transactions contemplated hereby or fulfillment of any of the conditions of this
Agreement.
(m) Compliance with Laws. GDS, its property and assets, and
GDS's use of the real property on which its business is conducted are in
compliance in all material respects with all applicable statutes, laws,
ordinances, rules, regulations, subdivision and plat restrictions, requirements
and orders of governments and governmental bodies, and GDS has received no
notice asserting any non-compliance with any of the foregoing. GDS has complied
with all administrative and judicial judgments, orders or decrees (federal,
state, local or foreign) to which it is subject.
(n) Permits and Other Regulatory Matters. SCHEDULE 7.2(N)
attached hereto sets forth all material regulatory permits, licenses and other
governmental authorizations and approvals necessary to the ownership or
operation of GDS' properties and the conduct of GDS' business as the business is
currently operated (collectively, "Permits"), all of which are have been duly
obtained and are in full force and effect. GDS has made available to Sabratek
true and complete copies of all such Permits. GDS is in compliance in all
material respects with the terms and conditions of such Permits, and GDS has
received no notice asserting any non-compliance with any of the foregoing. There
are no proceedings pending or, to the best knowledge of Key Officers, threatened
seeking to revoke, cancel or suspend, or to materially adversely modify, any
Permits.
(o) Taxes. GDS has delivered to Sabratek copies of all
original and amended federal, state, local and foreign income tax returns and
information returns filed by GDS for the three (3) fiscal years ended December
31, 1995, 1994 and 1993. Except as specifically set forth in the Financial
Statements or on SCHEDULE 7.2(O) attached hereto: (i) GDS has duly and timely
filed or caused to be filed all tax returns and information returns required to
be filed by it or for which it may be held responsible; (ii) all such tax
returns are true and accurate in all material respects; (iii) GDS has paid all
taxes due and payable and any deficiencies or assessment notices which have been
received by it; (iv) no income, information, business or occupation, or
franchise
<PAGE> 24
tax returns of GDS have been audited by the taxing authorities; (v) there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the filing of any tax returns of GDS or the payment by, or the
assessment against, GDS of any taxes, assessments or other governmental charges,
duties, penalties, interest or fines (such governmental charges, duties,
penalties, interest and fines are collectively referred to in this Agreement as
"Other Charges"); and (vi) there are no suits, actions, claims, investigations,
inquiries or other proceedings, pending or threatened against GDS in respect of
taxes, assessments or Other Charges, or any matters under discussion with any
governmental authority relating to taxes, assessments, or Other Charges, or any
claims for additional taxes, assessments or Other Charges asserted by any such
authority. Since the Balance Sheet Date, GDS has not incurred, nor are there
accruable, any debts, liabilities or obligations (whether absolute, contingent
or otherwise, whether due or to become due and whether or not presently
outstanding) on account of taxes, assessments or Other Charges of GDS other than
on account of the kinds of taxes, assessments or Other Charges in respect of
which accruals have been made on the Balance Sheet, and there is no basis for
the assertion of a claim for any such debts, liabilities or obligations against
it except for the kinds of taxes, assessments and Other Charges in respect of
which such accruals have been made. Since the Balance Sheet Date, accruals made
for taxes, assessments and Other Charges have been made on a basis consistent
with prior periods. GDS has withheld or collected from each payment made to each
of its employees all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes, and federal, state and local income,
unemployment, payroll and wage taxes) required to be withheld or collected by
GDS, and, if due, has paid the same through the proper tax receiving officers.
GDS has collected sales and use taxes for all sales made to customers making
purchases from GDS as required by law to be collected and, if due, have paid the
same to the proper tax receiving officers. GDS is not obligated under any
severance contract or other agreement to make any payments that will be
non-deductible under Section 280G of the Code or, to the best knowledge of Key
Officers, any corresponding provision of applicable state, local or foreign
income tax law.
(p) Contracts and Leases. All manufacturing, marketing,
sales or distribution agreements to which GDS is a party, all noncompetition
agreements to which GDS is a party either for the benefit of GDS or for the
benefit of a third party, and all other material real and personal property
leases and material contracts, agreements, licenses, franchises and commitments
to which GDS is a party or by which any of its assets are bound (collectively,
the "Contracts") are set forth on SCHEDULE 7.2(P) attached hereto. GDS has
delivered to Sabratek a correct and complete copy of (or a written description
of the significant terms of) each of the Contracts, as amended to date. Except
as otherwise set forth on SCHEDULE 7.2(P):
(i) The Contracts are valid and binding obligations
of the parties thereto and are in full force and effect, enforceable in
accordance with their respective terms;
(ii) GDS has performed all material obligations
required to be performed by it under the Contracts on or prior to the
Effective Date, and, to the best knowledge of Key Officers, neither GDS
nor any other party to such Contracts is in default thereunder (as to
payments due or otherwise) nor has any event occurred which, with
notice or the passage of time, or both, could constitute
<PAGE> 25
a default thereunder;
(iii) GDS has not received any notice that it is in
violation of any applicable building code, zoning ordinance, health and
safety regulation or other law or regulation relating to any real or
personal property leased by it; and
(iv) GDS has not released or waived any material
right under any Contract.
(q) Intellectual Property.
(i) SCHEDULE 7.2(Q) contains a complete and accurate
list of all patented and registered Intellectual Property (as hereafter
defined) owned by GDS and all pending patent applications and
applications for the registration of other Intellectual Property owned
by GDS, as well as (A) all trade names and all unregistered trademarks
owned by GDS; (B) all material computer software owned or used by GDS
other than commercially available software with a license fee of less
than One Thousand Dollars ($1,000); and (C) all licenses granted by GDS
to any third party, and all licenses granted by any third party to GDS,
with respect to Intellectual Property. GDS has delivered to Sabratek
true and complete copies of all documents embodying any licenses of
Intellectual Property.
(ii) Except as set forth on SCHEDULE 7.2(Q) or on
SCHEDULE 7.2(R): (A) to the best knowledge of Key Officers, GDS owns
and has good and marketable title to, or a valid and enforceable
written license to use, all Intellectual Property used in its business;
(B) no proceedings are pending or, to the best knowledge of Key
Officers, threatened against GDS by any third party contesting the
validity, enforceability, use or ownership of any Intellectual Property
owned or used by GDS in its operations; (C) no proceedings are pending
or, to the best knowledge of Key Officers, threatened against GDS by
any third party alleging any infringement or misappropriation by GDS of
any Intellectual Property rights of any third party; and (D) GDS is not
aware of any infringement or misappropriation by any third party of any
Intellectual Property rights of GDS.
(iii) For purposes of this Agreement, "Intellectual
Property" means: (A) all inventions (whether or not patentable and
whether or not reduced to practice), all improvements thereto and all
patents, patent applications and patent disclosures, together with all
reissues, continuations, continuations-in-part, revisions, extensions
and reexaminations thereof; (B) all trademarks, service marks, trade
dress, logos, Internet domain names, trade names and corporate names,
and all translations, adaptations, derivations and combinations thereof
and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith; (C) all copyrights
and copyrightable works and registrations, applications and renewals in
connection therewith; (D) all trade secrets and confidential
information (including ideas, research and development, technical data,
know-how, formulae, compositions, manufacturing and production
<PAGE> 26
processes and techniques, designs, drawings, specifications, financial
and accounting data, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals; and (E)
computer software (including operating software, data, databases and
documentation).
(r) Title to Assets. All of GDS' tangible assets and
properties are located at GDS' principal place of business in Elkhart, Indiana.
Except as otherwise disclosed on SCHEDULE 7.2(R) attached hereto, GDS owns and
has good and marketable title to all of its properties and assets, free and
clear of all liens, claims, encumbrances, equities, security interests, charges
and restrictions, except for liens, if any, for taxes not due. Except as set
forth on SCHEDULE 7.2(R), no currently effective financing statement under the
Uniform Commercial Code with respect to any of the properties and assets of GDS
has been filed in any jurisdiction, and neither GDS, nor anyone on its behalf,
has signed any financing statement or security agreement authorizing anyone to
file any financing statement, lien or other encumbrance against any assets or
properties of GDS.
(s) Insurance. SCHEDULE 7.2(S) hereto lists all insurance
policies maintained by GDS, each of which is in full force and effect and
enforceable in accordance with its terms.
(t) Labor and Employment.
(i) Since January 1, 1994, GDS has not experienced
any labor troubles or strikes, work stoppages, slow-downs or other
material interference with or impairment of the business of GDS by
labor. GDS is not experiencing union organization efforts or
negotiations, or requests for negotiations, for any representation or
any labor contract relating to the employees of GDS.
(ii) Except as set forth on SCHEDULE 7.2(T) hereto,
GDS has no: (A) contracts with labor organizations or other collective
bargaining agreements; (B) contracts with any of its officers,
directors or other employees; (C) contracts with independent
contractors or consultants; (D) "employee benefit plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (E) other profit sharing, deferred compensation,
bonus, stock option, stock purchase, welfare, vacation, holiday, sick
pay, or other plans or arrangements for the benefit of employees
maintained or contributed to by GDS; or (F) employee regulations or
handbooks which relate in any way to the employees of GDS.
(iii) GDS has materially complied with all applicable
laws, rules and regulations relating to the employment of labor,
including those relating to nondiscrimination, wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as
required by appropriate governmental authorities. Except as set forth
on SCHEDULE 7.2(T), no unfair labor practice complaint is pending
against GDS before the National Labor Relations Board or any state or
local agency, nor has any charge of discrimination been filed against
GDS with the Equal Employment Opportunity Commission or any similar
state or local agency at any time during the three-year period
preceding the Effective Date.
<PAGE> 27
(u) Environment, Health and Safety. Except as otherwise set
forth on SCHEDULE 7.2(U), GDS has materially complied with, and is in material
compliance with, any and all Environmental Laws (as hereafter defined), and no
claim, action, suit, demand, proceeding (including administrative proceeding),
or notice of violation has been filed or commenced against GDS alleging any
failure to comply with any Environmental Laws or alleging any actual or
potential liability thereunder. In addition, and without limiting the generality
of the foregoing, to the best knowledge of Key Officers, except as set forth on
SCHEDULE 7.2(U):
(i) There are no facts, events, circumstances,
activities, practices, incidents, actions, plans or conditions related
to past or present operations conducted by GDS on or off the
properties, facilities or premises on which it has conducted or
operated business that could form the basis for any claim, action,
demand, suit, proceeding (including administrative proceeding),
hearing, notice of violation or liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, the Federal Water
Pollution Control Act of 1974, the Toxic Substances Control Act of
1976, the Refuse Act of 1989, the Emergency Planning and Community
Right-to-Know Act of 1986, each as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local or foreign
government (or agency thereof) (including common law), concerning
release or threatened release of any Hazardous Substance (as hereafter
defined), pollution, protection of worker health and safety or
protection of the environment (collectively, "Environmental Laws").
(ii) GDS has not generated, treated, stored, handled,
transported or disposed of any substance, arranged for the disposal of
any substance or owned or operated any property or facility in any
manner which could form the basis for any present or future claim,
suit, hearing, proceeding (including administrative proceeding), demand
or action (under the common law or pursuant to any statute) seeking
cleanup of or compensation for damage to any site, location or body of
water (surface or subsurface) or compensation for illness or personal
injury.
(iii) GDS has not (A) taken any action or failed to
act in any manner that could form the basis for any claim or liability
under the Occupational Safety and Health Act, as amended, or any other
law (or rule or regulation thereunder) of any federal, state, local or
foreign government (or agency thereof) (including common law)
concerning worker health and safety or (B) exposed any employee to any
substance or condition which could form the basis for any present or
future claim, suit, hearing, proceeding (including administrative
proceeding), demand or action (under the common law or pursuant to
statute) seeking compensation for property damage or illness or
personal injury.
(iv) GDS has obtained and has materially complied
with, and is in material compliance with, all the terms and conditions
of all permits, licenses and other authorizations which are required
under, and has materially complied with all
<PAGE> 28
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables which are contained
in, all Environmental Laws, including rules, codes, plans, orders,
decrees, judgments, injunctions, and regulations thereunder, including
laws relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants, chemical or industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water or
lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of pollutants, contaminants, chemical or industrial, hazardous or toxic
materials or wastes.
(v) No real property owned, operated or used by GDS
contains any underground storage tanks, materials or equipment
containing asbestos or polychlorinated biphenyls, or landfills, surface
impoundments or waste disposal areas.
(vi) GDS has not, either expressly or by operation of
law, assumed or undertaken any liability, including, without
limitation, any obligation for corrective or remedial action, of any
other person or entity with respect to any Environmental Laws.
(vii) On and prior to the Effective Date, GDS has not
buried, stored, spilled, leaked, discharged, emitted, released, placed
or located any Hazardous Substance on any real property owned, operated
or used by GDS. As used herein, "Hazardous Substance" means any
hazardous or toxic substance, material or waste which is regulated by
any local governmental authority, the State of Indiana or the United
States Government. The term "Hazardous Substance" includes, without
limitation: (A) any material or substance which is listed or defined as
a "hazardous waste," "extremely hazardous waste," "restricted hazardous
waste," "hazardous substance" or "toxic substance" under any municipal,
state or federal law, code or other regulation; (B) petroleum; (C)
asbestos; (D) polychlorinated biphenyl; (E) any material or substance
which is designated as a "hazardous substance" pursuant to Section 311
of the Federal Water Pollution Control Act, as amended; (F) any
material or substance which is defined as "hazardous waste" pursuant to
Section 1004 of the Federal Resource Conservation and Recovery Act, as
amended; (G) any material or substance which is defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act, as amended; (H) any material
or substance which is defined as a toxic substance in the Toxic
Substances Control Act, as amended; or (I) any substance which
contaminates soil or ground water and causes degradation of the soil
and/or water to the extent that remediation efforts are needed to
restore the soil or water to its natural state.
(v) Brokers. Except as otherwise set forth on SCHEDULE 7.2(V),
neither GDS nor Key Officers have incurred any obligation for any finder's,
broker's or agent's fee in connection with the transactions contemplated by this
Agreement.
<PAGE> 29
(w) Termination of Royalty Payments. All royalty and similar
arrangements between GDS and any Related Party have been terminated and are of
no force or effect.
7.3 REPRESENTATIONS AND WARRANTIES OF SABRATEK. Sabratek hereby
represents and warrants to GDS and the GDS Shareholders that the following
statements are true and complete as of the Effective Date:
(a) Organization and Existence of Sabratek. Sabratek is duly
organized and validly existing under the laws of the State of Delaware, with all
requisite power and authority to own all of its properties and assets and to
carry on its business as it is now being conducted. Sabratek is duly qualified
to do business and is in good standing in all jurisdictions where the nature of
its business makes such qualification necessary.
(b) Execution, Delivery and Validity. Sabratek has full right,
power and authority to make, execute, deliver, perform and consummate this
Agreement and the other documents and instruments required or contemplated by
this Agreement. The execution, delivery and performance of this Agreement and
all other agreements and instruments contemplated hereby to which Sabratek is
party have been duly authorized and approved by the Board of Directors of
Sabratek. This Agreement and all other agreements and instruments contemplated
hereby to which Sabratek is party have been duly and validly executed and
delivered by Sabratek, and each constitutes the legal, valid and binding
obligations of Sabratek, enforceable against Sabratek in accordance with its
terms.
(c) Non-Contravention. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
or compliance with or fulfillment of the terms and provisions hereof or of any
other agreement or instrument contemplated hereby, do not and will not: (i)
conflict with or result in a breach of any of the provisions of the Certificate
of Incorporation or By-Laws of Sabratek; (ii) contravene any law, rule or
regulation or any order, writ, award, judgment, decree or other determination
which affects or binds Sabratek or any of its properties; or (iii) conflict
with, result in a breach of, constitute a default under, or give rise to a right
of acceleration, termination or the imposition of penalties under any contract,
deed of trust, mortgage, trust, lease, governmental or other license, permit or
other authorization, contract, agreement, note or any other agreement,
instrument or restriction to which Sabratek is a party or by which any of its
properties may be affected or bound.
(d) Consents. Except as set forth on SCHEDULE 7.3(D) hereto,
no authorization, consent, approval, permit or license of, or filing or
registration with, any governmental or public body or authority, any lender or
lessor or any other person is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby by Sabratek.
(e) Certain Securities Matters.
(i) Sabratek represents and warrants that (A) the Call
Option and
<PAGE> 30
the GDS Shares (including those acquired upon exercise of the Put
Option) are being acquired by Sabratek for its own account and not with
a view to, or for offer or sale in connection with, any distribution
thereof and it is not participating and does not have a participation
in any such distribution or the underwriting of any such distribution;
(B) Sabratek has sufficient knowledge and experience in financial and
business matters and is fully capable of evaluating the merits and
risks of purchasing the Call Option and the GDS Shares; and (C)
Sabratek has not been solicited to acquire the Call Option or the GDS
Shares by means of general advertising or general solicitation.
(ii) Sabratek has been furnished with information
about, and allowed access to GDS' business, books, records, files, and
properties and has had the opportunity to investigate GDS' business and
assets and to ask questions of and receive answers from GDS and the Key
Officers sufficient to satisfy Sabratek that GDS' business is
reasonably as described by GDS.
(iii) Sabratek understands that (A) the Call Option
and the GDS Shares are not registered under any applicable federal or
state securities law in reliance upon certain exemptions thereunder;
(B) the Call Option and the GDS Shares may not be sold, transferred or
otherwise disposed of without registration under the Securities Act and
compliance with applicable state securities laws or the availability of
an exemption therefrom; and (C) in the absence of registration under
the Securities Act and compliance with applicable state securities laws
or exemption therefrom, the GDS Shares must be held indefinitely.
Sabratek acknowledges that the reliance of the GDS Shareholders upon
such exemption from registration is predicated upon the foregoing
representations.
(iv) Sabratek has filed all reports and statements,
together with any amendments required to be made with respect thereto,
that it was required to file with the SEC, any state securities
authorities, and the Sabratek Principal Market. As of their respective
dates, each of such reports and documents, as amended, including the
financial statements, exhibits and schedules thereto, complied in all
material respects with the relevant statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they
were filed, and did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 8.
SURVIVAL AND INDEMNIFICATION
8.1 EXPIRATION AND SURVIVAL. The representations and warranties of GDS
and the Key Officers set forth in SECTION 7.2 hereof (collectively, the "GDS
Representations") and all representations and warranties of Sabratek set forth
in SECTION 7.3 except those contained in SECTION 7.3(E) shall expire at the
Closing on the Closing Date. The representations and
<PAGE> 31
warranties of the GDS Shareholders set forth in SECTION 7.1 (collectively, the
"Shareholder Representations") and the representations and warranties of
Sabratek set forth in SECTION 7.3(E) and in the Sabratek Closing Statement
(collectively, the "Sabratek Representations") shall survive the Closing and
shall not be merged therein.
8.2 INDEMNIFICATION.
(a) Obligations of the Parties. From and after Closing, each
of the GDS Shareholders shall individually indemnify, defend and hold Sabratek
harmless from and against any claims, obligations, liabilities, losses, expenses
or other costs (including, without limitation, reasonable attorneys' fees and
expenses) (collectively, "Damages") incurred by Sabratek and arising out of any
material inaccuracy in any of the Shareholder Representations given by such GDS
Shareholder or the breach of any covenant or agreement of such GDS Shareholder
contained in this Agreement. From and after Closing, Sabratek shall indemnify,
defend and hold each of the GDS Shareholders harmless from and against any
Damages incurred by any of the GDS Shareholders and arising out of any material
inaccuracy in any of the Sabratek Representations or the breach of any covenant
or agreement of Sabratek contained in this Agreement.
(b) Claim for Indemnification. If Sabratek or any of the GDS
Shareholders become aware of any matter for which a GDS Shareholder or Sabratek,
as the case may be, may be liable under SECTION 8.2(A), or if a party has
reasonable grounds to believe that it may incur or suffer any Damages, such
party shall immediately provide written notice ("Notice of Claim") to the
applicable GDS Shareholder or Sabratek, as the case may be, of such party's
intention to seek indemnification, the general basis of the claim for
indemnification, and the amount for which indemnification is sought
("Indemnification Amount"), if known. Sabratek and the applicable GDS
Shareholder shall thereafter attempt to resolve any disputes with respect to
either the right to indemnification or the Indemnification Amount in accordance
with the provisions of SECTION 10.1 hereof. If any action at law or suit in
equity is instituted by a third party with respect to which any party intends to
claim any liability or expense as Damages under SECTION 8.2(A), such party shall
promptly notify the indemnifying party in writing of such action or suit.
(c) Defense of Third Party Claims. The indemnifying party
shall have the right to conduct and control, at its expense and through counsel
of its own choosing, the defense of any third party claim, action or suit, but
the indemnified party may, at its election, participate in the defense of any
such claim, action or suit at its sole cost and expense; provided, that if (i)
the indemnifying party and the indemnified party mutually agree or (ii) the
named parties to such claim, action or suit (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them, then the indemnified party may
defend, through counsel of its own choosing, such claim, action or suit and (so
long as it gives the indemnifying party at least fifteen (15) days prior notice
of the terms of the proposed settlement thereof) settle such claim, action or
suit, and recover from the indemnifying party the amount of such settlement or
of any judgement and the costs and expenses of such defense. The indemnified
party shall not compromise or settle any third party claim, action or suit
without the prior written consent of the indemnifying party, which consent will
not be unreasonably withheld or delayed.
<PAGE> 32
ARTICLE 9.
TERMINATION
9.1 RIGHT TO TERMINATE.
(a) Termination by Agreement. This Agreement may be terminated
at any time prior to Closing upon the mutual written agreement of Sabratek and
GDS.
(b) Termination by GDS. GDS shall have the right to terminate
this Agreement at any time prior to Closing upon written notice given to
Sabratek upon the occurrence of any one or more of the following events:
(i) The material breach of any of the
representations, warranties, covenants or agreements of Sabratek
contained in this Agreement and the failure by Sabratek to take
adequate initial steps to remedy such breach within thirty (30) days
after written notice of breach is given by GDS to Sabratek and to have
remedied such breach within sixty (60) days after the delivery of such
written notice; or
(ii) The termination by GDS of the Distribution
Agreement in accordance with the provisions of Section 6 thereof; or
(iii) The Closing shall not have occurred by 11:59
p.m. on July 31, 1999.
(c) Termination by Sabratek. Sabratek shall have the right to
terminate this Agreement at any time prior to Closing upon written notice given
to GDS upon the occurrence of any one or more of the following events:
(i) Subject to SECTION 9.1(D) below, the material
breach of any of the representations and warranties of GDS and the Key
Officers set forth in SECTION 7.2 or of any of the covenants of GDS and
the Key Officers set forth in this Agreement and the failure by GDS and
the Key Officers to take adequate initial steps to remedy such material
breach within thirty (30) days after written notice of breach given by
Sabratek to GDS and to have remedied such breach within sixty (60) days
after the delivery of such written notice; or
(ii) The material breach of any of the
representations, warranties, covenants or agreements of the GDS
Shareholders (considered in the aggregate) contained in this Agreement
and the failure by such GDS Shareholders to take adequate initial steps
to remedy such breach within thirty (30) days after written notice of
breach is given by Sabratek to GDS (copies of which notice shall be
given simultaneously to each of the GDS Shareholders) and to have
remedied such breach within sixty (60) days after the delivery of such
written notice; or
<PAGE> 33
(iii) The termination by Sabratek of the Distribution
Agreement in accordance with the provisions of Section 6 thereof; or
(iv) The Closing shall not have occurred by 11:59
p.m. on July 31, 1999.
(d) Limitation on Sabratek's Right to Terminate.
Notwithstanding anything to the contrary contained herein, Sabratek shall not
have the right to terminate this Agreement pursuant to SECTION 9.1(C)(I) above
if the aggregate economic impact of such uncured breach or breaches (other than
a deliberate or intentional breach or breaches) has a present value on the date
of termination of less than Five Hundred Thousand Dollars ($500,000) (calculated
using a discount rate equal to the interest rate for six-month United States
Treasury Bills as reported in The Wall Street Journal on the date written notice
of breach is delivered) or if the economic impact of such uncured breach or
breaches is fully reflected in the calculation of the Formula Value of GDS under
SECTION 3.2(C) of this Agreement. Examples illustrating the determination of
whether a breach is material or not within the meaning of this Section are set
forth on EXHIBIT "C" attached hereto.
9.2 EFFECT OF TERMINATION. None of the parties hereto shall be bound to
the other after termination of this Agreement in accordance with its terms.
Neither GDS nor any of the Key Officers or other GDS Shareholders shall be
liable to Sabratek for any breach or termination of this Agreement prior to
Closing, Sabratek hereby expressly acknowledging that its entitlement to damages
in connection with the transactions contemplated by this Agreement and the
Distribution Agreement shall be limited solely to such Liquidated Damages, if
any, to which Sabratek may be entitled under the Distribution Agreement;
provided, that it is expressly understood that the foregoing limitation with
respect to liability for breach of this Agreement shall not be deemed to extend
to any breach by a GDS Shareholder of any of the Shareholder Representations or
of the covenants set forth in SECTION 5.5 of this Agreement or the obligation of
a GDS Shareholder to indemnify Sabratek with respect to any such breach in
accordance with the provisions of SECTION 8.2 hereof.
ARTICLE 10.
GENERAL PROVISIONS
10.1 DISPUTE RESOLUTION. To the extent feasible, the parties desire to
resolve any controversies or claims arising out of or relating to this Agreement
through discussions and negotiations between each other. GDS and Sabratek agree
to use their best efforts to attempt to resolve any disputes, controversies or
claims arising out of or relating to this Agreement by face-to-face negotiations
with the other party. In the event that, after good faith discussions, such
controversies or claims cannot be resolved solely between the parties, then
Sabratek and GDS shall, within ten (10) days thereafter, jointly submit their
dispute to arbitration in the City of Chicago, Illinois. Such arbitration shall
be administered by the Center for Public Resources Institute for Dispute
Resolutions (the "Institute") in accordance with its then prevailing Rules for
Non-Administered Arbitration of Business Disputes (except as otherwise provided
herein), by
<PAGE> 34
three (3) independent and impartial arbitrators (collectively, the
"Arbitrator"), one (1) of whom shall be appointed by Sabratek and one (1) of
whom shall be appointed by GDS. Notwithstanding anything to the contrary
provided in SECTION 10.7 of this Agreement, the arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. ss. 1 et. seq. The Arbitrator shall
permit and facilitate such discovery as it shall determine appropriate in the
circumstances, taking into account the needs of the parties hereto and the
desirability of making discovery expeditious and cost effective. The Arbitrator
shall render its award within ninety (90) days after the conclusion of the
arbitration hearing. The Arbitrator shall not be empowered to award any party
any punitive damages in connection therewith, and each party hereby irrevocably
waives any right to recover such punitive damages. The Arbitrator's
determination as to a dispute shall be final and binding for all purposes of
this Agreement. Sabratek and GDS shall equally share the fees and expenses of
the Arbitrator unless the Arbitrator rules otherwise.
10.2 REMEDIES CUMULATIVE. Except as otherwise expressly provided above,
all rights and remedies provided by this Agreement, or existing at law or in
equity, shall be cumulative of all other rights and remedies, and shall not be
exclusive of each other. No delay or omission by a party in the exercise of any
right or remedy shall waive that right or remedy, and the pursuit of one right
or remedy shall in no way operate as an exclusive election or otherwise preclude
or limit either party from pursuing any other or additional right or remedy. If
any action or other proceeding is brought to enforce this Agreement, or because
of an alleged breach of any of the representations, warranties or covenants
contained herein, the successful or prevailing party shall be entitled to
recover from the other party all reasonable attorneys' and paralegals' fees and
other costs and expenses incurred by such party. In the event any judgment is
secured by such prevailing party, all such fees and expenses shall be included
in such judgment as determined by the court and not by the jury.
10.3 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right
or duty created hereby shall be assignable by any of the parties hereto;
provided, that Sabratek may assign its rights and obligations hereunder to any
corporation which controls, is controlled by or is under common control with
Sabratek, or to any corporation which acquires all or substantially all of the
assets of Sabratek, so long as such assignee expressly agrees in writing to
assume and be bound by all of the terms of this Agreement, without modification.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns.
10.4 NOTICES. All notices and other communications must be in writing
and shall be deemed given on the date delivered if delivered in person or by
overnight courier, or on the third (3rd) business day after mailing if mailed by
registered or certified mail, postage pre-paid, return receipt requested, to the
persons at the addresses set forth below (or such other address for a party as
shall be specified by like notice):
If to Sabratek: Sabratek Corporation
5601 West Howard Street
Niles, Illinois 60714
Attention: Mr. Stephen Holden
<PAGE> 35
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Alan G. Berkshire, Esq.
If to GDS: GDS Technology, Inc.
25235 Leer Drive
Elkhart, Indiana 46514
Attention: Dr. Surendra K. Gupta
with a copy to: Barnes & Thornburg
600 1st Source Bank Center
100 North Michigan
South Bend, Indiana 46601
Attention: Nelson J. Vogel, Jr., Esq.
If to GDS Shareholders: To the address set forth on the signature
page affixed hereto for each such GDS
Shareholder or, if none, to the address
for such person as listed on SCHEDULE
7.1(B)
10.5 ENTIRE AGREEMENT. This Agreement, and the exhibits and schedules
hereto, the Distribution Agreement, the Confidentiality Agreement and the other
agreements referenced herein contain the entire agreement of the parties with
respect to the subject matter hereof and supersede all prior oral and written
agreements and understandings of the parties, including, but not limited to,
that certain Preliminary Term Sheet dated 12/9/96. This Agreement may be altered
or amended only by a writing signed by the party to be charged.
10.6 SEVERABILITY. If any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction or as a result
of legislative or administrative action, such holding or action shall be
strictly construed and shall not affect the validity or affect any other
provision of this Agreement.
10.7 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the State
of Indiana without regard to principles of conflicts of law.
10.8 INTERPRETATION. The captions in this Agreement are for convenience
of reference only and shall not limit or otherwise affect any of the terms or
provisions hereof. Terms such as "herein", "hereof", and "hereinafter" refer to
this Agreement as a whole and not to the particular sentence or paragraph where
they appear, unless the context otherwise requires. Whenever the context
requires, references in this Agreement to the singular number shall include the
plural, the plural number shall include the singular and words denoting gender
shall include the masculine, feminine and neuter.
10.9 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same
<PAGE> 36
instrument. In addition, this Agreement may contain more than one counterpart of
the signature page and this Agreement may be executed by the affixing of the
signatures of each of the parties to one of such counterpart signature pages;
all of such signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
10.10 WAIVER. The failure of any party to enforce at any time or for
any period of time any of the provisions of this Agreement shall not be
construed as a waiver of such provision or of the right of the party to enforce
such provision. The waiver of any default or the failure to exercise any right
shall not be deemed a waiver of any subsequent default or waiver of the right to
exercise any other right.
IN WITNESS WHEREOF, the parties have caused this Stock Option Agreement
to be executed on the date or dates set forth below, effective as of the
Effective Date.
SABRATEK CORPORATION GDS TECHNOLOGY, INC.
By: /s/ Stephen Holden By: /s/ Surrendra K. Gupta
Title: Senior Vice President and Title: President
Chief Financial Officer
Date: Date:
STATE OF ILLINOIS )
) SS:
COUNTY OF )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared _________________, as __________________ of Sabratek
Corporation, who having been duly sworn upon their oath acknowledged the
execution of the foregoing Stock Option Agreement for and on behalf of said
corporation.
Witness my hand and notarial seal this ______ day of ____________,
1997.
________, Notary Public
Residing in ______________ County, IL
My Commission Expires:
<PAGE> 37
STATE OF INDIANA )
) SS:
COUNTY OF )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared _________________, as __________________ of GDS
Technology, Inc., who having been duly sworn upon their oath acknowledged the
execution of the foregoing Stock Option Agreement for and on behalf of said
corporation.
Witness my hand and notarial seal this ______ day of ____________,
1997.
_________, Notary Public
Residing in ________________ County, IN
My Commission Expires:
<PAGE> 38
"KEY OFFICER"
Surendra K. Gupta
Date Signed:
STATE OF INDIANA )
) SS:
COUNTY OF )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared Surendra K. Gupta, who acknowledged the execution of
the foregoing Stock Option Agreement.
Witness my hand and notarial seal this ______ day of ____________,
1997.
____________, Notary Public
Residing in _____________________ County, IN
My Commission Expires:
<PAGE> 39
"KEY OFFICER"
Aurora F. de Castro
Date Signed:
STATE OF INDIANA )
) SS:
COUNTY OF )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared Aurora de Castro, who acknowledged the execution of
the foregoing Stock Option Agreement.
Witness my hand and notarial seal this ______ day of ____________,
1997.
_________, Notary Public
Residing in _____________________ County, IN
My Commission Expires:
<PAGE> 40
STOCK OPTION AGREEMENT AMONG
SABRATEK CORPORATION, GDS TECHNOLOGY, INC.
AND GDS SHAREHOLDERS -- SIGNATURE PAGE
"GDS SHAREHOLDER"
[Signature]
[Printed Name]
Date Signed:
RESIDENCE ADDRESS:
STATE OF )
) SS:
COUNTY OF )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared _____________________________, who acknowledged the
execution of the foregoing Stock Option Agreement.
Witness my hand and notarial seal this ______ day of ____________,
1997.
_________, Notary Public
Residing in ____________________ County, ____
My Commission Expires:
