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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1999
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SABRATEK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3700639
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
8111 NORTH ST. LOUIS AVENUE, SKOKIE, ILLINOIS 60076
(847) 720-2400
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
K. SHAN PADDA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SABRATEK CORPORATION
8111 NORTH ST. LOUIS AVENUE, SKOKIE, ILLINOIS 60076
(847) 720-2400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
SCOTT HODES, ESQ.
DAVID S. GUIN, ESQ.
ROSS & HARDIES
150 NORTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60601
(312) 558-1000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each Class of Amount to be Registered Proposed Maximum Amount of Registration
Securities to be Aggregate Offering Fee
Registered Price (1)
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<S> <C> <C> <C>
Common Stock 603,500 $14,013,270 $3,896
$.01 par value
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(1) Estimated pursuant to Rule 457(c) solely for purposes of calculating
the registration fee, based on the average of the high and low trading
prices for the common stock as reported by the NASDAQ National Market
on July 13, 1999.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY STATE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SUBJECT TO COMPLETION - DATED JULY 19, 1999
PROSPECTUS
603,500 SHARES
SABRATEK CORPORATION
COMMON STOCK
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This prospectus relates to the offer and sale of up to 603,500 shares
of our common stock from time to time by the selling stockholders, former
shareholders of Strategic Reimbursement Services, Inc., an Illinois corporation,
("SRS") and EGS Securities Corp. ("EGS"). The selling stockholders who were
former shareholders of SRS acquired the 600,000 shares of common stock being
offered by means of this prospectus in a transaction in which a newly-formed
wholly-owned subsidiary of Sabratek was merged with and into SRS. As a result of
the transaction, SRS became a wholly-owned subsidiary of Sabratek and Sabratek
paid the former SRS shareholders an aggregate of 1,636,359 shares of our common
stock. EGS provided us with assistance in structuring the acquisition in
exchange for which we agreed to pay EGS 3,500 shares of our common stock.
Under the terms of the merger agreement and a separate escrow
agreement, we delivered (i) 1,472,723 shares of our common stock to the former
SRS shareholders, and (ii) 163,636 shares of our common stock to U.S. Bank Trust
National Association as escrow agent. The purpose of the escrow is to secure any
payments to which Sabratek may be entitled in the event it is determined that
SRS breached any of its representation and warranties contained in the merger
agreement. While the shares are held in escrow, the selling stockholders have
the right to direct the sale of, and to vote, the shares, but not to receive any
of the proceeds of a sale of, or to receive any dividends or distributions
issued on, the shares held in escrow. The escrow agent has authority to sell
shares of stock held in escrow without instructions from the selling
stockholders if, and only if, the sales are necessary to satisfy any claim we
may make for indemnification. See "PLAN OF DISTRIBUTION," "USE OF PROCEEDS," and
"SELLING STOCKHOLDERS." Sabratek accounted for the merger using the pooling of
interests method of accounting. As part of the merger, we also agreed to
register the resale of the 1,636,359 shares of common stock by the selling
stockholders on two separate Shelf Registration Statements. This prospectus
forms a part of the first of these Shelf Registration Statements and relates to
the resale of up to 603,500 shares of our common stock. The second of these
Shelf Registration Statements, which will register the resale for the remaining
1,036,359 shares of common stock must be filed on or before _________ __, 1999.
Sabratek has delivered to EGS all 3,500 shares of our common stock to which EGS
was entitled for providing us the services described above.
Sabratek will not receive any of the proceeds for the sale of the
common stock offered by means of this prospectus unless it receives a payment
from the escrow to satisfy an indemnification claim. To the extent that Sabratek
does receive any proceeds from the sale of the common stock offered by means of
this prospectus, we will use such proceeds for working capital and other general
corporate purposes. See "USE OF PROCEEDS" and "SELLING STOCKHOLDERS." The shares
are quoted on the Nasdaq National Market under the symbol "SBTK".
The shares offered by this prospectus involve a high degree of risk.
See "RISK FACTORS" beginning on Page 1.
THE DATE OF THIS PROSPECTUS IS ___________, 1999
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TABLE OF CONTENTS
<TABLE>
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Page
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WHERE YOU CAN FIND MORE INFORMATION....................................................................... ii
RISK FACTORS.............................................................................................. 1
SELLING STOCKHOLDERS...................................................................................... 11
USE OF PROCEEDS........................................................................................... 14
PLAN OF DISTRIBUTION...................................................................................... 15
LEGAL MATTERS............................................................................................. 16
EXPERTS................................................................................................... 16
RECENT DEVELOPMENTS....................................................................................... 16
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.,
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room. Our SEC filings are also available to the public at the
SEC's web site at http://www.sec.gov. You may also reach us on our Internet web
site at http://www.sabratek.com.
The SEC allows us to incorporate by reference the information that we
file with the SEC, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings (File No.
1-11831) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
a. our annual report on Form 10-K for the fiscal year ended December
31, 1998;
b. our quarterly report on Form 10-Q, for the fiscal quarter ended
March 31, 1999;
c. our current report on Form 8-K, dated May 19, 1999 and filed with
the SEC on May 25, 1999;
d. our current report on Form 8-K, dated June 1, 1999 and filed with
the SEC on June 16, 1999 and any later filed amendments;
e. our current report on Form 8-K, dated June 7, 1999 and filed with
the SEC on June 16,1999;
f. our current report on Form 8-K, dated June 29, 1999 and filed
with the SEC on July 14, 1999 and any later filed amendments;
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g. our current report on Form 8-K, dated July 1, 1999 and filed with
the SEC on July 16, 1999; and
h. the description of our capital stock contained in our
registration statement on Form 8-A, declared effective by the SEC
on June 21, 1996; and any amendments or reports filed for the
purpose of updating that description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
847-720-2400
ATTENTION: VICE PRESIDENT OF FINANCE
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have not authorized anyone to provide information other than the
information provided in this prospectus. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front of this document.
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RISK FACTORS
In addition to the other information in this prospectus, the risk
factors shown below should be considered carefully by potential purchasers of
the shares being offered by this prospectus.
FORWARD-LOOKING STATEMENTS MAY GIVE RISE TO EXPECTATIONS THAT ARE NOT
FULFILLED.
We have made forward-looking statements in this prospectus (and in
certain documents that we incorporate by reference in this prospectus) which may
be affected by risks and uncertainties. We may also make written forward-
looking statements in our periodic reports to the SEC, in our press releases and
other written materials and in oral statements made by our officers, directors
or employees to third parties. Statements that are not historical facts,
including statements about our beliefs and expectations, are forward-looking
statements. These statements are based on the beliefs and assumptions of our
management and on information currently available to us. Forward-looking
statements include statements preceded by, followed by or that include the words
"believes", "expects", "anticipates", "intends", "plans", "estimates",
"designed" or similar expressions.
Because we are unable to control or predict many factors that will
determine our future performance including financial results, forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions. Our future results may differ materially from
those expressed in the forward-looking statements contained in this prospectus
and in the information incorporated by reference in this prospectus. See "WHERE
YOU CAN FIND MORE INFORMATION." We caution you that a number of important
factors could cause actual results to differ materially from those contained in
any forward-looking statement. See other Risk Factors in this section.
Sabratek's management believes these forward-looking statements are
reasonable. However, because these statements are based on current expectations,
you should not place undue reliance on these forward-looking statements, which
are based on current expectations. Forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update publicly any of
them in light of new information or future events.
WE MAY BE UNSUCCESSFUL AT DEVELOPING OR ACQUIRING AND INTRODUCING NEW
OR ENHANCED PRODUCTS, WHICH MAY RESULT IN A REDUCTION IN OUR REVENUE.
Our financial position and results of operations are dependent on our
ability to satisfy the increasingly sophisticated needs of our customers by
developing or acquiring and introducing new products, enhanced versions of
existing products and new complementary products. There can be no assurance that
Sabratek will be able to develop or acquire new or enhanced products. In
addition, our success in developing or acquiring and introducing new or enhanced
products may be affected by a variety of risks, which include, but may not be
limited to, the following:
- the products may require and fail to receive regulatory
clearance or approval,
- the products may be difficult or uneconomical to
manufacture or market,
- the proprietary rights of third parties may preclude us
from marketing these products,
- scientific developments or technological advancements may
produce more desirable or technologically advanced
products,
- our competitors may market superior or more
cost-effective products and may do so on a more timely
basis,
- errors and malfunctions may be found in products after
their commercial introduction and may not be corrected in
a timely manner, and
- customers may not accept or use the products.
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If Sabratek is unable to develop or acquire new or enhanced products
and successfully bring them to market, it could have a material adverse effect
on our financial position and results of operations.
WE MAY BE UNABLE TO CONTINUE TO COMPETE WITH OTHER COMPANIES IN OUR
INDUSTRY THAT HAVE FINANCIAL OR OTHER ADVANTAGES.
The medical products industry is characterized by intense competition.
Large competitors, including Abbott Laboratories, Alaris Medical, Inc., Baxter
International Inc., I-Flow Corp., McGaw, Inc., an indirect subsidiary of B.
Braun Melsungen AG and SIMS Deltec, Inc., a subsidiary of Smiths Industries,
PLC, among others, have significant market shares and installed bases of
products in the infusion pump and related disposable supplies industry. Many of
these competitors have substantially greater capital resources, research and
development staffs, regulatory experience, sales and marketing capabilities,
manufacturing facilities and broader product offerings than us. Moreover, we
expect that these competitors will continue to compete aggressively by offering
volume discounts based on "bundled" purchases of a broader range of medical
equipment and supplies, a tactic that we can currently only pursue on a more
limited basis. There can be no assurance that this competition will not
adversely affect our results of operations or our ability to maintain or
increase sales and market share. Currently, we derive substantially all of our
revenues from the sale of our multi-therapy infusion pumps and related
disposable supplies. Further, we expect that revenues from these products will
continue to account for a significant portion of our revenues in the future.
Therefore, if substantially increased competition or technological changes
create a decline in the demand for our infusion pumps and related disposable
supplies, we would experience materially adverse consequences in our financial
position and results of operations.
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OUR LONG-TERM STRATEGY MAY BE UNATTAINABLE OR WE MAY BE UNABLE TO
SUCCESSFULLY INTEGRATE COMPANIES OR PRODUCT LINES THAT WE ACQUIRE.
While we have historically focused on the manufacture and distribution
of infusion pumps and related medical devices, our long-term strategy is to
create a virtual hospital room that can be accessed by healthcare providers
through the Internet and telecommunication ports. Eventually, it is our goal to
make our primary products, infusion pumps and related disposable supplies, a
crucial but complimentary element in our business of providing a broad spectrum
of services and products. Because our strategy is visionary and unprecedented
for us, there can be no assurance that we will be able to successfully implement
it.
There can also be no assurance that medical professionals will support
or prescribe implementation of a virtual hospital room or that if they do
support a virtual hospital room, they will direct their patients to select our
products and services. There can be no assurance that third party payors will
provide reimbursements for the products and services of our virtual hospital
room to the extent that we will be able to provide those products and services
on a profitable basis. Moreover, there can be no assurance that we will be able
to create or infiltrate a customer base which accepts and purchases the products
and services that would be included in a virtual hospital room.
In addition, part of our strategy includes aggressive expansion of our
operations by acquisition of entities or product lines that contribute to our
ability to create a virtual hospital room. We may use cash from our reserves to
acquire entities or product lines. If we use cash for acquisitions, we could
deplete our liquidity and cash reserves, which could have a material, adverse
effect on our financial position. Furthermore, there can be no assurance that
we will be able to successfully integrate new entities or product lines into our
operations or that we will be able to realize positive financial results from
this integration.
If we are unable to attain our long-term strategy or to successfully
integrate companies or product lines, it could have a material adverse effect on
our financial position and results of operations.
WE ARE INVOLVED IN LITIGATION WHICH MAY CAUSE SABRATEK TO PAY
SUBSTANTIAL DAMAGES AND ATTORNEYS FEES AND COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS.
Sabratek is involved in litigation with SIMS Deltec concerning patent
infringement, trade secret misappropriate, unfair competition and interference
with SIMS Deltec's customers.
In addition, Sabratek was served with a complaint on January 27, 1999
alleging that Sabratek and seven of its current and former officers violated
Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 20(a)
promulgated under the Securities Exchange Act of 1934. On June 7, 1999, we were
served with an amended complaint which expanded allegations that Sabratek
withheld material information about Sabratek's future prospects and engaged in
improper accounting practices. The amended complaint also added three officers
and one director as additional defendants.
Sabratek will incur substantial attorneys' fees in these litigation
matters and if these matters are ultimately determined in a manner adverse to
Sabratek, we could be liable for substantial damage awards which could have a
material adverse effect on our financial condition and results of operations.
WE ARE DEPENDENT ON OBTAINING APPROVALS FROM GOVERNMENT REGULATORS.
INTRODUCTION: OVERVIEW OF REGULATORY REQUIREMENTS.
The FDA, and in some cases, state and foreign authorities regulate the
clinical testing, development, manufacture, packaging, labeling, distribution
and promotion of the medical devices and supplies that we market.
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Federal regulations enforced by the FDA classifies medical devices
intended for human use into three categories, Classes I, II and III, on the
basis of the controls deemed necessary by the FDA to reasonably assure their
safety and effectiveness. Class I devices are required to comply with general
controls regarding such matters as labeling, premarket notification and
adherence to current good manufacturing practice requirements. Class II devices
are required to comply with general and special controls regarding such matters
as performance standards, postmarket surveillance, patient registries, and FDA
guidelines. Generally, Class III devices are those which must receive premarket
approval from the FDA to ensure their safety and effectiveness. Examples of
Class III devices include life-sustaining, life-supporting and implantable
devices, or new devices which have not been found substantially equivalent to
legally marketed devices. Electronic infusion devices and disposable tubing
sets, which we assemble and distribute, are classified by the FDA as Class II
medical devices.
If a new Class II medical device is substantially equivalent to a
medical device already legally marketed in the United States, and the marketed
device did not require Class III premarket approval, the FDA requirements may be
satisfied through a procedure known as a "510(k) Submission," in which the
applicant provides product information supporting its claim of substantial
equivalency. "Substantial equivalence" means that a device has the same intended
use and the same technological characteristics as the legally marketed device,
or the same intended use and different technological characteristics, provided
that it can be demonstrated that the device is as safe and effective as the
legally marketed device, and does not raise different questions regarding safety
and effectiveness.
Commercial distribution of a device for which a 510(k) Submission is
required can begin only after the FDA issues an order finding the device to be
substantially equivalent to a legally marketed device. The FDA has recently been
requiring a more rigorous demonstration of substantial equivalence than in the
past. This may include a requirement for clinical testing of the device. The FDA
may determine that a proposed device is not substantially equivalent to a
legally marketed device, in which case a "premarket approval" will be required.
Alternatively, the FDA may require additional information before a substantial
equivalence determination can be made, in which case data from safety and
effectiveness tests, including clinical tests, may be required.
The process for preparing and obtaining FDA approval of a premarket
approval is generally much more elaborate, time-consuming and expensive than the
process of preparing and obtaining FDA clearance of a 510(k) Submission. A
premarket approval would require us, among other things, to conduct pre-clinical
and clinical trials to demonstrate the safety and effectiveness of the proposed
device. Therefore, a determination that we are not substantially equivalent or a
request for additional information could significantly delay the market
introduction of new products that fall into this category.
- THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
THE MEDIVIEW SOFTWARE, WHICH COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS.
We received 510(k) clearance to begin marketing our 3030
Stationary Pump in the United States in May, 1992. We received 510(k) clearance
for our disposable tubing sets for use with the 3030 Stationary Pump in March,
1995. In July, 1994, the FDA cleared the 510(k) Submission for our 6060
Ambulatory Pump and disposable tubing sets for use with our 6060 Ambulatory
Pump. In June, 1996, we received 510(k) clearance forthat our original 510(k)
clearance for our 6060 Ambulatory Pump covers the use of 6060 Ambulatory Pump
in conjunction with the MediVIEW software system. However, there can be no
assurance that the FDA would agree with our determination. If in the future the
FDA concluded that the MediVIEW software system for use with the 6060
Ambulatory Pump required a new 510(k) Submission, the FDA could prohibit us
from marketing the MediVIEW software system for this use until we file a new
510(k) Submission and obtain clearance from the FDA. The FDA could also take
regulatory action against us for any prior distribution of the MediVIEW
software system with the 6060 Ambulatory Pump.
- THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
THE PUMPMASTER, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.
The PumpMaster is a hardware and software system designed to
perform diagnostic tests on our infusion pumps. We have determined that the
PumpMaster does not qualify for regulation as a medical device. However, there
can be no assurance that the FDA will agree with our determination in this
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regard. If the FDA were to determine that the PumpMaster is a medical device, it
could suspend our commercial distribution of the PumpMaster until a 510(k)
Submission covering the PumpMaster has been filed and cleared by the FDA and
other medical device regulatory requirements have been met. The FDA could also
take regulatory action against us based on our prior distribution of the
uncleared product.
- THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
ANY AND ALL ENHANCEMENTS WE HAVE MADE, OR MAKE, TO OUR
PRODUCTS.
A new 510(k) Submission must be filed when, among other
things, there is a major change or modification in the intended use of the
device, or a change or modification, including product enhancements, to a
legally marketed device that could significantly affect its safety or
effectiveness. A device manufacturer is responsible for making the initial
determination as to whether a proposed change to a cleared device or to its
intended use necessitates the filing of a new 510(k) Submission.
We have made some enhancements to our currently marketed
products without filing 510(k) Submissions. There can be no assurance that the
FDA would agree with our determinations that these enhancements do not require a
510(k) Submission and would not require 510(k) clearance before further
distribution. Likewise, if we determine that any modifications that we may make
to our cleared devices in the future do not require a new 510(k) Submission,
there can be no assurance that the FDA would agree with our determinations and
would not require a new 510(k) Submission for any future modifications made to a
cleared device.
If the FDA requires us to file a new 510(k) Submission for any
modification to the device, we may be prohibited from marketing the device as
modified until it obtains clearance from the FDA. There can be no assurance that
we will obtain 510(k) clearance on a timely basis, if at all, for any device
modification for which we file a future 510(k) Submission. If 510(k) clearance
is granted, there can be no assurance that it will not contain significant
limitations in the form of warnings, precautions or contraindications with
respect to conditions of use.
- THERE CAN BE NO ASSURANCE THAT WE WILL RECEIVE FDA CLEARANCE
FOR ANY NEW PRODUCTS WE MANUFACTURE.
We intend to develop new products in the future. Our new
products, including new applications for existing products, may qualify as
devices that require FDA 510(k) clearance or premarket approval. There can be no
assurance that any required 510(k) clearance or premarket approval of any of our
future products or new applications will be forthcoming in a timely manner, if
at all, or that the FDA's clearance or premarket approval of future products or
new applications will not contain significant limitations in the form of
warnings, precautions or contraindications with respect to conditions of use.
If in the future the FDA concludes that current, modified or new products
marketed by us require that the products be relabeled, require previously
unobtained 510(k) clearance, require new drug approval, or require other
regulatory approval, the FDA could prohibit us from manufacturing and/or
distributing these products until we make the necessary submissions and obtain
any required clearances or approvals. The FDA could also take regulatory action
against us for the marketing of these products before obtaining these clearances
or approvals.
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- THE FDA COULD DETERMINE THAT OUR MANUFACTURING PRACTICES ARE
SEVERELY INADEQUATE AND, As A RESULT, ORDER SUSPENSION OF OUR
FACILITIES; SUCH A DETERMINATION WOULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS.
Device manufacturers are required to register their
establishments and list their devices with the FDA, and are subject to periodic
inspections by the FDA and state agencies. Devices must be manufactured in
compliance with current good manufacturing practices under the Quality System
Regulation. We believe that our manufacturing and quality assurance procedures
substantially conform to the requirements of the Quality System Regulation.
However, there can be no assurance that the FDA would concur with our
determination in this regard or that we will be able to maintain substantial
compliance with the Quality System Regulation.
In addition, the Medical Device Reporting regulation obligates
us to inform the FDA whenever information reasonably suggests that one of our
devices may have caused or contributed to a death or serious injury, or that one
of our devices has malfunctioned and, if the malfunction were to recur, the
device would be likely to cause or contribute to a death or serious injury.
There can be no assurance that the FDA would agree with our determinations as to
whether particular incidents meet the threshold for Medical Device Reporting.
- WE MAY FAIL TO COMPLY WITH LABELING AND PACKAGING
REQUIREMENTS.
Labeling and packaging activities are regulated by the FDA and
may be regulated by the Federal Trade Commission. The FDA actively enforces
statutes and regulations prohibiting marketing of products for unapproved or
uncleared uses.
If, as a result of FDA inspections, Medical Device Reporting
reports or information derived from any other source, the FDA believes we are
not in compliance with the applicable statutory law or regulations, the FDA can:
- refuse to clear pending 510(k) Submissions until
specified conditions are met,
- withdraw previously cleared 510(k) Submissions,
- require notification to users regarding newly found
unreasonable risks,
- request repair, refund or replacement of faulty
devices,
- shut down facilities,
- require corrective advertisements, recalls or
marketing suspension,
- impose civil penalties, and
- institute legal proceedings to detain or seize
products, enjoin future violations, or seek criminal
penalties against us, our officers or employees.
Civil penalties for violations may be assessed by the FDA instead of or
in addition to instituting legal action. Civil penalties may range up to $15,000
per violation, and a maximum of $1,000,000 per proceeding. Civil penalties may
not be imposed for good manufacturing practice violations, unless the violations
involve a significant or knowing departure from federal regulations or a risk to
public health. The FDA provides manufacturers with an opportunity to be heard
before the assessment of civil penalties. If civil penalties are assessed,
judicial review is available.
- WE MAY BE UNABLE TO FULLY COMPLY WITH INTERNATIONAL
REGULATORY REQUIREMENTS.
We export, or intend to export, our 510(k)-cleared products to
Europe, Japan and other foreign countries. Exports of products that have market
clearance from the FDA in the United States do not require FDA authorization
for export. However, foreign countries often require, among other things, an
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FDA Certificate to Foreign Government verifying that the product complies with
specified requirements. To obtain a Certificate to Foreign Government, Sabratek
must certify to the FDA that these foreign requirements have been met. The FDA
may refuse to issue a Certificate to Foreign Government if significant
outstanding good manufacturing practice violations exist.
International sales of medical devices are regulated by each
country in which the products are sold. The regulatory review process varies
from country to country. Many countries also impose product standards, packaging
and labeling requirements, and import restrictions on devices. In addition, each
country has its own tariff regulations, duties and tax requirements. We plan to
use our distributors to assist us in obtaining any necessary foreign
governmental and regulatory approvals. We have received approval to market our
products in Japan as well as in the European community, and we currently sell
our products in Japan and the European community. However, there can be no
assurance that we will be able to obtain all necessary approvals in the future.
WE MAY NOT BE ABLE TO OBTAIN FDA CLEARANCE TO RESUME DISTRIBUTION OF
OUR ROCAP HEPARIN PRE-FILLED FLUSH SYRINGE PRODUCT LINE, WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
On November 24, 1998, we announced that we had suspended distribution
of our Rocap pre-filled flush syringe product line. We also announced that we
would submit new 510(k) applications to the FDA for the Rocap pre-filled flush
syringe products and that new management was in place at Rocap for both
operations and regulatory affairs. We then submitted the new 510(k)
applications.
On May 28, 1999, we received FDA clearance of our 510(k) Submission
covering our pre-filled saline flush syringe products. Currently, we are
awaiting 510(k) clearance on our pre-filled heparin flush syringe products. We
will not be able to resume distribution of our heparin flush syringe products
until 510(k) Submissions are cleared. We can give no assurances as to when the
FDA clearance of our pre-filled heparin flush syringe products will be obtained.
In the event that there are substantial delays in obtaining, or we are unable to
obtain, the required FDA clearances and approvals, we could incur a material
write down of assets and our future profitability could be materially affected.
WE MAY NOT RECEIVE THE FULL BENEFITS OF OUR INTELLECTUAL PROPERTY
PROTECTIONS.
There can be no assurance that the common law, statutory and
contractual rights on which we rely to protect our intellectual property and
confidential and proprietary information will provide us with meaningful
protection. Third parties may independently develop products, techniques or
information which are substantially equivalent to the products, including
software products and/or the software components of other products, techniques
and information which we consider proprietary. Disputes regarding our
intellectual property could force us into expensive and protracted litigation or
costly agreements with third parties. An adverse determination in a judicial or
administrative proceeding or failure to reach an agreement with a third party
regarding intellectual property rights could prevent us from manufacturing and
selling products or could otherwise limit our use of our intellectual property
rights, which could have a material adverse effect on our financial position
and results of operations.
OUR CURRENT CASH RESERVES COULD BECOME INADEQUATE FOR OUR NEEDS AND WE
MAY NOT BE ABLE TO SECURE ADDITIONAL CAPITAL.
The adequacy of our current cash reserves will depend on the cash flow
generated from our operations, which could be affected by all of the Risk
Factors contained in this registration statement, as well as by the purposes for
which these cash reserves are used. In particular, the adequacy of our cash
reserves could be adversely influenced by:
- regulatory or legislative changes pertaining to health
care,
- product liability exposure,
- dependence on future product development,
- pending litigation, and
- acquisitions of companies or product lines and
integration of these companies or product lines into our
operations.
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<PAGE> 12
If current cash reserves become inadequate, we may need to seek
additional funds through bank facilities, or public or private debt or equity
offerings. There can be no assurance that we will be able to obtain additional
capital on favorable terms, or at all, if and when it becomes necessary. The
terms on which Sabratek obtains any necessary capital in the future could have
an adverse impact on the rights of holders of our common stock. In addition, if
we were unable to raise additional capital if and when necessary, we may be
unable to successfully complete our business strategy.
A SIGNIFICANT PORTION OF OUR REVENUES ARE DEPENDENT ON OUR CUSTOMERS'
ABILITY TO OBTAIN THIRD-PARTY REIMBURSEMENT FOR THE COST OF ACQUIRING
AND USING OUR PRODUCTS OR SERVICES.
Our products are generally purchased by health care providers and
patients, who then seek reimbursement from various government and private
third-party payors, including Medicare, Medicaid and managed care organizations.
Government and private third-party payors increasingly attempt to contain health
care costs by limiting both the extent of coverage and the reimbursement rate
for new diagnostic and therapeutic products and services. The Health Care
Financing Administration of the United States Department of Health and Human
Services ("HCFA"), which administers Medicare, and most private insurance
companies do not provide reimbursement for services that they determine to be
experimental in nature or that are not considered "reasonable and necessary" for
diagnosis or treatment. Many private insurers are influenced by HCFA actions in
making their own coverage decisions on new products or services. There can be no
assurance that third-party reimbursement for the use of our products or services
will continue to be available to our customers, that third-party reimbursement
will be available for new products or services we may introduce or that the rate
of any reimbursement will be adequate. Disapproval of, or limitations in,
coverage by HCFA or other third-party payors could materially and adversely
affect market acceptance of our products or services, financial position and
results of operations.
IF IT IS EVER DETERMINED THAT ONE OF OUR PRODUCTS OR SERVICES CAUSED
INJURY, WE COULD INCUR SUBSTANTIAL LIABILITIES.
Manufacturers of medical devices face the possibility of substantial
liability for damages in the event that the use of their products results in
adverse effects to a patient. As a manufacturer of medical devices, we maintain
product liability insurance, but there can be no assurance that liability claims
will not exceed the limits of our coverage or that our insurance will continue
to be available on commercially reasonable terms or at all. Furthermore, we do
not maintain insurance that would provide coverage for any costs or losses
resulting from any required recall of our products due to alleged defects,
whether instituted by a regulatory agency or by us. Product liability claims
that exceed our policy limits or the costs associated with any product recall
could have a material adverse effect on our financial position and results of
operations.
In addition, as providers of consulting and utilization review
services, we maintain liability and errors and omissions insurance, but there
can be no assurance that liability claims, if any, will not exceed the limits of
our coverage or that our insurance will continue to be available on commercially
reasonable terms or at all.
As providers of consulting and utilization review services, we incur
risks of liability arising out of the services we provide. A determination that
any damage including personal injury or commercial damage resulted from use of
our services could require us to pay substantial monetary awards or damages,
which could have a material adverse effect on our financial position.
WE RISK BUSINESS DECLINES DUE TO OUR INTERNATIONAL OPERATIONS.
During the year ended December 31, 1998, we derived approximately 4% of
our revenues from international sales, resulting in exposure to risks which
include, but may not be limited to, the following:
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<PAGE> 13
- maintenance of existing relationships and/or the
establishment of new relationships with international
distributors;
- fluctuations in exchange rates of the U.S. dollar against
foreign currencies;
- economic or political instability and domestic and
foreign governmental regulations, including export
license requirements, trade restrictions, changes in
tariffs, regulatory approval for marketing products or
similar factors;
- uncertain or limited protection of our intellectual
property rights under the laws of foreign countries may
not protect our intellectual property rights to the same
extent as do the laws of the United States.
Unfavorable changes in any of these factors could reduce the demand
for, or the profitability of, our products and services in foreign markets. This
reduction could have a material adverse effect on our financial position and
results of operation.
WE DEPEND ON KEY EXECUTIVES. A LOSS OF THESE EXECUTIVES AND PERSONNEL
COULD NEGATIVELY IMPACT OUR OPERATIONS.
We are highly dependent on the members of our management team, in
particular, our Chief Executive Officer. The loss of one or more of our
management team could have a material adverse effect on us. In addition, we
believe that our future success will depend in large part on our ability to
attract and retain highly skilled managerial personnel, particularly as we
expand our activities. We face significant competition for such personnel, and
there can be no assurance that we will be successful in hiring or retaining the
personnel we require for continued growth, if any. The failure to hire and
retain such personnel could have a material adverse effect on our financial
position and results of operations.
OFFICERS AND DIRECTORS MAY CONTROL CORPORATE ACTIONS DUE TO THEIR
COMBINED OWNERSHIP OF SHARES OF SABRATEK STOCK.
As of April 16, 1999, all officers and directors of Sabratek as a group
beneficially owned approximately 19% of the outstanding shares of Sabratek
common stock. Because of the combined voting power of the officers and
directors, these individuals acting as a group may be able to influence
Sabratek's affairs and business, including any determination with respect to a
change in control of Sabratek, future issuances of common stock or other
securities, declaration of dividends on Sabratek common stock and the election
of directors. Such influence could have the effect of delaying, deferring or
preventing a change in control of Sabratek which could deprive Sabratek's
stockholders of the opportunity to sell their shares of common stock at prices
higher than prevailing market prices.
OUR ISSUANCE OF A LARGE VOLUME OF SHARES OF OUR COMMON STOCK COULD
RESULT IN A DEPRESSION OF OUR STOCK PRICE.
Since June 1, 1999, we have issued approximately 3,347,000 shares of
our common stock to acquire LifeWatch, Inc., a subsidiary of Ralin Medical,
Inc., Strategic Reimbursement Services, Inc., Unitron Medical Communications,
Inc. and GDS Technology, Inc. In connection with these acquisitions, we entered
into agreements with the recipients of our common stock which obligate Sabratek
to file registration statements which will allow the recipients to resell their
approximately 3,347,000 shares. We will file registration statements relating to
the resale of approximately 2,311,000 shares of common stock in July, 1999 and a
registration statement relating to the resale of the remaining shares no later
than December 1, 1999. The filing of the registration statements allows the
recipients to sell the shares when and if they determine it is appropriate.
Sabratek cannot predict the timing or amount of any sale which may be
made under these registration statements. Even if no sales occur, the mere
issuance and registration for resale of approximately 3,347,000 shares of our
common stock, which is approximately 25% of our outstanding common stock as of
July 14, 1999, could have the effect of depressing the market price of our
common stock. Moreover, the simultaneous offering for public sale of a
significant number of the approximately 3,347,000 shares would likely have the
effect of depressing the market price of our common stock.
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<PAGE> 14
OUR FINANCIAL RESULTS AND STOCK PRICE MAY BE AFFECTED BY QUARTERLY
FLUCTUATIONS.
Our quarterly revenues and operating results have varied significantly
in the past and may continue to do so in the future. Future revenues and
operating results may also fluctuate significantly from quarter to quarter and
will depend upon, among other factors:
- demand for our products and new product introductions,
- demand for products distributed by our competitors,
- our efforts regarding transitions to new or enhanced
products,
- the timing of orders and shipments,
- the mix of sales between products,
- competition, including pricing pressures,
- the timing of regulatory filings and approvals,
- the timing of reimbursement from third-party payors, and
- the timing of research and development expenditures.
OUR STOCK PRICE MAY EXPERIENCE VOLATILITY.
The securities markets have, from time to time, experienced extreme
price and volume fluctuations which often have been unrelated to the operating
performance of particular companies. The market prices of the common stock of
many publicly-held companies that provide medical devices and services have been
in the past, and are expected to be, volatile. In addition to factors such as
interest rates and economic conditions which affect stock prices generally,
some, but not all, of the factors which could result in fluctuations in our
stock price include:
- announcements of technological or medical innovations,
- the introduction of new commercial products by our
competitors, o disputes concerning patents or proprietary
rights,
- positive or negative regulatory action,
- changes in regulatory or medical reimbursement policies,
and
- period-to-period fluctuations in the financial results of
the Company.
ANTI-TAKEOVER PROTECTIONS MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO
ACQUIRE SABRATEK.
Sabratek's Certificate of Incorporation and Bylaws contain general
requirements which pre-condition a third- party's ability to acquire a
controlling interest in Sabratek. These requirements and pre-conditions could
limit the price that potential acquirors might be willing to pay in the future
for shares of Sabratek common stock. These provisions are explained below.
- Sabratek's Certificate of Incorporation provides that the
Board of Directors may determine and set rights, preferences,
privileges and restrictions, including voting rights, of
unissued shares of Sabratek's preferred stock and that the
shares of preferred stock may be issued without any further
vote or action by Sabratek's stockholders. The rights of the
holders of common stock will be subject to, and may be
adversely affected by, the rights of the holders of any
preferred stock that may be created and issued in the future.
In addition, stockholders do not have the right to cumulative
voting in the election of directors.
- Sabratek's Bylaws provide for a staggered board so that only
one-third of the total number of directors are replaced or
re-elected each year. The Bylaws also require the affirmative
vote of two-thirds of the Company's issued and outstanding
voting stock to remove a director. Therefore, potential
acquirors of Sabratek may face delays in replacing the
existing directors.
-10-
<PAGE> 15
- Sabratek currently has approximately $85,000,000 in notes
outstanding. These notes, and the indenture which governs
them, provide that in some circumstances involving a change in
control, each holder of these notes may require Sabratek to
repurchase all or a portion of the holder's notes. This
repurchase obligation could discourage a third party from
attempting to acquire control of the Company.
- In August, 1998, Sabratek designated the relative rights and
preferences of a new Class of Series B Preferred Stock and
adopted a Shareholder Rights Plan. Sabratek's Board of
Directors declared a dividend of one right for each share of
Sabratek's common stock outstanding on September 4, 1998. Each
right gives the holder the opportunity to purchase one
one-hundredth of one share of Sabratek's new authorized Series
B Preferred Stock at a price of $150 (as adjusted from time to
time) upon the occurrences of a change of control of Sabratek.
The Rights Plan and the accompanying rights could have the
effect of delaying the ability of a potential acquiror from
acquiring control of Sabratek.
- Sabratek's Bylaws authorize Sabratek's Board to establish a
record date with respect to stockholders entitled to vote on
corporate matters by means of a written consent. This Bylaw
provision has the effect of allowing Sabratek's Board to react
to any unexpected stockholder actions and could slow the pace
of a potential acquisition.
- Sabratek's senior executive officers may be entitled to
substantial change in control payments. These payments could
have the effect of discouraging a potential acquiror from
acquiring control of Sabratek.
SELLING STOCKHOLDERS
1,636,359 of the shares of common stock offered by means of this
prospectus were originally issued under an agreement of merger, dated as of June
29, 1999, whereby our wholly-owned subsidiary, SBTK I, merged with and into SRS.
As a result of the merger, SRS became a wholly-owned subsidiary of Sabratek. As
part of the merger and as consideration for all of the issued and outstanding
shares of SRS' common stock, Sabratek issued a total of 1,636,359 shares of our
common stock to SRS' former shareholders. Sabratek accounted for the merger
using the pooling of interests method of accounting. Under the terms of the
merger agreement and a separate escrow agreement, 1,472,273 shares of our common
stock were delivered directly to the former SRS shareholders and 163,636 shares
of our common stock were delivered in escrow to U.S. Bank Trust National
Association which is acting as escrow agent under the escrow agreement. The
purpose of the escrow is to secure payment of any amounts to which we may be
entitled in the event it is determined that SRS has breached any of its
representations and warranties contained in the merger agreement. The former SRS
shareholders will have the right to vote the shares held in escrow as well as to
cause the escrow agent to sell all or any portion of the shares during the term
of the escrow but will not be entitled to receive any proceeds from the sale of
the shares until the escrow period ends. It is anticipated that the escrow
period will end on the date of issuance of Sabratek's first independent audit
report which reflects the acquisition of SRS through the merger, which audit
report is expected to be issued in March 2000. In the unlikely event that the
audit reports are not issued before the one year anniversary of the closing of
the merger, the escrow period will end on June 29, 2000.
The indemnification provisions contained in the merger agreement
provide that Sabratek's right to indemnification is limited to the value of the
163,636 shares of our common stock held in the escrow. In addition, Sabratek is
not entitled to indemnification payments until its damages as a result of one or
more breaches of SRS'
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<PAGE> 16
representations and warranties equals or exceeds $250,000, and then, only to the
extent the damages exceed $175,000. If Sabratek is entitled to an
indemnification payment and the cash generated through previous sales of shares
held in escrow is insufficient to make the payment, the escrow agent is required
to sell a sufficient number of the escrow shares to generate the necessary cash.
With this limited exception, the escrow agent has no authority to sell the
shares of our common stock held in the escrow without being directed to do so by
the former SRS shareholders.
In connection with the merger, SRS entered into a three year employment
agreement with Robert C. Gienko in which Gienko agreed to serve as president of
our SRS subsidiary after the consummation of the merger. Under the terms of the
employment agreement, Gienko will receive a minimum annual salary of $250,000 as
compensation. In addition, Gienko is entitled to receive an annual bonus, which
shall not be less than (a) 20% of his salary if he achieves 80% of specified
performance objectives, (b) 30% of his salary if he achieves 100% of specified
performance objectives, or (c) less than 40% of his salary if he achieves 120%
of specified performance objectives. Mr. Gienko is entitled to severance
payments if he is terminated other than for cause. In addition, the employment
agreement provides that if, within 12 months following a change in control of
SRS, Mr. Gienko's employment is terminated for any reason other than cause,
death or disability (as these terms are defined in the employment agreement) or
there is a material adverse change in Mr. Gienko's compensation, title or
duties, he shall be entitled to all salary, bonuses, and benefits earned but not
yet paid to Mr. Gienko and all salary, bonuses and benefits as if his employment
had been terminated by SRS without cause. Components of salary and benefits owed
to Mr. Gienko in the event of termination of his employment without cause
include: (a) Mr. Gienko's then current salary for a period of one year following
the date of termination of the employment agreement; (b) a prorated bonus for
the year in which terminated; and (c) continued coverage under SRS's health plan
for a period of one year. In addition to provisions relating to Mr. Gienko's
duties and compensation, the employment agreement requires Mr. Gienko to
maintain the confidentiality of SRS's proprietary information and refrain from
competing with SRS during his employment with SRS and for a period of twelve
months thereafter.
For purposes of Mr. Gienko's employment agreement, the term
change in control shall mean the occurrence of any of the following events:
(a) Consummation of the acquisition by any person, as such term is
defined in Section 13(d) or 14(d) of the Exchange Act, of
beneficial ownership, within the meaning of Rule l3d-3
promulgated under the Securities Act, of 40 percent or more of
the combined voting power of the then outstanding voting
securities of Sabratek or SRS; or
(b) The individuals who, as of the date hereof, are members of the
board of directors of Sabratek cease for any reason to
constitute a majority of Sabratek's board, unless the
election, or nomination for election by the stockholders of
Sabratek, of any new director or directors was approved by a
vote of a majority of Sabratek's Board, in which case the new
director or directors shall, for purposes of the employment
agreements, be considered as a member or members of Sabratek's
Board as of the date of the employment agreement; or
(c) Approval by stockholders of Sabratek or SRS of (A) a merger or
consolidation of Sabratek or SRS if the stockholders
immediately before the merger or consolidation do not, as a
result of the merger or consolidation, own, directly or
indirectly, more than 60 percent of the combined voting power
of the then outstanding voting securities of the entity
resulting from the merger or consolidation in substantially
the same proportion as their ownership of the combined voting
power of the voting securities of Sabratek or SRS, as
applicable, outstanding immediately before the merger or
consolidation; or (B) a complete liquidation or dissolution,
or an agreement for the sale or other disposition, of all or
substantially all of the assets of Sabratek or SRS.
Notwithstanding the foregoing, a change in control shall not be deemed
to occur (1) solely because 40 percent
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<PAGE> 17
or more of the combined voting power of the then outstanding securities is
acquired by (a) a trustee or other fiduciary holding securities under one or
more employee benefit plans maintained for employees of Sabratek or SRS, or (b)
any corporation that, immediately before the acquisition, is owned directly or
indirectly by the stockholders of Sabratek or SRS in the same proportion as
their ownership of stock of Sabratek or SRS immediately before the acquisition,
or (2) if the employee is, immediately after any above defined change in
control, employed by Sabratek in a comparable role and at a comparable salary.
Also in connection with the merger, SRS entered into three year
employment agreements with Mark Pugh, Kenneth J. Janowski and Steven G.
Fagerman, each of whom is a Vice President of SRS. Under the terms of their
respective employment agreements, each employee will receive a minimum annual
salary of $190,000 and any additional bonuses as determined by SRS' President.
Each employee is entitled to severance payments if he is terminated other than
for cause. In addition, the employment agreement provides that if, within 12
months following a change in control of SRS, any employee's employment is
terminated for any reason other than cause, death or disability (as these terms
are defined in the employment agreement) or there is a material adverse change
in any employee's compensation, title or duties under his respective employment
agreement, he shall be entitled to all salary, bonuses and benefits earned but
not yet paid to the employee, as well as all salary, bonuses and benefits as if
his employment had been terminated by SRS without cause. Components of salary
and benefits owed to any employee in the event of termination of his employment
without cause include: (a) each employee's then current salary for a period of
one year following the date of termination; (b) a prorated annual bonus for the
year in which terminated; and (c) continued coverage under SRS's health plan for
a period of one year. In addition to provisions relating to each employee's
duties and compensation, the employment agreement requires each employee to
maintain the confidentiality of SRS's proprietary information and refrain from
competing with SRS during his employment with SRS and for a period of one year
after his employment with SRS ends.
For purposes of the employment agreements for Messrs. Pugh, Janowski
and Fagerman, the term change in control shall mean the occurrence of any of the
following events:
(a) Consummation of the acquisition by any person, as such term is
defined in Section 13(d) or 14(d) of the Exchange Act, of
beneficial ownership, within the meaning of Rule l3d-3
promulgated under the Securities Act, of 40 percent or more of
the combined voting power of the then outstanding voting
securities of SRS; or
(b) The individuals who, as of the date hereof, are members of
SRS's board of directors of cease for any reason to constitute
a majority of SRS's Board, unless the election, or nomination
for election by the stockholders of SRS, of any new director
or directors was approved by a vote of a majority of SRS's
Board, in which case the new director or directors shall, for
purposes of this Agreement, be considered as a member or
members of SRS's Board; or
(c) Approval by stockholders of SRS of (A) a merger or
consolidation of SRS if the stockholders immediately before
the merger or consolidation do not, as a result of the merger
or consolidation, own, directly or indirectly, more than 60
percent of the combined voting power of the then outstanding
voting securities of the entity resulting from the merger or
consolidation in substantially the same proportion as their
ownership of the combined voting power of the voting
securities of SRS outstanding immediately before the merger or
consolidation; or (B) a complete liquidation or dissolution,
or an agreement for the sale or other disposition, of all or
substantially all of the assets of SRS.
Notwithstanding the foregoing, a change in control shall not be deemed
to occur solely because 40 percent or more of the combined voting power of the
then outstanding securities is acquired by (a) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained for
employees of SRS, or (b) any corporation that, immediately before the
acquisition, is owned directly or indirectly by the stockholders of SRS in the
same proportion as their ownership of stock of SRS immediately before the
acquisition.
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<PAGE> 18
3,500 shares of the common stock offered by means of this prospectus
were originally issued to EGS under a memorandum of understanding dated as of
March 2, 1999 in which EGS agreed to assist us in structuring the acquisition
and a supplement thereto dated as of July 5, 1999. EGS has received all 3,500
shares of our common stock to which it is entitled for the services provided to
Sabratek in our acquisition of SRS.
The following table sets forth information about the beneficial
ownership of the selling stockholders as of July 9, 1999 as to:
- the number of shares of common stock that are beneficially
held by each of the selling stockholders,
- the maximum number of shares that may be offered by the
selling stockholders by means of this prospectus, and
- the number of shares of common stock that can be sold by means
of this prospectus and the percentage of our total outstanding
common stock which the number represents.
We can provide no assurance as to the number of shares that will be
held by the selling stockholders after this offering because the selling
stockholders may offer all or some part of the shares which they hold by means
of this prospectus, and because this offering is not being underwritten on a
firm commitment basis.
<TABLE>
<CAPTION>
Shares
Shares Beneficially Number of Beneficially Owned
Owned Prior to the Shares Offered After the Offering(2)
Selling Stockholder Offering(1) Hereby Number Percentage
- ------------------- ------------------- -------------- ------ ----------
<S> <C> <C> <C> <C>
Robert C. Gienko 1,003,454 354,000 649,454 4.90%
Philip Mitchell 242,999 99,000 143,999 *
Mark Pugh 147,272 60,000 87,272 *
Kenneth J. 66,272 27,000 39,272 *
Janowski
Steven G. 147,272 60,000 87,272 *
Fagerman
EGS Securities Corp. 41,000 (3) 3,500 37,500 *
</TABLE>
* Less than 1% of the issued and outstanding shares of Sabratek's common stock.
(1) Sabratek has relied on information provided by the selling stockholders to
determine the number of shares of our common stock, if any, which the
selling stockholders owned before receiving the shares of our common
stock issued to them in connection with the merger.
(2) You should be aware that the registration rights agreement entered into by
and among Sabratek and the former SRS shareholders in connection with the
merger requires us to file an additional shelf registration statement
registering the resale by the Selling Stockholders of the remaining
1,036,359 shares of our common stock received by them in connection with
the merger on or before ____, 1999. Following the filing of the additional
Shelf Registration Statement, each of the selling stockholders may
significantly reduce the number of shares of Sabratek common stock owned by
him as indicated herein.
(3) Does not include 25,000 shares of Sabratek common stock which may be
acquired by EGS Securities Corp. upon the exercise of outstanding options,
43,851 shares of Sabratek common stock held of record by Mr. Lautman,
54,715 shares of common stock which may be acquired by Mr. Lautman upon the
exercise of outstanding options or 58,732 shares of common stock which may
be acquired by Mr. Lautman upon the exercise of outstanding warrants.
William D. Lautman, a director of Sabratek, is also a managing director of
EGS. EGS and Mr. Lautman each disclaim beneficial ownership of any shares
of Sabratek common stock which are owned or may be acquired by the other
party. You should be aware that the 37,500 shares of common stock owned by
EGS after the offering are being registered for resale by means of a
separate prospectus.
USE OF PROCEEDS
Other than the completion and filing of this registration statement, we
will not participate in the sale of the shares offered by means of this
prospectus. In addition because the shares of common stock being offered by
means
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<PAGE> 19
of this prospectus are being sold by the selling stockholders, we will not
directly receive any of the proceeds from the sale of the shares. However, in
the event that there is a determination that we are entitled to any
indemnification payments we may receive cash which was generated from the sale
of a portion of the shares of common stock offered hereby. See "SELLING
STOCKHOLDERS." We cannot, however, predict whether any payment will be made or
the amount of any payment if it is made. To the extent that Sabratek does
receive any amount generated through the sale of shares of common stock offered
by means of this prospectus, we will use the proceeds for working capital and
general corporate purposes.
PLAN OF DISTRIBUTION
The shares offered by means of this prospectus may be sold from time to
time by the selling stockholders. Unless we are entitled to reimbursement for
any damages we incur, we will not receive any proceeds from this offering. See,
"SELLING STOCKHOLDERS" and "USE OF PROCEEDS." We have agreed to register the
resale of 1,636,359 shares of our common stock held by the selling stockholders.
This prospectus relates to the resale of 603,500 of the shares of common stock.
The resale of the remaining shares of common stock will be registered in a
subsequent registration statement which Sabratek is required to file on or
before ______, 1999.
Except for those shares held in escrow, the selling stockholders may
offer the shares from time to time in the open market, on the Nasdaq National
Market, in privately negotiated transactions, or in a combination of these
methods, at market prices that prevail at the time of sale or at privately
negotiated prices. The selling stockholders may sell these shares through one or
more brokers or dealers or directly to purchasers. These broker-dealers may
receive compensation in the form of commissions, discounts or concessions from
the selling stockholders and/or purchasers of the shares for whom those
broker-dealers may act as agent, or to whom they may sell as principal, or both.
Compensation as to a particular broker-dealer may exceed customary commissions.
The selling stockholders and any broker-dealers who act in connection with the
sale of the shares under this prospectus may be deemed to be "underwriters"
within the meaning of the Securities Act. Any commissions they receive and
proceeds of any sale of shares may be deemed to be underwriting discounts and
commissions under the Securities Act. Under Exchange Act rules and regulations,
no distribution participant or its affiliated purchasers (as defined in
Regulation M adopted under the Exchange Act) may simultaneously engage in market
making activities with respect to the shares for a restricted period beginning
on the day proxy solicitation or offering materials are first disseminated to
security holders and ending upon the completion of the distribution, except
under limited circumstances. The selling stockholders, their affiliated
purchasers and any other person participating in the distribution will be
subject to certain provisions of the Exchange Act and related rules and
regulations. These provisions prohibit, except under limited circumstances, the
purchase and sale of any of the shares by the selling stockholders, their
affiliated purchasers and any other person participating in the distribution
during the restricted period described above. These restrictions may affect the
marketability of the shares and the ability of any person or entity to engage in
market making activities with respect to the shares.
Except for those shares held in escrow, from time to time, the selling
stockholders may pledge, hypothecate or grant a security interest in some or all
of the shares of our common stock they own. In the event of a foreclosure or
event of default in connection with those pledges, the shares may be transferred
to the persons to whom the shares were pledged. If such a transfer occurs, the
transferees will be deemed to have the rights of the selling stockholders under
this plan of distribution. At the same time, the selling stockholders will
beneficially own fewer shares. The plan of distribution for the selling
stockholders' shares will otherwise remain unchanged.
We have agreed to pay all of the expenses incident to the registration,
offering and sale of the shares to the public other than commissions or
discounts of underwriters, broker-dealers or agents. We have agreed to indemnify
the selling stockholders against certain liabilities, including certain
liabilities under the Securities Act.
In the event that we file a registration statement under the Securities
Act of an underwritten offering of our common stock, we may restrict the ability
of the selling stockholders to effect a public sale of the shares of common
-15-
<PAGE> 20
stock being offered by means of their prospectuses during the ten business days
before, and the 45-day period beginning on, the effective date of the
registration statement, so long as the selling stockholders are given an
opportunity to participate in the underwritten offering if the only selling
security holder in the offering is Sabratek.
This offering will terminate on the earlier of (a) the date on which all
shares offered by this prospectus have been sold by the selling stockholders or
(b) two years after the effective date of this registration statement.
LEGAL MATTERS
The legality of the shares of our common stock being offered by means of
this prospectus has been passed on for Sabratek by Ross & Hardies, Chicago,
Illinois. A member of this firm owns shares of Sabratek's common stock.
EXPERTS
The financial statements of Sabratek Corporation as of December 31, 1998
and 1997 and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference herein in reliance upon the report of
KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
RECENT DEVELOPMENTS
On May 28, 1999, Sabratek received FDA clearance of our 510(k) Submission
covering our Rocap division's pre-filled saline flush syringe products. We are
working closely with our customers and suppliers to resume production and
shipments in the shortest possible time frame.
On June 1, 1999, Sabratek purchased all of the issued and outstanding
shares of capital stock of LifeWatch, Inc., a wholly-owned subsidiary of Ralin
Medical, Inc. LifeWatch monitors patients transtelephonically in alternate site
settings on behalf of health care providers and is the market leader in
arrhythmia monitoring. Under the terms of a stock purchase agreement dated as of
May 19, 1999, Sabratek paid Ralin $12,260,000 in cash from its existing cash
reserves and 900,000 shares of our common stock in exchange for all of the
outstanding shares capital stock of LifeWatch.
On June 7, 1999, Sabratek was served with an amended complaint in a
proceeding filed in the United States District Court for the Northern District
of Illinois on January 27, 1999, as a purported class action. The amended
complaint expands the allegations against Sabratek to include allegations that
Sabratek withheld material information about its future prospects and engaged in
improper revenue recognition practices. The amended complaint also expanded the
number of named defendants in the proceeding by adding three additional officers
and one director of Sabratek as defendants. Sabratek is currently required to
file an answer, motion to dismiss or other responsive pleading on or before
July 28, 1999.
On July 1, 1999, Sabratek acquired substantially all of the issued and
outstanding shares of capital stock of Unitron Medical Communications, Inc.,
d/b/a/ MOON Communications. MOON Communications is a healthcare information
services company providing an array of healthcare related services to
physicians, home health agencies, payors and other participants in the
healthcare market through the internet. Under the terms of an option agreement
dated January 22, 1999, Sabratek paid the Unitron shareholders an aggregate
purchase price of 542,926 shares of our common stock in exchange for the shares
of capital stock we acquired. Sabratek is currently attempting to acquire
approximately 10,000 shares of Unitron's capital stock which we did not acquire
on July 1, 1999 on terms identical to those contained in the option agreement.
On July 9, 1999, Sabratek acquired all of the issued and outstanding
capital stock of GDS Technology, Inc. GDS develops, manufactures and markets
advanced point-of-care blood diagnostic tests and instruments. Under the terms
of an option agreement dated August 29, 1997, Sabratek paid the GDS shareholders
an aggregate purchase price of 216,949 shares of our common stock in exchange
for all of the issued and outstanding capital stock of GDS.
-16-
<PAGE> 21
All selling stockholders that effect transactions in the shares of
common stock offered by means of this prospectus are required to deliver a copy
of their prospectus to any purchaser of the shares of common stock at or before
the time a certificate representing the shares of common stock is delivered to
the purchaser.
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We have agreed to bear the expenses of registering the shares for the
selling stockholders under the federal and state securities laws. The following
table sets forth the costs and expenses, other than underwriting discounts and
commissions, payable by us in connection with the sale of common stock being
offered. All amounts are estimated except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee......................................$ 3,896
Printing expenses.........................................$ 2,500
Legal fees and expenses...................................$10,000
Accounting fees and expenses..............................$ 5,000
Miscellaneous expenses ...................................$ 3,604
Total $25,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sabratek's Amended and Restated Certificate of Incorporation provides
for indemnification to the full extent permitted by the laws of the State of
Delaware against and with respect to threatened, pending or completed actions,
suits or proceedings arising from or alleged to arise from, a party's actions or
omissions as a director, officer, employee or agent of Sabratek or of any other
corporation, partnership, joint venture, trust or other enterprise which has
served in such capacity at the request of Sabratek if the acts or omissions
occurred or were or are alleged to have occurred, while said party was a
director or officer of Sabratek; provided, however, Sabratek shall not indemnify
any director or officer in an action against Sabratek unless Sabratek shall have
consented to the action. Generally, under Delaware law, indemnification will
only be available where an officer or director can establish that he/she acted
in good faith and in a manner which was reasonably believed to be in or not
opposed to the best interests of Sabratek.
Section 145 of the Delaware Law provides that a corporation may
indemnify a director, officer, employee or agent made a party to an action by
reason of the fact that the person was a director, officer, employee or agent of
the corporation or was serving at the request of the corporation against
expenses actually incurred by the person in connection with the action if the
person acted in good faith and in a manner such person reasonably believed to be
in, or not opposed to, the best interest of the corporation with respect to any
criminal action, and had no reasonable cause to believe his conduct was
unlawful. Delaware Law does not permit a corporation to eliminate a director's
duty of care, and the provisions of Sabratek's Amended and Restated Certificate
of Incorporation have no effect on the availability of equitable remedies such
as injunction or rescission, based upon a director's breach of the duty of care.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling Sabratek under the
foregoing provisions and agreements, Sabratek has been informed that in the
opinion of the Staff of the Securities and Exchange Commission such
indemnification is against policy as expressed in the Securities Act and is
therefore unenforceable.
Sabratek maintains a director's and officer's liability insurance
policy which indemnifies directors and officers for specified losses arising
from a claim by reason of a wrongful act, as defined, under certain
circumstances where Sabratek does not provide indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Sabratek under the foregoing provisions or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against
II-1
<PAGE> 23
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of Sabratek in the successful defense of
any action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
will be governed by the final adjudication of the issue.
II-2
<PAGE> 24
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
(a) EXHIBITS NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
<TABLE>
<CAPTION>
Incorporation
Exhibit Page Number by reference
Number Description of Documents (if applicable) (if applicable)
<S> <C> <C> <C>
3.1 Articles of Incorporation, Rights Agreement Certificate
of Designations............................................................... +
3.2 Amended and Restated By-laws.................................................. ++++++++++
4.1 Indenture, dated April 14, 1998 by and between
Sabratek Corporation and LaSalle National Bank, as Trustee.................... ++++++
4.2 Rights Agreement, dated August 20, 1998 by and
between Sabratek Corporation and LaSalle National Bank,
as the Rights Agent........................................................... +++++++
4.3 Registration Rights Agreement, dated as of June 1, 1999,
by and between Sabratek Corporation and Ralin Medical......................... *
4.4 Registration Rights Agreement, dated as of June 29, 1999, by and
between Sabratek Corporation and the former shareholders of
Strategic Reimbursement Services, Inc......................................... **
4.5 Registration Rights Agreement, dated as of July 1, 1999, by and
between Sabratek Corporation and the former shareholders of Unitron
Medical Communications, Inc................................................... ****
5.1 Opinion of Ross & Hardies regarding legality of shares of
common stock..................................................................
10.1 Agreement with Americorp Financial, Inc. re: Leasing
Services, dated March 22, 1995................................................ +
10.1.1 Amendment, dated September 16, 1996, to Agreement
with Americorp Financial, Inc................................................. +++
10.2-10.12 Intentionally Omitted
10.13 Pump Contract with Chartwell Home
Therapies, dated November 22, 1993............................................ +
10.14 Sales Agreement with Pharmacy Corporation
of America, dated March 17, 1995.............................................. +
10.15 Sales & Marketing Agreement with Alpha Group,
dated November 6, 1995........................................................ +
10.16-10.25 Intentionally Omitted
10.26 Amended and Restated Stock Option Plan........................................ +
10.27 Lease of Real Property located at 5601 West Howard,
Niles, Illinois, dated as of May 31, 1994..................................... +
</TABLE>
II-3
<PAGE> 25
<TABLE>
<S> <C> <C>
10.27.1 Amendment, dated October 30, 1996, to Lease for
Real Property located at 5601 West Howard,
Niles, Illinois................................................................... +++
10.28 Employment Agreement for K. Shan Padda............................................ ++++++++++
10.29 Intentionally Omitted
10.30 Asset Purchase Agreement, dated February 25, 1997,
by and among Sabratek Corporation; Rocap, Inc. and
Elliott Mandell................................................................... ++
10.31 Employment Agreement for Stephen L. Holden........................................ ++++++++++
10.32 Employment Agreement for Elliott Mandell.......................................... ++++++++++
10.33 Lease Agreement for property located at 11 Sixth
Road, Woburn, Massachusetts, dated February 1, 1997............................... ++++
10.34 Lease Agreement for property located at 5 Constitution
Way, Woburn, Massachusetts, dated June 26, 1995................................... ++++
10.35 Lease Agreement for property located at 1629 Prime
Court, Suite 100, Orlando, Florida, dated March 11, 1997.......................... +++++
10.36 Lease Agreement for property located at 8350 Parkline
Blvd., Orlando Florida, dated June 18, 1998....................................... ++++++++
10.37 Credit Agreement, dated as of April 30, 1999, by
and between Sabratek Corporation as Borrower and LaSalle
National Bank (formerly known as LaSalle Bank NI)
as Lender......................................................................... ++++++
10.38 Long Term Incentive Compensation Plan............................................. +++++++++
10.39 Lease Agreement for property located 8111 North
St. Louis, Skokie, Illinois, dated May 15, 1998................................... +++++++++
10.40 Employment Agreement for Doron C. Levitas......................................... ++++++++++
10.41 Employment Agreement for Scott Skooglund.......................................... ++++++++++
10.42 Employment Agreement for Joseph Moser............................................. ++++++++++
10.43 Employment Agreement for Vincent J. Capponi....................................... ++++++++++
10.44 Employment Agreement for Tuan Bui................................................. ++++++++++
10.45 Employment Agreement for Stephan C. Beal.......................................... ++++++++++
10.46 Employment Agreement for Stephen L. Axel.......................................... ++++++++++
10.47 Intentionally Omitted
10.48 Employment Agreement for Mary Beth Blue........................................... ++++++++++
10.49 Intentionally Omitted
10.50 Stock Purchase Agreement, dated as of May 19, 1999,
between Sabratek Corporation and Ralin Medical, Inc. ............................ *
</TABLE>
II-4
<PAGE> 26
<TABLE>
<S> <C> <C>
10.51 Agreement of Merger, dated as of June 29, 1999, by and among Sabratek Corporation, SBTK I Acquisition
Corporation, a wholly-owned subsidiary of Sabratek and Strategic Reimbursement Services, Inc..................... **
10.52 Research and Development Agreement, dated as of June 30, 1999, by and between Sabratek Corporation
and Systle Corporation........................................................................................... ***
10.53 Memorandum of Understanding, dated as of March 26, 1999, and Supplement, dated as of July 2, 1999,
between Sabratek Corporation and EGS Securities Corp............................................................. ***
10.54 Stock Option Agreement, dated as of January 22, 1999, by and among Sabratek Corporation, Unitron Medical
Communications, Inc. and certain shareholders of Unitron......................................................... ****
10.55 Employment Agreement by and between Strategic Reimbursement Services, Inc. and Robert C. Gienko..................
10.56 Employment Agreement by and between Strategic Reimbursement Services, Inc. and Steve Fagerman....................
10.57 Employment Agreement by and between Strategic Reimbursement Services, Inc. and Kenneth Janowski..................
10.58 Employment Agreement by and between Strategic Reimbursement Services, Inc. and Mark Pugh.........................
10.59 Memorandum of Understanding, dated as of March 2, 1999, and Supplement, dated as of July 5, 1999, between
Sabratek Corporation and EGS Securities Corp.....................................................................
23.1 Consent of KPMG LLP..............................................................................................
23.2 Consent of Ross & Hardies (included in Exhibit 5.1)..............................................................
24 Powers of Attorney (included in the signature page hereto) ......................................................
+ Incorporated by reference to Sabratek's Registration Statement on Form S-1, declared effective by the SEC
on June 21, 1996 (File No. 333-3866).............................................................................
++ Incorporated by reference to Sabratek's Current Report on Form 8-K filed with the SEC on March 11, 1997..........
+++ Incorporated by reference to Sabratek's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 filed with the SEC on March 31, 1997....................................................................
++++ Incorporated by reference to Sabratek's Registration Statement on Form S-1, declared effective by the SEC
on April 4, 1997 (File No. 333-23437)............................................................................
+++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 filed with the
SEC on May 15, 1997..............................................................................................
++++++ Incorporated by reference to Sabratek's Registration Statement on Form S-3 declared effective by the SEC
on July 14, 1998.................................................................................................
+++++++ Incorporated by reference to Sabratek's Current Report on Form 8-K filed with the SEC on August 25,
1998.............................................................................................................
++++++++ Incorporated by reference to Sabratek's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
filed with the SEC on August 14, 1998............................................................................
+++++++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 filed with
the SEC on November 16, 1998.....................................................................................
++++++++++ Incorporated by reference to Sabratek's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 filed with
the SEC on April 9, 1999.........................................................................................
* Incorporated by reference to Sabratek's current report on Form 8-K dated June 1, 1999 and filed with the
SEC on June 16, 1999.............................................................................................
** Incorporated by reference to Sabratek's current report on Form 8-K dated June 29, 1999 and filed with the
SEC on July 14, 1999.............................................................................................
*** Incorporated by reference to Sabratek's Registration Statement on Form S-3 filed with the SEC on July 16, 1999...
**** Incorporated by reference to Sabratek's current report on Form 8-K dated July 1, 1999 and filed with the SEC on
July 16, 1999....................................................................................................
</TABLE>
II-5
<PAGE> 27
ITEM 17. UNDERTAKINGS
Sabratek hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of Sabratek's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in this Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Sabratek
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Skokie, State of Illinois, on July 19, 1999.
SABRATEK CORPORATION
By: /s/ K. Shan Padda
----------------------------
K. Shan Padda
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints K. Shan Padda and Stephen L.
Holden, and each of them, his true and lawful attorney-in-fact and agents, each
with full power of substitution and resubstitution for such person and in his
name, place and stead, in any and all capacities, to sign any amendments to
this registration statement, and to sign any registration statement for the
same offering covered by this Registration Statements including post-effective
amendments, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming the each of said such attorneys-in-fact and agents or
his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on this
nineteenth day of July, 1999 in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ K. Shan Padda Chairman of the Board and Chief Executive Officer -
- --------------------------- Principal Executive Officer
K. Shan Padda
/s/ Stephen L. Holden President
- ---------------------------
Stephen L. Holden
/s/ John Reilly Senior Vice President, Chief Financial Officer and
- --------------------------- Treasurer - Principal Financial Officer
John Reilly
/s/ Scott Skooglund Vice President - Finance and Assistant Secretary -
- --------------------------- Principal Accounting Officer
Scott Skooglund
/s/ Doron C. Levitas Director, Vice Chairman of the Board, Chief Administrative
- ---------------------------
Doron C. Levitas Officer, Vice President of International
Operations and Secretary
/s/ Francis V. Cook, M.D. Director
- ---------------------------
Francis V. Cook, M.D.
/s/ Mark Lampert Director
- ---------------------------
Mark Lampert
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
/s/ William D. Lautman Director
- --------------------------
William D. Lautman
/s/ William H. Lomicka Director
- --------------------------
William H. Lomicka
/s/ Marvin Samson Director
- --------------------------
Marvin Samson
/s/ L. Peter Smith Director
- --------------------------
L. Peter Smith
/s/ Edson W. Spencer, Jr. Director
- --------------------------
Edson W. Spencer, Jr.
</TABLE>
<PAGE> 30
SABRATEK CORPORATION
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
5.1 Opinion of Ross & Hardies
10.55 Gienko Employment Agreement
10.56 Fagerman Employment Agreement
10.57 Janowski Employment Agreement
10.58 Pugh Employment Agreement
10.59 Memorandum of Understanding, dated as of March 2,
1999, and Supplement, dated as of July 5, 1999,
between Sabratek Corporation and EGS Securities
Corp.
23.1 Consent of KPMG LLP
23.2 Consent of Ross & Hardies (Included in Exhibit 5.1)
<PAGE> 1
EXHIBIT 5.1
[ROSS & HARDIES LETTERHEAD]
July 19, 1999
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement") being filed by Sabratek Corporation, a Delaware corporation, (the
"Company") with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the offer and sale of
up to 603,500 shares of Common Stock, $0.01 par value per share (the "Common
Stock") of the Company by the former shareholders of Strategic Reimbursement
Services, Inc., which was acquired by the Company, and EGS Securities Corp.
Each term used herein that is defined in the Registration Statement
and not otherwise defined herein shall have the meaning specified in the
Registration Statement.
We are familiar with the proceedings to date with respect to the
proposed offering of the Common Stock and have examined such records, documents
and questions of law, and satisfied ourselves as to such matters of procedure,
law and fact, as we have considered relevant and necessary as a basis for the
opinion expressed in this letter. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, the conformity to originals of all documents submitted to us
as certified copies or photocopies and the authenticity of the originals of
such documents.
Based on the foregoing, and subject to the qualifications set forth
hereinafter, we are of the opinion that the Common Stock has been duly
authorized and, when issued and sold in accordance with the Registration
Statement, will be legally issued, fully paid and nonassessable shares of
Common Stock of the Company.
<PAGE> 2
Sabratek Corporation
July 19, 1999
Page 2
This opinion is limited to the matters set forth herein. No opinion
may be inferred or implied beyond the matters expressly contained herein.
We hereby consent to the reference to our firm under the caption
"Legal Matters" in the Registration Statement and the related Prospectus, and
to the filing of this opinion as an Exhibit to the Registration Statement.
Very truly yours,
ROSS & HARDIES
By:/s/ David S. Guin
-----------------------
A Partner
<PAGE> 1
EXHIBIT 10.55
EXHIBIT H
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of June 29, 1999, by and between Strategic Reimbursement Services, Inc., an
Illinois corporation (together with its successors and assigns permitted under
this Agreement, "SRS"), and Robert C. Gienko ("Employee"). Certain capitalized
terms used herein are defined in Section 1. SRS is a wholly-owned subsidiary of
Sabratek Corporation, a Delaware corporation ("Sabratek").
WITNESSETH:
WHEREAS, SRS has determined that it is in the best interests of SRS and
its stockholders to employ Employee and to set forth in this Agreement the
obligations and duties of both SRS and Employee; and
WHEREAS, SRS wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by SRS
for said period, upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, SRS and Employee (individually a "Party" and
together the "Parties" ) agree as follows:
1. DEFINITIONS.
(a) "Agreement of Merger" shall mean the Agreement of Merger by and
among Sabratek, SBTK I Acquisition Corporation (a wholly-owned subsidiary of
Sabratek) and SRS.
(b) "Beneficiary" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(c) "Board" shall mean the Board of Directors of SRS.
(d) "Cause" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to SRS or its business;
(ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that the chief executive officer
of Sabratek or his designee or the
H-1
<PAGE> 2
Board in good faith determines is extremely detrimental to the current and
future interests of SRS, which is not cured within 10 days after written notice
thereof to the Employee; or
(iii) a material breach by Employee of any material provision of
this Agreement, which is not cured within 10 days after written notice thereof
to the Employee.
(e) "Change in Control" shall mean the occurrence of any of the
following events:
(i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek or SRS; or
(ii) The individuals who, as of the date hereof, are members of the
board of directors of Sabratek cease for any reason to constitute a majority of
the board of directors of Sabratek, unless the election, or nomination for
election by the stockholders of Sabratek, of any new director or directors was
approved by a vote of a majority of the board of directors of Sabratek, in which
case such new director or directors shall, for purposes of this Agreement, be
considered as a member or members of the board of directors of Sabratek as of
the date hereof; or
(iii) Approval by stockholders of Sabratek or SRS of (A) a merger
or consolidation of Sabratek or SRS if the stockholders immediately before such
merger or consolidation do not, as a result of such merger or consolidation,
own, directly or indirectly, more than 60 percent of the combined voting power
of the then outstanding voting securities of the entity resulting from such
merger or consolidation in substantially the same proportion as their ownership
of the combined voting power of the voting securities of Sabratek or SRS, as
applicable, outstanding immediately before such merger or consolidation; or (B)
a complete liquidation or dissolution, or an agreement for the sale or other
disposition, of all or substantially all of the assets of Sabratek or SRS.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur (x) solely because 40 percent or more of the combined voting power of
the then outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained for
employees of Sabratek or SRS, or (ii) any corporation that, immediately prior to
such acquisition, is owned directly or indirectly by the stockholders of
Sabratek, Sabratek or SRS in the same proportion as their ownership of stock of
Sabratek or SRS immediately prior to such acquisition, or (y) if the Employee
is, immediately after any above defined change in control, employed by Sabratek
in a comparable role and at a comparable salary.
(f) "Closing Date" shall mean the date of the closing of the
transactions contemplated by the Agreement of Merger.
H-2
<PAGE> 3
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(h) "Committee" shall mean the Compensation Committee of the Board, or
if no such committee, the Board.
(i) "Disability" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of SRS
or Sabratek, as applicable, covering Employee, or if no such plan exists,
Employee's failure (i) to perform substantially his material duties under this
Agreement for a period of three consecutive months, or for an aggregate of 135
days during any month period, and (ii) to return to the performance of his
duties within 30 days after receiving written notice of termination.
(j) "Merger Agreement" shall mean the Agreement of Merger by and among
Sabratek Corporation, SBTK I Acquisition Corporation and SRA.
(k) "Salary" shall mean the annual salary provided for in Section 3
below, as adjusted from time to time.
(l) "Term of Employment" or "Term" shall mean the period specified in
Section 2(b) below.
(m) "Year" shall mean the calendar year, which is the fiscal year of
SRS.
(n) "Good Reason" means the occurrence of any one or more of the
following, without the express agreement of the Employee to continue employment
despite such occurrence, at any time after the date of this Agreement: (a)
material diminution of Employee's duties as President of SRS or the assignment
to the Employee of any material duties which are not substantially consistent
with such position, excluding, however, an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by SRS promptly upon
receipt of notice thereof from the Employee; (b) reduction in Employee's
compensation from that in effect upon the date hereof, excluding, however, any
diminution of the foregoing applied by Sabratek consistently and in good faith
to substantially all of the executive employees of Sabratek and the heads of its
principal subsidiaries; and (c) material diminution of Employee's perquisites or
benefits from those of Sabratek in effect upon the date hereof, excluding,
however any diminution in benefits applied by Sabratek consistently and in good
faith to substantially all of the executive employees of Sabratek and the heads
of its principal subsidiaries.
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2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) Employment of Employee. SRS hereby employs Employee, and Employee
hereby accepts continued employment with SRS, in the positions and with the
duties and responsibilities set forth below and upon such other terms and
conditions as are hereinafter stated.
(b) Term of Employment. The Term of Employment shall commence on the
Closing Date and shall terminate on the third anniversary of the Closing Date;
provided, however, that unless either Party gives at least three months' written
notice to the other that the Term shall not continue past the third anniversary
of the Closing Date or any subsequent 12-month period for which the Term has
previously been extended, the Term shall thereafter automatically extend for an
additional 12-month period, unless the Term is sooner terminated as provided in
Section 8 below.
(c) Titles and Duties. Until the date of termination of his employment
hereunder, Employee shall be employed as the President of SRS, reporting to the
chief executive officer of Sabratek or his designee and the Board. In this
capacity, Employee shall have the customary powers, responsibilities and
authorities of the President of a similar unit of Sabratek. The Employee shall
also be entitled to serve as a director on the Board. As President, the Employee
will run the day to day activities of SRS and will be entitled to be involved in
the long-term planning of SRS, subject to the authority of the Board and the
chief executive officer of Sabratek or his designee.
(d) Location. If Sabratek requires the Employee to relocate his
residence from Cook, DuPage or Lake County, Illinois, the Employee may treat
such relocation as a not for Cause termination.
(e) Time And Effort.
(i) Employee agrees to devote his full business time to the
affairs of SRS in order to carry out his duties and responsibilities under this
Agreement; and
(ii) The Employee may (A) serve on the boards of a reasonable
number of trade associations, charitable organizations and/or businesses not in
competition with SRS or Sabratek, (B) engage in charitable activities and
community affairs and (C) manage his personal investments and affairs, in each
case so long as such does not or would not cause a breach of this Agreement.
3. SALARY. Employee shall receive from SRS a Salary, payable in
accordance with the regular payroll practices of Sabratek, in a minimum amount
of $250,000. During the Term the chief executive officer of Sabratek shall
review his Salary no less often than once each Year, commencing January 1, 2000.
On the basis of any such review, the chief executive officer or his designee may
in its sole discretion increase the Salary of the Employee accordingly. The term
"Salary" as used in this Agreement shall refer to his Salary at any time as so
adjusted.
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4. BONUSES. Employee shall be eligible to receive an annual bonus,
which bonus shall not be (i) less than 20% of his Salary if he achieves 80% of
specified performance objectives, (ii) less than 30% of his Salary if he
achieves 100% of specified performance objectives, or (iii) less than 40% of his
Salary if he achieves 120% of specified performance objectives for any Year.
5. EQUITY OPPORTUNITY. During the Term, Employee shall be eligible to
receive grants of options to purchase shares of Sabratek common stock and awards
of shares of Sabratek common stock, either or both as determined by the chief
executive officer of Sabratek or his designee, under and in accordance with the
terms of applicable plans of Sabratek and related option and award agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS. During the Term,
Employee shall be entitled to prompt reimbursement by SRS for all reasonable
out-of-pocket expenses incurred by him in performing services under this
Agreement, upon his submission of such accounts and records as may be reasonably
required by SRS.
7. EMPLOYEE BENEFIT PLANS. During the Term Employee shall be entitled
to participate in all employee benefit plans and programs made available to
Sabratek's senior executives or to its employees generally, as such plans or
programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit-sharing plans, savings and similar
plans, group life insurance, accidental death and dismemberment insurance,
travel accident insurance, hospitalization insurance, surgical insurance, major
and excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation and any other employee benefit plans or programs that may be
sponsored by Sabratek from time to time, including plans that supplement the
above- listed types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) Voluntary Termination And Termination by Mutual Agreement. Employee
may terminate his employment voluntarily at any time. If he does so, his
entitlement hereunder shall be the same as if SRS had terminated his employment
for Cause. The Parties may terminate this Agreement by mutual agreement at any
time. If they do so, Employee's entitlement shall be as the Parties mutually
agree.
(b) General. Notwithstanding anything to the contrary herein, in the
event of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
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(ii) any unused vacation from prior years according to the SRS
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of SRS;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan; and
(v) reimbursement in accordance with Section 6 above of any
business expenses incurred by Employee through the date of termination but not
yet paid to him.
(c) Termination Due to Death. In the event that Employee's employment
is terminated due to his death, his Beneficiary shall be entitled, in addition
to the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before
such termination, payable through the end of the month in which the proceeds of
his life insurance under the SRS or Sabratek group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death
occurs.
(d) Termination Due to Disability. In the event of Disability, SRS or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) Termination by SRS For Cause. SRS may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the chief
executive officer of Sabratek his position regarding any dispute relating to the
existence of such Cause. Unless rescinded by the chief executive officer of
Sabratek, termination shall be effective on the date specified in the original
notice.
In the event that Employee's employment is terminated for Cause, he
shall be entitled only to the compensation and benefits specified in Section
8(b).
(f) Termination Without Cause.
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(i) Termination without Cause shall mean: termination of
Employee's employment by SRS and shall include any reason for termination other
than (i) due to death, Disability or Cause, (ii) by Employee voluntarily, or
(iii) by mutual agreement of Employee and SRS. In addition, termination without
Cause shall also include termination by Employee for Good Reason. SRS shall
provide Employee thirty days' prior written notice of termination by it without
Cause (other than any termination for Good Reason).
(ii) In the event of termination by SRS of Employee's
employment without Cause, he shall be entitled, in addition to the compensation
and benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately
before such termination, for a period of one year following the date of
termination, such salary to be paid on SRS' normal payroll schedule; and
(B) a prorated annual bonus for the year in which
terminated, such bonus to be paid at the same time annual bonuses are regularly
paid by SRS; and
(C) continued coverage under the health program
maintained by SRS for a period of one year; and
(D) notwithstanding anything in this Section 8(f) to
the contrary, SRS shall have no further obligation to make any salary or bonus
payments for any period following the first date on which Employee takes any
action which would fall within the definition of "Restrictive Covenant" as
provided in Section 10(a) hereof, whether or not such action occurs within the
Restrictive Period (as defined in Section 10(a) hereof).
(g) Voluntary Termination by Employee. Employee shall have the right,
upon 30 days' prior written notice, voluntarily to terminate his employment. If
he exercises this right, his employment shall cease and the Term shall terminate
as of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if SRS had terminated his employment for Cause, as
provided in Section 8(e).
(h) Notice That The Employment Term Shall Not Renew. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to SRS through the end of the Term as in effect on the date of delivery
of such notice, unless: (A) the non-renewal decision was made by SRS, in which
case, the chief executive officer of Sabratek or Employee may elect to treat the
notice as a termination without Cause of Employee's employment; or (B) the
non-renewal decision was made by Employee, in which case, the chief executive
officer of Sabratek may elect to treat the notice as a voluntary termination of
employment by Employee.
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<PAGE> 8
(i) Additional Health Insurance Benefits. To the extent permitted by
applicable law and the group health insurance provider and agreement of the
Company, the Company shall make available to the Employee at the sole cost and
expense of the Employee health insurance benefits for a period of 5 years
subsequent to the period during which the Company paid for such benefits under
this Agreement.
(j) Change in Control. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii) (without any duplication), including, but
not limited to, any other compensation or benefits under equity grants and
awards described in Section 5 above and employee benefits under plans described
in Section 7 above, that have vested through the date of termination or to which
he may then be entitled in accordance with the applicable terms and conditions
of each grant, award or plan, provided that the term during which Employee is
entitled to continue receiving his salary pursuant to Section 8(f)(ii)(A) hereof
shall increase from one year to two years.
9. CONFIDENTIALITY AND LOYALTY.
(a) General.
(i) Employee hereby acknowledges that as a result of his employment
with SRS he has produced and had access to, and may hereafter produce and have
access to, material, records, data, trade secrets, customer lists, inventions
and information not generally available to the public (collectively,
"Confidential Information") regarding SRS and that any such Confidential
Information is the exclusive property of SRS.
(ii) Accordingly, Employee hereby agrees that, during and
subsequent to the Term, he shall hold in confidence and not directly or
indirectly disclose, use, copy or make lists of any such Confidential
Information, except to the extent that such information in such form is or
thereafter becomes lawfully available from public sources, or such disclosure is
authorized in writing by the Board, required by a law or any competent
administrative agency or judicial authority, or otherwise as reasonably
necessary or appropriate in connection with performance by Employee of his
duties hereunder.
(b) Return of Documents. All records, files, documents and other
materials or copies thereof relating to SRS' business that Employee prepares or
uses shall be and remain the sole property of SRS and shall not be removed from
SRS' premises without its written consent. Upon termination of Employee's
employment with SRS for any reason, he shall promptly deliver to SRS all such
items that are then in his possession or control.
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(c) Duty of Loyalty. Employee hereby agrees to abide by SRS' reasonable
policies, as in effect from time to time, respecting avoidance of interests
conflicting with those of SRS.
(d) Remedies And Sanctions. In the event that Employee is found to be
in violation of Section 9(a), (b) or (c), SRS shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) Restrictive Covenant. Employee hereby agrees that, except with the
express prior written consent of SRS, for a period of one year after termination
of his employment with SRS for any reason (the "Restrictive Period"), he will
not directly or indirectly compete with the business of SRS as conducted on the
date of such termination, including, but not by way of limitation, by (i)
directly or indirectly owning, managing, operating, controlling, financing, (ii)
directly or indirectly serving as an employee, officer or director of or
consultant to, or (iii) soliciting or inducing, or attempting to solicit or
induce, any employee or agent of SRS to terminate employment with SRS and become
employed by, any person, firm, partnership, corporation, trust or other entity
that owns or operates an entity that is engaged in the same or similar business
as SRS as conducted on the date of such termination (the "Restrictive
Covenant").
If Employee violates the Restrictive Covenant and SRS brings legal
action for injunctive or other relief, SRS shall not, as a result of the time
involved in obtaining such relief, be deprived of the benefit of the full period
of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall be
deemed to endure for the period specified in this Section 10(a), computed from
the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) Exceptions. Notwithstanding anything to the contrary in Section
10(a), the Restrictive Covenant shall not:
(i) apply if SRS terminates Employee's employment without Cause, as
provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital
stock or similar securities or derivatives thereof which do not represent more
than five percent of the outstanding capital stock of any business similar to
that of SRS as conducted on the date of such termination.
(c) Remedies and Sanctions. In the event that Employee is found to be
in violation of Section 10(a) above, SRS shall be entitled to relief as provided
in Section 11 below.
11. REMEDIES/SANCTIONS. Employee hereby acknowledges that the
restrictions contained in Sections 9 (a), (b) and (c) and 10(a) above are
reasonable and necessary for the protection of the legitimate business interests
of SRS, for which monetary damages alone may not
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provide an adequate remedy, that any violation of these restrictions would cause
substantial injury to SRS and such interests, that SRS would not have entered
into this Agreement without receiving the additional consideration offered by
Employee in binding himself to these restrictions and that such restrictions
were a material inducement to SRS to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, SRS (a) shall be relieved of any further obligations under the
Agreement, (b) shall be entitled to seek monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to SRS under this Agreement or otherwise at law or
in equity, shall be entitled to seek preliminary and permanent injunctive relief
to prevent or restrain any such violation by Employee and any and all persons
directly or indirectly acting for or with him, as the case may be.
12. BENEFICIARIES/REFERENCES. Employee shall be entitled to select (and
change, to the extent permitted under any applicable law) a Beneficiary or
Beneficiaries to receive any compensation or benefit payable under this
Agreement following his death by giving SRS written notice thereof. In the event
of Employee's death, or of a judicial determination of his incompetence,
reference in this Agreement to Employee shall be deemed to refer, as
appropriate, to his Beneficiary, estate or other legal representative.
13. WITHHOLDING TAXES. All payments to Employee or his Beneficiary
under this Agreement shall be subject to withholding on account of federal,
state and local taxes as required by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE. Nothing herein is intended
to limit SRS' indemnification of Employee, and SRS shall indemnify him to the
fullest extent permitted by applicable law consistent with SRS' Articles of
Incorporation and By-Laws, with respect to any action or failure to act on his
part while he is an officer, director or employee of SRS. SRS shall cause
Employee to be covered at all times by directors' and officers' liability
insurance on terms no less favorable than the directors' and officers' liability
insurance maintained by Sabratek in effect on the date hereof in terms of
coverage and amounts. SRS shall continue to indemnify Employee as provided above
and maintain such liability insurance coverage for him after the Term for any
claims that may be made against him with respect to his service as a director or
officer of SRS.
15. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this
Agreement shall not prohibit or restrict Employee's entitlement to participate
fully in compensation, employee benefit and other plans of SRS in which senior
executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of Employee) and assigns.
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17. REPRESENTATIONS. The Parties respectively represent and warrant
that each is fully authorized and empowered to enter into this Agreement and
that the performance of its or his obligations, as the case may be, under this
Agreement will not violate any agreement between such Party and any other
person, firm or organization. SRS represents and warrants that this Agreement
has been duly authorized by all necessary corporate action and is valid, binding
and enforceable in accordance with its terms.
18. ENTIRE AGREEMENT. Except to the extent otherwise provided herein,
this Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes any prior
agreements, whether written or oral, between the Parties concerning the subject
matter hereof, between SRS and Employee, provided that the execution of this
Agreement shall not adversely affect (i) any award previously made to Employee
under any compensation plan maintained by SRS, or (ii) any statements regarding
the vesting of options or other benefits in such prior agreements. Payments and
benefits provided under this Agreement are in lieu of any payments or other
benefits under any severance program or policy of SRS to which Employee would
otherwise be entitled. The foregoing notwithstanding, the non-compete,
non-solicitation and related covenants contained in the Merger Agreement and
which relate to the Employee shall be unaffected by this Section, and such
covenants shall exist in addition to the similar covenants contained herein.
19. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both Employee and an
authorized officer of SRS. No waiver by either Party of any breach by the other
Party of any condition or provision contained in this Agreement to be performed
by such other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by the Party to be charged with the waiver. No
delay by either Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
20. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
21. SURVIVAL. The respective rights and obligations of the Parties
under this Agreement shall survive any termination of Employee's employment with
SRS.
22. GOVERNING LAW/JURISDICTION. This Agreement shall be governed by
and construed and interpreted in accordance with the laws of Illinois, without
reference to principles of conflict of laws.
23. ARBITRATION. Any dispute or controversy, other than a dispute or
controversy arising under Sections 9 or 10 hereof or with respect to Federal or
state employment laws, rules or
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regulations (actions regarding which may be brought in any court (i) having
situs within Cook County, Illinois and (ii) having jurisdiction over the dispute
or controversy), arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of three
arbitrators sitting in a location selected by Employee within thirty (30) miles
from the main office of SRS, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
24. LEGAL FEES. All reasonable expenses and legal fees paid or incurred
by Employee pursuant to any bona fide dispute or question of interpretation
relating to this Agreement, including all such expenses and fees, if any,
incurred in contesting any termination of this Agreement by SRS or in seeking to
obtain or enforce any right or benefit provided by this Agreement, shall be paid
or reimbursed by SRS, provided, however, that if this Agreement is terminated
for Cause or if this Agreement is terminated voluntarily by Employee other than
due to a breach of this Agreement by SRS, SRS shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
25. NOTICES. Any notice given to either Party shall be in writing and
shall be deemed to have been given when delivered either personally, by fax, by
overnight delivery service (such as Federal Express) or sent by certified or
registered mail postage prepaid, return receipt requested, duly addressed to the
Party concerned at the address indicated below or to such changed address as the
Party may subsequently give notice of:
If to SRS or the Board:
Strategic Reimbursement Services, Inc.
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE:
FAX: (847) 647-2382
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Carter W. Emerson
PHONE: (312) 861-2000
FAX: (312) 861-2200
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If to Employee:
Robert C. Gienko
5 Trenton Court
South Barrington, IL 60010
with a copy to:
Kenneth Kolmin
c/o Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Facsimile no: (312) 876-7934
If to Sabratek:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE: (847) 647-2382
FAX: (847) 720-2400
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Carter W. Emerson
PHONE: (312) 861-2000
FAX: (312) 861-2200
26. HEADINGS. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
27. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts together shall constitute one and the same instrument.
* * * * *
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IN WITNESS WHEREOF, the undersigned hereto have executed this
Employment Agreement as of the date first written above.
STRATEGIC REIMBURSEMENT SERVICES, INC.
By: /s/ Stephen L. Holden
-----------------------------------
Its: Vice President
----------------------------------
/s/ Robert C. Gienko
--------------------------------------
Robert C. Gienko
<PAGE> 1
EXHIBIT 10.56
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of June 29, 1999, by and between Strategic Reimbursement Services, Inc., an
Illinois corporation (together with its successors and assigns permitted under
this Agreement ("SRS"), and Steve Fagerman ("Employee"). Certain capitalized
terms used herein are defined in Section 1. SRS is a wholly-owned subsidiary of
Sabratek Corporation ("Sabratek").
WITNESSETH:
WHEREAS, SRS has determined that it is in the best interests of SRS and
its stockholders to employ Employee and to set forth in this Agreement the
obligations and duties of both SRS and Employee; and
WHEREAS, SRS wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by SRS
for said period, upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, SRS and Employee (individually a "Party" and
together the "Parties" ) agree as follows:
1. DEFINITIONS.
(a) "Beneficiary" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "Board" shall mean the Board of Directors of SRS.
(c) "Cause" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to SRS or its business;
(ii) any repeated and demonstrated failure by Employee to
discharge faithfully the responsibilities of his position that SRS in good faith
determines is extremely detrimental to the current and future interests of SRS;
or
(iii) a material breach by Employee of any provision of this
Agreement.
(d) "Change in Control" shall mean the occurrence of any of the
following events:
<PAGE> 2
(i) Consummation of the acquisition by any person (as such term
is defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of SRS; or
(ii) The individuals who, as of the date hereof, are members of
the board of directors of SRS cease for any reason to constitute a majority of
the board of directors of Sabratek, unless the election, or nomination for
election by the stockholders of SRS, of any new director or directors was
approved by a vote of a majority of the board of directors of SRS, in which case
such new director or directors shall, for purposes of this Agreement, be
considered as a member or members of the board of directors of SRS as of the
date hereof; or
(iii) Approval by stockholders of SRS of (A) a merger or
consolidation of SRS if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of SRS outstanding immediately
before such merger or consolidation; or (B) a complete liquidation or
dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of SRS.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because 40 percent or more of the combined voting power of the
then outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained for
employees of SRS, or (ii) any corporation that, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of SRS in the
same proportion as their ownership of stock of SRS immediately prior to such
acquisition.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean the Compensation Committee of the Board, or
if no such committee, the Board.
(g) "Disability" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of SRS
covering Employee, or if no such plan exists, Employee's failure (i) to perform
substantially his material duties under this Agreement for a period of three
consecutive months, or for an aggregate of 135 days during any month period, and
(ii) to return to the performance of his duties within 30 days after receiving
written notice of termination.
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(h) "Good Reason" means the occurrence of any one or more of the
following, without the express agreement of the Employee to continue employment
despite such occurrence, at any time after the date of this Agreement: (a)
material diminution of Employee's duties as contemplated by this Agreement or
the assignment to the Employee of any material duties which are not
substantially consistent with such position, excluding, however, an isolated,
insubstantial and inadvertent action not taken in bad faith which is remedied by
SRS promptly upon receipt of notice thereof from the Employee; (b) reduction in
Employee's compensation from that in effect upon the date hereof, excluding,
however, any diminution of the foregoing applied by Sabratek consistently and in
good faith to substantially all of the executive employees of Sabratek and the
heads of its principal subsidiaries; and (c) material diminution of Employee's
perquisites or benefits from those of Sabratek in effect upon the date hereof,
excluding, however any diminution in benefits applied by Sabratek consistently
and in good faith to substantially all of the executive employees of Sabratek
and the heads of its principal subsidiaries.
(h) "Salary" shall mean the annual salary provided for in Section 3
below, as adjusted from time to time.
(i) "Term of Employment" or "Term" shall mean the period specified in
Section 2(b) below.
(j) "Year" shall mean the calendar year, which is the fiscal year of
SRS.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) Employment of Employee. SRS hereby employs Employee, and Employee
hereby accepts employment with SRS, in the positions and with the duties and
responsibilities set forth below and upon such other terms and conditions as are
hereinafter stated.
(b) Term of Employment. The Term of Employment shall commence on the
date hereof and shall terminate on the third anniversary of the date hereof;
provided, however, that unless either Party gives three months' written notice
to the other that the Term shall not continue past the third anniversary of the
date hereof or any subsequent 12-month period for which the Term has previously
been extended, the Term shall thereafter automatically extend for an additional
12-month period, unless the Term is sooner terminated as provided in Section 8
below.
(c) Titles And Duties.
Until the date of termination of his employment hereunder, Employee
shall be employed as a _________ of SRS, reporting to the President of SRS or
his designee. In his capacity as a ___________, Employee shall have the
customary powers, responsibilities and authorities of a ___________ of a similar
unit of Sabratek.
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(d) Location. If Sabratek requires the Employee to relocate his
residence from Cook, DuPage or Lake County, Illinois, the Employee may treat
such relocation as a not for Cause termination.
(e) Time And Effort.
(i) Employee agrees to devote his full business time to the
affairs of SRS in order to carry out his duties and responsibilities under this
Agreement.
(ii) The Employee may (A) serve on the boards of a reasonable
number of trade associations, charitable organizations and/or businesses not in
competition with SRS or Sabratek, (B) engage in charitable activities and
community affairs and (C) manage his personal investments and affairs, in each
case so long as such does not or would not cause a breach of this Agreement.
3. SALARY. Employee shall receive from SRS a Salary, payable in
accordance with the regular payroll practices of SRS, in a minimum amount of
$190,000. During the Term the President or his designee shall review the Salary
of Employee no less often than once each Year, commencing January 1, 2000. On
the basis of any such review, the President or his designee may in its sole
discretion increase Employee's Salary accordingly. The term "Salary" as used in
this Agreement shall refer to the Salary of Employee at any time as so adjusted.
4. BONUSES. Employee shall be eligible to receive additional bonuses
during the Term and the President or his designee shall determine, in its
discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY. During the Term, Employee shall be eligible to
receive grants of options to purchase shares of Sabratek stock and awards of
shares of Sabratek stock, either or both as determined by the Board (with and
upon the approval of the Sabratek board of directors), under and in accordance
with the terms of applicable plans of SRS and related option and award
agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS. During the Term,
Employee shall be entitled to prompt reimbursement by SRS for all reasonable
out-of-pocket expenses incurred by him in performing services under this
Agreement, upon his submission of such accounts and records as may be reasonably
required by SRS.
7. EMPLOYEE BENEFIT PLANS. During the Term Employee shall be entitled
to participate in all employee benefit plans and programs made available to SRS'
senior executives or to its employees generally, as such plans or programs may
be in effect from time to time, including, without limitation, pension and other
retirement plans, profit-sharing plans, savings and similar plans, group life
insurance, accidental death and dismemberment insurance, travel accident
insurance, hospitalization insurance, surgical insurance, major and excess major
medical
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insurance, dental insurance, short-term and long-term disability insurance, sick
leave (including salary continuation arrangements), holidays, vacation and any
other employee benefit plans or programs that may be sponsored by SRS or
Sabratek from time to time, including plans that supplement the above-listed
types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) Voluntary Termination And Termination by Mutual Agreement. Employee
may terminate his employment voluntarily at any time. If he does so, his
entitlement hereunder shall be the same as if SRS had terminated his employment
for Cause. The Parties may terminate this Agreement by mutual agreement at any
time. If they do so, Employee's entitlement shall be as the Parties mutually
agree.
(b) General. Notwithstanding anything to the contrary herein, in the
event of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to SRS'
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of SRS;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan; and
(v) reimbursement in accordance with Section 6 above of any
business expenses incurred by Employee through the date of termination but not
yet paid to him.
(c) Termination Due to Death. In the event that Employee's employment
is terminated due to his death, his Beneficiary shall be entitled, in addition
to the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before
such termination, payable through the end of the month in which the proceeds of
his life insurance under the SRS or Sabratek group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death
occurs.
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<PAGE> 6
(d) Termination Due to Disability. In the event of Disability, SRS or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) Termination by SRS For Cause. SRS may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the
President his position regarding any dispute relating to the existence of such
Cause. Unless rescinded by the President, termination shall be effective on the
date specified in the original notice. In the event that Employee's employment
is terminated for Cause, he shall be entitled only to the compensation and
benefits specified in Section 8(b).
(f) Termination Without Cause.
(i) Termination without Cause shall mean: termination of
Employee's employment by SRS and shall include any reason for termination other
than (i) due to death, Disability or Cause, (ii) by Employee voluntarily, or
(iii) by mutual agreement of Employee and SRS. In addition, termination without
Cause shall also include termination by Employee for Good Reason. SRS shall
provide Employee twenty days' prior written notice of termination by it without
Cause (other than any termination for Good Reason).
(ii) In the event of termination by SRS of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of 12-months following the date of termination, such
salary to be paid on SRS' normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated,
such bonus to be paid at the same time annual bonuses are regularly paid by SRS;
and
(C) continued coverage under the health program maintained by
SRS or Sabratek for a period of 12-months; and
(D) notwithstanding anything in this Section 8(f) to the
contrary, SRS shall have no further obligation to make any salary or bonus
payments for any period following the first date on which Employee takes any
action which would fall within the definition of "Restrictive Covenant" as
provided in Section 10(a) hereof, whether or not such action occurs within the
Restrictive Period (as defined in Section 10(a) hereof).
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(g) Voluntary Termination by Employee. Employee shall have the right,
upon 30 days' prior written notice, voluntarily to terminate his employment. If
he exercises this right, his employment shall cease and the Term shall terminate
as of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if SRS had terminated his employment for Cause, as
provided in Section 8(e).
(h) Notice That The Employment Term Shall Not Renew. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to SRS through the end of the Term as in effect on the date of delivery
of such notice, unless: (A) the non-renewal decision was made by SRS, in which
case, the President or his designee or Employee may elect to treat the notice as
a termination without Cause of Employee's employment; or (B) the non-renewal
decision was made by Employee, in which case, the President or his designee may
elect to treat the notice as a voluntary termination of employment by Employee.
(i) Change in Control. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii) (without any duplication), including, but
not limited to, any other compensation or benefits under equity grants and
awards described in Section 5 above and employee benefits under plans described
in Section 7 above, that have vested through the date of termination or to which
he may then be entitled in accordance with the applicable terms and conditions
of each grant, award or plan.
9. CONFIDENTIALITY AND LOYALTY.
(a) General.
(i) Employee hereby acknowledges that as a result of his
employment with SRS he has produced and had access to, and may hereafter produce
and have access to, material, records, data, trade secrets, customer lists,
inventions and information not generally available to the public (collectively,
"Confidential Information") regarding SRS and that any such Confidential
Information is the exclusive property of SRS.
(ii) Accordingly, Employee hereby agrees that, during and
subsequent to the Term, he shall hold in confidence and not directly or
indirectly disclose, use, copy or make lists of any such Confidential
Information, except to the extent that such information in such form is or
thereafter becomes lawfully available from public sources, or such disclosure is
authorized in writing by SRS, required by a law or any competent administrative
agency or judicial authority, or otherwise as reasonably necessary or
appropriate in connection with performance by Employee of his duties hereunder.
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<PAGE> 8
(b) Return of Documents. All records, files, documents and other
materials or copies thereof relating to SRS' business that Employee prepares or
uses shall be and remain the sole property of SRS and shall not be removed from
SRS' premises without its written consent. Upon termination of Employee's
employment with SRS for any reason, he shall promptly deliver to SRS all such
items that are then in his possession or control.
(c) Duty of Loyalty. Employee hereby agrees to abide by SRS' reasonable
policies, as in effect from time to time, respecting avoidance of interests
conflicting with those of SRS.
(d) Remedies And Sanctions. In the event that Employee is found to be
in violation of Section 9(a), (b) or (c), SRS shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) Restrictive Covenant. Employee hereby agrees that, except with the
express prior written consent of SRS, for a period of 12-months after
termination of his employment with SRS for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of SRS as
conducted on the date of such termination, including, but not by way of
limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of SRS to terminate
employment with SRS and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as SRS as conducted on the date of such
termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and SRS brings legal
action for injunctive or other relief, SRS shall not, as a result of the time
involved in obtaining such relief, be deprived of the benefit of the full period
of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall be
deemed to endure for the period specified in this Section 10(a), computed from
the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) Exceptions. Notwithstanding anything to the contrary in Section
10(a), the Restrictive Covenant shall not:
(i) apply if SRS terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital
stock or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of SRS as conducted on
the date of such termination.
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(c) Remedies And Sanctions. In the event that Employee is found to be
in violation of Section 11(a) above, SRS shall be entitled to relief as provided
in Section 11 below.
11. REMEDIES/SANCTIONS. Employee hereby acknowledges that the
restrictions contained in Sections 9 (a), (b) and (c) and 10(a) above are
reasonable and necessary for the protection of the legitimate business interests
of SRS, for which monetary damages alone may not provide an adequate remedy,
that any violation of these restrictions would cause substantial injury to SRS
and such interests, that SRS would not have entered into this Agreement without
receiving the additional consideration offered by Employee in binding himself to
these restrictions and that such restrictions were a material inducement to SRS
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, SRS (a) shall be relieved of any further obligations under the
Agreement, (b) shall be entitled to seek monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to SRS under this Agreement or otherwise at law or
in equity, shall be entitled to seek preliminary and permanent injunctive relief
to prevent or restrain any such violation by Employee and any and all persons
directly or indirectly acting for or with him, as the case may be.
12. BENEFICIARIES/REFERENCES. Employee shall be entitled to select (and
change, to the extent permitted under any applicable law) a Beneficiary or
Beneficiaries to receive any compensation or benefit payable under this
Agreement following his death by giving SRS written notice thereof. In the event
of Employee's death, or of a judicial determination of his incompetence,
reference in this Agreement to Employee shall be deemed to refer, as
appropriate, to his Beneficiary, estate or other legal representative.
13. WITHHOLDING TAXES. All payments to Employee or his Beneficiary
under this Agreement shall be subject to withholding on account of federal,
state and local taxes as required by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE. Nothing herein is intended
to limit SRS' indemnification of Employee, and SRS shall indemnify him to the
fullest extent permitted by applicable law consistent with SRS' Articles of
Incorporation and By-Laws, with respect to any action or failure to act on his
part while he is an officer or employee of SRS. SRS shall cause Employee to be
covered at all times by directors' and officers' liability insurance on terms no
less favorable than the directors' and officers' liability insurance maintained
by SRS or Sabratek in effect on the date hereof in terms of coverage and
amounts. SRS shall continue to indemnify Employee as provided above and maintain
such liability insurance coverage for him after the Term for any claims that may
be made against him with respect to his service as a director or officer of SRS.
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15. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this
Agreement shall not prohibit or restrict Employee's entitlement to participate
fully in compensation, employee benefit and other plans of SRS in which senior
executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of Employee) and assigns.
17. REPRESENTATIONS. The Parties respectively represent and warrant
that each is fully authorized and empowered to enter into this Agreement and
that the performance of its or his obligations, as the case may be, under this
Agreement will not violate any agreement between such Party and any other
person, firm or organization. SRS represents and warrants that this Agreement
has been duly authorized by all necessary corporate action and is valid, binding
and enforceable in accordance with its terms.
18. ENTIRE AGREEMENT. Except to the extent otherwise provided herein,
this Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes any prior
agreements, whether written or oral, between the Parties concerning the subject
matter hereof, between SRS and Employee, provided that the execution of this
Agreement shall not adversely affect (i) any award previously made to Employee
under any compensation plan maintained by SRS, or (ii) any statements regarding
the vesting of options or other benefits in such prior agreements. Payments and
benefits provided under this Agreement are in lieu of any payments or other
benefits under any severance program or policy of SRS to which Employee would
otherwise be entitled. The foregoing notwithstanding, the non-compete,
non-solicitation and related covenants contained in the Merger Agreement and
which relate to the Employee shall be unaffected by this Section, and such
covenants shall exist in addition to the similar covenants contained herein.
19. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both Employee and an
authorized officer of SRS. No waiver by either Party of any breach by the other
Party of any condition or provision contained in this Agreement to be performed
by such other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by the Party to be charged with the waiver. No
delay by either Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
20. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
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21. SURVIVAL. The respective rights and obligations of the Parties
under this Agreement shall survive any termination of Employee's employment with
SRS.
22. GOVERNING LAW/JURISDICTION. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of Illinois, without
reference to principles of conflict of laws.
23. ARBITRATION. Any dispute or controversy, other than a dispute or
controversy arising under Sections 9 or 11 or with respect to Federal or state
employment laws, rules or regulations hereof (actions regarding which may be
brought in any court (i) having situs within Cook County, Illinois and (ii)
having jurisdiction over the dispute or controversy), arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators sitting in a location selected by
Employee within thirty (30) miles from the main office of SRS, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that the Executive shall be entitled to seek specific
performance of his right to be paid through the date of termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
24. LEGAL FEES. All reasonable expenses and legal fees paid or incurred
by Employee pursuant to any bona fide dispute or question of interpretation
relating to this Agreement, including all such expenses and fees, if any,
incurred in contesting any termination of this Agreement by SRS or in seeking to
obtain or enforce any right or benefit provided by this Agreement, shall be paid
or reimbursed by SRS, provided, however, that if this Agreement is terminated
for Cause or if this Agreement is terminated voluntarily by Employee other than
due to a breach of this Agreement by SRS, SRS shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
25. NOTICES. Any notice given to either Party shall be in writing and
shall be deemed to have been given when delivered either personally, by fax, by
overnight delivery service (such as Federal Express) or sent by certified or
registered mail postage prepaid, return receipt requested, duly addressed to the
Party concerned at the address indicated below or to such changed address as the
Party may subsequently give notice of:
If to Sabratek:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE: (847) 720-2400
FAX: (847) 647-2382
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with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Carter W. Emerson
PHONE: (312) 861-2000
FAX: (312) 861-2200
If to Employee:
Notice shall be sent to the address or facsimile number
of the respective Employee as inserted on the execution
pages of this Agreement
If to Strategic Reimbursement Services, Inc. or the Board:
Strategic Reimbursement Services, Inc.
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE: (847) 720-2345
FAX: (847) 647-2382
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
* * * * *
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IN WITNESS WHEREOF, the undersigned hereto have executed this
Employment Agreement as of the date first written above.
STRATEGIC REIMBURSEMENT SERVICES, INC.
By: /s/ STEPHEN L. HOLDEN
-----------------------------
Its: Vice President
---------------------------
/s/ Steve Fagerman
---------------------------
Signature
Print name:
Address:
------------------------
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<PAGE> 1
EXHIBIT 10.57
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of June 29, 1999, by and between Strategic Reimbursement Services, Inc., an
Illinois corporation (together with its successors and assigns permitted under
this Agreement ("SRS"), and Kenneth Janowski ("Employee"). Certain capitalized
terms used herein are defined in Section 1. SRS is a wholly-owned subsidiary of
Sabratek Corporation ("Sabratek").
WITNESSETH:
WHEREAS, SRS has determined that it is in the best interests of SRS and
its stockholders to employ Employee and to set forth in this Agreement the
obligations and duties of both SRS and Employee; and
WHEREAS, SRS wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by SRS
for said period, upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, SRS and Employee (individually a "Party" and
together the "Parties" ) agree as follows:
1. DEFINITIONS.
(a) "Beneficiary" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "Board" shall mean the Board of Directors of SRS.
(c) "Cause" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to SRS or its business;
(ii) any repeated and demonstrated failure by Employee to
discharge faithfully the responsibilities of his position that SRS in good faith
determines is extremely detrimental to the current and future interests of SRS;
or
(iii) a material breach by Employee of any provision of this
Agreement.
(d) "Change in Control" shall mean the occurrence of any of the
following events:
<PAGE> 2
(i) Consummation of the acquisition by any person (as such term
is defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of SRS; or
(ii) The individuals who, as of the date hereof, are members of
the board of directors of SRS cease for any reason to constitute a majority of
the board of directors of Sabratek, unless the election, or nomination for
election by the stockholders of SRS, of any new director or directors was
approved by a vote of a majority of the board of directors of SRS, in which case
such new director or directors shall, for purposes of this Agreement, be
considered as a member or members of the board of directors of SRS as of the
date hereof; or
(iii) Approval by stockholders of SRS of (A) a merger or
consolidation of SRS if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of SRS outstanding immediately
before such merger or consolidation; or (B) a complete liquidation or
dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of SRS.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because 40 percent or more of the combined voting power of the
then outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained for
employees of SRS, or (ii) any corporation that, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of SRS in the
same proportion as their ownership of stock of SRS immediately prior to such
acquisition.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean the Compensation Committee of the Board, or
if no such committee, the Board.
(g) "Disability" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of SRS
covering Employee, or if no such plan exists, Employee's failure (i) to perform
substantially his material duties under this Agreement for a period of three
consecutive months, or for an aggregate of 135 days during any month period, and
(ii) to return to the performance of his duties within 30 days after receiving
written notice of termination.
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(h) "Good Reason" means the occurrence of any one or more of the
following, without the express agreement of the Employee to continue employment
despite such occurrence, at any time after the date of this Agreement: (a)
material diminution of Employee's duties as contemplated by this Agreement or
the assignment to the Employee of any material duties which are not
substantially consistent with such position, excluding, however, an isolated,
insubstantial and inadvertent action not taken in bad faith which is remedied by
SRS promptly upon receipt of notice thereof from the Employee; (b) reduction in
Employee's compensation from that in effect upon the date hereof, excluding,
however, any diminution of the foregoing applied by Sabratek consistently and in
good faith to substantially all of the executive employees of Sabratek and the
heads of its principal subsidiaries; and (c) material diminution of Employee's
perquisites or benefits from those of Sabratek in effect upon the date hereof,
excluding, however any diminution in benefits applied by Sabratek consistently
and in good faith to substantially all of the executive employees of Sabratek
and the heads of its principal subsidiaries.
(h) "Salary" shall mean the annual salary provided for in Section 3
below, as adjusted from time to time.
(i) "Term of Employment" or "Term" shall mean the period specified in
Section 2(b) below.
(j) "Year" shall mean the calendar year, which is the fiscal year of
SRS.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) Employment of Employee. SRS hereby employs Employee, and Employee
hereby accepts employment with SRS, in the positions and with the duties and
responsibilities set forth below and upon such other terms and conditions as are
hereinafter stated.
(b) Term of Employment. The Term of Employment shall commence on the
date hereof and shall terminate on the third anniversary of the date hereof;
provided, however, that unless either Party gives three months' written notice
to the other that the Term shall not continue past the third anniversary of the
date hereof or any subsequent 12-month period for which the Term has previously
been extended, the Term shall thereafter automatically extend for an additional
12-month period, unless the Term is sooner terminated as provided in Section 8
below.
(c) Titles And Duties.
Until the date of termination of his employment hereunder, Employee
shall be employed as a _________ of SRS, reporting to the President of SRS or
his designee. In his capacity as a ___________, Employee shall have the
customary powers, responsibilities and authorities of a ___________ of a similar
unit of Sabratek.
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(d) Location. If Sabratek requires the Employee to relocate his
residence from Phoenix metropolitan area, the Employee may treat such relocation
as a not for Cause termination.
(e) Time And Effort.
(i) Employee agrees to devote his full business time to the
affairs of SRS in order to carry out his duties and responsibilities under this
Agreement.
(ii) The Employee may (A) serve on the boards of a reasonable
number of trade associations, charitable organizations and/or businesses not in
competition with SRS or Sabratek, (B) engage in charitable activities and
community affairs and (C) manage his personal investments and affairs, in each
case so long as such does not or would not cause a breach of this Agreement.
3. SALARY. Employee shall receive from SRS a Salary, payable in
accordance with the regular payroll practices of SRS, in a minimum amount of
$190,000. During the Term the President or his designee shall review the Salary
of Employee no less often than once each Year, commencing January 1, 2000. On
the basis of any such review, the President or his designee may in its sole
discretion increase Employee's Salary accordingly. The term "Salary" as used in
this Agreement shall refer to the Salary of Employee at any time as so adjusted.
4. BONUSES. Employee shall be eligible to receive additional bonuses
during the Term and the President or his designee shall determine, in its
discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY. During the Term, Employee shall be eligible to
receive grants of options to purchase shares of Sabratek stock and awards of
shares of Sabratek stock, either or both as determined by the Board (with and
upon the approval of the Sabratek board of directors), under and in accordance
with the terms of applicable plans of SRS and related option and award
agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS. During the Term,
Employee shall be entitled to prompt reimbursement by SRS for all reasonable
out-of-pocket expenses incurred by him in performing services under this
Agreement, upon his submission of such accounts and records as may be reasonably
required by SRS.
7. EMPLOYEE BENEFIT PLANS. During the Term Employee shall be entitled
to participate in all employee benefit plans and programs made available to SRS'
senior executives or to its employees generally, as such plans or programs may
be in effect from time to time, including, without limitation, pension and other
retirement plans, profit-sharing plans, savings and similar plans, group life
insurance, accidental death and dismemberment insurance, travel accident
insurance, hospitalization insurance, surgical insurance, major and excess major
medical
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insurance, dental insurance, short-term and long-term disability insurance, sick
leave (including salary continuation arrangements), holidays, vacation and any
other employee benefit plans or programs that may be sponsored by SRS or
Sabratek from time to time, including plans that supplement the above-listed
types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) Voluntary Termination And Termination by Mutual Agreement. Employee
may terminate his employment voluntarily at any time. If he does so, his
entitlement hereunder shall be the same as if SRS had terminated his employment
for Cause. The Parties may terminate this Agreement by mutual agreement at any
time. If they do so, Employee's entitlement shall be as the Parties mutually
agree.
(b) General. Notwithstanding anything to the contrary herein, in the
event of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to SRS'
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of SRS;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan; and
(v) reimbursement in accordance with Section 6 above of any
business expenses incurred by Employee through the date of termination but not
yet paid to him.
(c) Termination Due to Death. In the event that Employee's employment
is terminated due to his death, his Beneficiary shall be entitled, in addition
to the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before
such termination, payable through the end of the month in which the proceeds of
his life insurance under the SRS or Sabratek group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death
occurs.
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(d) Termination Due to Disability. In the event of Disability, SRS or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) Termination by SRS For Cause. SRS may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the
President his position regarding any dispute relating to the existence of such
Cause. Unless rescinded by the President, termination shall be effective on the
date specified in the original notice. In the event that Employee's employment
is terminated for Cause, he shall be entitled only to the compensation and
benefits specified in Section 8(b).
(f) Termination Without Cause.
(i) Termination without Cause shall mean: termination of
Employee's employment by SRS and shall include any reason for termination other
than (i) due to death, Disability or Cause, (ii) by Employee voluntarily, or
(iii) by mutual agreement of Employee and SRS. In addition, termination without
Cause shall also include termination by Employee for Good Reason. SRS shall
provide Employee twenty days' prior written notice of termination by it without
Cause (other than any termination for Good Reason).
(ii) In the event of termination by SRS of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of 12-months following the date of termination, such
salary to be paid on SRS' normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated,
such bonus to be paid at the same time annual bonuses are regularly paid by SRS;
and
(C) continued coverage under the health program maintained by
SRS or Sabratek for a period of 12-months; and
(D) notwithstanding anything in this Section 8(f) to the
contrary, SRS shall have no further obligation to make any salary or bonus
payments for any period following the first date on which Employee takes any
action which would fall within the definition of "Restrictive Covenant" as
provided in Section 10(a) hereof, whether or not such action occurs within the
Restrictive Period (as defined in Section 10(a) hereof).
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(g) Voluntary Termination by Employee. Employee shall have the right,
upon 30 days' prior written notice, voluntarily to terminate his employment. If
he exercises this right, his employment shall cease and the Term shall terminate
as of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if SRS had terminated his employment for Cause, as
provided in Section 8(e).
(h) Notice That The Employment Term Shall Not Renew. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to SRS through the end of the Term as in effect on the date of delivery
of such notice, unless: (A) the non-renewal decision was made by SRS, in which
case, the President or his designee or Employee may elect to treat the notice as
a termination without Cause of Employee's employment; or (B) the non-renewal
decision was made by Employee, in which case, the President or his designee may
elect to treat the notice as a voluntary termination of employment by Employee.
(i) Change in Control. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii) (without any duplication), including, but
not limited to, any other compensation or benefits under equity grants and
awards described in Section 5 above and employee benefits under plans described
in Section 7 above, that have vested through the date of termination or to which
he may then be entitled in accordance with the applicable terms and conditions
of each grant, award or plan.
9. CONFIDENTIALITY AND LOYALTY.
(a) General.
(i) Employee hereby acknowledges that as a result of his
employment with SRS he has produced and had access to, and may hereafter produce
and have access to, material, records, data, trade secrets, customer lists,
inventions and information not generally available to the public (collectively,
"Confidential Information") regarding SRS and that any such Confidential
Information is the exclusive property of SRS.
(ii) Accordingly, Employee hereby agrees that, during and
subsequent to the Term, he shall hold in confidence and not directly or
indirectly disclose, use, copy or make lists of any such Confidential
Information, except to the extent that such information in such form is or
thereafter becomes lawfully available from public sources, or such disclosure is
authorized in writing by SRS, required by a law or any competent administrative
agency or judicial authority, or otherwise as reasonably necessary or
appropriate in connection with performance by Employee of his duties hereunder.
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(b) Return of Documents. All records, files, documents and other
materials or copies thereof relating to SRS' business that Employee prepares or
uses shall be and remain the sole property of SRS and shall not be removed from
SRS' premises without its written consent. Upon termination of Employee's
employment with SRS for any reason, he shall promptly deliver to SRS all such
items that are then in his possession or control.
(c) Duty of Loyalty. Employee hereby agrees to abide by SRS' reasonable
policies, as in effect from time to time, respecting avoidance of interests
conflicting with those of SRS.
(d) Remedies And Sanctions. In the event that Employee is found to be
in violation of Section 9(a), (b) or (c), SRS shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) Restrictive Covenant. Employee hereby agrees that, except with the
express prior written consent of SRS, for a period of 12-months after
termination of his employment with SRS for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of SRS as
conducted on the date of such termination, including, but not by way of
limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of SRS to terminate
employment with SRS and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as SRS as conducted on the date of such
termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and SRS brings legal
action for injunctive or other relief, SRS shall not, as a result of the time
involved in obtaining such relief, be deprived of the benefit of the full period
of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall be
deemed to endure for the period specified in this Section 10(a), computed from
the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) Exceptions. Notwithstanding anything to the contrary in Section
10(a), the Restrictive Covenant shall not:
(i) apply if SRS terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital
stock or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of SRS as conducted on
the date of such termination.
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(c) Remedies And Sanctions. In the event that Employee is found to be
in violation of Section 11(a) above, SRS shall be entitled to relief as provided
in Section 11 below.
11. REMEDIES/SANCTIONS. Employee hereby acknowledges that the
restrictions contained in Sections 9 (a), (b) and (c) and 10(a) above are
reasonable and necessary for the protection of the legitimate business interests
of SRS, for which monetary damages alone may not provide an adequate remedy,
that any violation of these restrictions would cause substantial injury to SRS
and such interests, that SRS would not have entered into this Agreement without
receiving the additional consideration offered by Employee in binding himself to
these restrictions and that such restrictions were a material inducement to SRS
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, SRS (a) shall be relieved of any further obligations under the
Agreement, (b) shall be entitled to seek monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to SRS under this Agreement or otherwise at law or
in equity, shall be entitled to seek preliminary and permanent injunctive relief
to prevent or restrain any such violation by Employee and any and all persons
directly or indirectly acting for or with him, as the case may be.
12. BENEFICIARIES/REFERENCES. Employee shall be entitled to select (and
change, to the extent permitted under any applicable law) a Beneficiary or
Beneficiaries to receive any compensation or benefit payable under this
Agreement following his death by giving SRS written notice thereof. In the event
of Employee's death, or of a judicial determination of his incompetence,
reference in this Agreement to Employee shall be deemed to refer, as
appropriate, to his Beneficiary, estate or other legal representative.
13. WITHHOLDING TAXES. All payments to Employee or his Beneficiary
under this Agreement shall be subject to withholding on account of federal,
state and local taxes as required by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE. Nothing herein is intended
to limit SRS' indemnification of Employee, and SRS shall indemnify him to the
fullest extent permitted by applicable law consistent with SRS' Articles of
Incorporation and By-Laws, with respect to any action or failure to act on his
part while he is an officer or employee of SRS. SRS shall cause Employee to be
covered at all times by directors' and officers' liability insurance on terms no
less favorable than the directors' and officers' liability insurance maintained
by SRS or Sabratek in effect on the date hereof in terms of coverage and
amounts. SRS shall continue to indemnify Employee as provided above and maintain
such liability insurance coverage for him after the Term for any claims that may
be made against him with respect to his service as a director or officer of SRS.
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15. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this
Agreement shall not prohibit or restrict Employee's entitlement to participate
fully in compensation, employee benefit and other plans of SRS in which senior
executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of Employee) and assigns.
17. REPRESENTATIONS. The Parties respectively represent and warrant
that each is fully authorized and empowered to enter into this Agreement and
that the performance of its or his obligations, as the case may be, under this
Agreement will not violate any agreement between such Party and any other
person, firm or organization. SRS represents and warrants that this Agreement
has been duly authorized by all necessary corporate action and is valid, binding
and enforceable in accordance with its terms.
18. ENTIRE AGREEMENT. Except to the extent otherwise provided herein,
this Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes any prior
agreements, whether written or oral, between the Parties concerning the subject
matter hereof, between SRS and Employee, provided that the execution of this
Agreement shall not adversely affect (i) any award previously made to Employee
under any compensation plan maintained by SRS, or (ii) any statements regarding
the vesting of options or other benefits in such prior agreements. Payments and
benefits provided under this Agreement are in lieu of any payments or other
benefits under any severance program or policy of SRS to which Employee would
otherwise be entitled. The foregoing notwithstanding, the non-compete,
non-solicitation and related covenants contained in the Merger Agreement and
which relate to the Employee shall be unaffected by this Section, and such
covenants shall exist in addition to the similar covenants contained herein.
19. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both Employee and an
authorized officer of SRS. No waiver by either Party of any breach by the other
Party of any condition or provision contained in this Agreement to be performed
by such other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by the Party to be charged with the waiver. No
delay by either Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
20. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
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21. SURVIVAL. The respective rights and obligations of the Parties
under this Agreement shall survive any termination of Employee's employment with
SRS.
22. GOVERNING LAW/JURISDICTION. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of Illinois, without
reference to principles of conflict of laws.
23. ARBITRATION. Any dispute or controversy, other than a dispute or
controversy arising under Sections 9 or 11 or with respect to Federal or state
employment laws, rules or regulations hereof (actions regarding which may be
brought in any court (i) having situs within Cook County, Illinois and (ii)
having jurisdiction over the dispute or controversy), arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators sitting in a location selected by
Employee within thirty (30) miles from the main office of SRS, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that the Executive shall be entitled to seek specific
performance of his right to be paid through the date of termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
24. LEGAL FEES. All reasonable expenses and legal fees paid or incurred
by Employee pursuant to any bona fide dispute or question of interpretation
relating to this Agreement, including all such expenses and fees, if any,
incurred in contesting any termination of this Agreement by SRS or in seeking to
obtain or enforce any right or benefit provided by this Agreement, shall be paid
or reimbursed by SRS, provided, however, that if this Agreement is terminated
for Cause or if this Agreement is terminated voluntarily by Employee other than
due to a breach of this Agreement by SRS, SRS shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
25. NOTICES. Any notice given to either Party shall be in writing and
shall be deemed to have been given when delivered either personally, by fax, by
overnight delivery service (such as Federal Express) or sent by certified or
registered mail postage prepaid, return receipt requested, duly addressed to the
Party concerned at the address indicated below or to such changed address as the
Party may subsequently give notice of:
If to Sabratek:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE: (847) 720-2400
FAX: (847) 647-2382
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with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Carter W. Emerson
PHONE: (312) 861-2000
FAX: (312) 861-2200
If to Employee:
Notice shall be sent to the address or facsimile number
of the respective Employee as inserted on the execution
pages of this Agreement
If to Strategic Reimbursement Services, Inc. or the Board:
Strategic Reimbursement Services, Inc.
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE: (847) 720-2345
FAX: (847) 647-2382
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
* * * * *
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IN WITNESS WHEREOF, the undersigned hereto have executed this
Employment Agreement as of the date first written above.
STRATEGIC REIMBURSEMENT SERVICES, INC.
By: /s/ STEPHEN L. HOLDEN
---------------------------------------
Its: Vice President
--------------------------------------
/s/ KENNETH J. JANOWSKI
------------------------------------------
Signature
Print name: Kenneth J. Janowski
Address: 16408 E. Jacklin Dr.
----------------------------------
Fountain Hills, AR 85268
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<PAGE> 1
EXHIBIT 10.58
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of June 29, 1999, by and between Strategic Reimbursement Services, Inc., an
Illinois corporation (together with its successors and assigns permitted under
this Agreement ("SRS"), and Mark Pugh ("Employee"). Certain capitalized terms
used herein are defined in Section 1. SRS is a wholly-owned subsidiary of
Sabratek Corporation ("Sabratek").
WITNESSETH:
WHEREAS, SRS has determined that it is in the best interests of SRS and
its stockholders to employ Employee and to set forth in this Agreement the
obligations and duties of both SRS and Employee; and
WHEREAS, SRS wishes to assure itself of the services of Employee for
the period hereinafter provided, and Employee is willing to be employed by SRS
for said period, upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, SRS and Employee (individually a "Party" and
together the "Parties" ) agree as follows:
1. DEFINITIONS.
(a) "Beneficiary" shall mean the person or persons named by Employee
pursuant to Section 12 below or, in the event that no such person is named who
survives Employee, his estate.
(b) "Board" shall mean the Board of Directors of SRS.
(c) "Cause" shall mean:
(i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to SRS or its business;
(ii) any repeated and demonstrated failure by Employee to
discharge faithfully the responsibilities of his position that SRS in good faith
determines is extremely detrimental to the current and future interests of SRS;
or
(iii) a material breach by Employee of any provision of this
Agreement.
(d) "Change in Control" shall mean the occurrence of any of the
following events:
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(i) Consummation of the acquisition by any person (as such term
is defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of SRS; or
(ii) The individuals who, as of the date hereof, are members of
the board of directors of SRS cease for any reason to constitute a majority of
the board of directors of Sabratek, unless the election, or nomination for
election by the stockholders of SRS, of any new director or directors was
approved by a vote of a majority of the board of directors of SRS, in which case
such new director or directors shall, for purposes of this Agreement, be
considered as a member or members of the board of directors of SRS as of the
date hereof; or
(iii) Approval by stockholders of SRS of (A) a merger or
consolidation of SRS if the stockholders immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly
or indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of SRS outstanding immediately
before such merger or consolidation; or (B) a complete liquidation or
dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of SRS.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because 40 percent or more of the combined voting power of the
then outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained for
employees of SRS, or (ii) any corporation that, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of SRS in the
same proportion as their ownership of stock of SRS immediately prior to such
acquisition.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean the Compensation Committee of the Board, or
if no such committee, the Board.
(g) "Disability" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of SRS
covering Employee, or if no such plan exists, Employee's failure (i) to perform
substantially his material duties under this Agreement for a period of three
consecutive months, or for an aggregate of 135 days during any month period, and
(ii) to return to the performance of his duties within 30 days after receiving
written notice of termination.
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(h) "Good Reason" means the occurrence of any one or more of the
following, without the express agreement of the Employee to continue employment
despite such occurrence, at any time after the date of this Agreement: (a)
material diminution of Employee's duties as contemplated by this Agreement or
the assignment to the Employee of any material duties which are not
substantially consistent with such position, excluding, however, an isolated,
insubstantial and inadvertent action not taken in bad faith which is remedied by
SRS promptly upon receipt of notice thereof from the Employee; (b) reduction in
Employee's compensation from that in effect upon the date hereof, excluding,
however, any diminution of the foregoing applied by Sabratek consistently and in
good faith to substantially all of the executive employees of Sabratek and the
heads of its principal subsidiaries; and (c) material diminution of Employee's
perquisites or benefits from those of Sabratek in effect upon the date hereof,
excluding, however any diminution in benefits applied by Sabratek consistently
and in good faith to substantially all of the executive employees of Sabratek
and the heads of its principal subsidiaries.
(h) "Salary" shall mean the annual salary provided for in Section 3
below, as adjusted from time to time.
(i) "Term of Employment" or "Term" shall mean the period specified in
Section 2(b) below.
(j) "Year" shall mean the calendar year, which is the fiscal year of
SRS.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) Employment of Employee. SRS hereby employs Employee, and Employee
hereby accepts employment with SRS, in the positions and with the duties and
responsibilities set forth below and upon such other terms and conditions as are
hereinafter stated.
(b) Term of Employment. The Term of Employment shall commence on the
date hereof and shall terminate on the third anniversary of the date hereof;
provided, however, that unless either Party gives three months' written notice
to the other that the Term shall not continue past the third anniversary of the
date hereof or any subsequent 12-month period for which the Term has previously
been extended, the Term shall thereafter automatically extend for an additional
12-month period, unless the Term is sooner terminated as provided in Section 8
below.
(c) Titles And Duties.
Until the date of termination of his employment hereunder, Employee
shall be employed as a _________ of SRS, reporting to the President of SRS or
his designee. In his capacity as a ___________, Employee shall have the
customary powers, responsibilities and authorities of a ___________ of a similar
unit of Sabratek.
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(d) Location. If Sabratek requires the Employee to relocate his
residence from Denver metropolitan area the Employee may treat such relocation
as a not for Cause termination.
(e) Time And Effort.
(i) Employee agrees to devote his full business time to the
affairs of SRS in order to carry out his duties and responsibilities under this
Agreement.
(ii) The Employee may (A) serve on the boards of a reasonable
number of trade associations, charitable organizations and/or businesses not in
competition with SRS or Sabratek, (B) engage in charitable activities and
community affairs and (C) manage his personal investments and affairs, in each
case so long as such does not or would not cause a breach of this Agreement.
3. SALARY. Employee shall receive from SRS a Salary, payable in
accordance with the regular payroll practices of SRS, in a minimum amount of
$190,000. During the Term the President or his designee shall review the Salary
of Employee no less often than once each Year, commencing January 1, 2000. On
the basis of any such review, the President or his designee may in its sole
discretion increase Employee's Salary accordingly. The term "Salary" as used in
this Agreement shall refer to the Salary of Employee at any time as so adjusted.
4. BONUSES. Employee shall be eligible to receive additional bonuses
during the Term and the President or his designee shall determine, in its
discretion, the occasion for payment, and the amount, of any such bonus.
5. EQUITY OPPORTUNITY. During the Term, Employee shall be eligible to
receive grants of options to purchase shares of Sabratek stock and awards of
shares of Sabratek stock, either or both as determined by the Board (with and
upon the approval of the Sabratek board of directors), under and in accordance
with the terms of applicable plans of SRS and related option and award
agreements.
6. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS. During the Term,
Employee shall be entitled to prompt reimbursement by SRS for all reasonable
out-of-pocket expenses incurred by him in performing services under this
Agreement, upon his submission of such accounts and records as may be reasonably
required by SRS.
7. EMPLOYEE BENEFIT PLANS. During the Term Employee shall be entitled
to participate in all employee benefit plans and programs made available to SRS'
senior executives or to its employees generally, as such plans or programs may
be in effect from time to time, including, without limitation, pension and other
retirement plans, profit-sharing plans, savings and similar plans, group life
insurance, accidental death and dismemberment insurance, travel accident
insurance, hospitalization insurance, surgical insurance, major and excess major
medical insurance, dental insurance, short-term and long-term disability
insurance, sick leave (including
4
<PAGE> 5
salary continuation arrangements), holidays, vacation and any other employee
benefit plans or programs that may be sponsored by SRS or Sabratek from time to
time, including plans that supplement the above-listed types of plans, whether
funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) Voluntary Termination And Termination by Mutual Agreement. Employee
may terminate his employment voluntarily at any time. If he does so, his
entitlement hereunder shall be the same as if SRS had terminated his employment
for Cause. The Parties may terminate this Agreement by mutual agreement at any
time. If they do so, Employee's entitlement shall be as the Parties mutually
agree.
(b) General. Notwithstanding anything to the contrary herein, in the
event of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years according to SRS'
vacation policy;
(iii) any deferred compensation payable under any deferred
compensation plan of SRS;
(iv) any other compensation or benefits, including without
limitation, benefits under equity grants and awards described in Section 5 above
and employee benefits under plans described in Section 7 above, that have vested
through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan; and
(v) reimbursement in accordance with Section 6 above of any
business expenses incurred by Employee through the date of termination but not
yet paid to him.
(c) Termination Due to Death. In the event that Employee's employment
is terminated due to his death, his Beneficiary shall be entitled, in addition
to the compensation and benefits specified in Section 8(b), to:
(i) Employee's Salary, at the rate in effect immediately before
such termination, payable through the end of the month in which the proceeds of
his life insurance under the SRS or Sabratek group plan are paid; and
(ii) a prorated annual bonus for the Year in which his death
occurs.
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<PAGE> 6
(d) Termination Due to Disability. In the event of Disability, SRS or
Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 8(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.
(e) Termination by SRS For Cause. SRS may terminate Employee's
employment hereunder for Cause only upon written notice to Employee not less
than 10 days prior to any intended termination date, which notice shall specify
the grounds for such termination in reasonable detail. Upon receipt of such
notice, Employee (and his counsel) shall have the right to present to the
President his position regarding any dispute relating to the existence of such
Cause. Unless rescinded by the President, termination shall be effective on the
date specified in the original notice. In the event that Employee's employment
is terminated for Cause, he shall be entitled only to the compensation and
benefits specified in Section 8(b).
(f) Termination Without Cause.
(i) Termination without Cause shall mean: termination of
Employee's employment by SRS and shall include any reason for termination other
than (i) due to death, Disability or Cause, (ii) by Employee voluntarily, or
(iii) by mutual agreement of Employee and SRS. In addition, termination without
Cause shall also include termination by Employee for Good Reason. SRS shall
provide Employee twenty days' prior written notice of termination by it without
Cause (other than any termination for Good Reason).
(ii) In the event of termination by SRS of Employee's employment
without Cause, he shall be entitled, in addition to the compensation and
benefits specified in Section 8(b), to:
(A) his Salary, at the rate in effect immediately before such
termination, for a period of 12-months following the date of termination, such
salary to be paid on SRS' normal payroll schedule; and
(B) a prorated annual bonus for the year in which terminated,
such bonus to be paid at the same time annual bonuses are regularly paid by SRS;
and
(C) continued coverage under the health program maintained by
SRS or Sabratek for a period of 12-months; and
(D) notwithstanding anything in this Section 8(f) to the
contrary, SRS shall have no further obligation to make any salary or bonus
payments for any period following the first date on which Employee takes any
action which would fall within the definition of "Restrictive Covenant" as
provided in Section 10(a) hereof, whether or not such action occurs within the
Restrictive Period (as defined in Section 10(a) hereof).
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<PAGE> 7
(g) Voluntary Termination by Employee. Employee shall have the right,
upon 30 days' prior written notice, voluntarily to terminate his employment. If
he exercises this right, his employment shall cease and the Term shall terminate
as of the date stated in such notice, and he shall be entitled to receive
compensation and benefits as if SRS had terminated his employment for Cause, as
provided in Section 8(e).
(h) Notice That The Employment Term Shall Not Renew. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to SRS through the end of the Term as in effect on the date of delivery
of such notice, unless: (A) the non-renewal decision was made by SRS, in which
case, the President or his designee or Employee may elect to treat the notice as
a termination without Cause of Employee's employment; or (B) the non-renewal
decision was made by Employee, in which case, the President or his designee may
elect to treat the notice as a voluntary termination of employment by Employee.
(i) Change in Control. Notwithstanding anything to the contrary in this
Section 8, if, within twelve months following a Change in Control (A) Employee's
employment is terminated for any reason other than Cause, death or Disability,
or (B) there is a material adverse change in Employee's compensation, title or
duties specified herein, he shall be entitled to the compensation and benefits
provided in Sections 8(b) and 8(f)(ii) (without any duplication), including, but
not limited to, any other compensation or benefits under equity grants and
awards described in Section 5 above and employee benefits under plans described
in Section 7 above, that have vested through the date of termination or to which
he may then be entitled in accordance with the applicable terms and conditions
of each grant, award or plan.
9. CONFIDENTIALITY AND LOYALTY.
(a) General.
(i) Employee hereby acknowledges that as a result of his
employment with SRS he has produced and had access to, and may hereafter produce
and have access to, material, records, data, trade secrets, customer lists,
inventions and information not generally available to the public (collectively,
"Confidential Information") regarding SRS and that any such Confidential
Information is the exclusive property of SRS.
(ii) Accordingly, Employee hereby agrees that, during and
subsequent to the Term, he shall hold in confidence and not directly or
indirectly disclose, use, copy or make lists of any such Confidential
Information, except to the extent that such information in such form is or
thereafter becomes lawfully available from public sources, or such disclosure is
authorized in writing by SRS, required by a law or any competent administrative
agency or judicial authority, or otherwise as reasonably necessary or
appropriate in connection with performance by Employee of his duties hereunder.
7
<PAGE> 8
(b) Return of Documents. All records, files, documents and other
materials or copies thereof relating to SRS' business that Employee prepares or
uses shall be and remain the sole property of SRS and shall not be removed from
SRS' premises without its written consent. Upon termination of Employee's
employment with SRS for any reason, he shall promptly deliver to SRS all such
items that are then in his possession or control.
(c) Duty of Loyalty. Employee hereby agrees to abide by SRS' reasonable
policies, as in effect from time to time, respecting avoidance of interests
conflicting with those of SRS.
(d) Remedies And Sanctions. In the event that Employee is found to be
in violation of Section 9(a), (b) or (c), SRS shall be entitled to relief as
provided in Section 11 below.
10. NONCOMPETITION/NONSOLICITATION.
(a) Restrictive Covenant. Employee hereby agrees that, except with the
express prior written consent of SRS, for a period of 12-months after
termination of his employment with SRS for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of SRS as
conducted on the date of such termination, including, but not by way of
limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of SRS to terminate
employment with SRS and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as SRS as conducted on the date of such
termination (the "Restrictive Covenant").
If Employee violates the Restrictive Covenant and SRS brings legal
action for injunctive or other relief, SRS shall not, as a result of the time
involved in obtaining such relief, be deprived of the benefit of the full period
of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall be
deemed to endure for the period specified in this Section 10(a), computed from
the date the relief is granted but reduced by the time between the period when
the Restrictive Period began to run and the date of the first violation of the
Restrictive Covenant by Employee.
(b) Exceptions. Notwithstanding anything to the contrary in Section
10(a), the Restrictive Covenant shall not:
(i) apply if SRS terminates Employee's employment without Cause,
as provided in Section 8(f) above; or
(ii) prohibit Employee from owning directly or indirectly capital
stock or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of SRS as conducted on
the date of such termination.
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<PAGE> 9
(c) Remedies And Sanctions. In the event that Employee is found to be
in violation of Section 11(a) above, SRS shall be entitled to relief as provided
in Section 11 below.
11. REMEDIES/SANCTIONS. Employee hereby acknowledges that the
restrictions contained in Sections 9 (a), (b) and (c) and 10(a) above are
reasonable and necessary for the protection of the legitimate business interests
of SRS, for which monetary damages alone may not provide an adequate remedy,
that any violation of these restrictions would cause substantial injury to SRS
and such interests, that SRS would not have entered into this Agreement without
receiving the additional consideration offered by Employee in binding himself to
these restrictions and that such restrictions were a material inducement to SRS
to enter into this Agreement.
In the event of any violation or threatened violation of these
restrictions, SRS (a) shall be relieved of any further obligations under the
Agreement, (b) shall be entitled to seek monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to SRS under this Agreement or otherwise at law or
in equity, shall be entitled to seek preliminary and permanent injunctive relief
to prevent or restrain any such violation by Employee and any and all persons
directly or indirectly acting for or with him, as the case may be.
12. BENEFICIARIES/REFERENCES. Employee shall be entitled to select (and
change, to the extent permitted under any applicable law) a Beneficiary or
Beneficiaries to receive any compensation or benefit payable under this
Agreement following his death by giving SRS written notice thereof. In the event
of Employee's death, or of a judicial determination of his incompetence,
reference in this Agreement to Employee shall be deemed to refer, as
appropriate, to his Beneficiary, estate or other legal representative.
13. WITHHOLDING TAXES. All payments to Employee or his Beneficiary
under this Agreement shall be subject to withholding on account of federal,
state and local taxes as required by law.
14. INDEMNIFICATION AND LIABILITY INSURANCE. Nothing herein is intended
to limit SRS' indemnification of Employee, and SRS shall indemnify him to the
fullest extent permitted by applicable law consistent with SRS' Articles of
Incorporation and By-Laws, with respect to any action or failure to act on his
part while he is an officer or employee of SRS. SRS shall cause Employee to be
covered at all times by directors' and officers' liability insurance on terms no
less favorable than the directors' and officers' liability insurance maintained
by SRS or Sabratek in effect on the date hereof in terms of coverage and
amounts. SRS shall continue to indemnify Employee as provided above and maintain
such liability insurance coverage for him after the Term for any claims that may
be made against him with respect to his service as a director or officer of SRS.
9
<PAGE> 10
15. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this
Agreement shall not prohibit or restrict Employee's entitlement to participate
fully in compensation, employee benefit and other plans of SRS in which senior
executives are eligible to participate.
16. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of Employee) and assigns.
17. REPRESENTATIONS. The Parties respectively represent and warrant
that each is fully authorized and empowered to enter into this Agreement and
that the performance of its or his obligations, as the case may be, under this
Agreement will not violate any agreement between such Party and any other
person, firm or organization. SRS represents and warrants that this Agreement
has been duly authorized by all necessary corporate action and is valid, binding
and enforceable in accordance with its terms.
18. ENTIRE AGREEMENT. Except to the extent otherwise provided herein,
this Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes any prior
agreements, whether written or oral, between the Parties concerning the subject
matter hereof, between SRS and Employee, provided that the execution of this
Agreement shall not adversely affect (i) any award previously made to Employee
under any compensation plan maintained by SRS, or (ii) any statements regarding
the vesting of options or other benefits in such prior agreements. Payments and
benefits provided under this Agreement are in lieu of any payments or other
benefits under any severance program or policy of SRS to which Employee would
otherwise be entitled. The foregoing notwithstanding, the non-compete,
non-solicitation and related covenants contained in the Merger Agreement and
which relate to the Employee shall be unaffected by this Section, and such
covenants shall exist in addition to the similar covenants contained herein.
19. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both Employee and an
authorized officer of SRS. No waiver by either Party of any breach by the other
Party of any condition or provision contained in this Agreement to be performed
by such other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by the Party to be charged with the waiver. No
delay by either Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
20. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
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<PAGE> 11
21. SURVIVAL. The respective rights and obligations of the Parties
under this Agreement shall survive any termination of Employee's employment with
SRS.
22. GOVERNING LAW/JURISDICTION. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of Illinois, without
reference to principles of conflict of laws.
23. ARBITRATION. Any dispute or controversy, other than a dispute or
controversy arising under Sections 9 or 11 or with respect to Federal or state
employment laws, rules or regulations hereof (actions regarding which may be
brought in any court (i) having situs within Cook County, Illinois and (ii)
having jurisdiction over the dispute or controversy), arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators sitting in a location selected by
Employee within thirty (30) miles from the main office of SRS, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that the Executive shall be entitled to seek specific
performance of his right to be paid through the date of termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
24. LEGAL FEES. All reasonable expenses and legal fees paid or incurred
by Employee pursuant to any bona fide dispute or question of interpretation
relating to this Agreement, including all such expenses and fees, if any,
incurred in contesting any termination of this Agreement by SRS or in seeking to
obtain or enforce any right or benefit provided by this Agreement, shall be paid
or reimbursed by SRS, provided, however, that if this Agreement is terminated
for Cause or if this Agreement is terminated voluntarily by Employee other than
due to a breach of this Agreement by SRS, SRS shall be obligated to pay any of
Employee's expenses and legal fees arising therefrom only if Employee is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.
25. NOTICES. Any notice given to either Party shall be in writing and
shall be deemed to have been given when delivered either personally, by fax, by
overnight delivery service (such as Federal Express) or sent by certified or
registered mail postage prepaid, return receipt requested, duly addressed to the
Party concerned at the address indicated below or to such changed address as the
Party may subsequently give notice of:
If to Sabratek:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE: (847) 720-2400
FAX: (847) 647-2382
11
<PAGE> 12
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Carter W. Emerson
PHONE: (312) 861-2000
FAX: (312) 861-2200
If to Employee:
Notice shall be sent to the address or facsimile number
of the respective Employee as inserted on the execution
pages of this Agreement
If to Strategic Reimbursement Services, Inc. or the Board:
Strategic Reimbursement Services, Inc.
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: President
PHONE: (847) 720-2345
FAX: (847) 647-2382
26. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
27. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
* * * * *
12
<PAGE> 13
IN WITNESS WHEREOF, the undersigned hereto have executed this
Employment Agreement as of the date first written above.
STRATEGIC REIMBURSEMENT SERVICES, INC.
By: /s/ Stephen L. Holden
-----------------------------
Its: Vice President
---------------------------
/s/ Mark Pugh
---------------------------
Signature
Print name:
Address:
------------------------
------------------------
------------------------
------------------------
<PAGE> 1
MEMORANDUM
To: Mr. John P. Reilly
From: William D. Lautman
Date: March 2, 1999
Subject: SRS Advisory Engagement Letter
This memorandum memorializes the agreement (the "Agreement") between EGS
Securities Corp. ("EGS") and Sabratek Corporation ("Sabratek" or the "Company")
and confirms the understanding between such parties regarding the engagement of
EGS by Sabratek pursuant to which EGS will perform certain financial advisory
services on behalf of the Company. Such advisory services to be undertaken by
EGS will relate (1) to the prospective acquisition of, or (2) any other
consummation of a strategic relationship with (any individual transaction within
the context of (1) or (2) above, a "Transaction" hereinafter defined) Strategic
Reimbursement Services, Inc. ("SRS"). The terms of the Agreement are outlined as
follows:
1. The Company hereby engages EGS as its financial advisor in connection
with a Transaction with SRS.
2. EGS accepts the engagement described in Paragraph 1 and accordingly
agrees to undertake the following, at the option of the Company:
a) to assist the Company in assessing the strategic value of a
Transaction with SRS;
b) if applicable, to assist the Company with valuation analyses to
be used by management in its negotiations with SRS, provided,
however, that EGS will not have an obligation to render a
written appraisal of any of SRS' assets or liabilities or to
provide a "fairness opinion;"
c) to advise the Company with respect to the form and structure of
a Transaction;
<PAGE> 2
June 25, 1999
Page 2
d) to advise the Company as to strategy and tactics for negotiating
with SRS and to coordinate and assist in related discussions;
and
e) to assist the Company in its due diligence documentation and, if
applicable, to assist in the preparation of definitive
documentation relating to a Transaction
f) to assist the Company in negotiating a definitive agreement or
agreements with SRS.
3. In consideration for services rendered pursuant to paragraphs 1 and 2 of
this Agreement, the Company shall issue to EGS, at or shortly after the
Closing (hereinafter defined) of a Transaction, a success fee in the
form of shares of common stock of Sabratek ("Success Fee"), the number
of shares of which will be determined, by mutual agreement, at Closing
based on the actual services rendered by EGS.
Sabratek shall register any and all shares of common stock issued to EGS
pursuant to the terms of this Agreement, in the first registration form
filed on behalf of the equity holders of SRS who received common stock
of Sabratek in the Transaction. EGS shall not be subject to any sale
restrictions on such shares other than regulatory restrictions, if any.
4. The Company will also reimburse EGS, promptly upon request, for all
reasonable out-of-pocket expenses incurred in connection with this
Agreement.
5. The Company warrants that it is unconditionally authorized to compensate
EGS according to the formula outlined herein.
6. For the purposes of this Agreement:
a) "Sabratek" or the "Company" shall refer to Sabratek Corporation,
as well as any affiliate, joint venture investment, partner,
successor or predecessor company or any related entity;
b) "SRS" shall refer to Strategic Reimbursement Services, Inc., as
well as any affiliate, joint venture investment, partner,
successor or predecessor company or any related entity;
c) "Transaction" shall refer to any acquisition of, or other
strategic relationship established between, Sabratek and SRS,
including but not limited to: (i) a sale, purchase or transfer
of any equity interests (including, without limitation, options,
warrants or similar interests), (ii) a lease of assets other
than in the normal course of business, (iii) a merger or
consolidation, (iv) the formation of a joint venture or
partnership or any other business combination, (v) the execution
of any product or technology licensing agreement, (vi) the sale,
grant or other transfer of any option or other right (whether or
not contingent upon any future event) to acquire any equity
interests or assets or to enter into any product or technology
license or to consummate any other related transaction or, (vii)
any similar transaction;
<PAGE> 3
June 25, 1999
Page 3
d) "Closing" shall refer to the execution of definitive agreements
to enter into a Transaction. In the event that a Transaction
involves multiple steps (e.g., execution of an option agreement
to acquire assets at a subsequent date), Closing shall refer to
the execution of agreements committing the parties to the first
of these successive related Transactions.
7. The Company shall furnish, or cause to be furnished, to EGS all
reasonable information requested by EGS for the purpose of rendering
services hereunder (the "Information"). The Company recognizes and
confirms that EGS:
a) will use and rely on the Information and on information
available from generally recognized public sources in performing
the services contemplated by this Agreement without having
independently verified the same; and
b) does not assume responsibility for the accuracy or completeness
of the Information and such other information. EGS agrees to
keep confidential all non-public Information provided to it by
the Company, except as required by law or as contemplated by the
terms of this Agreement and will use such Information solely for
the purposes described in this Agreement. Notwithstanding
anything to the contrary contained herein, EGS may disclose
non-public Information to its or Sabratek's agents and advisors
whenever EGS determines that such disclosure is necessary to
provide the services contemplated hereunder; provided that EGS
will first advise the Company as to third parties receiving
confidential Information concerning the Company and the Company
shall first consent to such disclosure. Such party or parties
will further agree to handle the Information confidentially.
Upon the termination of this Agreement, EGS shall return the
Information, and all copies thereof, to the Company. This
provision may be enforced with equitable remedies.
8. EGS will use its "reasonable best efforts" to assist the Company,
pursuant to paragraph 2 of this Agreement, during the engagement period,
but there is no commitment, expressed or implied, by EGS or any of its
affiliates to effect the successful Closing of a Transaction.
9. Except as required by law, any advice rendered by EGS pursuant to its
engagement hereunder shall be treated as confidential by the Company and
any party to whom the Company discloses such advice, and shall not be
disclosed publicly in any manner without the prior written consent of
EGS. Without prior notification to EGS, the Company shall not make any
legally required disclosure of such advice nor make any legally required
public announcement or filing in which EGS' name appears.
<PAGE> 4
June 25, 1999
Page 4
10. Because EGS will be acting on behalf of the Company, the Company agrees
to the indemnification and contribution provisions (the
"Indemnification") attached to this Agreement as Annex A and
incorporated herein in their entirety.
11. In the event that a Transaction or other transaction with an entity
other than SRS is effected and the Company is not the surviving entity,
the Company shall use its reasonable best efforts to cause the surviving
company or purchaser to assume and honor the obligations and liabilities
of the Company hereunder, including, without limitation, the Company's
obligations and liabilities pursuant to provisions concerning
indemnification, contribution, and the Company's obligations to pay fees
and to reimburse expenses contained herein and under the Indemnification
provisions.
12. This Agreement may be terminated by either party at any time after 12
months from the date hereof on 30 days' prior written notice, without
liability, except for the Company's obligations (which shall survive
such termination) as to (i) reimbursement or payment for any Transaction
fees and expenses incurred by EGS prior to termination of this
Agreement, and (ii) any reimbursement, indemnity or contribution payable
by the Company pursuant to Annex A (subject to the limitations therein).
Notwithstanding anything contained in the preceding sentence, if a
Transaction is Closed (within one year of such termination) with SRS or
any other party: (i) for which EGS has provided the Company advisory
services in contemplation of a Transaction as part of this Agreement,
the Company shall pay to EGS Transaction Fees as specified herein.
13. This Agreement may not be amended or modified except in writing and when
mutually executed by the Company and EGS, and shall be governed and
construed in accordance with the internal laws of the State of New York
without reference to principles of conflicts of laws. Any controversy or
claim arising out of or relating to this Agreement, or the transactions
contemplated hereby, or the breach hereof or thereof, shall be settled
by binding and final arbitration in accordance with the then-existing
Commercial Arbitration Rules of the American Arbitration Association.
Unless otherwise agree, arbitration shall be conducted in Chicago,
Illinois before a single arbitrator appointed in accordance with such
Rules. The arbitrator shall follow the law governing this Agreement. The
arbitrator's decision shall include a statement specifying in reasonable
detail the basis for and computation of the amount of the award, if any.
The parties shall be entitled to conduct discovery in accordance with
the Federal Rules of Civil Procedure, as in effect in the jurisdiction
where the arbitration occurs. Judgement upon the arbitration award may
be entered in any court having jurisdiction.
<PAGE> 5
June 25, 1999
Page 5
Please confirm that the foregoing is in accordance with the Company's
understanding by signing and returning to EGS the enclosed duplicate of
this Agreement.
Sincerely,
EGS SECURITIES CORP.
By: /s/ William D. Lautman
--------------------------
William D. Lautman
Managing Director
Accepted and agreed to as of
the date first written above,
SABRATEK CORPORATION
By: /s/ John Reilly
-----------------------------------
Title: CFO
--------------------------------
Attachment
<PAGE> 6
ANNEX A
INDEMNIFICATION
In addition to the fees and expenses which the Company has agreed to pay for the
services to be performed pursuant to the letter agreement of even date herewith
(the "Agreement"), the Company agrees: (i) to indemnify and hold EGS (which term
for the purposes of this letter includes its directors, controlling persons [as
such term is defined under the Securities Act of 1933], the officers, employees
and agents) harmless against and from all losses, claims, damages or
liabilities, joint or several (and all actions, claims, proceeds and
investigations in respect thereof), to which EGS may become subject in
connection with its performance of the services described in the attached letter
agreement under any of the Federal securities laws, under any other statute, at
common law or otherwise; (ii) that EGS will not be culpable for and will have no
liability to the Company for or with respect to any and all losses, claims,
damages or liabilities, joint or several, of the Company incurred in connection
with EGS' performance of the services described in the Agreement; and (iii) in
each case to reimburse EGS for all reasonable legal and other out-of-pocket
expenses (including the cost of investigation and preparation) as and when
incurred by EGS arising out of or in connection with any action, claim,
proceeding or investigation (whether initiated or conducted by the Company or
any other party) in connection therewith, whether or not resulting in any
liability (and whether or not EGS is defendant in, or target of, any such
action, claim, proceeding or investigation); provided, however, that the Company
shall not be liable to EGS pursuant to clauses (i) and (iii) above and the
Company's exculpation of EGS pursuant to clause (ii) above shall not apply in
any such case to the extent that any such loss, claim, damage or liability is
found in a final judgment by a court of competent jurisdiction to have resulted
from EGS gross negligence, bad faith, or willful misconduct or the gross
negligence, bad faith, or willful misconduct of any other indemnified person
hereunder, and amounts paid and reimbursement of expenses under (iii) above
shall be refunded. If for any reason the foregoing indemnification (including
reimbursement pursuant to clause (iii) above) or the exculpation is unavailable
to EGS or insufficient to hold it harmless (other than by reason of the proviso
to the preceding sentence), then the Company shall contribute to the amount paid
or payable by EGS as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Company on the one hand and EGS on the other hand but also the relative
fault of the Company and EGS as well as any relevant equitable considerations,
provided that, in no event, will EGS' aggregate contribution hereunder exceed
the amount of fees actually received by EGS pursuant to the Agreement. The
indemnity, exculpation, reimbursement and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall survive any termination of the Agreement and
shall be binding upon and extend to the benefit of any successors, assigns,
heirs and personal representatives of the Company and EGS.
If any action, claim proceeding or investigation is instituted or threatened
against EGS in respect of which indemnity may be sought against the Company
hereunder, EGS shall promptly notify the Company thereof in writing, but the
omission to notify the Company shall relieve the Company from any other
obligation of liability that the Company may have to EGS under this letter or
otherwise, only to the extent that such delay in
<PAGE> 7
notification materially prejudices the Company's defenses of such claim or
action. The Company shall assume the defense of such action, including the
employment of counsel and the payment of reasonable expenses. EGS shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of EGS unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action or the Company shall not have employed counsel to
have charge of the defense of such action or in the opinion of counsel to EGS
that there may be defenses available to it which are unique or separate to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of EGS), in any of which events such
fees and expenses shall be borne by the Company; provided, that the Company
shall only be responsible for the fees and expenses of one counsel in each
jurisdiction. The Company will not be liable hereunder for any settlement
thereof by EGS without the Company's written consent, which will not be
unreasonably withheld. The Company shall not, without the prior written consent
of EGS settle or compromise any claim, or permit a default or consent to the
entry of any judgment in respect thereof, unless such settlement, compromise or
consent includes the giving by the claimant to EGS of an unconditional and
irrevocable release from all liability in respect of such claim.
<PAGE> 8
MEMORANDUM
To: John P. Reilly
From: William D. Lautman
Date: July 5, 1999
Subject: SRS Advisory Fees
- --------------------------------------------------------------------------------
This memorandum serves to confirm the determination, by mutual
agreement per the terms of my memorandum to you dated March 2, 1999, that EGS
will receive 3,500 shares of common stock of Sabratek for services rendered in
connection with the SRS Transaction (as defined in the memorandum). The terms of
issuance, registration and sale of such stock will follow the terms outlined in
the aforementioned memorandum.
Please confirm your understanding and acceptance of our agreement by
signing below and faxing a copy of this memorandum to me.
/s/ John P. Reilly
------------------------------
John P. Reilly
Chief Financial Officer
Sabratek Corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors
Sabratek Corporation:
We consent to incorporation by reference in the registration statement
on Form S-3 of Sabratek Corporation of our report dated March 12, 1999, relating
to the consolidated balance sheets of Sabratek Corporation as of December 31,
1998 and 1997 and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1998, which report appears in the December
31, 1998 Annual Report on Form 10-K of Sabratek Corporation and to the reference
to our firm under the heading "Experts" in the Registration Statement.
KPMG LLP
/s/ KPMG LLP
Chicago, Illinois
July 15, 1999
