<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) June 1, 1999
----------------------
SABRATEK CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-11831 36-3700639
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
8111 North St. Louis, Skokie, Illinois 60076
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(847) 720-2400
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS.
(a) On June 1, 1999, Sabratek Corporation, a Delaware corporation
("Sabratek") consummated a transaction with Ralin Medical, Inc. ("Ralin")
pursuant to a Stock Purchase Agreement ("Purchase Agreement"), dated as of May
19, 1999. Pursuant to the Purchase Agreement, Sabratek has purchased all of the
issued and outstanding shares of capital stock of LifeWatch, Inc. ("LifeWatch"),
a wholly-owned subsidiary of Ralin. 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 the Purchase Agreement, Sabratek paid Ralin
$12,260,000 in cash from its existing cash reserves and 900,000 shares of
Sabratek common stock (the "Shares") in exchange for all of the outstanding
shares of LifeWatch. The aggregate purchase price, however, is subject to
adjustment depending on the proceeds received by Ralin from its sale of the
Shares. Pursuant to an accompanying registration rights agreement, Sabratek is
required to file a registration statement registering Ralin's resale of the
Shares. The Shares are held of record by U.S. Bank Trust National Association as
Escrow Agent under the terms of two separate escrow agreements. Ralin, however,
has the exclusive right to direct the sale of, and to vote, the shares of common
stock. The timing and manner of Ralin's sale of the shares is limited by the
Registration Rights Agreement, but such amounts shall be adjusted for taxes.
In addition, under the terms of the Registration Rights Agreement, the
aggregate purchase price will be adjusted as follows in the event that Ralin
receives more than $19 million in aggregate proceeds from sale of the Shares,
Ralin must pay Sabratek the difference between $19 million and the aggregate
sale proceeds it receives. Alternatively, in the event that Ralin receives less
than $16 million in aggregate proceeds from sale of the Shares, Sabratek must
pay Ralin the difference between $16 million and the aggregate sales proceeds
received by Ralin. Additionally, in the event that Ralin does not sell all of
the Shares within thirteen months of the effective date of the registration
statement registering and resale of the Shares, such unsold shares will be
valued, for purposes of computing the adjustments described in this paragraph,
at the average of the per share closing prices for Sabratek stock over a period
of twenty days prior to and including the thirteenth month anniversary date of
the effective date of the registration statement. Any payment required to be
made pursuant to an adjustment of the purchase price must be made within five
(5) days of a determination of the amount of such adjustment.
Sabratek engaged Warburg Dillon Reed to provide Sabratek with an
analysis of the terms of the transaction and as a result of its engagement,
Warburg Dillon Reed delivered a fairness opinion to Sabratek. L. Peter Smith, a
director of Sabratek, is also Chief Executive Officer and a director of Ralin.
In accordance with the Delaware General Corporate Law, Mr. Smith abstained from
participating in, or voting on, Sabratek's acquisition of LifeWatch from Ralin.
(b) As part of its acquisition of LifeWatch, Sabratek will acquire from
Ralin (i) office space subject to existing leases, (ii) furniture,
- 2 -
<PAGE> 3
(iii) fixtures, (iv) equipment and (v) rights to intellectual property
(together, the "Property"). The Property was used by Ralin, through LifeWatch,
for the purposes of providing monitoring and diagnostic services to patients and
health care providers located at alternate sites. Sabratek intends to use the
Property for the same purposes and in the same manner as it was used by
LifeWatch prior to this acquisition.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
It is impracticable to provide the required financial
statements of LifeWatch at this time. The required financial statements will be
filed as an amendment to this report on Form 8-K as soon as they are prepared
and not later than sixty days after the deadline for filing this current report.
(b) Pro forma Financial Information.
It is impracticable to provide the required pro forma
financial statements at this time. The required pro forma financial statements
will be filed as an amendment to this report on Form 8-K as soon as they are
prepared and not later than sixty days after the deadline for filing this
current report.
(c) EXHIBITS PAGE NUMBER
4.3 Registration Rights Agreement, .............. E1
dated as of June 1, 1999, by and
between Sabratek Corporation and
Ralin Medical.
10.50 Stock Purchase Agreement, dated ............. E2
as of May 19, 1999, by and
between Sabratek Corporation and
Ralin Medical, Inc. (Sabratek
hereby agrees to furnish
supplementally to the Securities
and Exchange Commission upon
request a copy of any omitted
schedule or exhibit, all of
which are listed in the table of
contents to the Stock Purchase
Agreement.)
- 3 -
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 16, 1999 By: /s/ Stephen L. Holden
------------- -----------------------------------------
Stephen L. Holden, President
- 4 -
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
by and between
SABRATEK CORPORATION
and
RALIN MEDICAL, INC.
Dated as of June 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Definitions......................................................1
2. Demand Registrations.............................................3
3. Registration Procedures..........................................4
4. Holdback Arrangements............................................7
5. Registration Expenses............................................8
6. Indemnification..................................................8
7. Resale and Other Restrictions...................................11
8. True-Up Payment.................................................12
9. Miscellaneous...................................................13
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
as of June 1, 1999, by and between Sabratek Corporation, a Delaware corporation
(the "Company") and Ralin Medical, Inc., a Delaware corporation (the
"Stockholder").
The Company has no intention to and shall have no obligation
to repurchase any Registrable Securities issued to the Stockholder pursuant to
the Purchase Agreement.
The parties hereto agree as follows:
1. Definitions. The following terms as used herein shall have the
following meanings:
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the Federal government then
administering the Securities Act or the Exchange Act.
"Common Stock" means the Common Stock, par value $0.01 per
share, of the Company and the related preferred stock purchase rights,
as appropriate.
"Company" shall have the meaning specified in the introductory
paragraph of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute then in effect, and any
reference to a particular section thereof shall include a reference to
the comparable section, if any, of any such similar Federal statute,
and the rules and regulations thereunder.
"Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a
government or political subdivision or any agency or instrumentality
thereof.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any of the Registrable
Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such
prospectus.
"Purchase Agreement" means the Stock Purchase Agreement, dated
as of May 19, 1999, by and between the Company and the Stockholder.
1
<PAGE> 4
"Registrable Securities" means (i) the Common Stock owned by
the Stockholder and which was issued pursuant to the Purchase
Agreement, (ii) any shares of Common Stock of the Company issued
pursuant to clause (iii) hereafter and (iii) any shares of Common Stock
issued or issuable in respect of the securities described in clauses
(i) and (ii) by reason of a stock split, stock dividend or other
recapitalization of the Company. For the purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities when (i)
a registration statement covering such Registrable Securities has been
declared effective and they have been disposed of pursuant to such
effective registration statement, (ii) they are distributed to the
public pursuant to Rule 144 (or any similar provision then in force) or
(iii) they have been otherwise sold or transferred by the Stockholder.
"Registration Statement" means any registration statement
filed by the Company under the Securities Act that covers any of the
Registrable Securities, including the Prospectus, any amendments and
supplements to such Registration Statement, including post-effective
amendments and all exhibits and all material incorporated by reference
in such registration statement.
"Rule 144" means Rule 144 under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute then in effect, and any reference to a
particular section thereof shall include a reference to a comparable
section, if any, of any such similar Federal statute, and the rules and
regulations thereunder.
"Shelf Registration Statement" shall have the meaning
specified in Section 2.01.
"Stockholder" shall have the meaning specified in the
introductory paragraph of this Agreement.
"Total Sales Proceeds" means an amount equal to the sum of (i)
the aggregate sale proceeds of all Registrable Securities sold by the
Stockholder on or prior to the 13 month anniversary of the effective date of the
Shelf Registration Statement (such sales proceeds shall not be reduced by any
brokers fees and other sale costs incurred by the Stockholder) and (ii) the
number of Registrable Securities which have not been sold by the Stockholder on
or prior to the 13 month anniversary of the effective date of the Shelf
Registration Statement multiplied by the average of the per share closing prices
of a share of Common Stock on the NASDAQ Stock Market (NNM), as reported in The
Wall Street Journal Midwest edition (or the other principal trading market for
the Common Stock if the Common Stock is not then traded on the NASDAQ Stock
Market/NNM) during the 20 trading day period ending on and including the 13
month anniversary of the effective date of the Shelf Registration Statement (or
if such day is not a trading day, the trading day first preceding such day);
provided that if Total Sales Proceeds as calculated without giving effect to
this clause exceeds $19 million, then Total Sales Proceeds shall equal (x) Total
Sales Proceeds as calculated without giving effect to this clause (the
2
<PAGE> 5
"Pre-Adjustment Total Sales Proceeds") minus (y) an amount equal to the excess
of Pre-Adjustment Total Sales Proceeds over $19 million multiplied by 0.62 (that
is, 1.00 less an assumed tax rate of .38).
2. Demand Registrations.
2.01 Demand Registration. The Company shall file as promptly as
practicable (but in any event within 15 days after the date of this Agreement)
and use its reasonable best efforts to have declared effective a shelf
registration statement pursuant to Rule 415 (or any successor rule thereto)
under the Securities Act (the "Shelf Registration Statement") for a delayed or
continuous public offering of the Registrable Securities, subject to the
provisions of Section 2.02 and the other terms and conditions of this Agreement.
Such registration statement shall be on Form S-3 (or any successor form to Form
S-3) or another appropriate form permitting registration of such Registrable
Securities for resale by the Stockholder on a delayed or continuous basis as
contemplated by this Section. In the event the registration of a delayed or
continuous offering is not permitted under the Securities Act, the Company will
provide comparable alternative registration rights under the Securities Act to
the Stockholder.
2.02 Limitations on Shelf Registrations. The Shelf Registration
rights granted to the Stockholder pursuant to Section 2.01 are subject to the
following limitations:
(a) the Company shall not be obligated under Section 2.01 to
file more than one Shelf Registration Statement, provided that a Shelf
Registration Statement which does not become or remain effective for the period
specified in Section 3.01(a) shall not be deemed to constitute a Shelf
Registration Statement filed pursuant to Section 2.01 (unless such Shelf
Registration Statement has not become effective or does not remain effective due
solely to the fault of the Stockholder);
(b) the Company shall be entitled to postpone for a reasonable
time, not exceeding 20 days, the filing of the Shelf Registration Statement or
its efforts to cause the Shelf Registration Statement to become effective if at
the time the right to delay is exercised the Company shall determine in good
faith that such offering would interfere with any acquisition, financing or
other transaction which the Company is actively pursuing and is material to the
Company or would involve initial or continuing disclosure obligations that would
not be in the best interests of the Company;
(c) the Company by notice to the Stockholder may postpone all
sales under the Shelf Registration Statement for a reasonable time, not
exceeding 30 days, if the Company shall determine in good faith that permitting
such sales would interfere in any material respect with any material
acquisition, financing or other transaction which the Company is actively
pursuing or require premature disclosure (if the Company is so advised by its
legal counsel) of any other material corporate development or event, which
disclosure would adversely affect the interests of the Company in any material
respect; provided that (x) the Company may not implement more than three such
postponements, (y) all postponements under this paragraph shall not exceed 60
days and (z) the Company shall not be entitled to institute any such
postponement after the twelve
3
<PAGE> 6
month anniversary of the effective date of the Shelf Registration Statement, but
the Stockholder shall sell if and to the extent possible all Registrable
Securities after such 12 month anniversary pursuant to Rule 144 under the
Securities Act and not under the Shelf Registration Statement; and
(d) all sales by the Stockholder of Registrable Securities
shall be subject to the resale restrictions set forth in Section 7.
2.03 Facilitation of Sale of Registrable Securities. The Company
shall use its reasonable best efforts to facilitate (as explained below) upon
the written request of the Stockholder the private sale by the Stockholder of
the Registrable Securities to a third party in both of the following
circumstances: (i) the Shelf Registration Statement has not been declared
effective within 75 days after the date of this Agreement; provided that the
Company shall be entitled to suspend such efforts if and when the Shelf
Registration Statement is thereafter declared effective; and (ii) if the
Stockholder has not sold all Registrable Securities on or prior to the thirteen
month anniversary of the effective date of the Shelf Registration Statement;
provided that this requirement that Sabratek use its reasonable best efforts to
facilitate any such sale after such 13 month anniversary shall continue only
until the 18 month anniversary of the effective date of the Shelf Registration
Statement. The Stockholder acknowledges and agrees that the reasonable best
efforts to facilitate obligations of the Company under this Section will be
satisfied by the chief executive officer or the president of the Company giving
a "road show" type presentation about the Company to prospective buyers
identified by the Stockholder, that the Company shall not be required by this
Section to disclose any material inside information in any such presentation
and that the obligations of the Company under this Section do not require among
other things the Company to made representations and warranties to any buyer of
Registrable Securities. The Company and the Stockholder shall cooperate in good
faith to schedule the time and place for any above described and requested
"road show" presentation.
3. Registration Procedures.
3.01 Preparation and Filing. The Company will:
(a) prepare and file with the Commission a Shelf Registration
Statement with respect to the Registrable Securities and use its reasonable best
efforts to cause the Shelf Registration Statement to become and remain effective
until the earlier of (i) the date on which all Registrable Securities have
ceased to be Registrable Securities and (ii) the thirteen month anniversary of
the effective date of the Shelf Registration Statement (such thirteen month
anniversary, the "Shelf Expiration Date");
(b) otherwise use its reasonable best efforts to comply in all
material respects with all applicable rules and regulations of the Commission;
(c) use its reasonable best efforts to cause all the
Registrable Securities to be
4
<PAGE> 7
listed on the NSM, if the Registrable Securities are not so already listed, or
such other market as mutually agreed upon [by the Company and the Stockholder in
writing];
(d) take such actions as the Stockholder shall reasonably
request in order to expedite or facilitate the disposition of the Registrable
Securities, subject to the terms and conditions of this Agreement; provided that
Sabratek shall not be obligated pursuant to this subsection or any other
provision of this Agreement to participate in or assist with a "road show" or
other special selling efforts with respect to the sale of any Registrable
Securities;
(e) permit the Stockholder to participate in the preparation
of the Shelf Registration Statement and to require the insertion therein of
material furnished to the Company in writing which in the judgment of the
Stockholder should be included and which is reasonably acceptable to the
Company;
(f) use such reasonable efforts to prevent the issuance of any
stop order suspending the effectiveness of the Shelf Registration Statement or
of any order preventing or suspending the use of any preliminary prospectus and,
if any such order is issued, to obtain the lifting thereof at the earliest
reasonable time;
(g) not at any time file or make any amendment to the Shelf
Registration Statement, or any amendment of or supplement to the Prospectus
(excluding the documents incorporated by reference into the Prospectus), of
which the Stockholder shall not have previously been advised or furnished a copy
or to which the Stockholder, or counsel for the Stockholder, shall reasonably
object;
(h) furnish to the Stockholder without charge as many signed
copies of the Shelf Registration Statement (as originally filed) and of all
amendments thereto, whether filed before or after the Shelf Registration
Statement becomes effective, copies of all exhibits and documents filed
therewith, including documents incorporated by reference into the Prospectus,
and signed copies of all consents and certificates of experts, as the
Stockholder may reasonably request;
(i) The Company will deliver to the Stockholder, without
charge, from time to time during the period when the Prospectus is required to
be delivered under the Securities Act, such number of copies of the Prospectus
(as supplemented or amended) as the Stockholder may reasonably request; and
(j) comply in all material respects to the best of its ability
with the Securities Act and the rules and regulations of the Commission
thereunder, and the Exchange Act and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the
Registrable Securities in accordance with the intended method or methods of
distribution contemplated in the Prospectus and permitted by this Agreement. If
at any time when a prospectus is required by the Securities Act to be delivered
in connection with sales of the Registrable Securities any event shall occur or
condition exist as a result of which it is necessary or desirable, based on the
advice of counsel for the Stockholder or agents or counsel for the
5
<PAGE> 8
Company, to amend the Shelf Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, or if it shall be necessary or
desirable, based on the advice of such counsel, at any such time to amend the
Shelf Registration Statement or amend or supplement such Prospectus of the
Company, the Company will promptly prepare and file with the Commission such
amendment or supplement as may be necessary to correct such untrue statement or
omission or to make the Shelf Registration Statement or the Prospectus comply
with such requirements.
3.02 Amendments. In connection with the Shelf Registration
Statement filed pursuant to this Agreement, the Company shall file any
post-effective amendment or amendments to the Shelf Registration Statement
which may be required under the Securities Act during the period required to
effect the distribution contemplated thereby; provided that the Company shall
not be required to file any post-effective amendment to the Shelf Registration
Statement after the first anniversary of the date of this Agreement.
3.03 Notification of Certain Events.
(a) During the period for which the Company is required to
file and keep effective the Shelf Registration Statement pursuant to this
Agreement, the Company shall promptly notify the Stockholder during the period
the Shelf Registration Statement is required to remain effective, or at any time
when a Prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event or the existence of any fact, as a
result of which the Shelf Registration Statement or such Prospectus contained in
the Shelf Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of circumstances then existing. The Stockholder agrees, upon receipt of
such notice, forthwith to cease making offers and sales of such securities
pursuant to the Shelf Registration Statement or deliveries of the Prospectus
contained therein for any purpose and to return to the Company the copies of
such Prospectus not theretofore delivered by the Stockholder. Subject to Section
3.02, the Company shall prepare and furnish to the Stockholder a reasonable
number of copies of any supplement to or amendment of such Prospectus that may
be necessary so that, as thereafter delivered to the purchaser of the
Registrable Securities, such Prospectus shall not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make these statement therein not misleading in the light
of circumstances then existing.
(b) The Company will promptly notify the Stockholder and
confirm the notice in writing, (i) when the Shelf Registration Statement, or any
post-effective amendment to the Shelf Registration Statement, shall have become
effective, or any supplement to the Prospectus or any amended Prospectus shall
have been filed, (ii) of any request by the Commission to amend the Shelf
Registration Statement or amend or supplement the Prospectus or for additional
information and (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or of any order
preventing or suspending the use of any preliminary
6
<PAGE> 9
prospectus, or of the suspension of the qualification of the Registrable
Securities for offering or sale in any jurisdiction, or of the institution or
threatening of any proceedings for any of such purposes.
3.04 Provision of Information. As a condition to the obligation of
the Company under Section 2 to cause the Shelf Registration Statement or an
amendment to be filed or shares to be included in the Shelf Registration
Statement, the Stockholder shall provide such information and execute such
documents, powers of attorney and questionnaires as may reasonably be required
by the Company in connection with such registration.
3.05 Reports. The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the rules and
regulations of the Commission thereunder and it will take such further action as
the Stockholder may reasonably request, all to the extent required from time to
time to enable the Stockholder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
3.06 State Securities Laws. In connection with the offering of any
securities registered pursuant to this Agreement, the Company shall use its
reasonable best efforts to qualify or register the securities to be sold under
the securities or "blue sky" laws of such jurisdictions as may be reasonably
requested by the Stockholder or any other acts and things which may be necessary
or advisable to enable the Stockholder to consummate the disposition in such
jurisdiction of such securities; provided, however, that the Company shall not
be obligated to qualify as a foreign corporation to do business under the laws
of any such jurisdiction in which it is not then qualified or to file any
general consent to service of process.
4. Holdback Arrangements.
The Company shall have the right to require that the Stockholder shall
not effect any public sale or distribution (including sales pursuant to the
Shelf Registration Statement or pursuant to Rule 144) of Common Stock during the
ten business days prior to, and the 20-day period beginning on, the effective
date of the registration under the Securities Act of any underwritten offering
of Common Stock for cash by the Company (or such an offering by the Company and
stockholders of the Company), if the managing underwriter(s) for the public
offering so request. The Company shall be entitled to exercise its rights under
this Section not more than twice during any calendar year.
5. Registration Expenses.
(a) The Company will pay and bear all costs and expenses
incident to the performance of its obligations under this Agreement with respect
to the registration pursuant to Section 2, including:
(i) the preparation, printing and filing of the Shelf
Registration Statement (including financial statements and exhibits) as
originally filed and as amended, any preliminary prospectuses and the
Prospectus and any amendments or supplements
7
<PAGE> 10
thereto, and the cost or furnishing copies thereof to the Stockholder;
(ii) the preparation and printing of certificates
representing the Registrable Securities, any blue sky survey and other
documents relating to the performance of and compliance by the Company
with this Agreement;
(iii) all fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities
exchange or other trading market, if the Registrable Securities are not
already so registered.
(b) The Stockholder will pay and bear all costs and expenses
incident to the delivery of the Registrable Securities to be sold by it,
including any stock transfer taxes payable upon the sale of such Registrable
Securities and any underwriter discounts or commissions, broker or dealer fees
or costs and any similar costs and expenses in connection therewith. The
Stockholder will also bear the costs and expenses of its own counsel and other
agents retained in connection with the Shelf Registration Statement, except that
the Company shall pay for the reasonable and documented costs and expenses
incurred by legal counsel to the Stockholder in connection with the Shelf
Registration Statement in an amount not to exceed $10,000.
6. Indemnification.
6.01 Indemnification by the Company. In connection with any
registration of securities pursuant to this Agreement, to the extent permitted
by law, the Company shall indemnify and hold harmless the Stockholder and each
officer, director and agent of the Stockholder and each Person, if any, who
controls the Stockholder (within the meaning of the Securities Act or the
Exchange Act) (such holder and any such other Person being hereinafter an
"Indemnitee") (i) against any and all losses, claims, damages and expenses
whatsoever to which such Indemnitee may become subject, to the extent such
losses, claims, damages or expenses (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Shelf Registration Statement, Prospectus or any
amendment or supplement to any of the foregoing, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; (ii) against
any and all losses, claims, damages and expenses whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such settlement
is effected with the written consent of the Company; and (iii) against any and
all expense whatsoever (including reasonable fees and disbursements of counsel
chosen by the Stockholder), as reasonably incurred in investigating, preparing
for or defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid under
subparagraph
8
<PAGE> 11
(i) or (ii) above; provided, however, that the Company shall not be required to
indemnify and hold harmless or reimburse an Indemnitee to the extent that any
such loss, claim, damage or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission in any
document made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Indemnitee expressly for use in
the preparation of such documents; provided further that the Company shall not
be required to indemnify any Indemnitees, to the extent that the loss, claim,
damage, liability (or actions in respect thereof) or expense for which
indemnification is claimed results from the failure by such Indemnitee to send
or give a copy of the then current Prospectus (if theretofore made available to
the Stockholder) or a prospectus supplement to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission if such
statement or omission was corrected in the then current Prospectus or in the
prospectus supplement; provided further that the Company shall not be required
to indemnify any Indemnitees to the extent that the loss, claim, damage,
liability (or actions in respect thereof) or expense for which indemnification
is claimed arises with respect to a sale or transfer of Common Stock made during
a period during which the sale or transfer thereof is not permitted under this
Agreement.
6.02 Indemnification by the Stockholder. In connection with the
Shelf Registration Statement, the Stockholder will furnish to the Company in
writing such information as shall be reasonably requested by the Company for
use in any the Shelf Registration Statement or prospectus and shall, to the
extent permitted by law, indemnify and hold harmless the Company, its
directors, officers and agents and each Person, if any, who controls the
Company (within the meaning of the Securities Act or the Exchange Act) (the
Company and any such other Person being hereinafter a "Company Indemnitee")
against all losses, claims, damages or liabilities to which any such Company
Indemnitee may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Shelf Registration Statement,
prospectus or any preliminary prospectus or any amendment or supplement to any
of the foregoing, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, in each case, to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Stockholder expressly for use in the
preparation of such documents; and, subject to Section 6.03, the Stockholder
shall reimburse the Company Indemnitee for any and all expenses whatsoever
(including reasonable fees and disbursements of counsel chosen by the Company),
reasonably incurred by the Company Indemnitee in connection with investigating,
preparing for or defending against any such loss, claim, damage, liability or
action; provided, however, that the maximum amount of liability of the
Stockholder under this Section shall be limited to an amount equal to the net
proceeds actually received by the Stockholder from the sale of securities
effected pursuant to such registration.
6.03 Indemnification Procedures. Promptly after receipt by an
indemnified party under Section 6.01 or Section 6.02 of notice of the
commencement of any action, suit, proceeding or
9
<PAGE> 12
investigation or threat thereof made in writing for which such Person will claim
indemnification or contribution pursuant to this Agreement, the indemnified
party shall notify the indemnifying party thereof in writing and, unless in such
indemnified party's reasonable judgment a conflict of interest may exist between
such indemnified and indemnifying parties with respect to such claim, shall
permit such indemnifying party to assume and control the defense of such claim
at its expense with counsel reasonably satisfactory to such indemnified party.
The failure to so notify the indemnifying party shall relieve the indemnifying
party from any liability hereunder with respect to the action if such failure
prevents the indemnifying party from contesting such action; provided, however
that any such failure shall not relieve the indemnifying party from any other
liability which it may have to any other party. If the indemnifying party gives
notice to such indemnified party of its election to assume and control the
defense of such claim, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense or investigation of the action
unless the indemnified party shall have given the indemnifying party notice of a
conflict of interest with respect to such claim. The failure of an indemnifying
party to give notice to the indemnified party of its election to assume and
control the defense of any action for which notice has been received by the
indemnifying party in accordance with this Section within 45 days after the
receipt of such notice shall constitute an election by the indemnifying party
not to assume and control the defense of such action. An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other indemnified party with respect to
such claim, in which event the indemnifying party shall be obligated to pay the
fees and expenses of separate counsel for such indemnified parties. No
indemnified party shall consent to entry of any judgment or enter into any
settlement with respect to a claim without the consent of the indemnifying
party.
6.04 Rights of Contribution. In order to provide for just and
equitable contribution in circumstances under with the indemnity contemplated
by Section 6.01 and Section 6.02 is for any reason not available, other than by
reason of the exceptions provided therein, the parties required to indemnify by
the terms thereof shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the Stockholder, except to the extent
that contribution is not permitted under Section 11(f) of the Securities Act.
In determining the amounts which the respective parties shall contribute, there
shall be considered the relative benefits received by each party from the
offering of the Registrable Securities (taking into account the portion of the
proceeds of the offering realized by each), the relative knowledge of the
parties and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any statement or
omission and any other equitable considerations appropriate under the
circumstances. The Company and the Stockholder agree with each other that the
Stockholder shall not be required to contribute any amount in excess of the
amount the Stockholder would have been required to pay to an indemnified party
if the indemnity under Section 6.02 were available. For purposes of this
Section, each director and each officer of the Company who signed the Shelf
Registration Statement, and each Person, if any, who controls the Company or
the Stockholder within the meaning of Section 15 of the Securities Act shall
have the same rights to contribution as the Company or the Stockholder, as the
case may be.
10
<PAGE> 13
7. Resale and Other Restrictions. The Stockholder may not sell or
otherwise transfer any Registrable Securities except as expressly provided in
this Agreement, unless otherwise agreed in writing by the Company. The
Stockholder may sell Registrable Securities on the NASDAQ National Market (or
such other principal trading market of the Company if the Common Stock is not
listed on the NASDAQ National Market) pursuant to the Shelf Registration
Statement, except as otherwise expressly provided in this Agreement. In
addition, all sales by the Stockholder shall be made through a market maker or
broker mutually agreed upon by the Company and the Stockholder. In addition, the
right of the Stockholder to sell Registrable Securities pursuant to the Shelf
Registration Statement shall be subject to the limitations set forth in both
clauses (i) and (ii) as follows: (i) the Stockholder may not sell or otherwise
transfer more than 100,000 shares of Common Stock during the first 45 days
following the effective date of the Shelf Registration Statement; and (ii) the
Stockholder may not sell or otherwise transfer (x) more than 20,000 shares of
Common Stock per trading day, (y) more than 60,000 shares of Common Stock per
calendar week or (z) more than 180,000 shares of Common Stock in any calender
month; provided that if the closing share price for the Common Stock on the
principal trading market for the Common Stock is at least $22.00 on any trading
day, such weekly and calender month volume limitations shall not be applicable
to the next following trading day (an "Open Trading Day"); provided further that
the Stockholder shall not sell in excess of 15,000 shares of Common Stock on any
Open Trading Day. The restrictions on sales and transfers set forth in this
Section shall terminate and lapse on the twelve month anniversary of the
effective date of the Shelf Registration Statement, except that all sales and
transfers by the Stockholder shall be made through a market maker or broker
mutually agreed upon by the Company and the Stockholder. The Stockholder
(including its subsidiaries) shall not engage in any derivative transaction in
or relating to the Common Stock (including any short selling) while the
Stockholder owns any Registrable Securites.
8. True-Up Payment.
8.01 Determination of True-Up Payment. Promptly following the 13
month anniversary of the effective date of the Shelf Registration Statement
(but in any event within 10 days of such anniversary), the Stockholder shall
deliver to the Company a detailed computation (the "Payment Computation") of
the Total Sales Proceeds. The Stockholder will (i) make available to the
Company and its agents, attorneys and accountants upon reasonable advance
notice all records and work papers (including trading records) necessary to
understand the Payment Computation and to calculate the Total Sales Proceeds
and (ii) allow the Company and its agents, attorneys and accountants upon
reasonable advance notice to interview any Stockholder personnel significantly
involved in the preparation of the Payment Computation. If the Company
disagrees with the computation of the Total Sales Proceeds contained in the
Payment Computation, the Company may, within 10 days after receipt of the
Payment Computation, deliver a notice (the "Objection Notice") to the
Stockholder setting forth the objections of the Company and, to the extent
reasonably possible, the Total Sales Proceeds as determined by the Company. The
Stockholder and the Company will use reasonable efforts to resolve any
disagreements as to the computation of the Total Sales Proceeds, but if they do
not obtain a final resolution within 10 days after the
11
<PAGE> 14
Stockholder has received the Objection Notice, the Stockholder and the Company
shall submit such dispute to arbitration pursuant to Section 9.06 to resolve any
remaining disagreements. The Stockholder and the Company will direct the
arbitrator to render a determination within 30 days of its retention and the
Stockholder and the Company and their respective agents will cooperate with the
arbitrator during its engagement. The chosen arbitrator will consider only those
issues related to the determination of the Total Sales Proceeds set forth in the
Objection Notice which the Stockholder and the Company have been unable to
resolve. The determination of the arbitrator will be conclusive and binding upon
the Stockholder and the Company.
8.02 Payment of True-Up/True-Down. If the Total Sales Proceeds is
less than $16 million, the Company shall pay to the Stockholder within 5
business days of the final determination of the Total Sales Proceeds the amount
of such shortfall, which shall be payable in cash by wire transfer or delivery
of other immediately available funds. If the Total Sales Proceeds exceeds $19
million, the Stockholder shall pay to the Company within 5 business days of the
final determination of the Total Sales Proceeds the amount of such excess,
which shall be payable in cash by wire transfer or delivery of other
immediately available funds; provided that the obligation of the Stockholder to
make such payment may be satisfied by a payment out of an escrow established
for such purpose by the Company and the Stockholder pursuant to the Purchase
Agreement, and the Company and the Stockholder intend that any obligation of
the Stockholder to make a payment required by this Section shall to the extent
possible be made from such escrow. No interest shall be paid with respect to
any amount due and timely paid pursuant to this subsection. The right of the
Stockholder and the Company to any payment under this Section shall not be
sold, assigned, pledged, gifted, conveyed, transferred or otherwise disposed of
(a "Transfer") by either the Company or the Stockholder. Any Transfer in
violation of this Section shall be null and void.
9. Miscellaneous.
9.01 Mergers and Other Transactions. The Company agrees that, as a
condition to any merger, consolidation or the sale of all or substantially all
of its assets in exchange for securities of another entity, it will use its
reasonable best efforts in light of the circumstances then existing to require
the surviving, consolidated or purchasing entity to enter into an agreement to
register the securities of such surviving, consolidated or purchasing entity, to
be received by the Stockholder, on substantially the same terms and provisions
as are provided in this Agreement. The Stockholder agrees that, as a condition
to any merger, consolidation or the sale of all or substantially all of its
assets in exchange for securities of another entity, it will use its reasonable
best efforts in light of the circumstances then existing to require the
surviving, consolidated or purchasing entity to enter into an agreement which
obligates such entity to assume all of the obligations of the Stockholder under
this Agreement and in which agreement such entity expressly agrees to be subject
to the terms and conditions of this Agreement with respect to the Registrable
Securities.
12
<PAGE> 15
9.02 Assignment. The registration rights contained in Section 2 of
this Agreement shall not be transferable by any Stockholder. This Agreement is
not assignable other than by operation of law or with the consent of all
parties hereto, and any purported assignment in violation hereof shall be null
and void.
9.03 Limitation of Registration Rights. Nothing contained in this
Agreement shall create any obligation on behalf of the Company to register under
the Securities Act any securities which are not Registrable Securities held by
the Stockholder.
9.04 No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the Stockholder in this Agreement. The Company has
not previously entered into any agreement, with respect to any of its
securities, granting any registration rights to any person, which agreement is
in effect on the date hereof.
9.05 Remedies. The Stockholder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
9.06 Arbitration; Dispute Resolution. To the extent feasible, the
parties desire to resolve any controversies or claims or issues arising out of
or relating to this Agreement through discussions and negotiations between each
other. The parties agree to use their reasonable best efforts to attempt to
resolve any disputes, controversies, claims or issues arising out of or relating
to this Agreement by face-to-face negotiations with each other. In the event
that, after discussions, such controversies, claims or issues cannot be resolved
solely between the parties, then the parties shall, within 10 days after either
the Company or the Stockholder gives notice to the other, jointly submit their
dispute to binding arbitration in the City of Chicago, Illinois. Such
arbitration shall be administered by the American Arbitration Association (the
"Institute") in accordance with its then prevailing rules for arbitration of
business disputes (except as otherwise provided by this Agreement), by three
independent and impartial arbitrators, one of whom shall be appointed by the
Company, one of whom shall be appointed by the Stockholder and one of whom shall
be appointed by the Institute (collectively, the "Arbitrator"). Notwithstanding
anything to the contrary provided in Section 9.10 of this Agreement, the
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.ss.
1 et. seq. The Arbitrator shall permit and facilitate such discovery as it shall
determine appropriate in the circumstances, taking into account the needs of the
parties hereto and the desirability of making discovery expeditious and cost
effective. The arbitrator may issue such interim orders in accordance with
principles of equity as may be necessary to protect any party from irreparable
harm during the pendency of any arbitration, including entry of a preliminary
injunction. Any such order shall be without prejudice to the final determination
of the controversy. Each party to this Agreement hereby agrees that such
arbitration shall be completed and a final arbitration decision rendered within
60 days of the submission of the respective dispute to arbitration, except as
otherwise specified in this Agreement, and each of such parties shall take all
actions appropriate and necessary to cause such
13
<PAGE> 16
arbitration to be so completed within such 60 day period. The Arbitrator shall
not be empowered to award any party any punitive damages in connection
therewith, and each party hereby irrevocably waives any right to recover such
punitive damages. The determination of the Arbitrator as to a dispute shall be
final and binding for all purposes of this Agreement. Each party to any such
arbitration shall use its best efforts and utmost diligence to safeguard and to
protect against disclosure, misuse, espionage, loss and theft and shall keep and
maintain in strict confidence and shall not disclose to any third party any
information that may be disclosed to it in connection with such arbitration
proceeding, other than to its employees and agents who require access to such
information to perform their duties and other than is required or appropriate to
disclose pursuant to applicable law (including pursuant to securities laws and
any reporting requirements thereunder) or court order or in any arbitration
contemplated by this Agreement; the arbitrator shall to the extent permitted by
the rules and regulations of the Institute be likewise bound by this
confidentiality provision and shall not make public its opinion or findings in
connection with the relevant proceeding. The fees and expenses of the Arbitrator
shall be equally shared by the parties and each of the Parties shall bear its
own costs and expenses in connection with any such arbitrations.
9.07 Notices. All notices any other communications provided for or
permitted hereunder shall be made by hand delivery or registered first-class
mail:
If to the Company:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attn: Chief Financial Officer
with a copy (which shall not constitute notice) to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Attn: Carter W. Emerson
If to the Stockholder:
1371A Abbott Court
Buffalo Grove, Illinois 60089
Attention: President and Chief Executive Officer
14
<PAGE> 17
with a copy (which shall not constitute notice) to:
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610
Attn: Troy M. Calkins
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered, and 5 business days after
being deposited in the mail, postage prepaid, if mailed.
9.08 Counterparts. This agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same agreement. A facsimile copy of this
Agreement and any signatures hereon shall be considered as originals for all
purposes.
9.09 Headings. Section headings are inserted herein for convenience
only and do not form a part of this Agreement.
9.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without regard
to principles of conflicts of law.
9.11 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the Stockholder shall be enforceable to the fullest extent permitted by law.
9.12 Entire Agreement; Amendment. This agreement contains the
entire agreement among the parties hereto with respect to the transactions
contemplated herein, and supersedes all prior written agreements and
negotiations and oral understandings, if any, with respect to its subject
matter. This Agreement may not be amended, supplemented or discharged except by
an instrument in writing signed by the Company and the Stockholder.
* * * *
15
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
SABRATEK CORPORATION
By:
-----------------------------------
Its:
----------------------------------
RALIN MEDICAL, INC.
By:
-----------------------------------
Its:
----------------------------------
16
<PAGE> 1
STOCK PURCHASE AGREEMENT
BETWEEN
SABRATEK CORPORATION
AND
RALIN MEDICAL, INC.
-----------------
DATED AS OF MAY 19, 1999
-----------------
<PAGE> 2
TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT
<TABLE>
<S> <C> <C>
ARTICLE I. PURCHASE AND SALE......................................................................................1
1.1. Purchase Price; Allocation of Purchase Price....................................................1
1.2. Closing.........................................................................................2
1.3. Cash Reconciliation.............................................................................3
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF RALIN...............................................................5
2.1. Organization, Standing and Qualification of Ralin...............................................5
2.2. Organization, Standing, Qualification and Ownership of LWI......................................5
2.3. Capitalization..................................................................................5
2.4. Subsidiaries....................................................................................6
2.5. Financial Statements............................................................................6
2.6. Insurance.......................................................................................6
2.7. Authorization; Approvals........................................................................6
2.8. No Conflict with Other Instruments and Laws.....................................................7
2.9. Absence of Undisclosed Liabilities; Changes.....................................................7
2.10. Labor Agreement and Actions.....................................................................8
2.11. Compliance with Law and Other Instruments.......................................................9
2.12. Proprietary Rights..............................................................................9
2.13. Taxes..........................................................................................10
2.14. Contracts......................................................................................11
2.15. Litigation.....................................................................................12
2.16. Fees and Commissions...........................................................................12
2.17. ERISA..........................................................................................13
2.18. Title to Properties; Encumbrances..............................................................13
2.19. Environmental Compliance.......................................................................14
2.20. Affiliate Transactions.........................................................................15
2.21. Books and Records..............................................................................15
2.22. Financial Resources............................................................................15
2.23. Accounts Receivable............................................................................15
2.24. Customers......................................................................................15
2.25. Employees......................................................................................16
2.26. Leases.........................................................................................16
2.27. Investment.....................................................................................16
2.28. Sufficiency of Assets..........................................................................16
2.29. Inter-Company Indebtedness.....................................................................16
2.30. Disclosure.....................................................................................17
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SABRATEK..........................................................17
3.1. Organization, Standing and Qualification of Sabratek...........................................17
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C>
3.2. Capitalization.................................................................................17
3.3. Authorization; Approvals.......................................................................17
3.4. No Conflict with Other Instruments and Laws....................................................18
3.5. SEC Reports....................................................................................18
3.6. Undisclosed Liabilities........................................................................19
3.7. Litigation.....................................................................................19
3.8. Fees and Commissions...........................................................................19
3.9. Financial Resources............................................................................19
3.10. Disclosure.....................................................................................19
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................19
4.1. Conduct of Business Prior to the Closing.......................................................19
4.2. LWI Forbearances...............................................................................20
4.3. Compliance with Agreements and Laws............................................................21
4.4. Payment of Obligations.........................................................................21
4.5. Exclusivity....................................................................................21
ARTICLE V. ADDITIONAL AGREEMENTS.................................................................................22
5.1. Regulatory and Other Matters...................................................................22
5.2. Access to Information..........................................................................22
5.3. Additional Agreements..........................................................................22
5.4. Advice of Changes..............................................................................22
5.5. Restrictions on Transfer.......................................................................22
5.6. Pre-Closing Transfer Restrictions..............................................................23
5.7. Transition.....................................................................................23
5.8. Post-Closing Arrangements Concerning Contracts.................................................23
5.9. Non-Compete; Non-Solicitation..................................................................24
5.10. Written Consent................................................................................26
5.11. Settlement of Group Payments...................................................................26
5.12. Certain Tax Matters............................................................................26
5.13. Employee Matters...............................................................................28
5.14. Collection of LWI Accounts Receivable..........................................................29
5.15. Cooperation with Post-Closing Audit............................................................32
ARTICLE VI. CONDITIONS PRECEDENT.................................................................................32
6.1. Conditions to Each Party's Obligation To Effect the Transaction................................32
6.2. Conditions to Obligations of Sabratek..........................................................33
6.3. Conditions to Obligations of Ralin.............................................................34
6.4. Efforts to Close...............................................................................35
ARTICLE VII. TERMINATION AND AMENDMENT...........................................................................35
7.1. Termination....................................................................................35
7.2. Effect of Termination..........................................................................36
7.3. Amendment; Extension; Waiver...................................................................36
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII. INDEMNIFICATION....................................................................................36
8.1. Agreement to Indemnify.........................................................................36
8.2. Procedure for Indemnification..................................................................37
8.3. General Provisions Regarding Indemnification and Remedies......................................38
8.4. Escrow Agreements..............................................................................39
ARTICLE IX. GENERAL PROVISIONS...................................................................................40
9.1. Expenses.......................................................................................40
9.2. Notices........................................................................................41
9.3. Interpretation.................................................................................41
9.4. Counterparts; Facsimile........................................................................42
9.5. Entire Agreement...............................................................................42
9.6. Governing Law..................................................................................42
9.7. Severability...................................................................................42
9.8. Publicity......................................................................................42
9.9. Assignment; Third Party Beneficiaries..........................................................42
9.10. Construction...................................................................................43
9.11. Dispute Resolution.............................................................................43
9.12. Schedules and Exhibits.........................................................................44
EXHIBITS
Exhibit A List of Equipment
Exhibit B List of Assumed Contracts and Assumed Rights
Exhibit C List of Certain LWI Employees and Terms of Options
Exhibit D Form of Transition Services Agreement
Exhibit E List of Transferred Employees
Exhibit F Form of Employment Agreement
Exhibit G Form of Opinion of Ralin's Counsel
Exhibit H Form of Opinion of Sabratek's Counsel
Exhibit I Form of Registration Rights Agreement
Exhibit J-1 Form of Indemnification Escrow Agreement
Exhibit J-2 Form of Excess Share Escrow Agreement
Exhibit K-1 Indemnification Escrow Terms
Exhibit K-2 Excess Share Escrow Terms
SCHEDULES
Schedule 2.2 Organization, Standing, Qualification and Ownership of LWI
Schedule 2.5 Financial Statements
Schedule 2.6 Insurance
Schedule 2.7 Authorization; Approvals
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
SCHEDULES - (CONTINUED)
Schedule 2.8 No Conflicts with Other Instruments and Laws
Schedule 2.9 Absence of Undisclosed Liabilities; Changes
Schedule 2.11 Compliance with Law and Other Instruments
Schedule 2.12 Proprietary Rights
Schedule 2.14 Contracts
Schedule 2.15 Litigation
Schedule 2.17 ERISA
Schedule 2.18 Title to Properties; Encumbrances
Schedule 2.19 Environmental Compliance
Schedule 2.20 Affiliate Transactions
Schedule 2.23 Accounts Receivable
Schedule 2.25 Employees
Schedule 2.26 Leases
Schedule 2.28 Sufficiency of Assets
Schedule 3.3 Authorization; Approvals
Schedule 3.4 No Conflict with Other Instrumental and Laws
</TABLE>
5
<PAGE> 6
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of May 19, 1999 (the "Agreement"),
by and between SABRATEK CORPORATION, a Delaware corporation ("Sabratek"), and
RALIN MEDICAL, INC., a Delaware corporation ("Ralin").
WHEREAS, LifeWatch, Inc., an Illinois corporation ("LWI"), is a
wholly-owned subsidiary of Ralin.
WHEREAS, the Boards of Directors of Sabratek and Ralin have determined
that it is in their respective best interests to consummate the purchase and
sale provided for in this Agreement, in which Sabratek shall purchase from
Ralin, and Ralin shall sell to Sabratek, all of the outstanding capital stock of
LWI (the "Transaction") and as a result, LWI shall become a wholly-owned
subsidiary of Sabratek.
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Transaction and to establish certain
conditions to the Transaction.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, the parties agree
as follows:
ARTICLE I.
PURCHASE AND SALE
1.1. Purchase Price; Allocation of Purchase Price.
(a) Upon the terms and subject to the conditions of this Agreement,
Ralin shall sell to Sabratek, and Sabratek shall purchase from Ralin, 100 shares
of LWI Common Stock (as defined in Section 2.3), which shares of LWI Common
Stock shall constitute all of the issued and outstanding shares of capital stock
of LWI (the "Shares").
(b) The aggregate purchase price (the "Purchase Price") payable for all
of the Shares shall be as follows: (i) $12,260,000 in cash (the "Cash
Consideration"), plus (ii) 900,000 shares of unregistered Sabratek Common Stock
(as defined in Section 3.2), which shares shall be paid into escrow accounts at
the Closing (as defined below) as set forth in Section 1.1(c) below (the "Share
Consideration"). If, prior to the Closing, the outstanding shares of Sabratek
Common Stock shall have been increased, decreased, changed into or exchanged for
a different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar change in capitalization, then an
appropriate and proportionate adjustment shall be made to the Share
Consideration.
(c) Sabratek and Ralin agree to make a timely election under Section
338(h)(10) of the Code (as defined in Section 2.13) in respect to the purchase
and sale of the Shares as provided
<PAGE> 7
in Section 5.12(f) of this Agreement. As a result the parties agree that for
federal and state income tax purposes the transaction will be treated as a sale
of assets by LWI and that any tax attributes of LWI (including but not limited
to any net operating loss carryover) will not be transferred to Sabratek or
survive with LWI, but shall be retained by Ralin. The Purchase Price and the
liabilities of LWI (plus other relevant items) shall be allocated to the assets
of LWI for all purposes (including tax and financial accounting) as shown on a
schedule (the "Allocation Schedule") prepared in accordance with this Section
1.2(c). Within 60 days after the Closing Date, Sabratek shall prepare a draft of
the Allocation Schedule and deliver such draft to Ralin for Ralin's review. The
parties shall work together in good faith to resolve any disagreements regarding
any of the allocations proposed by Sabratek in such draft. If, within 30 days
after the date that Sabratek submits its draft of the Allocation Schedule to
Ralin for Ralin's review, the parties are unable to resolve all disagreements
regarding the allocations reflected thereon, then the disputed items shall be
submitted to a Big 5 accounting firm mutually agreeable to Sabratek and Ralin
for resolution, which firm shall resolve all disputed items within 30 days after
such submission. Such firm's resolution of all disputed items shall be binding
on Ralin and Sabratek, and the fees and expenses of such firm shall be borne
equally by Sabratek and Ralin. Sabratek, Ralin and LWI will file all Tax Returns
(including amended returns and claims for refund) and information reports
(including Form 8023) in a manner consistent with the Allocation Schedule as
finally determined pursuant to this Section 1.2(c).
1.2. Closing.
(a) On the terms and subject to the conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") will
take place at 10:00 a.m., local time, at the offices of Gardner, Carton &
Douglas, 321 North Clark Street, Chicago, Illinois, as soon as practicable but
in any event within three business days after the satisfaction or waiver of the
latest to occur of the conditions set forth in Article VI, unless otherwise
agreed by the parties (the actual date of the Closing being referred to herein
as the "Closing Date"). The Closing shall be deemed effective as of 12:01 a.m.
on the Closing Date.
(b) At the Closing, Ralin shall deliver to Sabratek certificates
evidencing the Shares duly endorsed for transfer in blank or accompanied by duly
executed assignments separate from the certificates evidencing the Shares,
together with the other documents, bills of sale, assignments and assumptions,
agreements, opinions, instruments and certificates contemplated by this
Agreement.
(c) At the Closing, Sabratek shall pay the Cash Consideration to Ralin
by wire transfer of immediately available funds to an account designated by
Ralin in writing to Sabratek and deliver to the respective Escrow Agent (as
defined in Section 8.4) stock certificates issued to Ralin representing the
portion of the Share Consideration as provided in Section 8.4, which Share
Consideration shall be duly authorized and validly issued, fully paid and
non-assessable, and not subject to preemptive or any other similar rights of
others, and be free and clear of all Liens (as defined in Section 2.18) (other
than state and federal securities law restrictions and any Liens that arise from
actions by or agreements of Ralin), and have no personal liability attaching to
the ownership thereof, subject to the terms of the Registration Rights Agreement
(as defined in Section 6.3).
7
<PAGE> 8
(d) As a matter of clarification, Ralin hereby assigns all of its
interest, whether ownership or leasehold, in the equipment described on Exhibit
A to LWI, effective as of the Closing. Ralin shall transfer and assign to LWI
the contracts, agreements and arrangements set forth on Exhibit B (the "Assumed
Contracts") and LWI shall assume, perform and discharge in a timely manner all
obligations of Ralin arising or occurring under the Assumed Contracts from and
after the Closing, subject to the terms of an assignment and assumption
agreement in a form reasonably satisfactory to Ralin and Sabratek (the
"Assignment and Assumption Agreement"). In addition, Ralin shall transfer and
assign to LWI the Ralin LWI-Related Proprietary Rights (as defined in Section
2.12) and the accounts receivable also set forth on Exhibit B (the "Assumed
Rights").
(e) In addition, at the Closing, the parties shall execute and deliver
any other instruments, documents and certificates that may be reasonably
requested by the other party in order to consummate the transactions
contemplated by this Agreement, including all forms required to make an election
under Section 338(h)(10) with respect to LWI.
1.3. Cash Reconciliation.
(a) Definitions. "Stub Period" means the period beginning on the first
day of the calendar month in which the Closing occurs and ending on the Closing
Date. "Stub Period LWI Receivables" means the aggregate amount collected in cash
during the Stub Period by LWI with respect to the accounts receivable of LWI.
"Stub Period LWI Payables" means the aggregate amount actually paid by LWI in
the ordinary course of business and in accordance with past practice during the
Stub Period with respect to the accounts payable of LWI. "Stub Period LWI
Payroll" means an amount equal to the pro-rated payroll of LWI (including normal
payroll costs, withholding and tax payments) with respect to the Stub Period,
calculated as the (x) total payroll of LWI for the calendar month immediately
preceding the month of the Closing divided by (y) 30 and then multiplied by (z)
the actual number of days in the Stub Period. "Stub Period Amount" means the
result of (x) the Stub Period LWI Receivables less (y) Stub Period LWI Payables,
and then less (z) Stub Period LWI Payroll.
(b) Interim Working Capital Statement. On or prior to the fifth
business day following the Closing Date, Sabratek and its independent auditors,
at Sabratek's cost, shall deliver to Ralin a statement of Stub Period LWI
Receivables, Stub Period LWI Payables and Stub Period LWI Payroll (the "Interim
Working Capital Statement"). Sabratek and its auditors will (i) make available
to Ralin and its agents, attorneys and accountants upon reasonable advance
notice all records and work papers necessary to understand the Interim Working
Capital Statement and to calculate Stub Period LWI Receivables, Stub Period LWI
Payables and Stub Period LWI Payroll and (ii) allow Sabratek and its agents,
attorneys and accountants upon reasonable advance notice to interview any
Sabratek or LWI personnel or independent auditor personnel significantly
involved in the preparation of the Interim Working Capital Statement. If Ralin
disagrees with the computation of Stub Period LWI Receivables, Stub Period LWI
Payables or Stub Period LWI Payroll contained in the Interim Working Capital
Statement, Ralin may, within 15 days after receipt of the Interim Working
Capital Statement, deliver a notice (the "Ralin Objection Notice") to Sabratek
setting forth the objections of Ralin and, to the extent reasonably possible,
Stub Period LWI Receivables, Stub Period LWI Payables and Stub Period LWI
Payroll as determined
8
<PAGE> 9
by Ralin. Ralin and Sabratek will use reasonable efforts to resolve any
disagreements as to the computation of Stub Period LWI Receivables, Stub Period
LWI Payables and Stub Period LWI Payroll, but if they do not obtain a final
resolution within 10 days after Sabratek has received the Ralin Objection
Notice, Ralin and Sabratek will jointly retain a mutually agreeable independent
accounting form of recognized national standing that is not a public accountant
of Ralin, Sabratek or any of their respective affiliates (and "Independent
Firm") to resolve any remaining disagreements. If Ralin and Sabratek are unable
to agree on the choice of an Independent Firm, the choice will be selected by a
lot from those top five accounting firms that are Independent Firms or, if no
top five accounting firm is an Independent Firm or is willing to serve, selected
by lot from those Independent Firms that are willing to serve. Ralin and
Sabratek will direct the chosen Independent Firm to render a determination
within 20 days of its retention and Ralin and Sabratek and their respective
agents will cooperate with the chosen Independent Firm during its engagement.
The chosen Independent Firm will consider only those issues related to the
determination of Stub Period LWI Receivables, Stub Period LWI Payables and Stub
Period LWI Payroll set forth in the Ralin Objection Notice which Ralin and
Sabratek have been unable to resolve. The determination of the chosen
Independent Firm will be based on and consistent with the definition of Stub
Period LWI Receivables, Stub Period LWI Payables and Stub Period LWI Payroll
included in this Agreement. The determination of the chosen Independent Firm
will be conclusive and binding upon Ralin and Sabratek. In any proceeding
described in this subsection, all of the costs and expenses of Ralin (including
attorneys' fees and expenses) shall be borne by Ralin, all of the costs and
expenses of Sabratek (including attorneys' fees and expenses) shall be borne by
Sabratek and all costs and expenses of the chosen Independent Firm shall be
equally shared by Ralin and Sabratek.
(c) Payment of Stub Period Amount. If the Stub Period Amount is a
positive number, then Ralin shall pay Sabratek an amount equal to the Stub
Period Payment within 5 business days of the final determination of the Stub
Payment Amount, which amount shall be payable in cash by wire transfer of
immediately available funds. If the Stub Period Payment is a negative number,
then Sabratek shall pay Ralin an amount equal to the Stub Period Payment (as if
such negative number were a positive number) within 5 business days of the final
determination of the Stub Payment Amount, which amount shall be payable in cash
by wire transfer of immediately available funds. Notwithstanding anything to the
contrary in this Section 1.3, in the event that the Closing shall occur on the
first business day of a calendar month or within 2 business days before the end
of a calendar month, then the parties agree to forgo the preparation of an
Interim Working Capital Statement and the payment of any Stub Period Amount. The
Stub Payment Amount shall not be included in or be subject to the Deductible or
the Cap (as defined in Section 8.3)
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF RALIN
Ralin represents and warrants to Sabratek as follows, subject in the
case of the representations and warranties in each particular Section below to
the exceptions set forth in the corresponding Section of the disclosure schedule
of Ralin (the "Ralin Disclosure Schedule"):
9
<PAGE> 10
2.1. Organization, Standing and Qualification of Ralin. Ralin is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite power and authority to own, lease
and operate its properties and assets and to transact its business as presently
conducted and to enter into this Agreement and, subject to stockholder approval
and the obtaining of the Ralin Governmental Consents and the Sabratek
Governmental Consents (as each term is hereinafter defined), to carry out the
transactions contemplated by the Agreement.
2.2. Organization, Standing, Qualification and Ownership of LWI. LWI is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Illinois and has full power and authority to own, lease and
operate its properties and assets and to conduct its business as presently
conducted. LWI is in good standing in the State of Illinois and duly qualified
to do business as a foreign corporation and in good standing in Oregon, South
Carolina and Florida and there is no other jurisdiction in which the failure to
so qualify and be in good standing could reasonably be expected to have a
material adverse effect on the business, assets, operations (including future
operations) or financial condition ("Material Adverse Effect") of LWI. Schedule
2.2 lists each of the current directors and officers of LWI. Ralin owns all of
the outstanding capital stock of LWI and there are no outstanding warrants,
options, convertible securities or rights to subscribe for or purchase any
capital stock or other securities from LWI.
2.3. Capitalization. The authorized capital stock of LWI consists of
1,000 shares of common stock, par value $0.01 per share (the "LWI Common
Stock"), of which 100 shares are issued and outstanding. The record owner of the
issued and outstanding shares of LWI Common Stock is Ralin and such shares are
free and clear of any restrictions on transfer (other than pursuant to the
federal securities laws and state law) and/or Liens. The issued and outstanding
shares of LWI's capital stock have been duly authorized and validly issued and
are fully paid and non-assessable, with no personal liability attaching to the
ownership thereof. Holders of shares of LWI's capital stock have no preemptive
rights, and no holder of shares of LWI's capital stock or any other Person has
any preemptive right or right of first refusal to purchase securities sold by
LWI or sold or transferred by a LWI shareholder. Except for the transactions
contemplated by this Agreement, there are no outstanding warrants, options,
convertible or exchangeable securities or rights to subscribe for or purchase
any capital stock or other securities (including any securities convertible into
or exchangeable for capital stock of LWI) from LWI or any commitments with
respect to any of the foregoing, and there are no agreements, restrictions or
encumbrances with respect to the sale, disposition or voting of any shares of
LWI's capital stock (other than state and federal securities law restrictions).
2.4. Subsidiaries. LWI has no (and has never had any) subsidiaries and
does not own any interest in or control, directly or indirectly, any other
corporation, limited liability company, partnership, association or other
entity.
2.5. Financial Statements. Ralin has furnished Sabratek with (i)
Ralin's consolidated audited balance sheet as of December 31, 1997 and related
consolidated audited statements of income and cash flows for the year ended
December 31, 1997, (ii) LWI's draft audited balance sheet as of December 31,
1998 and related draft audited statements of income and cash flows for the year
ended December 31, 1998 (the "LWI 1998 Financial Statements"), and (iii) LWI's
interim
10
<PAGE> 11
unaudited balance sheet (the "Unaudited Balance Sheet") as of March 31, 1999
(the "Unaudited Balance Sheet Date") and related interim unaudited statements of
income and cash flows for the three (3) months ended March 31, 1999 (the
"Unaudited Income Statement") (each of which in (i), (ii) and (iii) above are
collectively referred to as the "Financial Statements" and are attached as
Schedule 2.5). The Financial Statements are complete and correct (to the extent
they relate to or indirectly affect LWI) in all material respects, are in
accordance with the books and records of Ralin and its subsidiaries (including
LWI) (which in turn are complete and correct in all material respects (to the
extent they relate to or indirectly affect LWI)), have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied, and fairly and accurately present in all material respects
the financial position of the LWI business as of such dates and the results of
operations of the LWI business for the periods then ended, provided that the
unaudited and draft Financial Statements may not contain all footnotes required
by GAAP and the Unaudited Balance Sheet and the Unaudited Income Statement are
subject to normal year end adjustments. Since the Unaudited Balance Sheet Date,
LWI has not incurred or otherwise become subject to any liabilities, debts or
obligations other than in the ordinary course of business consistent with past
practice, except for those listed on Schedule 2.5. Except as disclosed on
Schedule 2.5, to Ralin's knowledge (a) the reserves established by Ralin and its
subsidiaries set forth in the Financial Statements with respect to LWI are
adequate in all material respects and (b) there are no material loss
contingencies which were not adequately disclosed in the Financial Statements
with respect to LWI.
2.6. Insurance. Ralin maintains valid policies of workers' compensation
insurance and of insurance with respect to LWI's properties and business of the
kinds and in the amounts not less than is customarily obtained by corporations
engaged in the same or similar business and similarly situated, including,
without limitation, insurance against property loss or damage, fire, theft and
liability, including professional liability (collectively, the "Insurance
Policies"). The Insurance Policies are identified on Schedule 2.6. Copies of the
Insurance Policies have been made available to Sabratek. No notice from any
insurance carrier insuring LWI's properties and business has been received by
Ralin claiming that Ralin is in default with respect to any provision contained
in any material insurance policy, and Ralin has not failed to give any notice or
present any claim under any material insurance policy in due and timely fashion.
All of the insurance policies with respect to LWI are issued in the name of
Ralin and will cease to cover LWI's properties and business as of the Closing.
2.7. Authorization; Approvals. The execution, delivery and performance
(subject to stockholder approval) by Ralin of this Agreement and all other
agreements, documents and instruments to be executed and delivered by Ralin in
connection with the transactions contemplated by this Agreement have been duly
authorized by its Board of Directors. Subject to approval by its stockholders,
Ralin has all necessary corporate power and authority to consummate the
transactions contemplated by this Agreement. This Agreement has been, and the
other agreements, documents and instruments to be executed and delivered by
Ralin in connection with the transactions contemplated by this Agreement will
have been, duly executed and delivered by Ralin. This Agreement constitutes, and
all other agreements, documents and instruments to be executed and delivered by
Ralin in connection with the transactions contemplated by the Agreement will
constitute, the valid and binding obligations of Ralin legally enforceable
against
11
<PAGE> 12
Ralin in accordance with their respective terms. Except as set forth on Schedule
2.7 (the "Ralin Governmental Consents"), Ralin has obtained all consents,
authorizations and approvals of, and has made all declarations and filings with,
all federal and state governmental authorities required on the part of Ralin or
LWI in connection with the consummation of the transactions contemplated by this
Agreement, and all other agreements, documents and instruments to be executed
and delivered by Ralin in connection with the transactions contemplated by the
Agreement, except to the extent that any failure by Ralin to comply with the
foregoing is due to misrepresentations or nondisclosures of Sabratek.
2.8. No Conflict with Other Instruments and Laws. Except as set forth
on Schedule 2.8 (the "Ralin Consents"), the execution and delivery by Ralin of
this Agreement and all other agreements, documents and instruments contemplated
hereby to which Ralin is or will become a party, the fulfillment of and
compliance with the respective terms hereof and thereof by Ralin do not and
shall not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under (whether with or without the
passage of time, the giving of notice or both), (iii) result in the creation of
any Lien upon the capital stock or assets of Ralin or LWI pursuant to, (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any third party or any court or administrative or governmental body or
agency pursuant to, the charter or bylaws of Ralin or LWI, or any law, statute,
rule or regulation to which Ralin, LWI or the transactions contemplated herein
are subject, or any agreement, instrument, order, judgment or decree to which
Ralin, LWI or the transactions contemplated herein are subject; except in each
case where the failure, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect on Ralin, LWI or Sabratek.
2.9. Absence of Undisclosed Liabilities; Changes.
(a) Except as otherwise described in Schedule 2.9, LWI has no liability
or obligation (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when asserted) of a type required
by GAAP to be reflected as a liability or obligation on a balance sheet prepared
in accordance with GAAP (including, without limiting the generality of the
foregoing, any tax liabilities due or to become due to the extent they relate to
the conduct of the business of LWI through the date hereof) that is not
reflected in the Unaudited Balance Sheet or described in the notes to the
Financial Statements, except (i) obligations and liabilities incurred after the
Unaudited Balance Sheet Date in the ordinary course of business consistent with
past practice (none of which is a liability resulting from breach of contract,
tort, infringement, claim, lawsuit or violation of applicable law); (ii)
obligations under contracts made in the ordinary course of business consistent
with past practice that would not be required to be reflected or disclosed in
financial statements prepared in accordance with GAAP; and (iii) obligations and
liabilities under this Agreement and the related documents and agreements.
(b) Except as described in Schedule 2.9 and this Agreement, since the
Unaudited Balance Sheet Date there has been no (i) occurrence or development
that has had or is reasonably likely to have a Material Adverse Effect on LWI;
(ii) agreement or arrangement entered into by LWI granting rights to purchase
any of the material assets (other than any inventory or other
12
<PAGE> 13
assets sold in the ordinary course of business consistent with past practice),
properties or rights of LWI (including management and control thereof), or
requiring the consent of any party to a transfer or assignment of such assets,
properties or rights (or change in the management or control thereof), or
providing for the merger or consolidation of LWI with or into another
corporation, association or business entity; (iii) payment of dividends on, or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of LWI, or any agreement or
commitment therefor; (iv) change in any material accounting method or practice
followed by Ralin or LWI; or (v) transaction, contract or agreement entered into
by LWI, other than in the ordinary course of business consistent with past
practice.
(c) In addition, since the Unaudited Balance Sheet Date, LWI has not:
(i) borrowed any amount (other than in the ordinary course of business
consistent with past practice) or incurred or become subject to any material
liabilities, except current liabilities incurred in the ordinary course of
business consistent with past practice; (ii) sold, assigned, transferred,
leased, licensed or otherwise encumbered any of its tangible assets, except in
the ordinary course of business consistent with past practice, or canceled any
material debts or claims; (iii) sold, assigned, transferred, leased, licensed or
otherwise encumbered any Proprietary Rights of LWI or any Ralin LWI-Related
Proprietary Rights (other than as expressly contemplated by this Agreement),
disclosed any material proprietary confidential information to any Person (other
than to Sabratek and other than in the ordinary course of business consistent
with past practice in circumstances in which it has imposed reasonable
confidentiality restrictions), or abandoned or permitted to lapse any
Proprietary Rights of LWI or Ralin LWI-Related Proprietary Rights (other than as
expressly contemplated by this Agreement); (iv) made or granted any bonus or any
wage or salary increase to any LWI employee or group of LWI employees (except in
connection with normal and customary annual performance reviews or as required
by pre-existing contracts described on the Ralin Disclosure Schedule); or (v)
made any loans or advances to, guarantees for the benefit of, or any investments
in, any Persons (other than advances to LWI employees in the ordinary course of
business consistent with past practice).
2.10. Labor Agreement and Actions. LWI is not bound by or subject to
any contract with any labor union and, to the knowledge of Ralin, no labor union
has requested or has sought to represent any of the employees of LWI. There is
no strike or other labor dispute involving LWI pending, or to the knowledge of
Ralin threatened, which could reasonably be expected to have a Material Adverse
Effect on LWI, nor is LWI aware of any labor organization activity involving its
employees.
2.11. Compliance with Law and Other Instruments. Neither Ralin nor any
of its subsidiaries (including LWI) is in violation in any material respect of
any statute or governmental rule or regulation or any writ, injunction or order
applicable to or which affect LWI. No notices have been received by Ralin or any
of its subsidiaries and no claims have been filed, to the knowledge of Ralin,
with respect to LWI alleging a material violation of any such laws, ordinances,
codes, rules, requirements or regulations. Except as otherwise described in
Schedule 2.11, to the knowledge of Ralin, there exists no condition, event or
act which after notice, lapse of time, or both, could constitute a material
violation or breach of, or a material default under, any statute or governmental
rule or regulation or writ, injunction or order applicable to LWI. To the
knowledge of Ralin, no employee of LWI is in violation of any term of
13
<PAGE> 14
any employment contract or any other contract or agreement relating to the
employment of such employee with LWI, the violation of which could reasonably be
expected to have a Material Adverse Effect on LWI. Except for governmental
licenses, permits, approvals and consents, the failure to obtain any of which
alone or in the aggregate could not reasonably be expected to have a Material
Adverse Effect on LWI, Schedule 2.11 lists all governmental licenses, permits,
franchises, approvals and consents required to be received or obtained by LWI to
conduct its business as presently conducted, all of which LWI currently
possesses and all of which are in full force and effect, and there have been no
violations in respect of any such licenses, permits, approvals or consents,
except in each case as could not reasonably be expected to have a Material
Adverse Effect on LWI. No notices have been received by LWI that seek to revoke
or limit any such licenses, permits, approvals or consents and no proceeding is
pending or, to Ralin's knowledge, threatened, to revoke or limit any of such
licenses, permits, approvals or consents.
2.12. Proprietary Rights. Except for off-the-shelf software, Schedule
2.12 contains a list of all patents, trademarks, trade names, corporate names,
executed software licenses in the name of LWI, Internet domain names and
registered copyrights (and all applications therefor) owned by LWI or used by
and reasonably necessary for LWI in the conduct of its business as presently
being conducted (the "Proprietary Rights"). Except as disclosed on Schedule
2.12, Ralin or LWI owns, or has the right to use, without limitation, without
the payment of royalties or fees or other consideration, free and clear of all
liens, licenses, security interests, encumbrances or other restrictions (except
the terms and conditions of agreements and licenses disclosed in Schedule 2.12)
all of the Proprietary Rights reasonably necessary for or used by LWI in the
conduct of LWI's business as presently being conducted. The Proprietary Rights
that are held by or in the name of Ralin and are used by or reasonably necessary
for LWI in the conduct of its business as presently being conducted (the "Ralin
LWI-Related Proprietary Rights") are identified as such on Schedule 2.12. Except
as disclosed on Schedule 2.12, none of the Proprietary Rights has been declared
invalid, been limited by order of the any court or by agreement, or is the
subject of any infringement, interference or similar proceeding or challenge.
Except as disclosed on Schedule 2.12 and to the knowledge of Ralin, LWI has not
infringed and is not infringing or misappropriating on the proprietary rights of
others which could reasonably be expected to have a Material Adverse Effect on
LWI, and neither Ralin nor LWI has received any notice to that effect. Except as
disclosed on Schedule 2.12 and as contemplated by this Agreement, the
consummation of the transactions contemplated by this Agreement will not
terminate or alter LWI's ownership of or the ability of LWI to utilize the
Proprietary Rights or the terms of such ownership or use. Except as disclosed on
Schedule 2.12, (a) LWI has not granted to any other party any assignment,
license, sublicense or other right to use or any right to purchase or otherwise
acquire or any security interest in the Proprietary Rights; (b) no proceedings
have been instituted or are pending against LWI which challenges its rights to
use any of the Proprietary Rights; and (c) to the knowledge of Ralin, no third
party has infringed or misappropriated, or is infringing or misappropriating the
Proprietary Rights.
2.13. Taxes.
(a) Ralin and its subsidiaries have timely filed all Tax Returns that
are required to be filed by any of them and all such Tax Returns are correct and
complete in all material respects. Ralin and its subsidiaries have paid or made
provision for the payment of all Taxes due from any
14
<PAGE> 15
of them. Ralin and its subsidiaries have not incurred any liability for Taxes
other than in the ordinary course of business since the Unaudited Balance Sheet
Date; the assessment of any additional Taxes for periods for which Tax Returns
have been filed by Ralin and its subsidiaries shall not exceed the recorded
liability therefor on the Unaudited Balance Sheet (excluding any amount recorded
which is attributable solely to timing differences between book and Tax income).
The Tax Returns of Ralin and its subsidiaries have not been audited by any
taxing authority, and there are no waivers in effect of the applicable statute
of limitations for any period. No examination or audit of any Tax Return or
report of Ralin or any subsidiary by any applicable taxing authority is
currently in progress. No deficiency assessment or proposed adjustment of Taxes
of Ralin or any subsidiary is pending, and Ralin has no knowledge of any
proposed liability for any Tax to be imposed on Ralin or any subsidiary;
provided, however, that if the foregoing is found to be breached or incorrect,
then it shall be deemed breached or incorrect only to the extent LWI is liable
to pay any Taxes.
(b) LWI is not obligated to make payments, and is not a party to an
agreement that could obligate it to make any payments, that would not be
deductible under Section 280G of the Code. No claim has ever been made in
writing to Ralin or LWI by a taxing authority in a jurisdiction where LWI does
not file Tax Returns that LWI is or may be subject to Taxes assessed by such
jurisdiction. There are no liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of LWI. LWI has not been a member of an
Affiliated Group other than the one of which Ralin was the common parent, or
filed or been included in a combined, consolidated or unitary income Tax Return,
other than one filed by Ralin or LWI. Sabratek will not be required to deduct
and withhold any amount pursuant to Section 1445(a) of the Code upon the
transfer of the Shares to the Sabratek.
(c) For purposes of this Agreement: (i) "Affiliated Group" means any
affiliated group of corporations within the meaning of Section 1504 of the Code
(and any corresponding provision of state, local or foreign income Tax law);
(ii) "Code" means the Internal Revenue Code of 1986, as amended; (iii) "Tax" or
"Taxes" means any federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; and (iv) "Tax Returns" means
returns, declarations, reports, claims for refund, information returns or other
documents (including any related or supporting schedules, statement or
information) filed or required to be filed in connection with the determination,
assessment or collection of Taxes of any party or the administration of any
laws, regulations or administrative requirements related to Taxes.
2.14. Contracts. Schedule 2.14 lists the following contracts,
agreements and arrangements to which LWI, or Ralin or any of its other
subsidiaries with respect to LWI, is a party or is subject:
(a) any agreement (or group of related agreements) for the
purchase or sale of supplies, products or other personal property, or
for the furnishing or
15
<PAGE> 16
receipt of services, the performance of which involved the payment by
any party thereto of consideration in excess of $25,000 in the 1998
fiscal year of LWI or which could reasonably be expected to involve the
payment by any party thereto of consideration in excess of $25,000 in
the 1999 fiscal year of LWI;
(b) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$10,000 or under which it has imposed a security interest on any of its
assets, tangible or intangible;
(c) any material agreement concerning confidentiality or
noncompetition;
(d) any agreement between LWI and Ralin, any subsidiary of
Ralin or any Ralin officer, director or holder, directly or indirectly,
of outstanding shares of Ralin capital stock (on an as-converted basis)
constituting more than 10% of the aggregate number of shares of Ralin
capital stock outstanding (on an as-converted basis) as of the date
hereof (each a "Ralin Affiliate");
(e) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of the LWI current or former directors,
officers, and employees;
(f) any collective bargaining agreement;
(g) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual
compensation in excess of $40,000 or providing material severance
benefits;
(h) any agreement under which it has advanced or loaned any
amount to any of its directors, officers and employees other than in
the ordinary course of business consistent with past practice;
(i) any agreement or license with respect to the Proprietary
Rights; or
(j) any other agreement (or group of related agreements) the
performance of which involved the payment of consideration in excess of
$25,000 in the 1998 fiscal year of LWI or which could reasonably be
expected to involve the payment of $25,000 in the 1999 fiscal year of
LWI.
Ralin has delivered or made available to Sabratek a correct and
complete copy of each written agreement, contract or arrangement listed in
Schedule 2.14 and a written summary setting forth the material terms and
conditions of any oral agreement, contract and arrangement referred to in
Schedule 2.14. Except as disclosed on Schedule 2.14, with respect to each of the
foregoing agreements, contracts and arrangements, to the knowledge of Ralin: (A)
the agreement, contract or arrangement is legal, valid, binding, enforceable and
in full force and effect in all material respects; (B) no party is in material
breach or default and no event has occurred which with notice
16
<PAGE> 17
or lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under the agreement, contract or
arrangement; and (C) no party has repudiated any material provision of the
agreement, contract or arrangement. Except as disclosed on Schedule 2.14, with
respect to each agreement, contract and arrangement listed thereon in which the
performance thereunder involved the payment of consideration in excess of
$50,000 in the 1998 fiscal year of LWI or could reasonably be expected to
involve the payment of $50,000 in the 1999 fiscal year of LWI (other than leases
disclosed in Schedule 2.26): (A) such agreement, contract or arrangement is
legal, valid, binding, enforceable and in full force and effect in all material
respects; (B) LWI is not (and, to the knowledge of Ralin, the other parties
thereto are not) in material breach or default and, to the knowledge of Ralin,
no event has occurred which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification, or
acceleration, under such agreement, contract or arrangement; and (C) LWI has not
(and, to the knowledge of Ralin, the other parties thereto have not) repudiated
any material provision of the agreement, contract or arrangement.
2.15. Litigation. Except as set forth in Schedule 2.15, no action,
suit, proceeding or governmental inquiry or investigation is pending or, to the
knowledge of Ralin, threatened against LWI or any of its officers, directors or
employees (in their capacity as such) or against Ralin with respect to LWI
before any court, arbitration board or tribunal or administrative or other
governmental agency, nor is Ralin aware of (i) any such threatened or
contemplated action, proceeding, inquiry or investigation or (ii) any facts or
circumstances that could reasonably be expected to give rise to (or any
correspondence with respect to) any such proceeding, inquiry or investigation
(except to the extent set forth on Schedule 2.15). Except as set forth in
Schedule 2.15, during the three years preceding the date hereof, there have not
been any actions, suits, proceedings (including any arbitration proceedings),
orders, investigations or claims pending or, to the knowledge of Ralin,
threatened against LWI or Ralin with respect to LWI. LWI is not subject to any
judgment, order or decree of any court or other governmental agency. To the
knowledge of Ralin, there are no material actions, suits, proceedings (including
any arbitration proceedings), orders, investigations or claims pending or
threatened against any past or current client or customer of LWI that relate to
services or products provided to or by LWI.
2.16. Fees and Commissions. Neither Ralin nor LWI, nor any officer or
director on behalf of them, has retained, or owes any fee to, any finder,
broker, agent, financial advisor or other intermediary (collectively,
"Intermediary") in connection with the transactions contemplated by this
Agreement.
2.17. ERISA. Except as disclosed on Schedule 2.17, neither Ralin nor
LWI maintains, sponsors, or contributes (or has during the last five (5) years
been obligated to maintain, sponsor or contribute) to, or has any liability with
respect to, any program or arrangement that is an "employee pension benefit
plan", an "employee welfare benefit plan", or a "multi-employer plan", as those
terms are defined in Sections 3(1), 3(2) or 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or any deferred compensation,
bonus, incentive compensation, savings, stock option or fringe benefit plan or
arrangement with respect to any employee of LWI. The plans, programs and
arrangements referred to in the preceding sentence are collectively called
"Employee Benefit Plans". Neither Ralin nor LWI nor any person that is a member
of LWI's controlled group of corporations or a trade or business under common
control
17
<PAGE> 18
with LWI as defined in Section 414 of the Code has, maintains, sponsors or
contributes or has during the last five (5) years been obligated to maintain,
sponsor or contribute) to any benefit plan subject to Title IV of ERISA or a
multi-employer plan. With respect to Ralin's Employee Benefit Plans,
individually and in the aggregate, all such plans have been maintained and
operated in accordance with their terms and applicable laws, including
compliance with all reporting and disclosure requirements, and no event has
occurred, and, to the knowledge of Ralin, there exists no condition or set of
circumstances in connection with which Ralin or LWI could be subject to any
liability (except for liability for benefits claims and funding obligations
payable in the ordinary course) under ERISA, the Code (including Consolidated
and Omnibus Recovery Act ("COBRA")) or any other applicable law or to any
person. With respect to Ralin's Employee Benefit Plans, individually and in the
aggregate, there are no benefit obligations for which contributions have not
been made or properly accrued in accordance with GAAP, on the Financial
Statements, and accounted for by reserves if unfunded. Each Employee Benefit
Plan that is intended to be tax qualified has received an Internal Revenue
Service determination letter covering all Code requirements for which the
remedial amendment period has expired. Neither Ralin nor LWI has any liability
to provide post-retirement welfare benefits to any former or current employee of
LWI.
2.18. Title to Properties; Encumbrances. LWI owns no real property.
Except as set forth on Schedule 2.18, LWI has good and valid title to all of the
assets used in its businesses, including, without limitation, all the material
properties and assets reflected in the Financial Statements as being owned by
LWI, subject to no encumbrance, lien, security interest, claim, charge or other
restriction of any kind or character (collectively, "Liens"), other than (a)
Liens set forth or disclosed in the Financial Statements or as listed on
Schedule 2.18; (b) Liens consisting of zoning or planning restrictions,
easements, permits and other similar restrictions or limitations on the use of
real property or irregularities in title thereto which do not materially detract
(in the aggregate) from the value of, or impair the use of, such property by
LWI; (c) Liens for current taxes, assessments or governmental charges or levies
on property not yet due and delinquent; (d) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and other similar
Persons; (e) Liens relating to deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security; and (f) Liens securing executory obligations under any lease
that constitutes an "operating lease" under GAAP (Liens of the type described in
clauses (a) through (f) above, inclusive, are hereinafter sometimes referred to
as "Permitted Liens") To the knowledge of Ralin, no Liens have been filed
against the assets of LWI other than Liens that, in the aggregate, do not
materially affect the operation of the business of LWI. Except as set forth in
Schedule 2.18, the assets of LWI are in good working order and condition,
ordinary wear and tear excepted.
2.19. Environmental Compliance. Except as disclosed in Schedule 2.19:
(a) Neither LWI nor any of its agents, contractors, employees or
representatives, has released, emitted, discharged, dumped or disposed of any
hazardous substances ("Hazardous Substances") onto or into the assets of LWI, or
any part thereof, or onto or into any other property in violation of
Environmental Laws. For purposes of this Agreement "Hazardous Substances" has
the meaning set forth in Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and shall also
expressly include
18
<PAGE> 19
petroleum, crude oil and any fraction thereof and any medical waste. The term
"Environmental Laws" means all applicable foreign, federal, state, county and
local statutes, regulations or ordinances (including common law duties
established by courts) relating to human health and the environment or the
generation, treatment, storage, recycling, transportation, release or disposal
of Hazardous Substances.
(b) No Hazardous Substances have been or are currently located at, in,
or under or about either the assets of LWI or any other property currently or
previously owned or operated by LWI in a manner which: (i) violates in any
material respect applicable Environmental Laws or (ii) requires response,
remedial, corrective action or cleanup of any kind under any applicable
Environmental Laws.
(c) With respect to the assets or other property of LWI, whether
previously or currently owned or operated or used by LWI for the treatment,
storage or disposal of Hazardous Substances, no litigation, investigation,
administrative or other proceeding of any kind is pending or, to the knowledge
of Ralin, threatened by any federal, foreign, state or local governmental entity
or private party arising from: (i) any applicable Environmental Laws; (ii) any
response, remedial or cleanup activities or (iii) any release or threatened
release of Hazardous Substances. In addition, Ralin is not now aware of any
facts on which such litigation, investigation, administrative or other
proceeding of any kind might reasonably be based.
(d) With respect to the assets or other property of LWI, whether
previously or currently owned or operated or used by LWI for the treatment,
storage or disposal of Hazardous Substances, LWI is not subject to any judgment,
injunction, writ, order or agreement arising from: (i) any applicable
Environmental Laws; (ii) any remedial, response or cleanup activities or (iii)
any liabilities, damages, costs, fees or expenses related to the release or
threatened release of Hazardous Substances. In addition, LWI is not aware of any
facts on which such a judgment, injunction, writ, order or agreement might
reasonably be based.
(e) The assets of LWI do not contain any asbestos or PCB containing
materials in violation of any applicable Environmental Laws.
(f) There are no underground storage tanks located on any real property
previously or currently owned or leased by LWI, and there has not been a release
or threatened release from any of such underground storage tanks.
(g) LWI and its property is in compliance in all material respects with
all Environmental Laws.
(h) No employee of LWI in the course of his or her employment with LWI
has been exposed to any Hazardous Substances or other substance generated,
produced or used by LWI which could give rise to any claim against LWI that
could be reasonably expected to have a Material Adverse Effect on LWI.
2.20. Affiliate Transactions. Except as set forth on Schedule 2.20, no
Ralin Affiliate or, to the knowledge of Ralin, any employee or any individual
related by blood, marriage or adoption
19
<PAGE> 20
to any such individual or any entity in which any such Person owns any
beneficial interest (excluding a less than 5% stockholder in a publicly held
corporation), is a party to any agreement, contract, commitment or transaction
with LWI or with Ralin with respect to LWI or has any material interest in any
material property owned or used by LWI (including any Proprietary Rights).
2.21. Books and Records. The books and records of LWI, including,
without limitation, its stock record books and minute books, are complete and
correct in all material respects and accurately and fairly reflect all material
information relating to its business, the nature, acquisition, maintenance,
location and character of its assets, and the nature of all transactions giving
rise to its obligations or accounts receivable.
2.22. Financial Resources. Ralin has reasonably sufficient financial
resources to perform its obligations under this Agreement and the documents to
be executed and delivered in connection with this Agreement.
2.23. Accounts Receivable. All accounts receivable reflected on the
Unaudited Balance Sheet with respect to LWI and all accounts receivable to be
reflected on the books and records of Ralin with respect to LWI as of the
Closing Date are or shall be valid receivables arising in the ordinary course of
business. Schedule 2.23 contains a complete and correct aging report for such
accounts receivables as of the date of such report. LWI has a protocol in place
which is intended to ensure that a physician's order or other legally required
supporting evidence or documents are on file for each of its accounts
receivable. To the knowledge of Ralin, no fraudulent or other inappropriately
submitted Medicare claim or other claim has been submitted by LWI with respect
to its accounts receivable. LWI has not intentionally submitted any Medicare
claim or other claim that it knew was fraudulent or inappropriate.
2.24. Customers. Ralin has not received any indication from any
customer of LWI accounting for 10% or more of the annual sales of LWI to the
effect that, and Ralin has no reason to believe that, such customers will stop,
or materially decrease the rate of, buying products or services from LWI
(whether as a result of the consummation of the transactions contemplated hereby
or otherwise).
2.25. Employees. To the knowledge of Ralin, no executive or key
employee of LWI and no group of LWI employees has any plans to terminate
employment with LWI (including those employees of Ralin to be transferred to LWI
as contemplated by this Agreement). To the knowledge of Ralin, none of the LWI
employees or consultants are subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or other agreement or judgment, decree
or order of any court or administrative agency, relating to, affecting or in
conflict with the business activities of LWI or the duties of such person to
LWI, except for agreements between LWI and its present and former employees. LWI
has not received or issued any notice alleging that any violation of any such
agreements has occurred. No current employee or consultant of LWI has excluded
works or inventions made prior to his or her employment with LWI from any
inventions or similar agreement between LWI and such person. A complete and
correct list as of the date of this Agreement of all employees and officers of
LWI and their current compensation (salary and bonus and other compensation) is
set forth on Schedule 2.25.
20
<PAGE> 21
2.26. Leases. Schedule 2.26 lists all real property leased or subleased
to LWI or used by LWI. Ralin has delivered or made available to Sabratek correct
and complete copies of such leases and subleases (as amended to date). To the
knowledge of Ralin, each such lease and sublease is legal, valid, binding,
enforceable and in full force and effect.
2.27. Investment. Except as provided in the Registration Rights
Agreement (as hereinafter defined), Ralin understands that the shares of
Sabratek capital stock acquired by it under this Agreement have not been, and
shall not be, registered under the Securities Act of 1933, as amended (the
"Securities Act"), or under any state securities laws, and are being offered and
sold in reliance upon United States federal and state exemptions for
transactions not involving any public offering. Ralin acknowledges that it is
acquiring such securities solely for its own account for investment purposes,
and not with a view to, or intention to effect, the distribution thereof in
violation of the Securities Act or any applicable state securities laws, and
that such securities may not be disposed of in contravention of the Securities
Act or any applicable state securities laws. Ralin represents that it is a
sophisticated investor with knowledge and experience in business and financial
matters, is able to evaluate the risks and benefits of the investment in such
securities, has received certain information concerning Sabratek and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits of and the risks inherent in purchasing such securities. Ralin is an
"accredited investor" as contemplated by Regulation D under the Securities Act.
2.28. Sufficiency of Assets. Except as disclosed on Schedule 2.28 and
the assets used by Ralin to perform the services under the Transition Services
Agreement (as defined in Section 6.1(d)), the assets of LWI (after taking into
account the transfer of assets from Ralin to LWI as contemplated by this
Agreement) include all of the assets reasonably necessary for the conduct of the
business of LWI after the Closing in the manner the business of LWI was
conducted immediately prior to the date of this Agreement.
2.29. Inter-Company Indebtedness. LWI is not indebted to Ralin or any
other Subsidiary of Ralin.
2.30. Disclosure. The representations and warranties of Ralin in this
Agreement do not include any untrue statement of a material fact nor do they
omit to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SABRATEK
Sabratek represents and warrants to Ralin as follows, subject in the
case of the representations and warranties in each particular Section below to
the exceptions set forth in the corresponding Section of the disclosure schedule
of Sabratek (the "Sabratek Disclosure Schedule"):
21
<PAGE> 22
3.1. Organization, Standing and Qualification of Sabratek. Sabratek is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its properties and assets and to transact its business as
presently conducted and to enter into this Agreement (except where the failure
to be so organized, existing and in good standing or to have such power,
authority and governmental approvals would not have a Material Adverse Effect on
Sabratek and its subsidiaries, taken as a whole) and, subject to obtaining the
Sabratek Governmental Consents and Ralin Governmental Consents (as each term is
hereinafter defined), to carry out the transactions contemplated by the
Agreement. Sabratek is duly qualified to do business as a foreign corporation
and is in good standing in the State of Illinois and in every other jurisdiction
in which the failure to so qualify and be in good standing would have a Material
Adverse Effect on Sabratek and its subsidiaries, taken as a whole.
3.2. Capitalization. The authorized capital stock of Sabratek consists
of (i) 25,000,000 shares of common stock, par value $0.01 per share (the
"Sabratek Common Stock"), of which 9,875,584 shares were issued and outstanding
on March 31, 1999 and (ii) 12,500,000 shares of preferred stock, par value $0.01
per share, none of which were issued or outstanding as of March 31, 1999. The
issued and outstanding shares of Sabratek's capital stock have been duly
authorized and validly issued and are fully paid and non-assessable, with no
personal liability attaching to the ownership thereof. The shares of Sabratek
Common Stock to be issued to Ralin pursuant to the Transaction are duly
authorized and, at the Closing, all such shares will be validly issued, fully
paid, nonassessable and not subject to preemptive or any other similar rights of
others, and be free and clear of all Liens (other than state and federal
securities law restrictions and any Liens which arise from actions by or
agreements of Ralin), and have no personal liability attaching to the ownership
thereof.
3.3. Authorization; Approvals. The execution, delivery and performance
by Sabratek of this Agreement and all other agreements, documents and
instruments to be executed and delivered by Sabratek in connection with the
transactions contemplated by this Agreement have been duly authorized by its
Board of Directors. Sabratek has all necessary corporate power and authority to
consummate the transactions contemplated by this Agreement. This Agreement has
been, and the other agreements, documents and instruments to be executed and
delivered by Sabratek in connection with the transactions
22
<PAGE> 23
contemplated by this Agreement will have been, duly executed and delivered by
Sabratek. This Agreement constitutes, and all other agreements, documents and
instruments to be executed and delivered by Sabratek in connection with the
transactions contemplated by the Agreement will constitute, the valid and
binding obligations of Sabratek legally enforceable against Sabratek in
accordance with their respective terms. Except as set forth on Schedule 3.3 and
except for filings, permits, authorizations, consents and approvals required
under the Exchange Act (as hereinafter defined), the Hart-Scott-Rodino Antitrust
Improvement Act (the "HSR Act"), the Nasdaq Stock Market and state securities
laws (the "Sabratek Governmental Consents"), Sabratek has obtained all consents,
authorizations and approvals of, and has made all declarations and filings with,
all federal and state governmental authorities required on the part of Sabratek
in connection with the consummation of the transactions contemplated by this
Agreement, and all other agreements, documents and instruments to be executed
and delivered by Sabratek in connection with the transactions contemplated by
the Agreement, except to the extent that any failure by Sabratek to comply with
the foregoing is due to misrepresentations or nondisclosures of Ralin.
3.4. No Conflict with Other Instruments and Laws. Except as set forth
on Schedule 3.4 (the "Sabratek Consents"), the execution of and performance by
Sabratek of its obligations under this Agreement and all other agreements,
documents and instruments to be executed and delivered by Sabratek in connection
with this Agreement will not violate any provision of law or governmental rule
or regulation and will not conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default under (i) Sabratek's
Certificate of Incorporation, (ii) Sabratek's By-Laws as currently in effect,
(iii) any judgment, decree or order to which Sabratek or any of its affiliates
is bound, (iv) any agreement, contract, lease, indenture or other instrument to
which Sabratek or any of its affiliates is a party, except in the case of
clauses (iii) and (iv) where such judgment, decree or order or conflict, breach
or default of such agreement, contract, lease, indenture or other instrument
could not reasonably be expected to have a Material Adverse Effect on Sabratek
and its subsidiaries, taken as a whole.
3.5. SEC Reports. The annual report on Form 10-K of Sabratek for the
fiscal year ended December 31, 1998, as filed under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), and all other reports and proxy statements
filed or required to be filed by Sabratek subsequent to such report
(collectively, the "Sabratek SEC Documents"), have been duly and timely filed by
Sabratek; and as of their respective dates (or if amended prior to the date of
this Agreement, then on the date of such last amendment) complied in all
material respects with all requirements under the Exchange Act and the rules and
regulations promulgated thereunder and contained no untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading. The financial statements of Sabratek included in the Sabratek
SEC Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
interim financial statements, as permitted by Forms 10-Q or 8-K of the SEC)
consistently applied during the periods involved (except as may be indicated in
the notes thereto) and fairly presented, in all material respects, the financial
position of Sabratek as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of interim financial
statements, to normal year-end adjustments, other adjustments discussed therein
(if any) and lack of footnote disclosures). Sabratek is currently eligible under
the Securities Act to use a Registration Statement on Form S-3 to register
resales of Sabratek Common Stock.
3.6. Undisclosed Liabilities. Except (i) to the extent disclosed in the
Sabratek SEC Documents and (ii) for liabilities and obligations incurred in the
ordinary course of business consistent with past practice, since December 31,
1998, neither Sabratek nor any of its subsidiaries has incurred any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
that have, or would be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Sabratek and its subsidiaries, taken as
a whole.
3.7. Litigation. Except as disclosed in the Sabratek SEC Documents, no
action, proceeding or governmental inquiry or investigation is pending or, to
the knowledge of Sabratek,
23
<PAGE> 24
threatened against Sabratek or any of its subsidiaries or any of their
respective officers, directors or employees (in their capacity as such) before
any court, arbitration board or tribunal or administrative or other governmental
agency, nor is Sabratek aware of any such threatened or contemplated action,
proceeding, inquiry or investigation, which, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on Sabratek and its
subsidiaries, taken as a whole, or would prevent Sabratek from consummating the
transactions contemplated by this Agreement.
3.8. Fees and Commissions. Except compensation to and expenses of EGS
Securities, Inc., neither Sabratek or any of its subsidiaries, nor any officer
or director on behalf of them, has retained, or owes any fee to, any
Intermediary in connection with the transactions contemplated by this Agreement.
3.9. Financial Resources. Sabratek has reasonably sufficient financial
resources to perform its obligations under this Agreement and the documents to
be executed and delivered in connection with this Agreement.
3.10. Disclosure. The representations and warranties of Sabratek in
this Agreement do not include any untrue statement of a material fact nor do
they omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Conduct of Business Prior to the Closing. During the period from
the date of this Agreement to the Closing, except as expressly contemplated or
permitted by this Agreement, Ralin shall cause LWI to (i) conduct its business
in the usual, regular and ordinary course consistent with past practice, (ii)
use its reasonable efforts to maintain and preserve intact its business
organization and advantageous business relationships and retain the services of
its key officers and employees and (iii) take no action which would materially
and adversely affect or delay the ability of Ralin or Sabratek to obtain any
necessary approvals or consents required for the transactions contemplated
hereby or to perform its covenants and agreements under this Agreement. During
the period from the date of this Agreement to the Closing, except as expressly
contemplated or permitted by this Agreement, the parties shall take no action
which would materially and adversely affect or delay the ability of them to
obtain any necessary approvals or consents required for the transactions
contemplated hereby or to perform its covenants and agreements under this
Agreement.
4.2. LWI Forbearances. During the period from the date of this
Agreement to the Closing, except as expressly contemplated or permitted by this
Agreement, Ralin shall cause LWI to not, without the prior written consent of
Sabratek:
(a) incur any indebtedness for borrowed money (except in the ordinary
course of the
24
<PAGE> 25
business consistent with past practice) assume, guarantee, endorse or otherwise
as an accommodation, become responsible for the obligations of any other
individual, partnership, limited liability company, corporation or other entity
(collectively, "Person"), or make any loan or advance;
(b) (i) adjust, split, combine or reclassify any capital stock; (ii)
make, declare or pay any dividend, or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of
LWI's capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, (iii) grant any Person any
right to acquire any shares of LWI's capital stock, or (iv) issue any additional
shares of capital stock;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any Person, or cancel or release any indebtedness or
claims owed to or held by LWI or by any Person, except in the ordinary course of
business consistent with past practice;
(d) make any investment in any Person by purchase of securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other Person;
(e) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material contract, or
change any terms in any material respect, other than renewals or changes in
immaterial terms thereof;
(f) increase the compensation or fringe benefits of any of its
directors or officers or (other than in the ordinary course of business
consistent with past practice) increase in any material respect the compensation
or fringe benefits of any of its employees, pay any pension or retirement
allowance not required by any existing plan or agreement to any of the
foregoing, or become a party to, amend or commit itself to, any pension,
retirement, profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any of the foregoing;
(g) settle any material claim, action or proceeding involving money
damages;
(h) directly or indirectly engage in any transaction (other than
customary reimbursement for travel and other transactions in the ordinary course
of business) or enter into, terminate or modify any arrangement or contract with
any officer, director, stockholder or other insider or affiliate of Ralin or
LWI;
(i) enter into or amend any agreement, contract or commitment involving
the expenditure of more than $25,000 or which has a term of more than six
months;
(j) enter into any new, or modify any existing, employment agreement;
(k) enter into any contract, agreement or arrangement with respect to
Proprietary Rights;
(l) amend its Articles of Incorporation or By-Laws; or
25
<PAGE> 26
(m) take any action that is intended or may reasonably be expected to
result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or (ii) any of the
conditions to the Transaction set forth in Article VI not being satisfied or
(iii) any violation of any provision of this Agreement, except, in each case, as
may be required by applicable law.
4.3. Compliance with Agreements and Laws. Ralin shall cause LWI to (i)
comply with all material obligations pursuant to any contract or agreement,
whether oral or written, express or implied, to which it is a party or subject
and (ii) comply in all material respects with applicable laws.
4.4. Payment of Obligations. Ralin shall (and shall cause LWI to) pay
and discharge as and when due and payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon unless contested in good faith by appropriate proceedings) and
pay and discharge as and when due and payable all claims for labor, materials or
supplies in the ordinary course of business consistent with past practice.
4.5. Exclusivity. Prior to the termination of this Agreement, none of
Ralin, any of its subsidiaries or affiliates or any of their respective
officers, employees, directors or agents shall, directly or indirectly, (i)
submit, solicit, initiate, encourage or discuss any proposal or offer from any
Person (other than Sabratek in connection with the transactions contemplated
hereby) or enter into any agreement or accept any offer relating to or
consummate any (a) merger or consolidation involving LWI, (b) purchase or sale
of any assets or capital stock (or any rights to acquire, or securities
convertible into or exchangeable for, any such capital stock) of LWI (other than
a purchase or sale in the ordinary course of business consistent with past
practice), or (c) similar transaction or business combination involving LWI or
its assets (each of the foregoing transactions described in clauses (a) through
(c), a "Company Transaction"); or (ii) furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort or attempt
by any Person to do or seek to do any of the foregoing. Ralin agrees to notify
Sabratek immediately if any Person makes any proposal, offer, inquiry or contact
with respect to a Company Transaction.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1. Regulatory and Other Matters. The parties shall cooperate with
each other and use their reasonable best efforts, before and after the Closing,
to prepare and file promptly all necessary documentation to effect all of their
respective applications, notices, petitions and filings and to obtain as
promptly as practicable all Ralin Consents, Sabratek Consents, Ralin
Governmental Consents and Sabratek Governmental Consents and such other consents
of third parties which are reasonably necessary or advisable to consummate the
transactions contemplated by this Agreement, and the parties shall keep each
other apprised of the status of matters relating to completion of the
transactions contemplated herein. The parties shall cooperate with each
26
<PAGE> 27
other and use their reasonable best efforts, at their own expense, to cause
their respective conditions to Closing set forth in Article VI to be satisfied.
5.2. Access to Information. Subject to the existing confidentiality
agreement between Sabratek and Ralin, upon reasonable notice, Ralin shall afford
to the officers, employees, accountants, counsel and other representatives of
Sabratek reasonable access during normal business hours during the period prior
to the Closing to all of the books and records, properties and contracts of LWI
and Ralin and its subsidiaries to the extent such relate to LWI, and, during
such period, Ralin shall make available or furnish, or cause to be furnished, to
Sabratek all information concerning LWI's business, assets and personnel as
Sabratek may reasonably request. Ralin will cause the employees, counsel,
financial advisors and accountants of Ralin (and its subsidiaries) and LWI to
cooperate with Sabratek in its investigation of the business of LWI and to
promptly answer and respond to any reasonable questions and inquiries of
Sabratek. Ralin shall deliver to Sabratek the final version of Ralin's
consolidated audited financial statements for the year ended December 31, 1998
and audited LWI 1998 Financial Statements, as soon as practicable, but in no
event later than 30 days after the Closing Date.
5.3. Additional Agreements. In case at any time after the Closing any
further action is necessary or desirable (i) to carry out the intents and
purposes of this Agreement or (ii) to vest Sabratek with full title to the
Shares, the proper officers and directors of each party to this Agreement shall
take all such necessary or advisable action.
5.4. Advice of Changes. Sabratek and Ralin shall promptly advise each
other of any change or event which is likely to have a Material Adverse Effect
on Ralin or LWI or Sabratek, or which Sabratek or Ralin believes would or would
be reasonably likely to cause or constitute a material breach of any of their
respective representations, warranties or covenants contained herein.
5.5. Restrictions on Transfer. Ralin agrees that (a) it will not offer,
sell or otherwise dispose of the Share Consideration, unless such offer, sale or
other disposition is effected in accordance with the terms of this Agreement and
the Registration Rights Agreement and such offer, sale or other disposition is
(i) registered under the Securities Act and applicable state securities laws,
(ii) pursuant to Rule 144 of the Securities Act, or (iii) in compliance with an
opinion of counsel to Ralin delivered to Sabratek and reasonably acceptable to
Sabratek and its counsel to the effect that such offer, sale or other
disposition thereof does not violate the Securities Act or applicable state
securities laws, and (b) the certificate(s) representing the Share Consideration
shall bear legends in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, UNLESS AND UNTIL REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND SUCH APPLICABLE STATE LAW OR, IN
THE OPINION OF COUNSEL REASONABLY ACCEPTABLE
27
<PAGE> 28
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, DOES NOT VIOLATE THE PROVISIONS THEREOF OR UNLESS
SOLD PURSUANT TO RULE 144 OF THE SECURITIES ACT OF 1933.
Upon request of Ralin, Sabratek shall remove the legend set forth above
from the certificates evidencing such Share Consideration or issue to Ralin new
certificates evidencing such Share Consideration free of such legend, if such
request is accompanied by an opinion of counsel, reasonably satisfactory to
Sabratek and its counsel, to the effect that such shares are not required by the
Securities Act or other applicable law to continue to bear the legend or a
legend similar thereto.
5.6. Pre-Closing Transfer Restrictions. Ralin expressly agrees that,
prior to termination of this Agreement in accordance with its terms or the
Closing, it will not, without the express prior written consent of Sabratek: (i)
directly or indirectly transfer, sell, assign, give, mortgage, pledge,
hypothecate, encumber or otherwise dispose of, or permit to be sold, assigned,
encumbered, attached or otherwise disposed of, in any manner, the whole or any
part of the Shares, or the certificate or certificates representing the same, or
any interest therein; or (ii) enter into any voting trust, shareholder agreement
or other understanding with any person with respect to the Shares. Any purported
transfer or other action in violation of the foregoing restrictions shall be
null and void.
5.7. Transition. The parties agree to cooperate with each other, and to
use their commercially reasonable efforts, prior to the Closing to facilitate
the expedient transition of ownership and operation of the business of LWI to
Sabratek at the Closing.
5.8. Post-Closing Arrangements Concerning Contracts. If (i) the consent
or approval of any third party is required for the assignment or transfer of any
agreement, contract, lease, license, permit or the like to LWI from Ralin and
such consent or approval has not been obtained prior to the Closing; and (ii)
the parties agree to waive any applicable condition to Closing and consummate
the Closing, then Ralin shall cooperate with Sabratek to obtain such consent or
approval following the Closing and, unless and until such consent or approval
has been obtained, the parties shall use reasonably diligent efforts to work
together, at Sabratek's expense, to develop and implement a legal and feasible
arrangement under which LWI will obtain the benefits of, and assume, timely
perform and discharge all of the obligations of Ralin under, the agreement,
contract, lease or license in question.
5.9. Non-Compete; Non-Solicitation.
(a) Ralin acknowledges that it is familiar with the trade secrets of
LWI and with other confidential information concerning LWI, including all (i)
inventions, technology and research and development of LWI, (ii) customers and
clients and customer and client lists of LWI, (iii) products (including any
products under development) and services of LWI and related costs and pricing
structures and manufacturing techniques, (iv) accounting and business methods
and practices of LWI and (v) similar and related confidential information and
trade secrets of LWI. Ralin acknowledges and agrees that LWI and Sabratek would
be irreparably damaged if Ralin
28
<PAGE> 29
were to provide trans-telephonic, cable and/or Internet based electrocardiograph
(including pacemaker) monitoring and holter monitoring services (including call
center operations) ("Competing Services") to any Competing Business (as defined
below). Ralin further acknowledges and agrees that the covenants and agreements
set forth in this Section were a material inducement to Sabratek to enter into
this Agreement. Therefore, in further consideration of the purchase price to be
paid to Ralin hereunder, Ralin agrees that until the fifth (5th) anniversary of
the date hereof, Ralin shall not directly or indirectly own any interest in
(other than less than 5% of the shares of a publicly held corporation), manage,
control, participate or assist in the management or control or render Competing
Services to any business engaged in trans-telephonic cable and/or Internet based
electrocardiograph (including pacemaker) monitoring and holter monitoring
(including, call center operations) (a "Competing Business") anywhere in the
United States; provided, however, that nothing herein shall prohibit Ralin from
(A) owning less than 5% of the equity of a publicly held corporation, or (B)
acquiring any interest in any Person which, directly or indirectly, engages in
any Competing Business (a "Competing Person") and subsequently managing,
controlling, participating in, assisting in the management or control or
rendering services to such Competing Person or engaging through such Competing
Person in any Competing Business, so long as (x) the sales of the products and
services which relate to the Competing Business in the United States do not
account for more than (1) $1,500,000 in sales in the twelve-month period
preceding such acquisition or (2) 20% of the sales of such Competing Person
either immediately before or after such acquisition, and (y) Ralin uses its
reasonable best efforts as soon as reasonably practicable to dispose of such
Competing Business to a Person which is not an affiliate of Ralin. Ralin will
make available to Sabratek and its agents, upon reasonable advance notice,
appropriate Ralin and subsidiary personnel and, subject to a confidentiality
agreement reasonably acceptable to Ralin, all records, documents, agreements,
financial statements, work papers and other information reasonably necessary for
Sabratek to determine (or verify) whether the size of the business tests
described in clauses (1) and (2) in the preceding sentence are satisfied with
respect to any acquired Competing Business.
(b) For so long as Ralin has continuing obligations under subsection
(a) above, Ralin shall not directly, or indirectly through another entity, (1)
induce or attempt to induce any employee of LWI to leave the employ of LWI, or
in any way interfere with the relationship between LWI and any employee thereof,
(2) hire any person who was an employee of LWI at any time during the six month
period immediately prior to the date on which such hiring would take place (it
being conclusively presumed by the parties so as to avoid any disputes under
this subsection (b) that any such hiring within such six month period is in
violation of clause (1) above), or (3) call on, solicit or service or otherwise
contact any customer, supplier, licensee, licensor or other business relation of
LWI for the purpose of (x) making any disparaging or negative statements or
communications about LWI, (y) inducing or attempting to induce such Person to
cease doing trans-telephonic, cable and/or Internet based electrocardiograph
(including pacemaker) monitoring and holter monitoring (including call center
operations) business with LWI or (z) in any way interfering with the
trans-telephonic, cable and/or Internet based electrocardiograph (including
pacemaker) monitoring (including call center operations) and holter monitoring
business relationship between such Person and LWI.
(c) For so long as Ralin has continuing obligations under subsection
(a) above,
29
<PAGE> 30
Sabratek shall not directly, or indirectly through another entity, (1) induce or
attempt to induce any employee of Ralin or its subsidiaries (other than LWI) to
leave the employ of Ralin or its subsidiaries (other than LWI), or in any way
interfere with the relationship between Ralin or its subsidiaries (other than
LWI) and any employee thereof, (2) hire any person who was an employee of Ralin
or its subsidiaries (other than LWI) at any time during the six month period
immediately prior to the date on which such hiring would take place (it being
conclusively presumed by the parties so as to avoid any disputes under this
subsection (c) that any such hiring within such six month period is in violation
of clause (1) above except to employee transfers contemplated by this
Agreement), (3) call on or otherwise contact any customer, supplier, licensee,
licensor or other business relation of Ralin or its subsidiaries (other than
LWI) for the purpose of making any disparaging or negative statements or
communications about Ralin or its subsidiaries (other than LWI), or (4) induce
any former employee of Ralin or its subsidiaries or any employee of LWI to
breach in any material respect his or her confidentiality obligations to Ralin
or its subsidiaries (other than LWI) contained in a confidentiality/proprietary
information agreement or otherwise imposed by law. This subsection shall not
apply to any of the Ralin employees transferred to LWI in connection with the
transactions contemplated by this Agreement.
(d) If, at the time of enforcement of the covenants contained in this
Section (the "Restrictive Covenants"), a court shall hold that the duration,
scope or area restrictions stated herein are unreasonable under circumstances
then existing, the parties agree that the maximum duration, scope or area
reasonable under such circumstances shall be substituted for the stated
duration, scope or area and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and area
permitted by law.
(e) Notwithstanding Section 9.11, if Ralin or Sabratek breaches any of
the Restrictive Covenants, the other party shall have the following rights and
remedies, each of which rights and remedies shall be independent of the others
and severally enforceable, and each of which is in addition to, and not in lieu
of, any other rights and remedies available to Ralin, LWI or Sabratek, as the
case may be, at law or in equity: (i) the right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach of the Restrictive Covenants would
cause irreparable injury to Ralin, LWI and Sabratek, as the case may be, and
that money damages would not provide an adequate remedy to Ralin, LWI and
Sabratek; and (ii) the right and remedy to require Ralin, Sabratek or LWI, as
the case may be, to account for and pay over to Ralin, Sabratek or LWI, as the
case may be, any profits, monies, accruals, increments or other benefits derived
or received by Ralin, Sabratek or LWI, as the case may be, as the result of any
transactions constituting a breach of the Restrictive Covenants.
5.10. Written Consent. Ralin shall solicit, in accordance with its
charter and bylaws and the Delaware General Corporation Law, the Ralin
Stockholder Consent (as hereinafter defined), which consent solicitation shall
take place as soon as reasonably practicable after the date of this Agreement.
Ralin shall complete such consent solicitation and inform Sabratek of the
results thereof within 45 days after the date of this Agreement. Such consent
shall be deemed not given if it has not been entered into by the requisite
number of stockholders of Ralin within 45 days after the date of this Agreement.
30
<PAGE> 31
5.11. Settlement of Group Payments.
(a) Ralin shall periodically pay over to Sabratek all payments received
by Ralin or any of its subsidiaries subsequent to the Closing Date which relate
to the receivables of LWI, net of any deductions taken against the receivables
of LWI attributable to LWI. The amounts of such payments and related deductions
attributable to LWI shall be as specified by the party making the payment;
provided that the amount of any such payments and deductions not specified by
the party making the payment as relating to LWI shall be determined by Ralin in
good faith subject to the reasonable approval of Sabratek.
(b) Sabratek shall periodically pay over to Ralin all payments received
by Sabratek or any of its subsidiaries (including LWI) subsequent to the Closing
Date which relate to the receivables of Ralin (other than Ralin receivables
assigned to LWI as contemplated by this Agreement), net of any deductions taken
against the receivables of Ralin attributable to Ralin. The amounts of such
payments and related deductions attributable to Ralin shall be as specified by
the party making the payment; provided that the amount of any such payments and
deductions not specified by the party making the payment as relating to Ralin
shall be determined by Sabratek in good faith subject to the reasonable approval
of Ralin.
5.12. Certain Tax Matters.
(a) Pre-Closing Returns. Ralin shall prepare or cause to be prepared in
a manner consistent with past practice (unless otherwise required to comply with
applicable law) and timely file or cause to be filed with the appropriate taxing
authorities all Tax Returns of LWI required to be filed for all taxable years or
periods ending on or before the Closing Date. Without limiting the foregoing,
Ralin will include the income of LWI (including, without limitation, any income
(A) resulting from the Section 338(h)(10) Election or (B) triggered by Sections
1.1502-13 and 1.1502-19 of the Treasury Regulations) on the Ralin consolidated
federal income Tax Returns (and any consolidated or combined state or local
income Tax Returns with respect to which Ralin has included LWI in prior
periods) for all periods through the Closing Date and pay any income Taxes
attributable to such income. For purposes of this Section 5.12(a), the income of
LWI will be apportioned to the period up to and including the Closing Date and
the period after the Closing Date by closing the books of LWI as of the end of
the Closing Date.
(b) Post Closing Returns. Sabratek shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns of LWI required to be
filed for all taxable years or periods that end after the Closing Date.
(c) Cooperation Regarding Tax Matters. The parties hereto shall provide
such necessary information as any other party hereto may reasonably request in
connection with the preparation of such party's Tax Returns, or to respond to or
contest any audit, litigation or other proceeding, prosecute any claim for
refund or credit or otherwise satisfy any legal requirement relating to taxes of
each party hereto or their respective affiliates. Such cooperation shall include
retaining and, upon the other party's request, making available records and
information that are reasonably relevant to any such Tax Returns, audits,
litigation, refund claims, or other proceedings and making employees available
on a mutually convenient basis to provide additional
31
<PAGE> 32
information reasonably relevant to any such Tax Returns, audits, litigation,
refund claims, or other proceedings and if necessary to execute or sign Tax
Returns or other documents. The parties further agree (i) to retain all books
and records reasonably relevant to taxes of LWI relating to any taxable period
beginning before the Closing Date until the expiration of the applicable statute
of limitations (including any extensions thereof, to the extent notice of such
extension is provided).
(d) Amended Returns. Without the prior consent of Ralin, neither LWI
nor Sabratek shall, for any taxable year or period ending on or prior to the
Closing Date, file any amended Tax Return, make or change any Tax election,
change any annual accounting period, adopt or change any method of Tax
accounting, enter into any closing agreement, settle any Tax claim, surrender
any right to claim a Tax refund or consent to any extension or waiver of the
limitations period applicable to any Tax claim, if any such action would
materially increase the Tax liability or indemnification obligation of Ralin.
(e) Refunds. If, after the Closing, LWI or Sabratek receives an income
Tax refund attributable to a tax period of LWI ending on or prior to the Closing
Date, then, Sabratek will pay to Ralin such Tax refund.
(f) Election under Section 338(h)(10). Ralin and Sabratek shall jointly
and timely file an election under Section 338(h)(10) of the Code with respect to
(and any corresponding provisions of state, local or foreign law) (collectively,
the "Section 338(h)(10) Election") with the purchase and sale of the Shares.
Sabratek will be responsible for preparing and timely filing any forms used to
make the Section 338(h)(10) Election. Ralin shall sign all federal and state
forms used to make the Section 338(h)(10) Election requiring its signature,
which forms shall be provided to Ralin at least 30 days prior to the required
filing date. Prior to the Closing Date, Ralin shall provide to Sabratek any
information (including Tax elections made by or on behalf of the Company)
reasonably requested by Sabratek in connection with its filing of the Section
338(h)(10) Election. Ralin shall pay or otherwise be liable for (and shall
indemnify and hold harmless Sabratek and LWI against) any and all Taxes
attributable to the recognition of income by Ralin or LWI resulting from the
treatment of the purchase and sale of the Shares as a purchase and sale of the
assets of LWI in accordance with this Section 5.7(f).
(g) Income. For purposes of this Section 5.12, the income of LWI will
be apportioned to the period up to and including the Closing Date and the period
after the Closing Date by closing the books of LWI as of the end of the Closing
Date.
(h) Tax Controversies. Sabratek shall give prompt notice to Ralin of
the assertion of any claim, or the commencement of any suit, action or
proceeding with respect to any Tax liability of LWI for which Ralin is
responsible under Section 5.12(g), and shall give Ralin such information with
respect thereto as Ralin may reasonably request. Ralin may, at its own expense,
participate in and, upon notice to Sabratek, assume the defense of any such
suit, action or proceeding, provided that (i) Ralin's counsel is reasonably
acceptable to Sabratek, (ii) Ralin shall thereafter consult with Sabratek upon
Sabratek's reasonable request for such consultation from time to time with
respect to such suit, action or proceeding, and (iii) Ralin shall not, without
Sabratek's consent, which consent shall not be unreasonably withheld or delayed,
agree to any settlement
32
<PAGE> 33
with respect to any Tax if such settlement could adversely affect any Tax
liability of Sabratek, any affiliate of Sabratek, or (with respect to any
taxable period (or portion thereof) beginning after the Closing Date) LWI. If
Ralin assumes such defense, Sabratek shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at, its own expense,
separate from the counsel employed by Ralin. Ralin shall be liable for the fees
and expenses of counsel employed by Sabratek for any period during which Ralin
has not assumed the defense thereof. Whether or not Ralin chooses to defend or
prosecute any claim, all of the parties hereto shall cooperate in the defense or
prosecution thereof.
(i) Tax Sharing Agreements. All tax-sharing agreements or similar
agreements with respect to or involving LWI shall be terminated as of the
Closing Date and, after the Closing Date, LWI shall not be bound thereby or have
any liability thereunder.
(j) Survival. The obligations of the parties with respect to any Tax
under this Section 5.12 shall survive until the date that is sixty (60) days
after the expiration of the applicable statute of limitations.
5.13. Employee Matters.
(a) Sabratek agrees that all employees of LWI immediately after the
Closing ("LWI Employees") shall become participants effective as of the Closing
in all of the "employee welfare benefit plans" and "employee pension benefit
plans" (as defined in Sections 3(1) and 3(2) of ERISA, respectively) and any
deferred compensation plan, bonus, incentive compensation , stock option, stock
purchase, severance and fringe benefit plans maintained, sponsored or
contributed to by Sabratek (collectively the "Sabratek Plans") that are made
available to similarly situated employees of Sabratek as of the Closing Date.
Sabratek understands that the LWI Employees will cease participation in Ralin's
Employee Benefit Plans as of the date of the Closing.
(b) Sabratek agrees to issue options to purchase Sabratek Common Stock
at the Closing ("Sabratek Options") to those LWI Employees set forth on Exhibit
C in such amounts as set forth on Exhibit C. The general terms and conditions of
such Sabratek Options (e.g., exercise price, vesting and other terms) are also
set forth on Exhibit C. In no event at any time within six months following the
Closing Date shall Sabratek issue Sabratek Options to any such LWI Employees
listed in Exhibit C who do not cancel their Ralin Options.
5.14. Collection of LWI Accounts Receivable
(a) Definitions. "Closing Date LWI A/R" means an amount equal to the
total accounts receivable of Ralin and its subsidiaries with respect to LWI as
of the first business day prior to the Closing determined in accordance with
GAAP consistently applied, as finally determined in accordance with subsection
(b) below, subject to any adjustment required to be consistent with this
Agreement. "Closing Date LWI Reserves" means an amount equal to the total
reserves against Closing Date LWI A/R as of the first business day prior to the
Closing determined in accordance with GAAP consistently applied, as finally
determined in accordance with subsection (b) below, which amount of total
reserves shall include all collection fee accruals. "Closing Date Net A/R" means
an amount equal to Closing Date LWI A/R less Closing Date LWI
33
<PAGE> 34
Reserves. "A/R Deductible" means an amount equal to 0.10 multiplied by Closing
Date Net A/R. "Total First Year A/R Collections" means an amount equal to the
aggregate amount collected in cash on or prior to the first year anniversary of
the Closing Date by LWI, Sabratek and the Third-Party Collection Agent (as
hereinafter defined) with respect to Closing Date LWI A/R (net of any discounts
or concessions or expenses related to collection), as finally determined in
accordance with subsection (d) below. "First Anniversary A/R Make Whole Payment"
means an amount equal to the excess of (x) Closing Date Net A/R less the A/R
Deductible over (y) Total First Year A/R Collections; provided that the First
Anniversary A/R Make Whole Payment shall equal zero if (i) Total First Year A/R
Collections exceed (ii) the result of Closing Date Net A/R less the A/R
Deductible.
(b) Determination of Closing Date LWI A/R and Reserves. Subsequent to
the Closing, Ralin shall deliver to Sabratek a statement of Closing Date LWI A/R
and Closing Date A/R Reserves (the "Closing Date A/R Statement"). Ralin will (i)
make available to Sabratek and its agents, attorneys and accountants upon
reasonable advance notice all records and work papers necessary to understand
the Closing Date A/R Statement and to calculate Closing Date LWI A/R and Closing
Date LWI Reserves and (ii) allow Sabratek and its agents, attorneys and
accountants upon reasonable advance notice to interview any Ralin personnel
significantly involved in the preparation of the Closing Date A/R Statement. In
addition, Sabratek will cause LWI to afford Ralin similar access with respect to
LWI to the extent in any dispute contemplated by this subsection such access is
reasonably necessary.
(c) Six Month Anniversary Collection Efforts. Prior to the six-month
anniversary of the Closing Date, Sabratek shall cause LWI or a third party (at
the discretion of Sabratek) to use reasonable best efforts to collect Closing
Date LWI A/R. Also prior to the six-month anniversary of the Closing, Ralin and
Sabratek shall mutually agree upon a third-party (the "Third-Party Collection
Agent") who shall be engaged to collect all then uncollected Closing Date LWI
A/R. The Third-Party Collection Agent shall commence such collection efforts
immediately following such six-month anniversary and shall continue its
collection efforts until the earlier of (i) the time at which all such Closing
Date LWI A/R have been collected or are determined by such agent to be
uncollectible and (ii) the one-year anniversary of the Closing Date, or until
such later time as mutually agreed by Ralin and Sabratek. The Third-Party
Collection Agent shall use reasonable best efforts to collect Closing Date LWI
A/R. The agreement pursuant to which the Third-Party Collection Agent is engaged
shall be mutually acceptable to both Sabratek and Ralin. Sabratek shall pay all
of the fees and expenses of the Third-Party Collection Agent. All Closing Date
LWI A/R collected by such Agent on or prior to the one-year anniversary of the
Closing Date shall be promptly delivered to Sabratek, or any of such Closing
Date LWI A/R paid directly to LWI or Sabratek shall be retained by them.
(d) Determination of Total First Year A/R Collections. Within 10
business days after the first anniversary of the Closing Date, Sabratek and its
independent auditors, at Sabratek's cost, shall deliver to Ralin a statement of
Total First Year A/R Collections (the "Collected A/R Statement"). Sabratek and
its auditors will (i) make available to Ralin and its agents, attorneys and
accountants upon reasonable advance notice all records and work papers necessary
to understand the Collected A/R Statement and to calculate Total First Year A/R
Collections and (ii) allow Ralin and its agents, attorneys and accountants upon
34
<PAGE> 35
reasonable advance notice to interview any Sabratek or LWI personnel or
independent auditor personnel significantly involved in the preparation of the
Collected A/R Statement.
(e) Payment of First Year A/R Make Whole Payment. Ralin and Sabratek
shall immediately following the final determination of the First Anniversary A/R
Make Whole Payment jointly direct the escrow agent with respect to the escrow
fund contemplated by Exhibit K-1 to this Agreement to distribute to Sabratek in
cash an amount equal to the First Anniversary Make Whole Payment (to the extent
such escrow fund is sufficient for such purpose, taking into account the face
amount of any then pending claims against the contents of such escrow fund);
provided that Ralin shall nonetheless be obligated to pay to Sabratek an amount
equal to the First Anniversary A/R Make Whole Payment even if the amount of such
payment is not fully available from the escrow fund described above.
Notwithstanding any other provision of this Agreement or any exhibit hereto, no
distribution shall be made out of the escrow fund described above pursuant to
Section 5 of the respective escrow agreement until such time as the First
Anniversary A/R Make Whole Payment has been determined in accordance with this
Agreement and a distribution is made out of such escrow fund (to the extent it
is sufficient for such purpose) to Sabratek.
(f) Post-One-Year Anniversary Date Collections. In the event, and only
in the event, that Ralin is required to make a First Anniversary A/R Make Whole
Payment to Sabratek pursuant to subsection (e) above:
(i) "Remaining A/R" shall mean the uncollected Closing Date
LWI A/R on the first anniversary date after the Closing Date. "Ralin
A/R" shall mean the youngest accounts receivables included in the
Remaining A/R having an aggregate face amount equal to the First
Anniversary A/R Make Whole Payment. "Sabratek A/R" shall mean the next
youngest accounts receivables included in the Remaining A/R, after the
Ralin A/R, having an aggregate face amount equal to the A/R Deductible.
"Shared A/R" shall mean the Remaining A/R that is not Ralin A/R or
Sabratek A/R. "Proceeds" shall mean all of the proceeds (net of any
discounts or concessions or expenses related to collection) received
from the collection of the specified accounts receivables.
(ii) Upon the payment in full to Sabratek of the First
Anniversary A/R Make Whole Payment, the Ralin A/R shall be transferred
and conveyed to Ralin by LWI pursuant to a bill of sale reasonably
acceptable to Ralin.
(iii) Sabratek shall retain all Proceeds received from the
collection of the Sabratek A/R and any such Proceeds received by Ralin
shall be promptly paid over to LWI.
(iv) Sabratek shall pay to Ralin all Proceeds received from
the collection of the Ralin A/R and the Shared A/R, until such time as
Ralin has received an amount of Proceeds from the Ralin A/R and Shared
A/R equal to the First Anniversary A/R Make Whole Payment.
(v) Once Ralin has received an amount of Proceeds from the
Ralin A/R and Shared A/R equal to the First Anniversary A/R Make Whole
Payment, then Sabratek shall
35
<PAGE> 36
retain all Proceeds from the collection of the Shared A/R (and any such
Proceeds received by Ralin shall be promptly paid over to LWI), until
such time as Sabratek has received an amount of Proceeds from the
collection of the Sabratek A/R and Shared A/R equal to the A/R
Deductible.
(vi) Once Ralin has received an amount of Proceeds from the
Ralin A/R and the Shared A/R equal to the First Anniversary A/R Make
Whole Payment and Sabratek has received an amount of Proceeds from the
collection of the Sabratek A/R and the Shared A/R equal to the A/R
Deductible, then Sabratek and Ralin shall each be entitled to one-half
of the Proceeds from the collection of the Ralin A/R still outstanding
and the Shared A/R still outstanding. Sabratek and Ralin shall mutually
agree on a process and timetable from time to time with respect to any
payments required to be made pursuant to this subsection (vi).
(vii) If Ralin determines in good faith that LWI is not
diligently collecting the Shared A/R at any time after the one year
anniversary of the Closing Date, then Ralin shall have the right, but
not the obligation, to select a third-party collection agent
(reasonably acceptable to LWI) to collect the Shared A/R on terms
(including compensation and collection expenses) reasonably acceptable
to LWI; provided, however, that this right of Ralin to engage a
third-party collection agent shall terminate (and such agent may be
terminated at the discretion of Sabratek if one is then serving)
immediately after such time as Ralin has received an amount of Proceeds
from the Ralin A/R and the Shared A/R equal to the First Anniversary
A/R Make Whole Payment.
(g) Treatment of First Anniversary A/R Make Whole Payment. The First
Anniversary A/R Make Whole Payment shall not be subject to the indemnification
Deductible or count toward indemnification Cap contemplated by Article VIII.
(h) LWI Receivables Books and Records. At all times Sabratek shall
cause LWI to maintain on its books and shall cause LWI to not transfer any
Closing Date LWI A/R, except as expressly contemplated by this Agreement.
5.15. Cooperation with Post-Closing Audit. After the Closing, Ralin
shall cause to be prepared audited LWI 1998 Financial Statements as soon as
practicable, at the expense of Sabratek as contemplated by this Agreement, and
shall reasonably cooperate in the audit of the LWI 1998 Financial Statements for
the fiscal year 1998, shall make available to Sabratek for examination and
copying all relevant documents in its possession and shall cause its employees
to answer reasonable questions and render other reasonable assistance to
Sabratek in completing such audit.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation To Effect the Transaction.
The respective
36
<PAGE> 37
obligation of each party to consummate the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Regulatory Approvals; Consents. All regulatory approvals and
filings required to consummate the transactions contemplated hereby, including
the Ralin Governmental Approvals and Sabratek Governmental Approvals, shall have
been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired (all such approvals and
the expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals"), and such Requisite Regulatory Approvals shall
not impose terms or conditions which are reasonably likely to materially
adversely effect Ralin, LWI or Sabratek, or their respective subsidiaries.
(b) No Proceedings, Injunctions or Restraints; Illegality. No action or
proceeding by any governmental authority or other Person shall have been
commenced that challenges the validity or legality of the transactions
contemplated by this Agreement, provided that this condition may be waived upon
the written agreement of Ralin and Sabratek. No judgment, order, injunction or
decree issued by any governmental authority or other legal restraint or
prohibition preventing the consummation of the Transaction or any of the other
transactions contemplated by this Agreement shall be in effect. No law, statute,
rule, regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any governmental authority which prohibits,
materially restricts or makes illegal the consummation of the Transaction or the
other transactions contemplated by this Agreement.
(c) Stockholder Approval. This Agreement and the transactions
contemplated hereby (including the amendments to Ralin's corporate charter set
forth in the Ralin Disclosure Schedule) shall have been approved by the
requisite holders of capital stock of Ralin (the "Ralin Stockholder Approval").
(d) Transition Services Agreement. The parties shall have entered into
an agreement for transition services in the form attached as Exhibit D (the
"Transition Services Agreement").
(e) Transfer of Employees. Each of the persons described on Exhibit E
shall have been transferred from Ralin to LWI, and such persons shall be
employed by LWI upon and immediately after the Closing.
(f) HCFP Release. Ralin shall have entered into a release agreement
with HCFP Funding, Inc. ("HCFP") (in form and substance reasonable satisfactory
to Sabratek) for the full release of LWI thereunder and for the release of
HCFP's Liens on assets of LWI and shall have caused to be delivered to Sabratek
executed copies of UCC-3 release statements or their equivalent with respect to
all liens of HCFP on the assets of LWI (in form and substance reasonably
satisfactory to Sabratek).
(g) Employment Agreement. Bill Willis and LWI shall have entered into
an employment agreement of the form attached as Exhibit F.
(h) Escrow Agreements. The parties and the respective Escrow Agent
shall have
37
<PAGE> 38
entered into each of the Escrow Agreements (as defined in Section 8.4).
6.2. Conditions to Obligations of Sabratek. The obligation of Sabratek
to effect the Closing is also subject to the satisfaction of or waiver by
Sabratek at or prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Ralin set forth in this Agreement that are qualified with reference to a
Material Adverse Effect or materiality shall be true and correct, and the
representations and warranties of Ralin that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date. Sabratek shall have received a certificate signed on behalf of LWI
by an authorized officer to such effect.
(b) Performance of Obligations of Ralin. Ralin shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing, and Sabratek shall have received a
certificate signed on behalf of Ralin by an authorized officer to such effect.
(c) Legal Opinion; Closing Certificates and Documents. Sabratek shall
have received from Gardner, Carton & Douglas, counsel to Ralin, an opinion
substantially in the form attached as Exhibit G. In addition, Ralin shall
provide Sabratek with such customary closing documents and certificates as
Sabratek or its counsel shall reasonably request and all forms required to make
an election under Section 338(h)(10) of the Code with respect to LWI.
(d) Resignation of Directors. Sabratek shall have received from each
person who is, immediately prior to the Closing, a director of LWI his written
resignation, effective as of the Closing, from such director position.
(e) Intellectual Property Transfer. Sabratek shall have received from
Ralin duly executed intellectual property transfer documents in recordable form
(and in a form reasonably acceptable to Sabratek), with respect to the transfer
to LWI of the LWI-Related Intellectual Property.
(f) Transfer of Assumed Contracts and Assumed Rights. The Assumed
Contracts shall have been duly transferred and assigned from Ralin to LWI
pursuant to the Assignment and Assumption Agreement and the Assumed Rights shall
have transferred and assigned from Ralin to LWI, and in each case any consent or
notice required in connection therewith shall have been duly obtained or given
(and evidence thereof reasonable satisfactory to Sabratek shall have been
delivered to Sabratek), and the same shall be in full force and effect with
respect to LWI.
(g) Material Adverse Change. There shall not have occurred any change
with respect to LWI (i) that would constitute a Material Adverse Effect on LWI,
(ii) that would be materially adverse to the prospects of LWI or to its customer
or employee relations, or (iii) that Sabratek reasonably believes has or would
result in $1,000,000 or more of adverse consequences to the assets, operations
(including future operations) or financial condition of LWI.
38
<PAGE> 39
(h) Fairness Opinion. Warburg, Dillon Read shall have brought-down its
fairness opinion (if such is requested by Sabratek) with respect to the
transactions contemplated by this Agreement to the Closing Date, but this shall
be a condition to Closing only if (x) Sabratek has used its reasonable best
efforts to obtain such bring-down fairness opinion and (y) the failure to obtain
such opinion is due to an adverse change with respect to LWI occurring after the
date of this Agreement.
6.3. Conditions to Obligations of Ralin. The obligation of Ralin to
effect the Closing is also subject to the satisfaction of or waiver by Ralin at
or prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Sabratek set forth in this Agreement that are qualified with a reference to a
Material Adverse Effect or materiality shall be true and correct, and the
representations and warranties of Sabratek that are not so qualified shall be
true and correct in all material respects, in each case, as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date. Ralin shall have received a certificate signed on behalf of
Sabratek by an authorized officer to the such effect.
(b) Performance of Obligations of Sabratek. Sabratek shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing, and Ralin shall have
received a certificate signed on behalf of Sabratek by an authorized officer of
to such effect.
(c) Legal Opinion; Closing Certificates. Ralin shall have received from
Kirkland & Ellis, counsel to Sabratek, an opinion substantially in the form
attached as Exhibit H together with such customary closing documents and
certificates as Ralin or its counsel shall reasonably request and all forms
required from Sabratek to make an election under Section 338(h)(10) of the Code.
(d) Registration Agreement. The parties shall have entered into an
agreement for registration rights related to the Share Consideration in the form
attached as Exhibit I (the "Registration Rights Agreement").
(e) Material Adverse Change. There shall not have occurred any change
which would constitute a Material Adverse Effect on Sabratek and its
subsidiaries, taken as a whole.
(f) Letter of Credit. Sabratek shall have obtained an irrevocable
stand-by letter of credit in the amount of $8,000,000 (from a financial
institution and in a form reasonably satisfactory to Ralin and its counsel) (the
"Letter of Credit"), which letter of credit shall be security for Sabratek's
true-up payment obligation under the Registration Rights Agreement and be in
full force and effect as of the Closing.
6.4. Efforts to Close. Each of the parties will use its reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including the satisfaction, but not waiver of the closing conditions
set forth in this Article VI).
39
<PAGE> 40
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of Ralin and Sabratek, if the Board of
Directors of each so determines by a vote of a majority of the members of its
entire Board;
(b) by either the Board of Directors of Ralin or the Board of Directors
of Sabratek, if any governmental authority which must grant a Requisite
Regulatory Approval has denied approval of the Transaction and such denial is
unappealable, or any governmental authority of competent jurisdiction shall have
issued an order permanently enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement and such denial is
unappealable;
(c) by either the Board of Directors of Ralin or the Board of Directors
of Sabratek (provided that the terminating party is not then in material breach
of any representation, warranty, covenant or other agreement contained herein),
if (x) there shall have been a material breach of any of the representations or
warranties or any of the covenants or agreements set forth in this Agreement on
the part of the other party, which breach is not cured within 15 days following
written notice to the party committing such breach, or which breach, by its
nature or timing, cannot be cured prior to July 3, 1999; or (y) the Closing
shall not have occurred on or before August 17, 1999; or
(d) by Sabratek, if Sabratek shall not have received from each person
who is, immediately prior to the Closing, a director of LWI his written
resignation, effective as of the Closing, from such position.
7.2. Effect of Termination. In the event of termination of this
Agreement by either Ralin or Sabratek as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect, and none of Ralin, LWI or
Sabratek or any of their directors or officers shall have any liability of any
nature whatsoever hereunder, or in connection with the transactions contemplated
hereby, except that (i) Sections 7.2, 9.1, 9.2 and 9.11 shall survive any
termination of this Agreement, and (ii) notwithstanding anything to the contrary
contained in this Agreement, neither Ralin nor Sabratek shall be relieved or
released from any liabilities or Damages (as defined in Section 8.1) arising out
of its willful breach of any provision of this Agreement.
7.3. Amendment; Extension; Waiver. At any time prior to the Closing,
the parties hereto, may (i) amend any term or provision of this Agreement, (ii)
extend the time for the performance of any of the obligations or other acts of
the parties hereto, (iii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iv) waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such
40
<PAGE> 41
amendment, extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such amendment, extension or
waiver or failure to insist on strict compliance with any obligation, covenant,
agreement or condition in this Agreement shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE VIII.
INDEMNIFICATION
8.1. Agreement to Indemnify.
(a) Upon the terms and subject to the conditions of this Agreement,
after the Closing, Ralin shall indemnify and hold harmless Sabratek and its
subsidiaries and their respective officers, directors, employees and agents
(collectively, the "Sabratek Indemnitees") from and against any and all losses,
damages, costs, expenses, liabilities, judgments, awards, fines, sanctions,
penalties, charges, amounts paid in settlement and costs of mitigation,
including reasonable costs, fees and expenses of attorneys and accountants
(collectively, "Damages") incurred or suffered by any Sabratek Indemnitees as a
result of or relating to (i) any breach or inaccuracy as of the date hereof of
any representation or warranty made by Ralin in this Agreement, any of the other
agreements contemplated hereby or in any certificates or instruments furnished
by Ralin pursuant to this Agreement; (ii) any breach or nonfulfillment by Ralin
of any of its covenants, agreements or other obligations contained in this
Agreement, any of the other agreements contemplated hereby or in any
certificates or instruments furnished by Ralin pursuant to this Agreement; (iii)
any income Taxes of Ralin, LWI or its subsidiaries arising attributable to any
taxable period (or portion thereof) ending on or before the Closing; (iv) any
Tax imposed on LWI by reason of (A) LWI having been a member of any Affiliated
Group on or prior to the Closing Date (including as a result of the application
of Treasury Regulation Section 1.1502-6 or any corresponding provision of state,
local or foreign Tax law) and (B) any obligation of LWI to pay the Taxes of any
other Person, whether by contract, agreement or otherwise; and (v) the failure
of Ralin to satisfy any of its obligations under Employee Benefit Plans.
(b) Upon the terms and subject to the conditions of this Agreement,
after the Closing, Sabratek shall indemnify and hold harmless Ralin, its
subsidiaries and their respective officers, directors, employees and agents
(collectively, the "Ralin Indemnitees") from and against any and all Damages
incurred or suffered by any Ralin Indemnitee as a result of or relating to (i)
any breach or inaccuracy as of the date hereof of any representation or warranty
of the Sabratek contained in this Agreement, any of the other agreements
contemplated hereby or in any certificates or instruments furnished by Sabratek
pursuant to this Agreement; (ii) any breach or nonfulfillment by Sabratek of any
of its covenants, agreements or other obligations contained in this Agreement,
any of the other agreements contemplated hereby (and any breach or
nonfulfillment by LWI of any of LWI's covenants, agreements or other obligations
contained in the Assignment and Assumption Agreement) or in any certificates or
instruments furnished by Sabratek pursuant to this Agreement; and (iii)
liabilities or obligations related to acts, omissions, events or circumstances
arising or occurring after the Closing.
8.2. Procedure for Indemnification. Except as otherwise provided to the
contrary in
41
<PAGE> 42
Section 5.12(h) or the Escrow Agreement, if a claim for Damages is to be made by
a Person entitled to indemnification under this Article VIII (an "Indemnified
Party") or promptly after receipt by an Indemnified Party of notice of the
commencement of any Proceeding by a third party in respect of which the
Indemnified Party will seek indemnification hereunder, the Indemnified Party
shall promptly notify the other party hereto that is obligated to provide such
indemnification (an "Indemnifying Party") thereof of the facts and circumstances
giving rise to such claim; provided, however, that the failure to so notify an
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent that (and only to the extent that) such failure
shall have caused actual prejudice to the Indemnifying Party. The Indemnifying
Party shall be entitled to participate in the defense of such claim and shall
also be entitled to assume control at its own cost of such defense with counsel
reasonably satisfactory to such Indemnified Party upon giving the Indemnified
Party notice within sixty days after notification from the Indemnified Party of
such claim; in each case with prejudice to the right of the Indemnifying Party
to thereafter contest its obligation to provide indemnification hereunder;
provided, however, that:
(a) the Indemnified Party shall be entitled to participate in (but not
control) the defense of such claim and to employ counsel at its own expense to
assist in the handling of such claim; and
(b) the Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into any settlement of such claim or
ceasing to defend against such claim, which approval will not to be unreasonably
withheld or delayed.
Notwithstanding the foregoing provisions, Sabratek or LWI shall be entitled to
control the defense of any claim with respect to which it intends to seek
indemnification, provided that (i) Sabratek determines in good faith that the
Cap (as defined in Section 8.3) would be exceeded if such claim were adversely
determined against Sabratek or LWI, and (ii) Sabratek or LWI, as the case may
be, employs counsel reasonably satisfactory to Ralin.
Except as otherwise provided to the contrary in Section 5.12(h) or the
Escrow Agreement, after written notice by the Indemnifying Party to the
Indemnified Party of its election to assume control of the defense of any claim
as provided herein, the Indemnifying Party shall not be liable to such
Indemnified Party hereunder for any legal expenses or other costs and expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof unless there is an actual conflict of interest that cannot be reasonably
waived and that requires the parties to retain separate legal counsel under
applicable rules of professional conduct for such counsel. If the Indemnifying
Party does not assume control of the defense of such claim as provided herein or
diligently conduct such defenses if assumed, the Indemnified Party shall have
the right to defend such claim in a reasonable manner, including settling such
claim with the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed.
8.3. General Provisions Regarding Indemnification and Remedies.
(a) Limitations on Indemnification. Notwithstanding anything herein to
the contrary, Ralin shall have no liability for indemnification with respect to
the matters described in clause (i)
42
<PAGE> 43
of Section 8.1(a): (x) unless and until the aggregate amount of all Damages for
which indemnification is so sought by the Sabratek Indemnitees from Ralin
exceeds $250,000 (the "Deductible"), whereupon Ralin shall be liable to
indemnify the Sabratek Indemnitees for amounts exceeding in the aggregate
$100,000; or (y) to the extent that the aggregate amount of all payments made by
Ralin pursuant to clause (i) of Section 8.1(a) would exceed $5,000,000 (the
"Cap"); provided, however, that the Deductible and Cap shall not be applicable
to claims of fraud or intentional misrepresentation by Ralin. The parties
acknowledge and agree that certain breaches of the representations and
warranties of Sabratek may negatively affect the trading price of Sabratek
Common Stock, thus creating or increasing Sabratek's obligation to make the
true-up payment to Ralin pursuant to the Registration Rights Agreement or
decreasing Ralin's obligation to make the true-down payment to Sabratek
thereunder. Accordingly, the parties agree that the indemnification obligations
of Sabratek hereunder with respect to breaches of representations and warranties
shall be reduced by the amount of any benefit received by Ralin through the
creation of, or increase in, the true-up payment or any reduction in the
true-down payment as contemplated by the Registration Rights Agreement;
provided, however, that Sabratek shall have the burden of proof with respect to
proving any such benefit received by Ralin.
(b) Effect of Insurance. In determining the amount of any claim for
which a Sabratek Indemnitee is entitled to indemnification pursuant to this
Article VIII, there shall be subtracted an amount equal to all insurance
proceeds actually received by any Sabratek Indemnitee by reason of such claim.
If a claim of a Sabratek Indemnitee is covered by insurance of any Sabratek
Indemnitee, the Sabratek Indemnitees agree to use all commercially reasonable
efforts to recover the amount of such claim from the issuer before seeking
indemnification hereunder.
(c) Mitigation; Subrogation; No Consequential Damages. The Indemnified
Party shall take all commercially reasonable steps to mitigate all indemnifiable
Damages upon and after becoming aware of any event which could reasonably be
expected to give rise to any Damages of the Indemnifying Party. To the extent
that an Indemnifying Party has discharged any claim for indemnification
hereunder, the Indemnifying Party shall be subrogated to all rights of the
Indemnified Party against any third parties.
(d) Certain Claims. The Sabratek Indemnities agree not to (and shall
not be entitled to) bring a claim for indemnification hereunder for any breach
or inaccuracy or nonfulfillment of any representation, warranty, covenant or
agreement of Ralin hereunder of which Sabratek had actual (and not constructive)
knowledge of on or before the Closing Date, including, without limitation, any
matter disclosed on any Schedule to this Agreement. Ralin shall have the burden
of proof with respect to Sabratek's actual knowledge. Ralin shall have no
liability hereunder for any Damages resulting from any acts or omissions of any
Sabratek Indemnitee. The parties hereby acknowledge and agree that Sabratek has
actual knowledge of the matters disclosed in the Ralin Disclosure Schedule.
(e) Sole Remedy. Except as otherwise provided in this Agreement and
with respect to claims of fraud or intentional misrepresentation by Ralin, the
sole and exclusive remedy of the parties hereto for any and all claims against
the other party hereto with respect to the transactions contemplated herein
shall be a claim for indemnification under this Article VIII on the terms and
subject to the conditions of this Agreement.
43
<PAGE> 44
(f) Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing. Notwithstanding the
foregoing, the representations and warranties contained in Article II (except
Sections 2.3 (capitalization), 2.5 (financial statements), 2.13 (taxes) and 2.23
(accounts receivable)) and Article III hereof shall terminate twelve months
after the Closing Date; the representations and warranties contained in Sections
2.5 (financial statements) and 2.23 (accounts receivable) shall terminate
eighteen months after the Closing Date; and the representations and warranties
contained in Sections 2.3 (capitalization) and 2.13 (taxes) shall terminate on
the expiration of the applicable statute of limitations (collectively, the
"Survival Periods"). The liability of Ralin for claims of indemnification under
clause (i) of Section 8.1(a) and the liability of Sabratek for claims of
indemnification under clause (i) of Section 8.1(b) shall be terminated and
deemed waived and released if written notice from the Indemnified Party is not
given as provided herein before expiration of the applicable Survival Period;
provided, however, that such liability shall not terminate (but shall survive
until resolved among the parties) with respect to any claim, whether or not
fixed as to liability or liquidated as to amount, with respect to which the
Indemnified Party has been given written notice prior to the expiration of the
applicable Survival Period.
8.4. Escrow Agreements. At the Closing, Ralin and Sabratek shall enter
into an indemnity escrow agreement in the form of Exhibit J-1 (the
"Indemnification Escrow Agreement") with the escrow agent identified therein
(the "Indemnification Escrow Agent"), and Sabratek shall deposit with the
Indemnification Escrow Agent a portion of the Share Consideration equal to
278,000 shares of Sabratek Common Stock (the "Indemnification Escrow Shares").
The indemnification escrow fund is intended to secure the indemnification
obligations of Ralin under this Agreement; however the indemnification rights of
Sabratek will not be limited to the amount in such fund, but shall be subject to
the limits set forth in Section 8.3(a) above. At the Closing, Ralin and Sabratek
shall also enter into an escrow agreement in the form of Exhibit J-2 (the
"Excess Share Escrow Agreement" and together with the Indemnification Escrow
Agreement, the "Escrow Agreements") with the escrow agent identified therein
(the "Excess Share Escrow Agent" and together with the Indemnification Escrow
Agent, the "Escrow Agents"), and Sabratek shall deposit with the Excess Share
Escrow Agent the remainder of the Share Consideration equal to 622,000 shares of
Sabratek Common Stock (the "Excess Share Escrow Shares" and together with the
Indemnification Escrow Shares, the "Escrow Shares"). The Escrow Shares,
including any proceeds from the sale of such shares in accordance with terms of
the respective Escrow Agreement and the Registration Rights Agreement
(collectively, the "Escrow Fund"), shall be held pursuant to the terms of the
respective Escrow Agreement. Ralin and Sabratek shall deal with the
indemnification escrow fund as specified in Exhibit K-1 and with the excess
share escrow fund as Specified in Exhibit K-2. During the duration of the
Indemnification Escrow Agreement (the "Indemnity Escrow Period"), Sabratek shall
make any claims for indemnification by Ralin under this Agreement only against
the Escrow Funds contained in the indemnification escrow fund pursuant to the
terms of this Agreement and Exhibit K-1, if and to the extent such escrow fund
is sufficient (taking into account all other indemnity claims of Sabratek then
pending, regardless of whether the amount thereof is disputed or the claim is
disputed) to satisfy such claim. Following the one year anniversary of the
Closing Date, Sabratek may pursue new claims for indemnification by Ralin under
this Agreement by bringing such claims against Ralin directly in accordance with
the terms of this Agreement, subject to the limits set forth in Section 8.3.
44
<PAGE> 45
ARTICLE IX.
GENERAL PROVISIONS
9.1. Expenses. Except as otherwise provided in this Agreement, all
costs and expenses incurred by Sabratek in connection with this Agreement and
the transactions contemplated hereby shall be paid by Sabratek, whether or not
the Closing shall occur, and all costs and expenses incurred by Ralin in
connection with this Agreement and the transactions contemplated hereby shall be
paid by Ralin, whether or not the Closing shall occur; provided, however, that:
(a) Sabratek shall pay the following amounts, whether or not the
Closing shall occur (the "Basic Expenses"): (i) the fees and expenses of Ralin's
counsel (Edgar F. Heizer, III and Gardner, Carton & Douglas) related to the
preparation of this Agreement in an amount not to exceed in the aggregate
$100,000; (ii) the fees, expenses and disbursements of Arthur Andersen LLP
("AA") in connection with the audit of LWI pursuant to the terms of the
engagement letter between AA and Sabratek; and (iii) the HSR Act filing fees of
Ralin, which filing fees were $45,000; and
(b) In the event that the Closing shall not occur (other than due to
Ralin's failure to obtain the Ralin Stockholder Approval or a willful act or
omission by Ralin), Sabratek shall pay to Ralin, in addition to the Basic
Expenses, $100,000 as reimbursement for Ralin's additional out-of-pocket
expenses and administrative costs related to the transactions contemplated by
this Agreement (for which Ralin shall not be required to account).
9.2. Notices. All notices and other required communications hereunder
shall be in writing and shall be deemed given: if delivered personally, when so
delivered; if telecopied, on the date telecopied; if mailed, by registered or
certified mail (postage prepaid and return receipt requested), on the date five
days after deposit in the mail; or if delivered by overnight courier, on the
next business day, in each case to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice, which
notice will be effective only upon receipt):
(a) if to Sabratek, to:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: K.S. Padda
Fax: (847) 647-2382
45
<PAGE> 46
with a copy to:
Carter W. Emerson
Kirkland & Ellis
200 E. Randolph
Chicago, Illinois 60601
Fax: (312) 861-2200
(b) if to Ralin
Ralin Medical, Inc.
1615 Barclay Boulevard
Buffalo Grove, Illinois 60089
Attention: L. Peter Smith
Fax: (847) 478-9502
with a copy to:
Gardner, Carton & Douglas
321 North Clark Street, Suite 3400
Chicago, Illinois 60610
Attention: Troy M. Calkins
Fax: (312) 644-3381
9.3. Interpretation. When a reference is made in this Agreement to
Sections, Schedules or Exhibits, such reference shall be to a Section of or
Schedule or Exhibit to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require
Sabratek, Ralin or any of their respective affiliates to take any action which
would violate any applicable law, rule or regulation. The parties intend that
each representation, warranty and covenant contained herein shall have
independent significance.
9.4. Counterparts; Facsimile. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement. The
Agreement may be executed and delivered by facsimile transmission, and a
facsimile of this Agreement or of a signature of a party shall be as effective
as an original.
9.5. Entire Agreement. This Agreement (including the Disclosure
Schedule, Exhibits, documents and instruments referred to herein) constitutes
the entire agreement of the parties and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
9.6. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Illinois, without regard to any
applicable conflicts of law which would result in the application of any other
state's law.
46
<PAGE> 47
9.7. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.8. Publicity. Except as otherwise required by applicable law or the
rules of The Nasdaq Stock Market, Inc. National Market, neither Ralin nor
Sabratek shall, or shall permit any of their respective affiliates to, issue or
cause the publication of any press release or other public announcement with
respect to, or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed. Furthermore, Ralin
shall not make any written or oral communication to the press or any financial
analyst regarding this Agreement or the agreements and transactions contemplated
hereby without the prior written consent of Sabratek and shall direct all press
and financial inquiries regarding such matters to Sabratek's Chief Financial
Officer or President; Ralin shall inform its relevant employees of this
provision.
9.9. Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations set forth herein shall be assigned
by either of the parties (whether by operation of law or otherwise) without the
prior written consent of the other party; provided, however, that Sabratek may
assign its rights and obligations under this Agreement to one of its affiliates;
provided, further, that any such assignment shall not release or discharge
Sabratek of any liability arising under or in connection with this Agreement or
the documents and instruments executed and delivered in connection with this
Agreement (including the Registration Rights Agreement and the Assignment and
Assumption Agreement). Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and permitted assigns. This Agreement (including the
Disclosure Schedule, Exhibits, documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, other than in respect to the parties entitled to
indemnification pursuant to Article VIII.
9.10. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumptions or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state,
county, local or foreign law or statute shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise.
9.11. Dispute Resolution. To the extent feasible, the parties desire to
resolve any controversies or claims or issues arising out of or relating to this
Agreement through discussions and negotiations between each other. The parties
agree to use their reasonable best efforts to attempt to resolve any disputes,
controversies, claims or issues arising out of or relating to this Agreement by
face-to-face negotiations with each other. In the event that, after discussions,
such
47
<PAGE> 48
controversies, claims or issues cannot be resolved solely between the parties,
then the parties shall, within 10 days after either Sabratek or Ralin gives
notice to the other, jointly submit their dispute to binding arbitration in the
City of Chicago, Illinois. Such arbitration shall be administered by the
American Arbitration Association (the "Institute") in accordance with its then
prevailing rules for arbitration of business disputes (except as otherwise
provided by this Agreement), by three independent and impartial arbitrators, one
of whom shall be appointed by Sabratek, one of whom shall be appointed by Ralin
and one of whom shall be appointed by the Institute (collectively, the
"Arbitrator"). Notwithstanding anything to the contrary provided in Section 9.6
of this Agreement, the arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. ss. 1 et. seq. The Arbitrator shall permit and
facilitate such discovery as it shall determine appropriate in the
circumstances, taking into account the needs of the parties hereto and the
desirability of making discovery expeditious and cost effective. The arbitrator
may issue such interim orders in accordance with principles of equity as may be
necessary to protect any party from irreparable harm during the pendency of any
arbitration, including entry of a preliminary injunction. Any such order shall
be without prejudice to the final determination of the controversy. Each party
to this Agreement hereby agrees that such arbitration shall be completed and a
final arbitration decision rendered within 60 days of the submission of the
respective dispute to arbitration, and each of such parties shall take all
actions appropriate and necessary to cause such arbitration to be so completed
within such 60 day period. The Arbitrator shall not be empowered to award any
party any punitive damages in connection therewith, and each party hereby
irrevocably waives any right to recover such punitive damages. The determination
of the Arbitrator as to a dispute shall be final and binding for all purposes of
this Agreement. Each party to any such arbitration shall use its best efforts
and utmost diligence to safeguard and to protect against disclosure, misuse,
espionage, loss and theft and shall keep and maintain in strict confidence and
shall not disclose to any third party any information that may be disclosed to
it in connection with such arbitration proceeding, other than to its employees
and agents who require access to such information to perform their duties and
other than is required or appropriate to disclose pursuant to applicable law
(including pursuant to securities laws and any reporting requirements
thereunder) or court order or in any arbitration contemplated by this Agreement;
the arbitrator shall to the extent permitted by the rules and regulations of the
Institute be likewise bound by this confidentiality provision and shall not make
public its opinion or findings in connection with the relevant proceeding. The
fees and expenses of the Arbitrator shall be equally shared by the parties and
each of the parties shall bear its own costs and expenses in connection with any
such arbitrations; provided that if the right of a party or parties to
indemnification for any particular matter is upheld or sustained in such
arbitration, the other party or parties to such arbitration shall bear all of
the fees and expenses of the Arbitrator, all of their own costs and expenses and
the reasonable costs and expenses (including reasonable attorneys' fees and
expenses) of the party or parties whose claim to indemnity is so upheld or
sustained.
9.12. Schedules and Exhibits. All Schedules and Exhibits attached
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
[SIGNATURE PAGE FOLLOWS]
48
<PAGE> 49
IN WITNESS WHEREOF, Sabratek and Ralin have caused this STOCK PURCHASE
AGREEMENT to be duly executed as of the date first above written.
SABRATEK CORPORATION RALIN MEDICAL, INC.
By: By:
Name: Name:
Title: Title:
49
