<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1999
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SABRATEK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3700639
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8111 NORTH ST. LOUIS AVENUE, SKOKIE, ILLINOIS 60076
(847) 720-2400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
K. SHAN PADDA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SABRATEK CORPORATION
8111 NORTH ST. LOUIS AVENUE, SKOKIE, ILLINOIS 60076
(847) 720-2400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
SCOTT HODES, ESQ.
DAVID S. GUIN, ESQ.
ROSS & HARDIES
150 NORTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60601
(312) 558-1000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each Class of Amount to be Registered Proposed Maximum Amount of Registration Fee
Securities to be Registered Aggregate Offering
Price (1)
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<S> <C> <C> <C>
Common Stock 937,500 $21,768,750 $6,052
$.01 par value
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</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for purposes of calculating the
registration fee, based on the average of the high and low trading prices
for the common stock as reported by the NASDAQ National Market on July 13,
1999.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY STATE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SUBJECT TO COMPLETION - DATED JULY 16, 1999
PROSPECTUS
937,500 SHARES
SABRATEK CORPORATION
COMMON STOCK
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This prospectus relates to the offer and sale of up to 937,500 shares
of common stock from time to time by Ralin Medical, Inc. and EGS Securities
Corp. Both Ralin and EGS will be selling stockholders offering shares of our
common stock by means of this prospectus.
Ralin acquired the shares of common stock offered by this prospectus as
part of a transaction in which we purchased LifeWatch, Inc., which was a
wholly-owned subsidiary of Ralin. In that transaction, Ralin received 900,000
shares of our common stock as partial consideration for LifeWatch. The shares of
common stock 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 being offered by means of this prospectus. As part of the
transaction, we also agreed to register the sale of the 900,000 shares of common
stock by Ralin under the Securities Act of 1933, as amended. Unless there is a
purchase price adjustment, Sabratek will not receive any of the proceeds from
the sale of the shares by Ralin. See "USE OF PROCEEDS."
EGS provided us with assistance in performing due diligence concerning
the business of LifeWatch, in structuring and negotiating the acquisition and in
reviewing and preparing documentation in exchange for which we agreed to pay EGS
37,500 shares of our common stock. We have delivered to EGS all 37,500 shares of
our common stock to which EGS was entitled for providing us the services
described above. See "SELLING STOCKHOLDERS."
The shares of our common stock are quoted on the Nasdaq National Market
under the symbol "SBTK".
The shares offered by this prospectus involve a high degree of risk.
See "RISK FACTORS" beginning on Page 1.
THE DATE OF THIS PROSPECTUS IS JULY __, 1999
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TABLE OF CONTENTS
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Page
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WHERE YOU CAN FIND MORE INFORMATION................................... ii
RISK FACTORS.......................................................... 1
SELLING STOCKHOLDERS.................................................. 12
USE OF PROCEEDS....................................................... 13
PLAN OF DISTRIBUTION.................................................. 13
LEGAL MATTERS......................................................... 15
EXPERTS............................................................... 15
RECENT DEVELOPMENTS................................................... 15
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.,
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room. Our SEC filings are also available to the public at the
SEC's web site at http://www.sec.gov. You may also reach us on our Internet web
site at http://www.sabratek.com.
The SEC allows us to incorporate by reference the information that we
file with the SEC, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings (File No.
1-11831) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
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a. our annual report on Form 10-K for the fiscal year ended
December 31, 1998;
b. our quarterly report on Form 10-Q, for the fiscal quarter
ended March 31, 1999;
c. our current report on Form 8-K, dated May 19, 1999 and filed
with the SEC on May 25, 1999;
d. our current report on Form 8-K, dated June 1, 1999 and filed
with the SEC on June 16, 1999 and any later filed amendments;
e. our current report on Form 8-K, dated June 7, 1999 and filed
with the SEC on June 16, 1999;
f. our current report on Form 8-K, dated June 29, 1999 and filed
with the SEC on July 14, 1999 and any later filed amendments;
and
g. the description of our capital stock contained in our
registration statement on Form 8-A, declared effective by the
SEC on June 21, 1996; and any amendments or reports filed for
the purpose of updating that description.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
847-720-2400
ATTENTION: VICE PRESIDENT OF FINANCE
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have not authorized anyone to provide information other than the
information provided in this prospectus. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front of this document.
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RISK FACTORS
In addition to the other information in this prospectus, the risk
factors set forth below should be considered carefully by potential purchasers
of the shares being offered by this prospectus.
FORWARD-LOOKING STATEMENTS MAY GIVE RISE TO EXPECTATIONS THAT ARE NOT
FULFILLED.
We have made forward-looking statements in this prospectus (and in
certain documents that we incorporate by reference in this prospectus) which may
be affected by risks and uncertainties. We may also make written forward-looking
statements in our periodic reports to the SEC, in our press releases and other
written materials and in oral statements made by our officers, directors or
employees to third parties. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements.
These statements are based on the beliefs and assumptions of our management and
on information currently available to us. Forward-looking statements include
statements preceded by, followed by or that include the words "believes",
"expects", "anticipates", "intends", "plans", "estimates", "designed" or similar
expressions.
Because we are unable to control or predict many factors that will
determine our future performance including financial results, forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions. Our future results may differ materially from
those expressed in the forward-looking statements contained in this prospectus
and in the information incorporated by reference in this prospectus. See "WHERE
YOU CAN FIND MORE INFORMATION." We caution you that a number of important
factors could cause actual results to differ materially from those contained in
any forward-looking statement. See other "Risk Factors" in this section.
Sabratek's management believes these forward-looking statements are
reasonable. However, because these statements are based on current expectations,
you should not place undue reliance on these forward-looking statements, which
are based on current expectations. Forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update publicly any of
them in light of new information or future events.
WE MAY BE UNSUCCESSFUL AT DEVELOPING OR ACQUIRING AND INTRODUCING NEW
OR ENHANCED PRODUCTS, WHICH MAY RESULT IN A REDUCTION IN OUR REVENUE.
Our financial position and results of operations are dependent on our
ability to satisfy the increasingly sophisticated needs of our customers by
developing or acquiring and introducing new products, enhanced versions of
existing products and new complementary products. There can be no assurance that
Sabratek will be able to develop or acquire new or enhanced products. In
addition, our success in developing or acquiring and introducing new or enhanced
products may be affected by a variety of risks, which include, but may not be
limited to, the following:
o the products may require and fail to receive
regulatory clearance or approval,
o the products may be difficult or uneconomical to
manufacture or market,
o the proprietary rights of third parties may preclude
us from marketing these products,
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o scientific developments or technological advancements
may produce more desirable or technologically
advanced products,
o our competitors may market superior or more
cost-effective products and may do so on a more
timely basis,
o errors and malfunctions may be found in products
after their commercial introduction and may not be
corrected in a timely manner, and
o customers may not accept or use the products.
If Sabratek is unable to develop or acquire new or enhanced products
and successfully bring them to market, it could have a material adverse effect
on our financial position and results of operations.
WE MAY BE UNABLE TO CONTINUE TO COMPETE WITH OTHER COMPANIES IN OUR
INDUSTRY THAT HAVE FINANCIAL OR OTHER ADVANTAGES.
The medical products industry is characterized by intense competition.
large competitors, including Abbott Laboratories, Alaris Medical, Inc., Baxter
International Inc., I-Flow Corp., McGaw, Inc., an indirect subsidiary of B.
Braun Melsungen Ag and Sims Deltec, Inc., a subsidiary of Smiths Industries,
PLC, among others, have significant market shares and installed bases of
products in the infusion pump and related disposable supplies industry. Many of
these competitors have substantially greater capital resources, research and
development staffs, regulatory experience, sales and marketing capabilities,
manufacturing facilities and broader product offerings than us. Moreover, we
expect that these competitors will continue to compete aggressively by offering
volume discounts based on "bundled" purchases of a broader range of medical
equipment and supplies, a tactic that we can currently only pursue on a more
limited basis. There can be no assurance that this competition will not
adversely affect our results of operations or our ability to maintain or
increase sales and market share. Currently, we derive substantially all of our
revenues from the sale of our multi-therapy infusion pumps and related
disposable supplies. Further, we expect that revenues from these products will
continue to account for a significant portion of our revenues in the future.
Therefore, if substantially increased competition or technological changes
create a decline in the demand for our infusion pumps and related disposable
supplies, we would experience materially adverse consequences in our financial
position and results of operations.
OUR LONG-TERM STRATEGY MAY BE UNATTAINABLE OR WE MAY BE UNABLE TO
SUCCESSFULLY INTEGRATE COMPANIES OR PRODUCT LINES THAT WE ACQUIRE.
While we have historically focused on the manufacture and distribution
of infusion pumps and related medical devices, our long-term strategy is to
create a virtual hospital room that can be accessed by healthcare providers
through the Internet and telecommunication ports. Eventually, it is our goal to
make our primary products, infusion pumps and related disposable supplies, a
crucial but complimentary element in our business of providing a broad spectrum
of services and products. Because our strategy is visionary and unprecedented
for us, there can be no assurance that we will be able to successfully implement
it.
There can also be no assurance that medical professionals will support
or prescribe implementation of a virtual hospital room or that if they do
support a virtual hospital room, they will direct their patients to select our
products and services. There can be no assurance that third party payors will
provide reimbursements for the products and services of our virtual hospital
room to the extent that we will be able to provide those products and services
on a profitable basis. Moreover, there can be no assurance that we will be able
to create or infiltrate a customer base
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which accepts and purchases the products and services that would be included in
a virtual hospital room.
In addition, part of our strategy includes aggressive expansion of our
operations by acquisition of entities or product lines that contribute to our
ability to create a virtual hospital room. We may use cash from our reserves to
acquire entities or product lines. If we use cash for acquisitions, we could
deplete our liquidity and cash reserves, which could have a material, adverse
effect on our financial position. Furthermore, there can be no assurance that
we will be able to successfully integrate new entities or product lines into our
operations or that we will be able to realize positive financial results from
this integration.
If we are unable to attain our long-term strategy or to successfully
integrate companies or product lines, it could have a material adverse effect on
our financial position and results of operations.
WE ARE INVOLVED IN LITIGATION WHICH MAY CAUSE SABRATEK TO PAY
SUBSTANTIAL DAMAGES AND ATTORNEYS FEES AND COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS.
Sabratek is involved in litigation with SIMS Deltec concerning patent
infringement, trade secret misappropriate, unfair competition and interference
with SIMS Deltec's customers.
In addition, Sabratek was served with a complaint on January 27, 1999
alleging that Sabratek and seven of its current and former officers violated
Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 20(a)
promulgated under the Securities Exchange Act of 1934. On June 7, 1999, we were
served with an amended complaint which expanded the allegations to include
allegations that Sabratek withheld material information about Sabratek's future
prospects and engaged in improper accounting practices. The amended complaint
also added three officers and one director as additional defendants.
Sabratek will incur substantial attorneys' fees in these litigation
matters and if these matters are ultimately determined in a manner adverse to
Sabratek, we could be liable for substantial damage awards which could have a
material adverse effect on our financial position and results of operations.
WE ARE DEPENDENT ON OBTAINING APPROVALS FROM GOVERNMENT REGULATORS.
INTRODUCTION: OVERVIEW OF REGULATORY REQUIREMENTS.
The FDA, and in some cases, state and foreign authorities regulate the
clinical testing, development, manufacture, packaging, labeling, distribution
and promotion of the medical devices and supplies that we market.
Federal regulations enforced by the FDA classifies medical devices
intended for human use into three categories, Classes I, II and III, on the
basis of the controls deemed necessary by the FDA to reasonably assure their
safety and effectiveness. Class I devices are required to comply with general
controls regarding such matters as labeling, premarket notification and
adherence to current good manufacturing practice requirements. Class II devices
are required to comply with general and special controls regarding such matters
as performance standards, postmarket surveillance, patient registries, and FDA
guidelines. Generally, Class III devices are those which must receive premarket
approval from the FDA to ensure their safety and effectiveness. Examples of
Class III devices include life-sustaining, life-supporting and implantable
devices, or new devices which have not been found substantially equivalent to
legally marketed devices. Electronic infusion devices and disposable tubing
sets, which we assemble and distribute, are classified by the FDA as Class II
medical devices.
If a new Class II medical device is substantially equivalent to a
medical device already legally marketed in the United States, and the marketed
device did not require Class III premarket approval, the FDA requirements may be
satisfied through a procedure known as a "510(k) Submission," in which the
applicant provides product information supporting its claim of substantial
equivalency. "Substantial equivalence" means that a device has the same intended
use and the same technological characteristics as the legally marketed device,
or the same intended use and different technological characteristics, provided
that it can be demonstrated that the device is as safe and effective as the
legally marketed device, and does not raise different questions regarding safety
and effectiveness.
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Commercial distribution of a device for which a 510(k) Submission is
required can begin only after the FDA issues an order finding the device to be
substantially equivalent to a legally marketed device. The FDA has recently been
requiring a more rigorous demonstration of substantial equivalence than in the
past. This may include a requirement for clinical testing of the device. The FDA
may determine that a proposed device is not substantially equivalent to a
legally marketed device, in which case a "premarket approval" will be required.
Alternatively, the FDA may require additional information before a substantial
equivalence determination can be made, in which case data from safety and
effectiveness tests, including clinical tests, may be required.
The process for preparing and obtaining FDA approval of a premarket
approval is generally much more elaborate, time-consuming and expensive than the
process of preparing and obtaining FDA clearance of a 510(k) Submission. A
premarket approval would require us, among other things, to conduct pre-clinical
and clinical trials to demonstrate the safety and effectiveness of the proposed
device. Therefore, a determination that we are not substantially equivalent or a
request for additional information could significantly delay the market
introduction of new products that fall into this category.
o THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
THE MEDIVIEW SOFTWARE, WHICH COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS.
We received 510(k) clearance to begin marketing our 3030
Stationary Pump in the United States in May, 1992. We received 510(k) clearance
for our disposable tubing sets for use with the 3030 Stationary Pump in March,
1995. In July, 1994, the FDA cleared the 510(k) Submission for our 6060
Ambulatory Pump and disposable tubing sets for use with our 6060 Ambulatory
Pump. In June, 1996, we received 510(k) clearance for our MediVIEW software
system for use with the 3030 Stationary Pump. We believe that our original
510(k) clearance for our 6060 Ambulatory Pump covers the use of 6060 Ambulatory
Pump in conjunction with the MediVIEW software system. However, there can be no
assurance that the FDA would agree with our determination. If in the future the
FDA concluded that the MediVIEW software system for use with the 6060 Ambulatory
Pump required a new 510(k) Submission, the FDA could prohibit us from marketing
the MediVIEW software system for this use until we file a new 510(k) Submission
and obtain clearance from the FDA. The FDA could also take regulatory action
against us for any prior distribution of the MediVIEW software system with the
6060 Ambulatory Pump.
o THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
THE PUMPMASTER, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.
The PumpMaster is a hardware and software system designed to
perform diagnostic tests on our infusion pumps. We have determined that the
PumpMaster does not qualify for regulation as a medical device. However, there
can be no assurance that the FDA will agree with our determination in this
regard. If the FDA were to determine that the PumpMaster is a medical device, it
could suspend our commercial distribution of the PumpMaster until a 510(k)
Submission covering the PumpMaster has been filed and cleared by the FDA and
other medical device regulatory requirements have been met. The FDA could also
take regulatory action against us based on our prior distribution of the
uncleared product.
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o THE FDA COULD DETERMINE THAT WE MUST SUBMIT A NEW 510(K) FOR
ANY AND ALL ENHANCEMENTS WE HAVE MADE, OR MAKE, TO OUR
PRODUCTS.
A new 510(k) Submission must be filed when, among other
things, there is a major change or modification in the intended use of the
device, or a change or modification, including product enhancements, to a
legally marketed device that could significantly affect its safety or
effectiveness. A device manufacturer is responsible for making the initial
determination as to whether a proposed change to a cleared device or to its
intended use necessitates the filing of a new 510(k) Submission.
We have made some enhancements to our currently marketed
products without filing 510(k) Submissions. There can be no assurance that the
FDA would agree with our determinations that these enhancements do not require a
510(k) Submission and would not require 510(k) clearance before further
distribution. Likewise, if we determine that any modifications that we may make
to our cleared devices in the future do not require a new 510(k) Submission,
there can be no assurance that the FDA would agree with our determinations and
would not require a new 510(k) Submission for any future modifications made to a
cleared device.
If the FDA requires us to file a new 510(k) Submission for any
modification to the device, we may be prohibited from marketing the device as
modified until it obtains clearance from the FDA. There can be no assurance that
we will obtain 510(k) clearance on a timely basis, if at all, for any device
modification for which we file a future 510(k) Submission. If 510(k) clearance
is granted, there can be no assurance that it will not contain significant
limitations in the form of warnings, precautions or contraindications with
respect to conditions of use.
o THERE CAN BE NO ASSURANCE THAT WE WILL RECEIVE FDA CLEARANCE
FOR ANY NEW PRODUCTS WE MANUFACTURE.
We intend to develop new products in the future. Our new
products, including new applications for existing products, may qualify as
devices that require FDA 510(k) clearance or premarket approval. There can be no
assurance that any required 510(k) clearance or premarket approval of any of our
future products or new applications will be forthcoming in a timely manner, if
at all, or that the FDA's clearance or premarket approval of future products or
new applications will not contain significant limitations in the form of
warnings, precautions or contraindications with respect to conditions of use. If
in the future the FDA concludes that current, modified or new products marketed
by us require that the products be relabeled, require previously unobtained
510(k) clearance, require new drug approval, or require other regulatory
approval, the FDA could prohibit us from manufacturing and/or distributing these
products until we make the necessary submissions and obtain any required
clearances or approvals. The FDA could also take regulatory action against us
for the marketing of these products before obtaining these clearances or
approvals.
o THE FDA COULD DETERMINE THAT OUR MANUFACTURING PRACTICES ARE
SEVERELY INADEQUATE AND, AS A RESULT, ORDER SUSPENSION OF OUR
FACILITIES; THIS DETERMINATION WOULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS.
Device manufacturers are required to register their
establishments and list their devices with the FDA, and are subject to periodic
inspections by the FDA and state agencies. Devices must be manufactured in
compliance with current good manufacturing practices under the Quality System
Regulation. We believe that our manufacturing and quality assurance procedures
substantially conform to the requirements of the Quality System Regulation.
However, there can be no assurance that the FDA would concur with our
determination in this regard or that we will be able to maintain substantial
compliance with the Quality System Regulation.
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In addition, the Medical Device Reporting regulation obligates
us to inform the FDA whenever information reasonably suggests that one of our
devices may have caused or contributed to a death or serious injury, or that one
of our devices has malfunctioned and, if the malfunction were to recur, the
device would be likely to cause or contribute to a death or serious injury.
There can be no assurance that the FDA would agree with our determinations as to
whether particular incidents meet the threshold for Medical Device Reporting.
o WE MAY FAIL TO COMPLY WITH LABELING AND PACKAGING
REQUIREMENTS.
Labeling and packaging activities are regulated by the FDA and
may be regulated by the Federal Trade Commission. The FDA actively enforces
statutes and regulations prohibiting marketing of products for unapproved or
uncleared uses.
If, as a result of FDA inspections, Medical Device Reporting
reports or information derived from any other source, the FDA believes we are
not in compliance with the applicable statutory law or regulations, the FDA can:
o refuse to clear pending 510(k) Submissions until
specified conditions are met,
o withdraw previously cleared 510(k) Submissions,
o require notification to users regarding newly found
unreasonable risks,
o request repair, refund or replacement of faulty
devices,
o shut down facilities,
o require corrective advertisements, recalls or
marketing suspension,
o impose civil penalties, and
o institute legal proceedings to detain or seize
products, enjoin future violations, or seek criminal
penalties against us, our officers or employees.
Civil penalties for violations may be assessed by the FDA in lieu of or
in addition to instituting legal action. Civil penalties may range up to $15,000
per violation, and a maximum of $1,000,000 per proceeding. Civil penalties may
not be imposed for good manufacturing practice violations, unless the violations
involve a significant or knowing departure from federal regulations or a risk to
public health. The FDA provides manufacturers with an opportunity to be heard
prior to the assessment of civil penalties. If civil penalties are assessed,
judicial review is available.
o WE MAY BE UNABLE TO FULLY COMPLY WITH INTERNATIONAL REGULATORY
REQUIREMENTS.
We export, or intend to export, our 510(k)-cleared products to
Europe, Japan and other foreign countries. Exports of products that have market
clearance from the FDA in the United States do not require FDA authorization for
export. However, foreign countries often require, among other things, an FDA
Certificate to Foreign Government verifying that the product complies with
specified requirements. To obtain a Certificate to Foreign Government, Sabratek
must certify to the FDA that these foreign requirements have been met. The FDA
may refuse to issue a Certificate to Foreign Government if significant
outstanding good manufacturing practice violations exist.
International sales of medical devices are regulated by each
country in which the products are sold. The regulatory review process varies
from country to country. Many countries also impose product standards, packaging
and labeling requirements, and import restrictions on devices. In addition, each
country has its own tariff regulations, duties and tax requirements. We plan to
use our distributors to assist us in obtaining any necessary foreign
governmental and regulatory approvals. We have received approval to market our
products in Japan as well as in the European community, and we currently sell
our products in Japan and the European community. However, there can be no
assurance that we will be able to obtain all necessary approvals in the future.
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WE MAY NOT BE ABLE TO OBTAIN FDA CLEARANCE TO RESUME DISTRIBUTION OF
OUR ROCAP HEPARIN PRE-FILLED FLUSH SYRINGE PRODUCT LINE, WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
On November 24, 1998, we announced that we had suspended distribution
of our Rocap pre-filled flush syringe product line. We also announced that we
would submit new 510(k) applications to the FDA for the Rocap pre-filled flush
syringe products and that new management was in place at Rocap for both
operations and regulatory affairs. We then submitted the new 510(k)
applications.
On May 28, 1999, we received FDA clearance of our 510(k) Submission
covering our pre-filled saline flush syringe products. Currently, we are
awaiting 510(k) clearance on our pre-filled heparin flush syringe products. We
will not be able to resume distribution of our heparin flush syringe products
until 510(k) Submissions are cleared. We can give no assurances as to when the
FDA clearance of our pre-filled heparin flush syringe products will be obtained.
In the event that there are substantial delays in obtaining, or we are unable to
obtain, the required FDA clearances and approvals, we could incur a material
write down of assets and our future profitability could be materially affected.
WE MAY NOT RECEIVE THE FULL BENEFITS OF OUR INTELLECTUAL PROPERTY
PROTECTIONS.
There can be no assurance that the common law, statutory and
contractual rights on which we rely to protect our intellectual property and
confidential and proprietary information will provide us with meaningful
protection. Third parties may independently develop products, techniques or
information which are substantially equivalent to the products, including
software products and/or the software components of other products, techniques
and information which we consider proprietary. Disputes regarding our
intellectual property could force us into expensive and protracted litigation or
costly agreements with third parties. An adverse determination in a judicial or
administrative proceeding or failure to reach an agreement with a third party
regarding intellectual property rights could prevent us from manufacturing and
selling products or could otherwise limit our use of such intellectual property
rights, which could have a material adverse effect on our financial position
and results of operations.
OUR CURRENT CASH RESERVES COULD BECOME INADEQUATE FOR OUR NEEDS AND WE
MAY NOT BE ABLE TO SECURE ADDITIONAL CAPITAL.
The adequacy of our current cash reserves will depend on the cash flow
generated from our operations, which could be affected by all of the Risk
Factors contained in this registration statement, as well as by the purposes for
which these cash reserves are used. In particular, the adequacy of our cash
reserves could be adversely influenced by:
o regulatory or legislative changes pertaining to health care,
o product liability exposure,
o dependence on future product development,
o pending litigation, and
o acquisitions of companies or product lines and integration of
these companies or product lines into our operations.
-7-
<PAGE> 14
If current cash reserves become inadequate, we may need to seek
additional funds through bank facilities, or public or private debt or equity
offerings. There can be no assurance that we will be able to obtain additional
capital on favorable terms, or at all, if and when it becomes necessary. The
terms on which Sabratek obtains any necessary capital in the future could have
an adverse impact on the rights of holders of our common stock. In addition, if
we were unable to raise additional capital if and when necessary, we may be
unable to successfully complete our business strategy.
A SIGNIFICANT PORTION OF OUR REVENUES ARE DEPENDENT ON OUR CUSTOMERS'
ABILITY TO OBTAIN THIRD-PARTY REIMBURSEMENT FOR THE COST OF ACQUIRING
AND USING OUR PRODUCTS OR SERVICES.
Our products are generally purchased by health care providers and
patients, who then seek reimbursement from various government and private
third-party payors, including Medicare, Medicaid and managed care organizations.
Government and private third-party payors increasingly attempt to contain health
care costs by limiting both the extent of coverage and the reimbursement rate
for new diagnostic and therapeutic products and services. The Health Care
Financing Administration of the United States Department of Health and Human
Services ("HCFA"), which administers Medicare, and most private insurance
companies do not provide reimbursement for services that they determine to be
experimental in nature or that are not considered "reasonable and necessary" for
diagnosis or treatment. Many private insurers are influenced by HCFA actions in
making their own coverage decisions on new products or services. There can be no
assurance that third-party reimbursement for the use of our products or services
will continue to be available to our customers, that third-party reimbursement
will be available for new products or services we may introduce or that the rate
of any such reimbursement will be adequate. Disapproval of, or limitations in,
coverage by HCFA or other third-party payors could materially and adversely
affect market acceptance of our products or services, financial position and
results of operations.
IF IT IS EVER DETERMINED THAT ONE OF OUR PRODUCTS OR SERVICES CAUSED
INJURY, WE COULD INCUR SUBSTANTIAL LIABILITIES.
Manufacturers of medical devices face the possibility of substantial
liability for damages in the event that the use of their products results in
adverse effects to a patient. As a manufacturer of medical devices, we maintain
product liability insurance, but there can be no assurance that liability claims
will not exceed the limits of our coverage or that our insurance will continue
to be available on commercially reasonable terms or at all. Furthermore, we do
not maintain insurance that would provide coverage for any costs or losses
resulting from any required recall of our products due to alleged defects,
whether instituted by a regulatory agency or by us. Product liability claims
that exceed our policy limits or the costs associated with any product recall
could have a material adverse effect on our financial position and results of
operations.
In addition, as providers of consulting and utilization review
services, we maintain liability and errors and omissions insurance, but there
can be no assurance that liability claims, if any, will not exceed the limits of
our coverage or that our insurance will continue to be available on commercially
reasonable terms or at all.
As providers of consulting and utilization review services, we incur
risks of liability arising out of the services we provide. A determination that
any damage including personal injury or commercial damage resulted from use of
our services could require us to pay substantial monetary awards or damages,
which could have a material adverse effect on our financial position.
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<PAGE> 15
WE RISK BUSINESS DECLINES DUE TO OUR INTERNATIONAL OPERATIONS.
During the year ended December 31, 1998, we derived approximately 4% of
our revenues from international sales, resulting in exposure to risks which
include, but may not be limited to, the following:
o maintenance of existing relationships and/or the establishment
of new relationships with international distributors;
o fluctuations in exchange rates of the U.S. dollar against
foreign currencies;
o economic or political instability and domestic and foreign
governmental regulations, including export license
requirements, trade restrictions, changes in tariffs,
regulatory approval for marketing products or similar factors;
o uncertain or limited protection of our intellectual property
rights under the laws of certain foreign countries may not
protect our intellectual property rights to the same extent as
do the laws of the United States.
Unfavorable changes in any of these factors could reduce the demand
for, or the profitability of, our products and services in foreign markets. This
reduction could have a material adverse effect on our financial position and
results of operation.
WE DEPEND ON KEY EXECUTIVES. A LOSS OF THESE EXECUTIVES AND PERSONNEL
COULD NEGATIVELY IMPACT OUR OPERATIONS.
We are highly dependent on the members of our management team, in
particular, our Chief Executive Officer. The loss of one or more of our
management team could have a material adverse effect on us. In addition, we
believe that our future success will depend in large part on our ability to
attract and retain highly skilled managerial personnel, particularly as we
expand our activities. We face significant competition for such personnel, and
there can be no assurance that we will be successful in hiring or retaining the
personnel we require for continued growth, if any. The failure to hire and
retain such personnel could have a material adverse effect on our financial
position and results of operations.
OFFICERS AND DIRECTORS MAY CONTROL CORPORATE ACTIONS DUE TO THEIR
COMBINED OWNERSHIP OF SHARES OF SABRATEK STOCK.
As of April 16, 1999, all officers and directors of Sabratek as a group
beneficially owned approximately 19% of the outstanding shares of Sabratek
common stock. Because of the combined voting power of the officers and
directors, these individuals acting as a group may be able to influence
Sabratek's affairs and business, including any determination with respect to a
change in control of Sabratek, future issuances of common stock or other
securities,
declaration of dividends on Sabratek common stock and the election of directors.
Such influence could have the effect of delaying, deferring or preventing a
change in control of Sabratek which could deprive Sabratek's stockholders of the
opportunity to sell their shares of common stock at prices higher than
prevailing market prices.
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<PAGE> 16
OUR ISSUANCE OF A LARGE VOLUME OF SHARES OF OUR COMMON STOCK COULD
RESULT IN A DEPRESSION OF OUR STOCK PRICE.
Since June 1, 1999, we have issued approximately 3,347,000 shares of
our common stock to acquire LifeWatch, Inc., a subsidiary of Ralin Medical,
Inc., Strategic Reimbursement Services, Inc., Unitron Medical Communications,
Inc., and GDS Technology, Inc. In connection with such acquisitions, we entered
into agreements with the recipients of our common stock which obligate Sabratek
to file registration statements which will allow such recipients to resell their
approximately 3,347,000 shares. We will file registration statements relating to
the resale of approximately 2,311,000 shares of common stock in July, 1999 and a
registration statement relating to the resale of the remaining shares no later
than December 1, 1999. The filing of the registration statements allows the
recipients to sell the shares when and if they determine it is appropriate.
Sabratek cannot predict the timing or amount of any sale which may be
made under these registration statements. Even if no sales occur, the mere
issuance and registration for resale of approximately 3,347,000 shares of our
common stock, which is approximately 25% of our currently outstanding common
stock as of July 14, 1999, could have the effect of depressing the market price
of our common stock. Moreover, the simultaneous offering for public sale of a
significant number of the approximately 3,347,000 shares would likely have the
effect of depressing the market price of our common stock.
OUR FINANCIAL RESULTS AND STOCK PRICE MAY BE AFFECTED BY QUARTERLY
FLUCTUATIONS.
Our quarterly revenues and operating results have varied significantly
in the past and may continue to do so in the future. Future revenues and
operating results may also fluctuate significantly from quarter to quarter and
will depend upon, among other factors:
o demand for our products and new product
introductions,
o demand for products distributed by our competitors,
o our efforts regarding transitions to new or enhanced
products,
o the timing of orders and shipments,
o the mix of sales between products,
o competition, including pricing pressures,
o the timing of regulatory filings and approvals,
o the timing of reimbursement from third-party payors,
and
o the timing of research and development expenditures.
OUR STOCK PRICE MAY EXPERIENCE VOLATILITY.
The securities markets have, from time to time, experienced extreme
price and volume fluctuations which often have been unrelated to the operating
performance of particular companies. The market prices of the common stock of
many publicly-held companies that provide medical devices and services have been
in the past, and are expected to be, volatile. In addition to factors such as
interest rates and economic conditions which affect stock prices generally,
some, but not all, of the factors which could result in fluctuations in our
stock price include:
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<PAGE> 17
o announcements of technological or medical
innovations,
o the introduction of new commercial products by our
competitors,
o disputes concerning patents or proprietary rights,
o positive or negative regulatory action,
o changes in regulatory or medical reimbursement
policies, and
o period-to-period fluctuations in the financial
results of the Company.
ANTI-TAKEOVER PROTECTIONS MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO
ACQUIRE SABRATEK.
Sabratek's Certificate of Incorporation and Bylaws contain general
requirements which pre-condition a third-party's ability to acquire a
controlling interest in Sabratek. These requirements and pre-conditions could
limit the price that potential acquirors might be willing to pay in the future
for shares of Sabratek common stock. These provisions are explained below.
o Sabratek's Certificate of Incorporation provides that the
Board of Directors may determine and set rights, preferences,
privileges and restrictions, including voting rights, of
unissued shares of Sabratek's preferred stock and that such
shares of preferred stock may be issued without any further
vote or action by Sabratek's stockholders. The rights of the
holders of common stock will be subject to, and may be
adversely affected by, the rights of the holders of any
preferred stock that may be created and issued in the future.
In addition, stockholders do not have the right to cumulative
voting in the election of directors.
o Sabratek's Bylaws provide for a staggered board so that only
one-third of the total number of directors are replaced or
re-elected each year. The Bylaws also require the affirmative
vote of two-thirds of the Company's issued and outstanding
voting stock to remove a director. Therefore, potential
acquirors of Sabratek may face delays in replacing the
existing directors.
o Sabratek currently has approximately $85,000,000 in notes
outstanding. These notes, and the indenture which governs
them, provide that in some circumstances involving a change in
control, each holder of these notes may require Sabratek to
repurchase all or a portion of the holder's notes. This
repurchase obligation could discourage a third party from
attempting to acquire control of the Company.
o In August, 1998, Sabratek designated the relative rights and
preferences of a new Class of Series B Preferred Stock and
adopted a Shareholder Rights Plan. Sabratek's Board of
Directors declared a dividend of one right for each share of
Sabratek's common stock outstanding on September 4, 1998. Each
right gives the holder the opportunity to purchase one
one-hundredth of one share of Sabratek's new authorized Series
B Preferred Stock at a price of $150 (as adjusted from time to
time) upon the occurrences of a change of control of Sabratek.
The Rights Plan and the accompanying rights could have the
effect of delaying the ability of a potential acquiror from
acquiring control of Sabratek.
o Sabratek's Bylaws authorize Sabratek's Board to establish a
record date with respect to stockholders entitled to vote on
corporate matters by means of a written consent. This Bylaw
provision has the effect of allowing Sabratek's Board to react
to any unexpected stockholder actions and could slow the pace
of a potential acquisition.
o Sabratek's senior executive officers may be entitled to
substantial change in control payments. Such payments could
have the effect of discouraging a potential acquiror from
acquiring control of Sabratek.
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<PAGE> 18
SELLING STOCKHOLDERS
The 900,000 shares of common stock being offered by means of this
prospectus by Ralin Medical, Inc. were originally issued under a stock purchase
agreement, dated as of May 19, 1999, in which we acquired all of the issued and
outstanding shares of LifeWatch, Inc., an Illinois corporation, from Ralin
Medical, Inc. LifeWatch was a wholly-owned subsidiary of Ralin. Ralin received
900,000 shares of our common stock and $12,260,000 in cash. The aggregate
purchase price, however, is subject to adjustment depending on the proceeds
received by Ralin from its sale of the shares of our common stock offered by
means of this prospectus.
Under the terms of the stock purchase agreement and the registration
rights agreement entered into by Ralin and Sabratek, in the event that Ralin
receives more than $19 million in aggregate proceeds from sale of shares of
Sabratek common stock, Ralin must pay us any amounts it receives in excess of
$19 million, but these amounts will be adjusted for taxes. Alternatively, in the
event that Ralin receives less than $16 million from sale of these shares, we
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 offered by this prospectus within thirteen months of the
effective date of this registration statement, the 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 this registration statement. Any payment required to be made
for an adjustment of the purchase price must be made within five (5) days of a
determination of the amount of the adjustment.
The shares of common stock 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 being offered by means of this prospectus.
L. Peter Smith, a director of Sabratek since 1992, is currently the
President and a director and stockholder of Ralin.
The 37,500 shares of common stock being offered by means of this
prospectus by EGS Securities Corp. were originally issued to EGS under a
memorandum of understanding dated March 26, 1999 and a supplement, dated as of
July 2, 1999, in which EGS agreed to assist us in performing due diligence
concerning the business of LifeWatch, in structuring and negotiating the
acquisition and in reviewing and preparing documentation. In return for such
services, Sabratek agreed to pay EGS 37,500 shares of our common stock. We have
delivered to EGS all 37,500 shares of our common stock to which EGS was entitled
for providing us the services described above.
The following table sets forth information about the beneficial
ownership of the selling stockholders as of July 9, 1999 as to:
o the number of shares of common stock that are beneficially
held by the selling stockholders,
o the maximum number of shares that may be offered by the
selling stockholders in this prospectus, and
o the number of shares of common stock that can be sold by means
of this prospectus and the percentage of our total outstanding
common stock which such number represents.
We can provide no assurance as to the number of shares that will be
held by the selling stockholders after this offering because the selling
stockholders may offer all or some part of the shares which they hold by means
of this prospectus, and because this offering is not being underwritten on a
firm commitment basis.
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<PAGE> 19
<TABLE>
<CAPTION>
Shares
Beneficially Owned
Shares Beneficially Number of After the Offering
Owned Prior to the Shares Offered --------------------
Selling Stockholder Offering Hereby Number Percentage
- -------------------- ------------------- -------------- --------------------
<S> <C> <C> <C> <C>
Ralin 900,000(1) 900,000 0 *
EGS Securities Corp. 41,000(2) 37,500 3,500 *
</TABLE>
(1) Does not include 7,913 shares of Sabratek common stock held of record by L.
Peter Smith or 56,667 shares of common stock which may be acquired by Mr.
Smith upon the exercise of outstanding options. Ralin and Mr. Smith each
disclaim beneficial ownership of any shares of Sabratek common stock which
are owned or may be acquired by the other.
(2) Does not include 25,000 shares of Sabratek common stock which may be
acquired by EGS Securities Corp. upon the exercise of outstanding options,
43,851 shares of Sabratek common stock held of record by William D.
Lautman, 54,715 shares of common stock which may be acquired by Mr. Lautman
upon the exercise of outstanding options or 58,732 shares of common stock
which may be acquired by Mr. Lautman upon the exercise of outstanding
warrants. Mr. Lautman, a director of Sabratek, is also a managing director
of EGS Securities Corp. EGS and Mr. Lautman each disclaim beneficial
ownership of any shares of Sabratek common stock which are owned or may be
acquired by the other. You should be aware that the 3,500 shares of common
stock owned by EGS after this offering are being registered for resale by
means of a separate prospectus.
* Less than 1% of the issued and outstanding shares of Sabratek's common
stock.
USE OF PROCEEDS
Other than the completion and filing of this registration statement, we
will not participate in the sale of the shares offered by means of this
prospectus. In addition because the shares of common stock being offered by
means of this prospectus are being sold by the selling stockholders, we will not
directly receive any of the proceeds from the sale of their shares.
However, in the event that there is an adjustment to the purchase price,
Ralin may be required to make a cash payment to Sabratek. See "SELLING
STOCKHOLDERS." Such cash payment, if any, shall include amounts generated by
Ralin through its sale of the shares of common stock being sold by means of this
prospectus. We cannot, however, predict whether any such payment will be made or
the amount of any such payment if it is made. To the extent that we receive any
amounts generated through the sale of shares of common stock offered by means of
this prospectus, we will use the proceeds for working capital and general
corporate purposes.
PLAN OF DISTRIBUTION
The 937,500 shares offered by means of this prospectus may be sold from
time to time by the selling stockholders. Unless we receive a cash payment from
Ralin in the event Ralin receives more than $19 million in aggregate proceeds
from the sale of shares of our common stock, we will not receive any proceeds
directly from this Offering. See, "SELLING STOCKHOLDERS" and "USE OF PROCEEDS."
We have agreed to pay all of the expenses incident to the registration, offering
and sale of these shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. We have agreed to indemnify the selling
stockholders against liabilities, including liabilities under the Securities
Act. This offering will terminate on the earlier of (i) date on which all shares
offered by this prospectus have been sold by the selling stockholder or (ii)
thirteen months after the effective date of this registration statement.
Under the terms of the registration rights agreement, upon the effective
date of this registration statement, Ralin is required to sell its shares on the
NASDAQ through a market maker or a broker mutually agreed upon by Ralin and
Sabratek. In addition, the Registration rights agreement provides that Ralin's
sale of the shares offered by means of this prospectus is, until the first year
anniversary of the effective date of this registration statement, limited in the
following manner:
o Ralin may not sell or transfer more than 100,000 shares during
the first forty-five days following the effective date of this
registration statement;
o Ralin may not sell or transfer more than 20,000 shares during
any trading day;
o Ralin may not sell or transfer more than 60,000 shares during
any calendar week;
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<PAGE> 20
o Ralin may not sell or transfer more than 180,000 shares during
any calendar month; and
o If the closing share price for Sabratek stock on any trading
day is at least $22, then the weekly and calendar month volume
limitations will not apply to the next following trading day,
provided that Ralin does not sell more than 15,000 shares on
that day.
Moreover, in the event that (a) this registration statement is not
declared effective by the SEC within seventy-five days of the effective date of
the registration rights agreement (June 1, 1999), (b) Ralin has not sold all of
the shares offered by this prospectus on the date of the thirteenth month
anniversary of the effective date of this registration statement or (c) if we
consent in writing, Ralin will have the right to sell the shares offered by this
prospectus through private sales.
The 900,000 shares of common stock offered by means of this prospectus
by Ralin 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 being offered by means of this prospectus.
Any market maker or broker may receive compensation in the form of
commissions, discounts or concessions from the selling stockholder and/or
purchasers of the shares for whom those broker-dealers may act as agent, or to
whom they may sell as principal, or both. Compensation as to a particular
broker-dealer may exceed customary commissions. The selling stockholder and any
broker who act in connection with the sale of the shares under this prospectus
may be deemed to be "underwriters" within the meaning of the Securities Act.
Any commissions they receive and proceeds of any sale of shares may be deemed
to be underwriting discounts and commissions under the Securities Act.
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<PAGE> 21
LEGAL MATTERS
The legality of the shares of our common stock being offered by means of
this prospectus has been passed on for Sabratek by Ross & Hardies, Chicago,
Illinois. A member of this firm owns shares of Sabratek's common stock.
EXPERTS
The financial statements of Sabratek Corporation as of December 31, 1998
and 1997 and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference herein in reliance upon the report of
KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
RECENT DEVELOPMENTS
On May 28, 1999, Sabratek received FDA clearance of our 510(k) Submission
covering our Rocap division's pre-filled saline flush syringe products. We are
working closely with our customers and suppliers to resume production and
shipments in the shortest possible time frame.
On June 7, 1999, Sabratek was served with an amended complaint in a
proceeding filed in the United States District Court for the Northern District
of Illinois on January 27, 1999 as a purported class action. The amended
complaint expands the allegations against Sabratek to include allegations that
Sabratek withheld material information about its future prospects and engaged in
improper revenue recognition practices. The amended complaint also expanded the
number of named defendants in the proceeding by adding three additional officers
and one director of Sabratek as defendants. Sabratek is currently required to
file an answer, motion to dismiss or other responsive pleading on or before
July 28, 1999.
On June 29, 1999, we consummated a transaction in which our
newly-formed, wholly-owned subsidiary merged with an into Strategic
Reimbursement Services, Inc., an Illinois corporation. As a result of the
merger, Strategic Reimbursement Services became a wholly-owned subsidiary of
ours. Strategic Reimbursement Services provides consulting services to
healthcare providers. Under the terms of a merger agreement, dated as of
June 29, 1999, we paid the shareholders of Strategic Reimbursement Services an
aggregate purchase price of 1,636,359 shares of our common stock.
On July 1, 1999, Sabratek acquired substantially all of the issued and
outstanding shares of capital stock of Unitron Medical Communications, Inc.,
d/b/a MOON Communications. MOON Communications is a healthcare information
services company providing an array of healthcare related services to
physicians, home health agencies, payors and other participants in the
healthcare market through the Internet. Under the terms of an option agreement
dated January 22, 1999, Sabratek paid the Unitron shareholders an aggregate
purchase price of 542,926 shares of common stock in exchange for the shares of
capital stock we acquired. Sabratek is currently attempting to acquire
approximately 10,000 shares of Unitron's capital stock which it did not acquire
on July 1, 1999, on terms identical to those contained in the option agreement.
On July 9, 1999, Sabratek acquired all of the issued and outstanding
capital stock of GDS Technology, Inc. GDS develops, manufactures and markets
advanced point-of-care blood diagnostic tests and instruments. Under the terms
of an option agreement dated August 29, 1997, Sabratek paid the GDS shareholders
an aggregate purchase price of 216,949 shares of Sabratek common stock in
exchange for all of the issued and outstanding capital stock of GDS.
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<PAGE> 22
All selling stockholders that effect transactions in the shares of common
stock offered by means of this prospectus are required to deliver a copy of this
prospectus to any purchaser of such shares of common stock at or before the time
a certificate representing the share of common stock is delivered to the
purchaser.
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<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We have agreed to bear the expenses of registering the shares for the
selling stockholders under the federal and state securities laws. The following
table sets forth the costs and expenses, other than underwriting discounts and
commissions, payable by us in connection with the sale of common stock being
offered. All amounts are estimated except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee..... ......................................................$ 6,052
Printing expenses...............................................................$ 2,500
Legal fees and expenses.........................................................$15,000
Accounting fees and expenses....................................................$ 5,000
Miscellaneous expenses..........................................................$ 5,448
Total $34,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sabratek's Amended and Restated Certificate of Incorporation provides
for indemnification to the full extent permitted by the laws of the State of
Delaware against and with respect to threatened, pending or completed actions,
suits or proceedings arising from or alleged to arise from, a party's actions or
omissions as a director, officer, employee or agent of Sabratek or of any other
corporation, partnership, joint venture, trust or other enterprise which has
served in such capacity at the request of Sabratek if the acts or omissions
occurred or were or are alleged to have occurred, while said party was a
director or officer of Sabratek; provided, however, Sabratek shall not indemnify
any director or officer in an action against Sabratek unless Sabratek shall have
consented to the action. Generally, under Delaware law, indemnification will
only be available where an officer or director can establish that he/she acted
in good faith and in a manner which was reasonably believed to be in or not
opposed to the best interests of Sabratek.
Section 145 of the Delaware Law provides that a corporation may
indemnify a director, officer, employee or agent made a party to an action by
reason of the fact that the person was a director, officer, employee or agent of
the corporation or was serving at the request of the corporation against
expenses actually incurred by the person in connection with the action if the
person acted in good faith and in a manner such person reasonably believed to be
in, or not opposed to, the best interest of the corporation with respect to any
criminal action, and had no reasonable cause to believe his conduct was
unlawful. Delaware Law does not permit a corporation to eliminate a director's
duty of care, and the provisions of Sabratek's Amended and Restated Certificate
of Incorporation have no effect on the availability of equitable remedies such
as injunction or rescission, based upon a director's breach of the duty of care.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling Sabratek under the
foregoing provisions and agreements, Sabratek has been informed that in the
opinion of the Staff of the Securities and Exchange Commission such
indemnification is against policy as expressed in the Securities Act and is
therefore unenforceable.
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<PAGE> 24
Sabratek maintains a director's and officer's liability insurance
policy which indemnifies directors and officers for specified losses arising
from a claim by reason of a wrongful act, as defined, under certain
circumstances where Sabratek does not provide indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Sabratek under the foregoing provisions or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of Sabratek in the successful defense of
any action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of the issue.
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<PAGE> 25
ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
(a) EXHIBITS NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
<TABLE>
<CAPTION>
Incorporation
Exhibit Page Number by reference
Number Description of Documents (if applicable) (if applicable)
<S> <C> <C> <C>
3.1 Articles of Incorporation, Rights Agreement Certificate
of Designations ................................................. +
3.2 Amended and Restated By-laws .................................... ++++++++++
4.1 Indenture, dated April 14, 1998 by and between
Sabratek Corporation and LaSalle National Bank, as Trustee ...... ++++++
4.2 Rights Agreement, dated August 20, 1998 by and
between Sabratek Corporation and LaSalle National Bank,
as the Rights Agent ............................................. +++++++
4.3 Registration Rights Agreement, dated as of June 1, 1999,
by and between Sabratek Corporation and Ralin Medical, Inc....... *
4.4 Registration Rights Agreement, dated as of June 29, 1999,
by and between Sabratek Corporation and the former
shareholders of Strategic Reimbursement Services, Inc. .......... **
5.1 Opinion of Ross & Hardies........................................
10.1 Agreement with Americorp Financial, Inc. re: Leasing
Services, dated March 22, 1995 .................................. +
10.1.1 Amendment, dated September 16, 1996, to Agreement
with Americorp Financial, Inc. .................................. +++
10.2 -
10.12 Intentionally Omitted
10.13 Pump Contract with Chartwell Home
Therapies, dated November 22, 1993 .............................. +
10.14 Sales Agreement with Pharmacy Corporation
of America,dated March 17, 1995 ................................. +
</TABLE>
II-3
<PAGE> 26
<TABLE>
<S> <C> <C>
10.15 Sales & Marketing Agreement with Alpha Group,
dated November 6, 1995 ...................................... +
10.16 -
10.25 Intentionally Omitted
10.26 Amended and Restated Stock Option Plan ...................... +
10.27 Lease of Real Property located at 5601 West Howard,
Niles, Illinois, dated as of May 31, 1994 ................... +
10.27.1 Amendment, dated October 30, 1996, to Lease for
Real Property located at 5601 West Howard,
Niles, Illinois ............................................. +++
10.28 Employment Agreement for K. Shan Padda ...................... ++++++++++
10.29 Intentionally Omitted
10.30 Asset Purchase Agreement, dated February 25, 1997,
by and among Sabratek Corporation; Rocap, Inc. and
Elliott Mandell ............................................. ++
10.31 Employment Agreement for Stephen L. Holden .................. ++++++++++
10.32 Employment Agreement for Elliott Mandell .................... ++++++++++
10.33 Lease Agreement for property located at 11 Sixth
Road, Woburn, Massachusetts, dated February 1, 1997 ......... ++++
10.34 Lease Agreement for property located at 5 Constitution
Way, Woburn, Massachusetts, dated June 26, 1995 ............. ++++
10.35 Lease Agreement for property located at 1629 Prime
Court, Suite 100, Orlando, Florida, dated March 11, 1997 +++++
10.36 Lease Agreement for property located at 8350 Parkline
Blvd., Orlando Florida, dated June 18, 1998 ................. ++++++++++
</TABLE>
II-4
<PAGE> 27
<TABLE>
<S> <C> <C>
10.37 Credit Agreement, dated as of April 30, 1999, by
and between Sabratek Corporation as Borrower and
LaSalle National Bank (formerly known as LaSalle
Bank NI) as Lender ....................................... ++++++
10.38 Long Term Incentive Compensation Plan .................... +++++++++
10.39 Lease Agreement for property located 8111 North
St. Louis, Skokie, Illinois, dated May 15, 1998 .......... +++++++++
10.40 Employment Agreement for Doron C. Levitas ................ ++++++++++
10.41 Employment Agreement for Scott Skooglund ................. ++++++++++
10.42 Employment Agreement for Joseph Moser .................... ++++++++++
10.43 Employment Agreement for Vincent J. Capponi .............. ++++++++++
10.44 Employment Agreement for Tuan Bui ........................ ++++++++++
10.45 Employment Agreement for Stephan C. Beal ................. ++++++++++
10.46 Employment Agreement for Stephen L. Axel ................. ++++++++++
10.47 Intentionally Omitted
10.48 Employment Agreement for Mary Beth Blue .................. ++++++++++
10.49 Intentionally Omitted
10.50 Stock Purchase Agreement, dated as of May 19, 1999,
between Sabratek Corporation and Ralin Medical, Inc. ..... *
10.51 Agreement of Merger, dated as of June 29, 1999, by
and among Sabratek Corporation, SBTK I Acquisition
Corporation, a wholly-owned subsidiary of Sabratek
and Strategic Reimbursement Services, Inc. ............... **
10.52 Research and Development Agreement, dated as of June 30,
1999, by and between Sabratek Corporation and Systle
Corporation ..............................................
10.53 Memorandum of Understanding, dated as of March 26,
1999, and Supplement, dated as of July 2, 1999, by and
between Sabratek Corporation and EGS Securities Corp......
21 List of Sabratek's Subsidiaries ..........................
23.1 Consent of KPMG LLP ......................................
23.2 Consent of Ross & Hardies (included in exhibit 5.1) ......
24 Powers of Attorney (included in the signature page hereto)
</TABLE>
+ Incorporated by reference to Sabratek's Registration
Statement on Form S-1, declared effective by the SEC on June
21, 1996 (File No. 333-3866)
++ Incorporated by reference to Sabratek's Current Report on
Form 8-K filed with the SEC on March 11, 1997. Incorporated
by reference to Sabratek's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the SEC on
March 31, 1997
+++ Incorporated by reference to Sabratek's Registration
Statement on Form S-1, declared effective by the SEC on April
4, 1997 (File No. 333-23437).
++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 filed with the
SEC on May 15, 1997.
II-5
<PAGE> 28
++++++ Incorporated by reference to Sabratek's Registration
Statement on Form S-3 declared effective by the SEC on July
14, 1998.
+++++++ Incorporated by reference to Sabratek's Current Report on
Form 8-K filed with the SEC on August 25, 1998.
++++++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 filed with the
SEC on August 14, 1998.
+++++++++ Incorporated by reference to Sabratek's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 filed with
the SEC on November 16, 1998.
++++++++++ Incorporated by reference to Sabratek's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 filed with
the SEC on April 9, 1999
* Incorporated by reference to Sabratek's current report on
Form 8-K dated June 1, 1999 and filed with the SEC on June
16, 1999.
** Incorporated by reference to Sabratek's current report on
Form 8-K dated June 29, 1999 and filed with the SEC on July
14, 1999.
ITEM 17. UNDERTAKINGS
Sabratek hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement:
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-6
<PAGE> 29
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of Sabratek's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in this Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-7
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Sabratek
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Skokie, State of Illinois, on July __, 1999.
SABRATEK CORPORATION
By: /s/ K. Shan Padda
-------------------------------------
K. Shan Padda
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints K. Shan Padda and Stephen L.
Holden, and each of them, his true and lawful attorney-in-fact and agents, each
with full power of substitution and resubstitution for such person and in his
name, place and stead, in any and all capacities, to sign any amendments to this
registration statement, and to sign any registration statement for the same
offering covered by this Registration Statements including post-effective
amendments, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming the each of said such attorneys-in-fact and agents or
his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on this
_________ day of July, 1999 in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ K. Shan Padda Chairman of the Board and Chief Executive Officer -
- ----------------------------------- Principal Executive Officer
K. Shan Padda
/s/ Stephen L. Holden President
- -----------------------------------
Stephen L. Holden
/s/ John Reilly Senior Vice President, Chief Financial Officer and
- ----------------------------------- Treasurer - Principal Financial Officer
John Reilly
/s/ Scott Skooglund Vice President - Finance and Assistant Secretary -
- ----------------------------------- Principal Accounting Officer
Scott Skooglund
/s/ Doron C. Levitas Director, Vice Chairman of the Board, Chief Administrative
- ----------------------------------- Officer, Vice President of International
Doron C. Levitas Operations and Secretary
</TABLE>
<PAGE> 31
/s/ Francis V. Cook, M.D. Director
- -----------------------------------
Francis V. Cook, M.D.
/s/ Mark Lampert Director
- -----------------------------------
Mark Lampert
/s/ William D. Lautman Director
- -----------------------------------
William D. Lautman
/s/ William H. Lomicka Director
- -----------------------------------
William H. Lomicka
/s/ Marvin Samson Director
- -----------------------------------
Marvin Samson
/s/ L. Peter Smith Director
- -----------------------------------
L. Peter Smith
/s/ Edson W. Spencer, Jr. Director
- -----------------------------------
Edson W. Spencer, Jr.
<PAGE> 32
SABRATEK CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
5.1 Opinion of Ross & Hardies
10.52 Research and Development Agreement, dated as of
June 30, 1999, by and between Sabratek Corporation
and Systle Corporation
10.53 Memorandum of Understanding, dated as of March 26,
1999, and Supplement, dated as of July 2, 1999, by
and between Sabratek Corporation and EGS
Securities Corp.
21 List of Sabratek's Subsidiaries
23.1 Consent of KPMG LLP
23.2 Consent of Ross & Hardies (included in
Exhibit 5.1)
</TABLE>
<PAGE> 33
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SABRATEK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
================================================================================
<PAGE> 1
EXHIBIT 5.1
[ROSS & HARDIES LETTERHEAD]
July 15, 1999
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement") being filed by Sabratek Corporation, a Delaware corporation, (the
"Company") with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the offer and sale of up
to 937,500 shares of Common Stock, $0.01 par value per share (the "Common
Stock") of the Company by Ralin Medical, Inc. and EGS Securities Corp.
Each term used herein that is defined in the Registration Statement and
not otherwise defined herein shall have the meaning specified in the
Registration Statement.
We are familiar with the proceedings to date with respect to the
proposed offering of the Common Stock and have examined such records, documents
and questions of law, and satisfied ourselves as to such matters of procedure,
law and fact, as we have considered relevant and necessary as a basis for the
opinion expressed in this letter. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to originals of all documents submitted to us as
certified copies or photocopies and the authenticity of the originals of such
documents.
Based on the foregoing, and subject to the qualifications set forth
hereinafter, we are of the opinion that the Common Stock has been duly
authorized and, when issued and sold in accordance with the Registration
Statement, will be legally issued, fully paid and nonassessable shares of Common
Stock of the Company.
<PAGE> 2
Sabratek Corporation
July 15, 1999
Page 2
This opinion is limited to the matters set forth herein. No opinion may
be inferred or implied beyond the matters expressly contained herein.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement and the related Prospectus, and to the
filing of this opinion as an Exhibit to the Registration Statement.
Very truly yours,
ROSS & HARDIES
By: /s/ David S. Guin
-------------------------------------
A Partner
<PAGE> 1
EXHIBIT 10.52
RESEARCH AND DEVELOPMENT AGREEMENT
This Research and Development Agreement (the "Agreement") is made as of
the thirtieth day of June, 1999 by and between Sabratek Corporation, a Delaware
corporation ("SBTK"), and Systle Corporation, a Delaware corporation ("Systle").
RECITALS
A. SBTK is engaged in the research, development and marketing of
diagnostic products and other products for a range of health conditions.
B. Systle desires to engage SBTK to perform, on behalf of Systle,
research and development and related activities in connection with the Systle
Programs (as defined below).
NOW, THEREFORE, in consideration of the various premises and
undertakings set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Acquired Product" shall mean any product for which SBTK has
exercised the Product Option.
1.2 "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party. "Control"
shall mean ownership of shares to which are attached more than fifty percent
(50%) of the votes that may be cast for the election of directors in the case of
a corporation, and at least fifty percent (50%) of the interests in profits in
the case of a business entity other than a corporation. SBTK and Systle shall
not be considered Affiliates of each other.
1.3 "Confidential Information" shall mean all information received by
one party with respect to the research, intellectual property or business of the
other and it shall include, without limiting the generality of the foregoing,
all documents, data and other technical information, such as know-how, formulae,
processes, models, manufacturing techniques, research projects, information
management systems and software as well as information relating to the
management and financial affairs of such party, such as figures relating to
profits, markets, sales, business, marketing and development plans, client
lists, supplier lists and information of a similar nature.
1.4 "Developed Technology" shall mean Proprietary Rights that (a) are
first generated, conceived or reduced to practice, as the case may be, by SBTK,
a SBTK Affiliate or by any third party in the course of performing activities
undertaken pursuant to this Agreement or (b) are acquired from a third party by
SBTK or a SBTK Affiliate during the term of this Agreement for use, in whole or
in part, in the conduct of the Systle Programs.
1.5 "Development Assets" shall mean any clinical supplies, materials
and other tangible assets purchased, manufactured or developed for use in any
Systle Program pursuant to approved Work Plans.
1.6 "FDA" shall mean the United States Food and Drug Administration or
any successor agency whose clearance is necessary to market a Systle Product in
the United States.
<PAGE> 2
1.7 "Product Option" shall mean the purchase rights granted to SBTK or
a designated SBTK Affiliate pursuant to Section 6 of this Agreement.
1.8 "Proprietary Rights" shall mean data, inventions, information,
processes, know-how and trade secrets, patents or patent applications claiming
any of the foregoing, and copyrights, owned by, licensed to or controlled by a
person and which such person has the right to license or sublicense without the
consent of any third party and without incurring additional liability to any
third party.
1.9 "Research and Development Costs" shall mean the fully-burdened
cost of activities undertaken pursuant to this Agreement plus twelve percent
(12%) of such costs, including research expenses, general and administrative
expenses, capital asset costs, costs for licenses or acquisition of technology,
products or therapeutic agents from third parties for the Systle Programs and
costs of third-party collaborations or contract research undertaken for the
Systle Programs, determined in accordance with Exhibit B hereto.
1.10 "Systle Product" shall mean any product developed pursuant to any
of the Systle Programs.
1.11 "Systle Programs" shall mean any of the product development
programs listed in Exhibit A and any additional or modified development programs
recommended by SBTK and accepted by Systle for development pursuant to this
Agreement.
1.12 "Work Plan" shall mean a work plan for research and development
under a Systle Program, including cost estimates.
2. DEVELOPMENT SERVICES.
2.1 Engagement of SBTK. Systle hereby engages SBTK to perform or cause
to be performed research, development and related activities in connection with
the Systle Programs in accordance with the respective Work Plan accepted by
Systle pursuant to Section 2.3, and to undertake such other activities as the
parties may from time to time agree, and SBTK hereby accepts such engagement.
2.2 Product Development -- SBTK Obligations. SBTK shall diligently
perform or cause to be performed those activities necessary to execute the Work
Plans accepted by Systle pursuant to Section 2.3, as amended from time to time
upon the mutual agreement of SBTK and Systle. In connection therewith, SBTK
shall make available such of its scientific and other personnel, and shall take
such steps as it deems reasonably necessary in order to perform its obligations
in accordance with the terms hereof, but SBTK is not obligated to devote any
specific amount of time or resources to activities hereunder. SBTK shall have
full discretion to determine from time to time the allocation of resources of
SBTK (facilities, equipment and personnel) to be made available for activities
hereunder, and to determine from time to time the allocation of resources of
SBTK among such activities. Systle understands, acknowledges and agrees that
SBTK may devote substantial time and resources to research and development
activities for other persons and for its own account, and as a result, SBTK may
develop and commercialize, or have commercialized, products competitive with
Systle Products.
2.3 Work Plans; Mediation of Disputes.
(a) From time to time during the term of this Agreement, SBTK
shall propose Work Plans for the Systle Programs and Systle shall have the right
to approve or reject all or any portion of a proposed Work Plan. SBTK shall
provide Systle with a proposed Work Plan under
2
<PAGE> 3
each of the Systle Programs. Systle shall promptly notify SBTK in writing of his
acceptance (in whole or in part) or rejection (in whole or in part) thereof.
(b) The parties understand and acknowledge that it is difficult to
predict accurately the activities that will be necessary to execute any Work
Plan, including the Research and Development Costs thereof, and that significant
uncertainties exist in any product development effort. Systle and SBTK shall
cooperate in good faith to devise mutually acceptable Work Plans for the Systle
Programs. SBTK and Systle shall review each such Work Plan from time to time,
and in any event no less often than at the end of each stage of research and
development, and shall then revise each Work Plan as appropriate such that each
Work Plan remains a best estimate of the work to be performed to complete the
development objectives identified therein and of the Research and Development
Costs thereunder. The parties may also mutually determine to discontinue any and
all Work Plans with respect to a Systle Program.
Except as set forth in Section 2.3(c), Systle shall not be obligated to
pay Research and Development Costs in excess of those provided for in approved
Work Plans (if such a maximum amount is so specified), and SBTK shall not be
obligated to perform work which would result in Research and Development Costs
exceeding those in approved Work Plans (if such a maximum amount is so
specified).
(c) The parties recognize that bona fide disputes may arise from time
to time in connection with devising mutually-acceptable Work Plans for the
Systle Programs. If Systle accepts or rejects a Work Plan in part, SBTK may
either (i) perform the activities under the Work Plan as approved by Systle or
(ii) propose a modified Work Plan to Systle for approval.
2.4 Consultation. Systle shall consult with SBTK and shall review with
SBTK from time to time SBTK's ongoing activities on behalf of Systle and the
progress toward completion of the activities under the Work Plans for each
Systle Program.
2.5 Third Party Rights. Subject to the terms and conditions of this
Agreement, SBTK shall have discretion to attempt to obtain any Proprietary
Rights from any third party that SBTK reasonably determines to be necessary or
useful to conduct any Systle Program or related activities pursuant to any
approved Work Plan. In addition, SBTK shall have the right to conduct its
research and development activities under this Agreement in connection with the
Systle Programs with SBTK Affiliates and third parties, including entering into,
on Systle's behalf, research and development agreements. Proprietary Rights
acquired by or licensed to SBTK as a result of the foregoing shall be included
in the Developed Technology. The costs of obtaining any such Proprietary Rights
or conducting such research and development activities shall be included in the
Research and Development Costs paid by Systle pursuant to this Agreement.
2.6 Development Assets. SBTK shall own and have the right to use any
Development Assets.
2.7 Notices. SBTK shall notify Systle within five (5) business days
after SBTK receives notice of clearance from any government or governmental
agency to market any Systle Product. SBTK shall promptly notify Systle of the
first commercial sale of any Systle Product in any jurisdiction.
3
<PAGE> 4
3. PAYMENT FOR SERVICES; TIMING OF PAYMENTS.
3.1 Payment of Research and Development Costs. In consideration of the
work to be carried out by SBTK hereunder, Systle shall make payments to SBTK (or
its Affiliates as directed by SBTK) for all Research and Development Costs
incurred by SBTK or its Affiliates in accordance with accepted Work Plans.
Systle shall also make payments to SBTK for Research and Development Costs with
respect to the initial Systle Programs which have been incurred from January 1,
1999 through the date hereof, in accordance with the Systle approved Work Plans
therefor in effect as of the date hereof. Systle shall make a payment of One
Million Dollars ($1,000,000) to cover estimated Research and Development Costs
upon execution of this Agreement.
3.2 Timing of Payments. Systle shall pay to SBTK quarterly, in
advance, the estimated amount of all Research and Development Costs to be
incurred by SBTK and its Affiliates during each calendar quarter, within five
(5) days after receipt of SBTK's invoice therefor, with a true-up payment to be
made by one party to the other within forty five (45) days after the end of each
calendar year as needed to reconcile estimated and actual Research and
Development Costs.
3.3 Sufficiency of Funds. Neither Systle nor SBTK makes any warranty,
express or implied, that the funds budgeted in any Work Plan will be sufficient
to complete the development under any or all of the Systle Programs or the other
activities contemplated hereunder.
3.4 Late Payments. Any payments due hereunder that are not made when
due shall accrue interest at the lesser of ten percent (10%) per annum or the
maximum rate as may be allowed by law, beginning on the date when SBTK notifies
Systle that such payments are overdue.
4. REPORTS AND RECORDS.
4.1 Research and Development Program Reports. Within forty-five (45)
days after the end of each calendar quarter, SBTK shall provide to Systle a
report setting forth (a) a summary of the work performed hereunder by or at the
direction of SBTK during such quarter; and (b) the total Research and
Development Costs of such activities during such quarter and cumulatively to
date, for each Work Plan.
4.2 Records; Review by Auditors. SBTK shall (and shall cause any
respective Affiliate to) keep and maintain, in accordance with U.S. generally
accepted accounting principles, proper and complete records and books of account
documenting all Research and Development Costs. Systle shall have the right,
once in each calendar quarter during regular business hours and upon reasonable
notice to SBTK or the respective Affiliate, and at his own expense, to examine
or to have examined by his auditors or representatives, pertinent books and
records of SBTK or such Affiliate, for the sole purpose of determining the
correctness of amounts invoiced, paid or due under this Agreement. Such
examination shall take place not later than two (2) years following the quarter
in question, and only one examination may take place with respect to any period
as to which such books and records are examined.
4
<PAGE> 5
5. OWNERSHIP OF TECHNOLOGY.
5.1 Ownership of Developed Technology. Unless SBTK and Systle agree
otherwise, all Developed Technology shall be owned by Systle, subject to the
Product Option.
5.2 Patents Covering Developed Technology. SBTK shall determine
whether and to what extent to seek and maintain patents covering any Developed
Technology. Any such patents and applications therefor shall be owned by Systle
unless such ownership separate from SBTK shall raise prior art issues with
respect to SBTK inventions, in which event, such patent applications shall be
filed by SBTK, subject to an exclusive license to Systle. Systle shall pay all
of the costs of obtaining and maintaining any patents and patent applications
during the term of this Agreement arising out of Systle Programs.
5.3 Transfer of Technology. Systle shall not grant any rights under or
to, transfer, assign or otherwise dispose of any Developed Technology or any
Systle Product, without first delivering to SBTK sixty (60) business days prior
written notice, whereupon SBTK shall have the opportunity to exercise its
Product Option with respect thereto as provided in Section 6.
6. PRODUCT OPTION.
6.1 Grant of Product Option. On the terms and subject to the
conditions of this Agreement, Systle hereby grants to SBTK an option to acquire
all of Systle's rights with respect to each Systle Product, exercisable on a
product-by-product basis as described in Section 6.2.
6.2 Time For Exercise. SBTK may exercise the Product Option with
respect to any Systle Product at any time during the period beginning on the
date hereof and ending one (1) year after clearance by the FDA to market such
Systle Product in the United States. The Product Option for any Systle Product
will expire if not exercised within the foregoing time periods.
6.3 Manner Of Exercise. SBTK shall exercise any Product Option by
delivering to Systle, within the time period described in Section 6.2 above, a
written notice of exercise specifying the Systle Product. Upon delivery of such
written notice of exercise, the parties shall execute an assignment to SBTK of
all Systle's rights in the Systle Product and all associated Developed
Technology. The consideration for such assignment shall be one and one third
(1-1/3) of the Research and Development Costs to develop such Systle Product
under this Agreement.
7. ACCESS TO INFORMATION; CONFIDENTIALITY.
7.1 Access. Systle shall be permitted access to the premises of SBTK
during normal business hours, solely for the purpose of monitoring the progress
of activities under this Agreement. SBTK shall keep records and notebooks
documenting the experiments performed during its work under this Agreement and
the results thereof. Such documentation shall be available during normal
business hours for inspection by Systle.
7.2 Third Parties. SBTK shall use reasonable efforts to obtain from
each third party engaged pursuant to Section 2.5 access similar to that to be
provided pursuant to Section 7.1, for the benefit of both Systle and SBTK.
7.3 Confidentiality. During the term of this Agreement and for a
period of ten (10) years following its termination, each party shall maintain in
confidence all Confidential Information of the other; provided, however, that
nothing contained herein shall prevent either party from disclosing any
Confidential Information to the extent that such Confidential Information (a) is
required to be disclosed in connection with conducting the Systle Programs,
securing necessary governmental authorization with respect to the Systle
Products, or directly or
5
<PAGE> 6
indirectly making, using or selling Systle Products, (b) is required or
appropriate to be disclosed by law for the purpose of complying with
governmental regulations, (c) is disclosed to sublicensees, distributors or
marketing partners or potential sublicensees, distributors or marketing partners
permitted under the agreements between the parties in connection with the
proposed or actual research, development, manufacturing or marketing of Systle
Products, subject to similar obligations of confidentiality on the part of such
third parties as required by the agreements between the parties, (d) is lawfully
disclosed to the recipient by a third party having the right to disclose such
information to the recipient, or (e) either before or after the time of
disclosure to the recipient, become known to the public other than by an
unauthorized act or omission of the recipient or any of the recipient's
employees or agents; provided further that, Systle may disclose SBTK
Confidential Information to third parties only in accordance with the provisions
of this Section 7.3 and Section 8.1 hereof and in accordance with the provisions
of any license entered into pursuant to the Product Option. The obligations of
each of the parties pursuant to this Section 7.3 shall survive the termination
of this Agreement for any reason. Any breach of this Section 7.3 may result in
irreparable harm, and in the event of a breach, the aggrieved party shall be
entitled to seek injunctive relief (without the need to post a bond) in addition
to any other remedies available at law or in equity.
8. PUBLIC DISCLOSURE.
8.1 Public Disclosure. No press releases or other releases of
information related to this Agreement or the transactions contemplated hereby
will be issued or released by Systle without the prior consent of SBTK. Only
SBTK and its representatives shall be permitted to communicate with financial
analysts, investors and the press regarding this Agreement and the transactions
contemplated hereby. Systle agrees that all such contacts shall be directed to
SBTK.
9. TERM AND TERMINATION.
9.1 Term. This Agreement shall become effective on the date set forth
on the first page (the "Effective Date") and shall continue thereafter, unless
earlier terminated pursuant to Section 9.2, until June 30, 2005.
9.2 Other Termination. Either party may, in its discretion, terminate
by written notice this Agreement in the event that the other party:
(a) breaches any material obligation hereunder and such breach
continues for a period of sixty (60) days after written notice thereof by the
terminating party to the other party; or
(b) enters into any proceeding, whether voluntary or involuntary, in
bankruptcy, reorganization of creditor's rights or similar arrangement for the
benefit of its creditors.
10. FORCE MAJEURE.
10.1 Force Majeure. Neither party to this Agreement shall be liable for
failure or delay in the performance of any of its obligations hereunder, if such
failure or delay is due to causes beyond its reasonable control including,
without limitation, acts of God, earthquakes, fires, strikes, acts of war, or
intervention of any governmental authority, but any such delay or failure shall
be remedied by such party as soon as possible after the removal of the cause of
such failure or delay.
6
<PAGE> 7
11. MISCELLANEOUS.
11.1 Amendment and Waiver. This Agreement may be amended and any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding upon a party only if set forth in a writing executed by
authorized representatives of such party and referring specifically to the
provision alleged to have been amended or waived. A waiver by any party hereto
of any terms and conditions of this Agreement in any one instance shall not be
deemed or construed to be a waiver of such terms and conditions for any similar
instance in the future. No course of dealing between or among any persons having
any interest in this Agreement shall be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
11.2 Assignment. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that SBTK may assign such
rights and obligations hereunder to an Affiliate of SBTK or to any person or
entity with which SBTK is merged or consolidated or which acquires all or
substantially all of the assets or issued and outstanding shares in the share
capital of SBTK.
11.3 Dispute Resolution. To the extent feasible, SBTK and Systle desire
to resolve any controversies or claims or issues arising out of or relating to
this Agreement through discussions and negotiations between each other. SBTK and
Systle 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
good faith discussions, such controversies, claims or issues cannot be resolved
solely between the parties, then SBTK and Systle shall, upon the election of
either SBTK or Systle, 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 SBTK, one of whom shall be appointed by Systle and
one of whom shall be appointed by the Institute (collectively, the
"Arbitrator"). Notwithstanding anything to the contrary provided in Section 11.5
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. SBTK and
Systle hereby agree that such arbitration shall be completed and a final
arbitration decision rendered within sixty (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 sixty (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.
7
<PAGE> 8
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.
11.4 Counterparts. This Agreement may be executed in any number of
counterparts (including by means of telecopied signature pages), each of which
when so executed shall be deemed to be an original and all of which when taken
together shall constitute this Agreement.
11.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
11.6 Headings. The section headings contained in sections of this
Agreement are included for convenience only and form no part of the Agreement
between the parties.
11.7 Notices. Notices required under this Agreement shall be in writing
and sent by registered or certified mail, postage prepaid, or by facsimile and
confirmed by registered or certified mail, postage prepaid, and addressed as
follows:
If to SBTK:
- -------------------
Sabratek Corporation
8111 North St. Louis Avenue
Skokie, Illinois 60076
Attention: Chief Financial Officer
Telephone: 847-720-2400
Facsimile: 847-720-2345
8
<PAGE> 9
with copy to:
(which shall not constitute notice to SBTK)
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Carter W. Emerson
Telephone: 312-861-2000
Facsimile: 312-861-2200
If to Systle:
- ---------------------
Charles K. Stewart
__________________________________
__________________________________
Facsimile: _______________________
All notices shall be deemed to be effective upon receipt unless such
notice is delivered or transmitted by facsimile, in which case, if it is
delivered or transmitted before 4:00 PM on a business day, it shall be deemed to
have been given and received on such day; in any other case, it will be deemed
to have been given and received on the first business day following the day on
which it is delivered or transmitted by facsimile. Either party may change the
address at which notice is to be received by written notice pursuant to this
Section 11.7.
11.8 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, it shall be
modified, if possible, to the minimum extent necessary to make it valid and
enforceable or, if such modification is not possible, it shall be stricken and
the remaining provisions shall remain in full force and effect.
11.9 Relationship of the Parties. For purposes of this Agreement,
Systle and SBTK shall be deemed to be independent contractors, and anything in
this Agreement to the contrary notwithstanding, nothing herein shall be deemed
to constitute Systle and SBTK as partners, joint venturers, co-owners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way obligate the other party, except as expressly authorized in
writing by the other party. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume or be liable for any liabilities
or obligations of the other party, whether past, present or future.
11.10 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings whether written or
oral, relating to such subject matter.
* * * * * *
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
SABRATEK CORPORATION
By: /s/ JOHN REILLY
---------------------------------
Title: Chief Financial Officer
------------------------------
SYSTLE CORPORATION
By: /s/ CHARLES STEWART
---------------------------------
Title:
------------------------------
10
<PAGE> 1
Exhibit 10.53
MEMORANDUM
To: Mr. John P. Reilly
From: William D. Lautman
Date: March 26, 1999
Subject: LifeWatch Advisory Engagement Letter
- --------------------------------------------------------------------------------
This memorandum memorializes the agreement (the "Agreement") between EGS
Securities Corp. ("EGS") and Sabratek Corporation ("Sabratek" or the "Company")
and confirms the understanding between such parties regarding the engagement of
EGS by Sabratek pursuant to which EGS will perform certain financial advisory
services on behalf of the Company. Such advisory services to be undertaken by
EGS will relate (1) to the prospective acquisition of, or (2) any other
consummation of a strategic relationship with (any individual transaction within
the context of (1) or (2) above, a "Transaction" hereinafter defined) LifeWatch,
Inc., a wholly-owned subsidiary of Ralin Medical Inc. ("LifeWatch"). The terms
of the Agreement are outlined as follows:
1. The Company hereby engages EGS as its financial advisor in connection
with a Transaction with LifeWatch.
2. EGS accepts the engagement described in Paragraph 1 and accordingly
agrees to undertake the following, at the option of the Company:
a) to assist the Company in assessing the strategic value of a
Transaction with LifeWatch to assist the Company, at the option
of the Company;
b) if applicable, to assist the Company with valuation analyses to
be used by management in its negotiations with LifeWatch,
provided, however, that EGS will not have an obligation to
render a written appraisal of any of LifeWatch's assets or
liabilities or to provide a "fairness opinion;"
c) to advise the Company with respect to the form and structure of
a Transaction;
d) to advise the Company as to strategy and tactics for negotiating
with LifeWatch and to coordinate and assist in related
discussions; and
<PAGE> 2
e) to assist the Company in negotiating a definitive agreement or
agreements with LifeWatch.
3. In consideration for services rendered pursuant to paragraphs 1 and 2 of
this Agreement, the Company shall pay to EGS, at or shortly after the
Closing (hereinafter defined) of a Transaction, a success fee in the
form of shares of common stock of Sabratek ("Success Fee"), the number
of shares of which will be determined, by mutual agreement, at Closing
based on the actual services rendered by EGS.
Sabratek shall register any and all shares of common stock issued to EGS
pursuant to the terms of this Agreement, in the first registration form
filed on behalf of the equity holders of LifeWatch who received common
stock of Sabratek in the Transaction. EGS shall not be subject to any
sale restrictions on such shares other than regulatory restrictions, if
any.
4. The Company will also reimburse EGS, promptly upon request, for all
reasonable out-of-pocket expenses incurred in connection with this
Agreement.
5. The Company warrants that it is unconditionally authorized to compensate
EGS according to the formula outlined herein.
6. For the purposes of this Agreement:
a) "Sabratek" or the "Company" shall refer to Sabratek Corporation,
as well as any affiliate, joint venture investment, partner,
successor or predecessor company or any related entity;
b) "LifeWatch" shall refer to LifeWatch, Inc., a wholly-owned
subsidiary of Ralin Medical, Inc., as well as any affiliate,
joint venture investment, partner, successor or predecessor
company or any related entity;
c) "Transaction" shall refer to any acquisition of, or other
strategic relationship established between, Sabratek and
LifeWatch, including but not limited to: (i) a sale, purchase or
transfer of any equity interests (including, without limitation,
options, warrants or similar interests), (ii) a lease of assets
other than in the normal course of business, (iii) a merger or
consolidation, (iv) the formation of a joint venture or
partnership or any other business combination, (v) the execution
of any product or technology licensing agreement, (vi) the sale,
grant or other transfer of any option or other right (whether or
not contingent upon any future event) to acquire any equity
interests or assets or to enter into any product or technology
license or to consummate any other related transaction or, (vii)
any similar transaction;
d) "Closing" shall refer to the execution of definitive agreements
to enter into a Transaction. In the event that a Transaction
involves multiple steps (e.g., execution of an option agreement
to acquire assets at a subsequent date), Closing shall refer to
the execution of agreements committing the parties to the first
of these successive related Transactions.
<PAGE> 3
7. The Company shall furnish, or cause to be furnished, to EGS all
reasonable information requested by EGS for the purpose of rendering
services hereunder (the "Information"). The Company recognizes and
confirms that EGS:
a) will use and rely on the Information and on information
available from generally recognized public sources in performing
the services contemplated by this Agreement without having
independently verified the same; and
b) does not assume responsibility for the accuracy or completeness
of the Information and such other information. EGS agrees to
keep confidential all non-public Information provided to it by
the Company, except as required by law or as contemplated by the
terms of this Agreement and will use such Information solely for
the purposes described in this Agreement. Notwithstanding
anything to the contrary contained herein, EGS may disclose
non-public Information to its or Sabratek's agents and advisors
whenever EGS determines that such disclosure is necessary to
provide the services contemplated hereunder; provided that EGS
will first advise the Company as to third parties receiving
confidential Information concerning the Company and the Company
shall first consent to such disclosure. Such party or parties
will further agree to handle the Information confidentially.
Upon the termination of this Agreement, EGS shall return the
Information, and all copies thereof, to the Company. This
provision may be enforced with equitable remedies.
8. EGS will use its "reasonable best efforts" to assist the Company,
pursuant to paragraph 2 of this Agreement, during the engagement period,
but there is no commitment, expressed or implied, by EGS or any of its
affiliates to effect the successful Closing of a Transaction.
9. Except as required by law, any advice rendered by EGS pursuant to its
engagement hereunder shall be treated as confidential by the Company and
any party to whom the Company discloses such advice, and shall not be
disclosed publicly in any manner without the prior written consent of
EGS. Without prior notification to EGS, the Company shall not make any
legally required disclosure of such advice nor make any legally required
public announcement or filing in which EGS' name appears.
10. Because EGS will be acting on behalf of the Company, the Company agrees
to the indemnification and contribution provisions (the
"Indemnification") attached to this Agreement as Annex A and
incorporated herein in their entirety.
11. In the event that a Transaction or other transaction with an entity
other than LifeWatch is effected and the Company is not the surviving
entity, the Company shall use its reasonable best efforts to cause the
surviving company or purchaser to assume and honor the obligations and
liabilities of the Company hereunder, including, without limitation, the
Company's obligations and liabilities pursuant to provisions concerning
<PAGE> 4
indemnification, contribution, and the Company's obligations to pay fees
provisions.
12. This Agreement may be terminated by either party at any time after 12
months from the date hereof on 30 days' prior written notice, without
liability, except for the Company's obligations (which shall survive
such termination) as to (i) reimbursement or payment for any Transaction
fees and expenses incurred by EGS prior to termination of this
Agreement, and (ii) any reimbursement, indemnity or contribution payable
by the Company pursuant to Annex A (subject to the limitations therein).
Notwithstanding anything contained in the preceding sentence, if a
Transaction is Closed (within one year of such termination) with
LifeWatch or any other party: (i) for which EGS has provided the Company
advisory services in contemplation of a Transaction as part of this
Agreement, the Company shall pay to EGS Transaction Fees as specified
herein.
13. This Agreement may not be amended or modified except in writing and when
mutually executed by the Company and EGS, and shall be governed and
construed in accordance with the internal laws of the State of New York
without reference to principles of conflicts of laws. Any controversy or
claim arising out of or relating to this Agreement, or the transactions
contemplated hereby, or the breach hereof or thereof, shall be settled
by binding and final arbitration in accordance with the then-existing
Commercial Arbitration Rules of the American Arbitration Association.
Unless otherwise agree, arbitration shall be conducted in Chicago,
Illinois before a single arbitrator appointed in accordance with such
Rules. The arbitrator shall follow the law governing this Agreement. The
arbitrator's decision shall include a statement specifying in reasonable
detail the basis for and computation of the amount of the award, if any.
The parties shall be entitled to conduct discovery in accordance with
the Federal Rules of Civil Procedure, as in effect in the jurisdiction
where the arbitration occurs. Judgement upon the arbitration award may
be entered in any court having jurisdiction.
<PAGE> 5
Please confirm that the foregoing is in accordance with the Company's
understanding by signing and returning to EGS the enclosed duplicate of
this Agreement.
Sincerely,
EGS SECURITIES CORP.
By: /s/ WILLIAM LAUTMAN
--------------------
William Lautman
Managing Director
Accepted and agreed to as of
the date first written above,
SABRATEK CORPORATION
By: /s/ JOHN REILLY
-------------------------------
Title: Chief Financial Officer
----------------------------
Attachment
<PAGE> 6
ANNEX A
INDEMNIFICATION
In addition to the fees and expenses which the Company has agreed to pay for the
services to be performed pursuant to the letter agreement of even date herewith
(the "Agreement"), the Company agrees: (i) to indemnify and hold EGS (which term
for the purposes of this letter includes its directors, controlling persons [as
such term is defined under the Securities Act of 1933], the officers, employees
and agents) harmless against and from all losses, claims, damages or
liabilities, joint or several (and all actions, claims, proceeds and
investigations in respect thereof), to which EGS may become subject in
connection with its performance of the services described in the attached letter
agreement under any of the Federal securities laws, under any other statute, at
common law or otherwise; (ii) that EGS will not be culpable for and will have no
liability to the Company for or with respect to any and all losses, claims,
damages or liabilities, joint or several, of the Company incurred in connection
with EGS' performance of the services described in the Agreement; and (iii) in
each case to reimburse EGS for all reasonable legal and other out-of-pocket
expenses (including the cost of investigation and preparation) as and when
incurred by EGS arising out of or in connection with any action, claim,
proceeding or investigation (whether initiated or conducted by the Company or
any other party) in connection therewith, whether or not resulting in any
liability (and whether or not EGS is defendant in, or target of, any such
action, claim, proceeding or investigation); provided, however, that the Company
shall not be liable to EGS pursuant to clauses (i) and (iii) above and the
Company's exculpation of EGS pursuant to clause (ii) above shall not apply in
any such case to the extent that any such loss, claim, damage or liability is
found in a final judgment by a court of competent jurisdiction to have resulted
from EGS gross negligence, bad faith, or willful misconduct or the gross
negligence, bad faith, or willful misconduct of any other indemnified person
hereunder, and amounts paid and reimbursement of expenses under (iii) above
shall be refunded. If for any reason the foregoing indemnification (including
reimbursement pursuant to clause (iii) above) or the exculpation is unavailable
to EGS or insufficient to hold it harmless (other than by reason of the proviso
to the preceding sentence), then the Company shall contribute to the amount paid
or payable by EGS as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Company on the one hand and EGS on the other hand but also the relative
fault of the Company and EGS as well as any relevant equitable considerations,
provided that, in no event, will EGS' aggregate contribution hereunder exceed
the amount of fees actually received by EGS pursuant to the Agreement. The
indemnity, exculpation, reimbursement and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall survive any termination of the Agreement and
shall be binding upon and extend to the benefit of any successors, assigns,
heirs and personal representatives of the Company and EGS.
If any action, claim proceeding or investigation is instituted or threatened
against EGS in respect of which indemnity may be sought against the Company
hereunder, EGS shall promptly notify the Company thereof in writing, but the
omission to notify the Company shall relieve the Company from any other
obligation of liability that the Company may have to EGS under this letter or
otherwise, only to the extent that such delay in
<PAGE> 7
notification materially prejudices the Company's defenses of such claim or
action. The Company shall assume the defense of such action, including the
employment of counsel and the payment of reasonable expenses. EGS shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of EGS unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action or the Company shall not have employed counsel to
have charge of the defense of such action or in the opinion of counsel to EGS
that there may be defenses available to it which are unique or separate to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of EGS), in any of which events such
fees and expenses shall be borne by the Company; provided, that the Company
shall only be responsible for the fees and expenses of one counsel in each
jurisdiction. The Company will not be liable hereunder for any settlement
thereof by EGS without the Company's written consent, which will not be
unreasonably withheld. The Company shall not, without the prior written consent
of EGS settle or compromise any claim, or permit a default or consent to the
entry of any judgment in respect thereof, unless such settlement, compromise or
consent includes the giving by the claimant to EGS of an unconditional and
irrevocable release from all liability in respect of such claim.
<PAGE> 8
MEMORANDUM
To: John P. Reilly
From: William D. Lautman
Date: July 2, 1999
Subject: LifeWatch Advisory Fees
- --------------------------------------------------------------------------------
This memorandum serves to confirm the determination, by mutual
agreement per the terms of my memorandum to you dated March 26, 1999, that EGS
will receive 37,500 shares of common stock of Sabratek for services rendered in
connection with the SRS Transaction (as defined in the memorandum). The terms of
issuance, registration and sale of such stock will follow the terms outlined in
the aforementioned memorandum.
Please confirm your understanding and acceptance of our agreement by
signing below and faxing a copy of this memorandum to me.
/s/ John Reilly
------------------------------
John P. Reilly
Chief Financial Officer
Sabratek Corporation
<PAGE> 1
EXHIBIT 21
LIST OF SABRATEK'S SUBSIDIARIES
CMS Healthcare, Inc., a Florida corporation.
LifeWatch, Inc., an Illinois corporation.
Unitron Medical Communications, Inc., doing business as MOON Communications, a
Florida corporation
Strategic Reimbursement Services, Inc., an Illinois corporation
GDS Technology, Inc., an Indiana corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG, LLP
The Board of Directors
Sabratek Corporation:
We consent to incorporation by reference in the registration statement
on Form S-3 of Sabratek Corporation of our report dated March 12, 1999, relating
to the consolidated balance sheets of Sabratek Corporation as of December 31,
1998 and 1997 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the years in the
three-year period ended December 31, 1998, which report appears in the December
31, 1998 Annual Report on Form 10-K of Sabratek Corporation and to the reference
to our firm under the heading "Experts" in the Registration Statement.
KPMG LLP
/s/ KPMG LLP
Chicago, Illinois
July 15, 1999
