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                                                                   EXHIBIT 10.38

                              SABRATEK CORPORATION
                      LONG-TERM INCENTIVE COMPENSATION PLAN

                                    ARTICLE I
                                     PURPOSE

The purpose of the Long-Tem Incentive Compensation Plan (the "Plan") is to
promote the interests of Sabratek Corporation (the "Company") and its
stockholders by (i) helping the Company to attract and retain outstanding
management , (ii) stimulating management's efforts on behalf of the Company by
giving participants a direct interest in the performance of the Company, and
(iii) suitably rewarding participants' contributions to success of the Company.

     Except for amounts payable upon a Change in Control (as hereinafter
defined) which shall be payable in all instances, no payments shall be made
hereunder unless the Company stockholders have approved the Plan in accordance
with the requirements of Code (as hereinafter defined) Section 162(m).

                                   ARTICLE II
                                   DEFINITIONS

     2.1 Award Certificate: A written instrument evidencing the award of Units
to a Participant.

     2.2 Base Year EPS: Earnings Per Share for the Fiscal Year immediately
preceding the date of an award of Units.

     2.3 Beneficiary: The person or persons designated by a Participant, in
accordance with Section 9. 1, to receive any amount payable under the Plan upon
the Participant's death.



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     2.4 Board: The Board of Directors of the Company.

     2.5 Change in Control:

         (a) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of the Company; or

         (b) The individuals who, as of the Effective Date, are members of the
Board cease for any reason to constitute a majority of the Board, unless the
election, or nomination for election by the stockholders of the Company, of any
new director or directors was approved by a vote of a majority of the Board, in
which case such new director or directors shall, for purposes of this Plan, be
considered a member or members of the Board; or

         (c) Approval by stockholders of the Company of (i) a merger or
consolidation of the Company if the stockholders immediately before such merger
or consolidation do not, as a result of such merger or consolidation, own,
directly or indirectly, more than 60 percent of the combined voting power of the
then outstanding voting securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of the Company outstanding
immediately before such merger or consolidation, or (ii) a complete liquidation
or dissolution, or an agreement for the sale or other disposition, of all or
substantially all of the assets of the Company.

     Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because 40 percent or more of the combined voting power of the then
outstanding securities is

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acquired by (i) a trustee or other fiduciary holding securities under one
or more employee benefit plans maintained for employees of the Company, or (ii)
any corporation which, immediately prior to such acquisition, is owned directly
or indirectly by the stockholders of the Company in the same proportion as their
ownership of stock of the Company immediately prior to such acquisition.

     2.6 Code: The Internal Revenue Code of 1986, as amended from time to time.

     2.7 Committee: The Compensation Committee of the Board, which is comprised
solely of two or more "outside directors" within the meaning of Section 162(m)
of the Code.

     2.8 Common Shares: Shares of common stock ($0.01 par value) of the Company.

     2.9 Company: Sabratek Corporation, a Delaware corporation, and its
consolidated subsidiaries, or any successor thereto.

     2.10 Cumulative Unit Value: The amount determined in accordance with
Section 7.2.

     2.11 Disability: Disability, as defined in a Participant's employment
agreement with the Company, or, absent an agreement, in the Company's group
disability insurance contract.

     2.12 Earnings: For any Fiscal Year, the consolidated income of the Company
prepared in accordance with generally accepted accounting principles, as
reported in the Company's audited consolidated financial statements for that
Fiscal Year, adjusted on an after-tax basis (a) to exclude (i) in its entirety
any items of nonrecurring gain or loss in excess of $1,000,000 including write
downs of items included in operating income, except that gains resulting from
the settlement or adjudication of intellectual property litigation shall be
totally includible, and (ii) any accruals for this Plan, and (b) to add back
write-offs required in connection with any acquisition in the year of
acquisition.


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     2.13 Earnings Per Share: For any Fiscal Year, Earnings divided by the
number of Common Shares used to determine the Company's fully diluted earnings
per share for that Fiscal Year, as reported in the Company's audited
consolidated financial statements for the Fiscal Year; provided, however, that
for the Fiscal Year ending December 31, 1998, Earnings Per Share shall be the
lesser of (i) 160 percent of Earnings Per Share for the period July 1, 1998
through December 31, 1998 or (ii) Earnings Per Share for 1998.

     2.14 Effective Date: The effective date of the Plan shall be July 1, 1998.

     2.15 Enterprise Value: The total proceeds and other consideration paid or
received or to be paid or received in connection with a Change in Control (which
consideration shall be deemed to include amounts in escrow), including, without
limitation, and taking into account: (i) cash; (ii) notes, securities and other
property valued at the fair market thereof; (iii) liabilities, including all
debt, pension liabilities, guarantees and capitalized leases, directly or
indirectly assumed, refinanced or extinguished; (iv) the value of operating
lease rental expense (calculated by multiplying the latest fiscal quarter
annualized operating lease rental expense prior to the closing of a Change in
Control by 10); (v) payments to be made in installments; (vi) amounts payable
under consulting agreements, agreements not to compete or similar arrangements
(including such payments to management); (vii) the net present value of
contingent payments (whether or not related to future earnings or operations);
(viii) if the Change in Control involves the disposition of assets, the net
value of current assets not sold; and (iv) if the Change in Control takes the
form of a recapitalization, restructuring or similar transaction, the fair
market value of equity securities of the acquired company retained by the
acquired company's security holders upon consummation of such Change in Control
(such

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securities, and all other securities received by such security holders, being
deemed to have been paid to such security holders in such Change in Control).

     2.16 Fiscal Year: The Company's fiscal year, which is the calendar year.

     2.17 Incremental Unit Value: The amount determined in accordance with
Section 7.1.

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     2.18 Maximum Cumulative Unit Value: For Units awarded as of the Effective
Date, $500 per Unit. For Units awards as of the beginning of any Fiscal Year
thereafter, the amount determined by the Committee with respect to those Units
when they are awarded.

     2.19 Measuring Price: For each Unit awarded as of the Effective Date,
$28.75; for each Unit awarded thereafter, the closing price of a Common Share as
reported on the NASDAQ National Market System on the last day of the Fiscal Year
preceding the date as of which the Unit is awarded.

     2.20 Participant: A key employee of the Company designated by the Committee
to participate in the Plan.

     2.21 Plan: The Sabratek Corporation Long-Term Inventive Compensation Plan,
as herein set forth and as it may be amended from time to time.

     2.22 Term of the Plan: The period commencing on the Effective Date and
ending five years after the final award of Units (but in no event later than
December 31, 2012), in accordance with Section 5.1 or on such earlier date as
the Maximum Cumulative Unit Value of all Units available for award under the
Plan has been achieved.

     2.23 Termination Without Cause: Termination of a Participants employment by
the Company for other than "Cause," as defined in the Participants employment
agreement with the Company. If the Participant's employment agreement does not
define "Cause," or the Participant has no employment agreement, "Cause" shall
mean (i) the Participant being found guilty of a felony, fraud or embezzlement,
in each case related to Sabratek or its business, or (ii) any repeated and
demonstrated failure by the Participant to discharge faithfully the
responsibilities of his position that the Board determines in good faith is
extremely detrimental to the current and future interests of the Company.


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     2.24 Unit: A unit of participation in the Plan awarded to a Participant in
accordance with Article V.
 
     2.25 Valuation Date: The last day of any Fiscal Year.


                                   ARTICLE III
                                 ADMINISTRATION

     3.1 The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum. Committee decisions and determinations
shall be made by a majority of its members present at a meeting at which a
quorum is present, and they shall be final. The actions of the Committee with
respect to the Plan shall be binding on all affected Participants. Any decision
or determination reduced to writing, and signed by all members of the Committee
shall be fully effective as if it had been made by a vote at a meeting duly
called and held. The Committee shall keep minutes of its meetings and shall make
such rules and regulations for the conduct of its business as it shall deem
advisable.

     3.2 The Committee shall have full authority, subject to the provisions of
the Plan: (i) to select Participants and determine the extent and terms of their
participation; (ii) to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration, of the Plan; (iii) to
construe and interpret the Plan, the rules and regulations adopted thereunder
and any notice or Award Certificate given to a Participant; and (iv) to make all
other determinations that it deems necessary or advisable in the administration
of the Plan.

     3.3 The Committee may employ attorneys, consultants, accountants or other
persons as it deems necessary for the proper administration of the Plan and may
rely on the advice, opinions

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or valuations of any such Persons. No member of the Committee shall be
personally liable for any action, determination or interpretation taken or made
in good faith by the Committee with respect to the Plan or any award hereunder,
and all members of the Committee shall be fully indemnified and protected by the
Company in respect of any such action, determination or interpretation.

     3.4 In the event of any stock split, stock dividend, reclassification,
recapitalization or other change that affects the character or amount of
outstanding Common Shares and Earnings Per Share, the Committee shall make such
adjustments in the number of Units (whether authorized or outstanding and
unexercised), the Measuring Price or both as shall, in the sole judgment of the
Committee, be equitable and appropriate in order to make the value of such
Units, as nearly as may be practicable, equivalent to the value of Units
outstanding and unexercised immediately prior to such change. In no event,
however, shall any such adjustment give any Participant any additional benefits.

     3.5 The Committee shall be precluded from increasing compensation payable
under the Plan to a Participant, including acceleration of payment and increase
of any amount payable, unless specifically provided for by the Plan.

                                   ARTICLE IV
                                  PARTICIPATION

     4.1 Only key employees of the Company who, in the Committees judgment, will
have a significant impact an the success of the business shall be eligible to
participate in the Plan. The Committee, in its sole discretion, shall select the
Participants.


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     4.2 In selecting Participants and in determining the number of Units to be
awarded to any Participant for any Fiscal Year, the Committee shall take into
account such factors as the individual's position, experience, knowledge,
responsibilities, advancement potential and past and anticipated contributions
to the Company's performance.

                                    ARTICLE V
                                 AWARD OF UNITS

     5.1 Subject to adjustment as provided in Section 3.4, a maximum of 100,000
Units may be awarded under the Plan. A Participant who has been awarded Units
may be awarded additional Units from time to time, and new Participants may be
awarded Units, both in the discretion of the Committee, provided, however, that
no Units shall be awarded after 2008.

     5.2 Units shall be awarded solely by the Committee and shall be evidenced
by an Award Certificate, as provided in Article X.

     5.3 Subject to adjustment as provided in Section 3.4, the maximum number of
Units awarded to any one individual shall not exceed 75,000 during the Term of
the Plan.

                                   ARTICLE VI
                            TERM AND VESTING OF UNITS

     6.1 Each Unit shall have a term of five years from the date of award,
subject to earlier termination (i) as provided in Article XI, or (ii) upon
attainment before five years of the Units Maximum Cumulative Unit Value. Units
awarded in 1998 shall be deemed to be awarded as of the

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Effective Date. Future awards of Units shall be deemed made as of the first
day of any subsequent Fiscal Year through 2008, as the case may be.

     6.2 Each Unit shall become vested on the date on which the Company publicly
discloses the Earnings Per Share applicable to the Valuation Date immediately
preceding the fifth anniversary of the date of its award or, if earlier, upon
(i) attainment of its Maximum Cumulative Unit Value, (ii) a Participant's
Termination Without Cause (before or after a Change in Control), (iii) the
termination of Participant's employment at the Participant's option within one
year of a Change in Control, or (iv) termination of a Participant's employment
with the Company by reason of death or Disability. Notwithstanding the
foregoing, Units awarded as of the Effective Date shall vest on the last day of
the Fiscal Year ending in 2002, subject to earlier vesting as aforesaid.

                                   ARTICLE VII
                        DETERMINATION OF VALUE OF A UNIT

     7.1 For any Fiscal Year, the Incremental Unit Value of a Unit shall be
equal to the product of the Measuring Price multiplied by.85 of the percentage
by which Earnings Per Share for the Fiscal Year exceeds Base Year EPS. In the
event Base Year EPS exceeds Earnings Per Share for any Fiscal Year, the
Incremental Unit Value for the Fiscal Year shall be zero. The Committee shall
notify each Participant of the Incremental Unit Value of his or her Units for
each Fiscal Year as soon as practicable after the Valuation Date for the Fiscal
Year.

     7.2 The Incremental Unit Value of each Unit for any Fiscal Year shall be
cumulated


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with the Incremental Unit Value of the Unit for all prior Fiscal Years from the
date of the Unit award. The cumulative amount thus determined shall be the then
Cumulative Unit Value of such Unit.


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                                  ARTICLE VIII
                          EXERCISE AND PAYMENT OF UNITS

     8.1 Except as provided in Article XI, a Unit that is vested, in accordance
with Article VI, shall thereupon be exercised. Prior to receiving payment for an
exercised Unit, a Participant shall deliver his or her Award Certificate to the
Secretary of the Company. Upon surrender of the Award Certificate, the
Participant shall be entitled to receive the Cumulative Unit Value of the Units
being exercised, determined as of the concurrent or immediately preceding
Valuation Date, but not in excess of the Maximum Cumulative Unit Value of each
such Unit.

     8.2 Payment of the amount due under the Plan shall be made not later than
five days following the date of exercise of any Unit or the date of such other
event as shall entitle the Participant to payment, provided, however, that,
before any payment may be made, the Committee must certify in writing that all
performance criteria under the Plan have been met. Not less than 40 percent of
any amount due shall be paid in cash, and the balance shall be paid in cash or
Common Shares or both, as determined by the Committee in its discretion.

     8.3 If a Participant's employment is terminated for any reason: other than
death or Disability within one year following a Change in Control, the
Participant shall be entitled to receive a lump-sum cash payment in an amount
equal to the Maximum Cumulative Unit Value of any Units awarded; provided,
however, that the amount paid to any Participant following a Change in Control
may not exceed 5 percent of the Company's Enterprise Value, and the amount paid
to all Participants may not exceed 7 percent of the Company's Enterprise Value.
If the amount otherwise payable to all Participants would exceed 7 percent of
the Enterprise Value, the payment to each Participant shall

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be reduced pro rata based on the amount each Participant would have received if
no limits existed as necessary in order not to exceed the limit.

                                   ARTICLE IX
                       LIMITS ON TRANSFERABILITY OF UNITS

     9.1 Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount payable under the Plan upon his or her death. A Participant may, from
time to time, revoke or change his or her Beneficiary designation without the
consent of any previously designated Beneficiary by filing a new designation
with the Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or revocation
thereof shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior to
such receipt. If at the date of a Participant's death, there is no designation
of a Beneficiary in effect for the Participant or if no Beneficiary survives to
receive any amount payable under the Plan by reason of the Participant's death,
the Participant's estate shall be treated as the Beneficiary for purpose of the
Plan.

     9.2 A Unit may be exercised only by the Participant to whom it was awarded,
except in the event of the Participants death, when a Unit may be exercised by
his or her Beneficiary. Except as provided in Section 9.1, a Participant may not
transfer, assign, alienate or hypothecate any benefits under the Plan.



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                                    ARTICLE X
                                AWARD CERTIFICATE

     10.1 Promptly following the making of an award, the Company shall deliver
to the recipient an Award Certificate specifying the terms and conditions of the
Unit. This writing shall be in such form and contain such provisions not
inconsistent with the Plan as the Committee shall prescribe.

                                   ARTICLE XI
                              TERMINATION OF UNITS

     11.1 An outstanding Unit awarded to a Participant shall be canceled and all
rights with respect thereto shall expire upon the earlier to occur of (i) its
exercise as provided in Section 8.1, or (ii) termination of the Participant's
employment with the Company; provided, however, that if such termination occurs
pursuant to clause (ii) of Section 6.2 above, or for any other reason
specifically approved in advance by the Committee, the term of such Unit shall
continue for a period of 14 months from the data of termination (the "Extended
Term"). For purposes of this Section 11.1, the Cumulative Unit Value of such
Unit shall be determined as of the Valuation Date concurrent with or immediately
preceding the end of the Extended Term or any earlier exercise date, whichever
is applicable. A Unit whose term is continued for an Extended Term shall be
deemed to be automatically exercised as of the last Valuation Date within the
Extended Term, unless sooner exercised by the Participant or his or her legal
representative.

     11.2 Nothing contained in Section 11.1 shall be deemed to extend the term
of any Unit beyond the end of the Term of the Plan.



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                                   ARTICLE XII
                                     FUNDING

     12.1 Immediately upon: (i) the filing by a third party with the United
States Securities and Exchange Commission of any proxy or tender offer material
evidencing an intent to gain control of the Company; (ii) the mailing of a proxy
statement by the Company to shareholders requesting an affirmative vote
regarding a Change in Control; or (iii) the receipt of information by the
Company that 40 percent or more of its outstanding common stock has been
acquired by any person (as defined under the 1934 Act), the Company shall
contribute to an irrevocable grantor trust (a "Rabbi Trust") an amount
sufficient to enable all amounts potentially due to the Participants hereunder
to be paid. The Company shall provide the Participants with a certification of
the payment to such trust. All such amounts which are due to the Participants
shall be paid using the assets of said trust except to the extent its terms
preclude such payment, in which event payment shall be made by the Company from
its own funds, or unless the Company elects to pay any or all such amounts from
its own funds.

                                  ARTICLE XIII
                      TERMINATION AND AMENDMENT OF THE PLAN

     13.1 The Company reserves the right to amend or terminate the Plan at any
time, by action of the Committee, but no such amendment or termination shall
adversely affect the rights of any Participant with respect to outstanding Units
held by the Participant without his or her written consent. No amendment will be
effective prior to the approval of the Company's stockholders to the extent that
such approval is required by Section 162(m) of the Code or is otherwise required
by law.


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                                   ARTICLE XIV
                               GENERAL PROVISIONS

     14.1 Nothing in the Plan, nor the award of any Unit shall confer on any
Participant a right to continue in the employment of the Company or affect any
right of the Company to terminate a Participant's employment.

     14.2 The Plan shall be governed by and construed in accordance with the
laws of the State of Illinois without reference to principles of conflict of
laws.

     14.3 The Company shall be authorized to withhold from any award or payment
it makes under the Plan to a Participant the amount of withholding taxes due
with respect to such award or payment and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes.

     14.4 Nothing in the Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to stockholder approval as may be
necessary, and such arrangements may be either generally applicable or
applicable only in specific cases.

     14.5 Participants shall not be required to make any payment or provide any
consideration for awards under the Plan other than the rendering of services.



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