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                                                                 EXHIBIT 10.31.1

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of September 28, 1998, by and between Sabratek Corporation, a Delaware
corporation, with its principal office located at 8111 North St. Louis Avenue,
Skokie, Illinois 60076 (together with its successors and assigns permitted under
this Agreement, "Sabratek") and Stephen L. Holden ("Employee").

                                   WITNESSETH:

         WHEREAS, Sabratek has determined that it is in the best interests of
Sabratek and its stockholders to continue to employ Employee and to set forth in
this Agreement the obligations and duties of both Sabratek and Employee; and

         WHEREAS, Sabratek wishes to assure itself of the services of Employee
for the period hereinafter provided, and Employee is willing to be employed by
Sabratek for said period, upon the terms and conditions provided in this
Agreement;

         NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Sabratek and Employee (individually a "Party"
and together the "Parties" ) agree as follows:


                                                        

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         1. DEFINITIONS.

         (a) "BENEFICIARY" shall mean the person or persons named by Employee
pursuant to Section 13 below or, in the event that no such person is named who
survives Employee, his estate.

         (b) "BOARD" shall mean the Board of Directors of Sabratek.

         (c) "CAUSE" shall mean:

             (i) Employee being found guilty of a felony or an act of fraud or
embezzlement, in each case related to Sabratek or its business;

             (ii) any repeated and demonstrated failure by Employee to discharge
faithfully the responsibilities of his position that the Board in good faith
determines is extremely detrimental to the current and future interests of
Sabratek; or

             (iii) a material breach by Employee of any provision of this
Agreement.

         (d) "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:

             (i) Consummation of the acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the 1934 Act) of 40 percent or more of the combined
voting power of the then outstanding voting securities of Sabratek; or

             (ii) The individuals who, as of the date hereof, 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 Sabratek, 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 Agreement,
be considered as a member or members of the Board; or


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

         Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because 40 percent or more of the combined voting power of the
then outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained for
employees of Sabratek, or (ii) any corporation that, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of Sabratek in
the same proportion as their ownership of stock of Sabratek immediately prior to
such acquisition.

         (e) "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.

         (f) "COMMITTEE" shall mean the Compensation Committee of the Board. 

         (g) "DISABILITY" shall mean the illness or other mental or physical
disability of Employee, as determined under the long-term disability plan of 
Sabratek covering Employee, or if no such plan exists, Employee's failure (i) 
to perform substantially his material duties under this Agreement for a period 
of six consecutive months, or for an aggregate of 270 days during any 12-

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month period, and (ii) to return to the performance of his duties within 30 days
after receiving written notice of termination.

         (h) "SALARY" shall mean the annual salary provided for in Section 3
below, as adjusted from time to time.

         (i) "TERM OF EMPLOYMENT" or "TERM" shall mean the period specified in
Section 2(b) below.

         (j) "YEAR" shall mean the calendar year, which is the fiscal year of 
Sabratek.

         2.  EMPLOYMENT TERM, POSITIONS AND DUTIES.

         (a) EMPLOYMENT OF EMPLOYEE. Sabratek hereby continues to employ
Employee, and Employee hereby accepts continued employment with Sabratek, in the
positions and with the duties and responsibilities set forth below and upon such
other terms and conditions as are hereinafter stated.

         (b) TERM OF EMPLOYMENT. The Term of Employment shall commence on the
date hereof and shall terminate on September 27, 2001; provided, however, that
at the end of each 12-month period after September 27, 1999 (unless either Party
gives three months' written notice to the other that the Term shall not
continue), the Term shall thereafter automatically extend for an additional
12-month period (with the result that, in the absence of such notice, the Term
shall never be less than two years in length), unless the Term is sooner
terminated as provided in Section 9 below.

         (c) TITLES AND DUTIES. Until the date of termination of his employment
hereunder, Employee shall be employed as President and Treasurer, reporting to
the Chief Executive Officer. In his capacity as President and Treasurer,
Employee shall have the customary powers,

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responsibilities and authorities of president and treasurer of
corporations of the size, type and nature of Sabratek. 

         (d) TIME AND EFFORT.

             (i) Employee agrees to devote his full business time to the affairs
of Sabratek in order to carry out his duties and responsibilities under this
Agreement. 

             (ii) Notwithstanding the foregoing, nothing shall preclude Employee
from (A) serving on the boards of a reasonable number of trade associations,
charitable organizations and/or businesses not in competition with Sabratek, (B)
engaging in charitable activities and community affairs, and (C) managing his
personal investments and affairs; provided, however, that, such activities do
not materially interfere with the proper performance of his duties and
responsibilities specified in Section 2(c). 

         3. SALARY. 

         Employee shall receive from Sabratek a Salary, payable in accordance
with the regular payroll practices of Sabratek, in a minimum amount of $200,000.
During the Term the Chief Executive Officer shall review his Salary no less
often than once each Year, commencing January 1, 1999. On the basis of any such
review, the Chief Executive Officer may in its sole discretion adjust Employee's
Salary accordingly. The term "Salary" as used in this Agreement shall refer to
his Salary at any time as so adjusted. 

         4. BONUSES. 

         (a) ANNUAL BONUS. Employee shall be eligible to receive an annual bonus
for each Year or portion thereof during the Term, which bonus shall not be (i)
less than 40% of his Salary if he achieves 80% of specified performance
objectives, (ii) less than 50% of his Salary if he achieves

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100% of specified performance objectives, or (iii) less than 60% of his Salary
if he achieves 120% of specified performance objectives for any Year. The
performance objectives shall be determined and approved at the beginning of each
Year by the Chief Executive Officer and agreed to by Employee.

         (b) SPECIAL BONUS. Employee shall be eligible to receive additional
bonuses during the Term. The Chief Executive Officer shall determine, in its
discretion, the occasion for payment, and the amount, of any such bonus.

         5. LONG-TERM INCENTIVE COMPENSATION.

         During the Term, Employee shall be entitled to participate in
Sabratek's Long-Term Incentive Compensation Plan (the "LTIP"), a copy of which
is attached hereto as Attachment I, and receive awards thereunder in accordance
with its terms.

         6. EQUITY OPPORTUNITY.

         During the Term, Employee shall be eligible to receive grants of
options to purchase shares of Sabratek's stock and awards of shares of
Sabratek's stock, either or both as determined by the Chief Executive Officer,
under and in accordance with the terms of applicable plans of Sabratek and
related option and award agreements.

         7. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.

         During the Term, Employee shall be entitled to prompt reimbursement by
Sabratek for all reasonable out-of-pocket expenses incurred by him in performing
services under this Agreement, upon his submission of such accounts and records
as may be reasonably required by Sabratek. In addition, Employee shall be
entitled to payment by Sabratek of all reasonable costs and expenses, including
attorneys' and consultants' fees and disbursements, incurred by him in
connection with

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adoption of this Agreement and any related compensatory arrangements that
Sabratek adopts solely for his benefit.

         8. EMPLOYEE BENEFIT PLANS.

         During the Term Employee shall be entitled to all benefits specifically
established for him, and to participate in all employee benefit plans and
programs made available to Sabratek's senior executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension and other retirement plans,
profit-sharing plans, savings and similar plans, group life insurance,
accidental death and dismemberment insurance, travel accident insurance,
hospitalization insurance, surgical insurance, major and excess major medical
insurance, dental insurance, short-term and long-term disability insurance, sick
leave (including salary continuation arrangements), holidays, vacation and any
other employee benefit plans or programs that may be sponsored by Sabratek from
time to time, including plans that supplement the above-listed types of plans,
whether funded or unfunded.

         9. TERMINATION OF EMPLOYMENT.

         (a) VOLUNTARY TERMINATION AND TERMINATION BY MUTUAL AGREEMENT. Employee
may terminate his employment voluntarily at any time. If he does so, his
entitlement hereunder shall be the same as if Sabratek had terminated his
employment for Cause. The Parties may terminate this Agreement by mutual
agreement at any time. If they do so, Employee's entitlement shall be as the
Parties mutually agree.

         (b) GENERAL. Notwithstanding anything to the contrary herein, in the
event of termination of Employee's employment under this Agreement, he or his
Beneficiary, as the case may

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be, shall be entitled to receive (in addition to payments and benefits under,
and except as specifically provided in, subsections (c) through (h) below, as
applicable):

             (i) his Salary through the date of termination;

             (ii) any unused vacation from prior years according to Sabratek's
vacation policy;

             (iii) any annual or special bonus awarded but not yet paid to him;

             (iv) any deferred compensation payable under any deferred
compensation plan of Sabratek; 

             (v) any other compensation or benefits, including without
limitation long-term incentive compensation described in Section 5 above,
benefits under equity grants and awards described in Section 6 above and
employee benefits under plans described in Section 8 above, that have vested
through the date of termination or to which he may then be entitled in
accordance with the applicable terms and conditions of each grant, award or
plan; and

             (vi) reimbursement in accordance with Section 7 above of any
business expenses incurred by Employee through the date of termination but not
yet paid to him.


         (c) TERMINATION DUE TO DEATH. In the event that Employee's employment
is terminated due to his death, his Beneficiary shall be entitled, in addition
to the compensation and benefits specified in Section 9(b), to: 

             (i) Employee's Salary, at the rate in effect immediately before
such termination, payable through the end of the month in which the proceeds of
his life insurance under Sabratek's group plan are paid; and 

             (ii) a prorated annual bonus for the Year in which his death
occurs.



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         (d) TERMINATION DUE TO DISABILITY. In the event of Disability, Sabratek
or Employee may terminate Employee's employment. If Employee's employment is
terminated due to Disability, he shall be entitled, in addition to the
compensation and benefits specified in Section 9(b), to a prorated annual bonus
for the Year in which his termination for Disability occurs.

         (e) TERMINATION BY SABRATEK FOR CAUSE. Sabratek may terminate
Employee's employment hereunder for Cause only upon written notice to Employee
not less than 45 days prior to any intended termination date, which notice shall
specify the grounds for such termination in reasonable detail. Upon receipt of
such notice, Employee (and his counsel) shall have 30 days to present to the
Chief Executive Officer his position regarding any dispute relating to the
existence of such Cause. Unless rescinded by the Chief Executive Officer,
termination shall be effective on the date specified in the original notice.

         In the event that Employee's employment is terminated for Cause, he
shall be entitled only to the compensation and benefits specified in Section
9(b).

         (f) TERMINATION WITHOUT CAUSE.

             (i) Termination without Cause shall mean: (A) termination of
Employee's employment by Sabratek and shall include any reason for termination
other than (i) due to death, Disability or Cause, (ii) by Employee voluntarily,
or (iii) by mutual agreement of Employee and Sabratek; or (B) Sabratek changes
the primary employment location of Employee to a place that is outside of the
Chicago metropolitan area. Sabratek shall provide Employee ten days' prior
written notice of termination by it without Cause.


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             (ii) In the event of termination by Sabratek of Employee's
employment without Cause, he shall be entitled, in addition to the compensation
and benefits specified in Section 9(b), to:

                 (A) his Salary, at the rate in effect immediately before such
termination, for the longer of the remainder of the Term or two years; and

                 (B) a prorated annual bonus for any partial year and an annual
bonus for each remaining Year of the Term equal to the average of the three
highest annual bonuses awarded to him during the five Years preceding the Year
of termination, such bonuses to be paid at the same time annual bonuses are
regularly paid; and 

                 (C) continued coverage under the health program maintained by
Sabratek for the remainder of the Term; and 

                 (D) the Cumulative Unit Value (as defined in and calculated
under the LTIP) for each unit awarded under the LTIP prior to the date of
termination to be paid in accordance with the terms thereof; and 

                 (E) notwithstanding anything in this Section 9(f) to the
contrary, Sabratek shall have no further obligation to make any salary or bonus
payments for any period following the first date on which Employee takes any
action which would fall within the definition of "Restrictive Covenant" as
provided in Section 12(a) hereof, whether or not such action occurs within the
Restrictive Period (as defined in Section 12(a) hereof). 

         (g) VOLUNTARY TERMINATION BY EMPLOYEE. Employee shall have the right,
upon 60 days' prior written notice, voluntarily to terminate his employment. If
he exercises this right, his employment shall cease and the Term shall terminate
as of the date stated in such notice, and he shall


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be entitled to receive compensation and benefits as if Sabratek had terminated
his employment for Cause, as provided in Section 9(e).

         (h) NOTICE THAT THE EMPLOYMENT TERM SHALL NOT RENEW. In the event that
either Party notifies the other that the Employment Term shall not renew
pursuant to the terms of Section 2(b) above, Employee shall continue to render
services to Sabratek through the end of the Term as in effect on the date of
delivery of such notice, unless: (A) the non-renewal decision was made by
Sabratek, in which case, (1) the Chief Executive Officer may elect to treat the
notice as a termination without Cause of Employee's employment, or (2) Employee
may elect to treat the notice as termination for Cause; or (B) the non-renewal
decision was made by Employee, in which case, the Chief Executive Officer may
elect to treat the notice as a voluntary termination of employment by Employee.

         (i) CHANGE IN CONTROL. (i) Notwithstanding anything to the contrary in
this Section 9, if, within twelve months following a Change in Control (A)
Employee's employment is terminated for any reason other than death or
Disability, or (B) Employee terminates his employment, he shall be entitled to
the compensation and benefits provided in Sections 9(b) and 9(f)(ii), including,
but not limited to, any other compensation or benefits, including the Maximum
Cumulative Unit Value (as defined in the LTIP) for each unit awarded under the
LTIP to the date of termination, benefits under equity grants and awards
described in Section 6 above and employee benefits under plans described in
Section 8 above, that have vested through the date of termination or to which he
may then be entitled in accordance with the applicable terms and conditions of
each grant, award or plan.

             (ii) Immediately upon: (A) 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

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gain control of the Company; (B) the mailing of a proxy statement by the Company
to shareholders requesting an affirmative vote regarding a Change in Control; or
(C) 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 potential amounts due to
Employee under this Section to be paid. The Company shall provide Employee with
a certification of the payment to such trust of all such amounts. All such
amounts which are due to Employee 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.

         10. PARACHUTES.

         (a) APPLICATION. If all, or any portion, of the payments provided under
this Agreement, and/or any other payments and benefits that Employee receives or
is entitled to receive from Sabratek, including, but not limited to, amounts
generated from the exercise and sale of options granted to Employee, constitutes
an excess "parachute payment" within the meaning of Section 280G(b) of the Code,
whether or not under an existing plan, arrangement or other agreement (each such
parachute payment, a "Parachute Payment") and will result in the imposition on
Employee of an excise tax under Section 4999 of the Code, then, in addition to
any other benefits to which Employee is entitled under this Agreement, Sabratek
shall pay him an amount in cash equal to the sum of the excise taxes payable by
him by reason of receiving such Parachute Payments, plus the amount necessary to
put him in the same after-tax position (taking into account any and all
applicable federal, state and local excise, income or other taxes at the highest
possible applicable

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rates on such Parachute Payments (including without limitation any payments
under this Section 10) as if no excise taxes had been imposed with respect to
Parachute Payments (the "Parachute Gross- up").

         (b) COMPUTATION. The amount of any payment under this Section 10 shall
be computed by Sabratek's certified public accounting firm in consultation with
legal counsel acceptable to Employee. Employee and Sabratek shall provide the
accounting firm with all information that it reasonably deems necessary in order
to compute the Parachute Gross-up. The cost and expenses of the accounting firm
retained to perform the computations shall be borne by Sabratek.

         (c) PAYMENT. In any event, Sabratek shall pay to Employee, or pay on
his behalf, the Parachute Gross-up as computed by the accounting firm by the
time any taxes payable by him as a result of the Parachute Payments become due.

         In the event that the Internal Revenue Service ("IRS") determines that
the amount of excise taxes thereon initially paid was insufficient to discharge
Employee's excise tax liability, Sabratek shall make additional payments to him
as may be necessary to reimburse him for discharging the full liability.

         11. CONFIDENTIALITY AND LOYALTY.

         (a) GENERAL.

             (i) Employee hereby acknowledges that as a result of his employment
with Sabratek he has produced and had access to, and may hereafter produce and
have access to, material, records, data, trade secrets, inventions and
information not generally available to the public (collectively, "Confidential
Information") regarding Sabratek and that any such Confidential Information is
the exclusive property of Sabratek.


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             (ii)  Accordingly, Employee hereby agrees that, during and
subsequent to the Term, he shall hold in confidence and not directly or
indirectly disclose, use, copy or make lists of any such Confidential
Information, except to the extent that such information is or thereafter becomes
lawfully available from public sources, or such disclosure is authorized in
writing by Sabratek, required by a law or any competent administrative agency or
judicial authority, or otherwise as reasonably necessary or appropriate in
connection with performance by Employee of his duties hereunder.

        (b) RETURN OF DOCUMENTS. All records, files, documents and other
materials or copies thereof relating to Sabratek's business that Employee
prepares or uses shall be and remain the sole property of Sabratek and shall not
be removed from Sabratek's premises without its written consent. Upon
termination of Employee's employment with Sabratek for any reason, he shall
promptly deliver to Sabratek all such items that are then in his possession or
control.

        (c) DUTY OF LOYALTY. Employee hereby agrees to abide by Sabratek's
reasonable policies, as in effect from time to time, respecting avoidance of
interests conflicting with those of Sabratek.

        (d) REMEDIES AND SANCTIONS. In the event that Employee is found to be
in violation of Section 11(a), (b) or (c), Sabratek shall be entitled to relief
as provided in Section 13 below.

        12. NONCOMPETITION/NONSOLICITATION.

        (a) RESTRICTIVE COVENANT. Employee hereby agrees that, except with the
express prior written consent of Sabratek, for a period of one year after
termination of his employment with Sabratek for any reason (the "Restrictive
Period"), he will not directly or indirectly compete with the business of
Sabratek as conducted on the date of such termination, including, but not by way
of

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limitation, by (i) directly or indirectly owning, managing, operating,
controlling, financing, (ii) directly or indirectly serving as an employee,
officer or director of or consultant to, or (iii) soliciting or inducing, or
attempting to solicit or induce, any employee or agent of Sabratek to terminate
employment with Sabratek and become employed by, any person, firm, partnership,
corporation, trust or other entity that owns or operates an entity that is
engaged in the same or similar business as Sabratek as conducted on the date of
such termination (the "Restrictive Covenant").

         If Employee violates the Restrictive Covenant and Sabratek brings legal
action for injunctive or other relief, Sabratek shall not, as a result of the
time involved in obtaining such relief, be deprived of the benefit of the full
period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall
be deemed to endure for the period specified in this Section 12(a), computed
from the date the relief is granted but reduced by the time between the period
when the Restrictive Period began to run and the date of the first violation of
the Restrictive Covenant by Employee.

        (b) EXCEPTIONS. Notwithstanding anything to the contrary in Section
12(a), the Restrictive Covenant shall not:

             (i) apply if Sabratek terminates Employee's employment without
Cause, as provided in Section 9(f) above; or 

             (ii) prohibit Employee from owning directly or indirectly capital
stock or similar securities which do not represent more than five percent of the
outstanding capital stock of any business similar to that of Sabratek as
conducted on the date of such termination.

        (c) REMEDIES AND SANCTIONS. In the event that Employee is found to be in
violation of Section 12(a) above, Sabratek shall be entitled to relief as
provided in Section 13 below.

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         13. REMEDIES/SANCTIONS.

         Employee hereby acknowledges that the restrictions contained in
Sections 11(a), (b) and (c) and 12(a) above are reasonable and necessary for
the protection of the legitimate business interests of Sabratek, for which
monetary damages alone may not provide an adequate remedy, that any violation of
these restrictions would cause substantial injury to Sabratek and such
interests, that Sabratek would not have entered into this Agreement without
receiving the additional consideration offered by Employee in binding himself to
these restrictions and that such restrictions were a material inducement to
Sabratek to enter into this Agreement.

         In the event of any violation or threatened violation of these
restrictions, Sabratek (a) shall be relieved of any further obligations under
the Agreement, (b) shall be entitled to monetary damages resulting from such
violation, and (c) in addition to and not in limitation of, any other rights,
remedies or damages available to Sabratek under this Agreement or otherwise at
law or in equity, shall be entitled to preliminary and permanent injunctive
relief to prevent or restrain any such violation by Employee and any and all
persons directly or indirectly acting for or with him, as the case may be.

         14. BENEFICIARIES/REFERENCES.

         Employee shall be entitled to select (and change, to the extent
permitted under any applicable law) a Beneficiary or Beneficiaries to receive
any compensation or benefit payable under this Agreement following his death by
giving Sabratek written notice thereof. In the event of Employee's death, or of
a judicial determination of his incompetence, reference in this Agreement to
Employee shall be deemed to refer, as appropriate, to his Beneficiary, estate or
other legal representative.

         15. WITHHOLDING TAXES.


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         All payments to Employee or his Beneficiary under this Agreement shall
be subject to withholding on account of federal, state and local taxes as
required by law.

         16. INDEMNIFICATION AND LIABILITY INSURANCE.

         Nothing herein is intended to limit Sabratek's indemnification of
Employee, and Sabratek shall indemnify him to the fullest extent permitted by
applicable law consistent with Sabratek's Certificate of Incorporation and
By-Laws as in effect at the beginning of the Term, with respect to any action or
failure to act on his part while he is an officer, director or employee of
Sabratek. Sabratek shall cause Employee to be covered at all times by directors'
and officers' liability insurance on terms no less favorable than the directors'
and officers' liability insurance maintained by Sabratek in effect on the date
hereof in terms of coverage and amounts. Sabratek shall continue to indemnify
Employee as provided above and maintain such liability insurance coverage for
him after the Term for any claims that may be made against him with respect to
his service as a director or officer of Sabratek.

         17. EFFECT OF AGREEMENT ON OTHER BENEFITS.

         The existence of this Agreement shall not prohibit or restrict
Employee's entitlement to participate fully in compensation, employee benefit
and other plans of Sabratek in which senior executives are eligible to
participate.

         18. ASSIGNABILITY; BINDING NATURE.

         This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Employee) and
assigns. No rights or obligations of Sabratek under this Agreement may be
assigned or transferred by Sabratek except pursuant to (a) a merger or
consolidation or (b) sale or liquidation of all or substantially all of the
assets of Sabratek,

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provided that the surviving entity or assignee or transferee is the successor to
all or substantially all of the assets of Sabratek and, in the case of a sale or
other transfer of assets or a merger in which Sabratek is not the surviving
entity, such surviving entity or assignee or transferee agrees in writing to
assume the liabilities, obligations and duties of Sabratek under this Agreement.
Notwithstanding such assignment, Sabratek shall remain liable and responsible
for fulfillment of the terms and conditions of this Agreement; and provided
further, that in no event shall such assignment of this Agreement adversely
affect Employee's right upon a Change in Control, as provided in Section 9(i)
above. No rights or obligations of Employee under this Agreement may be assigned
or transferred by him.

         19. REPRESENTATIONS.

         The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Sabratek represents and warrants that this Agreement has been duly
authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.

         20. ENTIRE AGREEMENT.

         Except to the extent otherwise provided herein, this Agreement contains
the entire understanding and agreement between the Parties concerning the
subject matter hereof and supersedes any prior agreements, whether written or
oral, between the Parties concerning the subject matter hereof, including
without limitation, the agreement made and entered into as of July 2, 1998,
between Sabratek and Employee as heretofore amended and supplemented, provided
that the execution of this Agreement shall not adversely affect (i) any award
previously made to Employee

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under any compensation plan maintained by Sabratek, or (ii) any statements
regarding the vesting of options or other benefits in such prior agreements.
Payments and benefits provided under this Agreement are in lieu of any payments
or other benefits under any severance program or policy of Sabratek to which
Employee would otherwise be entitled.

         21. AMENDMENT OR WAIVER.

         No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Employee and an authorized officer of
Sabratek. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.

         22. SEVERABILITY.

         In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.

         23. SURVIVAL.

         The respective rights and obligations of the Parties under this
Agreement shall survive any termination of Employee's employment with Sabratek.

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<PAGE>   20



         24. GOVERNING LAW/JURISDICTION.

         This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Illinois, without reference to principles of
conflict of laws.

         25. ARBITRATION.

         Any dispute or controversy other than a dispute or controversy arising
under Sections 11 or 12 hereof (actions regarding which may be brought in any
court (i) having situs within Cook County, Illinois and (ii) having jurisdiction
over the dispute or controversy) arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Employee within thirty
(30) miles from the main office of Sabratek, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.

         26. LEGAL FEES.

         All reasonable expenses and legal fees paid or incurred by Employee
pursuant to any bona fide dispute or question of interpretation relating to this
Agreement, including all such expenses and fees, if any, incurred in contesting
any termination of this Agreement by Sabratek or in seeking to obtain or enforce
any right or benefit provided by this Agreement, shall be paid or reimbursed by
Sabratek, provided, however, that if this Agreement is terminated for Cause or
if this Agreement is terminated voluntarily by Employee other than due to a
breach of this Agreement by Sabratek,

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<PAGE>   21



Sabratek shall be obligated to pay any of Employee's expenses and legal fees
arising therefrom only if Employee is successful on the merits pursuant to a
legal judgment, arbitration or settlement.

         27. NOTICES.

         Any notice given to either Party shall be in writing and shall be
deemed to have been given when delivered either personally, by fax, by overnight
delivery service (such as Federal Express) or sent by certified or registered
mail postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as the Party
may subsequently give notice of: 

If to Sabratek or the Board:

                  Sabratek Corporation
                  8111 North St. Louis Avenue
                  Skokie, Illinois 60076
                  Attention: Chairman

                  FAX: (847) 647-2382

with a copy to:

                  Ross & Hardies
                  150 North Michigan Avenue
                  Chicago, Illinois 60601
                  Attention: David S. Guin
                  PHONE: (312) 750-3501
                  FAX: (312) 750-8600

If to Employee:

                  Sabratek Corporation
                  8111 North St. Louis Avenue
                  Skokie, Illinois 60076
                  Attention: Stephen L. Holden

                  FAX: (847) 647-2382



                                       21

<PAGE>   22


and

                  Stephen L. Holden
                  395 Carlisle Avenue
                  Deerfield, Illinois 60015


         28. HEADINGS.

         The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.

         29. COUNTERPARTS.

         This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the undersigned have Agreement as of the date first
written above.


                                          SABRATEK CORPORATION


                                          By:                                 
                                             ---------------------------------
                                                  K. Shan Padda, Chairman
                                                  and Chief Executive Officer


                                             ---------------------------------
                                                  Stephen L. Holden





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