SABRATEK CORP, S-1/A, 1996-06-14

SABRATEK CORP
S-1/A, 1996-06-14
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1996.

REGISTRATION NO. 333-3866
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

SABRATEK CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3845 36-3700639
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

------------------------

SABRATEK CORPORATION
5601 WEST HOWARD STREET, NILES, ILLINOIS 60714
(847) 647-2760
(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
5601 WEST HOWARD STREET
NILES, ILLINOIS 60714
(847) 647-2760
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

------------------------

Copies To:

<TABLE>
<S> <C>
SCOTT HODES, ESQ. ROBERT SEBER, ESQ.
DAVID S. GUIN, ESQ. O'SULLIVAN GRAEV & KARABELL, LLP
ROSS & HARDIES 30 ROCKEFELLER PLAZA
150 N. MICHIGAN AVENUE NEW YORK, NEW YORK 10112
CHICAGO, ILLINOIS 60601-7567 (212) 408-2400
(312) 558-1000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If any of the 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, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SABRATEK CORPORATION

CROSS-REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY FORM S-1

<TABLE>
<CAPTION>
ITEM
NUMBER ITEM IN FORM S-1 AND TITLE OF ITEM LOCATION IN PROSPECTUS
- ------ ------------------------------------------ -------------------------------------------
<C> <S> <C>
1 Forepart of the Registration Statement and Outside Front Cover Page
Outside Front Cover Page of
Prospectus..............................
2 Inside Front and Outside Back Cover Pages Inside Front Cover Page, Back Cover Pages
of Prospectus...........................
3 Summary Information, Risk Factors and Prospectus Summary, Risk Factors
Ratio of Earnings to Fixed Charges......
4 Use of Proceeds........................... Use of Proceeds
5 Determination of Offering Price........... Underwriting
6 Dilution.................................. Risk Factors, Dilution
7 Selling Security Holders.................. Not Applicable
8 Plan of Distribution...................... Underwriting
9 Description of Securities to be Prospectus Summary, Description of Capital
Registered.............................. Stock -- Common Stock
10 Interests of Named Experts and Counsel.... Legal Matters, Experts
11 Information with Respect to the Prospectus Summary, Risk Factors, The
Registrant.............................. Company, Use of Proceeds, Capitalization,
Selected Financial Data, Management's
Discussion and Analysis of Financial
Condition and Results of Operations,
Business, Management, Principal
Stockholders, Certain Transactions,
Description of Capital Stock, Shares
Eligible for Future Sale
12 Disclosure of Commission Position on Undertakings
Indemnification for Securities Act
Liabilities.............................
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JUNE 14, 1996

PROSPECTUS

2,500,000 SHARES

SABRATEK LOGO

COMMON STOCK
------------------------------

All of the 2,500,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), offered hereby are being sold by Sabratek Corporation
("Sabratek" or the "Company"). Prior to this offering (the "Offering"), there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $11.00 and
$13.00. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Company has applied for
listing of its Common Stock on the Nasdaq National Market under the symbol
"SBTK."
------------------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
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PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
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Per Share........................ $ $ $
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Total(3)......................... $ $ $
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</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $990,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 375,000 additional shares at the Price to Public, less Underwriting
Discounts and Commissions, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ , and $ , respectively.
------------------------------

The shares of Common Stock are being offered severally by the Underwriters,
subject to prior sale, when, as and if accepted by the Underwriters and subject
to conditions including their right to reject orders in whole or in part. It is
expected that delivery of the shares will be made at the offices of Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, on or about
, 1996.

------------------------------

BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
BARINGTON CAPITAL GROUP, L.P.

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 4

The Company has registered or applied to register the following trademarks:
SABRATEK(R) and its logo, AutoRamp(R), HOMERUN(R), Seamless Delivery System(TM),
PumpMaster(TM), MediVIEW(TM) and TCS Total Compliance System(TM). The Company
has also filed a foreign trademark application for the name SABRATEK(TM) and its
logo in Japan.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements examined by its independent auditors and
quarterly reports containing unaudited financial information for each of the
first three quarters of each fiscal year.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER THE
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.

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<PAGE> 5

SUB-ACUTE FACILITY LONG-TERM CARE FACILITY SKILLED NURSING FACILITY HOSPICE

SEAMLESS DELIVERY SYSTEM(TM) FEATURES

FACILITATE THERAPIES FOR HIGHER ACUITY PATIENTS:

- - MULTIPLE THERAPY PROTOCOLS

- - REMOTE INTERACTIVE PROGRAMMING AND MONITORING

- - DATA CAPTURE AND OUTCOMES REPORTING

- - CUSTOMIZABLE DELIVERY FORMATS

- - USER-FRIENDLY DESIGN AND FEATURES

- - ADVANCED SAFETY ALARMS AND FEATURES

ANTIBIOTIC THERAPY PREGNANCY/OBSTETRICAL CHEMOTHERAPY PAIN MANAGEMENT
<PAGE> 6

INFUSION SUITE CLINIC PHYSICIAN'S HOME HEALTH PATIENT'S HOME
OFFICE AGENCY

HEALTH CARE PROVIDER AND PAYOR BENEFITS

ACHIEVE LOWER COSTS

- MINIMIZES ON-SITE CAREGIVER INTERVENTION

- MAXIMIZES THERAPY COMPLIANCE

- REDUCES TRAINING/TRAVEL TIME

- ENABLES OPTIMAL CLINICAL PROTOCOL
DEVELOPMENT

- MINIMIZES PUMP INVENTORIES AND
MAINTENANCE COSTS

- OPTIMIZES ADMINISTRATIVE EFFICIENCIES

ENTERAL NUTRITION PARENTERAL NUTRITION HUMAN GROWTH HORMONES HEMOPHILIA
<PAGE> 7

TECHNOLOGICALLY-ADVANCED
USER-FRIENDLY
AND COST-EFFECTIVE
MULTI-THERAPY SYSTEMS
DESIGNED TO MEET THE UNIQUE NEEDS
OF THE ALTERNATE-SITE HEALTH CARE MARKET

[SABRATEK LOGO]
<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the Financial Statements and Notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information contained in this
Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised, (ii) has been adjusted to give effect to a 1-for-3.173 reverse stock
split prior to the consummation of the sale by the Company of the 2,500,000
shares of Common Stock offered hereby (the "Offering"), and (iii) assumes the
conversion of the Company's Series A Preferred Stock and approximately $3.0
million principal amount of its outstanding debt plus $3.4 million accrued
interest and conversion premium into Common Stock upon consummation of the
Offering.

THE COMPANY

Sabratek Corporation (the "Company" or "Sabratek") develops, produces and
markets technologically-advanced, user-friendly and cost-effective multi-therapy
infusion systems designed to meet the unique needs of the alternate-site health
care market. The Company's integrated infusion products incorporate advanced
communications technology which is designed to reduce provider operating costs
while maintaining the integrity and quality of care. Sabratek's proprietary
health care information system provides remote programming as well as real-time
diagnostic and therapeutic data capture capabilities, allowing caregivers to
monitor patient compliance more effectively and allowing providers to develop
outcome analyses and optimal clinical protocols. The Company has designed its
integrated hardware and software system to permit providers of infusion therapy
to achieve cost-effective movement of patients along the continuum of
alternate-site health care settings. The Company intends to expand its product
line beyond infusion therapy to become a leading developer and marketer of a
variety of interactive therapeutic and diagnostic medical systems for the
delivery of high-quality, cost-effective health care at alternate sites. The
Company believes that its current and future products and related software will
facilitate the ability of alternate-site providers to create a "virtual"
hospital room, thereby affording the delivery of a wide range of care previously
provided primarily in an acute-care setting. Substantially all of the Company's
current revenues are derived from the sale of its multi-therapy infusion pumps
and related disposable supplies.

Sabratek's strategy focuses specifically on the alternate-site health care
market, which it believes will continue to experience significant growth as
managed care payors continue to move patients to the lowest-cost care setting.
Such growth may be attributed to increasing cost-containment pressures, along
with advances in medical technology, that have transitioned the delivery of
health care away from the traditional acute-care setting to more cost-effective
sites. The alternate-site market includes, among other things, the provision of
infusion services rendered in various settings, including the patient's
residence, sub-acute care facilities, nursing homes, outpatient clinics,
dialysis centers and hospice facilities. According to POV, Incorporated, an
industry tracking and consulting firm, the infusion therapy segment of this
market is expected to grow in revenue from $3.2 billion in 1992 to $7.9 billion
in 1997, representing an average annual compounded growth rate of approximately
20%.

The Company believes that for alternate-site health care providers, the
management of costly resources such as nursing staff and infusion equipment
inventories is critical to their operating viability. The Company's strategic
response to the need to achieve cost-effective movement of patients along the
continuum of alternate-site care has been to develop a SEAMLESS DELIVERY SYSTEM
that integrates stationary and ambulatory multi-therapy infusion pumps,
disposable supplies, a proprietary interactive software system and a proprietary
diagnostic testing device. Sabratek's SEAMLESS DELIVERY SYSTEM maximizes the
similarities in operating features and range of therapeutic applications of the
Company's stationary and ambulatory infusion devices, thereby reducing the
costly time requirements of training and infusion administration as well as
minimizing equipment inventories. The Company's interactive software system is
designed to augment the utilization of Sabratek's infusion pumps and allow
providers to program therapies and monitor compliance on a real-time basis from
a remote location. The Company's portable, automatic testing device will enable
providers to perform on-site diagnostic tests on Sabratek's infusion pumps and
thereby reduce costs by eliminating the

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traditional reliance on third-party testing services and in-house biomedical
engineering capabilities. The Company believes that competing infusion therapy
products do not meet the diverse needs of payors, alternate-site health care
providers and their patients within the managed care environment to the same
extent as the Company's SEAMLESS DELIVERY SYSTEM.

In 1992, the Company commercially launched its multi-therapy stationary
infusion device (the "3030 Stationary Pump"), and in 1995 introduced its
multi-therapy ambulatory infusion device (the "6060 Ambulatory Pump"). In
addition, the Company markets a comprehensive line of related disposable tubing
sets. Both the 3030 Stationary Pump and the 6060 Ambulatory Pump have received
510(k) clearance from the Food and Drug Administration (the "FDA"). The Company
is preparing to launch its proprietary medical software system ("MediVIEW") and
its proprietary diagnostic testing device (the "PumpMaster"). The Company
currently markets its products domestically to national, regional and local
alternate-site health care providers through a sales force composed of nine
direct sales professionals, four clinical support staff and two full-time sales
consultants combined with a network of specialized alternate-site medical
products distributors. The Company also markets its products internationally
through distributors in Europe, Asia, South America and the Middle East.

The Company's goal is to continue to develop and market interactive
therapeutic and diagnostic medical systems designed to improve the delivery of
high-quality, cost-effective health care at alternate sites. The Company intends
to achieve its goal by pursuing the following business strategies: (i) continue
to develop advanced medical products and related software systems that maximize
the cost-effective provision of alternate-site health care, (ii) develop a
system of therapeutic and diagnostic information-based medical products
supported by the Company's proprietary health care information system platform,
and (iii) create a proprietary outcomes database through the Company's products
and software system platform.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company................... 2,500,000 shares
Common Stock to be outstanding after the
Offering(1)......................................... 7,679,712 shares
Use of proceeds....................................... To repay certain outstanding
indebtedness, meet obligations under
certain stock appreciation rights,
expand sales and marketing activities,
fund research and development efforts
and increase manufacturing capacity
and for working capital and general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol................ SBTK
</TABLE>

- ---------------

(1) Excludes 1,192,832 shares of Common Stock issuable upon exercise of
outstanding stock options under the Company's Stock Option Plan at a
weighted average exercise price of $5.24 per share, 121,216 shares of Common
Stock reserved for future option grants under such plan and 604,046 shares
of Common Stock issuable upon exercise of warrants at a weighted average
exercise price of $4.59 per share. See "Management -- Stock Option Plan" and
"Description of Capital Stock -- Warrants."

4
<PAGE> 10

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $ 63 $ 842 $ 1,229 $ 3,315 $ 4,040 $ 930 $ 2,944
Gross margin (loss)............... (13) (28) (405) 834 1,138 213 1,488
Selling, general and
administrative expenses......... 174 734 1,698 3,009 4,680 1,190 1,245
Research and development.......... 6 31 713 1,099 2,194 541 231
Operating income (loss)........... (193) (793) (2,816) (3,274) (5,736) (1,518) 12
Net loss(1)....................... (207) (791) (2,821) (3,555) (6,036) (1,547) (1,716)
Pro forma net loss(2)............. -- -- -- -- (5,922) -- (1,639)
Weighted average common shares
outstanding(2).................. -- -- -- -- 6,610 -- 6,610
Pro forma net loss per share(2)... -- -- -- -- $ (.90) -- $ (.25)
Supplemental pro forma net
loss(2)......................... -- -- -- -- (5,861) -- (1,617)
Supplemental weighted average
common shares outstanding(2).... -- -- -- -- 6,689 -- 6,689
Supplemental pro forma net loss
per share(2).................... -- -- -- -- $ (.88) -- $ (.24)
Dividends declared................ -- -- -- -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)(5)
-------- ------------ -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash............................................... $ 1,253 $ 1,253 $ 25,584
Working capital.................................... 975 975 27,535
Total assets....................................... 6,500 6,500 30,832
Total debt and capital lease obligations........... 3,930 917 266
Accumulated deficit................................ (15,168) (15,168) (15,168)
Total stockholders' equity (deficit)............... (1,803) 1,438 28,348
</TABLE>

- ---------------
(1) For the period ended March 31, 1996, a non-recurring charge in the amount of
$1,628,463 was recorded to recognize obligations under certain stock
appreciation rights.

(2) See Note (1) to the Financial Statements for an explanation of the
calculation of the pro forma net loss per share. Supplemental pro forma net
loss per share includes adjustments to shares and pro forma net loss
assuming the use of offering proceeds to reflect the payment of debt.

(3) Gives effect to the conversion of the Series A Preferred Stock into
1,838,114 shares of Common Stock and $3,012,793 principal amount of
outstanding debt plus $3,409,245 of accrued interest and conversion premium
into 1,202,980 shares of Common Stock upon consummation of the Offering. See
Note (1)(j) to the Financial Statements for further information regarding
accrued interest.

(4) Adjusted to give effect to the sale of the 2,500,000 shares of Common Stock
offered by the Company hereby at an initial public offering price of $12.00
and the application of a portion of the net proceeds therefrom to the
repayment of $950,000 of certain outstanding indebtedness and $1,628,463 to
meet obligations under certain stock appreciation rights. See "Use of
Proceeds."

(5) Pro Forma, As Adjusted, amounts reflect the use of $600,000 of the net
proceeds of the Offering to repay the anticipated balance due Sterling
National Bank. The total amount due Sterling National Bank at March 31, 1996
was $301,393. See "Use of Proceeds."

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RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the risk factors set forth below
in evaluating an investment in the shares of Common Stock offered hereby.

HISTORY OF LOSSES

The Company was formed in 1989, introduced its first product in 1992, and
has incurred operating and net losses since its inception. The Company incurred
net losses of $2,820,644, $3,554,823, and $6,036,335, for the years 1993, 1994
and 1995, respectively, and as of March 31, 1996, had an accumulated deficit of
$15,167,582. The Company's losses resulted primarily from expenditures relating
to research and development, product engineering, obtaining FDA clearance for
its products, development of its initial sales and marketing organization, and
establishment of manufacturing capability. Although the Company has experienced
revenue growth in recent periods, such growth may not be sustainable, may not
result in the Company's profitability and may not be indicative of future
results. The Company's ability to increase sales and generate profits will
depend on numerous factors, and there can be no assurance that the Company's
revenues will continue to grow or that the Company will become profitable or
sustain profitability if it becomes profitable. See "Selected Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DEPENDENCE ON PRINCIPAL PRODUCT LINE AND NEW PRODUCT DEVELOPMENT

The Company currently derives substantially all of its revenues from the
sale of its multi-therapy infusion pumps and related disposable supplies and
expects that revenues from these products will continue to account for a
significant portion of the Company's revenues in the future. Declines in the
demand for the Company's infusion pumps and related disposable supplies, whether
due to increased competition, technological changes, or other factors, could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's execution of its business strategy and
its future financial performance will depend in large part on the Company's
ability to meet the increasingly sophisticated needs of its customers through
the timely development and successful introduction of new infusion therapy
products, enhanced versions of existing products, and new complementary
products. The success of new or enhanced products is subject to certain risks of
failure inherent in the development of products and materials based upon new
technologies. These risks include the possibilities that (i) certain of the
products developed may require and fail to receive regulatory clearance or
approval, (ii) the products may be difficult to manufacture on a commercial
scale or may be uneconomical to manufacture or market, (iii) the proprietary
rights of third parties may preclude the Company from marketing such products,
(iv) the Company's competitors may market superior, more cost-effective or
equivalent products and may do so on a more timely basis, (v) errors and
malfunctions may be found in products after their commercial introduction and
discovered errors and malfunctions may not be corrected in a timely manner, and
(vi) customers may not accept or use the products. The Company has historically
expended a significant amount on product development and believes that
significant continuing product development efforts will be required to sustain
the Company's growth. There can be no assurance that the market will continue to
accept the Company's existing products, or that product enhancements or new
products will be developed in a timely and cost-effective manner, meet the needs
and requirements of alternate-site health care providers or achieve market
acceptance. See "Business -- Products," "-- Sales and Marketing" and
"-- Competition."

HIGHLY COMPETITIVE MARKETS; TECHNOLOGICAL RISK

The medical products industry in general and the infusion therapy products
industry in particular are characterized by intense competition. Large
competitors, such as Abbott Laboratories, Baxter International Inc., IVAC
Corporation and SIMS Deltec, Inc., among others, have significant market shares
and installed bases of products in the infusion pump and related disposable
supplies industry. Many of the Company's competitors have substantially greater
capital resources, research and development staffs, regulatory experience, sales
and marketing capabilities, manufacturing facilities and broader product
offerings than the

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<PAGE> 12

Company. The Company expects that these competitors will continue to compete
aggressively with tactics such as offering volume discounts based on "bundled"
purchases of a broader range of medical equipment and supplies, a tactic that
the Company is currently unable to pursue except on a joint venture basis. There
can be no assurance that such competition will not adversely affect the
Company's results of operations or its ability to maintain or increase sales and
market share. As a consequence of the foregoing, the Company may not be able to
successfully execute its business strategies.

The market for infusion therapy products is affected by continuing
improvements and enhancements in technology. There can be no assurance that the
Company's competitors or potential competitors will not succeed in developing or
marketing products that provide more desirable characteristics, or are more
effective or less expensive than those developed or marketed by the Company. In
addition, technological advances in drug delivery systems, the development of
therapies that can be administered by methods other than infusion therapy, and
the development of new medical treatments that cure certain complex diseases or
reduce the need for infusion therapy could adversely impact the Company's
business. See "Business -- Research and Development" and "-- Competition."

UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY

There can be no assurance that the common law, statutory and contractual
rights on which the Company relies to protect its intellectual property and
confidential and proprietary information will provide it with meaningful
protection. Third parties may independently develop products, techniques or
information which are substantially equivalent to the products, techniques and
information which the Company considers proprietary. In addition, proprietary
information regarding the Company could be disclosed in a manner against which
the Company has no meaningful remedy.

Disputes regarding the Company's intellectual property could force the
Company 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 the Company from manufacturing and selling certain of its
products, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

Although the Company knows of no infringement of rights held by others, a
third-party may assert infringement of such rights, which assertion may result
in expensive and protracted litigation. Sabratek received a letter in September,
1995, in which a potential competitor (referred to below as "competitor") made
the following allegations: (i) that the competitor had developed a
re-certification system for an infusion pump; (ii) that the competitor had filed
several patent applications for the re-certification system; (iii) that
Sabratek's PumpMaster product appeared to implement many, if not all, of the
innovative features of the competitor's re-certification system; (iv) that the
competitor shared many of these features in confidence with an employee of
Sabratek prior to the commercial introduction of the competitor's
re-certification system; and (v) that the competitor was prepared, upon issuance
of any patents for its re-certification system, to enforce such patents if any
conflicts existed. Sabratek conducted an internal investigation of this matter
and believes that its PumpMaster product was independently developed by
Sabratek, and was not developed based on any information, confidential or
otherwise, improperly obtained from the competitor. Since patent applications
pending in the U.S. Patent and Trademark Office are maintained in secrecy until
issuance, the merits of the competitor's allegations with respect to its patent
claims cannot be evaluated until its alleged patent application(s) are issued.

LIMITED SALES AND MARKETING EXPERIENCE; DEPENDENCE ON DISTRIBUTORS

The Company has limited experience in the areas of sales, marketing and
distribution. The Company's sales and marketing staff will require additional
personnel in the future. There can be no assurance that the Company will be able
to build an adequate sales and marketing staff, that establishing such a sales
and marketing staff will be cost-effective, or that the Company's direct sales
and marketing efforts will be successful. The Company currently sells its
products primarily through domestic and international distributors of medical
products. The loss of one or more of these distributors or the inability to
enter into agreements with new distributors to sell its products in the United
States or internationally could have a material adverse effect

7
<PAGE> 13

on the Company. There can be no assurance that the Company or its distributors
will be successful in marketing or selling the Company's products. See
"Business -- Sales and Marketing."

LIMITED ASSEMBLY EXPERIENCE

The Company's 3030 Stationary Pump and 6060 Ambulatory Pump are currently
assembled by the Company at its facility. To be successful, the Company must
assemble its products in compliance with regulatory requirements, in sufficient
quantities and on a timely basis, while maintaining product quality and
acceptable assembly costs. The Company has limited experience assembling its
products in large commercial quantities. There can be no assurance that the
Company will be able to assemble products in large commercial quantities on a
timely basis and at an acceptable cost. If the Company becomes unable to
assemble its infusion pumps at its facility in a timely and efficient manner,
the Company's ability to supply product to its distributors and direct customers
may be adversely affected until such time as the Company is able to establish
alternative assembly arrangements. See "Business -- Assembly."

INTERRUPTION IN SOURCES OF SUPPLY

The Company could face problems in supplying its equipment and disposable
products to distributors and customers if its sources of supply are interrupted.
If the Company's primary sources of supply were interrupted, it would
nonetheless face delays in activating its secondary sources of supply which
could adversely affect the Company. There can be no assurance that the Company
will be able to maintain a sufficient and adequate supply of products in its own
inventory or that the Company will be able to cause its distributors to maintain
a sufficient and adequate supply of products to avoid such a disruption. See
"Business -- Manufacturing."

DEPENDENCE ON THIRD-PARTY REIMBURSEMENT

The Company's products are generally purchased by health care providers,
which then seek reimbursement from various public and private third-party
payors, such as Medicare, Medicaid and indemnity insurers, for health care
services provided to patients. Government and private third-party payors are
increasingly attempting 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 services provided using the Company's products will
continue to be available to its customers or that 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
the Company's products which could, in turn, have a material adverse affect on
the Company's business, financial condition and results of operations. See
"Business -- Reimbursement."

NO ASSURANCE OF REGULATORY CLEARANCE; STRICT GOVERNMENTAL REGULATION

The production and marketing of the Company's current products and the
products the Company intends to introduce in the future are subject to
regulations by numerous governmental authorities, including the FDA and
corresponding state and foreign agencies. In the United States, the development,
manufacture and promotion of medical devices are regulated by the FDA under the
Federal Food, Drug, and Cosmetic Act (the "FFDCA"). The Company's 3030
Stationary Pump and 6060 Ambulatory Pump, and the related disposable tubing
sets, have been cleared by the FDA under a premarket notification procedure
known as a "510(k) Submission," which generally takes less time to complete, and
requires less information, than the FDA's lengthy and expensive premarket
approval ("PMA") process.

8
<PAGE> 14

The Company believes that the original 510(k) clearance for the 6060
Ambulatory Pump permits the Company to market the MediVIEW software with the
6060 Ambulatory Pump in the United States without a new 510(k) Submission.
However, there can be no assurance that the FDA would agree with the Company's
determination. If in the future the FDA concludes that the MediVIEW software
system for use with the 6060 Ambulatory Pump required a new 510(k) Submission,
the FDA could prohibit the Company from marketing the MediVIEW software system
for this use until the Company filed a new 510(k) Submission and obtained
clearance from the FDA. The FDA could also take regulatory action against the
Company for its prior distribution of the MediVIEW software system with the 6060
Ambulatory Pump.

The Company has determined that the PumpMaster does not constitute a device
under the statutory definition and, therefore, did not file a 510(k) Submission
with respect to this product. There can be no assurance that the FDA will agree
with the Company's determination in this regard. If the FDA were to determine
that the PumpMaster is a medical device that requires a 510(k) Submission prior
to its commercial distribution, the FDA could suspend further commercial
distribution of the PumpMaster and take regulatory action against the Company
for its prior distribution of the product. The product clearance process for
future products can be lengthy, expensive and uncertain. There can be no
assurance that market clearances will be forthcoming in a timely manner, if at
all, or that the FDA will not require more extensive clinical evaluations, other
information or a PMA Submission. Moreover, the clearances, if granted, could
limit the uses for which the product could be marketed. Failure to obtain or
delays caused by, regulatory clearances or approvals could have a material
adverse affect on the Company's business, financial condition and results of
operations.

The Company is also subject to strict domestic and foreign regulations and
supervision regarding the manufacturing, marketing, labeling, distribution, and
promotion of its products. This includes periodic inspections of the Company's
manufacturing facility by the FDA to determine compliance with good
manufacturing practice ("GMP") regulations, which may become more stringent in
the future. There can be no assurance that the Company will be able to attain or
maintain compliance with GMP requirements.

Failure to comply with the regulations outlined above may result in severe
governmental sanctions. Noncompliance with applicable requirements can result
in, among other things, rejection or withdrawal of premarket clearance or
approval for devices, recall or seizure of products, total or partial suspension
of production, fines, injunctions, and civil and criminal penalties. The FDA
also has the authority to request repair, replacement or refund of the cost of
any devices manufactured or sold by the Company. Any of these sanctions may have
a material adverse effect on the Company's business, financial condition or
results of operations. See "Business -- Government Regulation."

PRODUCT LIABILITY EXPOSURE

Manufacturers of medical devices face the possibility of substantial
liability for damages in the event that the use of their products is alleged to
have resulted in adverse effects to a patient. The Company maintains product
liability insurance with coverage limits of $5.0 million per occurrence with an
annual aggregate policy limit of $5.0 million. The Company's product liability
insurance provides coverage only for products currently manufactured and
distributed. There can be no assurance that liability claims will not exceed the
limits of such coverage or that such insurance will continue to be available on
commercially reasonable terms or at all. Furthermore, the Company does not
maintain insurance that would provide coverage for any costs or losses resulting
from any required recall of its products due to alleged defects, whether
instituted by the Company or a regulatory agency. See "Business -- Product
Liability Exposure."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

During the year ended December 31, 1995, the Company derived approximately
15% of its revenues from international sales, resulting in exposure to certain
risks. Fluctuations in exchange rates of the U.S. dollar against foreign
currencies may reduce demand for, or the profitability of, the Company's
products sold overseas. In addition, the Company's international sales may be
affected by 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. Finally, the laws of certain

9
<PAGE> 15

foreign countries may not protect the Company's intellectual property rights to
the same extent as do the laws of the United States. See "Business -- Sales and
Marketing" and " -- Intellectual Property."

RELIANCE ON LIMITED NUMBER OF CUSTOMERS

In 1995, five customers accounted for 47% of the Company's sales. Four of
these customers are distributors and the fifth is a health care provider. The
loss of or a significant reduction of business from any of these distributors or
such provider would have a material adverse effect on the Company. See
"Business -- Sales and Marketing" and Note (15) to the Financial Statements.

QUARTERLY FLUCTUATIONS

The Company's quarterly revenues and operating results have varied
significantly in the past and may continue to do so in the future. In
particular, the Company's distributors may purchase several months of inventory
at one time which may cause fluctuations in quarterly revenues. Future revenues
and operating results may also fluctuate significantly from quarter to quarter
and will depend upon, among other factors: (i) demand for the Company's products
and new product introductions by the Company or its competitors or transitions
to new products, (ii) the timing of orders and shipments, (iii) the mix of sales
between third-party distributors and the Company's direct sales force, (iv)
competition, including pricing pressures, (v) the timing of regulatory and
third-party reimbursement approvals, (vi) expansion of the Company's assembly
capacity and the Company's ability to assemble or manufacture its products
efficiently, and (vii) the timing of research and development expenditures.
Accordingly, period-to-period comparisons of the Company's revenues and
operating results should not be relied upon as an indication of future
performance, and the results of any quarterly period may not be indicative of
results to be expected for a full year. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DEPENDENCE ON KEY PERSONNEL

The Company's future performance depends in significant part upon the
continued service of its senior management and other key personnel. Because the
Company has a relatively small number of employees when compared to other
companies in the same industry, its dependence on maintaining its employees is
particularly significant. There can be no assurance that the Company's current
employees will continue to work for the Company. Loss of services of key
employees could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company is also dependent on
its ability to attract and retain additional high quality personnel. The Company
may need to grant additional options to key employees and provide other forms of
incentive compensation to attract and retain key personnel. See
"Business -- Employees."

NEED FOR ADDITIONAL FINANCING

The Company anticipates that the net proceeds of the Offering will be
adequate to satisfy its operating and capital requirements at least through the
end of 1997. However, changes in the Company's business or business plan could
affect the Company's capital requirements. The Company's future capital
requirements will depend on many factors, including, but not limited to, the
cost of manufacturing and marketing activities, its ability to successfully
market its products, the scope of its research and development programs, the
length of time required to collect accounts receivable, competing technological
and market developments, and potential acquisitions. If additional financing is
needed, there can be no assurance that it will be available on terms acceptable
to the Company, if at all, or that such financing would not be dilutive to
existing stockholders. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

CONTROL BY LIMITED NUMBER OF STOCKHOLDERS

Following completion of the Offering, the directors and executive officers
of the Company and the Company's two largest existing stockholders will
beneficially own approximately 31% of the outstanding shares

10
<PAGE> 16

of the Company's Common Stock. As a result, these stockholders, acting together
with a limited number of other stockholders, may be able to effectively control
the Company and direct its affairs and business, including any determination
with respect to a change in control of the Company, future issuances of Common
Stock or other securities by the Company, declaration of dividends on the
Company's Common Stock and the election of directors. Such control by existing
stockholders could have the effect of delaying, deferring or preventing a change
in control of the Company which could deprive the Company's stockholders of the
opportunity to sell their shares of Common Stock at prices higher than
prevailing market prices. See "Principal Stockholders."

ABSENCE OF PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE;
OFFERING PRICE DETERMINED BY NEGOTIATION

Prior to the Offering, there has been no public trading market for the
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after the Offering. 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 medical device companies have
been in the past, and are expected to be, volatile. Announcements of
technological or medical innovations or new commercial products by the Company
or its competitors, developments or disputes concerning patents or proprietary
rights, changes in regulatory or medical reimbursement policies, and economic
and other external factors, as well as period-to-period fluctuations in the
financial results of the Company, may have a significant impact on the market
price and marketability of the Common Stock. The initial public offering price
of the shares of Common Stock in the Offering has been determined through
negotiations between the Company and the Underwriters based upon several factors
and may not be indicative of prices that will prevail in the trading market. See
"Underwriting."

ADVERSE IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE

Sales of shares of Common Stock (including shares issued upon the exercise
of outstanding options) in the public market after the Offering or the
perception that such sales could occur could adversely affect the market price
of the Common Stock. Such sales also might make it more difficult for the
Company to sell equity securities or equity-related securities in the future at
a time and price that the Company deems appropriate. Upon completion of the
Offering, the Company will have approximately 7,679,712 shares of Common Stock
outstanding. The 2,500,000 shares offered hereby will be freely tradable without
restriction, unless purchased by an affiliate of the Company. The remaining
approximately 5,179,712 shares are restricted securities that may be sold only
if registered under the Securities Act of 1933, as amended (the "Act"), or sold
in accordance with an applicable exemption from registration, such as Rule 144
promulgated under the Act. None of these shares will be available for sale upon
the effective date of the Registration Statement of which this prospectus is a
part (the "Effective Date"). Beginning 180 days after the Effective Date,
approximately 3,200,000 of these shares will become eligible for sale, under
Rule 144 or Rule 701 promulgated under the Act. In addition, beginning 180 days
after the Effective Date, an additional approximately 615,000 shares subject to
vested stock options and warrants will become eligible for sale under Rule 144
or Rule 701 promulgated under the Act. See "Shares Eligible for Future Sale" and
"Dilution."

IMPACT OF ANTI-TAKEOVER MEASURES; POSSIBLE ISSUANCE OF PREFERRED STOCK;
CLASSIFIED BOARD

Certain provisions of the Company's Certificate of Incorporation and Bylaws
and the Delaware General Corporation Law may have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the Company. Such provisions could limit the
price that certain investors might be willing to pay in the future for shares of
the Company's Common Stock. Pursuant to the Company's Certificate of
Incorporation, the Board of Directors is authorized to fix the rights,
preferences, privileges and restrictions, including voting rights, of unissued
shares of the Company's preferred stock and to issue such stock without any
further vote or action by the Company'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 for
the election of directors. The Company's Bylaws include a number of provisions

11
<PAGE> 17

which may have the effect of discouraging persons from pursuing non-negotiated
takeover attempts. Specifically, the Company's Bylaws provide for a staggered
board whereby 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 capital stock to remove a director.

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which restricts certain transactions and business
combinations between a corporation and an "Interested Stockholder" owning 15% or
more of the corporation's outstanding voting stock for a period of three years
from the date the stockholder becomes an Interested Stockholder. Subject to
certain exceptions, unless the transaction is approved in a prescribed manner,
Section 203 prohibits significant business transactions such as a merger with,
disposition of assets to or receipt of disproportionate financial benefits by
the Interested Stockholder, or any other transactions that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock.

BROAD DISCRETION WITH RESPECT TO ALLOCATION OF NET PROCEEDS

The Company has estimated the portion of the net proceeds of the Offering
to be used to expand its sales and marketing activities, to fund its research
and development efforts, including capital expenditures, and for the expansion
of manufacturing facilities. These proposed uses are estimates only and the
Company retains broad discretion over the actual amount allocated to each such
use.

In addition, the Company expects to use a significant portion of the net
proceeds of the Offering for working capital and general corporate purposes. The
Company has not yet identified the specific uses for such net proceeds and will,
therefore, retain broad discretion as to the allocation of a significant portion
of the net proceeds of the Offering. Pending such uses, the Company intends to
invest the net proceeds in short-term interest-bearing, investment-grade
securities. See "Use of Proceeds."

SUBSTANTIAL DILUTION AND ABSENCE OF DIVIDENDS

Purchasers of shares of Common Stock in the Offering will experience
immediate and substantial dilution in the net tangible book value per share of
Common Stock from the initial public offering price. In addition, the exercise
of outstanding options and warrants will result in further dilution. See
"Dilution." The Company has never paid any cash dividends and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
See "Dividend Policy."

12
<PAGE> 18

THE COMPANY

The Company was organized under Illinois law in December, 1989, and was
reincorporated under Delaware law in December, 1991. The Company's executive
offices are located at 5601 West Howard Street, Niles, Illinois 60714. The
Company's telephone number is (847) 647-2760.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
2,500,000 shares of Common Stock offered hereby are estimated to be
approximately $26,910,000 ($31,095,000 if the Underwriters' over-allotment
option is exercised in full), at an estimated initial public offering price of
$12.00 per share, after deducting underwriting discounts and commissions and
estimated Offering expenses.

The Company anticipates that it will use approximately $950,000 of the net
proceeds of the Offering to repay certain indebtedness, approximately $1.6
million to meet its obligations under certain stock appreciation rights,
approximately $5.0 million to expand sales and marketing activities,
approximately $4.0 million to fund the Company's research and development
efforts, including capital expenditures, and approximately $2.0 million for the
expansion of manufacturing capabilities. The Company intends to use the balance
of the proceeds for working capital and general corporate purposes. The Company
also may use a portion of the net proceeds to acquire businesses, technologies
or products complementary to the Company's business, although the Company
currently has no specific plans or commitments in this regard. The amounts
actually expended for each purpose may vary significantly depending upon the
costs and timing of expansion of marketing, sales and manufacturing activities
and hence the foregoing allocations represent the Company's best estimate of the
application of the net proceeds of the Offering and are subject to
reapportionment of proceeds among the categories listed above or to new
categories.

The $950,000 principal amount of indebtedness to be retired consists of the
following components: (i) $250,000 principal amount of Secured Subordinated
Notes which bear interest at a rate of 15.00% per annum and which are payable in
three yearly installments beginning in March, 1998, (ii) $100,000 principal
amount of Debentures which bear interest at a rate of 10.00% per annum until
June 30, 1996 and at a rate of 13.22% per annum thereafter and which mature on
January 23, 2002, and (iii) approximately $600,000 principal amount expected to
be advanced to the Company under its line of credit with Sterling National Bank
("Sterling") which indebtedness bears interest at a rate equal to the Base Rate
from time to time announced by Sterling plus 3.50% (11.75% as of March 31, 1996)
and which is due on demand. The proceeds of all such indebtedness was used by
the Company to fund working capital requirements.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain all available funds for use in
its business and therefore does not intend to pay any cash dividends on its
Common Stock in the foreseeable future.

13
<PAGE> 19

DILUTION

The pro forma net tangible book value of the Company as of March 31, 1996
was $1,437,990, or $.28 per share. Pro forma net tangible book value per share
is determined by dividing the pro forma tangible net worth of the Company (total
pro forma tangible assets less total pro forma liabilities) by the pro forma
number of shares of Common Stock outstanding. Without taking into account any
changes in such pro forma net tangible book value after March 31, 1996, other
than to give effect to the sale of the 2,500,000 shares of Common Stock offered
by the Company hereby at an initial public offering price of $12.00 per share,
pro forma net tangible book value of the Company as of March 31, 1996 would have
been $28,347,990, or $3.69 per share (after deducting the estimated underwriting
discount and Offering expenses payable by the Company). This represents an
immediate increase in pro forma net tangible book value of $3.41 per share to
existing stockholders and an immediate dilution of $8.31 per share to new
investors. Dilution to new investors is determined by subtracting the pro forma
net tangible book value per share after the Offering from the initial public
offering price per share. The following table illustrates this per share
dilution.

<TABLE>
<S> <C> <C>
Assumed public offering price per share (1).......................................... $12.00
Pro forma net tangible book value per share before Offering................. $ .28
Increase per share attributable to new investors............................ 3.41
-----
Pro forma net tangible book value per share after Offering........................... 3.69
------
Dilution per share to new investors (2).............................................. $ 8.31
======
</TABLE>

- ---------------
(1) Initial public offering price before deduction of underwriting discounts and
commissions and estimated expenses of the Offering to be paid by the
Company.

(2) Assumes no exercise of outstanding stock options and warrants. As of the
date of this Prospectus, there are options and warrants outstanding to
purchase a total of 1,796,878 shares of Common Stock at exercise prices
ranging from $3.17 to $11.11 per share. See "Management -- Stock Option
Plan" and Notes (11) and (12) to the Financial Statements.

The following table summarizes, as of March 31, 1996, the difference
between the existing stockholders and the new investors with respect to the
number of shares of Common Stock purchased (or to be purchased) from the
Company, the total consideration paid (or to be paid) and the average price per
share paid (or to be paid) by the existing stockholders and new investors,
including proceeds from the issuance.

<TABLE>
<CAPTION>
PRO FORMA
SHARES PURCHASED(1)(2) TOTAL CONSIDERATION(2)
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 5,179,712 67% $15,713,792 34% $ 3.03
New investors................... 2,500,000 33 30,000,000 66 12.00
--------- ---- ------------ ----
Total................. 7,679,712 100% $45,713,792 100%
========= ==== ============ ====
</TABLE>

- ---------------
(1) Assumes no exercise of outstanding stock options and warrants. See
"Management -- Stock Option Plan" and "Description of Capital
Stock -- Common Stock."

(2) Gives effect to the conversion of the Series A Preferred Stock into
1,838,114 shares of Common Stock and $3,012,793 of outstanding debt plus
$3,409,245 of accrued interest and conversion premium into 1,202,980 shares
of Common Stock upon consummation of the Offering. See Note (1)(j) to the
Financial Statements for further information regarding accrued interest.

14
<PAGE> 20

CAPITALIZATION

The following table sets forth (i) the total capitalization of the Company
as of March 31, 1996, (ii) the pro forma capitalization of the Company as of
March 31, 1996, reflecting the conversion of the Series A Preferred Stock and
$3,012,793 principal amount of outstanding debt plus $3,409,245 of accrued
interest and conversion premium into Common Stock upon consummation of the
Offering, and (iii) such pro forma capitalization as adjusted to reflect the
sale of the 2,500,000 shares of Common Stock offered by the Company hereby at an
initial public offering price of $12.00 per share and the application of a
portion of the net proceeds therefrom to the repayment of $950,000 of certain
outstanding indebtedness and $1,628,463 to meet obligations under certain stock
appreciation rights.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt (including current portion of long-term
obligations)(1)......................................... $ 455 $ 455 $ 154
Long-term obligations (excluding current portion)(1)...... 3,475 462 112
------- ------- -------
Total debt................................................ 3,930 917 266
------- ------- -------
Stockholders' equity:
Convertible Preferred Stock, par value $0.01; 12,500,000
shares authorized; 1,768,129 issued and outstanding
at March 31, 1996; no shares issued and outstanding
pro forma and as adjusted............................ 18 0 0
Common Stock, par value $0.01; 25,000,000 shares
authorized; 2,133,103 shares issued and outstanding
(pro forma 5,179,712); 7,679,712 shares issued and
outstanding as adjusted(2)........................... 21 52 77
Additional paid-in capital.............................. 13,439 16,667 43,552
Accumulated deficit..................................... (15,168) (15,168) (15,168)
Note receivable from stockholder........................ (113) (113) (113)
------- ------- -------
Total stockholders' equity (deficit)...................... (1,803) 1,438 28,348
------- ------- -------
Total capitalization...................................... $ 2,127 $ 2,355 $28,614
======= ======= =======
</TABLE>

- ---------------
(1) Includes capital lease obligations.

(2) Excludes 1,796,878 shares of Common Stock issuable upon exercise of
outstanding stock options and warrants.

15
<PAGE> 21

SELECTED FINANCIAL DATA

The selected financial data with respect to the Company's statements of
operations for each of the years in the four year period ended December 31, 1995
and the balance sheet data as of December 31, 1992, 1993, 1994 and 1995 are
derived from the Company's financial statements, which have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The selected
financial data with respect to the Company's statements of operations for the
year ended December 31, 1991 and the balance sheet data as of December 31, 1991,
as well as the Company's statement of operations for the three month periods
ended March 31, 1995 and 1996 and the balance sheet data as of March 31, 1996,
are derived from the Company's unaudited financial statements that include, in
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information set forth
therein. The financial data for the Company should be read in conjunction with
the Company's audited Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
----- ----- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................................... $ 63 $ 842 $ 1,229 $ 3,315 $ 4,040 $ 930 $ 2,944
Cost of sales.................................. 76 870 1,634 2,481 2,902 717 1,456
------ ------ ------- ------- ------- ------- -------
Gross margin (loss)............................ (13) (28) (405) 834 1,138 213 1,488
------ ------ ------- ------- ------- ------- -------
Operating expenses:
Selling, general and administrative.......... 174 734 1,698 3,009 4,680 1,190 1,245
Research and development..................... 6 31 713 1,099 2,194 541 231
------ ------ ------- ------- ------- ------- -------
Total................................. 180 765 2,411 4,108 6,874 1,731 1,476
------ ------ ------- ------- ------- ------- -------
Operating income (loss)........................ (193) (793) (2,816) (3,274) (5,736) (1,518) 12
Interest expense............................... (14) (11) (20) (260) (222) (11) (104)
Other income (expense), including interest
income(1).................................... -- 13 15 (21) (78) (18) (1,624)
------ ------ ------- ------- ------- ------- -------
Net loss....................................... $(207) $(791) $(2,821) $(3,555) $(6,036) $(1,547) $(1,716)
====== ====== ======= ======= ======= ======= =======
Pro forma net loss(2).......................... -- -- -- -- (5,922) -- (1,639)
======= =======
Weighted average common shares
outstanding(2)............................... -- -- -- -- 6,610 -- 6,610
======= =======
Pro forma net loss per share(2)................ -- -- -- -- $ (.90) -- $ (.25)
======= =======
Supplemental pro forma net loss(2)............. -- -- -- -- (5,861) -- (1,617)
======= =======
Supplemental weighted average shares
outstanding(2)............................... -- -- -- -- 6,689 -- 6,689
======= =======
Supplemental pro forma net loss per share(2)... -- -- -- -- $ (.88) $ (.24)
======= =======
Dividends declared............................. -- -- -- -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, AS OF MARCH 31, MARCH 31,
------------------------------------------- -------------------- 1996
1991 1992 1993 1994 1995 1995 1996 PRO FORMA(3)
------ ------ ------ ------ ------- ------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................................ $ 17 $ 85 $ 582 $ 765 $ 8 $ 46 $ 1,253 $ 1,253
Working capital..................... (233) (1) (1,296) 999 (1,101) (307) 975 975
Total assets........................ 133 1,547 2,215 3,338 4,179 2,866 6,500 6,500
Short-term debt (including current
portion of long term
obligations)(4)................... 161 381 2,013 91 775 486 455 455
Long term obligations (excluding
current portion)(4)............... -- -- 310 464 2,512 526 3,475 462
Accumulated deficit................. (249) (1,040) (3,861) (7,416) (13,452) (8,962) (15,168) (15,168)
Total stockholders' equity
(deficit)......................... (164) 390 (1,211) 1,151 (2,821) (11) (1,803) 1,438
</TABLE>

- ---------------
(1) For the three month period ended March 31, 1996, a non-recurring charge in
the amount of $1,628,463 was recorded to recognize obligations under certain
stock appreciation rights.

(4) Includes capital lease obligations.

16
<PAGE> 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Since its inception in 1989, through 1991, the Company was in its
development stage and engaged primarily in research and development, product
engineering and activities related to obtaining clearance from the FDA for its
first product, the 3030 Stationary Pump. The Company has a limited operating
history and has experienced significant operating losses since inception. Upon
receiving FDA clearance for the 3030 Stationary Pump in mid-1992, the Company
focused its efforts on creating a domestic and international sales and marketing
network, as well as a manufacturing capability, to assist in the distribution of
its first product to the alternate-site health care market. Concurrent with
these sales and marketing activities, the Company continued to fund the
research, development and regulatory clearance activities of other device and
software products. See "Risk Factors -- History of Losses."

After receiving FDA clearance, the Company commercially launched the 6060
Ambulatory Pump and related disposable supplies in late 1995. Since then, the
Company has continued its sales and marketing activities domestically and
internationally for the distribution of the 3030 Stationary Pump and the 6060
Ambulatory Pump and continued to fund the research and development of additional
products, including the MediVIEW software system and the PumpMaster.
Substantially all of the Company's current revenues are derived from the sale of
its multi-therapy infusion devices and the sale of related disposable supplies.
In addition, the Company derives revenues from the rental of its multi-therapy
infusion devices, servicing of products, and the sale of extended warranties.
The Company expects to be able to derive revenues in the future from the sale of
the MediVIEW software system and the PumpMaster. See "Risk Factors -- Dependence
on Principal Product Line and New Product Development."

The Company recognizes revenues at the time of shipment of its products
with allowances for discounts and estimated returns recorded at the time of
sale. The Company sells its products both directly to alternate-site health
providers as well as to third-party distributors. The Company's distributors may
purchase several months of inventory at any one time which may cause
fluctuations in quarterly revenues. Quarterly fluctuations may also result from
other factors. Although the Company does not sell its products on consignment,
it may allow the return of products it has shipped if the customer has no viable
resources to pay for such shipment due to the deterioration in the
creditworthiness of such customer. The Company also markets and sells its
products internationally and, as a result, its revenues may be affected by
fluctuations in exchange rates. Failure to obtain regulatory approval for the
distribution of new products domestically or in international markets, or
regulatory problems in general, may affect the revenues of the Company. See
"Risk Factors -- Dependence on Principal Product Line and New Product
Development," "-- Governmental Regulations," "-- International Operations," and
"-- Quarterly Fluctuations."

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 AND 1995

NET SALES. Net sales increased from $930,000 for the three months ended
March 31, 1995 to $2.9 million for the three months ended March 31, 1996, an
increase of $2.0 million or 217%. Incremental sales volume of the 3030
Stationary Pump and related disposables accounted for $1.1 million of the
increase. The remaining amount was primarily attributable to newly introduced
products.

COST OF SALES. Cost of sales increased from $718,000 for the three months
ended March 31, 1995 to $1.5 million for the three months ended March 31, 1996,
an increase of $738,000 or 103%. Approximately $663,000 of the increase was a
result of incremental volume and the remainder is attributable to the higher
level of fixed manufacturing costs resulting from the investment in additional
production capacity made throughout 1995. Cost of sales as a percentage of sales
decreased from 77% for the three months ended March 31, 1995 to 49% for the
three months ended March 31, 1996. The decrease was due to greater distribution
of fixed manufacturing costs over a larger sales volume and the related per unit
contribution. Secondarily, the percent of sales decrease was attributable to
higher average per unit pricing, reductions in direct product costs, and
improved manufacturing efficiencies.

17
<PAGE> 23

GROSS MARGIN. Gross margin increased from $213,000 for the three months
ended March 31, 1995 to $1.5 million for the three months ended March 31, 1996,
an increase of $1.3 million, or 600%. The increase is mostly attributable to
increased sales volume and the related effect of per unit contribution. Also
contributing to the increased margin were higher average unit pricing, a
reduction in direct product costs, volume discounts, and improved manufacturing
efficiencies as discussed above.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained virtually unchanged at a level of $1.2 million
for the three months ended March 31, 1995 and 1996. Even though the Company has
expanded its sales and clinical support staff since the first quarter of 1995,
the expense associated with that expansion was largely offset by the absence of
marketing and financial consulting fees of $128,000 that were incurred in the
comparative period of 1995.

RESEARCH AND DEVELOPMENT. Research and development costs decreased from
$541,000 for the three months ended March 31, 1995 to $231,000 for the three
months ended March 31, 1996, a decrease of $310,000 or 57%. The decrease is
attributable to the completion of the 6060 Ambulatory Pump development project
before the end of 1995. Specifically, substantial development materials and
services have been eliminated as a result of the project completion.

OPERATING INCOME AND LOSS. The Company recorded an operating loss of $1.5
million for the three months ended March 31, 1995 versus operating income of
$12,000 for the three months ended March 31, 1996. As described above, operating
profit was achieved by increased sales volume, increased per unit pricing,
reductions in direct product costs, and a reduction of research and development
expenses.

INTEREST EXPENSE. Interest expense increased from $11,000 for the three
months ended March 31, 1995 to $104,000 for the three months ended March 31,
1996. The increase was primarily a result of an increase in average debt
outstanding during the comparative periods and, secondarily, the result of
higher interest rates for debt issuances subsequent to March 31, 1995.

INCOME TAX PROVISION. Due to net losses for the three months ended March
31, 1995 and 1996, the Company did not incur any federal or state income tax
liability for such periods.

NET LOSS. Net loss increased from $1.5 million for the three months ended
March 31, 1995 to $1.7 million for the three months ended March 31, 1996. A
non-recurring reserve of $1.6 million was recorded in the three month period
ended March 31, 1996 for certain stock appreciation rights obligations of the
Company which are expected to be paid from the proceeds of the Offering. Such
obligations are not ongoing and are considered extraordinary in nature. Without
the above reserve, the net loss would have been $87,000.

YEARS ENDED DECEMBER 31, 1995 AND 1994

NET SALES. Net sales increased from $3.3 million for the year ended
December 31, 1994 to $4.0 million for the year ended December 31, 1995, an
increase of $725,000 or 22%. The market launch of the 6060 Ambulatory Pump and
related disposable tubing sets in the fourth quarter of 1995 accounted for
approximately $611,000 of the increase. The remaining amount was attributable to
further penetration of the alternate-site health care market through sales of
the 3030 Stationary Pump and related disposable tubing sets by regional
distributors, the implementation of a direct sales and marketing program in
non-distributor territories and the signing of additional national accounts.

COST OF SALES. Cost of sales increased from $2.5 million for the year
ended December 31, 1994 to $2.9 million for the year ended December 31, 1995, an
increase of $421,000, or 17%. Approximately $399,000 of the increase was
attributed to increased sales volume. The remainder was related to the expansion
of the Company's manufacturing capacities, including an increase in operations
headcount and facility and equipment expenditures. Cost of sales as a percentage
of sales decreased from 75% in 1994 to 72% in 1995 as a result of the change in
sales mix between disposables and capital equipment, as well as efficiencies
from volume purchases of supplies. However, the overall decrease in cost of
sales from these factors was partially offset by the costs associated with
increases in manufacturing capacities.

GROSS MARGIN. Gross margin increased from $834,000 for the year ended
December 31, 1994 to $1.1 million for the year ended December 31, 1995, an
increase of $304,000, or 36%. This increase in gross margin was attributable to
the higher percentage of sales to national accounts during 1995 at pricing
levels which were typically higher than those of sales to the Company's
distributors.

18
<PAGE> 24

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $3.0 million for the year ended December
31, 1994 to $4.7 million for the year ended December 31, 1995, an increase of
$1.7 million, or 56%. Selling, general and administrative expenses accounted for
91% of net sales in 1994 and 116% of net sales in 1995. The high level of such
expenses in both 1994 and 1995 is attributable to the Company's development of
its sales and marketing organization, expansion of its administrative staff, and
efforts to obtain FDA clearance for its products. The increase in such expenses
from 1994 to 1995 resulted primarily from an increase in the number of direct
sales personnel, the training of such personnel, the initiation of new marketing
programs, the creation of a clinical support department, and the further
addition of administrative support staff. Additionally, financial advisory fees
of $410,000 were recorded in 1995.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased from $1.1 million for the year ended December 31, 1994 to $2.2 million
for the year ended December 31, 1995, an increase of 100%. Research and
development expenses as a percentage of sales increased from 33% in 1994 to 54%
in 1995. This increase resulted primarily from the addition of staff and
increased expenditures related to the 6060 Ambulatory Pump, the MediVIEW
software system and the PumpMaster. The Company recorded for the service of
outside consultants a charge of $480,000 in 1995 in connection with above
mentioned development projects.

OPERATING LOSS. Operating loss increased from $3.3 million for the year
ended December 31, 1994 to $5.7 million for the year ended December 31, 1995.

INTEREST EXPENSE. Interest expense decreased from $260,000 for the year
ended December 31, 1994 to $222,000 for the year ended December 31, 1995. This
decrease was primarily attributable to a reduction of average debt outstanding
during the year.

INCOME TAX PROVISION. The Company had net operating losses for the years
ended December 31, 1994 and 1995, and therefore did not incur any federal or
state income tax liability.

NET LOSS. As a result of the items discussed above, the Company's net loss
increased from $3.6 million for the year ended December 31, 1994 to $6.0 million
for the year ended December 31, 1995.

YEARS ENDED DECEMBER 31, 1994 AND 1993

NET SALES. Net sales increased from $1.2 million for the year ended
December 31, 1993 to $3.3 million for the year ended December 31, 1994, an
increase of $2.1 million, or 170%. This increase reflects increased sales volume
of the 3030 Stationary Pump and related disposable tubing sets.

COST OF SALES. Cost of sales increased from $1.6 million for the year
ended December 31, 1993 to $2.5 million for the year ended December 31, 1994, an
increase of $847,000 or 52%. This increase resulted primarily from the increase
in sales volume. Cost of sales as a percent of net sales decreased from 133% of
sales in 1993 to 75% of sales in 1995. This decrease was primarily attributable
to greater absorption of fixed overhead costs due to increased sales volume.
Costs per unit for the Company's products decreased due to lower material costs
and increased labor productivity.

GROSS MARGIN. Gross margin increased from a loss of $405,000 for the year
ended December 31, 1993 to a profit of $834,000 for the year ended December 31,
1994, an increase of $1.2 million. This increase resulted primarily from the
increase in net sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $1.7 million for the year ended December
31, 1993 to $3.0 million for the year ended December 31, 1994, an increase of
$1.3 million, or 77%. This increase was due primarily to the increase in sales
staff and corresponding expenses, marketing costs, corporate overhead, and the
Company's relocation to a larger facility.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased from $713,000 for the year ended December 31, 1993 to $1.1 million for
the year ended December 31, 1994, an increase of $386,000 or 54%. This increase
resulted primarily from increased expenditures related to the addition of staff
and activities related to ongoing development projects.

OPERATING LOSS. Operating loss increased from $2.8 million for the year
ended December 31, 1993 to $3.3 million for the year ended December 31, 1994.

19
<PAGE> 25

INTEREST EXPENSE. Interest expense increased from $20,000 for the year
ended December 31, 1993 to $260,000 for the year ended December 31, 1994. This
increase was primarily attributable to the issuance of convertible subordinated
debentures and the corresponding increase in outstanding indebtedness.

INCOME TAX PROVISION. The Company had net operating losses for the years
ended December 31, 1993 and 1994 and therefore did not incur any federal or
state income tax liability.

NET LOSS. As a result of the items discussed above, the Company's net loss
increased from $2.8 million for the year ended December 31, 1993 to $3.6 million
for the year ended December 31, 1994.

NET OPERATING LOSSES AND CREDIT CARRYFORWARDS

As of March 31, 1996, the Company had net operating loss and credit
carryforwards of $12.6 million. The net operating loss and credit carryforwards
will expire at various dates between 2005 and 2010, if not utilized. The Tax
Reform Act of 1986, as amended, limits the use of net operating loss and credit
carryforwards in certain situations where changes occur in the ownership of a
company's capital stock.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company's cash expenditures have significantly
exceeded its revenues. The Company has funded its operations primarily through
the private placement of debt and equity securities, as well as through limited
product sales and secured loan arrangements. Through December 31, 1995, the
Company had raised approximately $10.7 million from the private placement of
equity securities and approximately $2.4 million from the issuance of privately
placed debt securities.

The Company used cash in its operations of $2.5 million, $3.6 million and
$4.9 million for the years ended December 31, 1993, 1994 and 1995, respectively,
primarily to fund sales and marketing efforts, research and development
activities and to expand its employee base. The Company's capital expenditures
were approximately $143,000, $250,000 and $459,000 for the years ended December
31, 1993, 1994 and 1995, respectively. The Company plans to finance its capital
needs principally from the net proceeds of the Offering and interest thereon,
cash flow from operations and, to the extent available, from bank and lease
financing.

At March 31, 1996, the Company had cash and cash equivalents of $1,252,896
and working capital of $974,772. The Company maintains a credit facility which
it uses to supplement working capital and is based upon the amount of qualifying
trade accounts receivable. At March 31, 1996, the outstanding balance of the
credit facility was $301,393; however, the total credit available under the
facility was not fully utilized as of that date. The Company intends to repay
certain of its outstanding indebtedness from the proceeds of the Offering.

The Company believes that the anticipated net proceeds from the Offering,
together with interest thereon, will be sufficient to fund its operations
through the foreseeable future. However, the Company's future liquidity and
capital requirements will depend upon numerous factors, including market
acceptance of the Company's products and product development programs and the
resources the Company devotes to marketing its products. The Company's
requirements will also depend on, among other things, the resources required to
hire and develop a direct sales force, the resources required to expand
manufacturing capacity and facilities requirements, and the extent to which the
Company's products generate market acceptance and demand. Accordingly, there can
be no assurance that the Company will not require additional financing and,
therefore, may in the future seek to raise additional funds through bank
facilities, debt or equity offerings, or other sources of capital. Additional
funding may not be available when needed or on terms acceptable to the Company,
which would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors -- Need for Additional
Financing" and "-- Significant Unallocated Net Proceeds."

RECENT ACCOUNTING PRONOUNCEMENTS

During October, 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation,"
which establishes a fair value base method of accounting for stock-based
compensation plans, and requires additional disclosures for those companies who
elect not to adopt the new method of accounting. While the Company studies the
impact of the pronouncement, it continues to account for employees' stock
options under APB Opinion No. 25, "Accounting for Stock Issued to Employees."
SFAS No. 123 will be effective for fiscal years beginning after December 15,
1995.

20
<PAGE> 26

BUSINESS

INTRODUCTION

Sabratek develops, produces and markets multi-therapy infusion systems
designed to meet the needs of alternate-site health care providers to reduce
operating costs while maintaining the integrity and quality of care. The Company
believes that the alternate-site health care market will continue to experience
significant growth as managed care payors continue to move patients to the
lowest-cost care setting. The Company also believes that the need of
alternate-site health care providers to reduce costs compels them to capitalize
on advances in medical technology that maximize operating efficiencies.
Sabratek's infusion system incorporates advanced technology that offers a
standardized programming format to permit a seamless transition from stationary
to ambulatory therapy, as well as multiple therapeutic applications to permit a
seamless transition across different therapies. The Company's proprietary
interactive communications software will enable providers to program and
monitor, on a real-time basis, the Company's infusion pumps and allow payors and
providers to capture data for clinical outcomes analysis and reporting purposes
from a remote location. The Company's portable, automatic testing device will
enable health care providers to perform on-site diagnostic tests on the
Company's infusion devices. The Company believes that its integrated hardware
and software system will permit providers of infusion therapy to achieve
cost-effective movement of patients along the continuum of alternate-site health
care settings. The Company intends to expand its product line beyond infusion
therapy and become a leading developer and marketer of a variety of interactive
therapeutic and diagnostic medical systems for the delivery of high-quality,
cost-effective health care at alternate sites. Substantially all of the
Company's current revenues are derived from the sale of its multi-therapy
infusion pumps and related disposable supplies.

CHANGING HEALTH CARE ENVIRONMENT

The continued increase in health care costs at a rate significantly higher
than that of overall inflation has caused managed care companies, indemnity
insurers, employers, governmental agencies and other payors to employ a variety
of strategies designed to contain health care expenditures. These
cost-containment strategies aim to reduce the price paid for health care
services, as well as the amount of health care services utilized. In certain
markets, payors are shifting away from traditional fee-for-service based payment
plans and moving towards managed care plans in an effort to deliver quality
health care services more cost-effectively. In particular, cost-containment
measures, including increased utilization review and case management, have
caused many health care providers to move patients from the higher-cost hospital
setting to lower-cost alternate sites.

The alternate-site health care industry, which includes the delivery of
skilled nursing services, intravenous infusion and respiratory therapy, physical
therapy and pharmaceutical therapies in the home, long-term care facilities,
physicians' offices and outpatient centers, has grown significantly during the
past decade. According to a report entitled "National Health Expenditure
Projections, 1994-2005" published in the summer of 1995 by HCFA, total
expenditures for home health care, which constitutes a significant component of
alternate-site health care, increased from approximately $11.1 billion in 1990
to approximately $24.2 billion in 1994 and is projected to reach $45.9 billion
in 2000. Since the early 1980s, the provision of acute and chronic care for
serious illnesses outside the hospital has been recognized as a critical
component of health care cost containment because the delivery of certain
therapies in an alternate-site setting is more cost effective than the delivery
of these same therapies in an acute-care hospital setting. The Company believes
that the alternate-site health care industry will continue to benefit from
cost-containment measures which governmental and private payors have employed to
reduce hospital admissions and lengths of stays in hospitals. The Company
believes that such measures will continue the increase in the use of
alternate-site health care due to its significantly lower cost when compared to
similar care provided in traditional health care settings. In addition to cost
savings, the alternate-site health care industry should continue to benefit from
advances in medical technology which have facilitated the provision of
sophisticated care outside the hospital. Many disease states, including
pulmonary diseases, neurological conditions, infectious diseases, digestive
disorders, AIDS-related symptoms, various forms of cancer and related medical
conditions such as pain and nausea, are now being treated in alternate-site
settings, including the home. Growth in alternate-site health care has also been

21
<PAGE> 27

facilitated by the increased acceptance of such care by physicians, caregivers
and patients. The American Medical Association Council on Scientific Affairs and
the American Medical Association Council on Medical Education have recommended
that training in the principles and practice of home health care be incorporated
into the undergraduate, graduate and continuing education of physicians. Also
contributing to the growth of the alternate-site health care industry is the
increase in the over-65 population, which has a higher incidence of illness and
disability.

A significant component of alternate-site health care is infusion therapy,
which involves the administration of fluid intravenously at a regulated rate and
volume. Alternate-site infusion therapy has historically been the
fastest-growing segment of the alternate-site health care market. According to
POV, Incorporated, an industry tracking and consulting firm, the infusion
therapy segment of this market is expected to grow in revenues from $3.2 billion
in 1992 to $7.9 billion in 1997, representing an average annual compounded
growth rate of approximately 20%. Infusion therapy is used in a wide range of
applications such as nutrition therapy, pain management, delivery of
antibiotics, pregnancy and obstetrical therapies, chemotherapy, cardiovascular
therapy and immunosuppressive therapy. These therapies generally require the use
of specialized infusion pumps to deliver precise dosages of fluids such as
nutrients, parenteral solutions, anti-infectives, chemotherapeutic agents,
narcotic analgesics and a variety of other drugs.

Due to the shift by managed care payors toward fixed fee or capitated
payment arrangements, providers of infusion therapy are being forced to reduce
costs without compromising the quality of care in order to maintain
profitability. The costs associated with providing infusion therapy are composed
of three general components: capital equipment, supplies and labor.
Traditionally, providers of infusion therapy needed to purchase multiple types
of infusion pumps and related back-up inventory because most pumps delivered
only one type of therapy. This requirement to purchase several single therapy
pumps also results in increased labor training costs because of the need to
learn multiple programming protocols. The delivery of infusion therapy requires
a substantial amount of non-clinical nursing time. The Company believes that
reducing the labor costs of delivering infusion therapy is critical for
alternate-site health care providers to achieve operating efficiencies.
According to a 1992 study of the home infusion therapy industry published by The
National Alliance for Infusion Therapy (the "NAIT Study"), nurses spent an
average of 3.1 hours per home visit, of which approximately 64 minutes, or 35%,
was spent traveling to and from the patient's home, 56 minutes, or 30%, was
spent documenting clinical observations as well as coordinating care and the
balance was spent on tasks performed during personal contact with the patient,
including documentation. The NAIT Study also shows that training is required for
patients not only at the start of therapy but also over time as the therapy of
an individual patient changes. The NAIT Study indicates that during such home
visits, a significant amount of nursing time is required to ensure that patients
are complying with the prescribed therapy. Compliance is important to ensure
that patients are not required to re-enter the costly hospital setting thereby
generating unnecessary incremental expenses and health risks as a result of
failure to adhere to their prescribed therapies, whether intentionally or
unintentionally. The Company believes that products and technology which reduce
the cost of providing infusion therapy, especially the labor component, will be
attractive to health care payors in general and providers of infusion therapy in
particular.

BUSINESS STRATEGY

The Company's goal is to become a leading developer and marketer of
interactive therapeutic and diagnostic medical systems designed to improve the
delivery of high-quality, cost-effective health care at alternate sites. The
Company intends to achieve its goal by pursuing the following business
strategies:

- DEVELOP ADVANCED MEDICAL PRODUCTS AND RELATED SOFTWARE SYSTEMS THAT
MAXIMIZE THE COST-EFFECTIVE PROVISION OF ALTERNATE-SITE HEALTH CARE. The
Company has designed its multi-therapy infusion products and related
software system, and intends to develop additional products, to address
the various needs of its major constituencies -- payors, providers and
patients and their families.

Payors -- The Company believes that payors are primarily concerned with
reducing costs while assuring the quality of health care. The Company's
multi-therapy infusion system has the flexibility to effectively treat a
wide range of disease states in the lower cost alternate-site market.
Characteris-

22
<PAGE> 28

tics of the Company's infusion and software systems help address quality
assurance concerns through such features as real-time data capture,
remote monitoring capability, alarms that immediately alert providers of
non-compliance and the capability to perform customized outcomes
analysis. Such analyses also help provide oversight of the practice
patterns of health care providers.

Providers -- The Company believes that alternate-site providers are
concerned with improving their ability to effectively treat patients
through the use of products that reduce labor costs, allow real-time
patient monitoring, improve patient compliance and provide data to
develop better protocols in order to improve operating efficiencies. The
Company's infusion products incorporate user-friendly characteristics
that minimize set-up time and nurse/patient training, and have the
flexibility to provide multiple therapies using a single infusion device.
Additionally, the Company believes that its infusion pumps' capabilities
for remote interactive programming and monitoring on a real-time basis
will considerably reduce costly on-site nurse intervention. The ability
of the Company's infusion system to administer a variety of infusion
therapies allows providers to minimize their inventories of infusion
pumps and related supplies. The Company believes that the advanced
features incorporated in its infusion system allow providers to treat
higher acuity patients in the alternate-site setting who could previously
only be treated in an acute-care hospital. In combination with the
Company's interactive software, Sabratek's infusion pumps will enable
health care professionals to collect diagnostic and therapeutic data
useful in the analysis and development of clinical protocols and provide
insight into practice patterns, thereby reducing the need for frequent
on-site visits and evaluations as well as redundant and burdensome
record-keeping.

Patients and their Families -- The Company believes that, while
undergoing infusion therapy, patients and their families want comfort,
peace of mind, ease of use and more control over their lives. The
Company's infusion system meets these needs through such characteristics
as user-friendly programming to aid those patients who are not
technologically literate, multiple language formats, quietness of
operation, bright LED displays, alarm system warnings of non-compliance
and, when used in conjunction with the Company's interactive software,
the ability to provide real-time information over standard telephone
lines to providers in remote locations. Real-time monitoring and
intervention capabilities provide patients with an increased comfort
level to receive therapies in a home setting where they would otherwise
feel uncomfortable because of the lack of immediately available medical
personnel.

- DEVELOP AN INTEGRATED SYSTEM OF THERAPEUTIC AND DIAGNOSTIC
INFORMATION-BASED MEDICAL PRODUCTS SUPPORTED BY THE COMPANY'S PROPRIETARY
HEALTH CARE INFORMATION SOFTWARE PLATFORM. The Company is developing a
software system to allow health care providers to program and monitor the
Company's infusion pumps and capture data for reporting and clinical
purposes from a remote location on a real-time basis. The Company intends
to expand the capabilities of its proprietary medical information
software as well as its line of advanced, user-friendly medical devices
to create a complete interactive system that addresses a variety of
therapeutic and diagnostic applications in the alternate-site health care
industry. The Company intends to expand its line of products through
further internal product design and development, licensing arrangements,
joint ventures and acquisitions of technology, products and companies
when available.

- CREATE A PROPRIETARY OUTCOMES DATABASE THROUGH THE COMPANY'S PRODUCTS AND
SOFTWARE SYSTEM PLATFORM. The Company's strategy is to expand the
installed base of its interactive medical system and to become the
preferred vendor of such system to alternate-site health care providers.
The Company believes that its software-based medical systems will serve
as a platform on which to develop interactive communication and
information systems designed to allow payors and providers to capture and
analyze clinical data to design the most cost-effective therapy protocols
and practice patterns. The Company has designed its proprietary
information system to incorporate a wide range of real-time, remote
programming, monitoring and administrative report functions for multiple
therapeutic modalities beyond infusion therapy.

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<PAGE> 29

PRODUCTS

SABRATEK'S SEAMLESS DELIVERY SYSTEM. Sabratek's software-based infusion
devices and related interactive information system are designed to provide both
health care professionals and patients with ease of use and a smooth transition
throughout the health care delivery spectrum. Sabratek's SEAMLESS DELIVERY
SYSTEM product design is the Company's strategic response to the need to achieve
cost-effective movement of patients from a hospital setting to an alternate-site
setting, and among the various stages in alternate-site care, from sub-acute to
home care, with maximum ease of transition. The SEAMLESS DELIVERY SYSTEM
maximizes the similarities between Sabratek's stationary and ambulatory infusion
devices and is intended to allow both patients and health care providers to use
both types of infusion devices interchangeably, as the specific setting or
therapy dictates, and with greater ease. This ability reduces the amount of time
health care professionals must spend training on multiple operating systems as
well as administering and monitoring therapies. In addition, Sabratek's infusion
devices have the flexibility to provide multiple therapies which allows
providers to minimize their equipment inventories. Sabratek's infusion devices
intravenously deliver therapeutic agents to address treatments for a wide
variety of conditions, including, among others, antibiotic therapy for viral or
bacterial infections, chemotherapy for cancer, pain management for chronic pain,
clotting agents for hemophelia and various therapies for pregnancy and
obstetrics.

The following table summarizes certain information with respect to the
Company's products:

<TABLE>
<CAPTION>
PRODUCT DESCRIPTION STATUS
- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
INFUSION PUMPS
3030 Stationary Pump...... Stationary, multi-therapy Commercially available since
infusion device 1992(1)

6060 Ambulatory Pump...... Ambulatory, multi-therapy Commercially available since
infusion device 1995(2)

INFUSION SUPPLIES
3030 Infusion Sets........ Non-proprietary, disposable Commercially available since
tubing sets for use with 1992
3030 Stationary Pump

6060 Infusion Sets........ Proprietary, disposable Commercially available since
tubing sets for use with 1995
6060 Ambulatory Pump

INTERACTIVE PROGRAMMING AND MONITORING SOFTWARE
MediVIEW.................. Proprietary, PC-based Beta-site test stage
software that allows remote
and real-time programming,
monitoring and data capture

AUTOMATIC DIAGNOSTIC TESTING DEVICE
PumpMaster................ Proprietary, portable, Beta-site test stage(3)
automatic diagnostic device
for the testing of Sabratek
infusion pumps
</TABLE>

- ---------------
(1) Patents issued in the United States.

(2) United States and foreign patents pending.

(3) Patent pending in the United States.

SABRATEK 3030 -- STATIONARY MULTI-THERAPY INFUSION PUMP. The Company's
3030 Stationary Pump is an electromechanical, volumetric infusion device that is
able to deliver a wide variety of infusion therapies including, among others,
chemotherapy, antibiotics, circadian rhythms and total parenteral nutrition
under three standard and one customizable delivery modes. The 3030 Stationary
Pump incorporates multiple language capabilities, remote communications and
pre-programming capabilities, a state-of-the-art ergonomic design and a
relatively easy-to-learn programming format. The 3030 Stationary Pump operates
with leading brands of disposable tubing as well as Sabratek's own line of
non-proprietary disposable tubing. The current list price for the 3030
Stationary Pump is $3,495.

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<PAGE> 30

SABRATEK 6060/HOMERUN -- AMBULATORY MULTI-THERAPY INFUSION PUMP. The
Company's 6060 Ambulatory Pump weighs approximately 13 ounces and can be worn
discreetly by a patient. The 6060 Ambulatory Pump was designed as a
complementary product to the 3030 Stationary Pump and, when combined with the
use of the 3030 Stationary Pump, provides a seamless transition between the bed
and an ambulatory state, or vice versa, with minimal additional training. The
6060 Ambulatory Pump has delivery capabilities and a programming format that are
similar to the 3030 Stationary Pump, with the addition of a pre-programmed
capability to deliver pain management infusion therapy. The 6060 Ambulatory Pump
also has the ability to work in conjunction with the MediVIEW software and
utilizes a proprietary disposable tubing set. The current list price for the
6060 Ambulatory Pump is $3,995.

DISPOSABLE INFUSION SUPPLIES. The Company sells non-proprietary disposable
tubing sets for use with the 3030 Stationary Pump and proprietary disposable
tubing sets for use exclusively with the 6060 Ambulatory Pump.

MEDIVIEW -- REMOTE PROGRAMMING; MONITORING AND DATA CAPTURE SOFTWARE
SYSTEM. MediVIEW is a proprietary software system designed to allow providers
to program and monitor Sabratek's infusion pumps and capture data for reporting
and clinical purposes from remote locations over standard telephone lines. The
Company believes that alternate-site health care providers using the 3030
Stationary Pump and 6060 Ambulatory Pump combined with MediVIEW will be able to:
(i) remotely monitor and program the Company's pumps on a real-time basis, (ii)
receive instantaneous notification of alarm activation and immediately respond
from the provider's physical location, (iii) automatically record and "package"
data regarding the outcomes of actual therapy courses for specific case
management and clinical as well as administrative/reimbursement purposes, and
(iv) develop a proprietary clinical protocol and outcomes database useful to
providers in managed care cases. In addition, patients who receive therapy on
the Company's infusion products should derive greater comfort because their
providers will be able to monitor their therapies on a real-time basis. MediVIEW
is currently not commercially available and is in the Beta-site test stage.

PUMPMASTER -- PORTABLE, AUTOMATIC DIAGNOSTIC DEVICE FOR THE TESTING OF
SABRATEK INFUSION PUMPS. The PumpMaster is a portable device designed to enable
providers to perform on-site diagnostic tests on Sabratek's infusion devices.
Pursuant to suggested standards adopted recently by the Joint Commission for the
Accreditation of Healthcare Organizations ("JCAHO"), an industry group which
promulgates standards relating to the provision of alternate-site health care,
the performance of every infusion pump is required to be re-certified on the
earlier of the date on which such pump is provided to a new patient for their
use or the date which is 12 months from the date of the last certification. The
Company believes that it is not cost-efficient for providers to maintain
in-house bio-medical engineering resources on a branch level to perform pump re-
certification. Instead, providers typically ship their pumps for remote-site
testing and, as a result, are required to maintain costly back-up pump
inventory. The PumpMaster is intended to obviate such incremental capital
expenditure outlays. The PumpMaster is designed to conduct automatically, in
approximately ten minutes, all tests typically performed as part of JCAHO
re-certification. PumpMaster is currently not commercially available and is in
the Beta-site test stage.

SALES AND MARKETING

The Company sells its products to a diverse group of customers in the
alternate-site health care industry such as sub-acute skilled nursing care
facilities, home health care providers, physicians' offices, clinics, surgery
centers and long-term care facilities. This group of customers ranges in size
from national and regional chains to local independent operators. Key decision
makers include nursing, pharmacy, purchasing and bio-medical departments, as
well as physicians.

During 1995, three of the Company's customers, namely Advanced Medical,
Inc., Clinical Technology, Inc. and Pharmacy Corporation of America, accounted
for 11%, 11% and 12% of the Company's sales, respectively.

As of March 31, 1996, the Company's domestic sales force consisted of nine
direct sales professionals, four clinical support staff and two full-time sales
consultants as well as a network of domestic distributors each

25
<PAGE> 31

of whom covers an exclusive geographic territory. The Company's distributors
have been selected for their experience in and focus on the infusion therapy
market, coverage of specific geographical areas, product sales support and
regional dominance. The Company's sales management team trains the sales
personnel of each of the distributors and provides them with all product sales
information and other relevant field literature. In addition, Sabratek's direct
sales representatives coordinate and manage national account activity. The
Company's marketing and sales efforts are supported by advertising in trade
journals, new product literature and attendance at trade shows. The Company
believes that its existing sales force and distribution network provide the
necessary infrastructure to market its current products and those under
development. The Company intends to use a portion of the proceeds from the
Offering to augment its sales and marketing staff and increase its marketing
efforts to further facilitate sales of current and future products.

The Company has also entered into distribution agreements with distributors
in South America, Europe, the Middle East and Asia. For the year ended December
31, 1995, Sabratek's international sales accounted for approximately 15% of the
Company's total sales. The Company perceives the international marketplace as a
potential area for significant future growth. The Company has distribution
agreements in Japan and Germany, which it believes are among the largest
international markets for infusion systems, and will commence marketing its
products in these countries upon receipt of regulatory approval. Currently, all
of the Company's international sales are invoiced and paid in U.S. dollars.

The Company has enhanced its domestic sales effort through an affiliation
with Americorp Financial, Inc. ("Americorp") to provide leasing services to the
Company's domestic customers. Americorp has licensed the name "Sabratek Credit
Corporation" from the Company and offers financing for the acquisition of
Sabratek products under both capital and operating leases. Under the agreement
entered into with Americorp, the Company retains a contingent repurchase
obligation for 20% of the outstanding balances of certain leases of Americorp to
customers that do not meet certain financial criteria. As of March 31, 1996, the
Company had no such repurchase obligation.

RESEARCH AND DEVELOPMENT

The Company is committed to continued product innovation and has invested
approximately $713,000, $1.1 million and $2.2 million in research and
development for the years ended December 31, 1993, 1994 and 1995, respectively.
The Company's research and development effort is supported by a staff of eight
electrical, mechanical and software engineers who have extensive experience in
the design and development of electromechanical infusion therapy devices, other
medical instrumentation and software. Sabratek's engineering team closely
coordinates its design activities with the Company's sales and marketing team.
This group solicits extensive pre-design focus group input from constituencies
that use or are impacted by the use of Sabratek's products, but who may possess
a host of different strategic, economic and other objectives.

Sabratek's research and development program is focused on both new product
development and enhancements of existing products. The Company's product
development efforts include advancements in infusion therapy, interactive
software systems and vital signs monitoring. The Company's product development
strategy is based on developing product platforms that have the flexibility to
be configured to respond to a variety of customer requirements. The Company's
product enhancement efforts are based on the input received from customers after
the initial introduction of its products and focus on addressing customers'
needs in a more cost-effective and comprehensive way.

ASSEMBLY

Sabratek currently assembles all of its infusion devices at its facility in
Niles, Illinois in an effort to ensure production quality and control its costs.
The Company does, however, purchase certain pre-assembled sub-systems from other
sources. In addition, disposable tubing sets sold by Sabratek are manufactured
by contract manufacturers. Sabratek believes in-house assembly of its infusion
devices and contract manufacturing of disposable tubing sets are the most
cost-effective means of producing its products.

The Company's production process for its infusion devices consists of
assembling major sub-systems as well as the assembly of both standard and custom
components. The standard components can be obtained

26
<PAGE> 32

from a number of sources. The custom components are produced by both Sabratek as
well as by sub-contractors and, in all cases, competitive back-up supply sources
exist. The Company believes that, due to volume discounts, the unit cost of both
standard and custom components will decrease as production volumes increase.

Disposable tubing sets are manufactured to Sabratek's specifications by
third parties in a clean room environment under stringent quality control
procedures covering assembly, storage and sterilization. Set production consists
of the assembly of both standard and custom components. The plastic custom
components are manufactured by a sub-contractor using molds supplied by the
Company. The Company uses more than one manufacturer for the production of its
disposable tubing sets.

QUALITY ASSURANCE

The Company maintains a comprehensive quality assurance program. The
quality assurance program begins with the components and other materials the
Company purchases from vendors. Vendors are required to supply materials which
meet stated specifications. The Company monitors vendors' compliance with the
stated specifications through a program of on-site surveys, audits and product
testing. The Company also employs quality assurance procedures during its
on-site manufacturing and assembly process in an effort to ensure that finished
products meet the standards set by the Company. All finished products are tested
by the Company's separate quality assurance department to ensure that the
Company avoids distributing sub-standard products. Finally, the Company
maintains a post-sale performance monitoring program.

Sabratek provides a one-year warranty on the 3030 Stationary Pump and the
6060 Ambulatory Pump. This warranty is passed on to the end-users by the
distributors. To provide further product support, the Company has established an
in-house capability for repair and maintenance of its products. The repair and
maintenance function utilizes one full-time engineer and one full-time
technician as well as on-going support from production personnel as required to
service infusion devices. The Company believes the service and maintenance of
its infusion devices require minimal manpower due to the modularity of such
devices' sub-systems, sound quality control procedures and the service
capabilities of distributors.

INTELLECTUAL PROPERTY

One United States patent has been issued for the 3030 Stationary Pump and
eight patent applications are pending for the 6060 Ambulatory Pump. The Company
also has a pending patent application on certain aspects of the PumpMaster. The
Company has two pending foreign design applications for the 6060 Ambulatory
Pump, which are patent applications seeking protection for the ornamental
design, rather than functional features, of the product. In addition, three
foreign patent applications are pending for the 3030 Stationary Pump and one
Patent Cooperation Treaty application is pending, seeking protection in foreign
countries for certain aspects of the 6060 Ambulatory Pump. The Company also
requires each of its employees, consultants and advisors to agree in writing to
keep its proprietary information confidential and to assign all inventions
relating to the Company's business to the Company. There can be no assurance
that any unprotected information will not also be developed by others.

COMPETITION

The Company faces substantial competition. At the present time, the Company
considers its primary competitors to be other marketers of infusion pumps. The
Company believes there are several major competitors in the market for infusion
pump devices, including, but not limited to: Abbott Laboratories; Baxter
International Inc.; BLOCK Medical, Inc.; I-Flow Corp.; IMED Corporation; IVAC
Corporation; McGaw, Inc. and SIMS Deltec, Inc. See "Risk Factors -- Highly
Competitive Markets; Technological Risk."

27
<PAGE> 33

Despite the greater size and market share of its competitors, Sabratek
believes that its products compete favorably against the products offered by its
competitors. Sabratek has strategically designed its stationary and ambulatory
pump products to offer cost efficient and convenient transferability of
training/operational procedures and functions. Unlike manufacturers that offer
only a stationary or an ambulatory pump, or offer both but whose products lack
operational integration, Sabratek's SEAMLESS DELIVERY SYSTEM product design
provides health care providers with product standardization which the Company
believes to be critical in achieving operating efficiencies. Sabratek believes
that its products also compete favorably with the products of larger, more
established companies on the basis of other advanced product features.

REIMBURSEMENT

The Company's current products are generally purchased by health care
providers who are reimbursed by third-party payors, including indemnity
insurance companies, managed care organizations and government agencies. Such
health care providers recover the cost of purchasing the Company's products
through reimbursement for services provided using the Company's products.

HCFA coordinates a system of reimbursement for outpatient hospital
procedures, physician office procedures and devices used in conjunction
therewith. Under this system, HCFA determines coverage eligibility, issues
coverage instructions and assigns billing codes called the HCFA Common
Procedures Coding System ("HCPCS") for such procedures and devices under
Medicare and Medicaid. HCFA has established HCPCS billing codes for infusion
devices. Moreover, the HCPCS system is referenced by most third-party payors,
including Medicare and Medicaid, insurance companies and health maintenance
organizations, thereby standardizing coverage identification and billing
identification across a broad spectrum of payor plans. When the use of
FDA-approved infusion devices is prescribed by a physician and determined to be
reasonable and necessary in the treatment of illness, such use is generally
reimbursable under Medicare and Medicaid. Reimbursement by other third-party
payors is dependent upon the coverage provided under the applicable plan. See
"Risk Factors -- Dependence on Third-Party Reimbursement."

GOVERNMENT REGULATION

The medical devices manufactured and marketed by the Company are subject to
regulation by the FDA and, in some instances, by state and foreign authorities.
Pursuant to the FFDCA and the regulations promulgated thereunder, the FDA
regulates the clinical testing, manufacture, packaging, labeling, distribution
and promotion of medical devices.

Pursuant to the FFDCA, medical devices intended for human use are
classified 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 subject to general controls (for example,
labeling, premarket notification and adherence to good manufacturing practice
("GMP") regulations) and Class II devices are subject to general and special
controls (for example, performance standards, postmarket surveillance, patient
registries, and FDA guidelines). Generally, Class III devices are those which
must receive premarket approval ("PMA") from the FDA to ensure their safety and
effectiveness (for example, 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 are classified by the FDA as Class II medical devices.

If a new Class II medical device is substantially equivalent in terms of
safety and effectiveness to a medical device already legally marketed in the
United States, 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. A
"legally marketed device" to which a new device may be compared for a
determination regarding substantial equivalence is a device that was legally
marketed prior to May 28, 1976, when the

28
<PAGE> 34

Medical Device Amendments were added to the FFDCA, or a device which has been
reclassified from Class III to Class II or I, or a device which has been found
to be substantially equivalent through the 510(k) premarket notification
process.

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. It
generally takes from four to twelve months from submission of a 510(k) to obtain
a 510(k) clearance, but it may take longer. The FDA may determine that a
proposed device is not substantially equivalent to a legally marketed device, in
which case a PMA may be required, or that additional information is needed
before a substantial equivalence determination can be made, in which case data
from safety and effectiveness tests, including clinical tests, may be required.
A "not substantially equivalent" determination or a request for additional
information could delay the market introduction of new products that fall into
this category.

The Company received 510(k) clearance to begin marketing the 3030
Stationary Pump in the United States in May, 1992. The Company received 510(k)
clearance for the disposable tubing sets for use with the 3030 Stationary Pump
in March, 1995. In July, 1994, the FDA cleared the 510(k) Submission for the
6060 Ambulatory Pump and disposable tubing sets for use with the 6060 Ambulatory
Pump. In June 1996, the Company received 510(k) clearance for the MediVIEW
software system for use with the 3030 Stationary Pump.

The FFDCA requires the filing of a new 510(k) Submission 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. The addition of software
features to currently marketed products may require the filing of a new 510(k)
Submission.

The Company believes that its 510(k) clearance for the 6060 Ambulatory Pump
adequately described the MediVIEW software system and, accordingly, that the
original 510(k) clearance for the 6060 Ambulatory Pump permits the Company to
market the MediVIEW software with the 6060 Ambulatory Pump in the United States.
However, there can be no assurance that the FDA would agree with the Company's
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 the Company from marketing the MediVIEW software system
for this use until the Company files a new 510(k) Submission and obtains
clearance from the FDA. The FDA could also take regulatory action against the
Company for any prior distribution of the MediVIEW software system with the 6060
Ambulatory Pump. Alternatively, the FDA could use its discretion not to take any
regulatory steps with regard to this issue.

The PumpMaster is a hardware and software system designed to perform
diagnostic tests on the Company's infusion pumps. The Company has determined
that the PumpMaster does not qualify as a medical device under the statutory
definition and, therefore, did not file a 510(k) Submission with respect to such
product. There can be no assurance that the FDA will agree with the Company's
determination in this regard. If the FDA were to determine that the PumpMaster
is a medical device, it could suspend its commercial distribution until such
time as a 510(k) Submission covering such product has been filed and cleared.
The FDA could also take regulatory action against the Company based on its prior
distribution of the uncleared product. Alternatively, the FDA could use its
discretion not to take any regulatory steps with respect to this issue.

Additional product modifications, including new software features, that the
Company intends to develop in the future will likely require 510(k) clearance if
the modifications could affect the safety or efficacy of the Company's products.
If the Company determines that any modifications that it may make to its cleared
devices do not require a new 510(k) Submission, there can be no assurance that
the FDA would agree with the Company's determinations and would not require a
new 510(k) Submission for any modifications made to the devices. If the FDA
requires the Company to file a new 510(k) Submission for any modification to the

29
<PAGE> 35

device, the Company may be prohibited from marketing the device as modified
until it obtains clearance from the FDA. There can be no assurance that the
Company will obtain 510(k) clearance on a timely basis, if at all, for any
device modification for which it files 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.

Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA. 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 certain state agencies. The FFDCA requires devices to be manufactured in
accordance with GMP regulations which impose certain process, procedure and
documentation requirements upon the Company with respect to manufacturing and
quality assurance activities. The FDA has proposed changes to the GMP
regulations which, if finalized, would likely increase the cost of complying
with GMP requirements. The Company believes that its manufacturing and quality
control procedures substantially conform to the requirements of FDA regulations.

In addition, the Medical Device Reporting ("MDR") regulation obligates the
Company to inform the FDA whenever there is reasonable evidence to suggest that
one of its devices may have caused or contributed to death or serious injury, or
where one of its devices malfunctions and, if the malfunction were to recur, the
device would be likely to cause or contribute to a death or serious injury.

Labeling and promotion activities are also subject to scrutiny by the FDA
and, in certain instances, by the Federal Trade Commission. The FDA actively
enforces regulations prohibiting marketing of products for unapproved uses.

If, as a result of FDA inspections, MDR reports or information derived from
any other source, the FDA believes the Company is not in compliance with the
law, the FDA can refuse to clear pending 510(k) Submissions; withdraw previously
cleared 510(k) Submissions; require notification to users regarding newly found
unreasonable risks; request repair, refund or replacement of faulty devices;
request corrective advertisements, formal recalls or temporary marketing
suspension; impose civil penalties; or institute legal proceedings to detain or
seize products, enjoin future violations, or seek criminal penalties against the
Company, its officers or employees. Civil penalties for FFDCA 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 for violations of the FFDCA, and
a maximum of $1,000,000 per proceeding. Civil penalties may not be imposed for
GMP violations, unless the violations involve a significant or knowing departure
from the requirements of the FFDCA 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.

The Company exports, or intends to export, its 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
for products for export (a "CPE"). To obtain a CPE the device manufacturer must
certify to the FDA that the product has been granted clearance in the United
States and that the manufacturing facilities appeared to be in compliance with
GMPs at the time of the last FDA inspection. The FDA will refuse to issue a CPE
if significant outstanding GMP violations exist.

International sales of medical devices are subject to the regulatory
requirements of each country. 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. The Company plans to
use its distributors to assist in obtaining any necessary foreign governmental
and regulatory approvals. The Company does not currently have its products
registered or approved in any countries requiring an extensive registration or
approval process and has, therefore, not sold any products in such countries.

The Company has received Underwriters Laboratory, Inc. product recognition
under UL 544, Standard for Medical and Dental Equipment as well as product
recognition under Canadian National Standard C22.2

30
<PAGE> 36

through cUL for both the 3030 Stationary Pump and the 6060 Ambulatory Pump. To
maintain "UL" status, the Company is subject to quarterly inspections by
Underwriters Laboratory, Inc.

The Company and its products are also subject to a variety of state and
local laws and regulations in those states or localities where its products are
or will be marketed. Use of the Company's products is subject to inspection,
quality control, quality assurance, proficiency testing, documentation and
safety reporting standards promulgated by JCAHO. Various states and
municipalities may also have similar regulations.

Manufacturers are also subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations.

PRODUCT LIABILITY INSURANCE

The Company faces an inherent business risk of exposure to product
liability claims in the event that the use of its products is alleged to have
resulted in adverse effects. The Company maintains product liability insurance
with coverage of $5.0 million per claim, with an annual aggregate policy limit
of $5.0 million. There can be no assurance that liability claims will not exceed
the coverage limits of such policies or that such insurance will continue to be
available on commercially acceptable terms, if at all. See "Risk Factors --
Product Liability Exposure."

LITIGATION

The Company is a party to routine litigation in the ordinary course of
business, none of which, if determined adversely to the Company, would
individually or in the aggregate have a material adverse effect on the Company.
Sabratek recently reached an agreement with Medtec Medical, Inc. ("Medtec") to
settle the litigation between the parties. Pursuant to the settlement, the
Company will pay Medtec $46,500 and Medtec will dismiss the lawsuit with
prejudice.

EMPLOYEES

As of March 31, 1996, the Company employed sixty-four persons full-time,
including thirty-four in manufacturing and operations, thirteen in sales and
marketing, seven in research and development, five in administration, and five
in regulatory affairs/quality assurance. The Company anticipates hiring
additional personnel following the completion of the Offering, primarily in the
areas of sales and marketing and operations. The Company's employees are not
represented by a union, and the Company considers its relationship with its
employees to be satisfactory.

The Company has entered into employee non-disclosure and non-competition
agreements with each of its full-time employees that (i) prohibit disclosure of
confidential information to anyone outside of the Company both during and
subsequent to employment, (ii) require disclosure to the Company of ideas,
discoveries or inventions relating to or resulting from the employee's work for
the Company and assignment to the Company of all proprietary rights to such
ideas, discoveries or inventions, and (iii) limit competition with the Company's
business by the employee for a maximum period of one year following termination
of their employment.

FACILITIES

The Company occupies approximately 30,500 square feet of development,
production, warehouse and administrative space in Niles, Illinois. The facility
lease runs through October 31, 1999. The current annual lease rate for this
space is approximately $161,000 and is subject to annual increases. Sabratek
believes that the leased space is adequate for its anticipated needs into the
foreseeable future.

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<PAGE> 37

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ----------------------------------------------
<S> <C> <C>
K. Shan Padda................. 33 Chairman of the Board, Chief Executive Officer
and Treasurer
Anil K. Rastogi, Ph.D......... 53 President and Chief Operating Officer
Doron C. Levitas.............. 38 Vice Chairman of the Board, Vice President of
International Operations and Secretary
Alan E. Jordan................ 52 Senior Vice President of Sales and Marketing
Scott Skooglund............... 37 Vice President of Finance
Joseph Moser.................. 42 Vice President of Research and Development
Donald J. India............... 44 Vice President of Operations
Vincent J. Capponi............ 38 Vice President of Quality Control
Scott Hodes................... 58 Director
Mark Lampert.................. 36 Director
William D. Lautman(1)......... 33 Director
William H. Lomicka(1)......... 58 Director
Marvin Samson(2).............. 54 Director
L. Peter Smith(2)............. 47 Director
Edson W. Spencer, Jr.(2)...... 41 Director
</TABLE>

- ---------------
(1) Member of Audit Committee

(2) Member of Compensation Committee

OFFICERS

The executive officers of the Company are elected annually by the Board of
Directors of the Company (the "Board") and serve at the discretion of the Board.

K. SHAN PADDA co-founded the Company in 1989 and has served as Chairman,
Chief Executive Officer and Treasurer since 1991 and Co-Chairman of the Board
and Vice President of Finance from 1989 to 1991. From 1984 to 1988, Mr. Padda
served as Chief Executive Officer of Andens of Illinois, Inc., a medical
supplies company headquartered in Chicago, Illinois, which assembled and
marketed hospital operating room supply kits. From 1982 to 1984, Mr. Padda
directed marketing and sales efforts for a division of Crowd Caps, Inc., an
apparel company, in Minneapolis, Minnesota. Mr. Padda graduated from Harvard
University with a B.A. in Biology. In 1995, Mr. Padda was inducted into the
Chicagoland Entrepreneur Hall of Fame.

ANIL K. RASTOGI, PH.D. joined the Company in August, 1995 as President and
Chief Operating Officer. Prior to joining Sabratek, from 1991 to 1995, Dr.
Rastogi held various positions with SIMS Deltec, Inc. (formerly Pharmacia
Deltec, Inc.), a manufacturer and marketer of ambulatory drug delivery and
vascular access devices. From 1994 to 1995, Dr. Rastogi served as Chief
Operating Officer; from 1992 to 1994, as Executive Vice President; and from 1991
to 1992, as Vice President and General Manager of the Infusion Division of SIMS
Deltec, Inc. Prior thereto, Dr. Rastogi was President of the Cycolor Division of
Mead Corporation and held various positions with Owens-Corning Fiberglas
Corporation. Dr. Rastogi graduated from McGill University with a Ph.D. degree in
Polymer Science.

DORON C. LEVITAS co-founded the Company in 1989 and has served as Vice
Chairman of the Board and Secretary since 1994 and Vice President of
International Operations since 1993. Prior thereto, Mr. Levitas served in
various capacities including Co-Chairman of the Board and Chief Operating
Officer. Before joining Sabratek, from 1986 to 1988, Mr. Levitas served as
President of a division of Chicago-based Andens of

32
<PAGE> 38

Illinois. From 1984 to 1986, Mr. Levitas served as President of Headings, Inc.,
an international apparel marketing firm based in New York, New York, which was
later sold to Andens of Illinois. Mr. Levitas graduated from Baruch College in
New York, New York with a B.A. in International Business and Finance. In 1996,
under Mr. Levitas' guidance, Sabratek received the State of Illinois's 1996
Governor's Export Award.

ALAN E. JORDAN has served as Senior Vice President of Sales and Marketing
of the Company since 1994 and in various other capacities since joining the
Company in 1991. Prior thereto, in 1986, he founded Ivonyx Corp., a national
home health care company, where he served until 1989 in various positions,
including Chairman and Chief Executive Officer. Mr. Jordan has many years
experience in the infusion pump industry, including tenures at IMED Corporation,
an electronic infusion pump manufacturer, where he, among other positions,
served as Vice President of Sales and Marketing. In 1968, Mr. Jordan joined IVAC
Corporation, an electronic infusion equipment manufacturer. He graduated from
Drake University with a B.S. in Business Management.

SCOTT SKOOGLUND has been Vice President of Finance of the Company since
joining Sabratek in 1992. Prior thereto, from 1989 to 1992, Mr. Skooglund served
in various capacities at XCEL Laboratories, Inc., a pharmaceutical manufacturer,
including Vice President of Finance. From 1984 to 1989, Mr. Skooglund was
Regional Accounting Manager at Leaseway Transportation Corp. Mr. Skooglund
graduated with a B.S. in Accounting from Eastern Illinois University and is a
certified public accountant.

JOSEPH MOSER has been Vice President of Research and Development of the
Company since joining Sabratek in 1994. Prior thereto, Mr. Moser served as Vice
President, Research and Development for VideOcart, a Chicago-based technology
firm from 1990 to 1993. Mr. Moser has served as Director of Engineering and Vice
President of Engineering for Information Resources, Inc., a communications
technology company. Mr. Moser graduated from the University of Michigan with a
B.S. in Electrical Engineering.

DONALD J. INDIA has been Vice President of Operations of the Company since
joining Sabratek in 1992. Prior thereto, Mr. India served as Vice President of
Operations for MDA Scientific Inc., a manufacturer of toxic gas monitoring
systems, from 1983 to 1992. Mr. India has also held various management positions
at Alphatype Corporation and EMI Medical Ltd. He graduated with a B.S. in
Electrical Engineering from the University of Illinois and an M.B.A. from the
Keller School of Management.

VINCENT J. CAPPONI joined the Company in April, 1996, as Vice President of
Quality Control. Prior to joining Sabratek, from 1992 to 1996, Mr. Capponi was
employed by SIMS Deltec, Inc. (formerly Pharmacia Deltec, Inc.), a manufacturer
and marketer of ambulatory drug delivery and vascular access devices, most
recently as Director of Operations. From 1984 to 1992, Mr. Capponi served in a
variety of positions with Mead Imaging, a division of Mead Corporation, which
commercialized a new color-imaging technology. Mr. Capponi graduated from
Bowling Green State University and also holds a Masters of Science degree in
Chemistry from Bowling Green State University.

BOARD OF DIRECTORS

In addition to K. Shan Padda and Doron C. Levitas, the Board includes:

SCOTT HODES, a director of the Company since 1992, has been a Senior
Partner in the Business and Finance Group of the Chicago law firm of Ross &
Hardies since 1992. Prior to joining Ross & Hardies, Mr. Hodes was a Partner at
the Chicago law firm of Arvey, Hodes, Costello & Burman. Mr. Hodes is a director
of the following companies: Richardson Electronics, Ltd. and First Investors
Life Insurance Co. Mr. Hodes graduated from the University of Chicago and has a
J.D. degree from the University of Michigan Law School and an LL.M. from
Northwestern University Law School.

MARK LAMPERT, a director of the Company since May, 1996, founded and has
been the managing partner of Biotechnology Value Fund, L.P., a private
investment partnership which specializes in biotechnology, since 1993. Prior to
forming the Biotechnology Value Fund in August, 1993, Mr. Lampert was a Vice
President at the investment banking firm Oppenheimer & Co. in New York, New York
from March, 1991 through August, 1992. Prior to joining Oppenheimer & Co., Mr.
Lampert worked at Biotechnology Royalty Corp., which he founded in March, 1990.
Prior to founding Biotechnology Royalty Corp., Mr. Lampert headed business

33
<PAGE> 39

development for Cambridge NeuroScience, Inc., a public biotechnology company,
and served as Assistant to the President of the NutraSweet Company, then a
subsidiary of G.D. Searle & Co. Mr. Lampert has also worked for the Boston
Consulting Group. Mr. Lampert received a B.A. in Chemistry from Harvard College
and a M.B.A. from Harvard Business School.

WILLIAM D. LAUTMAN, a director of the Company since 1994, has been a
Managing Director of EGS Securities Corp. since 1995. Prior to joining EGS
Securities Corp., Mr. Lautman served as a Managing Director of Advisory Capital
Partners, Inc., which he joined in 1994. Prior thereto, Mr. Lautman served as a
Managing Director of Cowen & Company, which he joined in 1992. From 1989 until
joining Cowen & Company, Mr. Lautman was employed by Kidder, Peabody & Co.,
Incorporated, most recently as a Senior Vice President. Mr. Lautman graduated
from The Wharton School, University of Pennsylvania with an M.B.A., and from
Georgetown University with a B.S. in Business Administration. Mr. Lautman also
completed the Comparative Business Policy Program, Centre for Management
Studies, Oxford University, England.

WILLIAM H. LOMICKA, a director of the Company since 1994, has been
President of Mayfair Capital, Inc., a private investment firm, since 1989 and
President of The Regent Group, an asset management firm since 1990. Prior
thereto, Mr. Lomicka was Senior Vice President of CW Group, a New York venture
capital firm specializing in health care enterprises. From 1975 to 1985, Mr.
Lomicka served in various capacities at Humana Inc., including Treasurer and
Senior Vice President -- Finance. Mr. Lomicka is a director of the following
companies: Advocat Inc., Regal Cinemas, Inc., TransAmerica Funds, Inc., and
Vencor, Inc.

MARVIN SAMSON, a director of the Company since 1994, has been President and
Chief Executive Officer of Marsam Pharmaceuticals Inc. ("Marsam"), a developer,
manufacturer and marketer of generic injectible drug products, since its
formation. Marsam was acquired by Schein Pharmaceutical, Inc. in 1995. Prior to
founding Marsam, Mr. Samson was a founder of Elkins-Sinn, Inc., a manufacturer
of generic injectible products. Mr. Samson is a director of Community National
Bank. Mr. Samson graduated from Temple University with a B.S. in Chemistry.

L. PETER SMITH, a director of the Company since 1992, has been Chairman and
Chief Executive Officer of Ralin, Inc., a medical service company specializing
in outpatient cardiac care, since 1990. Mr. Smith has also served as a Managing
Partner of AllCare Health Services, Inc., a health care services provider which
was acquired by Medisys, Inc. in 1992. Prior to joining Ralin, Inc. in 1990, Mr.
Smith served in various capacities with Baxter Healthcare, Inc., most recently
as President of Caremark Inc. and Travacare, a division of Baxter. He also
served as Chief Operating Officer of Baxter Japan, Ltd. He is a director of
Coram Healthcare Corporation. Mr. Smith graduated from Princeton University and
from the University of Chicago, Graduate School of Business with an M.B.A.

EDSON W. SPENCER, JR., a director of the Company since 1993, has been the
Managing Partner of PSF Health Care Fund, L.P., a Minnesota-based venture
capital partnership that invests in the health care sector, since 1993. Mr.
Spencer has also been principal and Chief Financial Officer of
Peterson-Spencer-Fansler Company since 1991. Mr. Spencer serves on the Board of
Directors of Pendose Corporation, a privately held physician practice management
company, and is Chairman of the Board of Directors of Children's Health Care,
the Minneapolis/St. Paul Children's Hospitals. Mr. Spencer graduated from
Columbia University with an M.B.A. and from Williams College.

BOARD COMMITTEES

The Board has established a Compensation Committee and an Audit Committee.
The Compensation Committee establishes salaries, incentives and other forms of
compensation for directors, executive officers and key employees of the Company
and administers the Company's Amended and Restated 1993 Stock Option Plan (the
"Stock Option Plan") and other incentive compensation and benefit plans. The
Audit Committee oversees the work performed by the Company's independent
auditors, and reviews internal audit controls.

34
<PAGE> 40

COMPENSATION OF DIRECTORS

Outside directors do not currently receive cash fees for serving as
directors or for attending meetings, participating on committees of the Board of
Directors or attending meetings of such committees. The Company does, however,
reimburse directors for out-of-pocket expenses incurred in connection with
attendance at such meetings. Pursuant to a formula contained in the Stock Option
Plan, each director receives an option to purchase 7,879 shares of the Company's
Common Stock annually. In addition, each member of a committee of the Board of
Directors receives an option to purchase 945 shares of the Company's Common
Stock annually and each chairman of each such committee receives an additional
option to purchase 473 shares of the Company's Common Stock annually. Such
options vest on the earlier of (i) one year from the date of grant or (ii) the
next annual election of directors and have an exercise price equal to the market
price of the Common Stock on the date of grant.

Directors who are not also executive officers of the Company have been
granted options to purchase a total of 89,819 shares of Common Stock at prices
ranging from $3.17 to $11.11 per share pursuant to the Company's Stock Option
Plan through December 31, 1995. In 1996, outside directors received additional
options to purchase an aggregate of 75,479 shares of Common Stock at prices
ranging from $4.76 to $9.80 per share.

CLASSIFIED BOARD OF DIRECTORS

The Company's By-Laws divide the Board of Directors into three classes,
with three-year staggered terms and initial terms of one, two and three years
for Class I, Class II and Class III Directors, respectively. The terms of
Messrs. Hodes, Lampert and Spencer expire at the 1997 annual meeting of
stockholders; the terms of Messrs. Lautman, Samson and Smith expire at the 1998
annual meeting of stockholders and the terms of Messrs. Padda, Levitas and
Lomicka expire at the 1999 annual meeting of stockholders.

35
<PAGE> 41

EXECUTIVE COMPENSATION

The Summary Compensation Table below sets forth certain information
concerning compensation paid or accrued for services rendered to the Company in
all capacities for the year ended December 31, 1995 to the Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

LONG-TERM COMPENSATION
1995 ANNUAL COMPENSATION ---------------------------------
--------------------------- AWARDS
OTHER -----------------------
ANNUAL RESTRICTED SECURITIES PAYOUTS
COMPEN- STOCK UNDERLYING ------- ALL OTHER
NAME AND SALARY BONUS SATION AWARD(S) OPTIONS LTIP COMPENSATION
PRINCIPAL POSITION ($) ($)(1) ($) ($) (#)(2) PAYOUTS ($)
- ----------------------------------- -------- ----- ------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
K. Shan Padda...................... $ 90,000 -- -- -- 157,580 -- --
Chairman and Chief Executive
Officer
Anil K. Rastogi, Ph.D.............. 52,500(3) -- -- -- 70,911 -- --
President and Chief Operating
Officer
Doron C. Levitas................... 90,000 -- -- -- 94,548 -- --
Vice Chairman and Vice President
of International Operations
Alan E. Jordan..................... 124,980 -- 22,939(4) -- 107,154 -- --
Senior Vice President of Sales
and Marketing
Joseph Moser....................... 95,000 -- -- -- -- -- --
Vice President of Research and
Development
</TABLE>

- ---------------
(1) The Board adopted a bonus plan for 1996 and subsequent years, with bonuses
to be paid in the discretion of the Compensation Committee.

(2) Represents shares of Common Stock underlying stock options granted to
executives during 1995 pursuant to the Stock Option Plan.

(3) Mr. Rastogi joined the Company in August, 1995.

(4) Represents commissions paid by the Company.

36
<PAGE> 42

The following table sets forth certain information with respect to options
granted to the Named Executive Officers during 1995.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES ANNUAL RATES OF STOCK
UNDERLYING PERCENT OF TOTAL PRICE APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE FOR OPTION TERM(3)
GRANTED TO EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME (#) 1995 ($/SH)(1) DATE(2) 5%($) 10%($)
- ----------------------------- ---------- ---------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
K. Shan Padda................ 157,580 30.44% $4.76 12/31/04 $452,255 $1,136,152
Anil K. Rastogi, Ph.D........ 70,911 13.70% $4.76 07/31/05 $212,024 $ 538,214
Alan E. Jordan............... 107,154 20.70% $4.76 12/31/04 $307,532 $ 772,580
Joseph Moser................. -- -- -- -- -- --
Doron C. Levitas............. 94,548 18.26% $4.76 12/31/04 $271,353 $ 681,691
</TABLE>

- ---------------
(1) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, as determined by the Board.

(2) Some of the options granted to the Named Executive Officers are subject to
vesting and, accordingly, may expire before the dates indicated.

(3) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.

The following table sets forth certain information with respect to the
unexercised options held by the Named Executive Officers as of December 31,
1995. No options were exercised by the Named Executive Officers during 1995.

YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT YEAR-END
VALUE OPTIONS AT YEAR-END 1995($)
SHARES ACQUIRED REALIZED 1995(#) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
- ----------------------------- --------------- -------- ---------------------- --------------------
<S> <C> <C> <C> <C>
K. Shan Padda................ -- -- --/157,580 --/--
Anil K. Rastogi, Ph.D........ -- -- 23,637/ 47,274 --/--
Alan E. Jordan............... -- -- --/107,154 --/--
Joseph Moser................. -- -- 11,026/ 7,884 --/--
Doron C. Levitas............. -- -- --/ 94,548 --/--
</TABLE>

- ---------------

(1) Based on the fair market value of the Common Stock at year-end ($4.76 per
share), as determined by the Company's Board of Directors, none of such
options were in-the-money at fiscal year-end.

STOCK OPTION PLAN

The Company's Stock Option Plan was adopted in 1992, amended in 1993 and
amended and restated in 1996. The Stock Option Plan, as amended, provides for
the grant of options to purchase up to an aggregate of 1,323,669 shares of
Common Stock. The Plan is administered by the Compensation Committee who will
make discretionary grants ("discretionary grants") of options to employees
(including employees who are officers and directors of the Company) and
consultants. The Stock Option Plan also provides for formula grants ("formula
grants") of options to directors who are not employees of the Company.

37
<PAGE> 43

Options granted pursuant to discretionary grants may be nonqualified
options or incentive options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.

The selection of participants, allotment of shares, determination of price
and other conditions of purchase of such options is determined by the
Compensation Committee, in its sole discretion. Options granted pursuant to
discretionary grants are exercisable for a period of up to ten years, except
that incentive options granted to optionees who, at the time the option is
granted, own stock representing greater than 10% of the voting power of all
classes of stock of the Company or any parent or subsidiary, are exercisable for
a period of up to five years. The per share exercise price of incentive options
granted pursuant to discretionary grants must be no less than 100% of the fair
market value of the Common Stock on the date of grant, except that the per share
exercise price of incentive options granted to optionees who, at the time the
options is granted, own stock representing greater than 10% of the voting power
of all classes of stock of the Company or any parent or subsidiary, must be no
less than 110% of the fair market value of the Common Stock. The per share
exercise price of non-qualified stock options granted pursuant to discretionary
grants must be no less than 85% of the fair market value of the Common Stock on
the date of grant.

Under the formula grants, each director who is not an employee of the
Company will receive automatically upon such director's election to the Board an
option to purchase 7,879 shares of Common Stock. In addition, each director who
serves on a Committee of the Board of Directors will receive an option to
purchase 945 shares of the Company's Common Stock annually and each Chairman of
each such Committee will receive an additional option to purchase 473 shares of
the Company's Common Stock annually. Such options vest on the earlier of (i) one
year from the date of grant or (ii) the next annual election of directors. Each
such option shall have a term of not more than ten years from the date of
vesting and the exercise price per share of Common Stock for such options shall
be 100% of the fair market value of the Common Stock as determined under the
terms of the Stock Option Plan.

Options granted under the Stock Option Plan are nontransferable, other than
by will or by the laws of descent and distribution, and may be exercised during
the optionee's lifetime, only by the optionee, or in the event of optionee's
legal incapacity to do so, by the optionee's guardian or legal representative.

EMPLOYMENT AGREEMENTS

The Company entered into a two-year Employment Agreement with Mr. Padda as
of January 1, 1996. The Employment Agreement provides that Mr. Padda shall
receive a base salary of $150,000, bonuses based upon the Company's performance
as compared to its budget and options to purchase shares of the Company's Common
Stock under its Stock Option Plan. Mr. Padda is entitled to severance payments
if he is terminated other than for cause. In addition, the Employment Agreement
provides that Mr. Padda will be paid his base salary through the term of the
Employment Agreement if he is terminated following a change in control of the
Company. In addition to provisions relating to Mr. Padda's duties and
compensation, the Employment Agreement requires Mr. Padda to assign all
inventions he develops in the course of his employment with the Company to the
Company, maintain the confidentiality of the Company's proprietary information
and refrain from competing with the Company during his employment with the
Company and for a period of twelve months thereafter.

The Company has entered into an Employment Agreement with Mr. Rastogi. The
Employment Agreement provides that Mr. Rastogi will receive a base salary of
$130,000, bonuses based upon the Company's performance as compared to its
business plan and options to purchase shares of the Company's Common Stock under
its Stock Option Plan. Mr. Rastogi is entitled to severance payments if he is
terminated other than for cause. Mr. Rastogi's Employment Agreement contains a
non-competition provision.

38
<PAGE> 44

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of the Company's Common Stock as of June 14, 1996, for (i) each officer of the
Company, (ii) each director of the Company, (iii) each stockholder known by the
Company to own beneficially 5% or more of the outstanding shares of Common Stock
of the Company and (iv) all officers and directors of the Company as a group.
Unless otherwise indicated, the address for each officer, director and 5%
stockholder is c/o the Company, 5601 West Howard Street, Niles, Illinois 60714.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES PERCENTAGE OF OUTSTANDING SHARES AFTER
OFFICERS, DIRECTORS OR BENEFICIALLY OUTSTANDING SHARES COMPLETION OF
5% STOCKHOLDERS OWNED(1) BEFORE OFFERING OFFERING(2)
------------------------------ ------------------ ------------------ ------------------------
<S> <C> <C> <C>
OFFICERS:
K. Shan Padda(3).............. 430,508 6.945% 4.949%
Doron C. Levitas(4)........... 414,828 6.692% 4.769%
Anil K. Rastogi, Ph.D(5)...... 70,911 1.144% 0.815%
Alan E. Jordan(6)............. 99,591 1.607% 1.145%
Scott Skooglund(7)............ 8,273 0.133% 0.095%
Donald J. India(8)............ 48,850 0.788% 0.562%
Joseph Moser(9)............... 14,702 0.237% 0.169%
Vincent J. Capponi............ 0 0.000% 0.000%
DIRECTORS:
Scott Hodes(10)............... 52,702 0.850% 0.606%
Mark Lampert.................. 0 0.000% 0.000%
William D. Lautman(11)........ 166,882 2.692% 1.918%
William H. Lomicka(12)........ 70,138 1.131% 0.806%
Marvin Samson(13)............. 12,291 0.198% 0.141%
L. Peter Smith(14)............ 31,023 0.500% 0.357%
Edson W. Spencer, Jr.(15)..... 176,630 2.849% 2.031%
5% STOCKHOLDERS:
MSI, Inc.(16)................. 758,633 12.238% 8.721%
Charles K. Stewart(17)........ 843,957 13.615% 9.702%
All Officers and Directors
as a group (15 persons):.... 1,597,329 25.768% 18.363%
</TABLE>

- ---------------

(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares of Common Stock subject to options that are currently exercisable or
exercisable within 60 days are deemed to be outstanding and to be
beneficially owned by the person holding such options. Assumes that all
outstanding shares of Series A Preferred Stock, all shares of Series A
Preferred Stock issuable upon exercise of warrants or options exercisable
within 60 days, and all outstanding convertible debt plus accrued interest
(other than $950,000 principal amount of debt being repaid with the
proceeds of the Offering) have been converted into Common Stock.

(2) Assumes that the Underwriters' over-allotment option to purchase up to
375,000 shares from the Company is not exercised.

(3) Includes 39,395 shares subject to options exercisable within 60 days.

(4) Includes 23,637 shares subject to options exercisable within 60 days.

(5) Includes 70,911 shares subject to options exercisable within 60 days.

(6) Includes 26,789 shares subject to options exercisable within 60 days.

(7) Includes 8,273 shares subject to options exercisable within 60 days.

(8) Includes 37,819 shares subject to options exercisable within 60 days.

(9) Includes 14,702 shares subject to options exercisable within 60 days.

39
<PAGE> 45

(10) Includes 20,042 shares subject to options exercisable within 60 days and 46
shares issuable upon exercise of warrants.

(11) Includes 12,291 shares subject to options exercisable within 60 days and
77,199 shares issuable upon exercise of warrants. Excludes 21,977 shares
held of record by The Pharmaceutical/Medical Technology Fund, L.P., an
investment partnership whose general partners are the owners of EGS
Partners, L.L.C. EGS Partners, L.L.C. is an affiliate of EGS Securities
Corp. of which Mr. Lautman is a managing director. Mr. Lautman disclaims
beneficial ownership of shares owned by The Pharmaceutical/Medical
Technology Fund, L.P.

(12) Includes 12,527 shares subject to options exercisable within 60 days and
3,152 shares issuable upon exercise of warrants.

(13) Includes 12,291 shares subject to options exercisable within 60 days. Mr.
Samson disclaims beneficial ownership of shares owned by MSI, Inc.

(14) Includes 24,110 shares subject to options exercisable within 60 days.

(15) Includes 19,618 shares subject to options exercisable within 60 days, 1,173
shares issuable upon exercise of warrants, 3,367 shares held of record by
Peterson-Spencer-Fansler Company ("PSF Co."), of which Mr. Spencer is a
principal, 14,240 shares issuable upon exercise of warrants held by PSF
Co., 110,526 shares held by PSF HealthCare Fund, L.P. ("PSF Health") of
which Mr. Spencer is the managing partner, 12,088 shares issuable upon
exercise of warrants held by PSF Health, and 7,109 shares held of record by
Spencer Family Partnership, L.P. Excludes 29,296 shares held of record by
Valerie Spencer, Mr. Spencer's wife, and by WHC #145751 Trust, a trust
established for the benefit of Mrs. Spencer's family. Mr. Spencer disclaims
beneficial ownership of shares owned by Mrs. Spencer and the WHC #145751
Trust.

(16) Includes 318,668 shares issuable upon exercise of warrants. MSI, Inc.
disclaims beneficial ownership of shares owned by Marvin Samson. MSI,
Inc.'s address is Building 31, Olney Ave., Cherry Hill, New Jersey 08034.

(17) Includes 3,939 shares subject to options exercisable within 60 days,
275,883 shares held of record by Charles K. Stewart Money Purchase Plan,
and 522,114 shares held of record by Charles K. Stewart Investments of
which Mr. Stewart is a general partner. Mr. Stewart's address is 401 South
LaSalle Street, Suite 1502, Chicago, Illinois 60605.

40
<PAGE> 46

CERTAIN TRANSACTIONS

In May, 1996 the Company entered into an agreement with EGS Securities
Corp., ("EGS") of which William D. Lautman, a director of the Company, is a
Managing Director, pursuant to which EGS agreed to provide financial advisory
services in connection with the Offering. In connection with this agreement, the
Company will pay to EGS $150,000 upon successful consummation of the Offering.

In March, 1996, the Company issued a Convertible Subordinated Debenture to
Charles K. Stewart Investments, in the principal amount of $844,500. The
debenture bears interest at a rate of 13.22% per annum and would have matured on
the date six years from the date of its issuance. On May 21, 1996, Charles K.
Stewart Investments agreed to convert the $844,500 principal and $1,014,153
accrued interest and conversion premium, which was calculated in accordance with
the terms of the debenture, on the debenture into 354,869 shares of Common Stock
effective upon the consummation of this Offering. The conversion price is equal
to $5.23757 per share. Also in March, 1996, the Company issued 167,245 shares of
Common Stock at $9.80 per share to Charles K. Stewart Investments.

In March, 1996, the Company issued 100,851 shares of Common Stock to Arie
Kalo at $4.76 per share in payment for past engineering consulting services
performed by him personally during 1995 and which the Company valued at
$480,000. K. Shan Padda and Doron Levitas, each of whom is an officer and
director of the Company, together with Arie Kalo each own one-third of the
shares of DAK-Tech, Ltd. (an Israeli corporation) which supplies component
assemblies and research and development services to the Company, the value of
which was $538,544 in 1995.

In January, 1996, the Company issued a Convertible Subordinated Debenture
to William D. Lautman, a director of the Company, in the principal amount of
$110,000, of which $60,000 was payment for financial consulting services
rendered. The debenture bears interest at a rate equal to 10% per annum until
June 30, 1996 and thereafter at a rate of 13.22%. The debenture would have
matured on the date six years from the date of its issuance. In February, 1996,
William D. Lautman agreed to convert the $110,000 principal into 23,112 shares
of Common Stock and to forgo the payment of accrued interest. The conversion
price is equal to $4.76 per share.

In January, 1996, the Company issued a Convertible Subordinated Debenture
to Marvin Samson, a director of the Company, in the principal amount of
$100,000. The debenture bears interest at a rate of 10% per annum until June 30,
1996. If the principal and interest under the debenture are not paid on such
date, then the interest rate will be 13.22% per annum through the date six years
from the date of its issuance. The Company may prepay the debenture at any time,
provided, however, that if the prepayment occurs after the initial maturity
date, the Company shall pay the outstanding principal balance plus a sum equal
to the amount of interest which would have been earned if the debenture remained
outstanding until the later maturity date.

In December, 1995, the Company issued a Convertible Subordinated Debenture
to Charles Stewart in the principal amount of $100,000. The debenture bears
interest at a rate of 13.22% per annum and would have matured on the date six
years from the date of its issuance. On May 21, 1996, Charles Stewart agreed to
convert the $100,000 principal and $120,088 accrued interest and conversion
premium on the debenture, calculated in accordance with the terms of the
debenture, into 42,021 shares of Common Stock effective upon the consummation of
the Offering. The conversion price is equal to $5.23757 per share.

On September 26, 1995, the Company entered into an agreement with EGS (the
"EGS Agreement") for a period of one year pursuant to which the Company engaged
EGS as a financial and business consultant for the Company. Mr. Lautman is a
Managing Director of EGS and a director of the Company. The EGS Agreement
provides for the payment to EGS of a $180,000 fee, $100,000 of which was to be
paid on the effective date of the agreement and $40,000 on each of the sixth and
twelfth month anniversaries of the agreement, plus an amount equal to 8% of the
proceeds of certain financings (hereinafter the "Success Fee"). Based primarily
on management's experience with other financial consultants, the Company
believes that the cost to it of the services provided was comparable to what the
Company would have paid in an arm's length transaction with an unrelated party.
The EGS Agreement was amended in December, 1995 to remove EGS' right to receive
the Success Fee. As part of this amendment, the Company agreed to pay EGS an
additional $150,000 for services performed prior to the date of the amendment
but which were not included in the consulting services previously provided for
in the EGS Agreement. An example of the services provided to the

41
<PAGE> 47

Company by EGS during 1995 but which did not fall within the scope of the
original agreement were providing the Company with investor relations and other
administrative services. In March 1996, the Company further amended the EGS
Agreement. Pursuant to the March amendment, the Company agreed to pay EGS
$80,000 in connection with the March 14, 1996 equity financing and both of the
Company and EGS were relieved from further rights and obligations under the EGS
Agreement including the obligation of the Company to pay EGS the two $40,000
installment payments. As of May 30, 1996, the Company's accrued obligations
under the agreement remained unpaid.

In July and September, 1995, the Company issued Convertible Subordinated
Debentures to Charles K. Stewart Money Purchase Plan in the principal amount of
$150,000 and $200,000 respectively. The debentures bear interest at a rate of
13.22% per annum and would have matured on the date six years from the date of
their issuance. On May 21, 1996, Charles K. Stewart Money Purchase Plan agreed
to convert the $350,000 principal and $420,316 accrued interest and conversion
premium, calculated in accordance with the terms of the debenture, on the
debenture into 147,075 shares of Common Stock effective upon the consummation of
the Offering. The conversion price is equal to $5.23757 per share.

On May 12, 1995, the Company issued warrants in exchange for advisory
services to Scott C. Newquist and Robert G. Eccles which gives each of them the
right to purchase 87,032 shares of Common Stock at $4.76 per share. The Company
valued the services received in exchange for these warrants at $27,618. Messrs.
Eccles and Newquist transferred such portion of the rights under their warrants
as was necessary to purchase 174,065 shares of Common Stock to Oracle Partners,
L.P. for immediate exercise and, in connection therewith, the Company entered
into stock appreciation rights agreements with Messrs. Newquist and Eccles.
Under the stock appreciation rights agreements, the Company agreed to make each
of Messrs. Newquist and Eccles a stock appreciation payment. The payment is to
be calculated by multiplying 87,032 by the difference between $4.76 and the per
share market price of the stock on the date payment is demanded, up to a maximum
of $4.76 per share. Messrs. Newquist and Eccles are principals of Advisory
Capital Partners, Inc. of which William D. Lautman, a director of the Company,
was also affiliated at the time the parties entered into the stock appreciation
rights agreement.

On May 12, 1995, the Company issued a warrant to purchase 87,032 shares of
Common Stock at $4.76 per share to William D. Lautman, a Managing Director of
EGS, as compensation for financial services rendered to the Company which
services were valued at $13,809. This warrant vested immediately and expires on
May 12, 2000. On May 31, 1995, Mr. Lautman exercised the warrant to purchase
21,011 shares of Common Stock at $2.38 per share, pursuant to a re-pricing
offered by the Company. Mr. Lautman and retains the right to exercise the
warrant for the remaining 66,021 shares of Common Stock at $4.76 per share.

On September 23, 1994, the Company issued a warrant (the "MSI Warrant") to
MSI, Inc. which initially gave MSI, Inc., a subsidiary of Marsam Pharmaceuticals
Inc. of which Marvin Samson, a director of the Company, is President and a
director, the right to purchase up to 472,739 shares of Series A Preferred
Stock. On May 8, 1995, such portion of the rights under the MSI Warrant as was
necessary to acquire 84,043 shares of Series A Preferred Stock was transferred
to each of Charles K. Stewart Money Purchase Plan and John Stafford for
immediate exercise. In connection with the transfer, the Company entered into a
stock appreciation rights agreement with MSI, Inc. pursuant to which the Company
agreed to make MSI, Inc. a stock appreciation payment. The payment is to be
calculated by multiplying 168,085, which constitutes the number of shares
exercised under the MSI Warrant, by the difference between $4.76 and the per
share market price of the stock on the date payment is demanded, up to a maximum
of $4.76 per share. Pursuant to the MSI Warrant, after giving effect to
conversion of Series A Preferred Stock to Common Stock, MSI, Inc. currently has
the right to purchase 318,668 shares of Common Stock at $4.55 per share.

On November 14, 1991, the Company lent Alan Jordan, currently its Executive
Vice President of Sales and Marketing, $112,500 to purchase 135,000 shares of
the Company's Common Stock. This note accrues interest at a rate of 5.89% and
the principal of and accrued interest on this note are due and payable on June
30, 1997. As of March 31, 1996, the principal of and accrued and unpaid interest
on this note amounted to $141,514.

Scott Hodes, a director of the Company, is a senior partner at the Chicago
law firm of Ross & Hardies and provides legal services as corporate counsel to
the Company.

42
<PAGE> 48

DESCRIPTION OF CAPITAL STOCK

Immediately prior to the issuance of the shares offered hereby, the
authorized capital of the Company will consist of 25,000,000 shares of Common
Stock, par value $0.01 per share, and 12,500,000 shares of Preferred Stock, par
value $0.01 per share. See "Risk Factors -- Control by Directors, Executive
Officers and Affiliated Entities" and "-- Impact of Anti-Takeover Measures;
Possible Issuance of Preferred Stock; Classified Board."

COMMON STOCK

As of May 30, 1996, assuming no exercise of outstanding options or warrants
or conversion of Series A Preferred Stock or convertible debt, there were
2,133,103 shares of Common Stock outstanding, held of record by approximately 90
stockholders. The holders of the Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. Holders
of the Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
the Common Stock are entitled to share ratably in all assets remaining after
payment of all liabilities. The outstanding shares of the Common stock are fully
paid and nonassessable. No preemptive rights, conversion rights, redemption
rights or sinking fund provisions are applicable to the Common Stock.

PREFERRED STOCK

Upon the consummation of the Offering, no shares of Preferred Stock will be
outstanding. The Company's Board of Directors is authorized, without further
stockholder action, to issue Preferred Stock in one or more series and to fix
the voting rights, liquidation preferences, dividend rights, repurchase rights,
conversion rights, redemption rights and terms, including sinking fund
provisions, and certain other rights and preferences, of the Preferred Stock.

Although there is no current intention to do so, the Board of Directors of
the Company may, without stockholder approval, issue shares of a class or series
of Preferred Stock with voting and conversion rights which could adversely
affect the voting power or dividend rights of the holders of Common Stock and
may have the effect of delaying, deferring or preventing a change in control of
the Company.

WARRANTS

As of May 30, 1996, there were warrants outstanding to purchase 604,046
shares of Common Stock at a weighted average exercise price of $4.59 per share.
The warrants were issued in exchange for services or in connection with the
issuance of debt securities by the Company. All of the warrants are currently
exercisable. The warrants will expire by their terms at times ranging from
November, 1996 to November, 2000.

REGISTRATION RIGHTS

The Company has entered into a Registration Rights Agreement (the
"Registration Rights Agreement") which may, in certain circumstances, be
applicable to the holders of the equivalent of approximately 1,591,390 shares of
Common Stock (the "Rights Holders"). In order for the Rights Holders to effect a
demand for registration, the Registration Rights Agreement requires that the
holders of more than 25% of all of the shares held under the Registration Rights
Agreement request such registration. An unlimited number of demands may be made;
however, the Company has an obligation to complete only two registrations at the
demand of Rights Holders. In addition to demand registration rights, Rights
Holders have unlimited "piggyback" registration rights pursuant to which the
Rights Holders will have the right to request that the Company register shares
of Common Stock under the Act at the expense of the Company, unless in
connection with an underwritten public offering, the managing underwriter is of
the opinion that inclusion of the shares of Common Stock to which the Rights
Holders request registration would have an adverse impact on the marketing of
the securities to be sold in such public offering. The Rights Holders have
waived their rights with respect to the Offering and have agreed not to demand
registration of any of their shares during any time during which the Rights
Holders are subject to the terms of a Lock-Up Agreement with the Company. The

43
<PAGE> 49

holders of 24,377 shares of Common Stock and the holders of warrants to purchase
87,127 shares of Common Stock have registration rights equivalent to those
contained in the Registration Rights Agreements. In addition, the holders of
warrants to purchase 7,832 shares of Common Stock have piggyback registration
rights. The holders of these registration rights have also waived their rights
with respect to the Offering and have agreed not to demand registration of any
of their shares during any time during which such holders are subject to the
terms of a Lock-Up Agreement with the Company.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is LaSalle National
Trust, N.A., Chicago, Illinois.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
7,679,712 shares of Common Stock. Of these shares, the 2,500,000 shares of
Common Stock sold in the Offering will be freely tradable without restriction
under the Act, unless held by "affiliates" of the Company (as that term is
defined in the Act and regulations promulgated thereunder).

The shares of Common Stock issued and outstanding prior to the Offering
were acquired by existing stockholders without registration under the Act in
reliance upon exemptions from registration and are "restricted securities" for
purposes of the Act. These shares may not be sold unless they are registered
under the Act or unless an exemption from registration, such as the exemption
provided by Rule 144 under the Act, is available.

The Company and all holders of capital stock of the Company, or securities
exercisable into such capital stock, have agreed not to offer, pledge, issue,
sell, contract to sell, grant any option for the sale of, or otherwise dispose
or announce any offer, sale, grant of any option to purchase or other
disposition of, directly or indirectly, any Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock, until 180 days
following the date of the final prospectus relating to the Offering without the
prior written consent of Bear, Stearns & Co. Inc. ("Bear, Stearns"), subject to
certain exceptions.

In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned "restricted
securities" for at least two but less than three years, and any affiliate of the
Company who has owned shares for at least two years, is entitled to sell within
any three-month period a number of shares that does not exceed the greater of 1%
of the outstanding shares of the Company's Common Stock or the average weekly
trading volume in the Company's Common Stock on the Nasdaq National Market
during the four calendar weeks preceding such sale. Such sales under Rule 144
are also subject to certain provisions regarding the manner of sale, notice
requirements and the availability of current public information about the
Company. A stockholder who is not an affiliate of the Company at the time of the
sale and for at least 90 days prior to a proposed transaction and who has
beneficially owned "restricted securities" for at least three years is entitled
to sell such shares under Rule 144 without regard to the limitations described
above. In addition, Rule 701 permits persons who purchase shares upon exercise
of options granted prior to the effective date of the Offering to sell such
shares without having to comply with the holding period requirements of Rule 144
and, in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice provisions of Rule 144. All shares
underlying options that could be sold pursuant to Rule 701 are subject to the
180-day lock-up agreement described above.

The Company anticipates that it will file a registration statement on Form
S-8 under the Act to register all of the shares of Common Stock issued or
reserved for future issuance under the Stock Option Plan and certain other
options currently outstanding to employees of the Company. After the effective
date of that registration statement, shares purchased upon exercise of options
covered by such registration statement generally would be available for resale
in public market (subject to the Lock-Up Agreement).

Beginning 180 days after the Effective Date, approximately 3,200,000 of the
shares of Common Stock outstanding before the Offering will become eligible for
sale under Rule 144 or Rule 701 promulgated under

44
<PAGE> 50

the Act. In addition, beginning 180 days after the Effective Date, an additional
approximately 615,000 shares subject to vested stock options and warrants will
become eligible for sale under Rule 144 or Rule 701 promulgated under the Act.
See "Shares Eligible for Future Sale" and "Dilution."

The holders of certain of the Company's outstanding securities also have
the benefit of a Registration Rights Agreement which provides that, subject to
certain conditions, certain holders of the Company's outstanding securities have
rights with respect to registration under the Act. See "Description of Capital
Stock -- Registration Rights."

Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
public sales of shares or the availability of such shares will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock in the public market, or the perception that such sales
could occur, could have an adverse impact on the market price of Common Stock.

45
<PAGE> 51

UNDERWRITING

Subject to certain terms and conditions contained in the Underwriting
Agreement (the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Bear, Stearns & Co. Inc., Salomon Brothers Inc and
Barington Capital Group, L.P. ("Barington") are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company an
aggregate of 2,500,000 shares of Common Stock. The number of shares of Common
Stock that each Underwriter has agreed to purchase is set forth opposite its
name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Bear, Stearns & Co. Inc. .................................................
Salomon Brothers Inc .....................................................
Barington Capital Group, L.P. ............................................

---------
Total........................................................... 2,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to approval of
certain legal matters by counsel and to certain other conditions precedent. If
any of the shares of Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all such shares of Common Stock (other than shares
of Common Stock covered by the over-allotment option described below) must be so
purchased.

Prior to the Offering, there has been no established public trading market
for the Common Stock. The initial price to the public for the Common Stock
offered hereby will be determined in negotiations between the Company and the
Representatives. Among the factors to be considered in such negotiations will be
the history of and the prospects for the industry in which the Company competes,
an assessment of the Company's management, the past and present operations of
the Company, the historical results of operations of the Company, the prospects
for future earnings of the Company, the general condition of the securities
markets at the time of the Offering, and the recent market prices of securities
of generally comparable companies. There can be no assurance that an active
trading market will develop for the Common Stock or that the Common Stock will
trade in the public market subsequent to the Offering at or above the initial
offering price.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or to contribute to payments
that the Underwriters may be required to make in respect thereof.

The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock to the public initially at the price set forth
on the cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price less a concession not to exceed $ per
share. The Underwriters may allow, and such dealers may allow, discounts not in
excess of $ per share to any Underwriter and certain other dealers.

The Company has granted to the Underwriters an option to purchase up to an
aggregate of 375,000 additional shares of Common Stock at the initial public
offering price less underwriting discounts and commissions solely to cover
overallotments. Such option may be exercised at any time until 30 days after the
date of the final Prospectus relating to the Offering. To the extent that the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriters' initial commitment as indicated in the
preceding table.

The Company, all of its directors and executive officers, and all holders
of capital stock of the Company, or securities convertible or exercisable into
such capital stock, have agreed not to offer, pledge, issue, sell, contract to
sell, grant any option to purchase or otherwise dispose (or announce any offer,
sale, grant of any

46
<PAGE> 52

option to purchase or other disposition) of any shares of Common Stock, or any
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock for a period of 180 days after the date of the final Prospectus
relating to the Offering, without the prior written consent of Bear, Stearns.

The Underwriters do not intend to sell shares of Common Stock to any
account over which they exercise discretionary authority.

At the request of the Company, the Underwriters have reserved 125,000
shares of Common Stock for sale at the public offering price to employees of the
Company, certain of the Company's suppliers and distributors and certain other
parties. The number of shares available for sale to the general public will be
reduced to the extent such individuals purchase such reserved shares. Any
reserved shares not so purchased will be released for sale by the Underwriters
to the general public no later than the closing date of the Offering on the same
terms as the other shares offered hereby. Reserved shares purchased by such
individuals will, except as restricted by applicable securities laws, be
available for resale following the Offering.

Pursuant to the terms of a Letter Agreement dated March 12, 1996 as amended
on May 29, 1996, Barington has been engaged as a financial advisor to the
Company and shall receive as compensation therefor a fee of $50,000 upon the
earlier of the consummation of the Offering and December 31, 1996. In addition,
Barington will be reimbursed for certain expenses expected to be approximately
$15,000.

In May, 1996, the Company engaged EGS as a financial advisor to the Company
in connection with the Offering. EGS shall receive as compensation for its
service a fee of $150,000 upon successful consummation of the Offering. EGS is
not an underwriter of this Offering and is not related to any underwriter.

Stephen Raphael, an employee and director of Bear, Stearns, beneficially
owns 10,505 shares of Common Stock, and Kenneth Lebow, an employee of Bear,
Stearns, beneficially owns 10,988 shares of Common Stock of the Company.

LEGAL MATTERS

Certain legal matters in connection with the shares of Common Stock of the
Company offered hereby will be passed upon for the Company by Ross & Hardies,
Chicago, Illinois. A partner of Ross & Hardies beneficially owns 52,702 shares
of the Company's Common Stock. O'Sullivan Graev & Karabell, LLP, New York, New
York, has acted as counsel to the Underwriters in connection with the Offering.

EXPERTS

The financial statements and schedule of the Company as of December 31,
1994 and 1995 and for each of the years in the three year period ended December
31, 1995 have been included herein and elsewhere in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing herein, and upon the authority of said firm as
experts in auditing and accounting.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
the exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected without charge
at the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C
20549, and copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the Commission upon the payment of
the fees prescribed by the Commission.

47
<PAGE> 53

SABRATEK CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996.................... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996.................................. F-4
Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and
1995
and the three months ended March 31, 1996........................................... F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996.................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE> 54

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Sabratek Corporation:

We have audited the accompanying balance sheets of Sabratek Corporation as
of December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sabratek Corporation as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
April 8, 1996, except as to Note 17

which is as of June 10, 1996.

F-2
<PAGE> 55

SABRATEK CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------- MARCH 31, MARCH 31,
1994 1995 1996 1996
---------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 764,762 $ 8,027 $ 1,252,896 $ 1,252,896
Receivables:
Trade, net of allowance for doubtful accounts of
$-0- and $187,969 at December 31, 1994 and
1995, respectively............................ 569,432 766,445 1,455,864 1,455,864
Due from related party (note 4)................. 486,338 575,974 673,735 673,735
Other........................................... 123,959 -- -- --
---------- ------------ ------------ ------------
Total receivables.......................... 1,179,729 1,342,419 2,129,599 2,129,599
---------- ------------ ------------ ------------
Inventories (note 2).............................. 635,085 1,825,411 2,022,351 2,022,351
Other current assets.............................. 96,488 50,737 170,028 170,028
---------- ------------ ------------ ------------
Total current assets................................ 2,676,064 3,226,594 5,574,874 5,574,874
---------- ------------ ------------ ------------
Property, plant, and equipment, net (note 3)........ 447,686 901,728 874,406 874,406
Advances to stockholders (note 4)................... 162,306 -- -- --
Organizational costs, net........................... 1,179 -- -- --
Other............................................... 50,828 50,828 50,828 50,828
---------- ------------ ------------ ------------
$3,338,063 $ 4,179,150 $ 6,500,108 $ 6,500,108
========== ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term debt (note 6).......................... $ -- $ 621,021 $ 301,393 $ 301,393
Current portion of capital lease obligations
(note 9)........................................ 87,942 150,848 150,848 150,848
Current portion of long-term debt (note 7)........ 3,200 3,200 3,200 3,200
Accounts payable.................................. 854,199 2,377,159 1,265,258 1,265,258
Accrued expenses:
Payroll and commissions......................... 77,967 191,086 330,588 330,588
Warranty........................................ 130,881 229,263 229,263 229,263
Other........................................... 103,004 286,990 212,344 212,344
Deferred rent..................................... 12,068 31,322 31,322 31,322
Deferred revenue.................................. -- 125,000 125,000 125,000
Stock appreciation rights payable................. -- -- 1,628,463 1,628,463
Due to affiliated company......................... 407,674 311,811 322,423 322,423
---------- ------------ ------------ ------------
Total current liabilities........................... 1,676,935 4,327,700 4,600,102 4,600,102
---------- ------------ ------------ ------------
Long-term capital lease obligations (note 9)........ 156,584 149,334 108,816 108,816
Long-term debt (note 7)............................. 306,960 2,362,293 3,365,993 353,200
Accrued interest.................................... 46,757 160,630 227,755 --
---------- ------------ ------------ ------------
Total liabilities................................... 2,187,236 6,999,957 8,302,666 5,062,118
---------- ------------ ------------ ------------
Stockholders' equity (deficit):
Convertible preferred stock, $.01 par value.
Authorized 12,500,000 shares; issued and
outstanding 1,317,715 and 1,768,129 shares at
December 31, 1994 and 1995, respectively........ 13,177 17,681 17,681 --
Common stock, $.01 par value. Authorized
25,000,000 shares; issued and outstanding
1,510,395 and 1,718,458 shares at December 31,
1994 and 1995, respectively..................... 15,104 17,185 21,331 51,797
Additional paid-in capital........................ 8,650,555 10,708,671 13,438,512 16,967,391
Note receivable from stockholder (note 4)......... (112,500) (112,500) (112,500) (112,500)
Accumulated deficit............................... (7,415,509) (13,451,844) (15,167,582) (15,468,698)
---------- ------------ ------------ ------------
Total stockholders' equity (deficit)................ 1,150,827 (2,820,807) (1,802,558) 1,437,990
---------- ------------ ------------ ------------
Commitments......................................... -- -- -- --
---------- ------------ ------------ ------------
$3,338,063 $ 4,179,150 $ 6,500,108 $ 6,500,108
========== ============ ============ ============
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 56

SABRATEK CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................... $ 1,228,921 $ 3,314,599 $ 4,039,797 $ 930,125 $ 2,944,090
Cost of sales............... 1,634,426 2,480,369 2,901,818 717,614 1,455,638
----------- ----------- ----------- ----------- -----------
Gross margin (loss)......... (405,505) 834,230 1,137,979 212,511 1,488,452
Selling, general, and
administrative expenses... 2,410,873 4,107,588 6,873,934 1,730,770 1,476,754
----------- ----------- ----------- ----------- -----------
Operating income (loss)..... (2,816,378) (3,273,358) (5,735,955) (1,518,259) 11,698
Other income (expense):
Interest income........... 7,682 19,340 12,607 3,782 2,182
Interest expense.......... (19,948) (260,494) (222,491) (11,153) (103,755)
Other..................... 8,000 (40,311) (90,496) (21,325) (1,625,863)
----------- ----------- ----------- ----------- -----------
Net loss.................... $(2,820,644) $(3,554,823) $(6,036,335) $(1,546,955) $(1,715,738)
=========== =========== =========== =========== ===========
Pro forma net loss.......... -- -- $(5,922,468) $(1,638,623)
=========== ===========
Weighted average shares
outstanding............... 6,609,571 6,609,571
=========== ===========
Pro forma net loss per
share..................... $ (.90) $ (.25)
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 57

SABRATEK CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
CONVERTIBLE TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDERS'
-------------------- -------------------- PAID-IN NOTE ACCUMULATED EQUITY
DESCRIPTION SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT (DEFICIT)
- --------------------- --------- ------- --------- ------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1992........... -- $ -- 1,398,046 $13,980 $ 1,528,935 $ (112,500) $ (1,040,042) $ 390,373
Issuance of common
stock, net of
$28,897 of offering
costs.............. -- -- 112,349 1,124 1,217,728 -- -- 1,218,852
Net loss............. -- -- -- -- -- -- (2,820,644) (2,820,644)
--------- ------- --------- ------- ----------- --------- ------------ -----------
Balance at December
31, 1993........... -- -- 1,510,395 15,104 2,746,663 (112,500) (3,860,686) (1,211,419)
Conversion of
short-term
convertible
subordinated
debentures to
convertible
preferred stock.... 635,815 6,358 -- -- 3,019,802 -- -- 3,026,160
Issuance of
convertible
preferred stock,
net of $354,596 of
offering costs..... 681,900 6,819 -- -- 2,884,090 -- -- 2,890,909
Net loss............. -- -- -- -- -- -- (3,554,823) (3,554,823)
--------- ------- --------- ------- ----------- --------- ------------ -----------
Balance at December
31, 1994........... 1,317,715 13,177 1,510,395 15,104 8,650,555 (112,500) (7,415,509) 1,150,827
Issuance of
convertible
preferred stock and
warrants, net of
$76,758 of offering
costs.............. 202,963 2,030 -- -- 887,207 -- -- 889,237
Issuance of preferred
stock in exchange
for services
rendered........... 728 7 -- -- 3,458 -- -- 3,465
Exercise of stock
options............ -- -- 9,621 96 33,623 -- -- 33,719
Exercise of stock
warrants........... 246,723 2,467 198,442 1,985 1,054,928 -- -- 1,059,380
Issuance of common
stock warrants..... -- -- -- -- 78,900 -- -- 78,900
Net loss............. -- -- -- -- -- -- (6,036,335) (6,036,335)
--------- ------- --------- ------- ----------- --------- ------------ -----------
Balance at December
31, 1995........... 1,768,129 17,681 1,718,458 17,185 10,708,671 (112,500) (13,451,844) (2,820,807)
--------- ------- --------- ------- ----------- --------- ------------ -----------
Issuance of common
stock in exchange
for services
rendered........... -- -- 124,488 1,245 591,255 -- -- 592,500
Conversion of
subordinated
convertible
debentures to
common stock....... -- -- 122,912 1,229 583,771 -- -- 585,000
Issuance of Common
Stock, net of
offering costs of
$83,274............ -- -- 167,245 1,672 1,554,815 1,556,487
Net loss............. -- -- -- -- -- -- (1,715,738) (1,715,738)
--------- ------- --------- ------- ----------- --------- ------------ -----------
Balance at March 31,
1996 (unaudited)... 1,768,129 $17,681 2,133,103 $21,331 $13,438,512 $ (112,500) $(15,167,582) $(1,802,558)
========= ======= ========= ======= =========== ========= ============ ===========
</TABLE>

See accompanying notes to financial statements

F-5
<PAGE> 58

SABRATEK CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $(2,820,644) $(3,554,823) $(6,036,335) $(1,546,955) $(1,715,738)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization......... 68,245 89,483 185,562 35,769 68,658
Loss on sale of property, plant, and
equipment........................... -- 63,498 -- -- --
Expenses paid with issuance of
preferred stock..................... -- -- 3,465 -- --
Expenses paid with issuance of
warrants............................ -- -- 35,700 -- --
Stock appreciation rights expense..... -- -- -- -- 1,628,463
Provision for bad debts............... -- -- 187,969 19,180 17,274
Changes in assets and liabilities:
Receivables......................... (29,371) (509,268) (350,659) 193,584 (804,454)
Inventories......................... (133,525) (90,479) (1,190,326) (189,715) (196,940)
Advances to stockholders............ (44,313) (11,827) 162,306 14,483 --
Accounts payable.................... 220,640 147,883 1,522,960 226,005 (519,401)
Accrued expenses.................... 48,414 139,010 509,360 15,234 131,981
Deferred rent....................... -- 3,535 19,254 -- --
Deferred revenue.................... -- -- 125,000 -- --
Due to affiliated company........... 174,408 238,732 (95,863) (9,019) 10,612
Other............................... (4,558) (124,196) 45,751 3,056 (119,291)
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities..... (2,520,704) (3,608,452) (4,875,856) (1,238,378) (1,498,836)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property, plant, and
equipment............................. (143,217) (249,824) (458,857) (211,971) (41,336)
Proceeds from sale of property, plant,
and equipment......................... -- 182,611 -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities..... (143,217) (67,213) (458,857) (211,971) (41,336)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of short-term
debt.................................. 2,010,000 860,000 621,021 363,028 --
Repayment of short-term debt............ (380,922) (25,000) -- -- (319,628)
Repayment of long-term debt............. (2,640) (3,200) (3,200) (560) (800)
Proceeds from issuance of long-term
debt.................................. 316,000 -- 2,058,533 -- 1,589,500
Payments of capital lease obligations... -- (45,880) (123,912) (15,354) (40,518)
Proceeds from sale of common stock,
net................................... 1,218,852 -- 505,963 -- 1,556,487
Proceeds from sale of convertible
preferred stock, net.................. -- 3,072,069 1,519,573 384,955 --
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities.............................. 3,161,290 3,857,989 4,577,978 732,069 2,785,041
----------- ----------- ----------- ----------- -----------
Increase (decrease) in cash............... 497,369 182,324 (756,735) (718,280) 1,244,869
Cash at beginning of year................. 85,069 582,438 764,762 764,762 8,027
----------- ----------- ----------- ----------- -----------
Cash at end of year....................... $ 582,438 $ 764,762 $ 8,027 $ 46,482 $ 1,252,896
=========== =========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 59

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of the Business

Sabratek Corporation (the Company) designs and manufactures electronic
medical infusion pumps. Sales of the infusion pumps are made primarily through a
nationwide network of specialty distributors.

(b) Revenue Recognition

Revenues are recognized when products are shipped with allowances for
discounts and estimated returns recorded at the time of sale. Contract revenue
from research agreements is recorded when earned and as the related costs are
incurred. Payments received which are related to future performance are deferred
and recognized as revenue when earned over future performance periods.

Inventories are stated at the lower of cost or net realizable value. Cost
is determined under the first-in, first-out (FIFO) method.

(d) Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated
depreciation and amortization. Expenditures for maintenance and repairs are
charged to expense as incurred. Depreciation and amortization is provided on a
straight-line basis over the estimated useful lives. The estimated useful lives
of the machinery and equipment range from 3 to 5 years. The estimated useful
lives of furniture and fixtures is 7 years. Leasehold improvements are amortized
over the life of the lease.

(e) Warranty

The provision for estimated warranty costs is recorded at the time of sale
and periodically adjusted to reflect actual experience.

(f) Research and Development

Research and development costs are expensed as incurred. Research and
development costs amounted to $713,218, $1,098,167 and $2,193,508 in 1993, 1994
and 1995, respectively.

(g) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(h) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-7
<PAGE> 60

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(i) Computation of Pro forma Net Loss per Share

The Company has presented pro forma net loss per share for the year ended
December 31, 1995 in lieu of historical net loss per share as such historical
information is not meaningful due to the conversion of the convertible preferred
stock and convertible subordinated debentures in connection with this offering.
The pro forma net loss per share has been computed assuming (a) the conversion
of the debt occurred at the beginning of each of the applicable periods
resulting in interest savings and (b) the weighted average number of common
shares outstanding for each period have been adjusted to give effect to the
conversion of all outstanding shares of convertible preferred stock and
convertible subordinated debentures and inclusion of stock, convertible
subordinated debentures, stock options and warrants for common stock and
convertible preferred stock granted by the Company for consideration below the
proposed public offering price during the twelve months immediately preceding
the offering date as if they were outstanding for all periods presented,
pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83.
Other common equivalent shares from stock options and warrants are excluded from
the computation because their effect is antidilutive.

(j) Pro-forma presentation (unaudited)

The March 31, 1996 pro forma balance sheet is presented giving effect to
the conversion of all outstanding shares of convertible preferred stock into
1,838,114 shares of common stock. In addition to the preferred conversion,
$3,012,793 of principal of the convertible debt and $3,409,245 of related
accrued interest has been converted at their respective conversion rates into
1,202,982 shares of common stock. The accrued interest for purposes of the pro
forma calculation includes accrued interest to the date of conversion plus the
interest that would have been earned if the debentures remained outstanding
until the maturity date as provided for in the debenture agreements.

(k) Interim Financial Statements

The financial statements as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 are unaudited. In the opinion of management, the
unaudited financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the financial position
and results of operations for such periods. Results of operations for interim
periods are not necessarily indicative of results that will be achieved for the
entire year.

(2) INVENTORIES

Inventories at December 31 is as follows:

<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Raw materials................................................ $508,638 $1,228,594
Work-in-process.............................................. 88,211 195,981
Finished goods............................................... 38,236 400,836
-------- ----------
$635,085 $1,825,411
======== ==========
</TABLE>

F-8
<PAGE> 61

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(3) PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment at December 31 is as follows:

<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Machinery and equipment.................................... $161,962 $ 725,694
Furniture and fixtures..................................... 220,376 278,168
Leasehold improvements..................................... 114,035 130,936
-------- ----------
496,373 1,134,798
Less accumulated depreciation and amortization............. 48,687 233,070
-------- ----------
$447,686 $ 901,728
======== ==========
</TABLE>

Depreciation expense for years ended December 31, 1993, 1994 and 1995
amounted to $65,401, $86,639 and $184,383, respectively.

(4) TRANSACTIONS WITH STOCKHOLDERS

A stockholder who is an officer of the Company owes $162,306 and $-0- at
December 31, 1994 and 1995, respectively, which is primarily an advance on sales
commissions. An additional receivable of $112,500 is outstanding as of December
31, 1994 and 1995, resulting from the exercise of a stock option. Such amount is
reflected as a reduction of stockholders' equity and is supported by a
promissory note which is due June 30, 1997 and accrues interest at 5.89%
annually.

Several officers of Sabratek customers are stockholders of Sabratek. These
officers own in the aggregate 44,122 shares of common stock. These customers
accounted for $417,699, $1,448,722 and $1,213,552 of sales for the years ended
December 31, 1993, 1994 and 1995, respectively, and $486,338 and $575,974 of
accounts receivable as of December 31, 1994 and 1995, respectively.

(5) AFFILIATED COMPANY

The Company is affiliated through common ownership with Dak-Tech Ltd., an
Israeli company. Dak-Tech Ltd. provides the Company with research and
development activities. 67% of the Dak-Tech Ltd. stock is owned by two
stockholders of Sabratek. Amounts included as research and development expense
were $70,007, $271,166, and $44,585 for the years ended December 31, 1993, 1994
and 1995, respectively. Amounts included as cost of sales were $378,251,
$748,652 and $493,959 for the years ended December 31, 1993, 1994 and 1995,
respectively. As of December 31, 1994 and 1995 the Company was indebted to
Dak-Tech Ltd. for receipts of various inventory components and research and
development activities in the amount of $407,674 and $311,811, respectively.

(6) SHORT-TERM DEBT

In 1993 and 1994, the Company issued short-term convertible subordinated
debentures totaling $2,870,000. Such debentures bore interest at prime plus 2%
and matured nine months from the issue date. On September 23, 1994 $2,845,000 of
the short-term convertible subordinated debenture agreements, including the
related accrued interest of $181,160, were converted into 635,815 shares of
Series A convertible preferred stock at a conversion rate of $4.76 per share.
The remaining $25,000 of debentures which were not converted were repaid on
September 23, 1994.

In February, 1995, the Company entered into a General Loan and Security
Agreement with Sterling Business Credit (Sterling), pursuant to which, Sterling
holds a first security interest in accounts receivable, as well as other assets,
of the Company. Under the terms of the agreement, the Company had outstanding
borrowings of $621,021 as of December 31, 1995. Interest at prime plus 3.5% is
payable monthly. The Company violated a covenant under the terms of the
agreement during the quarter ended December 31, 1995. Sterling has provided a
waiver of this covenant violation for the quarter ended December 31, 1995 and
through March 31, 1996.

F-9
<PAGE> 62

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(7) LONG-TERM DEBT

Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
1994 1995
-------- ---------
<S> <C> <C>
Convertible subordinated debentures:
$200,000 principal and interest payable June 1997 at a rate
of 10.35%, convertible by the holder into common stock at
a price of $7.17 per share............................... $200,000 $ 200,000
$100,000 principal and interest payable August 1997 at a
rate of 10.35%, convertible by the holder into common
stock at a price of $7.17 per share...................... 100,000 100,000
$600,000 principal and interest payable July 2001 at a rate
of 13.22%, convertible by the holder into common stock at
a price of $5.24 per share............................... -- 600,000
$925,000 principal and interest payable September 2001 at a
rate of 13.22%, convertible by the holder into common
stock at a price of $5.24 per share...................... -- 925,000
$200,000 principal and interest payable December 2001 at a
rate of 13.22%, convertible by the holder into common
stock at a price of $5.24 per share...................... -- 200,000
$50,000 principal and interest payable on the earlier to
occur of the closing of an offering of $1,000,000 of 10%
senior secured promissory notes or December 4, 2001;
interest at a rate of 10% through June 30, 1996 and
13.22% thereafter........................................ -- 50,000
Subordinated debentures:
$175,000 principal payable in installments in March 1998,
1999, and 2000, interest at a rate of 15% payable in
common stock on each anniversary date at a price of $4.76
per share, with warrants to purchase common stock
attached, secured by all assets of the Company........... -- 175,000
$75,000 principal payable in installments in March 1998,
1999, and 2000, interest at a rate of 15% payable
monthly, with warrants to purchase common stock attached,
secured by all assets of the Company..................... -- 75,000
Other......................................................... 10,160 40,493
-------- ----------
Total debt.................................................... 310,160 2,365,493
Less current portion.......................................... 3,200 3,200
-------- ----------
Long-term debt................................................ $306,960 $2,362,293
======== ==========
</TABLE>

The conversion price for the convertible subordinated debentures due June
1997 and August 1997 was changed during 1995. The previous conversion price of
$11.90 per share was reduced to $7.17 per share which was the fair market value
on the date of change.

F-10
<PAGE> 63

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The principal amounts of long-term debt maturing in each of the five years
subsequent to December 31, 1995 and thereafter are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
--------------------------------------------------------------------- ----------
<S> <C>
1996.............................................................. $ 3,200
1997.............................................................. 303,200
1998.............................................................. 800
1999.............................................................. 83,333
2000.............................................................. 83,333
Thereafter........................................................ 1,891,627
----------
$2,365,493
==========
</TABLE>

(8) INCOME TAXES

A deferred tax asset stemming from the Company's net operating loss
carryforward, research and development credit carryforward, and other accruals
has been reduced by a valuation account to zero due to uncertainties regarding
the utilization of the deferred assets. The deferred tax asset and the
corresponding valuation allowance were approximately $2,742,340 and $5,201,542
as of December 31, 1994 and 1995, respectively.

The sale of the Company's common stock will result in an ownership change
for the Company, as defined for tax purposes. As a result an annual limitation
will be placed on the utilization of the existing net operating loss
carryforwards and credit carryforwards. This limitation may cause a portion of
the existing net operating loss and credit carryforwards to expire prior to
utilization.

The net operating loss and research and development credit carryforwards
will expire as follows:

<TABLE>
<CAPTION>
NET RESEARCH
OPERATING AND
LOSS DEVELOPMENT
----------- -----------
<S> <C> <C>
2005....................................................... $ 42,000 $ --
2006....................................................... 128,000 --
2007....................................................... 794,000 2,000
2008....................................................... 2,500,000 47,000
2009....................................................... 3,341,000 53,000
2010....................................................... 5,668,000 86,000
----------- ---------
Total...................................................... $12,473,000 $ 188,000
=========== =========
</TABLE>

The net deferred tax assets are summarized at December 31 as follows:

<TABLE>
<CAPTION>
1992 1993 1994 1995
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards... $ 374,032 $ 1,344,032 $ 2,640,340 $ 4,839,542
Research and development credit
carryforwards................... -- -- 102,000 188,000
Other.............................. -- -- -- 174,000
--------- ----------- ----------- -----------
374,032 1,344,032 2,742,340 5,201,542
Less: Valuation allowance............ (374,032) (1,344,032) (2,742,340) (5,201,542)
--------- ----------- ----------- -----------
Net deferred taxes................... $ -- $ -- $ -- $ --
========= =========== =========== ===========
</TABLE>

F-11
<PAGE> 64

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(9) LEASES

The following summarizes assets held under capital leases which are
included in property, plant, and equipment as of December 31, 1994 and 1995:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Machinery and equipment........................................ $ 82,379 $239,839
Furniture and fixtures......................................... 159,665 181,750
Leasehold improvements......................................... 48,363 48,386
-------- --------
290,407 469,975
Less accumulated depreciation.................................. 21,935 94,316
-------- --------
$268,472 $375,659
======== ========
</TABLE>

The Company also leases various facilities under noncancelable operating
lease arrangements. Rent expense charged to operations for the years ended
December 31, 1993, 1994 and 1995 amounted to $68,082, $121,632 and $221,361,
respectively.

At December 31, 1995 minimum lease commitments together with the present
value of obligations under leases that have initial or remaining noncancelable
terms in excess of one year were as follows:

<TABLE>
<CAPTION>
YEARS ENDING CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
--------------------------------------------------------------- -------- ---------
<S> <C> <C>
1996........................................................... $178,629 $ 183,213
1997........................................................... 133,718 166,864
1998........................................................... 14,021 172,362
1999........................................................... -- 147,460
2000........................................................... -- --
-------- ---------
Total minimum lease payments................................... 326,368 $ 669,899
=========
Less amount representing interest.............................. 26,186
--------
Present value of minimum lease payments........................ 300,182
Less current installments of obligation........................ 150,848
--------
Obligation excluding current installments...................... $149,334
========
</TABLE>

(10) CONVERTIBLE PREFERRED STOCK

The Series A convertible preferred stock has voting rights and is
convertible to shares of the Company's common stock at a ratio of 1 to 1
initially. However, upon issuance of common stock or common stock equivalents,
the conversion ratio is subject to an anti-dilution adjustment pursuant to the
Series A convertible preferred stock Certificate of Designation for principally
all convertible preferred stock. As of December 31, 1995, the conversion ratio
has been adjusted per the terms of the anti-dilution provision whereby an
additional 4.6% shares will be issued upon conversion. The convertible preferred
shares are automatically converted into common stock upon closing of an
underwritten public offering of common stock. The Series A convertible preferred
stock has a liquidation preference to the common stock at an amount equal to the
amount originally paid.

(11) STOCK OPTIONS

The Company adopted the Amended and Restated 1993 Stock Option Plan (the
Stock Option Plan) which provided for the granting of stock options to
employees, nonemployee consultants, and directors of the Company. Options vest
over various periods as defined in the agreements and expire as determined by
the

F-12
<PAGE> 65

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Board on an individual basis, but not to exceed 10 years. Total shares of common
stock reserved at December 31, 1995 for issuance upon the exercise of stock
options was 923,250.

On March 18, 1995, the directors and stockholders authorized the repricing
of certain stock options held by employees to $4.76 per share, fair market value
at date of repricing. Such options were previously issued with an exercise price
of $11.11 per share.

On May 6, 1995, the directors approved a proposal offering option holders a
repricing of the outstanding options to $2.38 per share if such options were
exercised within a specified period of time. The directors designated 315,159
shares of common stock and 630,318 shares of preferred stock for this purpose.
Under the terms of this proposal, options were exercised resulting in the
issuance of 5,072 shares of common stock for gross proceeds of approximately
$12,000. This proposal expired in all cases by June 15, 1995.

The following table summarizes the transactions pursuant to the Company's
stock option plan:

<TABLE>
<CAPTION>
NUMBER
OF SHARES PRICE RANGE
--------- ---------------
<S> <C> <C>
Outstanding at December 31, 1992............................ 23,637 $3.17 to 11.11
Granted................................................... 81,547 3.17 to 11.11
-------
Outstanding at December 31, 1993............................ 105,184 3.17 to 11.11
Granted................................................... 53,577 4.76 to 11.11
Expired................................................... (157) 11.11
-------
Outstanding at December 31, 1994............................ 158,604 3.17 to 11.11
Granted................................................... 613,773 4.76
Exercised................................................. (9,621) 2.38 to 4.76
Expired................................................... (30,120) 3.17 to 11.11
-------
Outstanding at December 31, 1995............................ 732,636 $3.17 to 11.11
=======
Exercisable at December 31, 1995............................ 164,365 $3.17 to 11.11
=======
</TABLE>

(12) WARRANTS

The Company has issued both convertible preferred stock warrants and common
stock warrants to various parties for their efforts in connection with the
raising of additional capital through common stock offerings, preferred stock
offerings, and other services rendered.

On May 6, 1995, the directors approved a proposal offering warrant holders
a repricing of the outstanding warrants to $2.38 per share if such warrants were
exercised within a specified period of time. The directors designated 315,159
shares of common stock and 630,318 shares of preferred stock for this purpose.
Under the terms of this proposal, warrants were exercised resulting in the
issuance of 246,723 shares of preferred stock and 198,442 of common stock for
gross proceeds of $1,059,380. This proposal expired in all cases by June 15,
1995.

In 1995, the Company issued warrants for 90,000 shares of common stock in
exchange for services rendered. The value of the services rendered equaled
$78,900, with $35,700 included in selling, general and administrative expenses
and $43,200 net against proceeds raised from the issuance of convertible
securities.

Certain convertible preferred stock warrants contain an anti-dilution
provision. This provision was triggered in May 1995 resulting in the issuance of
19,849 shares upon conversion of the related warrants. The issuance of the
shares is a non-cash transaction.

F-13
<PAGE> 66

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the warrant transactions:

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
-------------------- -----------------------------
NUMBER PRICE NUMBER PRICE
OF SHARES RANGE OF SHARES RANGE
--------- ------ --------- ---------------
<S> <C> <C> <C> <C>
December 31, 1992..................... -- $ -- 7,832 $ 3.17
Issued.............................. 84,462 4.76 25,966 3.17 to 11.11
--------- ---------
December 31, 1993..................... 84,462 4.76 33,798 3.17 to 11.11
Issued.............................. 593,760 4.76 945 4.76
--------- ---------
December 31, 1994..................... 678,222 4.76 34,743 3.17 to 11.11
Issued.............................. 19,849 4.76 316,397 4.76
Exercised........................... (246,723) 2.38 (198,442) 2.38
--------- ---------
December 31, 1995..................... 451,348 $ 4.76 152,698 $ 3.17 to 11.11
========= =========
</TABLE>

(13) STOCK APPRECIATION RIGHTS

In May 1995, warrants to purchase a total of 168,085 shares of convertible
preferred stock were transferred, by the holder, to two other parties in
exchange for a Stock Appreciation Rights Agreement. The Agreement requires the
Company to pay the difference between $4.76 and the per share value of the stock
at the time of exercise of the right, up to a maximum of $4.76. Such rights are
exercisable at the earlier of the closing of an underwritten public offering
with gross proceeds not less than $15,000,000, any liquidation or dissolution of
the affairs of the Company, or upon demand of the right holder.

In May 1995, warrants to purchase 174,065 shares, in aggregate, of common
stock were transferred, by two holders, to a stockholder in exchange for a Stock
Appreciation Rights Agreement. The Agreement requires the Company to pay the
difference between $4.76 and the per share value of the stock at the time of
exercise of the right, up to a maximum of $4.76. Such rights are exercisable at
the earlier of the closing of an underwritten public offering with gross proceed
not less than $15,000,000, any liquidation or dissolution of the affairs of the
Company, or upon demand of the right holder.

(14) RETIREMENT PLAN

The Company implemented a defined contribution plan during 1995 pursuant to
section 401(k) of the Internal Revenue Code, whereby participants may contribute
a percentage of compensation, but not in excess of the maximum allowed under the
Code. The Plan includes a discretionary employer matching contribution program
as determined by the Board of Directors. In 1995, no matching contributions were
made to Plan participants' accounts.

(15) BUSINESS AND CREDIT CONCENTRATIONS

As of December 31, 1994 and 1995 three customers and five customers,
respectively, accounted for $505,362 or 43% and $848,588 or 53% of accounts
receivable, respectively. Aggregate sales to customers representing at least 10%
of total sales individually amounts to $565,657 (3 customers), $1,690,678 (4
customers) and $1,367,227 (3 customers), for the years ended December 31, 1993,
1994 and 1995, respectively. Individual customers representing over 10% of
aggregate sales each had sales of $234,656, $169,847 and $161,154 for the year
ended December 31, 1993; $517,204, $468,636, $353,364 and $351,474 for the year
ended December 31, 1994; and $475,591, $449,020 and $442,616 for the year ended
December 31, 1995.

The Company's customers are based throughout the world with 7%, 14% and 15%
of sales from international markets for the years ended December 31, 1993, 1994
and 1995 respectively. Customers are not

F-14
<PAGE> 67

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

concentrated in any specific geographic location. The customer base is very
specific, however, to the health care industry as the Company's products are
used primarily by hospitals and alternate site healthcare settings such as
nursing homes and clinics.

(16) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
1993 1994 1995
-------- ----- --------
<S> <C> <C> <C>
Cash paid during the year for interest..................... $ 10,924 $ -- $ 87,473
</TABLE>

Capital lease obligations of $-0-, $290,406 and $178,239 were incurred in
1993, 1994 and 1995, respectively, when the Company entered into leases
primarily for machinery, equipment, furniture and fixtures.

In 1994, 635,815 shares of Series A convertible preferred stock were issued
upon the conversion of $3,026,160 of short-term convertible subordinated
debentures, including accrued interest of $181,160.

In 1995, 728 shares of common stock were issued in exchange for services
rendered. The value of the services rendered equaled $3,465.

(17) SUBSEQUENT EVENTS

In January 1996, the Company issued convertible subordinated debentures to
a director and an independent third party in the principal amount of $50,000 and
$60,000, respectively. These debentures bear interest at a rate of 13.22% per
annum and will mature 6 years from the date of the debenture. Such debentures
are convertible into shares of common stock at the rate of one share of common
stock for each $5.24 of principal and accrued interest.

In January 1996, the Company issued a convertible subordinated debenture to
a director of the Company, in the principal amount of $100,000. The debenture
bears interest at a rate of 10% per annum until June 30, 1996. If the principal
and interest under the debenture are not paid on such date, then the interest
rate will be 13.22% per annum through the date six years from the date of its
issuance. The Company may prepay the debenture at any time, provided, however,
that if the prepayment occurs after the initial maturity date, the Company must
pay the outstanding principal balance plus a sum equal to the amount of interest
which would have been earned if the debenture remained outstanding until the
later maturity date.

In January and February 1996, the Company issued convertible subordinated
debentures to directors and independent third parties in the principal amount of
$110,000 and $425,000, respectively. Cash received from the issuance of
debentures was $475,000. There was no cash received for $60,000 of debentures
which were issued to a director for services rendered. The debentures bear
interest at a rate of 10% per annum until June 30, 1996 at which time the
interest rate would increase to 13.22% per annum and the debentures would become
convertible at a price of $5.24. The Company may prepay the debentures at any
time, provided, however, that if the prepayment occurs after June 30, 1996, the
Company shall pay the outstanding principal balance plus a sum equal to the
amount of interest which would have been earned if the debentures remained
outstanding until the later maturity date. In February 1996, the Company agreed
to convert the indebtedness evidenced by the debenture into shares of Common
Stock at a rate of one share for each $4.76 of principal so converted.

In January, February and March 1996, stock options for 377,070 shares of
common stock were granted to various officers, directors and employees under the
stock option plan at exercise prices between $4.76 and $9.80 per share. Options
have various vesting periods, none of which exceed four years.

In February 1996, the Company agreed to issue 124,488 shares of common
stock to two individuals in exchange for consulting services performed in 1995.
Related expenses in the amount of $592,500, representing

F-15
<PAGE> 68

SABRATEK CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the fair value of services provided, has been included in the selling, general,
and administrative expenses in the accompanying statement of operations for the
year ended December 31, 1995. Stock certificates were issued to the respective
individuals in April 1996.

In February 1996 the Company agreed to convert a total of $585,000 of
convertible subordinated debentures at a rate of one share for each $4.76 of the
principal amount converted which will result in the issuance of 122,912 common
shares on the Offering date.

In March 1996, the Company issued a convertible subordinated debenture to a
stockholder in the principal amount of $844,500. The debenture bears interest at
a rate of 13.22% per annum and will mature six years from the date of the
debenture. The debenture can be prepaid, however, the holder has the option to
convert the principal and accrued interest into shares of common stock. If
prepaid, the Company must pay the outstanding principal balance plus a sum equal
to the amount of interest which would have been earned if the debenture remained
outstanding until its maturity date. The debenture is convertible into shares of
common stock at the rate of one share of common stock for each $5.24 of
principal and accrued interest.

In March 1996, the Company issued 167,245 shares of common stock at $9.80
per share resulting in additional equity proceeds of $1,639,761.

In April 1996, stock options for 27,577 shares of common stock were granted
to various employees under the stock option plan at exercise prices between
$4.76 and $9.80 per share. Options have various vesting periods, none of which
exceed four years.

In April 1996, the Company approved a 1-for-3.173 reverse stock split of
its common stock and convertible preferred stock and increased the common shares
reserved for issuance upon the exercise of stock options to 1,314,048.
Additionally, on April 25, 1996, the Company filed a Restated Certificate of
Incorporation authorizing an increase in the number of authorized shares of
common stock to 25,000,000 shares, $.01 par value per share, and in the number
of authorized shares of preferred stock to 12,500,000, $.01 par value. All
references in the financial statements to share and per share data have been
adjusted to reflect this reverse stock split.

In May 1996, stock options for 40,814 shares of common stock were granted
to various directors under the stock option plan at an exercise price of $9.80.
Options have various vesting periods, none of which exceed four years.

On June 10, 1996, stock options for 14,735 shares of common stock were
granted to various employees and consultants under the stock option plan at an
exercise price of $9.80. Options have various vesting periods, none of which
exceed four years.

F-16
<PAGE> 69

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES IN ANY JURISDICTION IN WHICH SUCH OFFER IS NOT LAWFUL,
OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT AUTHORIZED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 13
Use of Proceeds....................... 13
Dividend Policy....................... 13
Dilution.............................. 14
Capitalization........................ 15
Selected Financial Data............... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 21
Management............................ 32
Principal Stockholders................ 39
Certain Transactions.................. 41
Description of Capital Stock.......... 43
Shares Eligible for Future Sale....... 44
Underwriting.......................... 46
Legal Matters......................... 47
Experts............................... 47
Available Information................. 47
Index to Financial Statements......... F-1
</TABLE>

------------------------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------

- ------------------------------------------------------
- ------------------------------------------------------

2,500,000 SHARES

SABRATEK LOGO

COMMON STOCK

---------------------------

PROSPECTUS

---------------------------

BEAR, STEARNS & CO. INC.

SALOMON BROTHERS INC

BARINGTON CAPITAL GROUP, L.P.

, 1996

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 70

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following are the estimated expenses of the issuance and distribution
of the securities being registered.

<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission.................... $ 12,888
Filing and Listing Fee -- National Association of Securities Dealers...... 46,338
Legal Fees................................................................ 325,000
Accounting Fees........................................................... 100,000
Printing and Engraving.................................................... 150,000
Blue Sky Fees and Expenses................................................ 15,000
Transfer Agent Fees....................................................... 20,000
Director and Officer Indemnification Insurance Premiums................... 105,774
Financial Advisory Fees................................................... 215,000
--------
Total........................................................... $990,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company'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 the Company or of any
other corporation, partnership, joint venture, trust or other enterprise which
has served in such capacity at the request of the Company if such acts or
omissions occurred or were or are alleged to have occurred, while said party was
a director or officer of the Company; provided, however, the Company shall not
indemnify any director or officer in an action against the Company unless the
Company shall have consented to such 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 the Company.

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 such 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 such person in connection with such action if such 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 the Company'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
the Company pursuant to the foregoing provisions and agreements, the Company 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.

Upon the consummation of the Offering the Company will purchase a
director's and officer's liability insurance policy which indemnifies directors
and officers for certain losses arising from a claim by reason of a wrongful
act, as defined in such policy, under certain circumstances where the Company
does not provide indemnification.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On April 18, 1996, the Company issued 23,637 shares of Common Stock to
Mirza Mehdi for aggregate consideration of $112,500 and 100,851 shares of Common
Stock to Arie Kalo for aggregate consideration of

II-1
<PAGE> 71

$480,000 in exchange for consulting services performed by such individuals
during 1995. The sales were exempted from registration in reliance on Section
4(2) of the Act.

On March 14, 1996, the Company issued a Convertible Subordinated Debenture
to Charles K. Stewart Investments, in the amount of $844,500 for a purchase
price equal to the face amount thereof. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act. The Company also issued
167,245 shares of Common Stock for aggregate consideration of $1,639,761 under
the Act pursuant to Regulation D of the Act.

On February 13, 1996, the Company issued a Debenture to Hospital Credit
Corp. in the amount of $200,000 for a purchase price equal to the face amount
thereof. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On February 8, 1996, the Company issued a Debenture to ABDM Partners c/o
Daniel E. Straus in the amount of $50,000 for a purchase price equal to the face
amount thereof. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On February 6, 1996, the Company issued a Debenture to Stephen Raphael, IRA
in the amount of $50,000 for a purchase price equal to the face amount thereof.
The sale was exempt from registration under the Act pursuant to Regulation D of
the Act.

On January 23, 1996, the Company issued a Debenture to Marvin Samson in the
amount of $100,000 for a purchase price equal to the face amount thereof. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On January 16, 1996, the Company issued a Debenture to Valerie Spencer in
the amount of $25,000 for a purchase price equal to the face amount thereof. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On January 15, 1996, the Company issued Convertible Subordinated Debentures
to Mark Mitchell in the amount of $60,000 and The Hodes Family Foundation in the
amount of $50,000. Each debenture was issued for a purchase price equal to the
face amount thereof, and the sales were exempt from registration under the Act
pursuant to Regulation D of the Act.

On January 11, 1996, the Company issued a Debenture to IASD Health Services
Corp. in the amount of $100,000 for a purchase price equal to the face amount
thereof. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On January 8, 1996, the Company issued a Debenture to William Lautman, a
managing director of EGS Securities Corp., in the amount of $110,000 for $50,000
in cash and $60,000 in payment for services rendered by Mr. Lautman to the
Company. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On December 19, 1995, the Company sold 3,152 shares of Common Stock to
Timothy M. McCaffrey for aggregate consideration of $15,000 in a private
transaction in reliance on Section 4(2) of the Act.

On December 14, 1995, the Company issued a Convertible Subordinated
Debenture to John Stafford in the amount of $100,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On December 11, 1995, the Company sold 1,397 shares of Common Stock to Todd
W. Garrison for aggregate consideration of $6,648 in a private transaction in
reliance on Section 4(2) of the Act.

On December 6, 1995, the Company issued a Debenture to Charles Stewart in
the amount of $100,000 for a purchase price equal to the face amount thereof.
The sale was exempt from registration under the Act pursuant to Regulation D of
the Act.

II-2
<PAGE> 72

On December 4, 1995, the Company issued a Debenture to William Lomicka in
the amount of $50,000 for a purchase price equal to the face amount thereof. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On November 30, 1995, the Company sold 105,053 shares of Series A Preferred
Stock to MSI, Inc. (Marsam) for aggregate consideration of $499,999.50 in a
private transaction in reliance on Section 4(2) of the Act.

On November 7, 1995, the Company issued Convertible Subordinated Debentures
to Ilan Kaufthal in the amount of $3,550 and Steven L. Volla in the amount of
$3,550. Each Convertible Subordinated Debenture was issued for a purchase price
equal to the face amount thereof, and the sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On November 6, 1995, the Company issued Convertible Subordinated Debentures
to Martin and Patricia Volla in the amount of $372.75 and Lillian Volla Trust in
the amount of $372.75. Each Convertible Subordinated Debenture was issued for a
purchase price equal to the face amount thereof, and the sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 5, 1995, the Company issued Convertible Subordinated Debentures
to Gildea Investment Co. Def. Benefit in the amount of $1,775 and John W. Gildea
in the amount of $3,550. Each Convertible Subordinated Debenture was issued for
a purchase price equal to the face amount thereof, and the sales were exempt
from registration under the Act pursuant to Regulation D of the Act.

On October 31, 1995, the Company issued Convertible Subordinated Debentures
to Anne L. Fawcett in the amount of $10,000, Donald N. Fawcett in the amount of
$1,000 and Dwight P. Fawcett in the amount of $1,000. Each Convertible
Subordinated Debenture was issued for a purchase price equal to the face amount
thereof, and the sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On October 28, 1995, the Company issued a Convertible Subordinated
Debenture to Peter M. Gaines in the amount of $2,946 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On October 26, 1995, the Company issued a Convertible Subordinated
Debenture to Jane F. Dearborn in the amount of $1,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On October 20, 1995, the Company issued a Convertible Subordinated
Debenture to John E. Traeger Trust No. 1 in the amount of $2,951 for a purchase
price equal to the face amount thereof. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act.

On October 16, 1995, the Company issued a warrant to Oscar E. Hyman to
purchase 18,910 shares of Common Stock at $4.76 per share as compensation for
services rendered to the Company. This warrant vested immediately and expires on
April 15, 1999. The Company valued the services received in exchange for the
warrant at $24,000. The sale was exempt from registration under the Act pursuant
to Regulation D of the Act.

On October 15, 1995, the Company issued a Convertible Subordinated
Debenture to Charles R. Hall in the amount of $1,225 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On October 5, 1995, the Company issued a warrant to Steven B. Johns to
purchase 9,455 shares of Common Stock at $4.76 per share as compensation for
services rendered to the Company. This warrant vested immediately and expires on
February 15, 1999. The Company valued the services received in exchange for the
warrant at $11,700. The sale was exempt from registration under the Act pursuant
to Regulation D of the Act.

On September 21, 1995, the Company issued a Convertible Subordinated
Debenture to Robert J. Nowlin in the amount of $25,000 for a purchase price
equal to the face amount thereof. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

II-3
<PAGE> 73

On September 13, 1995, the Company issued Convertible Subordinated
Debentures to John Stafford in the amount of $200,000 and Cowen & Co., Custodian
FBO William G. Walters IRA in the amount of $100,000. Each Convertible
Subordinated Debenture was issued for a purchase price equal to the face amount
thereof, and the sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On September 12, 1995, the Company issued a Convertible Subordinated
Debenture to R. J. Bertero in the amount of $150,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On September 8, 1995, the Company issued Convertible Subordinated
Debentures to Charles K. Stewart Money Purchase Plan in the amount of $200,000
and Paine Webber Inc. IRA Custodian for Francis Cook in the amount of $200,000.
Each Convertible Subordinated Debenture was issued for a purchase price equal to
the face amount thereof, and the sales were exempt from registration under the
Act pursuant to Regulation D of the Act.

On September 5, 1995, the Company issued a Convertible Subordinated
Debenture to Catherine Dawson in the amount of $50,000 for a purchase price
equal to the face amount thereof. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

On August 31, 1995, the Company issued a warrant to purchase 11,177 shares
of Common Stock at $4.76 per share to William D. Lautman as compensation for
financial services rendered to the Company. This warrant vested immediately and
expires on August 31, 2000. The Company valued the services received in exchange
for the warrant at $1,773. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On July 14, 1995, the Company issued a Convertible Subordinated Debenture
to George Walker in the amount of $100,000 for a purchase price equal to the
face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On July 12, 1995, the Company issued Convertible Subordinated Debentures to
Charles K. Stewart Money Purchase Plan in the amount of $150,000, John Stafford
in the amount of $150,000 and Paine Webber Inc. IRA Custodian for Francis Cook
in the amount of $200,000. Each Convertible Subordinated Debenture was issued
for a purchase price equal to the face amount thereof, and the sales were exempt
from registration under the Act pursuant to Regulation D of the Act.

On June 7, 1995, the Company sold 5,072 shares of Common Stock to Scott
Hodes for aggregate consideration of $12,071.25 in a private transaction in
reliance on Section 4(2) of the Act.

On June 5, 1995, the Company sold 6,303 shares of Common Stock to Charles
F. Manker for aggregate consideration of $15,000 in a private transaction in
reliance on Section 4(2) of the Act.

On May 31, 1995, the Company issued Secured Subordinated Notes to IASD
Health Services Corp. in the amount of $150,000, Edson W. Spencer, Jr. in the
amount of $25,000, Gideon Hixon Fund, L.P. in the amount of $25,000 and William
H. Lomicka in the amount of $50,000. Each Secured Subordinated Note was issued
for a purchase price equal to the face amount thereof, and the sales were exempt
from registration under the Act pursuant to Regulation D of the Act.

On May 31, 1995, in connection with certain secured notes issued by the
Company on May 31, 1995 to such parties, the Company issued the following
warrants to purchase shares of Common Stock at $4.76 per share: to Edson W.
Spencer, a warrant to purchase 1,576 shares of Common Stock; to William H.
Lomicka, a warrant to purchase 3,152 shares of Common Stock; to Gideon Hixon
Fund, L.P., a warrant to purchase 1,576 shares of Common Stock; and to IASD
Health Services Corp., a warrant to purchase 9,455 shares of Common Stock. These
warrants vested immediately and expire on May 31, 2000. The sales were exempt
from registration under the Act pursuant to Regulation D of the Act.

On May 31, 1995, the Company sold 7,202 shares of Series A Preferred Stock
to Charles K. Stewart Money Purchase Plan and Timm R. & Robin S. Reynolds for
aggregate consideration of $17,139.75, each in a private transaction in reliance
on Section 4(2) of the Act.

II-4
<PAGE> 74

On May 26, 1995, the Company sold 1,050 shares of Series A Preferred Stock
to Spencer Family Partnership, L.P. for aggregate consideration of $2,499.75 in
a private transaction in reliance on Section 4(2) of the Act.

On May 24, 1995, the Company sold 21,011 shares of Series A Preferred Stock
to PSF Health Care Fund for aggregate consideration of $50,000.25 in a private
transaction in reliance on Section 4(2) of the Act.

On May 22, 1995, the Company sold 1,050 shares of Series A Preferred Stock
to Edson W. & Harriett S. Spencer for aggregate consideration of $24,999.75 in a
private transaction in reliance on Section 4(2) of the Act.

On May 15, 1995, the Company sold 8,404 shares of Series A Preferred Stock
to Upland Associates, L.P., Namakagon Associates, L.P. and Barker, Lee & Company
for aggregate consideration of $20,000.25, each in a private transaction in
reliance on Section 4(2) of the Act.

On May 13, 1995, the Company sold 28,364 shares of Series A Preferred Stock
to Gideon Hixon Fund and Benson K. Whitney for aggregate consideration of
$67,500, each in a private transaction in reliance on Section 4(2) of the Act.

On May 12, 1995, the Company sold 2,101 shares of Series A Preferred Stock
to Robert D. Stuart, Jr. for aggregate consideration of $5,000.25 in a private
transaction in reliance on Section 4(2) of the Act.

On May 12, 1995, the Company issued a warrant to purchase 87,032 shares of
Common Stock at $4.76 per share to William D. Lautman, a managing director of
EGS Securities Corp., as compensation for financial services rendered to the
Company. The Company valued the services received in exchange for the warrant at
$13,809. This warrant vested immediately and expires on May 12, 2000. On May 31,
1995, Mr. Lautman exercised the warrant to purchase 21,011 shares of Common
Stock at $2.38 per share, pursuant to a discount offered by the Company in
consideration for services rendered by Mr. Lautman and retains the right to
exercise the warrant for the remaining 66,021 shares of Common Stock at $4.76
per share. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On May 12, 1995, the Company issued a warrant to purchase 87,032 shares of
Common Stock at $4.76 per share to Scott C. Newquist and a warrant to purchase
87,032 shares of Common Stock at $4.76 per share to Robert G. Eccles as
compensation for financial services rendered to the Company. The Company valued
the services received in exchange for the warrants at $27,618. These warrants
vested immediately and expire on May 12, 2000. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act. Messrs. Eccles
and Newquist transferred the rights under their warrants to Oracle Partners,
L.P. for immediate exercise. On May 31, 1995, Larry N. Feinberg c/o Oracle
Partners, L.P., Oracle Institutional Partners, L.P., Sam Oracle Fund, Inc. and
Oracle Partners, L.P. exercised the warrants which were transferred by Messrs.
Eccles and Newquist to purchase an aggregate of 174,064 shares of Common Stock.

On May 9, 1995, the Company sold 168,085 shares of Series A Preferred Stock
to Charles K. Stewart Money Purchase Plan and John Stafford for aggregate
consideration of $400,000.50, each in a private transaction in reliance on
Section 4(2) of the Act.

On April 24, 1995, the Company issued 5,072 shares of Common Stock to Scott
Hodes, in partial exercise of the stock option granted by the Company to Scott
Hodes, at an exercise price of $2.38 per share, in a private transaction in
reliance on Section 4(2) of the Act.

On March 2, 1995, the Company sold 5,252 shares of Series A Preferred Stock
to Joan O. Bent TTEE for aggregate consideration of $24,999 in a private
transaction in reliance on Section 4(2) of the Act.

On February 28, 1995, the Company sold 11,234 shares of Series A Preferred
Stock to Martin Volla and Patricia Volla as Joint Tenants, Lillian Volla Trust,
Stephen E. Raphael IRA, Lucy H. Gordon and Noam Frankel for aggregate
consideration of $53,466, each in a private transaction in reliance on Section
4(2) of the Act.

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On February 27, 1995, the Company sold 10,505 shares of Series A Preferred
Stock to Kenneth Lebow IRA R/O for aggregate consideration of $49,999.50 in a
private transaction in reliance on Section 4(2) of the Act.

On February 10, 1995, the Company sold 4,412 shares of Series A Preferred
Stock to Martin Volla and Patricia Volla as Joint Tenants and Lillian Volla
Trust for aggregate consideration of $21,000, each in a private transaction in
reliance on Section 4(2) of the Act.

On January 24, 1995, the Company sold 21,011 shares of Series A Preferred
Stock to Steven Volla for aggregate consideration of $100,000.50 in a private
transaction in reliance on Section 4(2) of the Act.

On January 17, 1995, the Company sold 46,223 shares of Series A Preferred
Stock to Eveswise Limited Retirement Benefit Scheme, Gildea Investment Co.
Defined Benefit Plan, John Gildea and Charles F. Manker for aggregate
consideration of $220,000.50, each in a private transaction in reliance on
Section 4(2) of the Act.

On December 21, 1994, the Company sold 10,505 shares of Series A Preferred
Stock to William D. Lautman IRA for aggregate consideration of $49,999.50 in a
private transaction in reliance on Section 4(2) of the Act.

On December 7, 1994, the Company sold 5,253 shares of Series A Preferred
Stock to Joe Gutman for aggregate consideration of $25,000.50 in a private
transaction in reliance on Section 4(2) of the Act.

On December 1, 1994, the Company sold 10,506 shares of Series A Preferred
Stock to Jeffrey B. Goldenberg for aggregate consideration of $50,001 in a
private transaction in reliance on Section 4(2) of the Act.

On November 22, 1994, the Company issued a warrant to Comdisco, Inc. to
purchase 8,089 shares of Series A Preferred Stock at $4.76 per share as
compensation for services rendered to the Company. This warrant vested
immediately and expires on November 22, 2000. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 3, 1994, the Company sold 2,364 shares of Series A Preferred
Stock to Buzz Benson for aggregate consideration of $11,250 in a private
transaction in reliance on Section 4(2) of the Act.

On October 31, 1994, the Company sold 105,053 shares of Series A Preferred
Stock to Oracle Partners, L.P.; Oracle Institutional Partners, L.P.; and Sam
Oracle Fund, Inc. for aggregate consideration of $500,001, each in a private
transaction in reliance on Section 4(2) of the Act.

On October 29, 1994, the Company sold 10,506 shares of Series A Preferred
Stock to William Lomicka for aggregate consideration of $50,001 in a private
transaction in reliance on Section 4(2) of the Act.

On October 5, 1994, the Company sold 21,011 shares of Series A Preferred
Stock to The Pharmaceutical/Medical Technology Fund, L.P. for aggregate
consideration of $100,000.50 in a private transaction in reliance on Section
4(2) of the Act. The Pharmaceutical/Medical Technology Fund, L.P. is an
investment partnership whose general partners are the owners of EGS Partners,
L.L.C., which is a registered investment adviser. EGS Partners, L.L.C. is an
affiliate of EGS Securities Corp. of which William D. Lautman is a managing
director. Mr. Lautman disclaims beneficial ownership of the shares held by
Pharmaceutical/Medical Technology Fund, L.P. On the same date, the Company also
issued a warrant to Steven Johns to purchase 9,455 shares of Common Stock at
$4.76 per share as compensation for services rendered to the Company. This
warrant vested immediately and expires on February 15, 1999. The issuance of
this warrant was exempted from registration under the Act pursuant to Regulation
D of the Act.

On September 23, 1994, the Company issued a warrant to
Peterson-Spencer-Fansler Co. to purchase 945 shares of Common Stock at $4.76 per
share as compensation for financial services rendered to the Company. The
Company valued the services received in exchange for this warrant at $150. This
warrant vested immediately and expires on September 23, 1999. The sale was
exempt from registration under the Act pursuant to Regulation D of the Act.

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<PAGE> 76

In connection with the sale of its Series A Preferred Stock, on September
23, 1994, the Company issued a warrant to MSI Inc. to purchase 472,739 shares of
Series A Preferred Stock at $6.35 per share. This warrant vested immediately and
expires on September 12, 1999. On May 8, 1995, MSI Inc. transferred the right to
exercise the warrant to purchase 168,085 shares of Series A Preferred Stock to
Charles K. Stewart Money Purchase Plan and John Stafford for immediate exercise,
and retains the right to exercise the warrant for the remaining 304,654 shares
of Series A Preferred Stock at an exercise price of $4.76 per share. On May 9,
1995, Charles K. Stewart Money Purchase Plan and John Stafford exercised such
warrant for 168,085 shares. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On September 23, 1994, the Company sold 1,152,682 shares of Series A
Preferred Stock to MSI Inc., a subsidiary of Marsam Pharmaceuticals Inc.;
William D. Lautman, a managing director of EGS Securities Corp.; James E. Flynn;
David H. Betts TIEE DHB Trust; Howard Miller; Mark Lenowitz; Ilan Kaufthal; IASD
Health Services Corp.; Leopold Swergold; William H. Lomicka; ABDM Partners;
Scott Newquist (later transferred to Scott C. Newquist and Aileen M. Newquist as
Joint Tenants); Spencer Family Partnership, L.P.; PSF Health Care Fund, L.P.;
Davis D. Fansler; Benson K. Whitney; Warren H. Corning #145751 Trust; Frank D.
Mayer Jr.; Duncan N. Dayton; Dwight W. Fawcett; Jane F. Dearborn; Donald N. &
Adrienne W. Fawcett; Charles R. Hall; John E. Traeger Trust #1; Gideon Hixon
Fund; Robert D. Stuart, Jr.; Peter M. Gaines; Paul J. Finnegan; Timm R. & Robin
S. Reynolds; Robin S. & Timm R. Reynolds; Gordon H. & Eunice H. Smith; James O.
Pohlad; P-J Investments; Vukasin Pavlovic; D-W Investments, L.P.; Gerald E. Jr.,
& Linda E. Bisbee; Steven M. & Rivanna Hyman; Sabratek Holdings I (later
transferred to Charles K. Stewart Money Purchase Plan, John Stafford, Jim
Stafford and Sabratek Holdings I); Edward G. Edelstein; Gideon Hixon Fund;
Pohlad Companies; Edson W. & Harriet S. Spencer; Jack E. Hill; John E. Rogers;
Upland Associates, L.P.; Barker, Lee & Company; Namakagon Associates, L.P.; D.W.
Fawcett; and Anne L. Fawcett for aggregate consideration of $5,486,190, each in
a private transaction in reliance on Section 4(2) of the Act.

On May 26, 1994, the Company issued a Convertible Debenture to Pohlad
Companies in the amount of $50,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted into 10,846 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Section 4(2) of the Act.

On May 26, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Pohlad Companies to purchase shares
of its Capital Stock which was subsequently exchanged for a warrant to purchase
10,505 shares of Series A Preferred Stock at $4.76 per share. This warrant
vested immediately and expires on May 26, 1997. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On May 18, 1994, the Company issued Convertible Debentures to the following
individuals and entities each in the amount set forth after its name and each
for a purchase price equal to the face amount thereof: Edson W. & Harriet S.
Spencer, $50,000; Barker, Lee & Company, $11,400; Upland Associates, L.P.,
$17,200; Namakagon Associates, L.P., $11,400. The Convertible Debentures were
exchanged for 10,869; 2,478; 3,739; and 2,478 shares of Series A Preferred Stock
respectively. The sales were exempt from registration under the Act pursuant to
Section 4(2) of the Act.

On May 18, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to Edson W. & Harriet S.
Spencer, a warrant to purchase 10,505 shares of Series A Preferred Stock, which
warrant was exercised on May 22, 1995; to Barker, Lee & Company, a warrant to
purchase 2,395 shares of Series A Preferred Stock, which warrant was exercised
on May 15, 1995; to Upland Associates, L.P., a warrant to purchase 3,614 shares
of Series A Preferred Stock, which warrant was exercised on May 15, 1995; and to
Namakagon Associates, L.P., a warrant to purchase 2,395 shares of Series A
Preferred Stock, which warrant was exercised on May 15, 1995. These warrants
vested immediately and expire on May 18, 1997. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

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<PAGE> 77

On May 16, 1994, the Company issued Convertible Debentures to the following
individuals each in the amount set forth after his name and each for a purchase
price equal to the face amount thereof: John E. Rogers, $100,000; and Jack E.
Hill, $20,000. The Convertible Debentures were exchanged for 21,750 and 4,350
shares of Series A Preferred Stock respectively. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On May 16, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to John E. Rogers, a warrant to
purchase 21,011 shares of Series A Preferred Stock; and to Jack E. Hill, a
warrant to purchase 4,202 shares of Series A Preferred Stock. These warrants
vested immediately and expire on May 16, 1997. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On May 12, 1994, the Company issued Convertible Debentures to the following
individuals and entities each in the amount set forth after its name and each
for a purchase price equal to the face amount thereof: PSF Health Care Fund,
L.P., $100,000; Gideon Hixon Fund, $75,000; and Benson K. Whitney, $25,000. The
Convertible Debentures were exchanged for 21,773; 16,330; and 5,443 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On May 12, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to PSF Health Care Fund, L.P., a
warrant to purchase 21,011 shares of Series A Preferred Stock, which warrant was
exercised on May 24, 1995; to Gideon Hixon Fund, a warrant to purchase 15,758
shares of Series A Preferred Stock, which warrant was exercised on May 13, 1995;
and to Benson K. Whitney, a warrant to purchase 5,253 shares of Series A
Preferred Stock, which warrant was exercised on May 13, 1995. These warrants
vested immediately and expire on May 12, 1997. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On April 28, 1994, the Company issued a Convertible Debenture to Peter M.
Gaines in the amount of $25,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted into 5,464 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On April 28, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Peter M. Gaines to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
5,253 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on April 28, 1997. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act.

On April 20, 1994, the Company issued a Convertible Debenture to Charles R.
Hall in the amount of $25,000 for a purchase price equal to the face amount
thereof. This Convertible Subordinated Debenture was converted into 5,678 shares
of Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On April 20, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Charles R. Hall to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
525 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on April 20, 1997. The sale was exempt from registration
under the Act pursuant to Regulation D of the Act.

On April 18, 1994, the Company issued a Convertible Debenture to Dwight W.
Fawcett in the amount of $45,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted into 10,225 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On April 18, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Dwight W. Fawcett to purchase shares
of its Capital Stock which were subsequently

II-8
<PAGE> 78

exchanged for warrants to purchase 5,253 shares of Series A Preferred Stock at
$4.76 per share. This warrant vested immediately and expires on April 18, 1997.
The sale was exempt from registration under the Act pursuant to Regulation D of
the Act.

On April 16, 1994, the Company issued a Convertible Debenture to John E.
Traeger Trust #1 in the amount of $25,000 for a purchase price equal to the face
amount thereof. This Convertible Debenture was converted into 5,681 shares of
Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On April 16, 1994, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to John E. Traeger Trust #1 to purchase
shares of its Capital Stock which were subsequently exchanged for warrants to
purchase 5,253 shares of Series A Preferred Stock at $4.76 per share. This
warrant vested immediately and expires on April 16, 1997. The sale was exempt
from registration under the Act pursuant to Regulation D of the Act.

On December 15, 1993, the Company issued a Convertible Debenture to Edward
G. Edelstein in the amount of $5,000 for a purchase price equal to the face
amount thereof. This Convertible Debenture was converted into 1,118 shares of
Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On December 15, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Edward G. Edelstein to purchase
shares of its Capital Stock which were subsequently exchanged for warrants to
purchase 210 shares of Series A Preferred Stock at $4.76 per share. This warrant
vested immediately and expires on December 15, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On December 2, 1993, the Company issued a warrant to Mirza Mehdi to
purchase 6,303 shares of Common Stock at $4.76 per share as compensation for
financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $1,000. This warrant vested immediately
and expires on December 2, 1998. The sale was exempt from registration under the
Act pursuant to Regulation D of the Act.

On December 2, 1993, the Company issued a Convertible Debenture to Sabratek
Holdings I for a purchase price equal to $600,000. The Convertible Debenture
converted into 134,951 shares of Series A Preferred Stock. The sale was exempt
from registration under the Act pursuant to Regulation D of the Act.

On December 2, 1993, in connection with the Company's sale of a Convertible
Debenture, the Company issued a warrant to purchase shares of its Capital Stock
which was subsequently exchanged for a warrant to purchase shares of Series A
Preferred Stock at $4.76 per share to Sabratek Holdings I, which warrant was
subsequently canceled and replaced with warrants to: Charles K. Stewart Money
Purchase Plan, a warrant to purchase 6,152 shares of Series A Preferred Stock,
which warrant was exercised on May 31, 1995; to John Stafford, a warrant to
purchase 5,118 shares of Series A Preferred Stock; to Sabratek Holdings I, a
warrant to purchase 8,824 shares of Series A Preferred Stock; and to Jim
Stafford, a warrant to purchase 5,118 shares of Series A Preferred Stock. These
warrants vested immediately and expire on December 2, 1996. The sales were
exempt from registration under the Act pursuant to Regulation D of the Act.

On November 30, 1993, the Company issued a warrant to purchase 5,725 shares
of Common Stock at $4.76 per share to James W. DeYoung as compensation for
financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $908. This warrant vested immediately
and expires on November 30, 1998. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

On November 30, 1993, the Company issued warrants to
Peterson-Spencer-Fansler Co. to purchase 1,576 shares of Common Stock at $4.76
per share and 3,519 shares of Common Stock at $4.76 per share as compensation
for financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $250. These warrants vested immediately
and expire on November 30, 1998. The sales were exempt from registration under
the Act pursuant to Regulation D of the Act.

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<PAGE> 79

On November 24, 1993, the Company issued a Convertible Debenture to Steven
M. & Rivanna Hyman in the amount of $50,000 for a purchase price equal to the
face amount thereof. This Convertible Debenture was converted into 11,288 shares
of Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On November 24, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Steven M. & Rivanna Hyman to
purchase shares of its Capital Stock which were subsequently exchanged for
warrants to purchase 2,101 shares of Series A Preferred Stock at $4.76 per
share. This warrant vested immediately and expires on November 24, 1996. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On November 22, 1993, the Company issued a Convertible Debenture to Gerald
E., Jr. and Linda Bisbee in the amount of $25,000 for a purchase price equal to
the face amount thereof. This Convertible Debenture was converted into 5,649
shares of Series A Preferred Stock. The sale was exempt from registration under
the Act pursuant to Regulation D of the Act.

On November 22, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Gerald E. Jr., & Linda E. Bisbee to
purchase shares of its Capital Stock which were subsequently exchanged for
warrants to purchase 1,050 shares of Series A Preferred Stock at $4.76 per
share. This warrant vested immediately and expires on November 22, 1996. The
sale was exempt from registration under the Act pursuant to Regulation D of the
Act.

On November 19, 1993, the Company issued a Convertible Debenture to D-W
Investments in the amount of $120,000 for a purchase price equal to the face
amount thereof. This Convertible Debenture was converted into 27,167 shares of
Series A Preferred Stock. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On November 19, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to D-W Investments to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
5,043 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on November 19, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 18, 1993, the Company issued a Convertible Debenture to Vukasin
Pavlovic in the amount of $25,000 for a purchase price equal to the face amount
thereof. This Convertible Debenture was converted into 5,649 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On November 18, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Vukasin Pavlovic to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
1,050 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on November 18, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 17, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: PSF Health Care Fund, L.P., $75,000; P-J Investments,
$100,000; James O. Pohlad, $50,000; Davis D. Fansler, $20,000; and Gordon H. &
Eunice H. Smith, $25,000. The Convertible Debentures converted into 16,995;
22,660; 11,330; 4,532; and 5,665 shares of Series A Preferred Stock
respectively. The sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On November 17, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share: to PSF Health Care Fund, L.P., a
warrant to purchase 3,152 shares of Series A Preferred Stock; to P-J
Investments, a warrant to purchase 4,202 shares of Series A Preferred Stock; to
James O. Pohlad, a warrant to purchase 2,101 shares of Series A Preferred Stock;
to Davis D. Fansler, a warrant to purchase 841 shares of Series A Preferred
Stock; and to

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<PAGE> 80

Gordon H. & Eunice H. Smith, a warrant to purchase 1,050 shares of Series A
Preferred Stock. These warrants vested immediately and expire on November 17,
1996. The sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On November 16, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: Robert D. Stuart, $50,000; Timm R. & Robin S.
Reynolds, $25,000; and Timm R. and Robin S. Reynolds, $25,000. The Convertible
Debentures converted into 11,335; 5,706; and 5,706 shares of Series A Preferred
Stock respectively. The sales were exempt from registration under the Act
pursuant to Regulation D of the Act.

On November 16, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: Robert D. Stuart, Jr., a
warrant to purchase 2,101 shares of Series A Preferred Stock, which warrant was
exercised on May 12, 1995; to Timm R. & Robin S. Reynolds, a warrant to purchase
1,050 shares of Series A Preferred Stock, which warrant was exercised on May 31,
1995; and to Robin S. & Timm R. Reynolds, a warrant to purchase 1,050 shares of
Series A Preferred Stock. These warrants vested immediately and expire on
November 16, 1996. The sales were exempt from registration under the Act
pursuant to Regulation D of the Act.

On November 15, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: PSF Health Care Fund, L.P., $50,000; Gideon Hixon
Fund, $150,000; Paul J. Finnegan, $75,000; and Peter M. Gaines, $25,000. The
Convertible Debentures converted into 11,409; 34,021; 17,010; and 5,670 shares
of Series A Preferred Stock respectively. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 15, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: PSF Health Care Fund, L.P., a
warrant to purchase 2,101 shares of Series A Preferred Stock; to Gideon Hixon
Fund, a warrant to purchase 6,303 shares of Series A Preferred Stock, which
warrant was exercised on May 13, 1995; to Paul J. Finnegan, a warrant to
purchase 3,152 shares of Series A Preferred Stock; and to Peter M. Gaines, a
warrant to purchase 1,050 shares of Series A Preferred Stock. These warrants
vested immediately and expire on November 15, 1996. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On November 12, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: Duncan N. Dayton, $50,000; and Frank D. Mayer, Jr.,
$25,000. The Convertible Debentures converted into 11,356; and 5,678 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On November 12, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: Duncan N. Dayton, a warrant
to purchase 2,101 shares of Series A Preferred Stock; to Frank D. Mayer Jr., a
warrant to purchase 1,050 shares of Series A Preferred Stock; and to Charles R.
Hall, a warrant to purchase 1,050 shares of Series A Preferred Stock. These
warrants vested immediately and expire on November 12, 1996. The sales were
exempt from registration under the Act pursuant to Regulation D of the Act.

On November 11, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: John E. Traeger Trust #1, $25,000; Dwight P. Fawcett,
$12,500; Dwight W. Fawcett, $45,000; Jane F. Dearborn, $12,500; Donald N. &
Adrienne W. Fawcett, $5,000; and D.W. Fawcett, $25,000. The Convertible
Debentures converted into 5,482; 10,225; 2,840; 2,840; 1,136 and 5,479 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On November 11, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for

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<PAGE> 81

warrants to purchase shares of Series A Preferred Stock at $4.76 per share to:
John E. Traeger Trust #1, a warrant to purchase 1,050 shares of Series A
Preferred Stock; to Anne L. Fawcett, a warrant to purchase 1,471 shares of
Series A Preferred Stock; to Dwight W. Fawcett, a warrant to purchase 420 shares
of Series A Preferred Stock; to Jane F. Dearborn, a warrant to purchase 525
shares of Series A Preferred Stock; to Donald N. & Adrienne W. Fawcett, a
warrant to purchase 210 shares of Series A Preferred Stock; to Dwight P,
Fawcett, a warrant to purchase 525 shares of Series A Preferred Stock. These
warrants vested immediately and expire on November 11, 1996. The sales were
exempt from registration under the Act pursuant to Regulation D of the Act.

On November 5, 1993, the Company issued a Convertible Debenture to Davis D.
Fansler in the amount of $15,000 for a purchase price equal to the face amount
thereof. The Convertible Debenture converted into 3,416 shares of Series A
Preferred Stock. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On November 5, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued a warrant to Davis D. Fansler to purchase shares
of its Capital Stock which were subsequently exchanged for warrants to purchase
630 shares of Series A Preferred Stock at $4.76 per share. This warrant vested
immediately and expires on November 5, 1996. The sale was exempt from
registration under the Act pursuant to Regulation D of the Act.

On October 14, 1993, the Company issued Convertible Debentures to the
following individuals and entities each in the amount and for the purchase price
set forth after its name: PSF Health Care Fund, L.P., $50,000; PSF Health Care
Fund, L.P., $100,000; Warren H. Corning #145751 Trust, $100,000; Benson K.
Whitney, $25,000; and Spencer Family Partnership, L.P., $25,000. The Convertible
Debentures converted into 11,493; 22,986; 22,986; 5,678; and 5,678 shares of
Series A Preferred Stock respectively. The sales were exempt from registration
under the Act pursuant to Regulation D of the Act.

On October 14, 1993, in connection with the Company's sale of Convertible
Debentures, the Company issued the following warrants to purchase shares of its
Capital Stock which were subsequently exchanged for warrants to purchase shares
of Series A Preferred Stock at $4.76 per share to: PSF Health Care Fund, L.P., a
warrant to purchase 2,101 shares of Series A Preferred Stock; to PSF Health Care
Fund, L.P., a warrant to purchase 4,202 shares of Series A Preferred Stock; to
Warren H. Corning #145751 Trust, a warrant to purchase 4,202 shares of Series A
Preferred Stock; to Benson K. Whitney, a warrant to purchase 1,050 shares of
Series A Preferred Stock, which warrant was exercised on May 1, 1995; and to
Spencer Family Partnership, L.P., a warrant to purchase 1,050 shares of Series A
Preferred Stock, which warrant was exercised on May 26, 1995. These warrants
vested immediately and expire on October 14, 1996. The sales were exempt from
registration under the Act pursuant to Regulation D of the Act.

On August 24, 1993, the Company issued a Convertible Subordinated Debenture
to Gideon Hixon Fund, L.P. in the amount of $100,000 for a purchase price equal
to the face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On July 15, 1993, the Company issued a warrant to Peterson-Spencer-Fansler
Co. to purchase 3,152 shares of Common Stock at $3.17 per share as compensation
for financial services rendered to the Company. The Company valued the services
received in exchange for this warrant at $500. This warrant vested immediately
and expires on July 15, 1998. The sale was exempt from registration under the
Act pursuant to Regulation D of the Act.

On June 29, 1993, the Company issued a Convertible Subordinated Debenture
to John E. Rogers in the amount of $200,000 for a purchase price equal to the
face amount thereof. The sale was exempt from registration under the Act
pursuant to Regulation D of the Act.

On May 31, 1993, the Company issued warrants to Peterson-Spencer-Fansler
Co. to purchase 735 shares of Common Stock at $4.76 per share, 918 shares of
Common Stock at $11.11 per share and 2,448 shares of Common Stock at $11.11 per
share as compensation for financial services rendered to the Company. The
Company valued the services received in exchange for this warrant at $262. These
warrants vested immediately and expire on May 31, 1998. The warrant for 918
shares of Common Stock and the warrant for

II-12
<PAGE> 82

2,448 shares of Common Stock were exercised on May 31, 1995. The sales were
exempt from registration under the Act pursuant to Regulation D of the Act.

On May 27, 1993, the Company issued a warrant to Mirza Mehdi to purchase
1,009 shares of Common Stock at $11.11 per share as compensation for financial
services rendered to the Company. The Company valued the services received in
exchange for this warrant at $160. This warrant vested immediately and expires
on May 27, 1998. The sale was exempt from registration under the Act pursuant to
Regulation D of the Act.

On May 27, 1993, the Company sold 15,758 shares of Common Stock to Murdoch
& Co. for aggregate consideration of $175,000 in a private transaction in
reliance on Section 4(2) of the Act.

On May 6, 1993, the Company sold 11,031 shares of Common Stock to MLPF&S
CUST FBO Donald India IRA for aggregate consideration of $122,500 in a private
transaction in reliance on Section 4(2) of the Act.

On May 5, 1993, the Company sold 2,206 shares of Common Stock to Noam
Frankel for aggregate consideration of $24,500 in a private transaction in
reliance on Section 4(2) of the Act.

On May 1, 1993, the Company sold 4,502 shares of Common Stock to Koshin
International Corporation for aggregate consideration of $49,997.50 in a private
transaction in reliance on Section 4(2) of the Act.

On April 13, 1993, the Company sold 610 shares of Common Stock to Lewis P.
Smith for aggregate consideration of $6,772.50 in a private transaction in
reliance on Section 4(2) of the Act.

On April 8, 1993, the Company issued the following warrants to purchase
shares of Common Stock at $11.11 per share: to Scott Hodes, in compensation for
services rendered, a warrant to purchase 46 shares of Common Stock; to Upland
Associates, L.P., in compensation for services rendered, a warrant to purchase
229 shares of Common Stock; to Barker, Lee & Co., in compensation for services
rendered, a warrant to purchase 153 shares of Common Stock; and to Namakagon
Associates, L.P., in compensation for services rendered, a warrant to purchase
153 shares of Common Stock. The Company valued the services received in exchange
for this warrant at $92. These warrants vested immediately and expire on April
8, 1998. The sales were exempt from registration under the Act pursuant to
Regulation D of the Act.

On April 8, 1993, the Company sold 10,692 shares of Common Stock to Barker,
Lee & Co., Upland Associates, L.P. and Namakagon Associates, L.P. for aggregate
consideration of $118,744.50 in a private transaction in reliance on Section
4(2) of the Act.

II-13
<PAGE> 83

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<S> <C>
++++ 1.1 Underwriting Agreement
+ 3.1 Amended and Restated Certificate of Incorporation
+ 3.2 Amended and Restated By-Laws
++++ 5.1 Opinion of Ross & Hardies regarding legality of shares of Common Stock
++10.1 Agreement with Americorp Financial, Inc. re: Leasing Services, dated March
22, 1995
++10.2 Agreement with Clintec Nutrition Company re: Development Agreement, dated
September 1, 1995
++10.3 Distributorship Agreement with IV Support Systems Inc., dated April 1, 1994
++10.4 Distributorship Agreement with PCI Medical, Inc., dated July 27, 1992
++10.5 Distributorship Agreement with CO-Medical, Inc., dated February 17, 1992
++10.6 Distributorship Agreement with Clinical Technology Inc., dated August 1,
1992
++10.7 Distributorship Agreement with Bimeco, Inc., dated August 21, 1991
++10.8 Distributorship Agreement with AMTEC Medical, Inc., dated March 31, 1992
++10.9 Distributorship Agreement with Advanced Medical, Inc., dated September 1,
1991
++10.10 Distributorship Agreement with Healthcare Technology, dated October 9, 1991
10.11 Intentionally Omitted
10.12 Intentionally Omitted
++10.13 Pump Contract with Chartwell Home Therapies, dated November 22, 1993
++10.14 Sales Agreement with Pharmacy Corporation of America, dated March 17, 1995
++10.15 Sales & Marketing Agreement with Alpha Group, dated November 6, 1995
++10.16 Foreign Distributorship Agreement with MED-O-GEN INC., dated September 22,
1995
++10.17 Foreign Distributorship Agreement with Yoon Duk Separation Technology, dated
April 17, 1995
++10.18 Foreign Distributorship Agreement with Upwards Biosystems Ltd., dated March
8, 1995
++10.19 Foreign Distributorship Agreement with Grupo Grifols, S.A., dated September
17, 1993
++10.20 Foreign Distributorship Agreement with JMS Company, dated March 22, 1996
++++10.21 Foreign Distributorship Agreement with Brasimpex
++10.22 Foreign Distributorship Agreements with Medicare (s) PTE LTD., dated
February 10, 1995
++10.23 Loan and Security Agreement with Sterling Business Credit, dated February 3,
1995
+10.24 Engagement Letter with EGS Securities Corp., dated September 26, 1995 and
amendments thereto
++10.25 Master Lease Agreement with Comdisco, Inc., dated August 9, 1994
+10.26 Stock Option Plan
++10.27 Lease for Real Property located at 5601 West Howard, Niles, Illinois, dated
as of May 31, 1994
++10.28 Employment Agreement for K. Shan Padda
10.29 Employment Agreement for Anil Rastogi
+++11.1 Computation of Per Share Earnings
23.1 Consent of KPMG Peat Marwick, LLP
++++23.2 Consent of Ross & Hardies (to be included as part of its opinion to be filed
as Exhibit 5.1 hereto)
</TABLE>

II-14
<PAGE> 84

++24.1 Powers of Attorney

- ---------------

+ Originally filed as an Exhibit to the Registration Statement on Form S-1 on
April 22, 1996, refiled as an Exhibit to Amendment No. 1 on May 30, 1996.

++ Filed as an Exhibit to the Registration Statement on Form S-1 on April 22,
1996.

+++ Originally filed as an Exhibit to Amendment No. 1 to the Registration
Statement on Form S-1 on May 30, 1996, being refiled to provide additional
information.

++++ Filed as an Exhibit to Amendment No. 1 to the Registration Statement on
Form S-1 on May 30, 1996.

(b) Financial Statement Schedules

The following financial statement schedules, which are not included in the
Prospectus, appear on the following pages of this Registration Statement:

<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
Schedule II -- Valuation and Qualifying Accounts............................. S-3
</TABLE>

II-15
<PAGE> 85

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Act may be
provided to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has 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 the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant 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
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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-16
<PAGE> 86

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Niles,
State of Illinois, on June 14, 1996.

SABRATEK CORPORATION

By: /s/ K. SHAN PADDA

------------------------------------
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities indicated on June 14, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
<C> <S>
/s/ K. SHAN PADDA Chairman of the Board and Chief Executive
- --------------------------------------------- Officer
K. Shan Padda
/s/ ANIL RASTOGI* President and Chief Operating Officer
- ---------------------------------------------
Anil Rastogi
/s/ DORON C. LEVITAS* Vice Chairman of the Board, Vice
- --------------------------------------------- President -- International Operations and
Doron C. Levitas Secretary
/s/ SCOTT SKOOGLUND Vice President -- Finance and Assistant
- --------------------------------------------- Secretary, Principal Financial Officer and
Scott Skooglund Principal Accounting Officer
/s/ WILLIAM D. LAUTMAN* Director
- ---------------------------------------------
William D. Lautman
/s/ L. PETER SMITH* Director
- ---------------------------------------------
L. Peter Smith
/s/ SCOTT HODES* Director
- ---------------------------------------------
Scott Hodes
/s/ EDSON SPENCER, JR.* Director
- ---------------------------------------------
Edson Spencer, Jr.
/s/ MARVIN SAMSON* Director
- ---------------------------------------------
Marvin Samson
/s/ WILLIAM H. LOMICKA* Director
- ---------------------------------------------
William H. Lomicka
Director
- ---------------------------------------------
Mark Lampert
</TABLE>

- ---------------
* Signed by K. Shan Padda pursuant to power of attorney

II-17
<PAGE> 87

INDEX TO FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Independent Auditors' Report............................................................. S-2
Schedule II -- Valuation and Qualifying Accounts.................................. S-3
</TABLE>

S-1
<PAGE> 88

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Sabratek Corporation:

Under date of April 8, 1996 except as to note 17 which is as of June 10,
1996, we reported on the balance sheets of Sabratek Corporation as of December
31, 1994 and 1995, and the related statements of operations, stockholders'
equity (deficit), and cash flows for each of the years in the three year period
ended December 31, 1995, which are included in the prospectus. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedule in the registration statement. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole present fairly, in
all material respects, the information set forth therein.

KPMG Peat Marwick LLP

Chicago, Illinois,
April 8, 1996, except as to note 17

which is as of June 10, 1996

S-2
<PAGE> 89

SABRATEK CORPORATION

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
---------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
December 31, 1993...................... $ -- -- -- -- $ --
December 31, 1994...................... -- -- -- -- --
December 31, 1995...................... -- 187,969 -- -- 187,969
</TABLE>

S-3
<PAGE> 90

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
--------- ----------------------------------------------------------------- ------------
<C> <S> <C>
++++1.1 Underwriting Agreement...........................................
+ 3.1 Amended and Restated Certificate of Incorporation................
+ 3.2 Amended and Restated By-Laws.....................................
++++5.1 Opinion of Ross & Hardies regarding legality of shares of Common
Stock............................................................
++10.1 Agreement with Americorp Financial, Inc. re: Leasing Services,
dated March 22, 1995.............................................
++10.2 Agreement with Clintec Nutrition Company re: Development
Agreement, dated September 1, 1995...............................
++10.3 Distributorship Agreement with IV Support Systems Inc., dated
April 1,
1994.............................................................
++10.4 Distributorship Agreement with PCI Medical, Inc., dated July 27,
1992.............................................................
++10.5 Distributorship Agreement with CO-Medical, Inc., dated February
17,
1992.............................................................
++10.6 Distributorship Agreement with Clinical Technology Inc., dated
August 1,
1992.............................................................
++10.7 Distributorship Agreement with Bimeco, Inc., dated August 21,
1991.............................................................
++10.8 Distributorship Agreement with AMTEC Medical, Inc., dated March
31,
1992.............................................................
++10.9 Distributorship Agreement with Advanced Medical, Inc., dated
September 1, 1991................................................
++10.10 Distributorship Agreement with Healthcare Technology, dated
October 9,
1991.............................................................
10.11 Intentionally Omitted............................................
10.12 Intentionally Omitted............................................
++10.13 Pump Contract with Chartwell Home Therapies, dated November 22,
1993.............................................................
++10.14 Sales Agreement with Pharmacy Corporation of America, dated March
17, 1995.........................................................
++10.15 Sales & Marketing Agreement with Alpha Group, dated November 6,
1995.............................................................
++10.16 Foreign Distributorship Agreement with MED-O-GEN INC., dated
September 22, 1995...............................................
++10.17 Foreign Distributorship Agreement with Yoon Duk Separation
Technology, dated April 17, 1995.................................
++10.18 Foreign Distributorship Agreement with Upwards Biosystems Ltd.,
dated March 8, 1995..............................................
++10.19 Foreign Distributorship Agreement with Grupo Grifols, S.A., dated
September 17, 1993...............................................
++10.20 Foreign Distributorship Agreement with JMS Company, dated March
22,
1996.............................................................
++++10.21 Foreign Distributorship Agreement with Brasimpex.................
++10.22 Foreign Distributorship Agreements with Medicare (s) PTE LTD.,
dated February 10, 1995..........................................
</TABLE>

<PAGE> 91

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
--------- ----------------------------------------------------------------- ------------
<C> <S> <C>
++10.23 Loan and Security Agreement with Sterling Business Credit, dated
February 3, 1995.................................................
+10.24 Engagement Letter with EGS Securities Corp., dated September 26,
1995 and amendments thereto......................................
++10.25 Master Lease Agreement with Comdisco, Inc., dated August 9,
1994.............................................................
+10.26 Stock Option Plan................................................
++10.27 Lease for Real Property located at 5601 West Howard, Niles,
Illinois, dated as of May 31, 1994...............................
++10.28 Employment Agreement for K. Shan Padda...........................
10.29 Employment Agreement for Anil Rastogi............................
+++11.1 Computation of Per Share Earnings................................
23.1 Consent of KPMG Peat Marwick LLP.................................
++++23.2 Consent of Ross & Hardies (to be included as part of its opinion
to be filed as Exhibit 5.1 hereto)...............................
++24.1 Powers of Attorney...............................................
</TABLE>

- ---------------

+ Originally filed as an Exhibit to the Registration Statement on Form S-1 on
April 22, 1996, refiled as an Exhibit to Amendment No. 1 on May 30, 1996.

++ Filed as an Exhibit to the Registration Statement on Form S-1 on April 22,
1996.

+++ Originally filed as an Exhibit to Amendment No. 1 to Registration Statement
on Form S-1 on May 30, 1996, being refiled to provide additional
information.

++++ Filed as an Exhibit to Amendment No. 1 to the Registration Statement on
Form S-1 on May 30, 1996.

<PAGE> 1
EXHIBIT 10.29

[SABRATEK LETTERHEAD]

POSITION: Chief Operating Officer and President.

RESPONSIBILITY: General Manager with direct reports from all operational
VP's. P/L responsibility. Report directly to the
Chairman of the Board and CEO.

BASE SALARY: 130K/yr.

CASH BONUS: 25K/yr for hitting 80% of plan, up to an additional
25k/yr for hitting plan. The bonus amount between 80%
and 100% of plan will be prorated. For example hitting
90% of plan entitles you to base 25K bonus plus 12.5K
additional bonus. Measurement of performance against
plan is 50% against top-line, 50% against pre-tax net
income.

OPTIONS: 225,000 shares of common stock at the strike price of
$1.50. This price reflects the price of last falls
fundraising round (September 1994). The stock would vest
in 3 equal annual installments.

All options will vest immediately in the case of either
change in ownership or an initial public offering.

ADDITIONAL BENEFITS: Health Insurance.
Standard coverage for all employees which means 80%
contribution by Sabratek for employee coverage only.
Insurance provided by Blue Cross/Blue Shield of
Illinois. Coverage for other family members can be
purchased at the Sabratek rate.

VACATION: 1.) 4 weeks per calendar year.
2.) Standard sick days and personal days.
(About total of 10 working days/year).

MOVING AND
RELOCATION: The company will pay all actual moving and relocation
expenses from Minneapolis to the Chicago area including
moving of house hold goods, real estate commissions and
closing costs. This is anticipated to happen in 12 to 18
months.

The company will rent a one bedroom furnished apartment
for temporary housing until the family moves to Chicago.

The company will pay for two round trip tickets per
month from Chicago to Minneapolis until the family moves
to Chicago.

SEVERANCE AND
OTHER ISSUES: 1.) Non-compete for 6 months.
2.) Dismissal for cause, no severance benefits.
3.) Dismissal for no cause entitles you to the
following:
A) One year salary.
B) Accelerated vesting of stock up to the next
milestone on a pro-rata basis. For example: If it
were to happen 18 months after start, 33% of stock
options would have already vested after 12 months
and you would have an additional 33% vest
immediately.

Shan Padda Anil K. Rastogi
- ------------------------------ -------------------------------
Shan Padda Anil K. Rastogi
Chairman of the Board and CEO

7/15/95
See attached letter of non-divulgence of Deltec intellectual property.

<PAGE> 1

EXHIBIT 11.1

SABRATEK CORPORATION

EXHIBIT 11.1 -- STATEMENT RE COMPUTATION OF SHARE EARNINGS

<TABLE>
<CAPTION>
SUPPLEMENTAL PRO FORMA PRO FORMA
NET LOSS PER SHARE NET LOSS PER SHARE
-------------------------------------- --------------------------------------
YEAR ENDED THREE MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996 DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Net Loss....................... $(6,036,335) $ (1,715,738) $(6,036,335) $ (1,715,738)
Adjustment to interest expense
assuming conversion of debt
at beginning of period....... 113,867 77,115 113,867 77,115
Adjustment to interest expense
assuming use of offering
proceeds to reflect repayment
of debt...................... 61,475 21,150 -- --
----------- ------------ ----------- -----------
Adjusted net loss.............. $(5,860,993) $ (1,617,473) $(5,922,468) $ (1,638,623)
=========== ============ =========== ===========
Weighted average shares used to
compute pro forma net loss
per share:
Weighted average common
shares outstanding........ 1,622,283 1,717,899 1,622,283 1,717,899
Weighted average preferred
shares
outstanding -- assuming
conversion................ 1,747,231 1,838,114 1,747,231 1,838,114
Weighted average convertible
subordinated debentures --
assuming conversion....... 322,209 612,358 322,209 612,358
Additional shares pursuant to
SAB83 computation......... 2,917,848 2,441,200 2,917,848 2,441,200
Adjustment to shares assuming
use of offering proceeds
to reflect repayment of
debt...................... 79,167 79,167 -- --
----------- ------------ ----------- -----------
6,688,738 6,688,738 6,609,571 6,609,571
=========== ============ =========== ===========
Net loss per share............. $ (0.88) $ (0.24) $ (0.90) $ (0.25)
=========== ============ =========== ===========
</TABLE>

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Sabratek Corporation:

We consent to the use of our reports included herein and to the
reference to our firm under the headings "SELECTED FINANCIAL DATA" and
"EXPERTS" in the prospectus.

KPMG Peat Marwick LLP

Chicago, Illinois
June 14, 1996