<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SABRATEK CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
DAVID S. GUIN, ESQ.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SABRATEK LOGO
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders (the
"Annual Meeting"), of Sabratek Corporation (the "Company"). The Annual Meeting
will be held at the Midland Hotel, 172 West Adams Street, Chicago, Illinois
60603, on June 10, 1997, at 3:30 p.m., local time.
At the Annual Meeting, you will be asked to consider and vote upon four
proposals: (i) to elect three directors to hold office for a three-year term
(ii) to further amend the Company's Amended and Restated 1993 Employee Stock
Option Plan to increase the number of shares of common stock for which options
may be granted thereunder and to otherwise amend the 1993 Employee Stock Option
Plan as permitted by recent amendments to the Federal securities laws, (iii) to
approve the Company's Employee Stock Purchase Plan and (iv) to transact such
other business as may properly come before the Annual Meeting and any
adjournment thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE (I) FOR ALL OF THE NOMINEES FOR ELECTION AS DIRECTORS AT THE
ANNUAL MEETING, (II) FOR THE AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
1993 EMPLOYEE STOCK OPTION PLAN AND (III) FOR THE APPROVAL OF THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN.
In the materials accompanying this letter, you will find a Notice of Annual
Meeting of Stockholders, a Proxy Statement relating to the actions to be taken
at the Annual Meeting and a proxy. The Proxy Statement includes certain
information about the Company which you should consider in connection with the
actions to be taken at the Annual Meeting. Also included along with the proxy
materials is the Company's Annual Report to Stockholders.
All stockholders are invited to attend the Annual Meeting in person.
However, whether or not you plan to attend the Annual Meeting, please complete,
sign, date and return your proxy in the enclosed envelope. If you attend the
Annual Meeting, you may vote in person if you wish, even though you have
previously returned your proxy. It is important that your shares be represented
and voted at the Annual Meeting.
Sincerely,
K. Shan Padda
K. Shan Padda
Chairman
May 5, 1997
<PAGE> 3
SABRATEK CORPORATION
5601 West Howard
Niles, Illinois 60714
(847) 647-2760
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To our Stockholders
The annual meeting of stockholders (the "Annual Meeting") of Sabratek
Corporation, a Delaware corporation ("Sabratek" or the "Company") will be held
at the Midland Hotel, 172 West Adams Street, Chicago, Illinois 60603, on
Tuesday, June 10, 1997 at 3:30 p.m. local time, for the following purposes:
1. To elect three directors to hold office for a three-year term (Proposal
No. 1);
2. To further amend the Company's Amended and Restated 1993 Employee Stock
Option Plan to increase the number of shares of common stock for which
options may be granted thereunder and to otherwise amend the 1993
Employee Stock Option Plan as permitted by recent amendments to the
Federal securities laws (Proposal No. 2).
3. To approve the Company's Employee Stock Purchase Plan (Proposal No. 3).
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
Only stockholders of record of the Company at the close of business on
April 25, 1997 are entitled to notice of and to vote at the Annual Meeting.
Sabratek hopes that as many stockholders as possible will personally attend
the Annual Meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE THE ENCLOSED PROXY AND SIGN, DATE AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED (WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES) SO
THAT YOUR SHARES WILL BE REPRESENTED. Sending in your proxy will not prevent you
from voting in person at the Annual Meeting.
By Order of the Board of Directors,
K. Shan Padda
K. SHAN PADDA, Chairman
Niles, Illinois
May 5, 1997
<PAGE> 4
SABRATEK CORPORATION
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the annual meeting of stockholders (the "Annual Meeting") of
Sabratek Corporation ("Sabratek" or the "Company") to be held at the Midland
Hotel, 172 West Adams Street, Chicago, Illinois 60603 at 3:30 p.m. local time,
on Tuesday, June 10, 1997 and at any adjournments thereof.
THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY (THE "BOARD") AND IS REVOCABLE BY THE STOCKHOLDER AT ANY TIME
BEFORE IT IS VOTED.
This Proxy Statement was first mailed to stockholders of the Company on or
about May 5, 1997, accompanied by the Company's 1996 Annual Report to
Stockholders. The principal executive offices of the Company are located at 5601
West Howard, Niles, Illinois 60714, telephone (847) 647-2760.
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of the Company at the close of business on April 25, 1997
(the "Record Date") are entitled to receive notice of and vote at the Annual
Meeting. As of the Record Date, the number and classes of stock that were
outstanding and will be entitled to vote at the meeting were 9,769,147 shares of
Common Stock, $.01 par value (the "Common Stock" or "Common Shares"). Each
Common Share is entitled to one vote on all matters. No other class of
securities will be entitled to vote at the Annual Meeting. There are no
cumulative voting rights.
To be elected, a director must receive a plurality of the votes of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors (Proposal No. 1 on the Proxy). The
affirmative vote of at least a majority of the Common Shares present in person
or by proxy and entitled to vote at the Annual Meeting, whether or not a quorum
is present when the vote is taken, is necessary for the approval of Proposal
Nos. 2 and 3. The Company's bylaws provide that a quorum is representation in
person or by proxy at the Annual Meeting of at least one half of the issued and
outstanding shares entitled to vote as of the Record Date.
Pursuant to the Delaware General Corporation Law, only votes cast "For" a
matter constitute affirmative votes. Further, under Delaware law, proxies which
are voted by marking "Withheld" or "Abstain" on a particular matter are counted
for quorum purposes, but since they are not cast "For" a particular matter, they
will have the same effect as negative votes or votes "Against" a particular
matter. If a validly executed proxy is not marked to indicate a vote on a
particular matter and the proxy granted thereby is not revoked before it is
voted, it will be voted "For" such matter. Where brokers are prohibited from
exercising discretionary authority for beneficial owners who have not provided
voting instructions (commonly referred to as "broker non-votes"), such broker
non-votes will be treated as shares that are present for purposes of determining
the presence of a quorum, but will be treated as not present for purposes of
determining the outcome of any matter as to which the broker does not have
authority to vote.
VOTING OF PROXIES
The Proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors for use at the Annual Meeting. Stockholders are requested to
complete, sign and date the accompanying proxy and promptly return it in the
accompanying postage paid envelope or otherwise mail it to the Company. K. Shan
Padda and Stephen L. Holden, the persons named as proxies on the proxy
accompanying this Proxy Statement, were selected by the Board of Directors to
serve in such capacity. The shares represented by a proxy which is properly
signed, dated, returned and not revoked will be voted in accordance with the
instructions contained therein, or, if no direction is indicated, will be voted
to approve all of the proposals recommended by the Board of Directors as
indicated herein. The Board of Directors presently does not intend to bring any
matter before the Annual Meeting except those referred to in this Proxy
Statement and specified in the Notice of Annual Meeting, nor does the Board of
Directors know of any matters which anyone else
<PAGE> 5
proposes to present for action at the Annual Meeting. However, if any other
matters properly come before the Annual Meeting, the persons named in the
accompanying proxy, or their duly constituted substitutes acting at the Annual
Meeting, will be authorized to vote or otherwise act thereon in accordance with
their judgment and discretion; provided, however, that proxies directing a vote
against a proposal may not be voted, pursuant to such discretionary authority,
for a proposal to adjourn the Annual Meeting in order to permit further
solicitation with respect to such proposal.
Each stockholder giving a proxy has the power to revoke it at any time
before the shares it represents are voted. Revocation of a proxy is effective
upon receipt by the Vice President of Finance and Assistant Secretary of the
Company at 5601 West Howard, Niles, Illinois 60714, of either (i) a written
notice, duly executed by the stockholder, stating that the proxy is revoked or
(ii) a duly executed proxy bearing a later date. Additionally, a stockholder may
revoke a previously executed proxy by voting in person at the Annual Meeting
(although attendance at the Annual Meeting will not, by itself, revoke a proxy).
SOLICITATION EXPENSES
The expenses of preparing and mailing this Proxy Statement and the
accompanying form of proxy and the cost of solicitation of proxies will be borne
by the Company. In addition to the use of mailings, proxies may be solicited by
personal interview, telephone and telegraph, and by directors, officers and
regular employees of the Company, without special compensation therefor. The
Company expects to reimburse banks, brokers and other persons for their
reasonable out-of-pocket expenses in handling proxy materials for beneficial
owners of the Company's Common Stock.
[Remainder of this page intentionally left blank.]
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock as of April 25, 1997, for (i) each officer of the
Company, (ii) each director and nominee for 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,
directors and nominees for director of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED(1) OUTSTANDING SHARES
---- --------------------- ------------------
<S> <C> <C>
OFFICERS:
K. Shan Padda(2)............................................ 478,705 4.388%
Doron C. Levitas(3)......................................... 425,961 3.904%
Stephen L. Holden(4)........................................ 27,500 *
Anil K. Rastogi, Ph.D.(5)................................... 70,548 *
Alan E. Jordan(6)........................................... 123,854 1.136%
Scott Skooglund(7).......................................... 12,606 *
Joseph Moser(8)............................................. 18,910 *
Vincent J. Capponi(9)....................................... 5,916 *
Elliot R. Mandell(10)....................................... 40,000 *
DIRECTORS:
Scott Hodes(11)............................................. 64,079 *
Mark Lampert(12)............................................ 7,879 *
William D. Lautman(13)...................................... 175,313 1.607%
William H. Lomicka(14)...................................... 84,434 *
Marvin Samson(15)........................................... 24,115 *
L. Peter Smith(16).......................................... 42,028 *
Edson W. Spencer, Jr.(17)................................... 93,913 *
NOMINEES:
Francis V. Cook, M.D.(18)................................... 210,105 1.926%
5% STOCKHOLDERS:
MSI, Inc.(19)............................................... 758,631 6.953%
Charles K. Stewart(20)...................................... 507,688 4.653%
The Kaufman Fund, Inc.(21).................................. 802,500 7.355%
All Officers, Directors and nominees for Director as a group
(17 persons).............................................. 1,905,966 17.469%
</TABLE>
- -------------------------
* Less than 1% of the issued and outstanding shares of the Common Stock of
the Company.
(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.
Percentage of beneficial ownership is based on 10,910,389 shares of Common
Stock outstanding as of April 25, 1997, including shares of Common Stock
subject to options and warrants that are currently exercisable or
exercisable within 60 days, which are deemed to be outstanding and to be
beneficially owned by the person holding such options or warrants.
(2) Includes 87,278 shares subject to options exercisable within 60 days.
(3) Includes 24,321 shares subject to options exercisable within 60 days.
(4) Includes 27,500 shares subject to options exercisable within 60 days.
(5) Includes 70,548 shares subject to options exercisable within 60 days.
(6) Includes 123,954 shares subject to options exercisable within 60 days.
(7) Includes 12,606 shares subject to options exercisable within 60 days.
3
<PAGE> 7
(8) Includes 18,910 shares subject to options exercisable within 60 days.
(9) Includes 5,916 shares subject to options exercisable within 60 days.
(10) Includes 40,000 shares subject to options exercisable within 60 days.
(11) Includes 24,080 shares subject to options exercisable within 60 days and 46
shares issuable upon exercise of warrants.
(12) Includes 7,879 shares subject to options exercisable within 60 days.
(13) Includes 21,115 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.
(14) Includes 21,824 shares subject to options exercisable within 60 days and
3,152 shares issuable upon exercise of warrants.
(15) Includes 21,115 shares subject to options exercisable within 60 days. Mr.
Samson disclaims beneficial ownership of shares owned by MSI, Inc., a
subsidiary of Marsam.
(16) Includes 34,115 shares subject to options exercisable within 60 days.
(17) Includes 20,830 shares subject to options exercisable within 60 days, 2,266
shares issuable upon exercise of warrants, 3,366 shares held of record by
Peterson-Spencer-Fansler Company ("PSF Co."), of which Mr. Spencer is a
principal, 8,372 shares issuable upon exercise of warrants held by PSF Co.,
33,098 shares held by PSF HealthCare Fund, L.P. ("PSF Health") of which Mr.
Spencer is the managing partner, and 12,153 shares held of record by
Spencer Family Partnership, L.P. Excludes 5,253 shares held of record by
Valerie Spencer, Mr. Spencer's wife, 1,719 shares held of record by Valerie
C. Spencer Trust #3 U/A 8/24/84, Valerie C. Spencer & Edward J. Stewart,
III TTEE, 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, Valerie C. Spencer Trust #3 and the WHC #145751
Trust.
(18) Includes 168,084 shares held in the name of PaineWebber, Inc. as custodian
for Francis V. Cook, IRA.
(19) Includes 318,667 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.
(20) Includes 3,939 shares subject to options exercisable within 60 days,
271,738 shares held of record by Charles K. Stewart Money Purchase Plan.
Mr. Stewart's address is 401 South LaSalle Street, Suite 1502, Chicago,
Illinois 60605.
(21) The Kaufman Fund's address is 140 E. 45th Street, New York, New York 10017.
4
<PAGE> 8
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation of the Company
provides that the Board of Directors of the Company shall be divided into three
classes, as nearly equal in number as possible, with one class being elected
each year for a three-year term. At the Annual Meeting of Stockholders, three
Class I directors are to be elected to serve until 2000 and six directors will
continue to serve in accordance with their prior election or appointment.
It is intended that the proxies (except proxies marked to the contrary)
will be voted for the nominees listed below, all of whom, except for Francis V.
Cook, M.D., are members of the present Board of Directors. It is expected that
the nominees will serve, but if any nominee declines or is unable to serve for
any unforeseen cause, the proxies will be voted to fill any vacancy so arising
in accordance with the discretionary authority of the persons named in the
proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CLASS I NOMINEES.
NOMINEE AND CONTINUING DIRECTORS
The following table sets forth certain information with respect to the
nominees and the continuing directors:
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
CLASS I NOMINEES FOR ELECTION WITH TERM EXPIRING IN 2000
Francis V. Cook, M.D. (52)........... N.A. Since September, 1994 Dr. Cook has been
Chief, Division of Infectious Diseases;
Hospital Epidemiologist and a member of the
Senior Attending Staff of Evanston Hospital
Corporation and its affiliates. Dr. Cook is
also an Assistant Professor of Clinical
Medicine at Northwestern University Medical
School; and an Associate of the Evanston
Northwestern Healthcare Faculty Practice
Associates. From July 1978 until joining
Evanston Hospital Corporation, Dr. Cook was
affiliated with North Suburban Internists.
Dr. Cook is Past President and current
Chairman of the Executive Committee of the
professional staff of Evanston Hospital
Corporation. He is also a director of the
following: Visiting Nurse Association North;
Evanston/Glenbrook Hospitals Home Services
and the Evanston Hospital Corporation
Physician Practice Division and is a member
of the Executive Committee of the Board of
Evanston Hospital Corporation. Dr. Cook is a
licensed Physician in Illinois and holds
Specialty Board certifications from the
American Board of Internal Medicine in
Infectious Disease and Internal Medicine and
is a member of the American College of
Physicians, the Infectious Disease Society
of America and the Chicago area Infectious
Disease Society. Dr. Cook graduated from
Northwestern University and has a M.D.
degree from the Medical College of
Wisconsin.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
L. Peter Smith (48).................. October, 1992 Mr. 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. (42)........... April, 1993 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.
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
CLASS II DIRECTORS WITH TERMS EXPIRING IN 1998
Mark Lampert (36).................... May, 1996 Mr. 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 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 (34).............. September, 1994 Mr. 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 is a director of One Call Medical,
Inc. 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.
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
William H. Lomicka (60).............. October, 1994 Mr. 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: Regal Cinemas, Inc.,
and Vencor, Inc.
CLASS III DIRECTORS WITH TERMS EXPIRING IN 1999
K. Shan Padda (34)................... December, 1989 Mr. 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.
Doron C. Levitas (39)................ December, 1989 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 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.
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
Marvin Samson (55)................... September, 1994 Mr. 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 injectable 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 injectable products.
Mr. Samson is a director of Community
National Bank. Mr. Samson graduated from
Temple University with a B.S. in Chemistry.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES NAMED ABOVE. (PROPOSAL NO. 1 ON THE PROXY CARD).
[Remainder of this page intentionally left blank.]
9
<PAGE> 13
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
Three regular and three special meetings of the Company's Board of
Directors were held during the fiscal year ended December 31, 1996. No incumbent
director failed to attend at least 75% of the total number of meetings of the
Board or any Committees of the Board of which he was a member, held during the
period in such fiscal year during which he was a director or a member of any
such Committee, as the case may be.
INFORMATION CONCERNING COMMITTEES OF THE BOARD
The only Committees of the Company's Board are the Audit Committee and
Compensation Committee.
The Audit Committee which is comprised entirely of outside directors is
comprised of Messrs. Lautman and Lomicka. The Audit Committee oversees the work
performed by the Company's independent auditors, and reviews internal audit
controls. The Audit Committee held 2 meetings during the fiscal year ended
December 31, 1996.
The Compensation Committee which is composed entirely of outside directors
is comprised of Messrs. Samson, Smith and Spencer. 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. There were three meetings of
the Compensation Committee during the fiscal year ended December 31, 1996.
DIRECTORS' COMPENSATION
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, 1996. 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.
10
<PAGE> 14
DIRECTORS' STOCK OPTIONS
During the year ended December 31, 1996, the Company granted options to
purchase Common Stock under the 1993 Plan exercisable at a price equal to the
fair market value of the Company's Common Stock on the date of grant, to the
following directors:
<TABLE>
<CAPTION>
GRANTED JANUARY 5, 1996 GRANTED MAY 6, 1996
------------------------------ ------------------------------
NAME NO. OF SHARES EXERCISE PRICE NO. OF SHARES EXERCISE PRICE
---- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
K. Shan Padda............................. 126,064 $4.76 0(1) $9.80
Doron C. Levitas.......................... 47,274 $4.76 0 $9.80
Scott Hodes............................... 7,091 $4.76 7,879 $9.80
Mark Lampert.............................. 0 $4.76 7,879 $9.80
William D. Lautman........................ 5,200 $4.76 1,733 $9.80
William H. Lomicka........................ 5,436 $4.76 2,206 $9.80
Marvin Samson............................. 7,564 $4.76 1,733 $9.80
L. Peter Smith............................ 7,564 $4.76 8,824 $9.80
Edson W. Spencer, Jr...................... 5,436 $4.76 9,297 $9.80
</TABLE>
- -------------------------
(1) K. Shan Padda received an additional grant of 31,516 options at an exercise
price of $9.80 on March 15, 1996.
REPORTING OF SECURITIES TRANSACTIONS
Ownership of and transactions in the Company's stock by executive officers
and directors of the Company and owners of 10% or more of the Company's
outstanding Common Stock are required to be reported to the Securities and
Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The information provided in this
paragraph is based, in part, upon information provided to the Company by the
reporting person. For the fiscal year ended December 31, 1996, Stephen L. Holden
inadvertently filed a Form 3 reporting his options granted under the 1993 Plan
after its due date and Edson W. Spencer inadvertently filed a Form 4 reporting a
distribution from the PSF Healthcare Fund, L.P., with which he is affiliated,
after its due date. Both such reports have been filed prior to the date of this
Proxy Statement.
11
<PAGE> 15
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
The following is a description of the background of the executive officers
of the Company who are not directors:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Anil K. Rastogi, Ph.D. (53)....... August, 1995 Dr. Rastogi 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.
Alan E. Jordan (53)............... February, 1991 Mr. 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.
Stephen L. Holden (43)............ August, 1996 Mr. Holden has served as Senior Vice
President and Chief Financial Officer of the
Company since August, 1996. Prior thereto,
from 1993 to 1996, Mr. Holden was Chief
Operating Officer of a unit of Value Health,
Inc., a provider of specialty managed care.
From 1976 to 1993, Mr. Holden was with
American Hospital Supply Corporation, Baxter
Healthcare Corporation and Caremark, Inc.,
where he served in a number of financial,
systems and operating roles. Mr. Holden
holds a B.A. in Economics and an M.S.B.A. in
finance from the University of Denver and is
a Certified Public Accountant.
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Scott Skooglund (38).............. November, 1992 Mr. 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 (43)................. March, 1994 Mr. 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.
Vincent J. Capponi (38)........... April, 1996 Mr. 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.
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Elliot R. Mandell (41)............ February, 1997 Mr. Mandell was elected a Vice President of
Sabratek upon the Company's acquisition of
Rocap in February, 1997. Mr. Mandell founded
Rocap in 1995 and served as its President
until its acquisition by Sabratek. Prior
thereto, Mr. Mandell served as corporate
director of clinical services for the Yankee
Alliance of Hospitals, an affiliation of
hospitals located in Andover, Massachusetts.
Previously, Mr. Mandell spent 14 years in
various clinical capacities with the New
England General Hospital. Mr. Mandell holds
a B.S. in Pharmacy from the Massachusetts
College of Pharmacy and also an M.B.A. from
the New Hampshire College Graduate School of
Business.
</TABLE>
[Remainder of this page intentionally left blank.]
14
<PAGE> 18
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 years ended December 31, 1995 and 1996 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
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
BONUS ($) COMPENSATION OPTIONS (#) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) (1) ($) (2) ($)
- --------------------------- ---- ---------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
K. Shan Padda.............. 1996 150,000 90,000 10,800(3) 157,580 --
Chairman, Chief Executive 1995 90,000 -- -- 157,580 --
Officer and Treasurer
Anil K. Rastogi, Ph.D. .... 1996 143,000 107,200 -- 31,516 --
President and Chief 1995 52,500(4) -- -- 70,911 --
Operating Officer
Doron C. Levitas........... 1996 120,000 24,000 -- 47,274 --
Vice Chairman and Vice 1995 90,000 -- -- 94,548 --
President of
International Operations
Alan E. Jordan............. 1996 132,000 26,400 426,533(5) 47,274 --
Senior Vice President of 1995 124,980 -- 22,939(6) 107,154 --
Sales and Marketing
Stephen L. Holden.......... 1996 50,053(7) 21,000 -- 55,000 --
Senior Vice President and 1995 -- -- -- -- --
Chief Financial Officer
</TABLE>
- -------------------------
(1) The Board adopted a bonus plan for 1996 and subsequent years, with bonuses
to be paid at the discretion of the Compensation Committee.
(2) Represents shares of Common Stock underlying stock options granted during
1995 and 1996 pursuant to the Stock Option Plan.
(3) Represents Mr. Padda's housing allowance as provided for in his employment
agreement.
(4) Mr. Rastogi joined the Company in August 1995.
(5) Represents $89,594 in commissions plus $336,939 in forgiveness of
indebtedness to the Company.
(6) Represents commissions paid by the Company.
(7) Mr. Holden joined the Company in August 1996.
15
<PAGE> 19
The following table sets forth certain information with respect to options
granted to the Named Executive Officers during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED
OPTIONS GRANTED TO EMPLOYEES IN EXERCISE PRICE GRANT DATE
NAME (#) 1996 ($/SH)(1) EXPIRATION DATE(2) VALUE(3)
---- --------------- --------------- -------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
K. Shan Padda........... 157,580 35.9% $4.76/$9.80 1/05/06, 3/15/06 $606,999
Anil K. Rastogi, Ph.D... 31,516 7.2% $4.76 01/05/06 100,221
Alan E. Jordan.......... 47,274 10.8% $4.76 01/05/06 150,331
Stephen L. Holden....... 55,000 12.5% $8.38 08/09/06 307,450
Doron C. Levitas........ 47,274 10.8% $4.76 01/05/06 150,331
</TABLE>
- -------------------------
(1) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, as determined by the Board.
(2) Some of the options granted to the Named Executive Officers are subject to
vesting and, accordingly, may expire before the dates indicated.
(3) Calculation based on the Black-Scholes model.
The following table sets forth certain information with respect to the
unexercised options held by the Named Executive Officers as of December 31,
1996. No options were exercised by the Named Executive Officers during 1996.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT YEAR-END YEAR-END 1996($)
ON EXERCISE VALUE REALIZED 1996(#) EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
K. Shan Padda.............. -- -- 39,395/275,765 $438,072/3,090,065
Anil K. Rastogi, Ph.D...... -- -- 70,911/31,516 788,530/350,458
Alan E. Jordan............. -- -- 50,425/104,003 560,726/1,156,513
Stephen L. Holden.......... -- -- 13,750/41,250 103,125/309,375
Doron C. Levitas........... -- -- 23,637/118,185 262,843/1,314,217
</TABLE>
- -------------------------
(1) Calculated based on stock price at December 31, 1996 of $15.88.
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 1,323,668 shares of
Common Stock. The Plan is administered by the compensation committee of the
Board of Directors (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. At the Annual Meeting, stockholders will
be asked to approve a proposal to increase the number of shares for which
options may be granted from 1,328,668 to 3,800,000.
16
<PAGE> 20
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Company's executive officers' compensation has been determined by the
Company's Chairman and reviewed by the Compensation Committee of the Board.
Compensation for the Company's executives, for the fiscal year ended December
31, 1996 was established in this manner, except for long-term incentive
compensation in the form of stock option grants which was established by the
Compensation Committee and approved by the Board of Directors. Compensation for
the Chairman for fiscal 1996 was determined pursuant to an employment agreement
set by the Board of Directors in 1996, at a fixed salary of $150,000 and a bonus
equal to 60% of salary based on achieving defined revenue and earnings
objectives. The Company expects that the Chairman will continue to set
compensation for the Company's other executive officers with the advice and
guidance of the Compensation Committee of the Board of Directors, that the
Compensation Committee will determine the granting of options, and that the
Chairman's compensation will be set by the Compensation Committee.
Individual compensation has been established to maintain equitable internal
relationships taking into account the responsibilities, experience, seniority
and work performance of the individual executive, the overall performance of the
Company and the unit or area of responsibility of the executive and the
strategic objectives and budget considerations of the Company. The relative
weight given to each of these factors varies from individual to individual and
from year to year. Increases ranging from 0% to 11% in executive officers' base
salaries were made for the year ended December 31, 1997.
A significant portion of each executive officer's compensation is in the
form of a bonus (in fiscal 1996, it was budgeted to be from 10% to 60% of total
compensation depending on the executive) which is performance-related. Bonuses
are designed to reward executives for achieving and exceeding Company
performance goals and/or individual performance goals. Bonuses based upon
overall Company performance in 1996 were based upon targeted levels of the
Company's revenues and earnings and were paid at 117% of the target bonus.
Performance measures and targets for each executive officer are set at the
beginning of the fiscal year by the Chairman and reviewed by the Compensation
Committee.
Salary levels, bonus criteria and performance objectives for the Company's
executive officers are examined each year to take into account factors discussed
above and other additional factors believed appropriate at the time. Executive
compensation structures and levels for each year's targeted overall Company and
individual performance goals are determined following regular structured annual
reviews of each executive officer conducted by the Chairman. Target performance
levels take into account historic patterns of the Company's performance and
strategic objectives.
Individual stock option grants in fiscal 1996 were determined giving
consideration to the factors discussed above and previous option grants and to
give the executive officers additional incentive to improve the overall
performance of the Company. This resulted in total options granted to executive
officers in fiscal 1996 being 365,433 shares. Such grants included options
granted to two executive officers to induce their employment.
In addition, all executive officers, including the Chairman, participate in
broad based benefits generally available to all U.S. employees of the Company,
such as medical, dental, disability and life insurance.
The Omnibus Budget Reconciliation Act of 1993 (the "Act") amended the
Internal Revenue Code, section 162(m), to limit deductibility for the Company
for income tax purposes of compensation paid to the Chairman and the other
highest paid executive officers to $1 million per year, per person, subject to
certain exceptions. The Company does not currently have any executive whose
compensation exceeds that limitation. If at a future date it appears likely that
such limitation may be exceeded, the Compensation Committee will consider
recommending restructuring of executive compensation programs in light of the
requirements of the Act and the regulations that may be promulgated thereunder
to permit them to meet the exceptions to the limitation so such compensation may
continue to be deductible.
Marvin Samson
L. Peter Smith
Edson W. Spencer, Jr.
17
<PAGE> 21
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 and provides that Mr. Padda will be entitled to exercise all options
granted to him, whether or not then vested, upon his death or disability,
termination without cause or termination following a change in control. 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. All of the options granted to Mr. Rastogi vested upon the
consummation of the Company's initial public offering. 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.
The Company entered into a seventeen-month Employment Agreement with Mr.
Holden, dated as of August 15, 1996, with provision for automatic extensions for
consecutive one-year terms, unless proper notice of termination is given. The
Employment Agreement provides that Mr. Holden will receive an annual base salary
of $140,000, with an unspecified guaranteed increase on January 1, 1997, bonuses
based upon the Company's performance, and options to purchase shares of the
Company's Common Stock under its Stock Option Plan. The Employment Agreement
provides that upon a sale of the Company or Mr. Holden's death or disability, he
may exercise all options granted to him, whether or not then vested. Mr. Holden
is entitled to severance payments if he is terminated other than for cause. In
addition to provisions relating to Mr. Holden's duties and compensation, the
Employment Agreement requires Mr. Holden 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 longer of the term of the contract or six months after his employment
with the Company ends.
The Company entered into a three-year Employment Agreement with Mr.
Mandell, dated as of February 25, 1997. The Employment Agreement provides that
Mr. Mandell will receive an annual base salary of $150,000, based upon Mr.
Mandell's and the Company's performance, and options to purchase shares of the
Company's Common Stock under its Stock Option Plan. As of the date of the
Employment Agreement, Mr. Mandell was granted options to acquire 200,000 shares
of the Company's Common Stock. Under the Employment Agreement, the Company could
be obligated to purchase 100,000 option shares at $18.00 each. Mr. Mandell is
entitled to severance payments if he is terminated other than for cause. Upon
Mr. Mandell's death, disability or termination without cause he shall be
entitled to one extra year's vesting of options granted pursuant to his
Employment Agreement. In addition to provisions relating to Mr. Mandell's duties
and compensation, the Employment Agreement requires Mr. Mandell 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 the longer of the term of the contract or 12 months
after his employment with the Company ends.
[The remainder of this page intentionally left blank.]
18
<PAGE> 22
PERFORMANCE GRAPH
The Performance Graph below shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Company Stock with the
cumulative total return of the S&P 500 Index and S&P Health Care (Medical
Products and Supplies) Index for the period commencing June 30, 1996 (the
closest date to the Company's registration of its Common Stock for which such
data is available) and ending December 31, 1996 where $100 was invested on June
30, 1996.
Historical stock price performance shown on the graph is not necessarily
indicative of the future price performance.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SABRATEK S&P 500 INDEX S&P HEALTH CARE
(FISCAL YEAR COVERED) CORPORATION
<S> <C> <C> <C>
6/30/96 100 100 100
7/31/96 77.01 95.58 92.64
8/31/96 97.10 97.69 97.14
9/30/96 150.57 103.32 111.73
10/31/96 140.23 106.08 109.12
11/30/96 121.84 113.64 111.93
12/31/96 145.98 111.66 111.98
</TABLE>
19
<PAGE> 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 26, 1996, the Company granted EGS Securities Corp. ("EGS"), of
which William D. Lautman, a director of the Company, is Managing Director, an
option under the Plan to purchase 50,000 shares of the Company's Common Stock at
a price of $14.00 per share. The option was granted in consideration of services
provided by EGS to the Company in evaluating potential acquisitions and
strategic relationships and fully vests on June 30, 1997.
In May, 1996 the Company entered into an agreement with 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 initial public offering. In connection with this agreement, the Company paid
EGS $150,000 upon successful consummation of the Company's initial public
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 the initial public 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 100,861 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 Subordinate 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 forego 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. This debenture, along with interest at a rate of 10% per annum, were
repaid by the Company in June, 1996.
On February 25, 1997, Sabratek acquired substantially all the assets of
Rocap, Inc., a Massachusetts corporation ("Rocap"), for $100,000 in cash,
131,593 shares of Sabratek Common Stock (valued at approximately $2.9 million),
plus the assumption of net liabilities of approximately $661,000 and the
forgiveness of a bridge loan. In connection with the acquisition, the former
President of Rocap, who is also the majority shareholder of Rocap, entered into
a three-year employment agreement with Sabratek. See "Management -- Employment
Agreements." The number of shares to be paid to Rocap may be increased based on
the value of the Sabratek Common Stock on July 1, 1997 (the "Valuation Date").
Sabratek retains the right to pay cash in lieu of delivery of the shares of
Common Stock. As part of the transaction, the former shareholders of Rocap
received the right to have a registration statement relating to the shares
issued in the acquisition filed for their benefit. In the event such
registration statement is not declared effective by the Commission on or before
September 1, 1997, such former shareholders have the right, exercisable from
September 2, 1997 to September 15, 1997, to put such shares to the Company at a
price determined in accordance with the acquisition agreement.
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.
20
<PAGE> 24
PROPOSAL NO. 2 -- AMENDMENT OF AMENDED AND RESTATED
1993 STOCK OPTION PLAN TO PROVIDE FOR THE ISSUANCE
OF OPTIONS TO PURCHASE UP TO 3,800,000 SHARES OF COMMON STOCK AND
TO OTHERWISE AMEND THE 1993 EMPLOYEE STOCK OPTION PLAN TO CONFORM TO
SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND
THE RULES PROMULGATED THEREUNDER AS NOW IN EFFECT
The Board of Directors recognizes that the Company experiences intense
competition from other companies for talented managers and employees and that
the Company's success is dependent upon its ability to attract and retain such
personnel. The Board of Directors has concluded that one of the best ways to
compete for key personnel is to offer significant potential rewards based upon
the Company's success through the issuance of stock options. The Board of
Directors believes that all employees of the Company should be provided the
opportunity to acquire or increase their holdings of the Company's Common Stock.
Both incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended), and non-qualified options may be granted
under the Amended and Restated 1993 Employee Stock Option Plan, as amended (the
"1993 Plan").
Therefore, the Board of Directors adopted amendments to the 1993 Plan in
June of 1996 and April of 1997 which increased the number of shares reserved for
options pursuant to grants under the 1993 Plan by an aggregate of 2,476,332 to
3,800,000. These amendments are subject to ratification by the stockholders. A
copy of the 1993 Plan is attached hereto as Appendix A.
The 1993 Plan was adopted in 1992, amended and renamed 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 1,323,668 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.
Options granted pursuant to discretionary grants may be non-qualified
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
will be 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 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, 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. To the extent options are
granted at less than fair market value, the Company incurs a non-cash cost for
financial reporting purposes.
Under the formula grants, each director of the Company who is not also an
officer or employee of the Company (an "Independent Director") will be
automatically granted a non-qualified option to purchase 7,879 shares (subject
to adjustment as provided in the 1993 Plan) each year immediately following the
Annual Meeting of Stockholders. Each such director may decline such grant. Each
option granted pursuant to a formula grant will vest and become exercisable
ratably over a period of one year. In addition, each Independent Director who
serves on a committee of the Board of Directors will receive an annual grant of
options to purchase 945 shares of Common Stock and each Independent Director who
is also the Chairman of a committee of the Board of Directors will receive an
annual grant of options to purchase 473 shares of Common Stock. Such additional
options are on the same terms as described above. Each such option shall
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have a term of five years from the relevant vesting date. The exercise price per
share of Common Stock for options granted pursuant to a formula grant shall be
100% of the fair market value on the date of grant as determined under the terms
of the 1993 Plan.
As of December 31, 1996, there were 100 employees and seven Independent
Directors eligible to participate and approximately 72 actual participants in
the 1993 Plan. In addition, the Company may make grants under the 1993 Plan to
consultants. During the fiscal year ended December 31, 1996, there were grants
to executive officers of options to acquire an aggregate of 365,433 shares of
Common Stock, at an average exercise price of $6.07 per share. There were grants
of options pursuant to the 1993 Plan to all Independent Directors as a group to
acquire an aggregate of 75,478 shares of Common Stock, at an average exercise
price of $7.40, grants of options to 8 consultants to acquire an aggregate of
67,240 shares of Common Stock, at an average exercise price of $11.74, and
grants of options to all other employees as a group to acquire an aggregate of
73,439 shares of Common Stock, at an average exercise price of $7.69 per share.
For a description of certain of the federal income tax consequences
associated with the grant and exercise of options under the 1993 Plan, see
"Stock Option Plan and Stock Purchase Plan -- Federal Income Tax Consequences."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE AMENDMENT
OF THE AMENDED AND RESTATED 1993 STOCK OPTION PLAN. (PROPOSAL NO. 2 ON THE PROXY
CARD).
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PROPOSAL NO. 3 -- ADOPTION OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
Based on the Board's recognition that the Company's success is dependent
upon its ability to attract and retain talented employees and that one of the
best ways to compete for such personnel is to offer significant potential
rewards which are tied to the Company's success, the Board adopted the Employee
Stock Purchase Plan -- 1997 (the "1997 Stock Plan") on April 28, 1997, subject
to approval by the stockholders. The Board of Directors is seeking stockholder
approval and ratification of the 1997 Stock Plan. The Board believes that all
employees of the Company and its subsidiaries should be provided the opportunity
to acquire or increase their holdings of the Company's Common Stock.
The 1997 Stock Plan, which is attached hereto as Appendix B, reserves
150,000 shares of the Company's Common Stock for the grant of options to
eligible employees of the Company and its subsidiaries. Any employee working
more than 20 hours a week and who has been employed ninety days or more by the
Company or any subsidiary of the Company prior to the commencement of an
offering period under the Plan is eligible to participate in offers under the
1997 Stock Plan. Non-employee directors of the Company and its subsidiaries will
not be eligible to participate in the 1997 Stock Plan. The 1997 Stock Plan shall
be implemented by one or more offer periods ("Offer Periods") in which an offer
or offers under the Plan ("Offers") will commence and terminate. The first Offer
Period shall commence on July 1, 1997 and end on September 30, 1997 with new
three month Offer Periods commencing on the first day of each subsequent
October, January, March and July until the 1997 Stock Plan shall terminate. The
1997 Stock Plan shall expire by its own provisions in five years. However, the
Board shall have the power to shorten the duration of the 1997 Stock Plan.
The option price at which shares of Common Stock may be purchased under any
option granted under the 1997 Stock Plan is 85% of the fair market value of a
share of Common Stock on the date Common Stock is purchased pursuant to an
offering under the Plan. The stock subject to options granted under the 1997
Stock Plan shall be authorized and unissued shares of Common Stock. The
aggregate number of shares which may be issued pursuant to options exercised
under the 1997 Stock Plan may not exceed 150,000 and the number of shares
subject to options outstanding at any time may not exceed the number of shares
remaining available for issuance thereunder.
On the effective date of an Offer, each then eligible employee will be
granted an option to purchase, through payroll deductions, as many full shares
of Common Stock as he or she may purchase with up to the maximum percentage of
eligible compensation to be received by such employee during the term of the
Offer. An eligible employee may elect to participate in the 1997 Stock Plan by
authorizing regular payroll deductions, which may not exceed the maximum
percentage of the employee's eligible compensation per pay period, to be applied
toward the purchase of Common Stock pursuant to the Offer. The "maximum
percentage" means the percent of eligible compensation available for payroll
deductions which shall be specified by the Board at the beginning of the term of
each Offer, which shall not exceed 10%. The compensation of an employee which is
"eligible compensation" for payroll deductions under the 1997 Stock Plan
includes only base salary and commissions (if any) paid in each payroll period.
A participating employee may change his percentage of eligible compensation
deductions beginning in the following Offer Period. On the last trading day
during the term of an Offer, a participating employee will be deemed to have
exercised his option to purchase, at the applicable option price, that number of
full shares of Common Stock which may be purchased with the amount deducted from
such employee's compensation during that Offer and excess funds from the
preceding Offers, if any.
In no event will an employee be permitted to purchase any shares under the
1997 Stock Plan if the employee, immediately after the purchase, owns or would
own shares (including all shares which may be purchased under outstanding
options) representing 5% or more of the total combined voting power or value of
all classes of shares of capital stock of the Company or its subsidiaries. In
addition, in no event may shares be purchased under the 1997 Stock Plan with a
value in excess of $25,000 in any calendar year. Once enrolled in the Plan, an
eligible employee shall be a participant in all Offers under the Plan until he
or she withdraws from further participation in the Plan.
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The right to participate in the 1997 Stock Plan and the interest of an
employee in the shares of Common Stock or excess funds accumulated on his or her
behalf, is nontransferable, other than transfers by will or under the laws of
descent and distribution or as otherwise provided by law. In the event an
employee's employment with the Company is terminated for any reason, including
upon the retirement or death of the employee, no payroll deductions will be made
from any compensation then due and owing to such employee at such time, and a
certificate representing the number of full shares of Common Stock then credited
to the participant's account, and a check for any amount of excess funds
contributed as of that date (and not eligible for the purchase of shares) will
be issued and delivered to the employee (or the representative of such employee,
if applicable). A participant may designate a beneficiary who is to receive any
shares of Common Stock and cash, if any, from the participant's account under
the Plan in the event of such participant's death prior to delivery to him or
her of such shares and cash.
For a description of certain of the federal income tax consequences
associated with the grant and exercise of options under the 1997 Stock Plan, see
"Stock Option Plan and Stock Purchase Plan -- Federal Income Tax Consequences".
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE ADOPTION
OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN. (PROPOSAL NO. 3 ON THE PROXY CARD).
STOCK OPTION PLAN AND STOCK PURCHASE PLAN -- FEDERAL INCOME TAX CONSEQUENCES
The following general summary is based upon the Internal Revenue Code of
1986, as amended (the "Code") and does not include a discussion of any state or
local tax consequences.
STOCK OPTION PLAN -- NON-QUALIFIED STOCK OPTIONS
An optionee will not generally recognize any taxable income upon the grant
of a non-qualified option because, under current Treasury regulations pursuant
to Section 83 of the Code, the fair market value of an option at the time it is
granted is ordinarily not considered to be "readily ascertainable." However,
upon exercise of a non-qualified option, an optionee must recognize ordinary
income in an amount equal to the excess of the fair market value of the Common
Stock at the time of exercise over the exercise price. Upon the subsequent
disposition of the Common Stock, the optionee will realize a capital gain or
loss, depending on whether the selling price exceeds the fair market value of
the Common Stock on the date of exercise.
An optionee's tax basis in the shares received on exercise of a
non-qualified option will be equal to the amount of consideration paid by the
optionee on exercise, plus the amount of ordinary income recognized as a result
of the receipt of such shares, which together equals the fair market value of
the Common Stock on the date of exercise. The optionee's holding period in the
Common Stock, for capital gains and losses purposes, begins on the date of
exercise. Optionees who are required to report their holdings and transfers of
the Common Stock under Section 16(a) of the Exchange Act ("Section 16 Persons")
are subject to the trading restrictions of Section 16(b) of the Exchange Act and
unless the election described below is made will not recognize ordinary
compensation income until the date such trading restrictions terminate (the
"Deferred Date"), rather than the exercise date. If the election is not made,
the amount of such taxable income will equal the excess of the fair market value
on the Deferred Date of the Common Stock received over the exercise price for
such Common Stock and the holding period for long-term capital gain would not
begin until the Deferred Date.
Section 16 Persons may elect to recognize compensation income on the date
of exercise of the non-qualified option. In such event, the amount of taxable
income to be recognized would equal the excess of the fair market value of the
Common Stock on such exercise date, over the exercise price for such Common
Stock. The election to recognize income on the date of exercise of the
non-qualified option, may be made by the timely filing of an appropriate
statement with the Internal Revenue Service.
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The Company will be entitled to a deduction for federal income tax purposes
at the same time and in the same amount as the optionee recognizes compensation
income, provided the Company satisfies any applicable withholding tax obligation
with respect to such income.
STOCK OPTION PLAN -- INCENTIVE STOCK OPTIONS
Under Section 422 of the Code, no taxable income is realized by the
optionee upon the grant or exercise of an incentive stock options, provided that
the optionee is continuously employed by the Company during the period beginning
on the date of grant and ending on the date three months before the date of
exercise (or, in the case of disability, one year before the date of exercise).
However, the exercise of an incentive stock option may result in alternative
minimum tax liability for the optionee. If no disposition of shares issued to an
optionee pursuant to the exercise of an incentive stock option is made by the
optionee within two years from the date of grant or within one year after the
transfer of such shares to the optionee, then upon sale of such shares, any
amount realized in excess of the exercise price will be taxed to the optionee as
long-term capital gain (and any loss sustained will be long-term capital loss)
and no deduction will be allowed to the Company for federal income tax purposes.
The grant of an incentive stock option and the optionee's exercise of the
incentive stock option will result in no federal income tax consequences to the
Company.
If the shares of Common Stock acquired upon the exercise of an incentive
stock option are disposed of prior to the expiration of the two-year and
one-year holding periods described above (a "Disqualifying Disposition"),
generally the optionee will realize ordinary income in the year of disposition
in an amount equal to the excess (if any) of the fair market value of the shares
on the date of exercise (or, if less, the amount realized on an arms-length sale
of such shares) over the exercise price thereof, and the Company will be
entitled to deduct such amount as compensation expenses.
STOCK PURCHASE PLAN -- EMPLOYEE STOCK PURCHASE OPTIONS
Under Section 423 of the Code, no taxable income is realized by the
employee at the time the option issued pursuant to an employee stock purchase
plan (an "ESPO") is granted or exercised, provided that the employee (i) has not
severed his employment relationship more than three months before the exercise
and (ii) has not made a Disqualifying Disposition (as described under "Incentive
Stock Options", above).
When the Common Stock is disposed of after the required holding period, the
employee realizes ordinary compensation income equal to the lesser of (1) the
excess of the fair market value of the Common Stock at the time of disposition
(or death of the employee) over the exercise price of the ESPO, or (2) the
excess of the fair market value of the Common Stock at the time the ESPO was
granted over the exercise price of the ESPO. Any additional gain is capital
gain. If the sale price of the Common Stock is exceeded by the exercise price of
the ESPO, there is no compensation income and the employee will have a long term
capital loss. When the Common Stock is disposed of in a Disqualifying
Disposition, the employee realizes compensation income to the extent of the
excess of the fair market value of the Common Stock on the date such stock was
issued pursuant to the ESPO over the exercise price of the ESPO. In addition, if
the employee has disposed of the shares of Common Stock one year or less
following the date such shares were acquired, excess gain realized on such
disposition over the amount includible as compensation income if any, will be
treated as short-term capital gain.
As in the case of incentive stock options, the basis of the Common Stock
received upon the exercise of an ESPO is the purchase price. However, when an
employee is required to include compensation in his gross income, the amount of
compensation is added to the basis of his stock.
The grant of an ESPO or the issuance of stock thereunder will not result in
federal income tax consequences to the employer. Moreover, the employer will not
be entitled to deduct the difference between the fair market value of the stock
and the exercise price of the ESPO. However, if the employee severed his or her
employment in a Disqualifying Disposition, the employer will be entitled to the
compensation deduction equal to the amount that the employee includes in income.
For federal income tax purposes, an ESPO issued under this Plan shall be
treated as having been granted on the date of its exercise.
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ACCOUNTANTS
KPMG Peat Marwick LLP currently serves as the Company's independent public
accountants. It is expected that representatives of KPMG Peat Marwick LLP will
be present at the Annual Meeting and will be available to respond to questions.
They will be given an opportunity to make a statement if they desire to do so.
ANNUAL REPORT TO STOCKHOLDERS
The Company's 1996 Annual Report to Stockholders along with the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 accompany this
Proxy Statement but do not constitute a part of the proxy materials.
STOCKHOLDERS' PROPOSALS
In the event that a stockholder desires to have a proposal formally
considered at the 1998 Annual Stockholders' Meeting, and included in the Proxy
Statement for that meeting, the proposal must be received in writing by the
Company's Secretary on or before February 10, 1998.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. If matters other than the foregoing should arise at the Annual
Meeting, it is intended that the shares represented by proxies will be voted in
accordance with the judgment of the persons named in the proxy.
Please complete, sign and date the enclosed proxy, which is revocable as
described herein, and mail it promptly in the enclosed postage-paid envelope.
By Order of the Board of Directors,
K. Shan Padda
K. SHAN PADDA, Chairman
Dated: May 5, 1997
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APPENDIX A
SABRATEK CORPORATION
AMENDED AND RESTATED
1993 STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE.
1.1 Establishment. Sabratek Corporation (the "Company") hereby establishes
a plan providing for the grant of stock options to certain eligible individuals
who have or will render services to the Company. This plan will be known as the
Sabratek Corporation 1993 Stock Option Plan (the "Plan").
1.2 Purpose. The purpose of the Plan is to advance the interests of the
Company and its stockholders by enabling the Company to attract and retain
persons of ability to perform services for the Company, by providing an
incentive to such persons through equity participation in the Company and by
rewarding such persons who contribute to the achievement by the Company of its
economic objectives.
ARTICLE 2. DEFINITIONS.
The following terms have the meanings set forth below, unless the context
clearly otherwise requires:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Broker Exercise Notice" means the written notice described in Section
6.6(b) of the Plan.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means the committee appointed by the Board consisting of
not less than two persons or otherwise determined in accordance with Article 3
of this Plan.
2.5 "Common Stock" means the common stock of the Company, par value $.01
per share, or the number and kind of shares of stock or other securities into
which such Common Stock may be changed in accordance with Section 4.3 of the
Plan.
2.6 "Disability" means the disability of the Participant as defined in the
long-term disability plan of the Company then covering the Participant or, if no
such plan exists, the permanent and total disability of the Participant within
the meaning of Section 22(e)(3) of the Code.
2.7 "Eligible Recipient" means all employees (including, without
limitation, officers and directors who are also employees) directors who are not
employees, consultants and independent contractors of the Company or any
Subsidiary.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 "Fair Market Value" means, with respect to the Common Stock, the
following:
(a) If the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the NASDAQ
National Market System, the mean between the reported high and low sale
prices of the Common Stock on such exchange or by the NASDAQ National
Market System as of such date (or, if no shares were traded on such day, as
of the next preceding day on which there was such a trade).
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the NASDAQ National Market System, and
bid and asked prices therefor in the over-the-counter market are reported
by the NASDAQ National Market System or the National Quotation Bureau, Inc.
(or any comparable reporting service), the mean of the closing bid and
asked prices as of such date, as so reported by the NASDAQ National Market
System, or, if not so reported thereon, as reported by the National
Quotation Bureau, Inc. (or such comparable reporting service).
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the NASDAQ National Market System, and
such bid and asked prices are not so reported, such price as the Committee
determines in good faith in the exercise of its reasonable discretion.
<PAGE> 31
2.10 "Incentive Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Article 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.11 "Non-Employee Director" shall have the meaning ascribed in Rule 16b-3
promulgated under the Exchange Act.
2.12 "Non-Statutory Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Article 6 of the Plan that does not
qualify as an Incentive Stock Option.
2.13 "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.14 "Participant" means an Eligible Recipient who receives one or more
Options under the Plan.
2.15 "Person" means any individual, corporation, partnership, group,
association or other "person" (as such term is used in Section 14(d) of the
Exchange Act), other than the Company, a wholly owned subsidiary of the Company
or any employee benefit plan sponsored by the Company or a wholly owned
subsidiary of the Company.
2.16 "Previously Acquired Shares" mean shares of Common Stock that are
already owned by the Participant and shares of Common Stock that are to be
acquired by the Participant pursuant to the exercise of an Option.
2.17 "Retirement" means the retirement of a Participant pursuant to and in
accordance with the regular or, if approved by the Board for purposes of the
Plan, any early retirement plan or practice of the Company or Subsidiary then
covering the Participant.
2.18 "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act.
2.19 "Securities Act" means the Securities Act of 1933, as amended.
2.20 "Subsidiary" means any subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code.
2.21 "Tax Date" means the date any withholding tax obligation arises under
the Code for a Participant with respect to an Option.
ARTICLE 3. PLAN ADMINISTRATION.
3.1 The Committee. The Plan will be administered by the Board or by the
Committee; provided, however, that only the Board shall make decisions with
respect to Options granted or to be granted to employees who are subject to the
provisions of Section 16(b) of the Exchange Act unless (i) the Committee is
composed solely of two or more Non-Employee Directors appointed by the Board, or
(ii) if not so composed, the Committee includes directors who are not
Non-Employee Directors and (A) such persons, by abstention or recusal, do not
participate in the vote with respect to Options granted or to be granted to
Employees who are subject to the provisions of Section 16(b) of the Exchange
Act, and (B) the Committee includes at least two Non-Employee Directors, or
(iii) notwithstanding (i) or (ii) above, the transaction upon which a vote is
being had is otherwise exempt pursuant to the provisions of Rule 16b-3(d).
Members of such the Committee, will be appointed from time to time by the Board,
will serve at the pleasure of the Board and may resign at any time upon written
notice to the Board. A majority of the members of the Committee will constitute
a quorum. The Committee will act by majority approval of the members, will keep
minutes of its meetings and will provide copies of such minutes to the Board.
Action of the Committee may be taken without a meeting if unanimous written
consent is given. Copies of minutes of such a committee's meetings and of its
actions by written consent will be provided to the Board and kept with the
corporate records of the Company.
3.2 Authority of the Committee or the Board.
(a) In accordance with and subject to the provisions of the Plan, the
Committee or the Board will have the authority to determine (i) the
Eligible Recipients who are selected as Participants, (ii) the nature and
extent of the Options to be made to each Participant (including the number
of shares of
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Common Stock to be subject to each Option, the exercise price and the
manner in which Options will vest or become exercisable), (iii) the time or
times when Options will be granted, (iv) the duration of each Option, (v)
the restrictions and other conditions to which the exercisability or
vesting of Options may be subject, and (vi) such other provisions of the
Options as the Committee or Board may deem necessary or desirable and as
consistent with the terms of the Plan. The Committee or Board will
determine the form or forms of the option agreements with Participants
which will evidence the particular terms, conditions, rights and duties of
the Company and the Participants with respect to Options granted pursuant
to the Plan, which agreements will be consistent with the provisions of the
Plan.
(b) With the consent of the Participant affected thereby, the
Committee or Board may amend or modify the terms of any outstanding Option
in any manner, provided that the amended or modified terms are permitted by
the Plan as then in effect. Without limiting the generality of the
foregoing sentence, the Committee or Board may, with the consent of the
Participant affected thereby, modify the exercise price, number of shares
or other terms and conditions of an Option, extend the term of an Option,
accelerate the exercisability or vesting or otherwise terminate any
restrictions relating to an Option, accept the surrender of any outstanding
Option, or, to the extent not previously exercised or vested, authorize the
grant of new Options in substitution for surrendered Options.
(1) The Committee or Board will have the authority, subject to the
provisions of the Plan, to establish, adopt and revise such rules and
regulations relating to the Plan as it may deem necessary or advisable for
the administration of the Plan. The Committee's or Board's decisions and
determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are
similarly situated. Each determination, interpretation or other action made
or taken by the Committee or Board pursuant to the provisions of the Plan
will be conclusive and binding for all purposes and on all persons,
including, without limitation, the Company and its Subsidiaries, the
stockholders of the Company, the Committee, the Board and each of its
respective members, the directors, officers and employees of the Company
and its Subsidiaries, and the Participants and their respective successors
in interest. No member of the Committee or Board will be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted under the Plan.
ARTICLE 4. STOCK SUBJECT TO THE PLAN.
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
below, the maximum number of shares of Common Stock that will be authorized and
reserved for issuance under the Plan will be 3,800,000 shares of voting Common
Stock. The maximum number of shares authorized may also be increased from time
to time by approval of the Board and, if required pursuant to Rule 16b-3 under
the Exchange Act, Section 422 of the Code, or the applicable rules of any
securities exchange or the NASD, the stockholders of the Company.
4.2 Shares Available for Use. Shares of Common Stock that may be issued
upon exercise of Options will be applied to reduce the maximum number of shares
of Common Stock remaining available for use under the Plan. Any shares of Common
Stock that are subject to an Option (or any portion thereof) that lapses,
expires or for any reason is terminated unexercised will automatically again
become available for use under the Plan.
4.3 Adjustments to Shares. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other change in the corporate
structure or shares of the Company, the Committee or Board (or, if the Company
is not the surviving corporation in any such transaction, the board of directors
of the surviving corporation) will make appropriate adjustment (which
determination will be conclusive) as to the number and kind of securities
subject to and reserved under the Plan and, in order to prevent dilution or
enlargement of the rights of Participants, the number, kind and exercise price
of securities subject to outstanding Options. Without limiting the generality of
the foregoing, in the event that any of such transactions are effected in such a
way that holders of Common Stock are entitled to receive stock, securities or
assets, including cash, with respect to or in exchange for such Common Stock,
all Participants holding outstanding Options will upon the exercise of such
Options receive, in lieu of any
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<PAGE> 33
shares of Common Stock they may be entitled to receive, such stock, securities
or assets, including cash, as would have been issued to such Participants if
their Options had been exercised and such Participants had received Common Stock
prior to such transaction.
ARTICLE 5. PARTICIPATION.
Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee or Board, have performed, are performing, or during
the term of an Option will perform, services in the management, operation and
development of the Company or any Subsidiary, and significantly contributed, are
significantly contributing or are expected to significantly contribute to the
achievement of corporate economic objectives. Eligible Recipients may be granted
from time to time one or more Options, as may be determined by the Committee or
Board in their sole discretion. The number, type, terms and conditions of
Options granted to various Eligible Recipients need not be uniform, consistent
or in accordance with any plan, regardless of whether such Eligible Recipients
are similarly situated. Upon determination by the Committee or Board that an
Option is to be granted to an Eligible Recipient, written notice will be given
such person, specifying the terms, conditions, rights and duties related
thereto. Each Eligible Recipient to whom an Option is to be granted will enter
into an agreement with the Company, in such form as the Committee determines and
which is consistent with the provisions of the Plan, specifying such terms,
conditions, rights and duties. Options will be deemed to be granted as of the
date specified in the grant resolution of the Committee or Board, and the
related option agreements will be dated as of such date.
ARTICLE 6. STOCK OPTIONS.
6.1 Grant.
(a) Discretionary Grants. An Eligible Recipient, other than an
Independent Director (as defined below) who shall receive grants
exclusively pursuant to Section 6.1(b) hereof, may be granted one or more
Options under the Plan, and such Options will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as are
determined by the Committee or Board in their sole discretion. The
Committee or Board may designate whether an Option is to be considered an
Incentive Stock Option or a Non-Statutory Stock Option; provided, however,
that an Incentive Stock Option will be granted only to an Eligible
Recipient who is an employee of the Company or a Subsidiary. The terms of
the agreement relating to a Non-Statutory Stock Option will expressly
provide that such Option will not be treated as an Incentive Stock Option.
(b) Formula Grants. An Option to purchase 7,879 shares of Common Stock
shall automatically be granted to each director of the Company who is not
also an officer or employee of the Company (an "Independent Director") and
who is a director of the Company on the day the stockholders of the Company
elect persons to serve on the Company's Board of Directors at a meeting
called for such purpose. Notwithstanding the foregoing, the number of
shares subject to such Option shall be reduced by such number of shares
subject to options granted by the Company held by such Independent Director
which were granted prior to January 5, 1996, and remain unvested as of the
date of his election as aforesaid. In addition to the foregoing, each
Independent Director will receive the following grants: (i) for any such
Independent Director who serves on a committee of the Board, an Option to
purchase 945 shares of Common Stock on the date of the appointment to such
committee, and (ii) for each such Independent Director who serves as the
chairman of such a committee, an Option to purchase 473 shares of Common
Stock on the date of the appointment to such position. Notwithstanding any
other provision of this Agreement relating to the discretion of the
Committee to determine the terms of Options granted pursuant hereto, each
Option granted pursuant to this Section 6.1(b) shall be granted with an
exercise price equal to the Fair Market Value on the date of grant, shall
vest ratably over a period of one (1) year and shall be a Non-Statutory
Stock Option.
6.2 Exercise. An Option will become exercisable at such times and in such
installments (which may be cumulative) as determined by the Committee or Board
in their sole discretion at the time the Option is granted. Upon the completion
of its exercise period, an Option, to the extent not then exercised, will
expire.
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6.3 Exercise Price.
(a) Incentive Stock Options. The per share price to be paid by the
Participant at the time an Incentive Stock Option is exercised will be
determined by the Committee or Board, in their discretion, at the date of
its grant; provided, however, that such price will not be less than (i)
100% of the Fair Market Value of one share of Common Stock on the date the
Option is granted, or (ii) 110% of the Fair Market Value of one share of
Common Stock on the date the Option is granted if, at that time the Option
is granted, the Participant owns, directly or indirectly (as determined
pursuant to Section 424(d) of the Code), more than 10% of the total
combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation of the Company (within the meaning of
Sections 424(f) and 424(e), respectively, of the Code).
(b) Non-Statutory Stock Options. The per share price to be paid by the
Participant at the time a Non-Statutory Stock Option is exercised will be
determined by the Committee or Board in their sole discretion at the time
the Option is granted; provided, however, that such price will not be less
than 85% of the Fair market Value of one share of Common Stock on the date
the Option is granted.
6.4 Duration.
(a) Incentive Stock Options. The period during which an Incentive
Stock Option may be exercised will be fixed by the Committee or Board in
their sole discretion at the time such Option is granted; provided,
however, that in no event will such period exceed 10 years from its date of
grant or, in the case of a Participant who owns, directly or indirectly (as
determined pursuant to Section 424(d) of the Code), more than 10% of the
total combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation of the Company (within the meaning of
Sections 424(f) and 424(e), respectively, of the Code), five years from its
date of grant.
(b) Non-Statutory Stock Options. The period during which a
Non-Statutory Stock Option may be exercised will be fixed by the Committee
or Board in their sole discretion at its date of grant.
(2) Effect of Termination of Employment or Other
Service. Notwithstanding this Section 6.4, all Options granted to a
Participant will terminate and may no longer be exercised sixty (60) days
after the termination of the Participant's employment or other status with
the Company and all Subsidiaries in relation to which the Option was
granted.
6.5 Manner of Exercise. An Option may be exercised by a Participant in
whole or in part from time to time, subject to the conditions contained herein
and in the agreement evidencing such Option, by delivery, in person or through
certified or registered mail, of written notice of exercise to the Company at
its principal executive office (Attention: Chief Financial Officer), and by
paying in full the total Option exercise price for the shares of Common Stock
purchased. Such notice will be in a form satisfactory to the Committee and will
specify the particular Option (or portion thereof) that is being exercised and
the number of shares with respect to which the Option is being exercised.
Subject to compliance with Section 11.1 of the Plan, the exercise of the Option
will be deemed effective upon receipt of such notice and payment complying with
the terms of the Plan and the agreement evidencing such Option. As soon as
practicable after the effective exercise of the Option, the Participant will be
recorded on the stock transfer books of the Company as the owner of the shares
purchased, and the Company will deliver to the Participant one or more duly
issued stock certificates evidencing such ownership. If a Participant exercises
any Option with respect to some, but not all, of the shares of Common Stock
subject to such Option, the right to exercise such Option with respect to the
remaining shares will continue until it expires or terminates in accordance with
its terms. An Option will only be exercisable with respect to whole shares.
6.6 Payment of Exercise Price.
(a) The total purchase price of the shares to be purchased upon
exercise of an Option will be paid entirely in cash (including check, bank
draft or money order); provided, however, that the Committee or Board, in
their sole discretion, may allow such payments to be made, in whole or in
part, by delivery of a Broker Exercise Notice or a promissory note
(containing such terms and conditions as the Committee or
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Board may in their discretion determine), by transfer from the Participant
to the Company of Previously Acquired Shares, or by a combination thereof.
In determining whether or upon what terms and conditions a Participant will
be permitted to pay the purchase price of an Option in a form other than
cash, the Committee or Board may consider all relevant facts and
circumstances, including, without limitation, the tax and securities law
consequences to the Participant and the Company and the financial
accounting consequences to the Company. In the event the Participant is
permitted to pay the purchase price of an Option in whole or in part with
Previously Acquired Shares, the value of such shares will be equal to their
Fair market Value on the date of exercise of the Option.
(b) For purposes of this Section 6.6, a "Broker Exercise Notice" means
a written notice from a Participant to the Company at its principal
executive office (Attention: Chief Financial Officer), made on a form and
in the manner as the Committee may from time to time determine, pursuant to
which the Participant irrevocably elects to exercise all or any portion of
an Option and irrevocably directs the Company to deliver the Participant's
stock certificates to be issued to such Participant upon such Option
exercise directly to a broker or dealer. A Broker Exercise Notice must be
accompanied by or contain irrevocable instructions to the broker or dealer
(i) to promptly sell a sufficient number of shares of such Common Stock or
to loan the Participant a sufficient amount of money to pay the exercise
price for the Options and, if not otherwise satisfied by the Participant,
to fund any related employment and withholding tax obligations due upon
such exercise, and (ii) to promptly remit such sums to the Company upon the
broker's or dealer's receipt of the stock certificates.
6.7 Rights as a Stockholder. The Participant will have no rights as a
stockholder with respect to any shares of Common Stock covered by an Option
until the participant becomes the holder of record of such shares, and no
adjustments will be made for dividends or other distributions or other rights as
to which there is a record date preceding the date the Participant becomes the
holder of record of such shares, except as the Committee or Board may determine
pursuant to Section 4.3 of the Plan.
6.8 Disposition of Common Stock Acquired Pursuant to the Exercise of
Incentive Stock Options. Prior to making a disposition (as defined in Section
424(c) of the Code) of any shares of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option granted under the Plan before the
expiration of two years after its date of grant or before the expiration of one
year after its date of exercise and the date on which such shares of Common
Stock were transferred to the Participant pursuant to exercise of the Option,
the Participant will send written notice to the Company of the proposed date of
such disposition, the number of shares to be disposed of, the amount of proceeds
to be received from such disposition and any other information relating to such
disposition that the Company may reasonably request. The right of a Participant
to make any such disposition will be conditioned on the receipt by the Company
of all amounts necessary to satisfy any federal, state or local withholding and
employment-related tax requirements attributable to such disposition. The
Committee or Board will have the right, in their sole discretion, to endorse the
certificates representing such shares with a legend restricting transfer and to
cause a stop transfer order to be entered with the Company's transfer agent
until such time as the Company receives the amounts necessary to satisfy such
withholding and employment-related tax requirements or until the later of the
expiration of two years from its date of grant or one year from its date of
exercise and the date on which such shares were transferred to the Participant
pursuant to the exercise of the Option.
6.9 Aggregate Limitation of Stock Subject to Incentive Stock Options. To
the extent that the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which incentive stock options within the meaning of Section 422 of the Code) are
exercisable for the first time by a Participant during any calendar year under
the Plan and any other incentive stock option plans of the Company or any
subsidiary or any parent corporation of the Company (within the meaning of
Sections 424(f) an 424(e), respectively, of the Code)) exceeds $100,000 (or such
other amount as may be prescribed by the Code from time to time), such excess
Options will be treated as Non-Statutory Stock Options. The determination will
be made by taking Incentive Stock Options into account in the order in which
they were granted. If such excess only applies to a portion of an Incentive
Stock Option, the Committee or Board, in their discretion, will designate which
shares will be treated as shares to be acquired upon exercise of an Incentive
Stock Option.
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ARTICLE 7. RIGHT TO WITHHOLD; PAYMENT OF WITHHOLDING TAXES.
7.1 General Rules. The Company is entitled to (a) withhold and deduct from
future wages of the Participant (or from other amounts which may be due and
owing to the Participant from the Company), or make other arrangements for the
collection of, all legally required amounts necessary to satisfy any and all
federal, state and local withholding and employment-related tax requirements (i)
attributable to the grant or exercise of an Option or to a disqualifying
disposition of stock received upon exercise of an Incentive Stock Option, or
(ii) otherwise incurred with respect to an Option, or (b) require the
Participant promptly to remit the amount of such withholding to the Company
before taking any action with respect to the exercise of an Option or the
issuance of any stock certificate either to the Participant or any transferee.
7.2 Special Rules.
(a) Without limiting the generality of Section 7.1 above, the
Committee or Board, in their sole discretion and subject to such rules as
the Committee may adopt, permit a Participant to satisfy, in whole or in
part, any withholding or employment-related tax obligations described in
Section 7.1 above by electing to use Previously Acquired Shares or by
electing to have the Company accept a Broker Exercise Notice with respect
to that number of shares, in any such case, having a Fair Market Value, on
the Tax Date, equal to the amount necessary to satisfy the withholding or
employment-related taxes due, or by agreeing to deliver to the Company a
promissory note in payment for some or all of the necessary amounts
(containing such terms and conditions as the Committee or Board in their
sole discretion may determine).
(b) A Participant's election to use Previously Acquired Shares, a
Broker Exercise Notice or a promissory note must be made on or prior to the
Tax Date, is irrevocable and is subject to the consent or disapproval of
the Committee or Board. When shares of Common stock are issued prior to the
Tax Date to a Participant making an election to use Previously Acquired
Shares, the Participant will agree in writing to surrender that number of
shares on the Tax Date having an aggregate Fair Market Value equal to the
tax due.
ARTICLE 8. RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS.
8.1 Employment or Service. Nothing in the Plan will interfere with or limit
in any way the right of the Company or any Subsidiary to terminate the
employment or service of any Eligible Recipient or Participant at any time, nor
confer upon any Eligible Recipient or Participant any right to continue in the
employ or service of the Company or any Subsidiary.
8.2 Non-Exclusivity of the Plan. Nothing contained in the Plan is intended
to amend, modify or rescind any previously approved compensation plans or
programs entered into by the Company. The Plan will be construed to be in
addition to any and all such other plans or programs. Neither the adoption of
the Plan nor the submission of the Plan to the stockholders of the Company for
approval will be construed as creating any limitations on the power of authority
of the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.
ARTICLE 9. SECURITIES LAW RESTRICTIONS.
9.1 Share Issuances. Notwithstanding any other provision of the Plan or any
agreements entered into pursuant hereto, the Company will not be required to
issue or deliver any certificate for shares of Common Stock under this Plan, and
an Option will not be considered to be exercised notwithstanding the tender by
the Participant of any consideration therefor, unless and until each of the
following conditions has been fulfilled:
(a) (i) There is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state securities laws
if the Committee or Board, in their sole discretion, has determined to
file, cause to become effective and maintain the effectiveness of such
registration statement; or (ii) if the Committee or Board has determined
not to so register the shares of Common Stock to be issued under the Plan,
(A) exemptions from registration under the Securities Act and applicable
state securities laws are available for such issuance (as determined by
counsel to the
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Company) and (B) there has been received from the Participant (or, in the
event of death or disability, the Participant's heir(s) or legal
representative(s)) any representations or agreements requested by the
Company in order to permit such issuance to be made pursuant to such
exemptions; and
(b) There has been obtained any other consent, approval or permit from
any state or federal governmental agency which the Committee or Board, in
their sole discretion upon the advice of counsel, deems necessary or
advisable.
9.2 Share Transfers. Shares of Common Stock issued pursuant to Options
granted under the Plan may not be sold, assigned, transferred, pledged,
encumbered or otherwise disposed of, whether voluntarily or involuntarily,
directly or indirectly, by operation of law or otherwise, except pursuant to
registration under the Securities Act and applicable state securities laws or
pursuant to exemptions form such registrations. The Company may condition the
sale, assignment, transfer, pledge, encumbrance or other disposition of such
shares not issued pursuant to an effective and current registration statement
under the Securities Act and all applicable state securities laws on the receipt
from the party to whom the shares of Common Stock are to be so transferred to
any representations or agreements requested by the Company in order to permit
such transfer to be made pursuant to exemptions from registration under the
Securities Act and applicable state securities laws.
9.3 Legends. Unless a registration statement under the Securities Act and
applicable state securities laws is in effect with respect to the issuance or
transfer of shares of Common Stock under the Plan, each certificate representing
any such shares may be endorsed with such legend as the Board or the Committee
may, in the exercise of their sole discretion, deem appropriate.
ARTICLE 10. PLAN AMENDMENT, MODIFICATION AND TERMINATION.
The Board may suspend or terminate the Plan or any portion thereof at any
time, and may amend the Plan from time to time in such respects as the Board may
deem advisable in order that Options under the Plan conform to any change in
applicable laws or regulations or in any other respect the Board may deem to be
in the best interests of the Company; provided, however, that no such amendment
will be effective, without approval of the stockholders of the Company, if
stockholder approval of the amendment is then required pursuant to Rule 16b-3
under the Exchange Act or any successor rule or Section 422 of the Code or under
the applicable rules or regulations of any securities exchange or the NASD. No
termination, suspension or amendment of the Plan will alter or impair any
outstanding Option without the consent of the Participant affected thereby;
provided, however, that this sentence will not impair the right of the Committee
or Board to take whatever action it deems appropriate under Section 4.3 of the
Plan.
ARTICLE 11. EFFECTIVE DATE OF THE PLAN.
11.1 Effective Date. The Plan is effective as of December 13, 1993, the
date it was adopted by the Board.
11.2 Duration of the Plan. The Plan will terminate at midnight on December
13, 2006 and may be terminated prior thereto by Board action, and no Option will
be granted after such termination. Options outstanding upon termination of the
Plan may continue to be exercised in accordance with their terms.
ARTICLE 12. MISCELLANEOUS.
12.1 Construction and Headings. The use of the masculine gender also
includes within its meaning the feminine, and the singular may include the
plural and the plural may include the singular, unless the context clearly
indicates to the contrary. The headings of the Articles, Sections and subparts
of the Plan are for convenience of reading only and are not meant to be of
substantive significance and will not add to or detract from the meaning of such
Article, Section or subpart.
12.2 Governing Law. The Place of administration of the Plan will be
conclusively deemed to be within the State of Illinois, and claiming to have had
an interest under the Plan or under any agreements evidencing Options will be
governed by and construed exclusively and solely in accordance with the General
Corporation Law of the State of Delaware to the extent applicable and otherwise
the laws of the State of Illinois without
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regard to the conflict of laws provisions of any jurisdictions. All parties
agree to submit to the jurisdiction of the state and federal courts of Illinois
with respect to matters relating to the Plan and agree not to raise or assert
the defense that such forum is not convenient for such party.
12.3 Successors and Assigns. This Plan will be binding upon and inure to
the benefit of the successors and permitted assigns of the Company, including,
without limitation, whether by way of merger, consolidation, operation of law,
assignment, purchase or other acquisition of substantially all of the assets or
business of the Company, and any and all such successors and assigns will
absolutely and unconditionally assume all of the Company's obligations under the
Plan.
12.4 Survival of Provisions. The rights, remedies, agreements, obligations
and covenants contained in or made pursuant to the Plan, any agreement
evidencing an Option and any other notices or agreements in connection
therewith, including, without limitation, any notice of exercise of an Option,
will survive the execution and delivery of such notices and agreements and the
delivery and receipt of shares of Common Stock and will remain in full force and
effect.
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APPENDIX B
SABRATEK CORPORATION
EMPLOYEE STOCK PURCHASE PLAN -- 1997
Sabratek Corporation, a Delaware corporation (the "Company"), does hereby
establish its Employee Stock Purchase Plan -- 1997 (the "Plan") as follows:
1. Purpose of the Plan. The Plan is intended to provide a method whereby
eligible employees of the Company and its Subsidiaries will have an opportunity
to acquire a proprietary interest in the Company through the purchase of shares
of common stock of the Company. The Company believes that employee participation
in the ownership of the Company is of benefit to both the employees and the
Company. The Company intends to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Code. The provisions of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
that is consistent with the requirements of that Section of the Code.
2. Definitions.
Account. "Account" shall mean the funds that are accumulated with respect
to each individual Participant as a result of payroll deductions for the purpose
of purchasing Shares under the Plan. The funds that are allocated to a
Participant's account shall at all times remain the property of that
Participant, but such funds may be commingled with the general funds of the
Company.
Base Pay. "Base Pay" means an employee's regular straight time salary or
earnings.
Board. The "Board" means the Board of Directors of the Company.
Code. The "Code" means the Internal Revenue Code of 1986, as amended.
Commencement Date. The "Commencement Date" means the January 1, April 1,
July 1 or October 1, as the case may be, on which the particular Offering
begins.
Ending Date. The "Ending Date" means the March 31, June 30, September 30 or
October 31, as the case may be, on which the particular Offering concludes.
ESPP Broker. The "ESPP Broker" is a qualified stock brokerage or other
financial services firm that has been designated by the Company.
Holding Period. The "Holding Period" shall mean the holding period that is
set forth in Section 423(a) of the Code, which, as of the date that the
Company's Board of Directors adopted this Plan, is both (a) that two (2) year
period after the Commencement Date and (b) that one (1) year period after
transfer to a Participant of any Shares under the Plan.
Participant. "Participant" means an employee who, pursuant to Section 3, is
eligible to participate in the Plan and has complied with the requirements of
Section 7.
Offerings. "Offerings" means the twenty separate consecutive three month
offerings for the purchase and sale of Shares under the Plan. Each one of the
Offerings shall be referred to as an "Offering."
Shares. "Shares" means shares of the Company's common stock, $0.01 par
value per share, that will be sold to Participants under the Plan.
Subsidiaries. "Subsidiaries" shall mean any present or future domestic or
foreign corporation that: (i) would be a "subsidiary corporation" of the Company
as that term is defined in Section 424 of the Code, and (ii) whose employees
have been designated by the Board to be eligible, subject to Section 3, to be
Participants under the Plan.
Withdrawal Notice. "Withdrawal Notice" means a notice, in a form designated
by the Company, that a Participant who wishes to withdraw from an Offering must
submit to the Company pursuant to Section 22 prior to the Ending Date.
3. Employees Eligible to Participate. Any regular employee of the Company
or any of its Subsidiaries who (a) is in the employ of the Company or any of its
Subsidiaries on the Commencement Date, (b) has
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been so employed for at least three months as of the Commencement Date and (c)
has worked an average of twenty (20) hours per week during such employment is
eligible to participate in the Plan. Notwithstanding the foregoing and only to
the extent permitted by Section 423 of the Code and any rules or regulations
promulgated thereunder, if an employee is employed to render services primarily
within the jurisdiction of a union and his compensation, hours of work, or
conditions of employment are determined by collective bargaining with such
union, he shall be deemed an employee for purposes of the Plan, only if the
applicable collective bargaining agreement expressly so provides and only to the
extent and on the terms and conditions specified in such collective bargaining
agreement. Upon re-employment of a former Participant whose employment with the
Company or a Subsidiary is terminated, the former Participant will be required
to fulfill the eligibility requirements set forth in this paragraph anew.
4. Offerings. The Plan shall consist of twenty separate consecutive three
month Offerings. The first Offering shall commence on July 1, 1997. Thereafter,
Offerings shall commence on each subsequent October 1, January 1, April 1, July
1, and the final Offering under the Plan shall commence on April 1, 2002 and
terminate on June 30, 2002.
5. Price. The purchase price per Share acquired during an Offering shall be
the lesser of (1) 85 percent of the fair market value of the Shares on the
Commencement Date of such Offering, or the nearest subsequent business day; or
(2) 85 percent of the fair market value of the Shares on the Ending Date of such
Offering, or the nearest prior business day. Fair market value shall mean the
average of the high and low sale prices as reported on the National Association
of Securities Dealers Automated Quotation System or, if the stock is traded on
one or more stock exchanges, the closing price for the stock on the principal
exchange on which the Shares are traded.
6. Number of Shares Reserved Under the Plan. The maximum number of Shares
that will be offered under the Plan is one hundred fifty thousand (150,000). If,
on any date, the total number of Shares for which purchase rights are to be
granted pursuant to Section 9 exceeds the number of Shares then available under
this Section 6, (after deduction of all Shares (a) that have been purchased
under the Plan, and (b) for which rights to purchase are then outstanding), the
Company shall make a pro rata allocation of the Shares that remain available in
as nearly a uniform manner as shall be practicable and as it shall determine, in
its sole judgement, to be equitable. In such event, each Participant's payroll
deductions shall be reduced accordingly and the Company shall give to each
Participant a written notice of such reduction.
7. Participation. An eligible employee may become a Participant by
completing the enrollment agreement that shall be provided by the Company and
filing it with the Company prior to the Commencement Date of the Offering to
which it relates. Participation in one Offering under the Plan shall neither
limit, nor require, participation in any other Offering.
8. Payroll Deductions.
8.1 At the time the Enrollment Agreement is filed with the Company and
for so long as a Participant participates in the Plan, each Participant
shall authorize the Company to make payroll deductions of either (a) a
fixed dollar amount per pay period or (b) a whole percentage (not partial
or fractional) of Base Pay; provided, however, that no payroll deduction
shall exceed 10 percent of Base Pay. The amount of the minimum fixed dollar
deduction may be adjusted by the Board of Directors from time to time;
provided, however, that a Participant's existing rights under any Offering
that has already commenced may not be adversely affected thereby.
8.2 Each Participant's payroll deductions shall be credited to that
Participant's Account. A Participant may not make a separate cash payment
into such Account nor may payment for Shares be made from other than the
Participant's Account.
8.3 A Participant's payroll deductions shall begin on the Commencement
Date, and shall end on the Ending Date unless the Participant elects to
withdraw pursuant to Section 13.
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8.4 A Participant may discontinue participation in the Plan as
provided in Section 13, but no other change may be made during an Offering
and, specifically, a Participant may not alter the amount or rate of
payroll deductions during an Offering.
9. Granting of Right to Purchase. On the Commencement Date, the Plan shall
be deemed to have granted automatically to each Participant a right to purchase
as many full Shares (not any fractional Shares) as may be purchased with such
Participant's Account.
10. Purchase of Shares. On the Ending Date, each Participant who has not
otherwise withdrawn from an Offering shall be deemed to have carried out the
right to purchase, and shall be deemed to have purchased at the purchase price
set forth in Section 5, the number of full Shares (not any fractional Shares)
that may be purchased with such Participant's Account. The excess of funds not
expended in the purchase of whole Shares on any Ending Date will, for each
Participant, be retained by the custodian and carried forward and applied to the
purchase of shares on the next subsequent purchase date. Any excess of funds not
expended on the last purchase date during the Offer Period will be returned to
Participants.
11. Participant's Rights as a Shareholder. No Participant shall have any
rights of a shareholder with respect to any Shares until the Shares have been
purchased in accordance with Section 10 and issued by the Company.
12. Evidence of Ownership of Shares.
12.1 Promptly following the Ending Date of each Offering, the Shares
that are purchased by each Participant shall be deposited into an account
that is established in the Participant's name with the ESPP Broker.
12.2 A Participant may direct, by written notice to the Company prior
to the Ending Date of the pertinent Offering, that the ESPP Broker account
be established in the names of the Participant and one such other person as
may be designated by the Participant as joint tenants with right of
survivorship, tenants in common, or community property, to the extent and
in the manner permitted by applicable law.
12.3 A Participant shall be free to undertake a disposition, as that
term is defined in Section 424(c) of the Code (which generally includes any
sale, exchange, gift or transfer of legal title), of Shares in the
Participant's ESPP Broker account at any time, whether by sale, exchange,
gift or other transfer of title.
12.4 A Participant who is not subject to United States taxation may,
at any time and without regard to the Holding Period, move its Shares to an
account at another brokerage firm of the Participant's choosing or request
that a certificate that represents the Shares be issued and delivered to
the Participant.
13. Withdrawal.
13.1 A Participant may withdraw from an Offering, in whole but not in
part, or from any further participation in the Plan at any time prior to
the Ending Date by delivering a Withdrawal Notice to the Company, in which
event the Company shall refund the Participant's entire Account as soon as
practicable thereafter.
13.2 An employee who has previously withdrawn from the Plan may
re-enter by complying with the requirements of Section 7, provided,
however, that any Participant who withdraws from an Offering, or from the
Plan at the conclusion of an Offering, may not reenter the Plan until the
third subsequent Offering following such withdrawal. Upon compliance with
such requirements, an employee's re-entry into the Plan will become
effective on the Commencement Date of the next Offering following
withdrawal.
14. Carryover of Account. At the conclusion of each Offering, the Company
shall automatically re-enroll each Participant in the next Offering, and the
balance of each Participant's Account shall be used to purchase Shares in the
subsequent Offering, unless the Participant has advised the Company otherwise in
writing, in which case the Company shall refund to the Participant the funds
that remain in the Participant's Account as soon as practicable thereafter.
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15. Interest. No interest shall be paid or allowed on a Participant's
Account.
16. Rights Not Transferable. No Participant shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber such Participant's
Account or any rights to purchase or to receive Shares under the Plan other than
by will or the laws of descent and distribution, and such rights and interests
shall not be liable for, or subject to, a Participant's debts, contracts, or
liabilities. If a Participant purports to make a transfer, or a third party
makes a claim in respect of a Participant's rights or interests, whether by
garnishment, levy, attachment or otherwise, such purported transfer or claim
shall be treated as a withdrawal election under Section 13.
17. Termination of Employment. As soon as practicable upon termination of a
Participant's employment with the Company for any reason whatsoever, including
but not limited to death or retirement, the Participant's Account shall be
returned to the Participant or the Participant's estate, as applicable.
18. Amendment or Discontinuance of the Plan. The Board shall have the right
to amend, modify or terminate the Plan at any time without notice, provided that
(i) subject to Sections 19 and 23.1(b), no Participant's existing rights under
any Offering that is in progress may be adversely affected thereby, and (ii)
subject to Section 19, in the event that the Board desires to retain the
favorable tax treatment under Sections 421 and 423 of the Code, no such
amendment of the Plan shall increase the number of Shares that were reserved for
issuance hereunder unless the Company's shareholders approve such an increase.
19. Changes in Capitalization. In the event of reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, offerings of rights, or any other change in the capital structure
of the Company, the Board may make such adjustment, if any, as it may deem
appropriate in the number, kind, and the price of the Shares that are available
for purchase under the Plan, and in the number of Shares that an employee is
entitled to purchase.
20. Share Ownership. Notwithstanding anything herein to the contrary, no
Participant shall be permitted to subscribe for any Shares under the Plan if
such Participant, immediately after such subscription, owns shares that account
for (including all shares that may be purchased under outstanding subscriptions
under the Plan) five percent or more of the total combined voting power or value
of all classes of shares of the Company or its Subsidiaries. For the foregoing
purposes the rules of Section 424(d) of the Code shall apply in determining
share ownership. In addition, no Participant shall be allowed to subscribe for
any Shares under the Plan if such subscription would result in the Participant
having the right to purchase in excess of $25,000 (valued at the fair market
value on the date such determination under Section 424(b)(8) of the Code) worth
of Shares under all "employee stock purchase plans" of the Company or
Subsidiaries during any calendar year.
21. Administration. The Plan shall be administered by the Board, which may
engage any other person or persons it deems appropriate to assist in the
administration of the Plan. The Board shall be vested with full authority to
make, administer, and interpret such rules and regulations as it deems necessary
to administer the Plan, and any determination, decision, or action of the Board
in connection with the construction, interpretation, administration or
application of the Plan shall be final, conclusive, and binding upon all
Participants and any and all persons that claim rights or interests under or
through a Participant. The Board may delegate any or all of its authority
hereunder to a committee of the Board, as it may designate.
22. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, that is designated by the Company from time to time for the receipt
thereof, and, in the absence of such a designation, the Company's Vice
President-Finance and Assistant Secretary shall be authorized to receive such
notices.
4
<PAGE> 43
23. Termination of the Plan.
23.1 This Plan shall terminate at the earliest of the following:
(a) June 30, 2003;
(b) The date of the filing of a Statement of Intent to Dissolve
by the Company or the effective date of a merger or consolidation
wherein the Company is not to be the surviving corporation, which
merger or consolidation is not between or among corporations related
to the Company. Prior to the occurrence of either of such events, on
such date as the Company may determine, the Company may permit a
Participant to carryout the right to purchase, and to purchase at the
purchase price set forth in Section 5, the number of full Shares (not
any fractional Shares) that may be purchased with that Participant's
Account. In such an event, the Company shall refund to the Participant
the funds that remain in the Participant's Account after such
purchase;
(c) The date the Board acts to terminate the Plan in accordance
with Section 18 above; and
(d) The date when all of the Shares that were reserved for
issuance hereunder have been purchased.
23.2 Upon termination of the Plan, the Company shall refund to each
Participant the balance of each Participant's Account.
24. Limitations on Sale of Stock Purchased Under the Plan. The Plan is
intended to provide Shares for investment and not for resale. The Company does
not, however, intend to restrict or influence the conduct of any employee's
affairs. An employee, therefore, may sell Shares that are purchased under the
Plan at any time, subject to compliance with any applicable federal or state
securities laws and the Company's policy on insider trading. THE EMPLOYEE
ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES.
25. Governmental Regulation. The Company's obligation to sell and deliver
Shares under this Plan is subject to any governmental approval that is required
in connection with the authorization, issuance, or sale of such Shares.
26. No Employment Rights. The Plan does not, directly or indirectly, create
any right for the benefit of any employee or class of employees to purchase any
Shares under the Plan, or create in any employee or class of employees any right
with respect to continuation of employment by the Company, and it shall not be
deemed to interfere in any way with the Company's right to terminate, or
otherwise modify, an employee's employment at any time.
27. Governing Law. The law of the state of Illinois shall govern all
matters that relate to this Plan except to the extent it is superseded by the
laws of the United States.
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<PAGE> 44
(continued from other side)
This proxy, when properly executed, will be voted in the manner as directed
herein by the undersigned stockholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND IN THE DISCRETION OF THE
PROXIES AS TO OTHER MATTERS. The undersigned stockholder may revoke this proxy
at any time before it is voted by delivering to the Vice President of Finance
and Assistant Secretary of the Company either a written revocation of the proxy
or a duly executed proxy bearing a later date, or by appearing at the Annual
Meeting and voting in person. The undersigned stockholder hereby acknowledges
receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement.
DATED:____________________________________
__________________________________________
SIGNATURE
__________________________________________
Signature (if held jointly)
Please date and sign exactly as the name
appears hereon. When signing as executor,
administrator, trustee, guardian,
attorney-in-fact or other fiduciary, please
give title as such. When signing as
corporation, please sign in full corporate
name by President or other authorized
officer. If you sign for a partnership,
please sign in partnership name by an
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL
CARDS IN THE ENCLOSED ENVELOPE.
<PAGE> 45
<TABLE>
<S><C>
PROXY
THIS PROXY IS SOLICITED
SABRATEK CORPORATION ON BE HALF OF
5601 West Howard-Niles, ILLINOIS 60714 THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 10, 1997
TO VOTE AT THE ANNUAL MEETING IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF SABRATEK CORPORATION, SIGN AND
DATE THE REVERSE SIDE OF THIS CARD WITHOUT CHECKING ANY BOX.
The undersigned holder of Common Stock, par value $.01 per share, of Sabratek Corporation (the "Company") herby appoints K. Shan
Padda and Stephen L. Holden, or either of them, with full power of substitution in each as proxies to cast all votes which the
undersigned stockholder is entitled to cast at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the Midland
Hotel, 172 West Adams Street, Chicago, Illinois 60603, on Tuesday, June 10, 1997, at 3:30 P.M., local time, and at any adjournments
thereof, upon the following matters. The undersigned stockholder hereby revokes any proxy or proxies heretofore given.
1. ELECTION OF CLASS 1 DIRECTORS
[ ] FOR all nominees listed below (except as marked to the contrary below) [ ] WITHHOLD AUTHORITY to vote for all
nominees listed below
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a line through the nominee's name listed
below.)
FRANCIS V. COOK, M.D. L. PETER SMITH EDSON W. SPENCER, JR.
If a nominee becomes unavailable for election or unable to serve as a director, the votes will be cast for a person that
will be designated by the Board of Directors of the Company.
2. A PROPOSAL TO ADOPT THE AMENDMENTS TO THE AMENDED AND RESTATED 1993 EMPLOYEE STOCK OPTION PLAN
[ ] For [ ] Against [ ] Abstain
3. A PROPOSAL TO ADOPT THE 1997 EMPLOYEE STOCK PURCHASE PLAN
[ ] For [ ] Against [ ] Abstain
4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual
Meeting, or any adjournments thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
</TABLE>
