<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule sec. 240.14a-11(c) or Rule
sec. 240.14a-12
SABRATEK CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] 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 in the Frank Lloyd Wright Room at the Midland Hotel, 172 West Adams
Street, Chicago, Illinois 60603, on June 4, 1998, at 3:30 p.m., local time.
At the Annual Meeting, you will be asked to consider and vote (i) to elect
three directors to hold office for a three-year term, (ii) to adopt an amendment
to the Amended and Restated 1993 Stock Option Plan to increase the Formula
Grants to Independent Directors and (iii) 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 FOR ALL OF THE NOMINEES FOR ELECTION AS DIRECTORS AND FOR
ADOPTION OF THE AMENDMENT OF THE AMENDED AND RESTATED 1993 STOCK OPTION PLAN AT
THE ANNUAL MEETING.
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
April 24, 1998
<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
in the Frank Lloyd Wright Room at the Midland Hotel, 172 West Adams Street,
Chicago, Illinois 60603, on Thursday, June 4, 1998 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 adopt an amendment to the Amended and Restated 1993 Stock Option Plan
to increase the formula grants to Independent Directors (Proposal No.
2); and
3. 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 13, 1998 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
April 24, 1998
<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 in the Frank Lloyd
Wright Room at the Midland Hotel, 172 West Adams Street, Chicago, Illinois 60603
at 3:30 p.m. local time, on Thursday, June 4, 1998 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 April 24, 1998, accompanied by the Company's 1997 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 13, 1998
(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 10,521,013 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)
assuming there is a quorum present at the meeting. The affirmative vote of at
least a majority of the Common Stock represented in person or by proxy at the
Annual Meeting is necessary for the adoption of the amendment of the Amended and
Restated 1993 Stock Option Plan (Proposal No. 2 on the Proxy) assuming there is
a quorum present at the meeting. 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 nonvotes"), such broker
non-votes will be treated as shares that are present for purposes of determining
the presence of 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 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
<PAGE> 5
of Annual Meeting, nor does the Board of Directors know of any matters which
anyone else 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 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 13, 1998, 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)......................... 497,419 4.67%
Doron C. Levitas(3)...................... 550,226 5.15%
Anil K. Rastogi, Ph.D.(4)................ 86,669 *
Stephen L. Holden(5)..................... 43,473 *
Alan E. Jordan(6)........................ 25,000 *
Scott Skooglund(7)....................... 6,250 *
Joseph Moser(8).......................... 12,610 *
Vincent J. Capponi(9).................... 18,404 *
Elliott R. Mandell(10)................... 97,557 *
Tuan Bui................................. -- *
Stephan C. Beal(11)...................... 8,328
Stephen L. Axel.......................... 4,000
DIRECTORS:
Francis V. Cook, M.D.(12)................ 210,084 2.0%
Mark Lampert(13)......................... 17,879 *
William D. Lautman(14)................... 134,898 1.27%
William H. Lomicka(15)................... 86,234 *
Marvin Samson(16)........................ 35,315 *
L. Peter Smith(17)....................... 54,410 *
Edson W. Spencer, Jr.(18)................ 40,647 *
5% STOCKHOLDERS:
The Kaufman Fund, Inc.(19)............... 744,100 7.07%
All Officers and Directors............... 1,929,443 18.27%
</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 10,521,013 shares of Common
Stock outstanding as of April 13, 1998, 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 134,992 shares subject to options exercisable within 60 days.
(3) Includes 171,575 shares subject to options exercisable within 60 days, out
of which 15,000 shares are held of record by Forrest-Henryk Investment LLC
of which Mr. Levitas is the principal.
(4) Includes 86,669 shares subject to options exercisable within 60 days.
(5) Includes 43,166 shares subject to options exercisable within 60 days.
(6) Includes 25,000 shares subject to options exercisable within 60 days.
(7) Includes 6,250 shares subject to options exercisable within 60 days.
(8) Includes 12,610 shares subject to options exercisable within 60 days.
3
<PAGE> 7
(9) Includes 18,404 shares subject to options exercisable within 60 days.
(10) Includes 95,000 shares subject to options exercisable within 60 days and
2,557 shares held of record by Ginger Mandell, Mr. Mandell's wife.
(11) Includes 8,250 shares subject to options exercisable within 60 days and 78
shares held of record by Mr. Beal's minor son.
(12) Includes 10,000 shares subject to options exercisable within 60 days.
(13) Includes 17,879 shares subject to options exercisable within 60 days.
(14) Includes 32,315 shares subject to options exercisable within 60 days and
68,327 shares issuable upon exercise of warrants. 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 options owned by
EGS Securities Corp.
(15) Includes 33,624 shares subject to options exercisable within 60 days and
3,152 shares issuable upon exercise of warrants.
(16) Includes 32,315 shares subject to options exercisable within 60 days.
(17) Includes 46,497 shares subject to options exercisable within 60 days.
(18) Includes 11,800 shares subject to options exercisable within 60 days and
7,962 shares held of record by Spencer Family Partnership, L.P. Mr. Spencer
disclaims beneficial ownership of 11,112 shares owned by Valerie C. Spencer
Trust #3.
(19) The Kaufman Fund's address is 140 E. 45th Street, New York, New York 10017.
[Remainder of this page intentionally blank.]
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 consist of nine
members and 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 II directors are to be elected to
service until 2001 and six directors will continue to service in accordance with
their prior election.
It is intended that the proxies (except proxies marked to the contrary)
will be voted for the nominees listed below, all of whom 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 ELECTION OF EACH OF THE CLASS
II NOMINEES NAMED BELOW (PROPOSAL NO. 1 ON THE PROXY CARD).
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 II NOMINEES FOR ELECTION WITH TERMS EXPIRING IN 2001
Mark Lampert (38).................... May, 1996 Mr. Lampert, a director of the Company since
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 an M.B.A.
from Harvard Business School.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
William D. Lautman (35).............. 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 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. Mr. Lautman is a director
of One Call Medical, Inc., Louisville
Laboratories, Inc., CareMedic Systems, Inc.,
and Osler Health, 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.
Marvin Samson (56)................... September, 1994 Mr. Samson, a director of the Company since
1994, has been Chairman of the Generic
Pharmaceutical Industry Association since
March, 1997. From April, 1985 to January,
1998, Mr. Samson was President and Chief
Executive Officer of Marsam Pharmaceuticals
Inc. ("Marsam"), a developer, manufacturer
and marketer of generic injectable drug
products. 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.
[Remainder of this page intentionally blank.]
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
CLASS III DIRECTORS WITH TERMS EXPIRING IN 1999
K. Shan Padda (36)................... December, 1989 Mr. Padda co-founded the Company in 1989 and
has served as Chairman and Chief Executive
Officer 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. Mr. Padda is a
director of AKSYS, Ltd.
Doron C. Levitas (40)................ December, 1989 Mr. Levitas co-founded the Company in 1989
and has served as Vice Chairman of the Board
and Secretary since 1994 and Vice President
of International Operations since 1993.
Prior thereto, Mr. Levitas served in various
capacities including Co-Chairman of the
Board and Chief Operating Officer. Before
joining Sabratek, from 1986 to 1988, Mr.
Levitas served as President of a division of
Andens of Illinois, Inc., a medical supplies
company headquartered in Chicago, Illinois,
which assembled and marketed hospital
operating room supply kits. 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. Under
Mr. Levitas' guidance, Sabratek received the
State of Illinois's 1996 and 1997 Governor's
Export Award.
William H. Lomicka (61).............. 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.,
Louisville Laboratories, Inc. and Vencor,
Inc.
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
CLASS I DIRECTORS WITH TERM EXPIRING IN 2000
Francis V. Cook, M.D. (53)........... June, 1997 Dr. Cook, a director of the Company since
1997, has been Chief, Division of Infectious
Diseases at Evanston Northwestern Healthcare
since September, 1994. 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. Dr.
Cook is a director of the Evanston
Northwestern Healthcare Home Services. Dr.
Cook is past President and past Chairman of
the Executive Committee of the professional
staff of Evanston Northwestern Healthcare.
Dr. Cook is a licensed physician in Illinois
and holds specialty board certifications
from the American Board of Internal Medicine
and Infectious Disease. He is a member of
the American College of Physicians,
Infectious Disease Society of America, and
the Chicago Are Infectious Disease Society.
Dr. Cook graduated from Northwestern
University and has an M.D. degree from the
Medical College of Wisconsin.
L. Peter Smith (49).................. 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.
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
Edson W. Spencer, Jr. (44)........... April, 1993 Mr. Spencer, a director of the Company since
1993, is the founder and CEO of Affinity
Capital Management and Managing Member of
Affinity Ventures II, a health care venture
capital limited liability corporation formed
in January, 1997. Mr. Spencer is also the
Managing Partner of PSF Health Care Fund,
L.P., a Minnesota-based venture capital
partnership formed in 1993. Mr. Spencer is
also a principal and Chief Financial Officer
of Peterson-Spencer-Fansler Company which
was formed in 1991. Mr. Spencer serves on
the Board of Directors of Ig3D Corporation,
a privately held Minneapolis, Minnesota
medical device company, TouchPoint Software
Corporation, a privately held health care
software company located in Boston,
Massachusetts, and Mezzanine Capital
Partners, an SBIC located in Minneapolis,
Minnesota. Mr. Spencer also serves on
several not-for-profit boards, including
Children's Health Care, the Minneapolis/St.
Paul, Minnesota Children's Hospitals.
</TABLE>
[Remainder of this page intentionally blank.]
9
<PAGE> 13
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
Six regular and two special meetings of the Company's Board of Directors
were held during the fiscal year ended December 31, 1997. In addition, the
Company's Board of Directors acted by unanimous written consent on two occasions
during such fiscal year. 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 permanent committees of the Company's Board are the Audit
Committee and the 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 two meetings during the fiscal year ended
December 31, 1997.
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 five
meetings of the Compensation Committee during the fiscal year ended December 31,
1997.
DIRECTORS' COMPENSATION
Outside directors currently receive cash fees of $5,000 annually at the end
of the year of service as well as $1,000 for each Board meeting and $500 for
each Committee meeting attended by such director in person and $500 for each
Board meeting attended by such director telephonically. In addition, the Company
reimburses 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 237,770 shares of Common Stock at prices
ranging from $3.17 to $30.38 per share pursuant to the Company's Stock Option
Plan through December 31, 1997.
10
<PAGE> 14
DIRECTORS' STOCK OPTIONS
During the year ended December 31, 1997, the Company paid cash fees and
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 outside directors:
<TABLE>
<CAPTION>
GRANTED JUNE 10, 1997
----------------------------------
NAME CASH FEES NO. OF SHARES EXERCISE PRICE
---- --------- ------------- --------------
<S> <C> <C> <C>
Francis V. Cook, M.D. ................. 2,000 10,000 $30.38
Mark Lampert........................... 1,000 10,000 $30.38
William D. Lautman..................... 1,500 11,200 $30.38
William H. Lomicka..................... 1,000 11,800 $30.38
Marvin Samson.......................... 2,000 11,200 $30.38
L. Peter Smith......................... 2,000 11,200 $30.38
Edson W. Spencer, Jr. ................. 2,000 11,800 $30.38
</TABLE>
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"). For the fiscal year ended December 31,
1997, each of Dr. Tuan Bui, Dr. Francis V. Cook, Stephen L. Axel and Elliot R.
Mandell filed a Form 3 after its due date and each of Doron C. Levitas and Edson
W. Spencer, Jr. filed a Form 4 after its due date. All such reports have been
filed prior to the date of this Proxy Statement.
[Remainder of this page intentionally blank.]
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. (54)....... August, 1995 Dr. Rastogi joined the Company in 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 senior
management positions with Owens-Corning
Fiberglas Corporation. Dr. Rastogi graduated
from McGill University with a Ph.D. degree
in Polymer Science.
Alan E. Jordan (54)............... 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.
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Stephen L. Holden (44)............ August, 1996 Mr. Holden has served as Senior Vice
President and Chief Financial Officer of the
Company since 1996 and in June, 1997 became
the Company's Treasurer. Prior thereto, from
1993 to 1996, Mr. Holden was Chief Operating
Officer of a unit of Value Health, Inc., a
national 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.
Scott Skooglund (39).............. 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 (44)................. March, 1994 Mr. Moser currently serves as Vice President
of Engineering of the Company. Until
recently, he served as Vice President of
Research and Development 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.
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Tuan Bui, Ph.D. (47).............. July, 1997 Dr. Bui joined the Company in July, 1997 as
Vice President of Research and Development.
Prior to joining Sabratek, from 1989 to
1997, Dr. Bui served in various capacities
at Telectronics Pacing Systems, a
Denver-based manufacturer and marketer of
implantable pacemakers, including Director
of Tachycardia Strategic Marketing and
Director of Cardiomyoplasty Operations. From
1981 to 1988, Dr. Bui was employed in a
number of positions by Ausonics, a
manufacturer of ultrasound diagnostic
equipment in Australia, including Chief
Research Engineer. He graduated with a Ph.D.
in Electrical Engineering from Canterbury
University, New Zealand and an M.B.A. degree
from Macquarie University, Australia.
Vincent J. Capponi (40)........... April, 1996 Mr. Capponi has served as Vice President of
Operations since September, 1996 and
previously served 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.
Elliott R. Mandell (42)........... 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 Network of Hospitals, an
affiliation of hospitals located throughout
New England. Previously, Mr. Mandell spent
14 years in various clinical capacities and
as a hospital administrator with New England
Memorial 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>
14
<PAGE> 18
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Stephan C. Beal (43).............. February, 1998 Mr. Beal, who has served in various
positions with the Company since 1992, was
elected Vice President of Sales in February,
1998. Prior to joining the Company, Mr. Beal
was National/ International Distributor
Sales Manager of O'Brien/KMI, a full-line
medical nutrition company, from 1989. From
1985 to 1989, Mr. Beal was with Knight
Medical, Inc. where he was National Sales
Manager. From 1981 to 1985, Mr. Beal was
employed by Medical Electronics Corp. where
he served as Regional Sales Manager. Mr.
Beal graduated from Hartwick College with a
B.A. in Sociology.
Stephen L. Axel (42).............. 1997 Mr. Axel has been Vice President of
Marketing of the Company since 1997. Prior
to joining Sabratek, Mr. Axel was employed
by Paidos Health Management Services, Inc.
where he served as Vice President, Managed
Care and Business Development from 1996.
Previously, Mr. Axel was Vice President of
Strategic Planning and Area Vice President
for Caremark International, Inc. from 1989
to 1996. From 1977 to 1989, Mr. Axel was
with Baxter International and American
Hospital Supply and held several positions
including Director of Sales and Marketing.
Mr. Axel graduated from the University of
California at Santa Barbara and the
Northwestern University JL Kellogg Graduate
School of Management with an MBA.
</TABLE>
[Remainder of this page intentionally blank.]
15
<PAGE> 19
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, 1996 and 1997 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............. 1997 175,000 147,500 10,800(3) 700,000
Chairman and Chief 1996 150,000 90,000 10,800(3) 157,580 --
Executive Officer 1995 90,000 -- -- 157,580 --
Anil K. Rastogi, Ph.D. ... 1997 160,000 185,953 -- 200,000 --
President and Chief 1996 143,000 107,200 -- 31,516 --
Operating Officer 1995 52,500(4) -- -- 70,911 --
Doron C. Levitas.......... 1997 132,000 49,650 -- 100,000 --
Vice Chairman and 1996 120,000 24,000 -- 47,274 --
Vice President of 1995 90,000 -- -- 94,548 --
International Operations
Alan E. Jordan............ 1997 132,000 50,655 144,391(5) 100,000 --
Senior Vice President of 1996 132,000 26,400 426,533(6) 47,274 --
Sales and Marketing 1995 124,980 -- 22,939(5) 107,154 --
Stephen L. Holden......... 1997 154,000 82,863 -- 50,000 --
Senior Vice President, 1996 50,053(7) 21,000 -- 55,000 --
Chief Financial Officer 1995 -- -- -- -- --
and Treasurer
</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, 1996 and 1997 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 commissions paid by the Company.
(6) Represents $89,594 in commissions plus $336,939 in forgiveness of
indebtedness to the Company.
(7) Mr. Holden joined the Company in August 1996.
16
<PAGE> 20
The following table sets forth certain information with respect to options
granted to the Named Executive Officers during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS GRANTED TO EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT DATE
NAME (#) 1997 ($/SH)(1) DATE(2) VALUE(3)
---- --------------- ---------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
K. Shan Padda.................. 700,000 39.9% $22.00 5/20/07 $9,786,000
Anil K. Rastogi, Ph.D.......... 200,000 11.4% $22.00 5/20/07 2,796,000
Alan E. Jordan................. 100,000 5.7% $22.00 5/20/07 1,398,000
Stephen L. Holden.............. 50,000 2.9% $22.00 5/20/07 699,000
Doron C. Levitas............... 10,000 5.7% $22.00 5/20/07 1,398,000
</TABLE>
- -------------------------
(1) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, as determined by the Board.
(2) Some of the options granted to the Named Executive Officers are subject to
vesting and, accordingly, may expire before the dates indicated.
(3) Calculation based on the Black-Scholes model.
The following table sets forth certain information with respect to the
unexercised options held by the Named Executive Officers as of December 31,
1997.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT YEAR-END YEAR-END 1997($)
ON EXERCISE VALUE REALIZED 1997(#) EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
K. Shan Padda................. 108,406 2,160,407 325/896,975 6,158/9,331,299
Anil K. Rastogi, Ph.D......... 40,000 774,605 38,790/223,637 930,572/1,917,051
Alan E. Jordan................ 90,607 1,759,361 0/173,275 0/2,612,885
Stephen L. Holden............. 3,000 62,500 24,500/77,500 499,065/897,675
Doron C. Levitas.............. 54,321 1,075,757 4,771/182,730 114,456/2,659,692
</TABLE>
- -------------------------
(1) Calculated based on stock price at December 31, 1997 of $28.75
STOCK OPTION PLAN
The Company's Stock Option Plan was adopted in 1992, amended in 1993,
amended and restated in 1996 and further amended in 1997. The Stock Option Plan,
as amended, provides for the grant of options to purchase up to an aggregate of
3,800,000 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.
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
17
<PAGE> 21
fiscal year ended December 31, 1997 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 1997, at a fixed
salary of $175,000 and a bonus equal to 70% of salary based on achieving defined
revenue and earnings objectives. In addition, a discretionary bonus of $25,000
was granted to the Chairman in 1997 based upon the Company's performance in
1996. 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 29% in executive officers' base
salaries were made for the year ended December 31, 1998.
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 70% 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 1997 were based upon targeted levels of the
Company's revenues and earnings. 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 evaluated 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 CEO and
President. Target performance levels take into account historic patterns of the
Company performance and strategic objectives.
Individual stock option grants in fiscal 1997 were determined giving
consideration to the factors discussed above and previous option grants in order
to give the executive officers a long-term incentive to improve the overall
performance of the Company. This resulted in total options granted to executive
officers in fiscal 1997 of 1,513,000 shares, which vest over a minimum of four
years. Such grants included options granted to three executive officers to
induce their employment.
In addition, all executive officers, including the Chairman, are eligible
to participate in broad based benefits generally available to all U.S. employees
of the Company, such as the Company's 401(k) and Stock Purchase Plans as well 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.
18
<PAGE> 22
EMPLOYMENT AGREEMENTS
The Company entered into a two-year Employment Agreement with Mr. Padda as
of January 1, 1996. Pursuant to its terms, the Employment Agreement
automatically renewed itself for an additional one year term on January 1, 1998.
The Employment Agreement currently provides that Mr. Padda shall receive a base
salary of $225,000, bonuses based upon the Company's performance as compared to
its budget and options to purchase shares of the Company's Common Stock under
its Stock Option Plan. Mr. Padda is entitled to severance payments if he is
terminated other than for cause. In addition, the Employment Agreement provides
that Mr. Padda will be paid his base salary through the term of the Employment
Agreement if he is terminated following a change in control of the Company. In
addition to provisions relating to Mr. Padda's duties and compensation, the
Employment Agreement requires Mr. Padda to assign all inventions he develops in
the course of his employment with the Company to the Company, maintain the
confidentiality of the Company's proprietary information and refrain from
competing with the Company during his employment with the Company and for a
period of twelve months thereafter.
The Company has entered into an Employment Agreement with Mr. Rastogi. The
Employment Agreement currently provides that Mr. Rastogi will receive a base
salary of $200,000, bonuses based upon the Company's performance as compared to
its business plan and options to purchase shares of the Company's Common Stock
under its Stock Option Plan. Mr. Rastogi is entitled to severance payments if he
is terminated other than for cause. Mr. Rastogi's Employment Agreement contains
a non-competition provision.
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.
Pursuant to its terms, the Employment Agreement automatically renewed itself for
an additional one year term on January 1, 1998. The Employment Agreement
currently provides that Mr. Holden will receive an annual base salary of
$170,000, bonuses based upon the Company's performance, and options to purchase
shares of the Company's Common Stock under its Stock Option Plan. 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. 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.
19
<PAGE> 23
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 quarterly 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 period beginning June 30, 1996 (the earliest
date following the Company's initial public offering for which comparable data
is available) and ending December 31, 1997 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>
health care
Measurement Period medical prod
(Fiscal Year Covered) S&P500 & supplies SBTK
<S> <C> <C> <C>
6/30/96 100 100 100
9/30/96 103.0906 110.935 150.57
12/31/96 111.6842 111.6763 145.97
3/31/96 114.9785 110.4764 183.91
6/30/97 134.999 131.9391 257.47
9/30/97 144.7891 137.1959 334.48
12/31/97 148.9458 139.2298 264.37
</TABLE>
[Remainder of this page intentionally blank.]
20
<PAGE> 24
PROPOSAL NO. 2 -- AMENDMENT OF AMENDED AND RESTATED
1993 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
OPTIONS TO BE GRANTED ANNUALLY TO OUTSIDE DIRECTORS
The Board of Directors believes that the Company's success is dependent, in
part, upon its ability to attract and retain qualified and dedicated outside
directors. The Board of Directors has concluded that one of the best ways to
compete for such directors is to offer significant potential rewards based upon
the Company's success through the issuance of stock options.
The 1993 Plan (the "Plan") was adopted in 1992, amended and renamed in 1993
and amended and restated in 1996 and again amended in 1997. The Plan, as
amended, provides for the grant of options to purchase up to an aggregate of
3,800,000 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 Plan also provides for formula grants ("formula grants") of
options to directors who are not employees of the Company.
The Plan previously provided that 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 Plan) each year immediately following the
Annual Meeting of Stockholders as well as an annual grant of options to purchase
945 shares of Common Stock for each Independent Director who serves on a
committee of the Board of Directors and options to purchase 473 shares of Common
Stock for each Independent Director who serves as Chairman of a committee of the
Board of Directors. 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 and shall 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 Plan. On June 10, 1997, the Board
of Directors, subject to stockholder approval, amended the Plan to provide that
Independent Directors would receive an annual grant of options to purchase
10,000 shares of Common Stock for serving on the Board of Directors as well as
options to purchase 1,200 shares of Common Stock for serving on a committee of
the Board of Directors and options to purchase 600 shares of Common Stock for
serving as a Chairman of a committee. All other provisions of the Plan remained
unchanged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE AMENDMENT
OF THE PLAN. (PROPOSAL NO. 2 ON THE PROXY CARD).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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."
On December 26, 1996 and December 2, 1997, the Company granted EGS
Securities Corp. ("EGS"), of which William D. Lautman, a director of the
Company, is Managing Director, options under the Plan to purchase 50,000 shares
and 25,000 shares of the Company's Common Stock at a price of $14.00 and $24.25
per share, respectively. The options were granted in consideration of services
provided by EGS to the Company in evaluating potential acquisitions and
strategic relationships and fully vest on June 30, 1997 and July 1, 1998,
respectively. In addition, EGS received a fee of $150,000 in connection with the
Company's August, 1997 transaction with GDS.
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
21
<PAGE> 25
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 100,851 shares of Common Stock to Arie
Kalo at $4.76 per share in payment for past engineering consulting services
performed by him personally during 1995 and which the Company valued at
$480,000. K. Shan Padda and Doron Levitas, each of whom is an officer and
director of the Company, together with Arie Kalo each own one-third of the
shares of DAK-Tech, Ltd. (an Israeli corporation) which supplies component
assemblies and research and development services to the Company, the value of
which was $538,544 in 1995.
In January, 1996, the Company issued a Convertible 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 forgo the payment of accrued interest. The conversion
price is equal to $4.76 per share.
In January, 1996, the Company issued a Convertible Subordinated Debenture
to Marvin Samson, a director of the Company, in the principal amount of
$100,000. The debenture bears interest at a rate of 10% per annum until June 30,
1996.
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 1997 Annual Report to Stockholders along with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 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 January 6, 1999.
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.
22
<PAGE> 26
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: April 24, 1998
23
<PAGE> 27
PROXY SABRATEK CORPORATION THIS PROXY IS SOLICITED
5601 WEST HOWARD ON BEHALF OF THE
NILES, ILLINOIS 60714 BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 4, 1998
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") hereby 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 Thursday, June
4, 1998, 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.
<TABLE>
<CAPTION>
1. ELECTION OF CLASS II DIRECTORS
<S> <C> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the contrary below) vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's
name listed below.)
MARK LAMPERT WILLIAM D. LAUTMAN WILLIAM H. LOMICKA
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 AMEND THE AMENDED AND RESTATED 1993 EMPLOYEE STOCK OPTION PLAN
[ ] For [ ] Against [ ] Abstain
3. 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.
</TABLE>
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 AND 2 AND IN ACCORDANCE WITH THE
UNANIMOUS DETERMINATION OF THE BOARD OF DIRECTORS 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.
<PAGE> 28
(continued from other side)
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.
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.
