SABRATEK CORP, DEF 14A, 1999-04-26

SABRATEK CORP
DEF 14A, 1999-04-26
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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<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 (AMENDMENT NO. )

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 14a-11(c) or Rule 14a-12
SABRATEK CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
SABRATEK CORPORATION
- --------------------------------------------------------------------------------
(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)(1) 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 of Sabratek
Corporation. The Annual Meeting will be held at the Midland Hotel, 172 West
Adams Street, Chicago, Illinois 60603, on Thursday, June 3, 1999, at 3:30 p.m.,
local time.

At the Annual Meeting, you will be asked to (a) consider and vote to elect
three directors to hold office for a three-year term (b) consider and vote to
approve Sabratek's Long-Term Incentive Compensation Plan, (c) consider and vote
to approve an amendment to Sabratek's Stock Option Plan to provide for the
issuance of options to purchase an additional 400,000 shares of Sabratek's
common stock, and (d) to transact any other business as may properly come before
the Annual Meeting and any adjournment of the Annual Meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR ALL OF THE NOMINEES FOR ELECTION AS DIRECTORS, FOR
APPROVAL OF THE LONG-TERM INCENTIVE COMPENSATION PLAN AND FOR APPROVAL OF AN
INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK PROVIDED FOR IN SABRATEK'S
STOCK OPTION 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 Card. The Proxy Statement includes specific
information about Sabratek which you should consider in connection with the
actions to be taken at the Annual Meeting. Also included along with the proxy
materials is Sabratek'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,
/s/ K. Shan Padda
--------------------
K. Shan Padda
Chairman

April 26, 1999
<PAGE> 3

SABRATEK CORPORATION
8111 North St. Louis Avenue
Skokie, Illinois 60076
(847) 720-2400

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To our Stockholders

The Annual Meeting of stockholders of Sabratek Corporation will be held at
the Midland Hotel, 172 West Adams Street, Chicago, Illinois 60603, on Thursday,
June 3, 1999 at 3:30 p.m. local time, for the following purposes:

1. To elect three directors to hold office for a three-year term, as
described in Proposal No. 1;

2. To approve Sabratek's Long-Term Incentive Compensation Plan, as
described in Proposal No. 2;

3. To approve an amendment to Sabratek's Stock Option Plan to provide for
the issuance of options to purchase an additional 400,000 shares of
Sabratek's common stock, as described in Proposal No. 3; and

4. To transact any other business as may properly come before the Annual
Meeting and any adjournment of the Annual Meeting.

Only stockholders of record at the close of business on April 16, 1999 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 CARD 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,
/s/ K. Shan Padda
-----------------------
K. SHAN PADDA, Chairman

Skokie, Illinois
April 26, 1999
<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 of Sabratek Corporation to
be held at the Midland Hotel, 172 West Adams Street, Chicago, Illinois 60603 at
3:30 p.m. local time, on Thursday, June 3, 1999 and any adjournment of the
Annual Meeting.

THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF SABRATEK
AND IS REVOCABLE BY THE STOCKHOLDER AT ANY TIME BEFORE IT IS VOTED.

This Proxy Statement was first mailed to Sabratek's stockholders on or
about April 26, 1999, accompanied by Sabratek's 1998 Annual Report to
Stockholders. Sabratek's principal executive offices are located at 8111 North
St. Louis Avenue, Skokie, Illinois 60076, telephone (847) 720-2400.

OUTSTANDING SHARES AND VOTING RIGHTS

Only stockholders of record at the close of business on April 16, 1999 (the
"Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. As of the Record Date, the number of shares and classes of stock that
were outstanding and will be entitled to vote at the Annual Meeting were
9,882,445 shares of common stock, $.01 par value. Sabratek has no other class of
securities which is entitled to vote at the Annual Meeting. Each share of common
stock is entitled to one vote on all matters and the common stock does not have
cumulative voting rights in the election of directors or any other matter.

A quorum of the shares of common stock must be present at the Annual
Meeting in order for the stockholders to act upon the proposals contained in
this Proxy Statement. Sabratek's bylaws provide that a quorum is established if
at least a majority of the total number of outstanding shares of common stock as
of the Record Date is represented in person or by proxy at the Annual Meeting.
The following discussions of the votes necessary to approve the specific
proposals identified in this Proxy Statement assumes that a quorum is present at
the Annual Meeting.

To be elected as a director, each nominee must have a majority of the votes
cast at the Annual Meeting voted "For" his election, as described in Proposal
No. 1 on the Proxy Card. Likewise, in order for Sabratek's Long-Term Incentive
Compensation Plan to be approved, as described in Proposal No. 2 on the Proxy
Card, a majority of the votes cast at the Annual Meeting must be voted "For"
approval. Similarly, in order for the amendment to Sabratek's Stock Option Plan
to provide for the issuance of options to purchase an additional 400,000 shares
of Sabratek's common stock, for an aggregate of up to 4,200,000 shares of common
stock, to be approved, as described in Proposal No. 3 on the Proxy Card, a
majority of the votes cast at the Annual Meeting must be voted "For" approval.

The Delaware General Corporation Law provides that 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" the matter. Where brokers are prohibited from
exercising discretionary authority for beneficial owners who have not provided
voting instructions, commonly referred to as "broker nonvotes," these 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 Card 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
<PAGE> 5

Card and promptly return it in the accompanying postage paid envelope or
otherwise mail it to Sabratek. K. Shan Padda and Stephen L. Holden, the persons
named as proxies on the Proxy Card accompanying this Proxy Statement, were
selected by the Board of Directors to serve in this capacity. The shares of
common stock represented by a proxy which is properly signed, dated and returned
will be voted in compliance 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 unless the proxy is
subsequently revoked at or before the Annual Meeting. 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 any
stockholder 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, subject to the following, be authorized to vote or
otherwise act thereon using their reasonable judgment and discretion with
respect to the following matters:

For any stockholder proposals to be raised at the 1999 Annual Meeting, a
proxy may confer discretionary authority to vote on any of the following:

(a) any stockholder proposal (proxies are entitled with some limited
exceptions to exercise discretionary authority with respect to
stockholder proposals of which Sabratek does not have notice at least
45 days prior to the date in 1999 which corresponds to the date in
1998 on which Sabratek mailed its proxy materials for its 1998 annual
meeting);

(b) approval of the minutes of the prior year's annual meeting if that
approval does not constitute the ratification of the action taken at
that annual meeting;

(c) the election of any person to any office for which a bona fide
nominee, as defined below, has already been stated in the proxy
statement and the nominee is unable to serve in that office or for
good cause will not serve in that office; or

(d) any other matters incident to the conduct of the meeting.

For purpose of the foregoing, a bona fide nominee shall be defined as a
person who has consented to being named in the proxy statement and who will
serve in the office if elected.

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
Sabratek at 8111 North St. Louis Avenue, Skokie, Illinois 60076, of either (a) a
written notice, duly executed by the stockholder, stating that the proxy is
revoked or (b) 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 Proxy Card and the cost of solicitation of proxies will be borne by
Sabratek. 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 Sabratek, without special compensation therefor. Sabratek
expects to reimburse banks, brokers and other persons for their reasonable
out-of-pocket expenses in handling proxy materials for beneficial owners of
Sabratek's common stock.

2
<PAGE> 6

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth information regarding beneficial ownership
of Sabratek's common stock as of April 16, 1999, for (a) each officer of
Sabratek, (b) each director and nominee for director of Sabratek, (c) each
stockholder known by Sabratek to own beneficially 5% or more of the outstanding
shares of Sabratek's common stock and (d) all officers, directors and nominees
for director as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED(1) OUTSTANDING SHARES
---- --------------------- ------------------
<S> <C> <C>
OFFICERS:
K. Shan Padda(2)......................... 624,444 6.14%
Doron C. Levitas(3)...................... 668,435 6.57%
Stephen L. Holden(4)..................... 67,785 *
Vincent J. Capponi(5).................... 43,409 *
Paul S. Jurewicz(6)...................... 25,000 *
Scott Skooglund(7)....................... 20,779 *
Joseph Moser(8).......................... 12,610 *
Tuan Bui................................. 4,852 *
Stephan C. Beal(9)....................... 29,038 *
Stephen L. Axel(10)...................... 14,529 *
DIRECTORS:
Francis V. Cook, M.D.(11)................ 220,084 2.2%
Mark Lampert(12)......................... 27,879 *
William D. Lautman(13)................... 146,101 1.46%
William H. Lomicka(14)................... 98,034 *
Marvin Samson(15)........................ 46,515 *
L. Peter Smith(16)....................... 54,580 *
Edson W. Spencer, Jr.(17)................ 53,447 *
5% STOCKHOLDERS:
Pilgram Baxter & Associates, Ltd.(18).... 794,200 8.04%
Putnam Investments, Inc.(19)............. 1,517,589 15.36%
The Kaufman Fund, Inc.(20)............... 744,100 7.53%
George D. Bjurman & Associates(21)....... 512,190 5.18%
All Officers, Directors and nominees for
Director as a group (17 persons)(22)... 2,157,521 19.67%
</TABLE>

- -------------------------
* Less than 1% of the issued and outstanding shares of Sabratek's common
stock.

(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 9,882,445 shares of common
stock outstanding as of April 16, 1998, plus 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 the options or warrants.

(2) Includes 290,934 shares subject to options exercisable within 60 days.

(3) Includes 289,744 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 64,833 shares subject to options exercisable within 60 days.

(5) Includes 43,409 shares subject to options exercisable within 60 days.

(6) Includes 25,000 shares subject to options exercisable within 60 days.

(7) Includes 20,584 shares subject to options exercisable within 60 days.

3
<PAGE> 7

(8) Includes 12,610 shares subject to options exercisable within 60 days.

(9) Includes 27,924 shares subject to options exercisable within 60 days and 78
shares held of record by Mr. Beal's minor son.

(10) Includes 13,750 shares subject to options exercisable within 60 days.

(11) Includes 20,000 shares subject to options exercisable within 60 days.

(12) Includes 27,879 shares subject to options exercisable within 60 days.

(13) Includes 43,515 shares subject to options exercisable within 60 days and
58,732 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.

(14) Includes 25,806 shares subject to options exercisable within 60 days and
3,152 shares issuable upon exercise of warrants.

(15) Includes 43,515 shares subject to options exercisable within 60 days.

(16) Includes 46,667 shares subject to options exercisable within 60 days.

(17) Includes 23,600 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 shares owned by Valerie C. Spencer Trust
#3.

(18) Pilgram Baxter & Associates, Ltd.'s address is 825 Duportail Road, Wayne,
Pennsylvania 19087

(19) Putnam Investments, Inc.'s address is One Post Office Square, Boston,
Massachusetts 02109.

(20) The Kaufman Fund's address is 140 E. 45th Street, New York, New York 10017.

(21) George D. Bjurman & Associates' address is 10100 Santa Monica Boulevard,
Suite 1200, Los Angeles, California 90067.

(22) Includes 1,085,416 shares subject to options exercisable within 60 days.

4
<PAGE> 8

PROPOSAL NO. 1 -- ELECTION OF DIRECTORS

Sabratek's Amended and Restated Certificate of Incorporation provides that
Sabratek's Board of Directors 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, three Class III
directors are to be elected to service until 2002 and six directors will
continue to service in accordance with their prior election.

The proxies, except proxies marked to the contrary, will be voted for the
nominees listed below, all of whom are presently members of Sabratek's 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
III NOMINEES NAMED BELOW, AS DESCRIBED IN PROPOSAL NO. 1 ON THE PROXY CARD.

NOMINEES AND CONTINUING DIRECTORS

The following table sets forth certain information with respect to
Sabratek's nominees for election to the Board of Directors and Sabratek's
continuing directors:

CLASS III NOMINEES FOR ELECTION WITH TERMS EXPIRING IN 2002

5
<PAGE> 9

<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
Doron C. Levitas (41)................ December, 1989 Mr. Levitas co-founded Sabratek in 1989 and
has served as Vice Chairman of the Board and
Secretary since 1994, Vice President of
International Operations since 1993 and
Chief Administrative Officer since 1998.
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, 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. In both 1996 and 1997, under Mr.
Levitas' guidance, Sabratek received the
State of Illinois's Governor's Export Award.
In 1998, Mr. Levitas was co-named the
Illinois High Tech Entrepreneur of the Year.
William H. Lomicka (62).............. October, 1994 Mr. Lomicka 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:
MedVenture Technologies, Inc., Pomeroy
Computer Resources, Inc. and Vencor, Inc.
</TABLE>

6
<PAGE> 10

CLASS I DIRECTORS WITH TERMS EXPIRING IN 2000

<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
Francis V. Cook, M.D.(54)............ June, 1997 Dr. Cook 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
Area Infectious Disease Society. Dr. Cook
graduated from Northwestern University and
has an M.D. degree from the Medical College
of Wisconsin.
L. Peter Smith(50)................... October, 1992 Mr. Smith 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. Before 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>

7
<PAGE> 11

<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
Edson W. Spencer, Jr.(45)............ April, 1993 Mr. Spencer is the founder and Chief
Executive Officer of Affinity Capital
Management and Managing Member of Affinity
Ventures II, both Minneapolis,
Minnesota-based health care venture capital
concerns formed in January, 1997. Mr.
Spencer is also the Managing Partner of PSF
Health Care Fund, L.P., a Minneapolis,
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 IGN Corporation, a
privately held Minneapolis, Minnesota
medical device company, TouchPoint Software
Corporation, a privately held health care
software company located in Boston,
Massachusetts, cMore Medical, a privately
held health care information systems company
located in Minneapolis, Minnesota and
Mezzanine Capital Partners, a Small Business
Investment Company 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.

CLASS II DIRECTORS FOR ELECTION WITH TERMS EXPIRING IN 2001

Mark Lampert(39)..................... May, 1996 Mr. Lampert founded and has been the
managing partner of Biotechnology Value
Fund, L.P., a private investment partnership
which specializes in biotechnology, since
1993. Before 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. Before
joining Oppenheimer & Co., Mr. Lampert
worked at Biotechnology Royalty Corp., which
he founded in March, 1990. Before 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.
</TABLE>

8
<PAGE> 12

CLASS II DIRECTORS FOR ELECTION WITH TERMS EXPIRING IN 2001

<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ -------------- ------------------------------------------
<S> <C> <C>
William D. Lautman (36).............. September, 1994 Mr. Lautman has been a Managing Director of
EGS Securities Corp. since 1995. Before
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 also a
director of MedVenture Technology Corp.,
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 (57)................... September, 1994 Mr. Samson 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., a developer, manufacturer and marketer
of generic injectable drug products. Marsam
was acquired by Schein Pharmaceutical, Inc.
in 1998. Before founding Marsam, Mr. Samson
was a founder of Elkins-Sinn, Inc., a
manufacturer of generic injectable products.
Mr. Samson graduated from Temple University
with a B.S. in Chemistry.
</TABLE>

[Remainder of this page intentionally left blank.]

9
<PAGE> 13

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS

INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS

Six regular and four special meetings of Sabratek's Board of Directors were
held during the fiscal year ended December 31, 1998. In addition, Sabratek's
Board of Directors acted by unanimous written consent on one occasion during the
fiscal year. No incumbent director failed to attend at least 75% of the total
number of meetings of the Board of Directors or any committees of the Board of
Directors of which he was a member, held during the fiscal year.

INFORMATION CONCERNING COMMITTEES OF THE BOARD

The only permanent committees of Sabratek's Board of Directors 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 Sabratek's independent auditors and reviews internal audit
controls. The Audit Committee held one meeting during the fiscal year ended
December 31, 1998.

The Compensation Committee, which is composed entirely of outside
directors, is currently comprised of Messrs. Cook, Samson and Spencer. L. Peter
Smith had served on the Compensation Committee until April, 1999 at which time
he resigned. Mr. Smith's resignation from the Compensation Committee was not the
result of any disagreement with the other members of the Compensation Committee
regarding Sabratek's Compensation policies or any other matter. The Compensation
Committee establishes salaries, incentives and other forms of compensation for
directors, executive officers and key employees of Sabratek and administers
Sabratek's Stock Option Plan, Long-Term Incentive Compensation Plan and other
incentive compensation and benefit plans. There were eight meetings of the
Compensation Committee during the fiscal year ended December 31, 1998.

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 the director in person and $500 for each
Board meeting attended by the director telephonically. In addition, Sabratek
reimburses directors for out-of-pocket expenses incurred in connection with
attendance at these meetings. Using a formula contained in the Stock Option
Plan, each director receives an option to purchase 10,000 shares of common stock
annually. In addition, each member of a committee of the Board of Directors
receives an option to purchase 1,200 shares of common stock annually and each
chairman of each committee receives an additional option to purchase 600 shares
of common stock annually. These options vest on the earlier of (a) one year from
the date of grant or (b) the next annual election of directors, although vesting
will be accelerated upon a change in control, 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 Sabratek have been granted
options to purchase a total of 314,970 shares of common stock at prices ranging
from $3.17 to $30.38 per share through December 31, 1998.

10
<PAGE> 14

During the year ended December 31, 1998, Sabratek paid cash fees and
granted options to purchase common stock under the Stock Option Plan to the
following outside directors:

<TABLE>
<CAPTION>
GRANTED JUNE 4, 1998
----------------------------------
NAME CASH FEES NO. OF SHARES EXERCISE PRICE
---- --------- ------------- --------------
<S> <C> <C> <C>
Francis V. Cook, M.D. ................. $14,000 10,000 $24.00
Mark Lampert........................... 13,000 10,000 24.00
William D. Lautman..................... 16,500 11,200 24.00
William H. Lomicka..................... 16,000 11,800 24.00
Marvin Samson.......................... 16,500 11,200 24.00
L. Peter Smith......................... 16,500 11,200 24.00
Edson W. Spencer, Jr................... 16,500 11,800 24.00
</TABLE>

REPORTING OF SECURITIES TRANSACTIONS

Ownership of and transactions in shares of Sabratek's common stock by
Sabratek's executive officers and directors and owners of 10% or more of
Sabratek'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. For the fiscal year ended December 31, 1998, Paul S.
Jurewicz filed a Form 3 and each of Stephen L. Holden, Stephen Axel and Tuan Bui
filed a Form 4 after its due date. All late reports have been filed before the
date of this Proxy Statement.

[Remainder of this page intentionally left blank.]

11
<PAGE> 15

BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS

The following is a description of the background of Sabratek's executive
officers who are not also directors:

<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Stephen L. Holden (45)............ August, 1996 Mr. Holden has served as President and
Treasurer of Sabratek since July, 1998.
Previously, he served as Senior Vice
President and Chief Financial Officer since
joining Sabratek in 1996. 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.
Vincent J. Capponi (41)........... April, 1996 Mr. Capponi currently serves as Vice
President and Chief Operating Officer. From
September, 1999 until recently, he served as
Vice President of Operations and previously
served as Vice President of Quality Control.
Before 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>

12
<PAGE> 16

<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Paul S. Jurewicz (43)............. July, 1998 Mr. Jurewicz has served as Senior Vice
President and Chief Financial Officer since
July 1998. From 1996 until joining Sabratek,
Mr. Jurewicz was Senior Vice President and
Chief Financial Officer at OptionCare, Inc.,
a national provider of home health services.
Prior thereto, during 1996, Mr. Jurewicz was
Executive Vice President, Treasurer and
Chief Financial Officer of Health
Management, Inc., a provider of specialty
pharmaceutical services. From 1980 to 1989,
Mr. Jurewicz was with Baxter Healthcare
Corporation and Caremark, Inc. where he
served in a variety of increasingly
responsible financial positions. From 1978
to 1980, Mr. Jurewicz was with Hollister,
Inc., a manufacturer of medical supplies.
Mr. Jurewicz holds a B.S. in Accountancy
from DePaul University, a M.B.A. from the
Lake Forest Graduate School of Management
and is a Certified Public Accountant.
Stephan C. Beal (44).............. February, 1998 Mr. Beal, who has served in various
positions with Sabratek since 1992, was
elected Vice President of Sales in February,
1998. From 1989 until joining Sabratek, Mr.
Beal was National/International Distributor
Sales Manager of O'Brien/KMI, a full-line
medical nutrition company. 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 (43).............. November, 1997 Mr. Axel has been Vice President of
Marketing of Sabratek since November, 1997.
From 1996 until joining Sabratek, Mr. Axel
was employed by Paidos Health Management
Services, Inc. where he served as Vice
President, Managed Care and Business
Development. Prior thereto, 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, Pharmaseal
Division and Director of Marketing. Mr. Axel
is a graduate from the University of
California at Santa Barbara and the
Northwestern University JL Kellogg Graduate
School of Management.
</TABLE>

13
<PAGE> 17

<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ ----------------- ------------------------------------------
<S> <C> <C>
Tuan Bui, Ph.D. (48).............. July, 1997 Dr. Bui joined Sabratek in July, 1997 as
Vice President of Research and Development.
Before 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.
Scott Skooglund (40).............. November, 1992 Mr. Skooglund has been Vice President of
Finance of Sabratek 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 (45)................. March, 1994 Mr. Moser currently serves as Vice President
of Engineering of Sabratek. From the time he
joined Sabratek in 1994 until recently, he
served as Vice President of Research and
Development. 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>

[Remainder of this page intentionally left blank.]

14
<PAGE> 18

SUMMARY COMPENSATION TABLE

EXECUTIVE COMPENSATION

The Summary Compensation Table below sets forth information concerning
compensation paid or accrued for services rendered to Sabratek in all capacities
by Sabratek's Chief Executive Officer and each of Sabratek's four other most
highly compensated executive officers for the years ended December 31, 1996,
1997 and 1998. The persons identified in the Summary Compensation table are
referred to collectively as the "Named Executive Officers" elsewhere in this
Proxy Statement.

<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...................... 1998 225,000 172,500 10,800(3) -- --
Chairman and Chief 1997 175,000 147,500 10,800(3) 700,000 --
Executive Officer 1996 150,000 90,000 10,800(3) 157,580 --

Stephen L. Holden.................. 1998 200,000 89,500 -- 100,000 --
President and Treasurer 1997 154,000 82,863 -- 50,000 --
1996 50,053(4) 21,000 -- 55,000 --

Doron C. Levitas................... 1998 160,000 39,600 -- -- --
Vice Chairman, Vice President 1997 132,000 49,650 -- 100,000 --
of International Operations, 1996 120,000 24,000 -- 47,274 --
Chief Administrative Officer and
Secretary

Vincent J. Capponi................. 1998 152,000 64,411 -- 50,000 --
Vice President and Chief 1997 115,500 60,144 -- 50,000 --
Operating Officer 1996 105,000 -- -- 23,637 --

Paul S. Jurewicz................... 1998 79,423(5) -- -- 50,000 --
Senior Vice President and 1997 -- -- -- -- --
Chief Financial Officer 1996 -- -- -- -- --
</TABLE>

- -------------------------
(1) The Board adopted a bonus plan for 1996 and subsequent years, with bonuses
to be paid according to the recipient's success in achieving certain
performance objectives established at the beginning of each fiscal year. The
bonus paid during any given fiscal year is based upon Sabratek's performance
in the prior fiscal year. For example, bonuses paid in 1998 are based upon
Sabratek's performance in 1997.

(2) Represents shares of common stock underlying stock options granted during
the applicable fiscal year as described in the Stock Option Plan.

(3) Represents Mr. Padda's housing allowance as provided for in his employment
agreement.

(4) Mr. Holden joined the Company in August, 1996.

(5) Mr. Jurewicz joined the Company in July, 1998.

15
<PAGE> 19

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to options granted
to the Named Executive Officers during 1998.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS GRANTED TO EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT DATE
NAME (#) 1998 ($/SH)(1) DATE(2) VALUE(3)
---- --------------- ---------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
K. Shan Padda.................. -- -- -- -- --
Stephen L. Holden.............. 100,000 -- $22.38 7/2/08 $1,618,000
Doron C. Levitas............... -- -- -- -- --
Vincent J. Capponi............. 50,000 -- 22.38 7/2/08 809,000
Paul S. Jurewicz............... 50,000 -- 22.38 7/6/08 809,000
</TABLE>

- -------------------------
(1) Options are granted with an exercise price equal to the fair market value of
Sabratek's common stock on the date of grant.

(2) Some of the options granted to the Named Executive Officers are subject to
vesting and, accordingly, may expire before the dates indicated. For
example, all options expire, unless extended by Sabratek, if not exercised
within 60 days of the date on which the option holder's employment with
Sabratek ends.

(3) Calculation based on the Black-Scholes model.

OPTION EXERCISES DURING 1998 AND YEAR-END OPTION VALUES

The following table sets forth information with respect to options
exercised by the Named Executive Officers during 1998 as well as the unexercised
options held by the Named Executive Officers as of December 31, 1998.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT YEAR-END YEAR-END 1998($)
ON EXERCISE VALUE REALIZED 1998(#) EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
K. Shan Padda................. -- -- 134,992/380,366 404,794/893,741
Stephen L. Holden............. 3,000 $ 77,235 43,166/155,834 245,175/146,580
Doron C. Levitas.............. 17,500 559,264 171,576/380,367 951,364/1,053,481
Vincent J. Capponi............ 5,905 104,515 12,500/99,318 0/77,703
Paul S. Jurewicz.............. -- -- 12,500/37,500 0/0
</TABLE>

- -------------------------
(1) Calculated based on stock price at December 31, 1998 of $16 3/8.

16
<PAGE> 20

LONG-TERM INCENTIVE PLANS -- AWARDS IN
LAST FISCAL YEAR

The following table sets forth certain information with respect to
Sabratek's Long-Term Incentive Compensation Plan. The Long-Term Incentive
Compensation Plan was adopted by Sabratek in 1998 and entitles the recipients of
awards thereunder to payments, up to 60% of which may be paid in shares of
Sabratek's common stock except in the event of a change in control, if and to
the extent that they are successful in increasing Sabratek's earnings per share
as more fully described below. All payments under the Long-Term Incentive
Compensation Plan, other than the payments, if any, to be made upon a change in
control of Sabratek, are subject to stockholder approval as more particularly
described in Proposal No. 2 in this Proxy Statement.

<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OR OTHER PERIOD
OTHER RIGHTS (#) UNTIL MATURATION CUMULATIVE UNIT VALUE AT
NAME (1) OR PAYOUT (2) DECEMBER 31, 1998 (3)
---- ---------------- ---------------- ------------------------
<S> <C> <C> <C>
K. Shan Padda.............................. 40,000 units 5 years $ 0
Stephen L. Holden.......................... 2,000 units 5 years 0
Doron C. Levitas........................... 2,000 units 5 years 0
Vincent J. Capponi(4)...................... -- -- --
Paul S. Jurewicz(4)........................ -- -- --
</TABLE>

- -------------------------
(1) Awards under Sabratek's Long-Term Incentive Compensation Plan (the "LTIP")
are made in Units. The Incremental Unit Value for any year is equal to the
product of (a) the Unit's Measuring Price, as defined below, and (b) 85
percent of the percentage by which Earnings Per Share for the year exceeds
Base Year EPS, as defined below. The Measuring Price for each Unit awarded
is the closing price of the common stock as reported on the Nasdaq National
Market on the last day of the year preceding the award of the Unit. The
Measuring Price for Units awarded as of July 1, 1998 is $28.75. Base Year
EPS for each Unit awarded will be equal to Earnings Per Share for the
immediately preceding year.

(2) Generally, a Unit will vest and become exercisable after a term of five (5)
years from the date of its award, but a Unit awarded as of July 1, 1998 will
vest on December 31, 2002. Notwithstanding the foregoing, a Unit will vest
earlier if (a) it attains its Maximum Cumulative Unit Value, as defined in
the LTIP, (b) the participant's employment with the Company terminates
without Cause before or with or without Cause after a Change in Control,
both as defined in the LTIP, or (c) the participant dies or becomes
disabled.

(3) There is no minimum award guaranteed under the LTIP. The LTIP does not
contain a target award. However, based upon Sabratek's Earnings Per Share
for the period ended December 31, 1998, the Units awarded under the LTIP (as
identified in the first column of this table) had no value as of December
31, 1998. The maximum value of a Unit is capped at $500 for Units awarded as
of July 1, 1998. Absent a Change in Control, participants would not have
been entitled to the maximum payment at December 31, 1998 unless Sabratek's
Earnings Per Share for the fiscal year ended December 31, 1998 had been
$14.38. Because, except in the event of a Change in Control, Sabratek has
the right to pay up to 60% of the total award in shares of its common stock
valued for such purposes at the market price of such shares on the date of
payment, no current determination can be made as to the maximum amount of
cash and maximum number of shares to which participants may be entitled,
although such cash and shares would have total values as follows: K. Shan
Padda, $20,000,000, Stephen L. Holden, $1,000,000, Doron C. Levitas,
$1,000,000. See "Summary Description of Long-Term Incentive Compensation
Plan" under Proposal No. 2 herein for a description of when a Unit reaches
the Maximum Cumulative Unit Value.

(4) Did not receive awards under the LTIP during fiscal 1998.

17
<PAGE> 21

STOCK OPTION PLAN

Sabratek's Stock Option Plan was adopted in 1992, amended in 1993 and
amended and restated in 1996 and 1997. The Stock Option Plan, as amended,
provides for the grant of options to purchase up to an aggregate of 4,200,000
shares of common stock. The Plan is administered by the Compensation Committee
of the Board of Directors who will make discretionary grants of options to
employees, including employees who are Sabratek officers and directors, and
consultants. The Stock Option Plan also provides for formula grants of options
to directors who are not Sabratek officers or employees:

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION

The Compensation Committee of the Board of Directors (the "Committee")
makes base salary, bonus, stock option and long-term incentive compensation plan
decisions with respect to Sabratek's senior executive officers. Sabratek has
delegated authority to make compensation decisions regarding other officers to
Sabratek's Chief Executive Officer, although such decisions remain subject to
review and approval by the Committee.

SUMMARY

The primary objective of Sabratek's executive compensation program is to
help Sabratek attract and retain talented executives while at the same time
promoting the interests of Sabratek's stockholders through pay programs that
reward the achievement of business results. To obtain this objective, the
Company has adopted a compensation program which places a substantial portion of
each officer's potential compensation at risk and dependent on Sabratek's
performance. Following is a brief description of each of the components of
Sabratek's executive compensation program.

Base Salary

Base salary is intended to provide a fixed level of compensation reflecting
the scope and nature of basic job responsibilities. The Committee grants or
approves salary increases, if appropriate, after a review of individual
performance, changes if any, in job responsibilities by virtue of promotions or
otherwise, and an assessment of the relative competitiveness of the current
salary as compared to persons with similar job responsibilities at similarly
situated companies..

Annual Bonus

Annual bonus awards recognize an executive's contribution to each year's
annual business results as measured against a specified performance objective
which relates to such individual's job performance. The performance objective is
set by Sabratek annually and the actual bonus is calculated as a percentage of
the executive's base salary, which percentage varies depending on the extent to
which the performance objective is achieved. Generally, executives receive a
minimum bonus if they are successful in achieving 80% of the stated performance
objective and receive a maximum bonus if they are successful in achieving 120%
of the stated performance objective. The bonus paid during any fiscal year is
based upon results achieved during the prior fiscal year and paid within a
reasonable time after the data necessary to calculate the actual bonus payment
becomes available to Sabratek. For example, the bonus paid to Mr. Padda,
Sabratek's Chief Executive Officer in 1998 was based on Sabratek's performance
in the fiscal year ended December 31, 1997. Based upon Sabratek's performance in
the fiscal year ended December 31, 1998, Mr. Padda has not been and will not be
paid a bonus during 1999.

Stock Option Plan

Stock options are considered an important component of Sabratek's incentive
compensation. Stock options provide the right to purchase a fixed number of
shares of Sabratek's common stock during the term of the option, which is
typically ten years from the date of grant. Sabratek's Stock Option Plan
requires that the exercise price of each stock option be set at an amount equal
to the fair market value of Sabratek's common stock on the date of grant. Stock
options are also typically subject to vesting provisions which require the
18
<PAGE> 22

recipient's continued employment by Sabratek for a period of three to five years
from the date of grant in order for the recipient to be entitled to the full
benefit of the option.

Long-Term Incentive Compensation Plan

Sabratek adopted its Long-Term Incentive Compensation Plan during 1998 and
made awards of Units thereunder to Messrs. Padda, Holden and Levitas. Adoption
of the Long-Term Incentive Compensation Plan and the award of Units thereunder
were determined to be appropriate both because the total amount of incentive
compensation available to recipients of Units was determined to be low in
comparison to Sabratek's competitors and because the Long-Term Incentive
Compensation Plan measured Sabratek's performance with relation to the growth in
earnings per share as opposed to increases in stock price. The Compensation
Committee believes that providing multiple components of the incentive
compensation portion of its overall compensation package allows Sabratek maximum
flexibility in providing incentives for its executives to promote both
short-term and long-term stockholder value. In addition, because participants in
the Long-Term Incentive Compensation Plan must generally wait for the five-year
term of each Unit awarded thereunder before they are entitled to receive any
payment with respect to these Units, the Compensation Committee views the award
of Units thereunder as a valuable tool to help retain its most valued
executives. A description of how this plan functions is contained under the
heading "Summary Description of the Long-Term Incentive Compensation Plan"
beginning on page 24 of this Proxy Statement.

DETERMINATION OF COMPENSATION LEVELS

Individual base subsidiaries have been established to maintain equitable
internal relationships taking into account the responsibilities, experience,
seniority and work performance of the individual executive, as well as the
performance of the unit or function over which the particular executive
exercises primary control and Sabratek's overall performance, strategic
objectives and budget considerations. The relative weight given to each of these
factors varies from individual to individual and from year to year. Sabratek
also takes into account the base salary levels being offered by its competitors
and other similarly situated companies. Increases ranging from 0% to 35% in
executive officers' base salaries were made for the year ended December 31,
1998. In some cases, a portion of the increase in base salary was a result of
promotions for the executive officers.

A significant portion of each executive officer's compensation is in the
form of a bonus which is performance-related. For example, in fiscal 1998,
individual bonuses were budgeted to be from 10% to 70% of total compensation
depending on the executive. Performance measures and targets for Sabratek's
Chief Executive Officer are established by the Compensation Committee and
performance measures and targets for other executive officers are set by the
Chairman and approved by the Compensation Committee at the beginning of each
fiscal year. Bonus criteria and performance objectives for Sabratek's executive
officers are evaluated each year to take into account the factors discussed
above with respect to base salary as well as additional factors, which may vary
from year-to-year, believed appropriate at the time. The level of base salary
and potential annual bonus, as well as the bonus criteria and performance
objectives for all executives other than the Chief Executive Officer are
determined each year following regular, structured reviews of each executive
conducted by the Chief Executive Officer. Decisions with respect to the Chief
Executive Officer's level of base salary and potential annual bonus are made by
the Compensation Committee after less formal discussions with the Chief
Executive Officer regarding his and Sabratek's performance, current situation
and strategic growth and objectives, as well as the Chief Executive Officer's
role in each of the foregoing.

Generally, Sabratek's Chief Executive Officer makes recommendations to the
Compensation Committee regarding the appropriate stock option grants for other
executives. Such recommendations are usually adopted by the Compensation
Committee. The Compensation Committee makes decisions regarding the appropriate
stock option grants to the Chief Executive Officer. The Chief Executive Officer
and the Compensation Committee consider the factors discussed above with respect
to the other components of the overall compensation package as well as the level
of prior grants of stock options when determining who should receive stock
options during a given fiscal year as well as the appropriate level of the
current grant. Based on the foregoing factors, the Compensation Committee
granted or approved the grant of stock options to
19
<PAGE> 23

purchase an aggregate of 230,000 shares of common stock to Sabratek's executives
during 1998. A portion of the total stock options granted during 1998 were
granted to newly hired executives to induce them to join the Sabratek management
team.

In 1998, Sabratek added its Long-Term Incentive Compensation Plan as a new
component of its overall compensation plan. All decisions with respect to
Long-Term Compensation Plan awards during 1998 were made exclusively by the
Compensation Committee. The overriding factor considered by the Compensation
Committee was the retention of Sabratek's current senior management, in
particular, Mr. Padda, Sabratek's Chief Executive Officer. The Compensation
Committee believes the terms of the plan it adopted, as well as the level of the
awards made thereunder, were necessary in order to bring the total level of
compensation, as well as the attributes of such Compensation, in line with what
its three most senior executives might reasonably be offered by another
employer. Although the Compensation Committee has no current plans to award
additional Units under the Long-Term Incentive Compensation Plan, we do
anticipate that awards of additional Units will be made at a future date. The
Compensation Committee further anticipates that when making future decisions
regarding the award of additional Units under the Long-Term Incentive
Compensation Plan, it will take into account factors similar to those considered
by the Compensation Committee when making or approving grants of stock options
as discussed above.

In addition, all executive officers, including the Chairman, are eligible
to participate in broad based benefits generally available to all U.S. employees
of Sabratek, including 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 amended the Internal Revenue
Code, section 162(m), to limit deductibility for Sabratek for income tax
purposes of compensation paid to the Chairman and the other highest paid
executive officers to $1 million per year, per person, with some other limited
exceptions. Sabratek has designed the other incentive based portions of its
overall compensation plan to qualify, and is submitting the Long-Term Incentive
Compensation Plan for stockholder approval in order to allow it to qualify, for
an exemption to this limitation. If the Long-Term Incentive Compensation Plan
(Proposal No. 2 on the Proxy) receives stockholder approval, Sabratek believes
that all compensation paid to its executive officers will be fully deductible
for income tax purposes.

Francis V. Cook, MD.
Marvin Samson
Edson W. Spencer, Jr.

EMPLOYMENT AGREEMENTS

Sabratek entered into a five-year Employment Agreement with Mr. Padda as of
September 28, 1998. The Employment Agreement provides that at the end of each
12-month period after September 27, 2000, unless either Mr. Padda or Sabratek
gives six months' written notice to the other that the term shall not continue,
the term shall thereafter automatically extend for an additional 12-month
period. The Employment Agreement currently provides that Mr. Padda shall receive
a base salary of $250,000, bonuses based upon Mr. Padda's achievement of
specified performance objectives, options to purchase shares of Sabratek's
common stock under its Stock Option Plan and the right to participate in
Sabratek's Long-Term Incentive Compensation Plan. Mr. Padda is entitled to
severance payments if he is terminated other than for cause. In addition, the
Employment Agreement provides that if Mr. Padda's employment terminates for any
reason within 12 months following a change in control of Sabratek, he shall be
entitled to (a) all salary, bonuses, and benefits earned but not yet paid to
him, (b) all salary, bonuses and benefits to which he would have been entitled
if his employment had been terminated by the Company without cause, and (c) an
amount equal to the amount of taxes incurred by Mr. Padda as a result of these
payments. Components of salary and benefits owed to Mr. Padda in the event of
termination of his employment without cause include: (a) Mr. Padda's then
current salary for the longer of three years or the remainder of the term of the
Employment Agreement; (b) annual bonuses for each remaining year of the term of
the Employment Agreement equal to the average of the three highest annual
bonuses awarded to him during the five years preceding the year of termination;
(c) continued coverage under Sabratek's health plan for the remainder of the
term of the Employment Agreement; and

20
<PAGE> 24

(d) the Cumulative Unit Value (as defined in and calculated in accordance with
Sabratek's Long-Term Incentive Compensation Plan) for each Unit awarded under
Sabratek's Long-Term Incentive Compensation Plan prior to the date of
termination of the Employment Agreement. The Employment Agreement prohibits Mr.
Padda from competing with Sabratek during the term of his employment and for a
period of 12 months thereafter and further provides that, should he compete with
Sabratek during any period in which Sabratek has an obligation to make payments
to him under the Employment Agreement, Sabratek's obligations to make future
payments thereunder shall terminate. In addition to his Employment Agreement,
Mr. Padda has entered into an agreement with Sabratek which requires him to
assign all inventions he develops in the course of his employment to Sabratek
and maintain the confidentiality of Sabratek's proprietary information.

Sabratek entered into three-year Employment Agreements with Mr. Holden and
Mr. Levitas, each of which is dated as of September 28, 1998. Each Employment
Agreement provides that at the end of each 12-month period after September 27,
1999, unless the applicable officer or Sabratek gives three months' written
notice to the other party to the Employment Agreement that the term shall not
continue, the term shall thereafter automatically extend for an additional
12-month period. Annual base salary for each officer is as indicated below. Each
of the Employment Agreements currently provides that the applicable officer will
receive bonuses based upon his achievement of specified performance objectives,
options to purchase shares of Sabratek's common stock under its Stock Option
Plan and the right to participate in Sabratek's Long-Term Incentive Compensation
Plan. Each officer is entitled to severance payments if he is terminated other
than for cause. In addition, each officer's Employment Agreement provides that
if the applicable officer's employment terminates for any reason within 12
months following a change in control of Sabratek, he shall be entitled to (a)
all salary, bonuses, and benefits earned but not yet paid to him, (b) all
salary, bonuses and benefits to which he would have been entitled if his
employment had been terminated by Sabratek without cause and (c) an amount equal
to the amount of taxes incurred by him as a result of these payments. Components
of salary and benefits owed to either officer in the event of termination of his
employment without cause include: (a) his then current salary for the longer of
two years or the remainder of the term of the Employment Agreement; (b) annual
bonuses for each remaining year of the term of the Employment Agreement equal to
the average of the three highest annual bonuses awarded to him during the five
years preceding the year of termination; (c) continued coverage under Sabratek's
health plan for the remainder of the term of the Employment Agreement; and (d)
the Cumulative Unit Value (as defined in and calculated in accordance with
Sabratek's Long-Term Incentive Compensation Plan) for each Unit awarded under
Sabratek's Long-Term Incentive Compensation Plan prior to the date of
termination of the Employment Agreement. The Employment Agreement prohibits each
of the officers from competing with Sabratek during the term of his employment
and for a period of 12 months thereafter. In addition to their respective
Employment Agreements, each of Messrs. Holden and Levitas have entered into an
agreement with Sabratek which requires him to assign all inventions he develops
in the course of his employment to Sabratek and maintain the confidentiality of
Sabratek's proprietary information. The annual base salary for each officer is
as follows: Mr. Holden receives an annual base salary of $200,000 and Mr.
Levitas receives an annual base salary of $145,000.

Sabratek entered into one-year Employment Agreements with Mr. Capponi and
Mr. Jurewicz, each of which is dated as of September 28, 1998, with provision
for automatic extensions for consecutive 12-month terms, unless proper notice of
termination is given. Each Employment Agreement currently provides that each
officer will receive an annual base salary of $175,000, bonuses based upon his
achievement of specified performance objectives and options to purchase shares
of Sabratek's common stock under its Stock Option Plan. Each employee is
entitled to severance payments if he is terminated other than for cause. In
addition, the Employment Agreement provides that if the applicable officer's
employment terminates for any reason within 12 months following a change in
control of Sabratek or there is a material adverse change in each employee's
compensation, title or duties as specified in the Employment Agreement during
such period, he shall be entitled to all salary, bonuses and benefits earned but
not yet paid to him, as well as all salary, bonuses and benefits to which he
would have been entitled if his employment had been terminated by Sabratek
without cause. Components of salary and benefits owed to the applicable officer
in the event of termination of his employment without cause include: (a) then
current salary for a period of one year following the date of termination; (b) a
prorated annual bonus for the year in which terminated; and (c) continued
coverage under
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<PAGE> 25

Sabratek's health plan for a period of one year. In addition, each of the
officers' Employment Agreements prohibits him from competing with Sabratek
during his employment and for a period of six months thereafter.

For purposes of the above-described employment agreements, the term change
in control shall mean the occurrence of any of the following events:

(a) Consummation of the acquisition by any person, as such term is defined
in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, of
beneficial ownership, within the meaning of Rule l3d-3 promulgated under
the Securities Act of 1933, of 40 percent or more of the combined voting
power of the then outstanding voting securities of Sabratek; or

(b) The individuals who, as of the date of the applicable employment
agreement, are members of Sabratek's Board of Directors cease for any
reason to constitute a majority of the Board of Directors, unless the
election, or nomination for election by the stockholders of Sabratek, of
any new director or directors was approved by a vote of a majority of
the Board of Directors, in which case the new director or directors
shall, for purposes of the foregoing, be considered as a member or
members of the Board of Directors as of the date of the applicable
employment agreement; or

(c) Approval by Sabratek's stockholders of (A) a merger or consolidation
of Sabratek if the stockholders immediately before the merger or
consolidation do not, as a result of the merger or consolidation, own,
directly or indirectly, more than 40 percent of the combined voting
power of the then outstanding voting securities of the entity resulting
from the merger or consolidation in substantially the same proportion as
their ownership of the combined voting power of the voting securities of
Sabratek outstanding immediately before the merger or consolidation; or
(B) a complete liquidation or dissolution, or an agreement for the sale
or other disposition, of all or substantially all of the assets of
Sabratek.

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

[Remainder of this page intentionally left blank.]

22
<PAGE> 26

PERFORMANCE GRAPH

The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act,
except to the extent Sabratek specifically incorporates this information by
reference, and shall not otherwise be deemed filed under Securities Act or the
Exchange Act.

Shown below is a line graph comparing the yearly change in the cumulative
total shareholder return on Sabratek's common stock with the cumulative total
return of the S&P 500 Index and the S&P Health Care (Medical Products and
Supplies) Index for year ending December 31, 1998 where $100 was invested on
June 30, 1996, the earliest date following Sabratek's initial public offering
for which comparable data is available.

Historical stock price performance shown on the graph is not necessarily
indicative of the future price performance.

<TABLE>
<CAPTION>
S&P HEALTH CARE
(MEDICAL PRODUCTS
S&P 500 AND SUPPLIES) SBTK
------- ----------------- ----
<S> <C> <C> <C>
6/30/96 100.00 100.00 100.00
9/30/96 103.00 111.00 151.00
12/31/96 112.00 112.00 146.00
3/31/97 115.00 111.00 184.00
6/30/97 135.00 132.00 257.00
9/30/97 145.00 137.00 334.00
12/31/97 149.00 139.00 264.00
3/31/98 170.00 160.00 350.00
6/30/98 175.00 176.00 227.00
9/30/98 158.00 166.00 226.00
12/31/98 191.00 201.00 164.00
</TABLE>

23
<PAGE> 27

PROPOSAL NO. 2 -- APPROVAL OF
LONG-TERM INCENTIVE COMPENSATION PLAN

Prior to adopting the Long-Term Incentive Compensation Plan, Sabratek's
Board of Directors determined that retaining Sabratek's current management and,
in particular, Mr. Padda, Sabratek's Chief Executive Officer, was of critical
importance to maintaining and increasing stockholder value. The Board of
Directors also determined that the amount of incentive compensation available to
Sabratek's most senior executives was very likely not sufficient to deter such
individuals from accepting other employment if and when the same was offered to
them. Having made such determinations, the Board of Directors decided to
substantially increase the amount of incentive compensation which Messrs. Padda,
Holden and Levitas had the potential to earn.

The Board of Directors provided the potential increase in incentive
compensation in the form of Sabratek's Long-Term Incentive Compensation Plan,
the terms of which are summarized below. The Board of Directors believes the
terms of the Long-Term Incentive Compensation Plan, as well as the amount of
potential incentive compensation available thereunder, are appropriate and
reasonable.

Although it is impossible to predict with reasonable accuracy due to the
number of variables which must be taken into account in the calculation, it is
not anticipated that substantial payments will be made pursuant to the Long-Term
Incentive Compensation Plan unless the participants therein are successful in
guiding Sabratek to dramatic increases in earnings per share. The Board of
Directors also believes that the terms of the Long-Term Incentive Compensation
Plan, not just the amounts potentially payable thereunder, allow it to function
exceptionally well as an executive retention tool. For example, with limited
exceptions described below, actual payments with respect to Units awarded under
the Long-Term Incentive Compensation Plan are not made until five years from the
date of the award. In addition, except for payments made in connection with a
change in control, Sabratek may pay up to 60% of any payment due under the
Long-Term Incentive Compensation Plan in shares of its common stock; thereby
further linking the interests of participants to those of stockholders. Finally,
the Long-Term Incentive Compensation Plan contains change in control provisions
which are designed to provide participants with an incentive to remain with
Sabratek during times of uncertainty. It should be noted, however, that the
payments to be made to participants upon a change in control, if any, can be
limited based on the total value to be received by Sabratek's stockholders in
any such transaction; thereby further aligning the interests of Sabratek's
management with the stockholders, even in the event of such a contingency.

Sabratek is seeking stockholder approval of the Long-Term Incentive
Compensation Plan as required by Section 162(m) of the Internal Revenue Code of
1986, as amended, so that compensation paid under the Long-Term Incentive
Compensation Plan may be fully deductible by Sabratek. The Long-Term Incentive
Compensation Plan is designed so that all compensation payable thereunder
qualifies as "performance-based" compensation and if this Proposal No. 2
receives stockholder approval all payments made thereunder will be fully
deductible by Sabratek.

The Long-Term Incentive Compensation Plan provides that Sabratek will be
required to make any payments due thereunder upon a change in control regardless
of whether the Long-Term Incentive Compensation Plan receives stockholder
approval. Thus, if this Proposal No. 2 fails to receive stockholder approval it
will not effect Sabratek's obligation to make the payments, if any, due upon a
change in control for previous awards but may affect Sabratek's ability to fully
deduct these payments as compensation expenses for tax purposes.

SUMMARY DESCRIPTION OF LONG-TERM INCENTIVE COMPENSATION PLAN

The Long-Term Incentive Compensation Plan will be administered by the
Compensation Committee of the Board of Directors, which has full power and
authority to determine which key employees of Sabratek will receive awards under
the Long-Term Incentive Compensation Plan, to interpret and construe the terms
of the Long-Term Incentive Compensation Plan and to make all determinations it
deems necessary in the administration of the Long-Term Incentive Compensation
Plan.

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<PAGE> 28

The Compensation Committee has previously made awards under the Long-Term
Incentive Compensation Plan to Messrs. Padda, Holden and Levitas. See "Executive
Compensation Long-Term Incentive Plans -- Awards in Last Fiscal Year."

The Long-Term Incentive Compensation Plan provides for the award of
participation Units to key employees as determined by the Compensation
Committee. Units may be awarded as of the first day of any calendar year through
2008; provided, however, that the initial award of Units was made as of July 1,
1998. A maximum of 100,000 Units may be awarded under the Long-Term Incentive
Compensation Plan, and no more that 75,000 Units may be awarded to any one
participant.

Generally, Units vest and become exercisable after a term of five years
from the date of their award, but Units awarded as of July 1, 1998 will vest on
December 31, 2002. Notwithstanding the foregoing, a Unit will vest earlier if it
attains its Maximum Cumulative Unit Value, as defined below, or if the
participant's employment with Sabratek terminates (a) without cause before or
after a change in control, both as defined in the Long-Term Incentive
Compensation Plan, or (b) by reason of death or disability.

The value of a Unit at any time (the "Incremental Unit Value") depends on
the extent of increase in the Company's Earnings Per Share, as defined below,
from year to year. For purposes of the Long-Term Incentive Compensation Plan,
Earnings Per Share for any year is the Company's Earnings, as defined in the
Long-Term Incentive Compensation Plan, divided by the number of shares of common
stock used to determine the Company's diluted earnings per share for that year,
as reported in the Company's audited consolidated financial statements;
provided, however, that for 1998, Earnings Per Share will be the lesser of (a)
160% of Earnings Per Share for the period July 1, 1998 through December 31, 1998
or (b) Earnings Per Share for 1998.

The Incremental Unit Value for any year is equal to the product of (a) the
Unit's Measuring Price and (b) 85 percent of the percentage by which Earnings
Per Share for the year exceeds Base Year EPS. The Measuring Price for each Unit
awarded is the closing price of the common stock as reported on the Nasdaq
National Market on the last day of the year preceding the award of the Unit. The
Measuring Price for Units awarded as of July 1, 1998 is $28.75. Base Year EPS
will be equal to Earnings Per Share for the immediately preceding year.

A Unit's Incremental Unit Value for each of the five years from the date of
award is cumulated to obtain the Unit's Cumulative Unit Value, which is capped
at $500 for Units awarded as of July 1, 1998, and, for Units awarded thereafter,
at an amount determined by the Committee when the Unit is awarded (the "Maximum
Cumulative Unit Value").

A Unit that becomes vested shall thereupon be exercised. Upon its exercise,
a participant will receive the Unit's Cumulative Unit Value, but not more than
the Maximum Cumulative Unit Value. Except upon a Change in Control, when payment
must be made entirely in cash, not less than 40 percent of the amount due will
be paid in cash, and the balance will be paid in cash or in shares of common
stock or both, as determined by the Compensation Committee in its discretion.

In respect of a Unit that becomes vested by reason of termination of a
participant's employment without Cause within one year following a Change in
Control, the amount payable will be the Unit's Maximum Cumulative Unit Value,
provided that no single participant shall receive a payment that exceeds 5%, and
all participants in the aggregate shall not receive payments which exceed 7%, of
the total consideration paid or received or to be paid or received in connection
with such Change in Control.

A Unit will expire upon the earlier of (a) its exercise or (b) termination
of the participant's employment with Sabratek; provided, however, that upon
termination (x) by Sabratek without Cause, (y) by reason of death or disability
or (z) for any other reason specifically approved in advance by the Committee,
the term of the Unit will be extended for a period of 14 months from the date of
termination.

The Committee may amend or terminate the Long-Term Incentive Compensation
Plan at any time, provided that no amendment will be effective before approval
by Sabratek's stockholders to the extent that the

25
<PAGE> 29

approval is required to preserve deductibility of compensation paid under
Section 162(m) of the Code or is otherwise required by law.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE LONG-TERM
INCENTIVE COMPENSATION PLAN, AS DESCRIBED IN PROPOSAL NO. 2 ON THE PROXY CARD.

[Remainder of this page intentionally left blank.]

26
<PAGE> 30

PROPOSAL NO. 3 -- AMENDMENT OF STOCK OPTION PLAN
TO PROVIDE FOR THE ISSUANCE OF OPTIONS
TO PURCHASE AN ADDITIONAL 400,000 SHARES OF COMMON STOCK

The Board of Directors recognizes that Sabratek experiences intense
competition from other companies for talented managers and employees and that
Sabratek'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
Sabratek's success through the issuance of stock options. The Board of Directors
believes that all employees of Sabratek should be provided the opportunity to
acquire or increase their holdings of Sabratek'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 stock options may be granted under the Stock
Option Plan.

Because of the value the Board of Directors places on stock options as a
compensation tool, the Board of Directors adopted an amendment to the Stock
Option Plan in April of 1999 which increased the number of shares of common
stock reserved for options granted under the Stock Option Plan by an aggregate
of 400,000 to 4,200,000. The amendment is subject to ratification by the
stockholders.

STOCK OPTION PLAN

Sabratek's Stock Option Plan was adopted in 1992, amended in 1993 and
amended and restated in 1996 and 1997. The Stock Option Plan, as amended,
provides for the grant of options to purchase up to an aggregate of 4,200,000
shares of common stock. The Stock Option Plan is administered by the
Compensation Committee of the Board of Directors which makes discretionary
grants ("discretionary grants") of stock 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 stock
options to directors who are not employees of the Company.

Stock options granted pursuant to discretionary grants may be non-qualified
stock options or incentive stock 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 stock options are determined by the Compensation Committee, in its sole
discretion. Stock options granted under discretionary grants are exercisable for
a period of up to ten years, except that incentive stock options granted to
optionees who, at the time the stock option is granted, own stock representing
greater than 10% of the voting power of all classes of Sabratek's stock or the
stock of any parent or subsidiary, are exercisable for a period of up to five
years. The per share exercise price of incentive stock 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 stock options granted to optionees who, at the time the stock
option is granted, own stock representing greater than 10% of the voting power
of all classes of Sabratek's stock or the stock of 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 stock options are granted at
less than fair market value, Sabratek incurs a non-cash expense for financial
reporting purposes.

Under the formula grants, each director of Sabratek who is not also an
officer or employee of Sabratek (an "Independent Director") will be
automatically granted a non-qualified stock option to purchase 10,000 shares of
common stock, which amount may be adjusted as provided in the Stock Option Plan,
each year immediately following the Annual Meeting of stockholders. Each
Independent Director may decline his respective grant. Each stock 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 stock
options to purchase 1,200 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 stock options to purchase 600 shares of common stock. These
additional stock options are on the same terms as described above. Each of these
stock options shall have a term of five years from the
27
<PAGE> 31

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 of December 31, 1998, there were 382 employees eligible to participate
and approximately 123 actual participants in the Stock Option Plan. During the
fiscal year ended December 31, 1998, the Named Executive Officers were granted
stock options to acquire 200,000 shares of common stock, at an average exercise
price of $22.38 per share. During the fiscal year ended December 31, 1998, all
Independent Directors as a group were granted stock options to acquire 77,200
shares of common stock, at an average exercise price of $24.00, and grants of
stock options to all other employees as a group to acquire 91,000 shares of
common stock, at an average exercise price of $22.88 per share.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT OF
THE STOCK OPTION PLAN TO PROVIDE FOR THE ISSUANCE OF OPTIONS TO PURCHASE AN
ADDITIONAL 400,000 SHARES OF SABRATEK'S COMMON STOCK, AS DESCRIBED IN PROPOSAL
NO. 3 ON THE PROXY CARD.

[Remainder of this page intentionally left blank.]

28
<PAGE> 32

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On August 18, 1997, EGS Securities Corp., of which William D. Lautman, a
director of Sabratek, is a Managing Director, exercised an option, originally
granted on December 26, 1996 under Sabratek's Stock Option Plan, to purchase
50,000 shares of Sabratek's common stock at a price of $14.00.

On December 2, 1997, Sabratek granted EGS Securities Corp. an option under
Sabratek's Stock Option Plan to purchase 25,000 shares of Sabratek's common
stock at a price of $24.25 per share. The option was granted in consideration of
the services provided by EGS Securities Corp. to the Company in evaluating
potential acquisitions and strategic relationships. The option fully vested on
July 1, 1998 and expires on December 2, 2007.

K. Shan Padda and Doron C. Levitas, both of whom are officers and directors
of Sabratek, formerly owned an aggregate of 67% of the common stock of Dak-Tech
Ltd., an Israeli company. Prior to December, 1998, Sabratek had a right to
purchase the Dak-Tech interests owned by Messrs. Padda and Levitas pursuant to a
previously agreed upon option. On December 29, 1998, the Board of Directors
determined that Sabratek's exercise of the option to purchase the Dak-Tech
interests owned by Messrs. Padda and Levitas would not be in Sabratek's best
interests. Accordingly, Sabratek waived and canceled its option to purchase the
Dak-Tech interests owned by Messrs. Padda and Levitas. Further, Mr. Padda
subsequently sold his entire one-third interest in Dak-Tech in equal percentages
to Mr. Levitas and the other stockholder of Dak-Tech. As such, Mr. Levitas
currently owns one-half of the common stock of Dak-Tech. During the fiscal year
ended December 31, 1998, Sabratek purchased manufactured components with a value
of $1,064,464 from Dak-Tech.

ACCOUNTANTS

KPMG LLP currently serves as Sabratek's independent public accountants. It
is expected that representatives of KPMG 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

Sabratek's 1998 Annual Report to Stockholders, along with Sabratek's Annual
Report on Form 10-K for the year ended December 31, 1998, accompany this Proxy
Statement but do not constitute a part of the proxy materials.

STOCKHOLDERS' PROPOSALS

If a stockholder desires to have a proposal formally considered at the 2000
Annual Meeting of Sabratek's stockholders, and included in the Proxy Statement
for that meeting, the proposal must be received in writing by Sabratek's
Secretary on or before December 24, 1999. Additionally, if a proponent of a
stockholder proposal at the 2000 Annual Stockholder's Meeting fails to provide
notice of the intent to make such proposal by personal delivery or mail to
Sabratek on or before March 7, 2000, or by an earlier or later date, if such
date is established by amendment to Sabratek's bylaws, then any proxy solicited
by management may confer discretionary authority to vote on such proposal.
Sabratek reserves the right to decline to include in Sabratek's proxy statement
and proxy any stockholder proposal that does not comply with the rules of the
United States Securities and Exchange Commission or the provisions of Sabratek's
bylaws relating to stockholder proposals.

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, subject to applicable rules relating to the
discretionary voting of proxies, the shares represented by proxies will be voted
in accordance with the judgment of the persons named in the proxy.

29
<PAGE> 33

Please complete, sign and date the enclosed Proxy Card, which is revocable
as described herein, and mail it promptly in the enclosed postage-paid envelope.

By Order of the Board of Directors,

/s/ K. Shan Padda
------------------------------
K. SHAN PADDA, Chairman

Dated: April 26, 1999

30
<PAGE> 34

PROXY SABRATEK CORPORATION THIS PROXY IS SOLICITED
8111 North St. Louis Avenue ON BEHALF OF THE
Skokie, Illinois 60076 BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 3, 1999

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 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 to be held at the Midland Hotel, 172 West Adams Street,
Chicago, Illinois 60603, on Thursday, June 3, 1999, at 3:30 P.M., local time,
and at any adjournment of the Annual Meeting, upon the following matters. The
undersigned stockholder hereby revokes any proxy or proxies heretofore given.

1. ELECTION OF CLASS III DIRECTORS

|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary below) listed below

(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name listed below.)

K. SHAN PADDA DORON C. LEVITAS 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 Sabratek.

2. A PROPOSAL TO APPROVE SABRATEK'S LONG-TERM INCENTIVE COMPENSATION PLAN

|_| For |_| Against |_| Abstain

3. A PROPOSAL TO APPROVE AN AMENDMENT TO SABRATEK'S STOCK OPTION PLAN TO
PROVIDE FOR THE ISSUANCE OF OPTIONS TO PURCHASE AN ADDITIONAL 400,000
SHARES OF SABRATEK'S COMMON STOCK

|_| 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
adjournment of the Annual Meeting.

<PAGE> 35

(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 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 Sabratek
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.

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.