<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
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 Section 240.14a-11(c) or Section 240.14a-12
Aksys, Ltd.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
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Notes:
<PAGE>
AKSYS, LTD.
TWO MARRIOTT DRIVE
LINCOLNSHIRE, ILLINOIS 60069
TELEPHONE: (847) 229-2020
March 17, 1998
Dear Aksys Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Aksys, Ltd. The meeting will be held on Tuesday, April 21, 1998, at 2:00
p.m. at the Marriott Lincolnshire Resort located at Ten Marriott Drive,
Lincolnshire, Illinois.
At the meeting, we will report on current industry conditions and recent
developments at Aksys. Members of the Board of Directors and our senior
management team will be present to discuss the affairs of Aksys and answer any
questions you may have. After the conclusion of the meeting, you are cordially
invited to attend an Open House at the Aksys, Ltd. facilities located near the
Marriott Lincolnshire Resort.
Enclosed is the Company's Annual Report for the year ended December 31,
1997, a proxy statement and a proxy card. It is important that your shares be
represented and voted at the meeting, regardless of the size of your holdings.
Accordingly, please complete, sign and date the enclosed proxy card and return
it promptly in the enclosed envelope to ensure your shares will be
represented. If you do attend the meeting, you may withdraw your proxy if you
wish to vote in person.
On behalf of the Board of Directors and management of Aksys, I would like to
thank you for choosing to invest in our Company.
Sincerely,
/S/ Lawrence H.N. Kinet
Lawrence H.N. Kinet
Chairman and Chief Executive Officer
<PAGE>
AKSYS, LTD.
TWO MARRIOTT DRIVE
LINCOLNSHIRE, ILLINOIS 60069
TELEPHONE: (847) 229-2020
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1998
The Annual Meeting of Stockholders of Aksys, Ltd., a Delaware corporation
(the "Company"), will be held on Tuesday, April 21, 1998, at 2:00 p.m. (the
"Annual Meeting") at the Marriott Lincolnshire Resort located at Ten Marriott
Drive, Lincolnshire, Illinois, for the purpose of:
(1) Electing two Class II Directors to serve until the annual meeting of
stockholders in 2001 and until their successors are duly elected and
qualified or until their earlier removal or resignation; and
(2) Transacting such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 3, 1998, as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournment or postponement thereof.
By Order of the Board of Directors
/S/ Steven A. Bourne
Steven A. Bourne
Assistant Secretary
March 17, 1998
The Company's Annual Report for the year ended December 31, 1997 is
enclosed. The Annual Report contains financial and other information about the
Company, but is not incorporated into the attached Proxy Statement and is not
deemed to be a part of the Company's proxy soliciting material.
EVEN IF YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE,
SIGN AND RETURN THE ENCLOSED PROXY CARD. A SELF-ADDRESSED ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE, AND NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES
AND VOTE IN PERSON IF THEY SO DESIRE.
<PAGE>
AKSYS, LTD.
TWO MARRIOTT DRIVE
LINCOLNSHIRE, ILLINOIS 60069
TELEPHONE: (847) 229-2020
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
APRIL 21, 1998
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Aksys, Ltd., a Delaware corporation (the "Company"), of
proxies to be used at the annual meeting of stockholders of the Company that
will be held on Tuesday, April 21, 1998 (the "Annual Meeting"). This Proxy
Statement and the related proxy card are being mailed to holders of the
Company's common stock, par value $.01 per share (the "Common Stock"), on or
about March 17, 1998.
If the enclosed proxy card is executed and returned, the shares represented
by it will be voted as directed on all matters properly coming before the
Annual Meeting for a vote. Returning a completed proxy card will not prevent
you from voting in person at the Annual Meeting should you be present and
desire to vote. In addition, a proxy may be revoked at any time prior to its
exercise either by giving written notice to the Company or by submission of a
later-dated proxy.
Stockholders of record of the Common Stock at the close of business on March
3, 1998 will be entitled to vote at the Annual Meeting. On such date, the
Company had 14,587,624 issued and outstanding shares of Common Stock. A list
of the Company's stockholders will be available for examination by
stockholders of the Company, for any purpose germane to the Annual Meeting, at
the Company's headquarters for a period of ten days prior to the meeting. Each
share of Common Stock entitles the holder thereof to one vote on all matters
submitted to stockholders. At the Annual Meeting, an inspector of election
shall determine the presence of a quorum and shall tabulate the voting
results. The holders of a majority of the total number of outstanding shares
of Common Stock entitled to vote must be present in person or by proxy to
constitute the necessary quorum for any business to be transacted at the
Annual Meeting. In accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), properly executed proxies marked "abstain" as well as
proxies held in street name by brokers that are not voted on all proposals to
come before the Annual Meeting ("broker non-votes") will be considered present
for the purposes of determining whether a quorum is in attendance at the
Annual Meeting.
The two nominees for Class II Director receiving the greatest number of
votes cast at the Annual Meeting in person or by proxy shall be elected.
Consequently, any shares of Common Stock present in person or by proxy at the
Annual Meeting but not voted for any reason have no impact in the election of
Directors, except to the extent that the failure to vote for an individual may
result in another individual receiving a larger percentage of the votes cast.
Other matters that may be considered at the Annual Meeting may require for
approval the favorable vote of a majority of the shares entitled to vote at
the meeting either in person or by proxy. Stockholders have no right to
cumulative voting as to any matter, including the election of Directors. If
any proposal at the Annual Meeting must receive a specific percentage of
favorable votes for approval, abstentions in respect of such proposal are
treated as present and entitled to vote under the DGCL and therefore have the
effect of a vote against such proposal. Broker non-votes in respect of any
proposal are not counted for purposes of determining whether such proposal has
received the requisite approval under the DGCL.
The shares represented by all valid proxies received by the Company will be
voted in the manner specified on the proxies. Where specific choices are not
indicated on a valid proxy, the shares represented by such proxies received
will be voted for the nominees for Director named in this Proxy Statement and
in accordance with the best judgment of the persons named as proxies on the
enclosed proxy card, or their substitutes, for any other matters which
properly come before the Annual Meeting or any adjournment or postponement
thereof.
2
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors is currently comprised of seven directors divided
into three classes. The term of each class expires in different years. The
Board of Directors has nominated and recommends the election for the class of
directors up for election at the Annual Meeting (the Class II Directors) the
two nominees set forth below. Each nominee is currently serving as a director
of the Company. If any nominee becomes unavailable for any reason or should a
vacancy occur before the Annual Meeting (which events are not anticipated),
the persons named as proxies on the enclosed proxy card may substitute another
person as a nominee or may increase or decrease the number of nominees to such
extent as they shall deem advisable. At the Annual Meeting, two directors are
to be elected as members of Class II to serve until the annual meeting in 2001
and until their successors are elected and qualified or until their earlier
removal or resignation. At present, no cash compensation or fees are payable
to directors of the Company, other than reimbursement for reasonable travel
expenses incurred in attending Board meetings. However, nonemployee directors
are entitled to receive annual stock option awards under the Company's 1996
Stock Awards Plan.
Information regarding the nominees for Class II Director of the Company is
set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lawrence H.N. Kinet..... 50 Chairman, Chief Executive Officer and Director
W. Dekle Rountree, Jr... 56 Director (1)
</TABLE>
- --------
(1) Member of the Compensation Committee.
Information regarding directors of the Company not standing for election at
the Annual Meeting is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard B. Egen......... 59 Director (2)
Rodney S. Kenley........ 48 Founder, Vice President of Business Development and
Director
Peter H. McNerney....... 47 Director (1)
K. Shan Padda........... 36 Director
Bernard R. Tresnowski... 65 Director (2)
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
There are no family relationships between or among any directors or
executive officers of the Company.
DIRECTOR NOMINEES (CLASS II DIRECTORS)
Lawrence H.N. Kinet was appointed Chairman of the Board and Chief Executive
Officer of the Company in December 1994, and has served as a director of the
Company since April 1993. From July 1991 through December 1994, he served as
Chairman of the Board of Directors and Chief Executive Officer of Oculon
Corporation, a pharmaceutical development company engaged in the field of
anti-cataract drugs. He was a Managing Partner of The Kensington Group, a
provider of management services to health care companies, from 1989 to 1992.
From 1985 through 1988, he was President of Baxter World Trade Corporation,
the international division of Baxter International Inc. and corporate Group
Vice President of Baxter International Inc. Mr. Kinet is a director of NeoRx
Corporation.
3
<PAGE>
W. Dekle Rountree, Jr. has been a director of the Company since April 1993.
Since April 1993 he has served as President and Chief Executive Officer of
AcroMed Corporation, a company that designs and manufactures orthopedic spinal
devices. Prior to this position, Mr. Rountree was Executive Vice President and
Chief Operating Officer of BOC Health Care, a company that provides products
and services for critical care in the hospital and home. Mr. Rountree has
headed OHMEDA, a division of BOC Health Care, and has held multiple management
positions with Baxter Travenol Laboratories, including President of the
Artificial Organs (Renal) Division.
CLASS I DIRECTORS (TERM EXPIRING AT THE 2000 ANNUAL MEETING)
Rodney S. Kenley founded the Company in January 1991 and has served as a
director since such date. Mr. Kenley has served as Vice President of Business
Development since November 1997. Mr. Kenley served as the Company's Executive
Vice President and Chief Technical Officer from June 1997 until November 1997,
as its President and Chief Operating Officer from October 1994 to June 1997,
and as its President and Chief Executive Officer from January 1991 to October
1994. Prior to founding the Company, Mr. Kenley worked for over 12 years at
Baxter International Inc., where he was involved principally in the
development and product management of dialysis therapies and products,
including from January 1990 until January 1991, when he served as Vice
President of Electronic Drug Infusion.
Richard B. Egen has been a director of the Company since November 1997.
Since January 1997, Mr. Egen has served as President and Chief Executive
Officer of NephRx Corporation, a biotechnology company that develops
technology for kidney growth factors. From January through December 1996, Mr.
Egen was an independent business consultant. From 1989 to 1995, Mr. Egen was
President and Chief Executive Officer of Clintec International, a joint
venture owned by Baxter International Inc. and Nestle S.A. Clintec
International is engaged in the development of clinical nutrition products.
Prior to working at Clintec International, Mr. Egen held various senior
management positions during his fifteen year career with Baxter International
Inc., including corporate Senior Vice President. Mr. Egen serves as a director
of Optical Sensors Incorporated.
K. Shan Padda has been a director of the Company since February 1998. In
1989, Mr. Padda co-founded Sabratek Corporation, a bio-medical company that
produces and markets therapeutic and diagnostic medical devices, and has
served as its Chairman and Chief Executive Officer since 1991 and as its Co-
Chairman of the Board of Directors and Vice President of Finance from 1989 to
1991. From 1984 to 1988, Mr. Padda served as Chief Executive Officer of Andens
of Illinois, Inc., a medical supplies company which assembled and marketed
hospital operating room supply kits.
CLASS III DIRECTORS (TERM EXPIRING AT THE 1999 ANNUAL MEETING)
Peter H. McNerney has been a director of the Company since April 1993. Since
July 1992, Mr. McNerney has been a general partner of the general partner of
Coral Partners II (a venture capital fund) and a general partner of the
general partner of Coral Partners IV (a venture capital fund) . Mr. McNerney
is also the Executive Vice President of Coral Group, Inc., a manager of
venture capital partnerships. From 1989 through June 1992, Mr. McNerney was a
Managing Partner of The Kensington Group, a provider of management services to
health care companies. From 1975 through 1986, Mr. McNerney held various
management positions with Baxter Travenol Laboratories in the United States,
Europe and the Far East. Mr. McNerney is a director of Biomira, Inc.,
Endocardial Solutions, Inc., and Cerus, Inc.
4
<PAGE>
Bernard R. Tresnowski has been a director of the Company since April 1996.
Mr. Tresnowski served from December 1981 to December 1994 as the President and
Chief Executive Officer of the Blue Cross and Blue Shield Association, the
national coordinating body for all Blue Cross and Blue Shield Plans. He has
also held various other leadership positions in the healthcare industry,
including President of the International Federation of Health Service Funds,
Member of the Jackson Hole Group, Principal of the Dunlop Group of Six, Member
of the Secretary of Health and Human Services Private/Public Sector Advisory
Committee on Catastrophic Illness, Co-Chairman of the Secretary of Health and
Human Services Work Group on Electronic Data Interchange and Member of the
American Medical Association National Health Policy Steering Committee. Mr.
Tresnowski retired from the Blue Cross and Blue Shield Association in December
1994.
COMMITTEES AND DIRECTORS' MEETINGS
The Board of Directors has two standing committees: the Audit Committee and
the Compensation Committee. The Compensation Committee, which currently
consists of Messrs. McNerney and Rountree, is responsible for approving (or at
the election of the Compensation Committee, recommending to the Board)
compensation arrangements for officers and directors of the Company and
reviewing benefit plans.
The Audit Committee, which currently consists of Messrs. Egen and
Tresnowski, is responsible for selecting (or at the election of the Audit
Committee, recommending to the Board) the independent auditors of the Company,
evaluating the independent auditors, reviewing the scope of the annual audit
with management and the independent auditors, consulting with management,
internal auditors and the independent auditors as to the systems of internal
accounting controls and reviewing the non-audit services performed by the
independent auditors.
The Board of Directors held 8 meetings during 1997. Each of the directors
attended each such meeting. The Audit Committee held 3 meetings and the
Compensation Committee held 8 meetings during 1997.
The Company does not have a nominating committee. The entire Board of
Directors currently is responsible for filling vacancies on the Board as they
occur and recommending candidates for election as directors at the annual
meetings of stockholders.
The Board will consider individuals recommended for nomination by
stockholders of the Company. Such recommendations should be submitted in
writing to the Chairman of the Board, who will submit them to the entire Board
for its consideration. The recommendation must be accompanied by the consent
of the individual nominated to be elected and to serve. In addition, the
Bylaws of the Company require that advance notice of a stockholder's
nomination for the election of directors (as distinguished from a
stockholder's recommendation to the Board) be given to the Secretary of the
Company no later than 60 days and no more than 90 days before an annual
meeting of stockholders; however, if the date of the annual meeting is changed
from 30 days from the first anniversary date of the preceding year's annual
meeting, notice by stockholders must be received no later than the close of
business on the tenth day following the earlier of the date on which notice
was mailed or public announcement of the meeting was made. Such notice must
include (i) as to each person whom the stockholder proposes to nominate for
election as a director at such meeting, all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (ii) as
to the stockholder giving the notice, (A) the name and address of such
stockholder as they appear on the Company's books and (B) the number of shares
of Common Stock which are beneficially owned by such stockholder and which are
owned of record by such stockholder; and (iii) as to the beneficial owner, if
any, on whose behalf the nomination is made, (A) the name and address of such
person and (B) the number of shares of Common Stock which are beneficially
owned by such person.
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. McNerney and Rountree.
No officers or employees of the Company currently serve, or during the last
completed fiscal year did serve, on the Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, certain executive officers and certain other stockholders are
parties to a Registration Agreement (the "Registration Agreement"). Under the
Registration Agreement, the holders of a majority of the shares of Common
Stock (generally excluding shares held by certain executive employees of the
Company and shares acquired under the Company's 1993 Stock Option Plan)
subject thereto have the right at any time, subject to certain conditions, to
require the Company to file a "long-form" or, if available, a "short-form"
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") covering any or all of their shares of Common Stock (each, a
"demand registration"). The Company is obligated to pay all registration
expenses (other than underwriting discounts and commissions) incurred in
connection with up to two demand registrations filed on Form S-1 or any
similar "long-form" registration statement under the Securities Act and two
demand registrations on Form S-2 or Form S-3 or any similar "short-form"
registration statement under the Securities Act. In addition, such parties are
entitled to request the inclusion of any Common Stock subject to the
Registration Agreement in any registration statement at the Company's expense
whenever the Company proposes to register any of its securities under the
Securities Act, subject to certain conditions.
The Company has entered into agreements to provide indemnification for its
directors and executive officers in addition to the indemnification provided
for in the Company's Restated Certificate of Incorporation and Bylaws.
6
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Except as otherwise noted, the following table sets forth certain
information as of February 28, 1998 as to the security ownership of those
persons owning of record or known to the Company to be the beneficial owner of
more than five percent of the voting securities of the Company and the
security ownership of equity securities of the Company by (i) each of the
directors of the Company, (ii) the director nominees, (iii) each of the
executive officers named in the Summary Compensation Table and (iv) all
directors and executive officers as a group. All information with respect to
beneficial ownership has been furnished by the respective director, director
nominee, executive officer or five percent beneficial owner, as the case may
be. Unless otherwise indicated, the persons named below have sole voting and
investment power with respect to the number of shares set forth opposite their
names. Beneficial ownership of the Common Stock referenced in the following
table (including those shares of Common Stock which were issuable pursuant to
the exercise of options which vested within 60 days of February 28, 1998) has
been determined for this purpose in accordance with the applicable rules and
regulations promulgated under the Exchange Act. Except as indicated below, the
address for each such person is c/o Aksys, Ltd., Two Marriott Drive,
Lincolnshire, Illinois, 60069.
DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES OF CLASS
--------- --------
<S> <C> <C>
Coral Partners (1).......................................... 4,352,894 29.8
Suite 3510
60 South Sixth Street
Minneapolis, MN 55402
Sutter Hill Ventures (2).................................... 1,064,833 7.3
Suite A-200
755 Page Mill Road
Palo Alto, CA 94304
Lawrence H.N. Kinet (3)..................................... 609,324 4.1
Rodney S. Kenley............................................ 748,575 5.1
Richard B. Egen (4)......................................... 8,000 *
Peter H. McNerney (1)....................................... 4,408,351 30.2
K. Shan Padda (5)........................................... 5,000 *
W. Dekle Rountree, Jr. (6).................................. 47,500 *
Bernard R. Tresnowski (7)................................... 12,250 *
All directors and executive officers as a group (7 persons) 5,856,500 38.5
(8)........................................................
</TABLE>
- --------
* Less than one percent.
(1) Amounts shown represent the aggregate number of shares held by Coral
Partners II, L.P. ("Coral Partners II") and Coral Partners IV, L.P.
("Coral Partners IV"). Peter H. McNerney, a director of the Company, Yuval
Almog and Linda L. Watchmaker are general partners of Coral Management
Partners II (which is the general partner of Coral Partners II) and thus
may be deemed to have beneficial ownership of the Common Stock held by
Coral Partners II. Messrs. McNerney and Almog are general partners of
Coral Management Partners IV (which is the general partner of Coral
Partners IV) and thus may be deemed to have beneficial ownership of the
Common Stock held by Coral Partners IV. Messrs. McNerney and Almog and Ms.
Watchmaker disclaim beneficial ownership of such shares of Common Stock
held by Coral Partners II and Coral Partners IV except to the extent of
their pecuniary interest in such shares. In addition, Mr. McNerney
beneficially owns 55,457 shares of Common Stock which are not owned by
Coral Partners II or Coral Partners IV, including 10,000 shares of Common
Stock issuable upon the exercise of options.
(2) Amounts shown represent the number of shares held by Sutter Hill Ventures
of which it has sole voting and dispositive power, as disclosed on a
Schedule 13G filed with the SEC on February 12, 1998 by Sutter Hill
Ventures.
(3) Includes 562,500 shares of Common Stock issuable upon the exercise of
options.
(4) Includes 5,000 shares of Common Stock issuable upon the exercise of
options.
(5) Represents 5,000 shares of Common Stock issuable upon the exercise of
options.
(6) Represents 47,500 shares of Common Stock issuable upon the exercise of
options.
(7) Includes 11,250 shares of Common Stock issuable upon the exercise of
options.
(8) Includes 641,250 shares of Common Stock issuable upon the exercise of
options.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The table below provides information relating to compensation for the Chief
Executive Officer and the other executive officers of the Company described
below (collectively, the "Named Executive Officers") for the indicated
periods. The amounts shown include compensation for services in all capacities
that were provided to the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------
SECURITIES
NAME AND SALARY OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR ($) BONUS ($) COMPENSATION ($) OPTIONS (#) COMPENSATION ($)
- ------------------ ---- ------- --------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence
H.N.
Kinet.....
Chairman
and Chief 1997 262,500 6,250 -0- -0- 402(1)
Executive 1996 250,000 25,000 -0- -0- 387(1)
Officer 1995 250,000 -0- -0- -0- 375(1)
Rodney S.
Kenley....
Vice
President
of 1997 175,000 -0- -0- -0- 875(1)
Business 1996 166,250 15,000 -0- -0- 792(1)
Development 1995 150,000 -0- -0- -0- 1,930(2)
</TABLE>
- --------
(1) Represents amount contributed by the Company to its 401(k) plan on behalf
of the Named Executive Officer.
(2) Represents payment by the Company of premiums on term life insurance and
an amount contributed by the Company to its 401(k) plan on behalf of Mr.
Kenley.
(3) Mr. Kenley's annual base salary has remained at $175,000 since May 1996.
STOCK OPTION GRANTS
There were no stock options awarded to the Named Executive Officers during
the Company's last fiscal year.
STOCK OPTION HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the stock options held as of December 31, 1997.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
---------------------- ----------------------
EXERCISABLE/ EXERCISABLE(1)/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------- ---------------
<S> <C> <C>
Lawrence H.N. Kinet............... 562,500/-0- 3,142,856/-0-
Rodney S. Kenley (2).............. -0-/-0- -0-/-0-
</TABLE>
- --------
(1) The closing sale price of the Common Stock on the Nasdaq National Market
on December 31, 1997 was $5.75 per share. The value of such options at the
fiscal year end is calculated on the basis of the difference between the
respective option exercise price and $5.75 multiplied by the number of
shares of Common Stock underlying the option.
(2) In 1997, Mr. Kenley exercised all of his options, which were awarded prior
to 1997.
SEVERANCE AGREEMENT
The Company has entered into severance, confidentiality and noncompetition
agreements with Messrs. Kinet and Kenley. The agreements provide for a non-
competition period of two years following the employee's resignation or
termination by the Company for cause or for one year following termination by
the Company without cause or due to disability. Severance payments are
provided for in the event of termination without cause or due to a disability.
Such severance payments equal the greater of $55,000 and the aggregate base
salary for the prior six months before termination in the case of Mr. Kenley
and the aggregate base salary for the prior six months before termination in
the case of Mr. Kinet. Customary ownership of intellectual property and
confidentiality provisions are also contained in these agreements.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing and administering
compensation plans for the Company's executive officers, reviewing executive
officer compensation levels and evaluating management performance. The members
of the Compensation Committee are Messrs. McNerney and Rountree. The material
set forth below is a report submitted by the Compensation Committee regarding
the Company's compensation policies and programs for executive officers for
fiscal year 1997.
COMPENSATION PHILOSOPHY AND EXECUTIVE COMPENSATION OBJECTIVES
The Company's management compensation program is designed to reward
outstanding performance and results. The Company's compensation philosophy and
program objectives are directed by two primary guiding principles. First, the
program is intended to provide fully competitive levels of compensation--at
expected levels of performance--in order to attract, motivate and retain
talented executives. Second, the program is intended to create an alignment of
interests between the Company's executives and stockholders such that a
significant portion of each executive's compensation is directly linked to
maximizing stockholder value.
In support of this philosophy, the executive compensation program is
designed to reward performance that is directly relevant to the Company's
short-term and long-term success. As such, the Company attempts to provide
both short-term and long-term incentive compensation that varies based on
corporate and individual performance. To accomplish these objectives, the
Compensation Committee has structured the executive compensation program with
three primary underlying components: base salary, annual incentives and long-
term incentives (such as stock options). The following sections describe these
elements of compensation and discuss how each component relates to the
Company's overall compensation philosophy.
BASE SALARY PROGRAM
The Company's base salary program is based on a philosophy of providing base
pay levels that are competitive with other development stage companies in the
medical device industry. The Company periodically reviews its executive pay
levels to ensure consistency with similarly positioned companies in such
industry.
Annual salary adjustments are based on several factors: the general level of
market salary increases, individual performance and long-term value to the
Company, competitive base salary levels and the Company's overall results.
ANNUAL BONUS
Annual bonuses are intended to (1) reward key employees based on Company and
individual performance, (2) motivate key employees and (3) provide pay-for-
performance cash compensation opportunities to plan participants. The criteria
for bonus payments to Messrs. Kinet and Kenley were based on the achievement
of the specific development and Company milestones established by the
Compensation Committee at the beginning of 1997.
LONG-TERM INCENTIVES
Long-term incentives are designed to focus the efforts of key employees on
the long-term goals of the Company and to maximize total return to the
stockholders of the Company. The Committee has relied solely on stock option
awards to provide long-term incentive opportunities. Stock options align the
interests of key employees and stockholders by providing value to the key
employee through stock price appreciation only. Stock options issued to
employees generally have a ten-year term before expiration and are fully
exercisable within four years of the grant date. No additional stock options
were granted to Messrs. Kinet and Kenley in fiscal year 1997.
9
<PAGE>
FISCAL 1997 ACTIONS
The compensation for Messrs. Kinet and Kenley for fiscal 1997 was determined
in the manner described above and no particular quantitative measures were
used by the Compensation Committee in determining their compensation except as
so described.
In fiscal 1997 neither Mr. Kinet nor Mr. Kenley were granted any additional
stock option awards. Mr. Kenley's base salary in 1997 remained at the 1996
level set in May 1996, and Mr. Kinet's base salary increased in 1997 from
$250,000 to $262,500 per annum.
Compensation Committee
Peter H. McNerney
W. Dekle Rountree, Jr.
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the Common Stock became publicly traded on May 17, 1996 with the
Nasdaq Total Return Index and an index of certain companies selected by the
Company as comparative to the Company in that each is or recently has been a
development stage manufacturer of medical devices. The graph assumes that the
value of the investment in the Company's Common Stock and each index was
$100.00 on May 17, 1996.
COMPARISON OF THE COMPANY'S COMMON STOCK,
THE NASDAQ TOTAL RETURN INDEX AND A PEER GROUP INDEX (1)
LOGO
<TABLE>
<CAPTION>
MAY 17, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
------------ ----------------- -----------------
<S> <C> <C> <C>
Aksys, Ltd..................... 100 54 36
Nasdaq Total Return Index...... 100 104 128
Peer Group Index............... 100 72 76
</TABLE>
- --------
(1) The companies selected to form the Company's industry peer group index are
Cardiac Pathways, CardioGenesis, Conceptus, FemRx, Heartstream, Minntech,
Novoste, Optical Sensors, Sabratek and Urologix. The Company previously
included Endovascular Technologies in its peer group index but no longer
does so due to the acquisition of Endovascular Technologies during fiscal
year 1997. Total returns are based on weighted market capitalization at
May 17, 1996.
11
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers to file reports of ownership and changes in ownership of shares of
the Company's Common Stock with the Securities and Exchange Commission (the
"SEC"). Directors and officers are required by SEC regulations to furnish the
Company with copies of all Section 16(a) reports they file. Based on its
review of the copies of such reports received by it, or written
representations from certain reporting persons that no Forms 5 were required
for those persons, the Company believes that, from January 1, 1997 through
December 31, 1997, its directors and officers complied with all applicable
filing requirements except as noted below. During fiscal 1997, Richard B.
Egen, a director of the Company, was late in filing with the SEC one report
(Form 3), as such report was filed more than ten days after Mr. Egen was
appointed as a director of the Company.
INDEPENDENT AUDITORS
The Board of Directors has designated KPMG Peat Marwick LLP ("KPMG") to
audit the books and accounts of the Company for the year ending December 31,
1998. It is anticipated that representatives of KPMG will be present at the
Annual Meeting for the purpose of making a statement, should they so desire,
and responding to stockholder questions.
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND ADDITIONAL INFORMATION
Proposals of stockholders intended to be eligible for inclusion in the
Company's proxy statement and proxy card relating to the 1999 annual meeting
of stockholders of the Company must be received by the Company on or before
the close of business November 25, 1998. Such proposals should be submitted by
certified mail, return receipt requested.
The Company's Bylaws provide that a stockholder wishing to present a
nomination for election of a director or to bring any other matter before an
annual meeting of stockholders must give written notice to the Company's
Secretary not less than 60 days nor more than 90 days prior to the meeting and
that such notice must meet certain other requirements. Any stockholder
interested in making such a nomination or proposal should request a copy of
the Bylaws provisions from the Secretary of the Company.
The Company will furnish without charge to each person whose proxy is being
solicited, upon written request of any such person, a copy of the Annual
Report on Form 10-K of the Company for the fiscal year ended December 31,
1997, as filed with the SEC, including the financial statements and schedules
thereto. Requests for copies of such Annual Report on Form 10-K should be
directed to the Chief Financial Officer, Aksys, Ltd., Two Marriott Drive,
Lincolnshire, Illinois 60069.
12
<PAGE>
OTHER MATTERS
The Company will bear the costs of soliciting proxies from its stockholders.
In addition to the use of the mail, proxies may be solicited by the directors,
officers and employees of the Company by personal interview, telephone or
telegram. Such directors, officers and employees will not be additionally
compensated for such solicitation, but may be reimbursed for out-of-pocket
expenses incurred in connection therewith. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of Common Stock
held of record by such persons, and the Company will reimburse such brokerage
houses, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred in connection therewith.
The directors know of no other matters which are likely to be brought before
the Annual Meeting, but if any such matters properly come before the meeting
the persons named in the enclosed proxy, or their substitutes, will vote the
proxy in accordance with their best judgment.
By Order of the Board of Directors
/S/ Steven A. Bourne
Steven A. Bourne
Assistant Secretary
March 17, 1998
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. EVEN IF YOU EXPECT TO
ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
13
<PAGE>
AKSYS, LTD.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby constitutes and appoints Lawrence H.N. Kinet and
Steven A. Bourne, and each or either of them, proxies of the undersigned, with
full power of substitution, to vote all of the shares of Aksys, Ltd., a Delaware
Company (the "Company") which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the Marriott
Lincolnshire Resort located at Ten Marriott Drive, Lincolnshire, Illinois on
Tuesday, April 21, 1998 at 2:00 p.m. or at any adjournment or postponement
thereof, as shown on the voting side of this card.
Election of All Nominees for Class II Directors (change of address/comments)
Listed Hereon. ___________________________
___________________________
Nominees: Lawrence H.N. Kinet ___________________________
W. Dekle Rountree Jr.
___________________________
(if you have written in the
above space, please mark the
corresponding box on the
reverse side of this card)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxy committee cannot vote
your shares unless you sign and return this card.
See Reverse side
FOLD AND DETACH HERE
<PAGE>
[X] Please mark your value as in this example.
This proxy will be voted as specified. If a choice is not specified, this
proxy will be voted FOR the nominees for Class II Directors.
1. Election of Directors (See reverse)
FOR WITHHELD
[ ] [ ]
For all nominees listed hereon, except (vote withheld for the following
nominee(s):
- ----------------------------
[ ] I will Attend the Annual Meeting
[ ] Change of Address Comments of Reverse Side
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof.
SIGNATURE(S)__________________________________________DATE_____________________
NOTE: Please sign exactly as name(s) appear hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
This proxy should be dated, signed by the stockholder exactly as the
stockholder's name appears hereon and returned promptly in the enclosed
envelope. Person signing in a fiduciary capacity should so indicate.
FOLD AND DETACH HERE
