<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 240.14a-11(c) or Section 240.14a-12
Isco, Inc.
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A. - FEE BY WIRE TRANSFER
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
------------------------------------------------------------------------
<PAGE>
Isco, Inc.
4700 Superior Street
Lincoln, Nebraska 68504
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held December 12, 1996
The annual meeting of shareholders of Isco, Inc. will be held at The Cornhusker
Hotel, 333 South 13th Street, Lincoln, Nebraska on December 12, 1996 at 2:00
p.m. for the purpose of:
1. The election, as Directors, of four persons listed in the accompanying
Proxy Statement dated November 8, 1996.
2. The approval of the Isco, Inc. 1996 Stock Option Plan.
3. The approval of the Isco, Inc. 1996 Outside Directors Stock Option
Plan.
4. Whatever other business may properly be brought before the meeting or
any adjournment thereof.
Only those shareholders of record at the close of business on October 18, 1996
shall be entitled to notice of the meeting and to vote at the meeting.
In order to assure a quorum, all shareholders are urged to attend the meeting or
to vote by proxy. In the event you are present at the meeting you may withdraw
your proxy if you wish to do so, and vote in person.
By Order of the Board of Directors
Robert W. Allington
Chairman and Chief Executive Officer
November 8, 1996
<PAGE>
PROXY STATEMENT
November 8, 1996
GENERAL INFORMATION.
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Isco, Inc. (the "Company") for use at the annual
meeting of shareholders to be held on December 12, 1996. Shareholders of record
at the close of business on October 18, 1996 are entitled to notice of and to
vote at the meeting and any adjournment thereof.
This Proxy Statement was first mailed to shareholders on November 22, 1996.
As of the close of business on October 18, 1996, the Company had 5,351,931
shares of outstanding Common Stock, all of which are entitled to vote at the
annual meeting.
As of the record date, Robert W. Allington, 4700 Superior, Lincoln, Nebraska
68504, owns 2,736,338 shares or 50.73 percent of the Company's outstanding
Common stock plus presently exercisable stock options. Mr. Allington does not
hold any stock options. As of the record date, Dimensional Fund Advisors, Inc.
owned 462,051 shares or 8.63 percent of the shares outstanding.
Each share is entitled to one vote on each matter presented, except that in the
election of Directors each shareholder shall have the right to vote the number
of shares owned by him or her for as many persons as there are Directors to be
elected, or to cumulate such shares and give one candidate as many votes as the
number of Directors multiplied by the number of his or her shares, or to
distribute them on the same principle among as many candidates as he or she
shall determine.
Proxies which are properly signed and returned will be voted at the meeting.
Shareholders may specify their preference by marking the appropriate boxes on
the proxy and the proxy will then be voted in accordance with such
specifications. In the absence of such specifications the proxy will be voted
for the election of the four nominees for Director, for approval of the 1996
Stock Option Plan, for approval of the 1996 Outside Directors Stock Option Plan,
and in accordance with the instructions of the Board of Directors as to any
other matters. A proxy is revocable at any time before it is voted and a proxy
is automatically revoked upon the giving of a subsequent proxy. The Company
will bear the cost of solicitation of proxies, including the charges and
expenses of brokers and others for forwarding solicitation material to
shareholders. In addition to the use of mail, proxies may be solicited by
personal interview, telephone, facsimile or telegraph.
Shareholders who attend the meeting may vote in person even though they have
voted by proxy. However, if your shares are held by your broker for your
account and you do not personally hold the certificates for the shares, you
should mark the proxy to indicate that you plan to attend the shareholders'
meeting. You will then receive a "legal proxy" showing the number of shares you
own. Bring that "legal proxy" with you to the shareholders' meeting and you
will then be credited with voting your shares in person at the meeting.
SHAREHOLDER PROPOSALS.
In the event that any shareholder desires to submit a proposal for action at the
1997 annual meeting of shareholders, such proposal must be received at the
Company's office at 4700 Superior Street, Lincoln, Nebraska 68504-1398, marked
to
2
<PAGE>
the attention of the President or Secretary of the Company, no later than July
10, 1997. It is suggested that any shareholder desiring to submit a proposal,
do so by Certified Mail, Return Receipt Requested. Shareholders should also
note that, in addition to the requirement of timely receipt by the Board of
Directors of a proposal as stated above, such proposal will not be included in
the proxy solicitation material for the 1997 annual meeting of shareholders
unless it otherwise complies with the requirements of Section 14(a) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated and in
effect thereunder.
1. ELECTION OF DIRECTORS.
The Bylaws of the Company provide that the number of Directors shall be not more
than nine, such number to be set annually by the Board of Directors. The Board
of Directors has set such number at seven for 1997 and has nominated the four
persons listed below for election as Directors to serve until the adjournment of
the 1998 annual meeting of shareholders, currently scheduled for December 10,
1998 or until their successors are duly elected and qualified.
The Bylaws also provide that the Directors shall be divided into classes and
that there be two classes if the number of Directors is less than nine. The
class of 1996 has a term expiring December 12, 1996 and the class of 1997 has a
term expiring upon the adjournment of the 1997 annual meeting of shareholders,
currently scheduled for December 11, 1997. The Board of Directors has nominated
Douglas M. Grant, Robert B. Harris, Harris Wagenseil, and Philip M. Wittig for a
two-year term.
The proxy holders named in the proxy intend to vote "FOR" the election of the
four nominees listed above unless authority to so vote is withheld. In the
unexpected event that any nominees are unable to serve or for good cause will
not serve as Directors, the proxy holders reserve the right to vote for such
substitute nominees as are designated by the Board of Directors.
Following is a list of the names and ages of the four nominees, all are
presently serving as Directors. Also listed are the three Directors whose terms
expire in 1997. Included is the past five-year business history of each
Director and nominee, the year in which each became a Director of the Company
and the number and the percentage of outstanding shares of Common Stock of the
Company beneficially owned by each as of October 18, 1996.
3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Common Stock
Beneficially
Owned as of
October 18, 1996
------------------------
Number
Director of
Name of Individual Age Employment History Since Shares(1) Percent(2)
- ------------------ --- ---------------------- -------- --------- ----------
NOMINEES FOR ELECTION (TERM EXPIRING DECEMBER 10, 1998)
<S> <C> <C> <C> <C> <C>
Douglas M. Grant 50 President and Chief 1988 18,289 .34
Operating Officer since
October 6, 1995; Vice
President August 31,
1989 to October 5, 1995;
Environmental Division
General Manager May 26,
1987 to July 15, 1996.
Robert B. Harris 51 Chairman, Harris 1994 617 .01
Laboratories, Inc.,
since 1977; President,
Scientific Development
Corporation since 1979;
and Founder and Partner,
Harris Realty Partners
since 1987.
Harris Wagenseil 50 Held following offices 1994 500 .01
at the Union Pacific
Railroad Company:
Maintenance Operations
since 1991; Vice
President Supply &
Maintenance Operation
in 1991; Vice President
Supply in 1991;
Assistant to the
Chairman 1989.
Philip M. Wittig 62 Chief Financial 1967 37,732(3) .70
Officer and Treasurer
since 1967.
CLASS OF 1997 (TERM EXPIRES DECEMBER 11, 1997)
Robert W. Allington 61 Chairman of the Board, 1959 2,736,338 50.73
Chief Executive Officer
since 1959; President
1959 to October 5, 1995.
James L. Linderholm 58 Chairman and President 1994 1,500 .03
since 1986 and 1984,
respectively, of HWS
Consulting Group, Inc.
4
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dale L. Young 68 Corporate Secretary 1966 48,420(4) .90
since 1991; Retired
Executive Vice
President and Cashier
of FirsTier Bank, N.A.,
Lincoln, NE.
All Executive Officers and Directors as a group
(10) persons 2,849,072 52.82
- -------------------------------------------------
</TABLE>
(1) Unless otherwise noted, all shares were held with sole investment and
voting power.
(2) Percentage computed by dividing the number of shares owned including
options presently exercisable under the 1985 Incentive Stock Option Plan by
the total shares outstanding on October 18, 1996, including such number of
presently exercisable options.
(3) Includes 644 shares as to which Philip M. Wittig has shared voting rights
and investment power.
(4) Includes 20,000 shares as to which Dale L. Young has shared voting rights
and investment power.
ADDITIONAL INFORMATION CONCERNING BOARD OF DIRECTORS.
The Company's Board of Directors has not established a Nominating Committee.
The Audit Committee, during fiscal 1996 was comprised of Dale L. Young,
Chairman; James Linderholm, Secretary; and Harris Wagenseil. All are
independent members of the Board. The Audit Committee assists the Board in
fulfilling its fiduciary responsibilities with respect to accounting policies,
reporting practices, and the sufficiency of the Company's annual audit. The
Committee met once during fiscal year 1996.
The Compensation Committee, during fiscal 1996, was comprised of Dale L. Young,
Chairman; Robert B. Harris, Secretary; Harris Wagenseil; and Robert W. Allington
(a non-voting member). The Committee recommends to the Board the compensation
programs and salaries for the officers and also acts as the stock option
committee. The Committee met once during fiscal 1996.
The Board of Directors met 12 times in fiscal 1996. Robert Harris and Harris
Wagenseil attended less than 75 percent of the total meetings held by the Board
and its committees in fiscal 1996.
5
<PAGE>
LIST OF CURRENT EXECUTIVE OFFICERS OF THE COMPANY.
The following is a list of the names and ages of the current executive officers
of the Company and their business history for the last five years.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year first
became
Executive
Position and Principal Occupation Officer of
Name of Individual Age Since July 31, 1989 the Company
- ------------------ --- --------------------------------- -----------
<S> <C> <C> <C>
Robert W. Allington 61 Chairman of the Board and Chief 1959
Executive Officer since 1959;
President 1959 to October 5, 1995.
Vicki L. Benne 34 Controller and Chief Accounting 1991
Officer since October 21, 1989.
Alfred G. Craske 53 Vice President, Sales and Marketing 1996
since July 18, 1996; Director, Sales
and Marketing, May 20, 1996 to
July 18, 1996; Vice President,
Marketing, Gelman Science, Inc.
1994-1996; Vice President, Sales
and Marketing, Difco Laboratories
1993-1994; Vice President, Sales
and Marketing, Hitachi Instruments,
Inc. 1991-1993; Vice President,
Sales and Marketing, Extrel
Corporation 1984-1991.
Douglas M. Grant 50 President and Chief Operating 1987
Officer since October 6, 1995;
Vice President August 31, 1989
to October 5, 1995; Environmental
Division General Manager May 26, 1987
to July 15, 1996.
John J. Korab, Jr. 47 Vice President, Corporate Development 1989
since December 11, 1989.
Philip M. Wittig 62 Chief Financial Officer and 1967
Treasurer since 1967.
- ---------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
EXECUTIVE COMPENSATION.
The following table sets forth a summary of the compensation paid to the chief
executive officer and the two other executive officers of the Company whose
compensation exceeded $100,000 for the fiscal years ended July 29, 1994,
July 28, 1995, and July 26, 1996.
<TABLE>
<CAPTION>
Long-term Compensation
--------------------------------
Annual Compensation Awards Payouts
-------------------------------- -------------------- -------
Other Restricted
Annual Stock Options/ LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Awards SARs Payouts Compensation
Position Year ($)(1) ($)(2) ($)(3) ($) (#) ($) ($)(4)
- -------- ------ ------ ----- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Allington 1996 227,429 -- 3,000 -- -- -- 1,230
Chairman and Chief 1995 205,076 -- 6,600 -- -- -- 5,051
Executive Officer 1994 205,264 -- 6,250 -- -- -- 7,058
Douglas M. Grant 1996 154,062 21,475 3,000 -- -- -- 3,498
President and Chief 1995 129,882 -- 6,250 -- -- -- 6,686
Operating Officer 1994 129,882 -- 6,250 -- 40,000 -- 6,503
Philip M. Wittig 1996 109,944 -- 3,000 -- -- -- 2,957
Chief Financial Officer 1995 107,095 -- 6,600 -- -- -- 5,721
and Treasurer 1994 107,095 8,000 6,250 -- -- -- 5,847
</TABLE>
(1) During fiscal 1996 the Company modified its vacation policy. In January
1996 employees were paid for a portion of the vacation hours they had
accrued which were in excess of a base number of hours. These payments in
fiscal 1996 were as follows: Mr. Allington $23,446; Mr. Grant $1,383; and
Mr. Wittig $2,554.
(2) Bonuses represent amounts paid in the year shown for performance in the
preceding year.
(3) The annual director fees paid to the officers who are also directors. See
section on Compensation of Directors.
(4) Profit-sharing contributions, including forfeitures and 401(k) matching
contributions including forfeitures, respectively, for fiscal 1996 were as
follows: Mr. Allington - $1,230 and $-0-; Mr. Grant - $1,230 and $2,268;
Mr. Wittig - $987 and $1,970.
7
<PAGE>
The following table sets forth information with respect to exercised and
unexercised options and SARs, if any, during fiscal 1996, and exercised and
unexercised options and SARs, if any, held by the chief executive officer and
the two other most highly compensated executive officers of the Company during
fiscal 1996.
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired Number of Unexercised In-the-Money Options/
on Value Options/SARs at Fy-end (#) SARs at Fy-end ($)
Exercise Realized Exercisable ("Ex") Exercisable ("Ex")
Name (#) ($) Unexercisable ("Un") Unexercisable ("Un")
- ------------------- -------- -------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Robert W. Allington -- -- -- --
Douglas M. Grant -- -- 3,450 shares ("Ex") *
8,050 shares ("Un") *
8,000 shares ("Ex") *
32,000 shares ("Un") *
Philip M. Wittig -- -- 1,150 shares ("Ex") *
1,150 shares ("Un") *
</TABLE>
* Share option price is not In-the-Money.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
Compensation Committee. The Compensation Committee ("Committee") for fiscal
1996 was comprised of Directors Dale L. Young, Chairman; Robert B. Harris,
Secretary; Harris Wagenseil; and Robert W. Allington (a non-voting member).
Messrs. Harris, Wagenseil, and Young are non-employee directors. The Committee
reviews and recommends to the Board the direct and indirect compensation and
employee benefits of the Chairman of the Board, the President, and other elected
officers of the Corporation. The Committee also acts as the stock option
committee.
Compensation Principles. The philosophy of the Company with regard to executive
compensation is to design executive compensation programs in a manner intended
to enhance corporate performance and shareholder value by achieving the
following objectives:
- Provide reasonable and appropriate levels of compensation that will
attract, motivate, and retain highly qualified executives;
- Integrate compensation with the Company's business and strategic
plans;
- Reward both business and individual performance; and
- Encourage stock ownership by executives, thereby aligning executive
compensation with shareholder value.
8
<PAGE>
Executive Officer Compensation Program. The Company's compensation program for
executive officers consists of annual payments of salary, bonuses, and periodic
grants of options to purchase the Company's common stock. In addition,
executives are entitled to customary benefits, including medical and retirement
benefits as well as participation in the Company's 401(k) matching contributions
plan, that are generally available to employees of the Company. Salary and
bonus payments are designed to reward current and past performance, while the
stock options are intended to provide incentives for long-term future
performance and are directly linked to the interests of the shareholders because
the value of options will increase or decrease based directly upon the future
price of the Company's common stock.
Base Salary. The base salary levels of Company's executives are evaluated
periodically by the Committee in view of specific job responsibilities and
prevailing salary levels of companies of comparable size and complexity. The
Committee utilizes the Ernst & Young National Survey of Executive Compensation,
the Wyatt Data Service ECS survey, and Compensation in the Accounting/Financial
Field published by Abbott, Langer & Associates as aids in determining whether
executive salaries are appropriate and competitive. The Committee's salary
decisions were made in the context of past practices and the current competitive
environment. Increases effective fiscal 1996 ranged from $4,000 to $34,480 on
an annual basis.
Annual Bonus Compensation. The Committee believes that executive compensation
should be based on comparable salaries as determined by professional surveys,
but also believes that cash incentives in the form of bonuses for the
achievement of Company goals and corporate and individual performance are
warranted. A bonus program for fiscal 1996 based on the achievement of
established sales and profit goals was committed to President Douglas M. Grant.
Mr. Grant did not receive a bonus based under that program. The other executive
officers received a bonus based principally on their individual job performances
during fiscal year 1996.
Stock Option Compensation. The 1985 Stock Option Plan expired on July 25, 1995,
therefore no stock options were granted during this fiscal year. The
Compensation Committee has developed a stock option plan for our staff based on
our goals in keeping compensation levels closely aligned with both individual
performance and the long-range interest of the shareholders. The proposed plan
is being presented for approval at the 1996 annual shareholders' meeting. More
than 10% of the Company's present staff hold options under the 1985 plan.
Chief Executive Officer Compensation. Robert W. Allington's salary was not
increased during fiscal 1996.
Chief Operating Officer Compensation. Douglas M. Grant was elected President
and Chief Operating Officer of the Company effective October 6, 1995. In
recognition of his new and added responsibilities his base salary was increased
$34,480, to $160,000, effective October 28, 1995. This was reported in the 1995
proxy statement.
Chief Financial Officer Compensation. Philip M. Wittig's salary was not
increased during fiscal 1996.
Overall Review. The Committee believes that the Chief Executive Officer and
other executive officers of the Company have managed and operated the Company
through a very difficult year for the instrument industry. The Committee
further believes that the compensation for the executive officers is fair and
reasonable for both the officers and the shareholders of the Company.
9
<PAGE>
Submitted by the Compensation Committee of the Company's Board of Directors,
Robert B. Harris, Chairman; Dale L. Young, Secretary;
James L. Linderholm; Robert W. Allington (non-voting member)
This report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement in any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, and except to the extent the Company specifically
incorporates this information by reference, it shall not otherwise be deemed
filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
No member of the Committee is a current or former executive officer or employee
of the Company except Robert W. Allington. Mr. Allington makes recommendations
but does not vote on matters involving compensation of officers. No other
relationships existed in fiscal 1996 between the Company and any member of the
Committee.
PERFORMANCE GRAPH.
The following performance graph compares the performance of the Company's common
stock to the Standard and Poor's 500 Stock Index and the NASDAQ peer group. The
industry peer group, selected by the Company, is comprised of the 81 companies
whose stock is traded on NASDAQ and are included in the Standard Industrial Code
Classification No. 382 entitled "Measuring and Controlling Devices". The graph
assumes that $100 was invested on July 31, 1991 in the Company's stock and the
indices. It is also assumed that dividends were reinvested when paid. Fiscal
year ends July 31.
Data Points For Graph
Cumulative Total Return
-------------------------------------------------------
7/91 7/92 7/93 7/94 7/95 7/96
Isco Inc. 100 133 97 84 95 88
PEER GROUP 100 103 109 117 215 197
S & P 500 100 113 123 129 163 190
RETIREMENT PLAN.
The Company's defined contribution retirement plan includes a 401(k) provision
that covers all employees meeting age and service requirements. Significant
provisions of the plan include the following: (i) an employee may reduce his or
her salary by up to 12 percent, and the Company will match the reduction, up to
10 percent, with a 20 percent matching contribution; (ii) the Company's
contribution to the plan is equal to approximately 7 percent of its net earnings
before income taxes; (iii) the Company's aggregate contribution to the plan is
limited to 15 percent of the aggregate compensation of the plan participants;
(iv) participants vest 20 percent of employer profit sharing and employer 401(k)
matching contributions after three years and 20 percent per year thereafter
until 100 percent vested. Management and administrative costs of the plan are
borne by the Company. For fiscal year 1996, amounts contributed to the plan for
the chief executive officer and the two other most highly compensated executive
officers of the Company are set forth as part of the table appearing in the
Executive Compensation section.
10
<PAGE>
COMPENSATION OF DIRECTORS FOR FISCAL 1996.
During fiscal 1996, a cash-based compensation plan was in affect for the period
August through December 1995 and a Deferred Stock Compensation Plan was in
affect for the period January through July 1996. All Directors of the Company,
under the cash-based compensation plan received $350 per meeting attended and an
annual fee of $2,400 pro-rated for five months of service. Dale L. Young, the
Corporate Secretary of the Company received an additional pro-rated portion of
$2,500 for his services as Corporate Secretary. Further, Outside Directors who
served on Board Committees were paid additionally $350 per meeting attended.
Inside Directors were paid no fee for attending committee meetings.
Under the Deferred Stock Compensation Plan approved by the shareholders at the
last annual meeting, all Directors receive 35 Deferred Stock Units for each
Board and committee meeting attended, and 240 Deferred Stock Units for the
annual Board retainer. In addition, the Corporate Secretary receives an
additional 250 Deferred Stock Units annually for serving as Corporate Secretary.
At the time the Director ceases to be a member of the Board, the Director's
accumulated Deferred Stock Units are converted to shares of the Company's Common
Stock at a ratio of 1 to 1 and distributed. The annual amount of Deferred Stock
Units given to each director was pro-rated for the seven-month period of January
through July 1996.
The Board recommends a vote FOR the four nominees listed above.
2. APPROVAL OF 1996 STOCK OPTION PLAN.
1996 STOCK OPTION PLAN.
The Company's Board adopted a stock option plan on September 19, 1996 which will
provide for the granting of incentive stock options ("ISOs") within the meaning
of Section 422 of the Code and for the granting of Non-incentive stock options
("NQSOs") to employees and officers and such other persons rendering substantial
services to the Company and its subsidiaries (the "Stock Option Plan");
provided, however, that only employees of the Company or any subsidiary thereof
shall be eligible to receive ISOs. The maximum aggregate number of shares of
Common Stock that may be issued under the Stock Option Plan will be 250,000
(subject to adjustment as described below). On the date of adoption of the
Stock Option Plan by the Board, there were approximately eighty (80) persons
eligible to receive a grant under the Stock Option Plan.
MATERIAL FEATURES.
The Stock Option Plan will be administered by a committee appointed by the
Board, (the "Stock Option Plan Committee"), consisting of not less than two
(Non-Employee Directors) as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") who are also
not currently an officer or otherwise employed by the issuer or a parent or
subsidiary of the issuer; do not receive compensation directly or indirectly
from the issuer, its parent or subsidiary for services rendered as a consultant
or in any capacity other than a director; do not possess an interest in any
other transaction for which disclosure would be required pursuant to Item 404(a)
or Regulation S-K; and is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of Regulation S-K.
Subject to the express terms of the Stock Option Plan, the Stock Option Plan
Committee will have the authority to administer the Stock Option Plan in its
sole and absolute discretion, including, but not limited to, the authority to
construe and interpret the Stock Option Plan and the authority to determine the
eligible
11
<PAGE>
individuals who shall be granted options and the number of options to be
granted, the vesting period, if any, for all options granted, the date on which
any option becomes first exercisable, the number of shares of Common Stock
subject to each option, the exercise price for the shares of Common Stock
subject to each option and whether the option to be granted is an ISO or a NQSO.
The per share exercise price of incentive stock options granted under the Stock
Option Plan cannot be less that the fair market value of a share of Common Stock
on the date of grant (110% of fair market value in the case of an incentive
stock option granted to any person who, at the time the incentive stock option
is granted, owns (or is considered as owning within the meaning of Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting powers of all classes of stock of the Company or any parent or
subsidiary (a "10% Owner")). With respect to non-incentive stock option, the
per share exercise price will be determined by the Stock Option Plan Committee
on the date of grant, but will not be less than 85% of the fair market value of
a share of Common Stock on the date of grant. Each option shall vest and become
first exercisable as determined by the Stock Option Plan Committee. The terms of
options granted under the Stock Option Plan may not exceed ten years (or five
years for any incentive stock option granted to a 10% Owner).
In the event of a Change of Control (as defined in the Stock Option Plan),
unless otherwise determined by the Stock Option Plan Committee at the time of
grant or by amendment (with the holder's consent) of such grant, all options not
vested on or prior to the effective time of any such Change of Control shall
immediately vest as of such effective time. The Stock Option Plan Committee in
its discretion may make provisions for the assumption of outstanding options, or
the substitution for outstanding options of new incentive awards covering the
stock of a successor corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices so as to
prevent dilution or enlargement of rights. The Stock Option Plan contains
customary anti-dilution provisions which provide that in the event of
recapitalization, a change in the outstanding capital stock of the Company and
certain other events, an adjustment shall be made, as determined by the Stock
Option Plan Committee in its sole discretion, in the aggregate number of shares
of Common Stock available for issuance under the Stock Option Plan, the number
of shares of Common Stock subject to outstanding options under the Stock Option
Plan.
Options granted under the Stock Option Plan will not be assignable or
transferable except by will or the laws of descent and distribution. The Stock
Option Plan may be amended, suspended or terminated by the Board, except that:
(i) any revision or amendment that would cause the Stock Option Plan to fail to
comply with Rule 16b-3 of the Exchange Act, Sections 442 or 162(m) of the Code
or any other requirement shall not be effective until stockholder approval is
obtained; and (ii) no such action may impair rights under a previously granted
option. No options may be granted under the Stock Option Plan after its tenth
anniversary but options theretofore granted may extend beyond such date.
TAX CONSEQUENCES.
a. INCENTIVE STOCK OPTION. No taxable income is realized by the Participant
upon the grant of an incentive stock option, or upon exercise and similarly, no
deduction is then available to the Company. A taxable event occurs upon
disposition of the stock by the Participant. Assuming the Participant has held
the stock the longer of two years from the date of grant or one year from the
date of exercise, Participant will realize long-term capital gain or loss upon
the disposition of the stock. In this case, the Participant's tax basis will be
equal to the exercise price.
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If the Participant disposes of the stock prior to satisfying the holding period
set forth above, the Participant will realize ordinary income equal to the
excess, if any, of the fair market value of the shares on the date of
disposition and the exercise price. The Company, in turn, will have a deduction
for the same amount.
b. NON-QUALIFIED STOCK OPTION. No taxable income is realized by the
Participant upon the grant of a non-qualified stock option, and no deduction is
then available to the Company. Upon exercise of the option, the excess of the
fair market value of the shares on the date of exercise over the option price
will be taxable to the Participant as compensation income and deductible to the
Company. The tax basis of shares acquired will be the fair market value on the
date of exercise. For shares held for more than one year following exercise of
the option, the Participant will realize long-term capital gain or loss (using
the fair market value on the date of exercise as the basis for the stock) upon
disposition (assuming the stock would be a capital asset in his or her hands).
OTHER INFORMATION.
At the time this Proxy Statement was printed, no stock options have been granted
pursuant to the 1996 Stock Option Plan.
The Board recommends a vote FOR Item No. 2.
3. APPROVAL OF THE 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN.
1996 OUTSIDE DIRECTORS STOCK OPTION PLAN.
The Company's Board adopted an outside directors non-incentive stock option plan
(the "Outside Directors Plan") on September 19, 1996 which will provide for the
granting of non-incentive stock options ("NQSOs") to each director of the
Company who: (i) is not an employee of the Company or any subsidiary or
affiliate of the Company on the date of the grant of an option; and (ii) has not
elected to decline to participate in the Outside Directors Plan pursuant to an
irrevocable one-time election made within 30 days after first becoming a
director. The maximum aggregate number of shares of Common Stock that may be
issued under the Outside Directors Plan will be 100,000 (subject to adjustment
as described below). On the date of adoption of the Outside Directors Plan by
the Board there were four Non-Employee Directors eligible to receive NQSOs under
the plan.
MATERIAL FEATURES.
The Outside Directors Plan will be administered by a committee (The "Outside
Directors Plan Committee") consisting of no less than two (2) individuals.
Members of the Outside Directors Plan Committee will not be entitled to
participate in the Outside Directors Plan. Subject to the limits imposed by the
terms of the Outside Directors Plan, the Outside Directors Plan Committee will
have the power to administer the Outside Directors Plan in its sole and absolute
discretion; provided, however, that the Outside Directors Plan Committee shall
have no authority to grant NQSOs, to determine the number of shares of Common
Stock subject to NQSOs or the price at which each share of Common Stock covered
by NQSOs may be purchased pursuant to the Outside Directors Plan.
Pursuant to the terms of the Outside Directors Plan on the next succeeding
business day following election of the Board at the 1996 Annual Meeting of
stockholders and each Annual Meeting of stockholders thereafter, all
Non-Employee Directors who will serve as a Director in the succeeding year shall
automatically be granted NQSOs to purchase 1,000 shares of Common Stock. With
respect to any
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non-employee director who first becomes a member of the Board other than at an
Annual Meeting of Stockholders, said Non-Employee Director shall automatically
be granted a NQSO to purchase a pro-rata portion of the 1,000 shares for his/her
partial year of service on the Board. NQSOs shall be granted in the aforesaid
manner until the date on which shares of Common Stock available for grant shall
no longer be sufficient to permit grants of NQSOs covering 1,000 Shares to be
made to each Non-Employee Director entitled to a grant as of such date, in which
event the Shares then available for grant shall be allocated on a pro-rata basis
among the Non-Employee Directors entitled to a grant of NQSOs as of such date.
All NQSOs shall vest and become first exercisable immediately upon grant. Each
NQSO will have a term of ten years from the date of grant and will have a per
share exercise price equal to the fair market value of a share of Common Stock
on the date of grant. This provision may not be amended more than once every
six months, other than to comply with changes in the Code or ERISA.
In the event of a Change of Control (as defined in the Outside Directors Plan),
the Outside Directors Plan Committee, in its discretion, may make provisions for
the assumption of outstanding NQSOs, or the substitution for outstanding NQSOs
of new incentive awards covering the stock of a successor corporation or a
parent or subsidiary thereof, which appropriate adjustments as to the number and
kind of shares and prices so as to prevent dilution or enlargement of rights;
provided, however, that no such adjustment shall be made if the adjustment would
cause the Outside Directors Plan to fail to comply with the "formula award"
exception, as set forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for grants
of NQSOs to non-employee directors. The Outside Directors Plan contains
customary anti-dilution provisions which provide that in the event of any
recapitalization, change in the Company's outstanding capital stock, and certain
other events, an adjustment shall be made, in the aggregate number of shares of
Common Stock available for issuance under the Outside Directors Plan, the number
of shares of Common Stock available for any individual awards, and the number
and exercise price of shares of Common Stock subject to outstanding NQSOs under
the Outside Directors Plan, provided, however, that no such adjustment shall be
made if the adjustment would cause the Outside Directors Plan to fail to comply
with the "formula award" exception, as set forth in Rule 16b-3(c)(2)(ii) of the
Exchange Act.
NQSOs will not be assignable or transferable except by will or the laws of
descent and distribution. The Outside Directors Plan may be amended, suspended
or terminated by the Board, except that: (i) any revision or amendment that
would cause the Outside Directors Plan to fail to comply with Rule 16b-3 of the
Exchange Act or any other requirement shall not be effective until stockholder
approval is obtained; and (ii) no such action may impair rights under a
previously granted NQSO. No options may be granted under the Outside Directors
Plan after its tenth anniversary but NQSOs theretofore granted may extend beyond
such date.
TAX CONSEQUENCES.
No taxable income is realized by the Participant upon the grant of a
non-qualified stock option, and no deduction is then available to the Company.
Upon exercise of the option, the excess of the fair market value of the shares
on the date of exercise over the option price will be taxable to the Participant
and deductible by the Company. The tax basis of shares acquired will be the
fair market value on the date of exercise. For shares held for more than one
year following exercise of the option, the Participant will realize long-term
capital gain or loss upon disposition (assuming the stock would be a capital
asset in his or her hands).
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OTHER INFORMATION.
The following table sets forth the name of each Outside Director who will
receive stock options on the business day following the 1996 Annual Meeting of
Stockholders to be held on December 12, 1996, the number of options each Outside
Directors will receive pursuant to the Plan, the exercise price and the
expiration date of each option.
Number of Exercise Expiration
Name Option Shares Price Date
- -------------------- ------------- -------- ----------
Robert B. Harris 1,000 * 12/13/06
James L. Linderholm 1,000 * 12/13/06
Harris Wagenseil 1,000 * 12/13/06
Dale L. Young 1,000 * 12/13/06
- --------------------------------------------------------------------------------
* The exercise price will be determined on the date of grant.
The Board recommends a vote FOR Item No. 3.
ADDITIONAL INFORMATION.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than 10
percent of the Company's stock, to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors, and greater than 10 percent beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
For fiscal year 1996, due to an administrative oversight, John J. Korab, Jr. was
approximately three weeks late in filing Form 5.
INDEPENDENT PUBLIC ACCOUNTANTS. Deloitte & Touche LLP, certified public
accountants, are the independent public accountants for the Company.
Representatives of Deloitte & Touche LLP are expected to be present at the
shareholders' meeting and will be given the opportunity to make any statement
they might desire and will also be available to respond to appropriate questions
from shareholders. Deloitte & Touche LLP has been selected as independent
public accountants for the Company for fiscal year 1997.
OTHER MATTERS. The Board of Directors does not know of any other matters to be
presented at the annual meeting. In the event that other business is properly
brought before the meeting, it is the intention of the proxy holders named in
the proxy to vote the proxies in accordance with the recommendation of the Board
of Directors.
Robert W. Allington
Chairman and Chief Executive Officer
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Appendix A
Isco, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS DECEMBER 12, 1996
The undersigned hereby constitutes and appoints ROBERT W. ALLINGTON and PHILIP
M. WITTIG, or either of them, with full power to act alone, or any substitute
appointed by either of them as the undersigned's agents, attorneys and proxies
to vote the number of shares the undersigned would be entitled to vote if
personally present at the Annual Meeting of the Shareholders of Isco, Inc., to
be held at The Cornhusker Hotel, 333 South 13th Street, Lincoln, Nebraska, on
the 12th day of December 1996, at 2:00 p.m., or any adjournments thereof, as
indicated below.
1. ELECTION OF DIRECTORS
NOMINEES: Douglas M. Grant, Robert B. Harris, Harris Wagenseil, and
Philip M. Wittig
/ / Vote FOR all four nominees (except as marked to the contrary below)
/ / WITHHOLD AUTHORITY to vote for all four nominees
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the following space. _________________________
2. ISCO, INC. 1996 STOCK OPTION PLAN
/ / Vote to approve the Plan / / Vote to disapprove the Plan / / Abstain
3. ISCO, INC. 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
/ / Vote to approve the Plan / / Vote to disapprove the Plan / / Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR, FOR APPROVAL OF THE 1996 STOCK
OPTION PLAN, FOR APPROVAL OF THE 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN, AND
WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS.
Dated: , 1996
--------- -------------------------------------------------------
Signature of Shareholder
-------------------------------------------------------
Signature of Shareholder
Please sign exactly as your name appears at the left.
When signing as attorney, executor, administrator,
trustee, guardian or conservator, give full title. All
joint tenants must sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
/ / I (we) plan to attend the Annual Meeting.
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