<PAGE>
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 Section240.14a-11(c) or
Section240.14a-12
ISOLYSER COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ISOLYSER COMPANY, INC,
4320 INTERNATIONAL BOULEVARD
NORCROSS, GEORGIA 30093
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 27, 1999
To the Shareholders:
The Annual Meeting of Shareholders of Isolyser Company, Inc. (the "Company")
will be held at the Atlanta Marriott North Central Hotel, 2000 Century
Boulevard, N.E., Atlanta, Georgia, on Wednesday May 27, 1999 at 2:00 p.m. for
the following purposes, all as set forth in the attached Proxy Statement:
1. To elect eight directors to serve for one-year terms expiring at the
annual meeting in 2000 and until their successors are elected and qualified.
The Board of Directors' nominees are named in the attached Proxy Statement.
2. To consider and act upon the proposed 1999 Long-Term Incentive Plan.
3. To consider and act upon the proposed 1999 Employee Stock Purchase
Plan.
4. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Only shareholders of record on the books of the Company at the close of
business on April 14, 1999, are entitled to receive notice of and to vote at the
meeting.
Shareholders are cordially invited to attend the meeting in person. However,
whether or not you expect to attend, we urge you to read the accompanying Proxy
Statement and then complete, sign, date and return the enclosed proxy card in
the enclosed postage-prepaid envelope. It is important that your shares be
represented at the meeting, and your promptness will assist us to prepare for
the meeting and to avoid the cost of a follow-up mailing. If you receive more
than one proxy card because you own shares registered in different names or at
different addresses, each proxy card should be completed and returned.
Sincerely,
/s/ Migirdic Nalbantyan
Norcross, Georgia
April 20, 1999
<PAGE>
ISOLYSER COMPANY, INC.
4320 INTERNATIONAL BOULEVARD
NORCROSS, GEORGIA 30093
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 27, 1999
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of Isolyser Company, Inc.,
a Georgia corporation ("Isolyser" or the "Company"), in connection with the
solicitation by the Board of Directors of Isolyser (the "Board of Directors" or
"Board") of proxies for use at the Annual Meeting of Shareholders (the
"Meeting") scheduled to be held on Thursday, May 27, 1999, at 2:00 p.m., Atlanta
time, at the Atlanta Marriott North Central Hotel, 2000 Century Boulevard, N.E.,
Atlanta, Georgia, and at any and all adjournments or postponements thereof. This
Proxy Statement and the accompanying form of proxy were first mailed to
shareholders on or about April 20, 1999.
At the Meeting, shareholders of Isolyser will vote upon: (1) the election of
eight directors; (2) the proposal to adopt the Company's 1999 Long-Term
Incentive Plan (the "1999 Stock Option Plan"); (3) the proposal to adopt the
Company's 1999 Employee Stock Purchase Plan (the "1999 Stock Purchase Plan");
and (4) such other business as may properly come before the Meeting and any and
all adjournments thereof.
VOTING RIGHTS AND VOTES REQUIRED
The close of business on April 14, 1999, has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Meeting. As of the close of business on such date, Isolyser had
outstanding and entitled to vote 40,077,412 shares of Common Stock, $.001 par
value per share ("Common Stock").
A majority of the outstanding shares of Common Stock on the record date must
be represented in person or by proxy at the Meeting in order to constitute a
quorum for the transaction of business. The record holder of each share of
Common Stock entitled to vote at the Meeting will have one vote for each share
so held. Abstentions will be treated as Common Stock present and entitled to
vote for purposes of determining the presence of a quorum.
Directors are elected by a plurality of the votes cast. Shareholders may not
cumulate their votes. The eight candidates receiving the highest number of votes
will be elected. In tabulating the votes, abstentions and broker non-votes will
be disregarded and have no effect on the outcome of the vote for the election of
directors.
The affirmative vote of holders of a majority of the outstanding shares of
Common Stock of the Company entitled to vote and present in person or by proxy
at the Meeting is required for approval of the 1999 Stock Option Plan and for
approval of the 1999 Stock Purchase Plan. It is expected that shares held by
executive officers and directors of the Company, which in the aggregate
represent approximately 9.4 percent of the outstanding shares of Common Stock,
will be voted in favor of each of these proposals. With respect to the proposals
concerning the 1999 Stock Option Plan and 1999 Stock Purchase Plan, abstentions
will have the effect of a vote against the proposals and broker non-votes will
be disregarded and will have no effect on the outcome of the votes.
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VOTING OF PROXIES
Shares represented by all properly executed proxies will be voted at the
Meeting in accordance with the instructions specified thereon. If no
instructions are specified, the shares represented by any properly executed
proxy will be voted FOR the election of the nominees listed below under
"Election of Directors" and for the adoption of each of the 1999 Stock Option
Plan and 1999 Employee Stock Purchase Plan.
The Board of Directors is not aware of any matter that will come before the
Meeting other than as described above. However, if any such other matter is duly
presented, in the absence of instructions to the contrary, such proxies will be
voted in accordance with the judgment of the proxy holders with respect to such
matter properly coming before the Meeting. There are no rights of appraisal or
similar dissenter's rights with respect to any matter to be acted upon pursuant
to this Proxy Statement
REVOCATION OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by a
shareholder at any time before it is exercised. Any proxy may be revoked by a
writing, by a valid proxy bearing a later date delivered to Isolyser or by
attending the Meeting and voting in person.
SOLICITATION OF PROXIES
The expenses of this solicitation will be paid by Isolyser. To the extent
necessary to ensure sufficient representation at the Meeting, proxies may be
solicited by any appropriate means by officers, directors and regular employees
of Isolyser, who will receive no additional compensation therefor. Isolyser will
pay persons holding shares in their names or in the names of their nominees, but
not owning such stock beneficially (such as brokerage houses, banks and other
fiduciaries), for the expense of forwarding soliciting material to their
principals.
DIRECTORS AND EXECUTIVE OFFICERS
Proxies will be voted for the election of the following eight nominees as
directors to serve until the 2000 Annual Meeting of Shareholders or until their
successors are elected and qualified. The election of each nominee for director
requires the affirmative vote of the holders of a plurality of the shares cast
in the election of directors. All of the nominees, except Ronald L. Smorada, are
presently members of the Board. The Board of Directors has no reason to believe
that any of the nominees will be unavailable for service if elected, but if any
are unavailable, proxies will be voted for such substitute as the Board may
designate.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
- ------------------------------------------------------------------------- --- ---------------
<S> <C> <C>
Gene R. McGrevin......................................................... 56 1998
Migirdic Nalbantyan...................................................... 56 1998
Travis W. Honeycutt...................................................... 56 1987
Dan R. Lee............................................................... 51 1996
Rosdon Hendrix........................................................... 59 1994
Kenneth F. Davis......................................................... 48 1996
John E. McKinley......................................................... 55 1998
Ronald L. Smorada........................................................ 52 --
</TABLE>
GENE R. MCGREVIN was elected Chairman of the Board of Directors and acting
President of the Company in April, 1997, and currently serves as Chairman of
Isolyser. Mr. McGrevin also serves as chairman of P.E.T.Net Pharmaceutical
Services, LLC, a manufacturer and distributor of radiopharmaceuticals. Mr.
McGrevin previously served as Vice Chairman and Chief Executive Officer of
Syncor International Corp., a public company in the nuclear medicine industry,
with which Mr. McGrevin was associated since 1987. Prior to running Syncor, Mr.
McGrevin served in executive positions with various health care businesses
including President of the Health Care Products Group of Kimberly-Clark
Corporation,
2
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founder and President of a consulting firm specializing in the health care
industry and an executive officer of VHA Enterprises, Inc.
MIGIRDIC NALBANTYAN was elected a Director of the Company in September 1998,
and President and Chief Executive Officer of the Company effective October 1,
1998. Previously, Mr. Nalbantyan served as an Executive Vice President of the
Company from February 1, 1998. Prior to accepting this position, Mr. Nalbantyan
served in various executive positions, including president, of BBA Nonwovens, a
division of BBA Group PLC and now one of the world's largest manufacturers of
nonwoven products, from 1986 to 1997. From 1968 to 1986 he held various
manufacturing, process and product development, marketing and business planning
positions at DuPont's Textile Fibers operations.
TRAVIS W. HONEYCUTT has been Executive Vice President, Secretary and a
Director of the Company since its inception in 1987. Prior to his co-founding
the Company in 1987, Mr. Honeycutt had over 20 years of experience in new
product development for the industrial and health care markets.
DAN R. LEE became an executive officer of the Company following the
conclusion of Isolyser's acquisition of Microtek Medical, Inc. ("Microtek")
effective September 1, 1996 (the "Microtek Acquisition"), and became a Director
of the Company in December, 1996. Prior to accepting these positions with the
Company, Mr. Lee had served as the Vice President and Chief Operating and
Financial Officer of Microtek since 1987. Previous to that time, he was engaged
in the public accounting practice, including more than five years with KPMG Peat
Marwick.
ROSDON HENDRIX was elected a Director of the Company in December 1994. Until
he retired in June 1992, Mr. Hendrix served for approximately 30 years in
various financial positions for General Motors Corporation, including serving as
Resident Comptroller from 1975 until his retirement. Since June 1992, Mr.
Hendrix has engaged in efficiency consulting studies with various governmental
authorities and businesses in Georgia.
KENNETH F. DAVIS was elected a Director of the Company in January 1996. Dr.
Davis has been a practicing surgeon on the staff of the Harbin Clinic and
Redmond Regional Medical Center, Rome, Georgia since 1986. In addition, Dr.
Davis serves on the Board of AmSouth Bank of Georgia, a publicly owned bank, as
well as various other companies including a privately held hospital consulting
firm.
JOHN E. MCKINLEY was elected a Director of the Company in May 1998. Between
1991 and 1996, Mr. McKinley was the principle operating officer of BankSouth
Corporation, Atlanta, Georgia, where he was a Board member and Chairman of the
Credit Policy Committee. Mr. McKinley also headed the Management Committee of
Bank South, which included direct responsibility for credit policy, business
banking and mortgage banking. From 1969 to 1991, Mr. McKinley worked with
Citizens and Southern National Bank and C&S/Sovran where he was the chief credit
officer of C&S Georgia Corporation and a senior vice president. Additionally,
Mr. McKinley has taught in numerous banking schools and has authored or
co-authored numerous books and articles on banking. Since 1996, Mr. McKinley has
been engaged in private consulting services. Mr. McKinley also serves as a
director of Inficorp Holdings, Inc.
RONALD L. SMORADA, a nominee as Director, has not previously been affiliated
with the Company. During the past five years, Dr. Smorada has been an active
participant in the nonwovens industry holding senior management positions at
Reemay, Fiberweb and BBA US Holdings, the latter being the parent of the former
two, with nonwoven sales in excess of $800 million. Dr. Smorada worked in the
development, acquisition and integration of new and existing businesses, both
domestic and international. A major focus for him has been the application and
conversion of science and technical concepts into meaningful businesses. The
Company has purchased significant quantities of nonwovens from Fiberweb.
3
<PAGE>
Listed below is information regarding the executive officers of the Company
who are not also directors.
PETER A. SCHMITT (age 39) was elected Executive Vice President of Finance
and Administration, Chief Financial Officer, Treasurer and Assistant Secretary
in October 1998 after serving as Vice President of Finance, Chief Financial
Officer, Treasurer and Assistant Secretary of the Company since May, 1997. Prior
to accepting this position, Mr. Schmitt served for two years as the chief
financial officer and general manager of MedSurg, the Company's custom procedure
tray business. From 1993 to 1995 Mr. Schmitt was controller of Digene, Inc., a
biotechnology company. From 1991 to 1993, Mr. Schmitt was part of a management
turnaround team for a private printing company and between 1985 and 1990 Mr.
Schmitt was employed by Touche Ross & Company and Coopers & Lybrand as a senior
auditor and audit supervisor, respectively.
LESTER J. BERRY (age 65) became an executive officer of the Company
following the conclusion of the acquisition of Microtek. Prior to that time, Mr.
Berry had served as a director and officer of Mictotek since 1994. From 1987
through 1993, Mr. Berry served in various capacities at 3M Corporation,
including service as General Manager of Vision Care, National Sales and
Marketing Manager, Medical Specialties, and as the National Sales Manager,
Health Care Specialties and Surgical Products.
MICHAEL MABRY (age 36) was elected Executive Vice President in October 1998
after serving as Vice President of Operations of the Company since May, 1997.
Mr. Mabry also serves as manager of the Company's OREX business unit. Prior to
accepting such positions, Mr. Mabry served in various positions with the Company
(including Chief Information Officer) since his joining the Company in
September, 1995. From 1984 to 1995, Mr. Mabry was employed by DeRoyal Industries
where his career advanced from software engineer to vice president of
information systems and operations.
DAVID W. VELMOSKY (age 49) was elected Vice President of
Administration/Strategic Alliances in October 1998 after serving as Vice
President of Human Resources of the Company since May, 1997. Prior to accepting
such position, Mr. Velmosky served in a non-executive capacity as Vice President
of Human Resources of the Company since his joining the Company in July, 1996.
Mr. Velmosky was formerly employed as Vice President of Human Resources for
Atlantis Plastics, Inc. from 1994 to 1996. Between 1992 and 1994, Mr. Velmosky
was in the human resources department of Pittsburg Plate and Glass. In addition
to a bachelors degree in industrial psychology and a masters degree in
industrial relations, Mr. Velmosky holds numerous advanced certifications in
employment law, ERISA benefits and compensation practices, and is a certified
Senior Human Resources Professional.
STEVE PLANTE (age 48) was elected Vice President of the Company in October
1998 after serving as General Manager of MedSurg, the Company's custom procedure
tray business, beginning earlier in 1998 and as Vice President of Operations of
MedSurg since 1996. Mr. Plante joined MedSurg in 1979, serving as plant manager.
JAMES C. "JIM" RUSHING III (age 55) was elected to the executive position of
Vice President--Finance effective March 1999. Prior to accepting this
appointment, Mr. Rushing served in various financial positions including Chief
Financial Officer of New Life Corporation of America, a national charity serving
the financial and estate planning needs of high net worth investors through
5,000 financial advisors throughout the U.S., from 1997 to 1998, and as Vice
President--Finance, BBA Nonwovens, a division of BBA Group PLC, which is one of
the worlds largest manufacturers of nonwoven products, from 1995 to 1997. As
owner of a management consulting firm, Mr. Rushing provided various chief
financial officer and director services to various firms in the Mid-South from
1980 to 1995. Mr. Rushing was employed by Northern Telecom, Inc. (NORTEL), at
its U.S. Headquarters as Director of Accounting and Financial Analysis from 1978
to 1980.
The Company's Articles of Incorporation adopt the provisions of the Georgia
Business Corporation Code (the "Corporation Code") providing that no member of
the Company's Board of Directors shall be
4
<PAGE>
personally liable to the Company or its shareholders for monetary damages for
any breach of his duty of care or any other duty he may have as a director,
except liability for any appropriation, in violation of the director's duties,
of any business opportunity of the Company, for any acts or omissions that
involve intentional misconduct or a knowing violation of law, for liability
under the Corporation Code for unlawful distributions to shareholders, and for
any transaction from which the director receives an improper personal benefit.
The Company's Bylaws provide that each officer and director shall be
indemnified for all losses and expenses (including attorneys' fees and costs of
investigation) arising from any action or other legal proceeding, whether civil,
criminal, administrative or investigative, including any action by and in the
right of the Company, because he is or was a director, officer, employee or
agent of the Company or, at the Company's request, of any other organization. In
the case of an action by or in the right of the Company, such indemnification is
subject to the same exceptions, described in the preceding paragraph, that apply
to the limitation of a director's monetary liability to the Company. The Bylaws
also provide for the advancement of expenses with respect to any such action,
subject to the officer's or director's written affirmation of his good faith
belief that he has met the applicable standard of conduct, and the officer's or
director's written agreement to repay any advances if it is determined that he
is not entitled to be indemnified. The Bylaws permit the Company to enter into
agreements providing to each officer or director indemnification rights
substantially similar to those set forth in the Bylaws, and such agreements have
been entered into between the Company and each of the members of its Board of
Directors. Although the form of indemnification agreement offers substantially
the same scope of coverage afforded by provisions in the Articles of
Incorporation and Bylaws, it provides greater assurances to officers and
directors that indemnification will be available, because, as a contract, it
cannot be modified unilaterally in the future by the Board of Directors or by
the shareholders to eliminate the rights it provides.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors maintains standing Audit and Compensation Committees.
The Board has not established a standing nominating committee.
The Audit Committee, currently consisting of Rosdon Hendrix and John
McKinley (until Mr. McKinley's election to the Board in May 1998 such seat had
been filled by Olivia Kirtley, a former independent director who resigned in
April 1998 due to other commitments), recommends to the Board the firm of
independent public accountants that audits the consolidated financial statements
of Isolyser and its subsidiaries, the reviews the plan and scope of any audit of
the Company's financial statements, reviews the financial statements, and
reviews matters pertaining to the audit. The primary function of the Audit
Committee is to strengthen the independence and objectivity of the external
auditors and to monitor the accuracy and completeness of the Company's financial
statements and matters which relate to them. It should be noted, however, that
the members of the Committee are not necessarily experts in the fields of
auditing and accounting and do not provide special assurances on such matters.
The Audit Committee met two times during 1998.
The Compensation Committee, consisting of Rosdon Hendrix and Kenneth F.
Davis, makes recommendations to the Board regarding the compensation of
executive officers and administers Isolyser's incentive plans, including the
Stock Option Plan and the Stock Purchase Plan. The Compensation Committee's
report on executive compensation begins at page 15 of this Proxy Statement. The
Compensation Committee met six times during 1998.
The Board of Directors held 13 meetings during 1998. Each incumbent director
attended at least 75 percent of the aggregate of the meetings of the Board of
Directors and of the committees of which he or she was a member.
5
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules issued thereunder, Isolyer's executive officers and directors and any
persons holding more than ten percent of the Company's common stock are required
to file with the Securities and Exchange Commission and the Nasdaq Stock Market
reports of their initial ownership of the Company's common stock and any changes
in ownership of such common stock. Specific due dates have been established and
the Company is required to disclose in its Annual Report on Form 10-K and Proxy
Statement any failure to file such reports by these dates. Copies of such
reports are required to be furnished to Isolyser. Based solely on its review of
the copies of such reports furnished to Isolyser, or written representations
that no reports were required, Isolyser believes that, during 1998, all of its
executive officers (including the Named Executive Officers), directors and
persons owning more than 10% of its common stock complied with the Section 16(a)
requirements, except Mr. Nalbantyan filed a Form 4 late to report an exempt
share purchase by a family member and Mr. McGrevin filed an amended Form 5 to
correct a clerical error.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of April 14, 1999, certain information
regarding the beneficial ownership of common stock by (i) each person known by
the Company to be the beneficial owner of more than five percent of the
outstanding shares of common stock, (ii) each director nominee and Named
Executive Officer identified under "Executive Compensation" below, and (iii)
directors and executive officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED
- ------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Robert L. Taylor (1)................................................................. 2,012,600 5.0%
Dimensional Fund Advisors, Inc. (2).................................................. 2,582,850 6.4%
Travis W. Honeycutt (3).............................................................. 2,563,722 6.4%
Gene R. McGrevin (4)................................................................. 220,000 *
Migirdic Nalbantyan (5).............................................................. 51,000 *
Dan R. Lee (6)....................................................................... 384,188 *
Rosdon Hendrix (7)................................................................... 127,000 *
Kenneth Davis (8).................................................................... 114,243 *
John E. McKinley (9)................................................................. 145,000 *
Ronald L. Smorada.................................................................... 0 *
Steve Plante (10).................................................................... 24,278 *
Lester J. Berry (11)................................................................. 112,974 *
All directors and executive officers as a group 14 persons (12)...................... 3,863,177 9.4%
</TABLE>
- ------------------------
* Represents less than 1% of the common stock
(1) As reported by Mr. Taylor in a Statement on Schedule 13G filed with the
Securities and Exchange Commission. Includes 2,600 shares of common stock
over which Mr. Taylor acts as custodian under the Georgia Transfers to
Minors Act, and options to acquire 40,000 shares exercisable within 60 days.
(2) As reported by Dimensional Fund Advisors, Inc. in a Statement on Form 13G
filed with the Securities and Exchange Commission. Dimensional Fund
Advisors, Inc. address is 1299 Ocean Avenue, 11(th) Floor, Santa Monica,
California 90401.
(3) Includes options to acquire 40,000 shares exercisable within 60 days.
(4) Includes options to acquire 180,000 shares exercisable within 60 days.
(5) Includes options to acquire 50,000 shares exercisable within 60 days and
1,000 shares owned by a family member.
(6) Includes options to acquire 374,123 shares exercisable within 60 days.
(7) Includes options to acquire 81,000 shares exercisable within 60 days.
(8) Includes options to acquire 79,000 shares exercisable within 60 days.
(9) Includes options to acquire 25,000 shares exercisable within 60 days.
(10) Includes options to acquire 18,596 shares exercisable within 60 days.
(11) Includes options to acquire 102,500 shares exercisable within 60 days.
(12) Includes options to acquire 1,067,236 shares exercisable within 60 days.
7
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION TABLES
The following table sets forth the cash and non-cash compensation paid by
the Company (or Microtek for services rendered during the year ended December
31, 1996), to the two individuals serving as the Company's chief executive
officer during portions of 1998, and each of the four most highly compensated
executive officers of the Company other than such chief executive officers who
were serving as executive officers at December 31, 1998 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
---------------------------------------------------- COMPENSATION
OTHER ANNUAL AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION
- ----------------------------------------- --------- ---------- ---------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Migirdic Nalbantyan...................... 1998 $ 127,112(1) -- -- 400,000 $ 2,077(2)
President and Chief Executive Officer
Terence N. Furness....................... 1998 $ 240,000 $ 62,500 -- 600,000(3) $ 4,750(4)
Former President and Chief Executive
Officer
Travis W. Honeycutt...................... 1998 $ 150,000 -- -- -- $ 3,235(5)
Executive Vice President 1997 $ 150,000 -- -- -- $ 3,235(5)
1996 $ 150,000 -- -- 40,000 $ 3,235(5)
Dan R. Lee............................... 1998 $ 150,000 -- -- 122,368 $ 5,133(7)
Executive Vice President (6) 1997 $ 150,000 -- -- 100,000 $ 4,978(7)
1996 $ 150,000 $ 100,000 -- 50,000 $ 4,417(7)
Lester J. Berry.......................... 1998 $ 150,000 -- -- 20,000 $ 9,658(8)
Vice President (6) 1997 $ 150,000 -- -- -- 9,302(8)
1996 $ 150,000 $ 100,000 -- 16,500 $ 7,539(8)
Steve Plante............................. 1998 $ 157,930 -- -- 72,999 $ 3,841(9)
Vice President
</TABLE>
- ------------------------
(1) This amount represents compensation paid from February 1, 1998, the date Mr.
Nalbantyan became an employee of the Company.
(2) This amount represents contributions to a 401(k) plan.
(3) Mr. Furness' options, while awarded in 1998, have since expired.
(4) This amount represents contributions to a 401(k) plan.
(5) This amount represents the Company's payment on Mr. Honeycutt's behalf, for
$500,000 term life insurance policies.
(6) Compensation earned prior to 1997 by Messrs. Lee and Berry stated in the
table is based upon compensation plans of Microtek as these individuals were
executive officers of Microtek prior to the Microtek Acquisition effected
September 1, 1996.
(7) This amount represents payment ($2,036 per year) for $250,000 term life
insurance and contributions for a 401(k) plan for the balance of the amount
stated.
(8) This amount represents the Company's payment ($5,158 per year) for $250,000
term life insurance and contributions for a 401(k) plan for the balance of
the amount stated.
8
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(9) This amount represents contributions to a 401(k) plan.
EMPLOYMENT ARRANGEMENTS
The Company is a party to employment agreements with all of its currently
employed Named Executive Officers, except Travis W. Honeycutt and Steve Plante.
Mr. Furness was hired as the Company's President and Chief Executive Officer
effective January 1, 1998, and resigned such position effective October 1, 1998.
In connection with such resignation, the Company entered into a severance
agreement with Mr. Furness pursuant to which the Company agreed to severance
payments aggregating $300,000 payable over one year and agreed to continue
Company provided medical and dental coverage for one year, and Mr. Furness
agreed to certain covenants relating to the protection of confidential
information and restricting his ability to compete against the Company.
Effective February 1, 1998, in connection with the Company's hiring of Mr.
Nalbantyan as an Executive Vice President of the Company in charge of the
Company's OREX commercial development business unit, Mr. Nalbantyan entered into
a three year employment agreement with the Company. Such employment agreement
specifies a minimum salary and benefits payable to him during the term of the
employment agreement, and contains certain restrictive covenants including
covenants relating to the protection of confidential information and restricting
competition against the Company. The agreement is terminable by the Company or
the employee with or without cause. In the event of a termination of the
agreement by the Company without cause, or by the employee for good reason (as
defined), the employee would be entitled to one year of salary as severance. In
the event of any termination of Mr. Nalbantyan's employment occurring within six
months after a change in control (as defined) of the Company, other than a
termination of employment as a result of death, disability or for cause, then
the Company is obligated to pay a severance amount equal to 2.99 times Mr.
Nalbantyan's annual base salary as then in effect plus certain other amounts
primarily involving continuation of health insurance for up to one year
following the date of such termination of employment. In the event any such
payments would be subject to the excise tax imposed under the Internal Revenue
Code, then such amount would be reduced to the extent necessary so that no
payment shall be subject to such excise tax unless any such reduction would net
the employee a lesser amount on an after tax basis.
The Company and Dan R. Lee are parties to an employment agreement under
which Mr. Lee agrees to continue to serve as an employee of the Company through
March 31, 2000, and specifies a certain minimum salary and benefits. The
agreement also includes certain restrictive covenants including covenants
relating to the protection of confidential information and restricting
competition against the Company. The agreement is terminable by the Company with
or without cause. In the event of any termination of Mr. Lee's employment by the
Company without cause, the Company remains obligated to pay the base salary
provided in the agreement through March 31, 2000.
Mr. Berry is a party to an employment agreement with Microtek expiring on
December 31, 1999. Such employment agreement specifies a minimum salary and
benefit payable to him during the term of the employment agreement and, in
consideration therefore, contains certain provisions restricting his ability to
compete against the Company after termination of the agreement or to use or
disclose confidential information. In connection with the Microtek acquisition,
Mr. Berry agreed to delete certain compensatory provisions of such agreement
otherwise arising in the event of certain events constituting a change of
control. Mr. Berry has agreed to continue to assist the Company in a
non-executive capacity following his scheduled retirement at the end of 1999.
Mr. Plante and the Company are parties to a severance agreement pursuant to
which the Company has agreed to pay Mr. Plante severance in the amount equal to
one year's salary in the event the employment of Mr. Plante is terminated by the
Company without cause including a termination of employment resulting from a
change of control.
9
<PAGE>
EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN. In April 1992, the Board of Directors and shareholders
of the Company adopted a Stock Option Plan (the "Plan"). The Plan currently
provides for the issuance of options to purchase up to 4,800,000 shares of
common stock (subject to appropriate adjustments in the event of stock splits,
stock dividends and similar dilutive events). Options may be granted under the
Plan to employees, officers or directors of, and consultants and advisors to,
the Company who, in the opinion of the Compensation Committee, are in a position
to contribute materially to the Company's continued growth and development and
to its long-term financial success. The Plan is administered by a committee
appointed by the Board of Directors. The Compensation Committee has been
designated by the Board of Directors as the committee to administer the Plan.
The purposes of the Plan are to ensure the retention of existing executive
personnel, key employees and consultants and to provide additional incentives by
permitting such individuals to participate in the ownership of the Company.
Options granted to employees may either be incentive stock options (as
defined in the Internal Revenue Code (the "Code")) or nonqualified stock
options. The exercise price of the options shall be determined by the Board of
Directors or the committee at the time of grant, provided that the exercise
price may not be less than the fair market value of the Company's common stock
on the date of grant as determined in accordance with the limitations set forth
in the Code. The terms of each option and the period over which it vests are
determined by the committee, although no option may be exercised more than ten
years after the date of grant and all options become exercisable upon certain
events defined to constitute a change of control. To the extent that the
aggregate fair market value, as of the date of grant, of shares with respect to
which incentive stock options become exercisable for the first time by an
optionee during the calendar year exceeds $100,000, the portion of such option
which is in excess of the $100,000 limitation will be treated as a nonqualified
stock option. In addition, if an optionee owns more than 10% of the total voting
power of all classes of the Company's stock at the time the individual is
granted an incentive stock option, the purchase price per share cannot be less
than 110% of the fair market value on the date of grant and the term of the
incentive stock option cannot exceed five years from the date of grant. Upon the
exercise of an option, payment may be made by cash, check or, if provided in the
option agreement, by delivery of shares of the Company's common stock having a
fair market value equal to the exercise price of the options, or any other means
that the Board or the committee determines. Options are non-transferable during
the life of the option holder. The Plan also permits the grant of alternate
rights defined as the right to receive an amount of cash or shares of common
stock having an aggregate fair market value equal to the appreciation in the
fair market value of a stated number of shares of common stock from the grant
date to the date of exercise. No alternate rights have been granted under the
Plan.
As of March 11, 1999, options to purchase 4,078,543 shares of common stock
were outstanding under the Plan, approximately 145,200 shares remained available
for the grant of options or alternate right under the Plan, and no alternate
rights were outstanding under the Plan. As of March 11, 1999, options for the
purchase of 690,000 shares of Common Stock were outstanding which had been
granted outside the Plan. On March 25, 1999, the Board of Directors of the
Company approved, adopted and recommended to the shareholders the 1999 Stock
Option Plan. For a more complete description of the proposal related to the 1999
Stock Option Plan, see "Adoption of Stock Option Plan" below.
EMPLOYEE STOCK PURCHASE PLAN. In February 1995 the Board approved and in
April 1995 the Company's shareholders ratified, the adoption of the Company's
Employee Stock Purchase Plan for employees of the Company and its subsidiaries
(the "1995 Stock Purchase Plan"). The Stock 1995 Purchase Plan was established
pursuant to the provisions of Section 423 of the Code to provide a method
whereby all eligible employees of the Company may acquire a proprietary interest
in the Company through the purchase of common stock. Under the 1995 Stock
Purchase Plan payroll deductions are used to purchase the Company's common
stock.
10
<PAGE>
An aggregate of 300,000 shares of common stock of the Company were reserved
for issuance under the 1995 Stock Purchase Plan, all of which have been
purchased and issued under the 1995 Stock Purchase Plan. On March 25, 1999, the
Board of Directors of the Company approved, adopted and recommended to the
shareholders the 1999 Stock Purchase Plan containing terms substantially similar
to the terms of the 1995 Stock Purchase Plan. For a more detailed description of
the proposal related to the 1999 Stock Purchase Plan, see "Adoption of Stock
Purchase Plan" below.
STOCK OPTIONS
The Company granted options to its Named Executive Officers in 1998 as set
forth in the following table. The Company has no stock appreciation rights
("SARs") outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF ANNUAL RATES OF STOCK
UNDERLYING TOTAL OPTIONS/ PRICE APPRECIATION FOR
OPTIONS/ SARS GRANTED EXERCISE OR OPTION TERM(1)
SARS TO EMPLOYEES BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------------------------ ----------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Migirdic Nalbantyan....................... 200,000 7% $ 2.6875 02/01/08 $ 338,031(1) $ 856,637(1)
200,000 7% $ 1.25 10/02/08 $ 157,224(1) $ 398,436(2)
Terence N. Furness........................ 42,666 2% $ 2.34375 12/31/98 $ 0(2) $ 0(2)
557,334 20% $ 2.00 12/31/98 $ 0(2) $ 0(2)
Dan R. Lee................................ 36,842 1% $ 3.375 11/01/01 $ 34,353(1) $ 75,912(1)
85,526 3% $ 3.375 04/04/02 $ 79,749(1) $ 176,224(1)
Lester J. Berry........................... 20,000 * $ 3.375 02/25/08 $ 42,450(1) $ 107,578(1)
Steve Plante.............................. 7,368 * $ 3.375 10/20/99 $ 15,639(1) $ 39,632(1)
2,211 * $ 3.375 10/03/00 $ 2,062(1) $ 4,556(1)
1,105 * $ 3.375 10/03/00 $ 1,030(1) $ 2,277(1)
7,368 * $ 3.375 11/01/01 $ 6,870(1) $ 15,182(1)
21,750 * $ 3.375 01/01/99 $ 20,281(1) $ 44,815(1)
33,197 1% $ 1.25 10/01/08 $ 26,097(1) $ 66,134(1)
</TABLE>
- ------------------------
* Less than one percent.
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall market conditions.
(2) While these options were granted in the last fiscal year, they also expired
in the last fiscal year.
The following table sets forth the value of options exercised during 1998
and of unexercised options held by the Company's Named Executive Officers at
December 31, 1998.
11
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Migirdic Nalbantyan............................ -0- -0- 0/400,000 0/0(1)
Travis W. Honeycutt............................ -0- -0- 40,000/0 0/0(2)
Dan R. Lee..................................... -0- -0- 345,617/69,302 57,798/0(3)
Lester J. Berry................................ -0- -0- 102,500/0 0/0(4)
Steve Plante................................... -0- -0- 37,346/47,654 0/0(5)
</TABLE>
- ------------------------
(1) The indicated value is based on an exercise prices of $2.6875 per share on
200,000 shares and $1.25 per share on 200,000 shares for unexercisable
options, and a value per share on December 31, 1998 of $1.06.
(2) The indicated value is based on an exercise price of $14.45 per share and
value per share at December 31, 1998 of $1.06.
(3) The indicated value is based on exercise prices of $0.83 per share on
251,295 shares, $3.49 per share on 41,250 shares, $3.375 per share on 53,072
shares for exercisable options and $3.375 on 69,302 shares for unexercisable
options, and a value per share on December 31, 1998 of $1.06.
(4) The indicated value is based on an exercise price of $3.19 per share on
66,000 shares, $2.73 per share on 16,500 shares for exercisable options and
$3.375 per share on 20,000 shares for unexercisable options and value per
share at December 31, 1998 of $1.06.
(5) The indicated value is based upon an exercise price of $3.375 per share on
37,346 shares for exercisable options and $3.375 per share on 14,457 shares
and $1.25 per share on 33,197 shares for unexercisable options, and a value
per share at December 31, 1998 of $1.06.
12
<PAGE>
TEN YEAR OPTION/SAR REPRICINGS
In February 1998, the Company permitted option holders to exchange all of
their stock options having an exercise price at or above $3.49 for a lesser
number of replacement stock options at a new exercise price equal to the then
current fair market value of a share of Common Stock. (The exchange formula
provided for the reduction in the number of outstanding stock options by a
percentage equal to the product of fifty percent multiplied by the percentage
differential between the exercise price set forth in the stock option to be
cancelled in the exchange and the new exercise price.) The exchange program was
made available to all current employees in the Company except one executive
officer. The following table provides certain information regarding the exchange
for those executive officers of the Company who elected to participate in the
exchange, as well as certain information relative to a stock option repricing in
1996, for all current executive officers of the Company and executive officers
of the Company existing at the time of such repricing.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SECURITIES SECURITIES
UNDERLYING UNDERLYING MARKET PRICE EXERCISE
OPTIONS/ OPTIONS/ SARS OF STOCK AT PRICE AT
SARS REC'D IN TIME OF TIME OF
REPRICED OR REPRICING OR REPRICING OR REPRICING OR NEW
AMENDED AMENDMENT AMENDMENT AMENDMENT EXERCISE
NAME AND TITLE DATE (#) (#) ($) ($) PRICE ($)
- ------------------------------------ --------- ----------- ------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dan R. Lee.......................... 02/25/98 50,000 36,842 3.375 7.125 3.375
Executive Vice President 02/25/98 100,000 85,526 3.375 4.75 3.375
Peter A. Schmitt.................... 02/25/98 30,000 22,105 3.375 7.125 3.375
Executive Vice President 02/25/98 45,000 33,158 3.375 7.125 3.375
Michael Mabry....................... 02/25/98 40,000 29,473 3.375 7.125 3.375
Executive Vice President 02/25/98 50,000 42,763 3.375 4.75 3.375
11/01/96 40,000 40,000 7.125 18.00 7.125
David W. Velmosky................... 02/25/98 20,000 14,737 3.375 7.125 3.375
Vice President
Steve Plante........................ 02/25/98 10,000 7,368 3.375 7.125 3.375
Vice President 02/25/98 3,000 2,211 3.375 7.125 3.375
02/25/98 1,500 1,105 3.375 7.125 3.375
02/25/98 10,000 7,368 3.375 7.125 3.375
02/25/98 30,000 21,750 3.375 7.125 3.375
11/01/96 10,000 10,000 7.125 9.00 7.125
11/01/96 3,000 3,000 7.125 18.00 7.125
11/01/96 1,500 1,500 7.125 18.00 7.125
11/01/96 30,000 30,000 7.125 7.50 7.125
James S. Asip....................... 11/01/96 25,000 25,000 7.125 13.13 7.125
Former Vice President of Sales
Richard Setian...................... 11/01/96 54,000 54,000 7.125 9.00 7.125
Former Vice President of Marketing
Michael Sahady...................... 11/01/96 40,000 40,000 7.125 14.45 7.125
Former Executive Vice President
Kenneth R. Newsome.................. 12/18/96 25,000 25,000 7.125 13.13 7.125
Former Vice President of 12/18/96 99,000 99,000 7.125 7.50 7.125
Operations
<CAPTION>
LENGTH OF
ORIGINAL
OPTION TERM
REMAINING AT
DATE OF
REPRICING OR
NAME AND TITLE AMENDMENT
- ------------------------------------ ------------
<S> <C>
Dan R. Lee.......................... 3.7 years
Executive Vice President 4.1 years
Peter A. Schmitt.................... 2.5 years
Executive Vice President 3.7 years
Michael Mabry....................... 2.6 years
Executive Vice President 4.1 years
4.0 years
David W. Velmosky................... 3.7 years
Vice President
Steve Plante........................ 1.7 years
Vice President 2.6 years
2.6 years
3.7 years
0.8 years
3 years
3.8 years
3.8 years
2.2 years
James S. Asip....................... 4.2 years
Former Vice President of Sales
Richard Setian...................... 3.5 years
Former Vice President of Marketing
Michael Sahady...................... 4.2 years
Former Executive Vice President
Kenneth R. Newsome.................. 4.1 years
Former Vice President of 2.0 years
Operations
</TABLE>
DIRECTOR COMPENSATION
In 1998, the Company revised its system for compensating nonemployee
directors of the Company who are not affiliated with greater than 5%
shareholders of the Company ("Nonemployee Directors").
13
<PAGE>
The Chairman receives a retainer of $48,000 per year, payable at the rate of
$4,000 per month. Such retainer became effective April 1, 1998, until which time
the Chairman continued to be compensated at the rate of $90,000 per year, which
was the salary rate approved for the Chairman in connection with his agreement
to accept the offices of acting president and chairman of the Company in 1997.
The other Nonemployee Directors of the Company receive a retainer of $10,000 per
year payable in a lump sum following each annual meeting of shareholders. No
meeting fees are payable to the Nonemployee Directors. Nonemployee Directors are
reimbursed upon request for reasonable expenses incurred in attending Board of
Director or committee meetings.
The Company's 1995 Nonemployee Director Stock Option Plan (the "Director
Option Plan") provides for automatic grants to Nonemployee Directors of
non-qualified stock options covering 2,000 shares of common stock at an exercise
price equal to the fair market value of the Company's common stock on the date
of grant. The date of grant under the Director Option Plan for each Nonemployee
Director then serving as such is (i) on the election of a Nonemployee Director
to the Board of Directors (except at an annual meeting of each shareholder) and
(ii) following each annual meeting of shareholders occurring subsequent to the
first anniversary of the date of any options granted to such Nonemployee
Director under the proceeding clause (i). The Board of Directors terminated the
Director Option Plan effective in March, 1999. The Board of Directors took such
action because of the compensation expenses which are expected to be required to
be recorded for future options granted under the Director Option Plan during
1999 which may be avoided by granting options under another Stock Option Plan
with earlier vesting provisions than those provided under the Director Option
Plan. Supplementing such grants under the Director Option Plan, the Company
grants to each Nonemployee Director a non-qualified stock option covering 3,000
shares of common stock at an exercise price equal to the fair market value of
the Company's common stock on such date of grant concurrently with the automatic
grants under the Director Option plan as described above. Historically, these
option grants may be exercised only by the optionee beginning six months after
the date of the grant until the earliest of five years after the date of grant,
thirty days after ceasing to be a director of the Company (other than due to
death or disability), and one year after death or disability.
In addition, the Board of Directors, with each Nonemployee Director (other
than the Chairman) abstaining, awarded to each Nonemployee Director (other than
the Chairman) a non-qualified stock option under the Company's Stock Option Plan
covering 20,000 shares of the Company's common stock at an exercise price of
$2.28125 per share (being the fair market value of the Company's common stock on
the grant date), and being exercisable immediately upon the date of grant until
the earliest of five years after the grant date or one year after ceasing to be
a director of the Company. The Board of Directors, with the Chairman abstaining,
awarded the Chairman a non-qualified stock option under the Company's Stock
Option Plan covering 25,000 shares of the Company's common stock at an exercise
price of $2.8125 per share (being the fair market value of such stock on the
grant date), and being exercisable immediately upon the date of grant until the
earliest of five years after the grant date or one year after ceasing to be a
director of the Company. Also in 1998, the Board of Directors, with the Chairman
abstaining, awarded the Chairman a non-qualified stock option under the
Company's Stock Option Plan covering 50,000 shares of the Company's common stock
at an exercise price of $1.25 per share (being the fair market value on the
grant date), being exercisable one year after the grant date until the earliest
of five years after the grant date or one year after ceasing to be a director of
the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
P.E.T. Net Pharmaceutical Services, LLC ("PETNet"), a limited liability
company which develops and operates facilities to distribute pharmaceuticals to
provide diagnostic services through an advanced technology known as positron
imaging, leases approximately 3,500 square feet of space included within the
Company's administrative headquarters located in Norcross, Georgia. Mr.
McGrevin, the Chairman of the Company, serves as the Chairman and is a
substantial investor in PETNet. The lease between the
14
<PAGE>
Company and PETNet provides for a rental rate of $15.00 per square foot per year
($52,500 per year) which includes certain basic services such as utilities and
maintenance within such rental rate. The lease was terminated by mutual
agreement at or about February 1, 1999. Prior to entering into such lease,
representatives of the Company evaluated rental rates for comparable office
space in order to advise the Company's Board of Directors relative to the
fairness of the transaction. With Mr. McGrevin abstaining, the Board of
Directors approved and authorized the lease transaction.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
IN THE NEXT SECTION SHALL NOT BE DEEMED TO BE "SOLICITING MATERIAL" OR TO BE
"FILED" WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR
SUBJECT TO REGULATIONS 14A OR 14C OF THE COMMISSION OR TO THE LIABILITIES OF
SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT") AND SHALL
NOT BE DEEMED INCORPORATED BY REFERENCE INTO ANY FILING UNDER THE SECURITIES ACT
OF 1933 OR THE EXCHANGE ACT, NOTWITHSTANDING ANY GENERAL INCORPORATION BY
REFERENCE OF THIS PROXY STATEMENT INTO ANY OTHER DOCUMENT.
Two outside directors and no inside directors comprise the Compensation
Committee of the Board of Directors. Neither of the outside directors serves on
the board of any other committee member's company or organization and none of
the executive officers of Isolyser serve on the board of any committee member's
organization. The Committee has access to outside consultants and counsel at the
discretion of the Committee.
The Committee oversees three elements of executive compensation: base pay or
salary, annual performance bonus, and long-term compensation, which currently
consists of a stock option plan approved by shareholders. The Committee seeks to
provide a competitive compensation package that enables the Company to attract
and retain key executives, to integrate pay programs with the business
objectives of the Company, and to link individual executive compensation with
the Company's performance. The Compensation Committee's responsibilities
include: (i) participating in the determination of goals for the Company's
executive officers; (ii) participating in the selection and design of
compensation packages and programs relating to such goals; (iii) monitoring the
effectiveness of the compensation packages and programs; and (iv) monitoring
compensation-related developments generally and considering their application to
the Company's executive officers.
BASE PAY. The salary paid to the Company's executives is targeted to be in
line with related industry companies of similar size, while taking into account
the experience of individual officers and the requirements of attracting
prospective key executives to join Isolyser. In general, the Committee attempts
to fix base salaries at levels deemed appropriate by the Committee in order that
compensation packages may also emphasize result-oriented factors reflected in a
bonus potential and the value of stock options and stock ownership. The
Committee reviews salaries and pay ranges for its executives, and salaries may
be increased based on the Committee's assessment of an individual's performance
and contributions to Isolyser goals. Salary adjustments are generally based on
historical performance. Mr. Furness was hired as the Company's President and
Chief Executive Officer effective January 1, 1998 and was provided an annual
base salary of $250,000. By mutual agreement with the Company, Mr. Furness
resigned as an employee of the Company effective October 1, 1998. The Company
entered into a severance agreement with Mr. Furness pursuant to which the
Company agreed to severance payments in lieu of any other compensation or
benefits to Mr. Furness aggregating $300,000 payable over one year and agreed to
continue Company provided medical and dental coverage for one year. In
connection with Mr. Furness' resignation, Mr. Nalbantyan was appointed as the
Company's President and Chief Executive Officer. Prior to accepting such
appointment, Mr. Nalbantyan had served as the Company's Executive Vice President
in charge of the Company's OREX commercial development unit since September 1,
1998 in accordance with the terms of an employment agreement which provided for
an annual base salary of $150,000. Such base salary and employment agreement was
not modified during 1998. Except for modest increases of salary for
15
<PAGE>
three of the Company's incumbent executive officers, the salary of all the
Company's other executive officers remained unchanged from such salary for the
previous year.
BONUS. In connection with the hiring of Mr. Furness as the Company's
President and Chief Executive Officer, the Company and Mr. Furness agreed upon
an incentive bonus program with a total bonus potential for 1998 of $250,000.
Due to Mr. Furness' relative lack of familiarity with the Company's likely
operating results for 1998, half of such bonus potential was guaranteed. Due to
Mr. Furness' resignation effective October 1, 1998, Mr. Furness received a pro
rata portion of his guaranteed bonus and no other part of his bonus potential.
During 1998, the Compensation Committee adopted an Economic Measure Compensation
Plan providing bonus potential for substantially all of the Company's employees
including its executive officers. None of the Company's executive officers,
other than Mr. Furness, received a bonus for 1998.
LONG-TERM INCENTIVE. The Company's only current method of awarding
long-term compensation is its stock option plan, approved by shareholders. All
officers are eligible to receive grants under the stock option plan. Grants
under the plan generally extend for five to ten years, are priced at not less
than fair market value on the date of grant, and are generally intended to
provide incentive for future performance rather than reward past performance.
Seven of the Company's executive officers were granted stock options in 1998. To
induce Mr. Furness to accept employment with the Company and to link Mr.
Furness' compensation with the Company's operating results, Mr. Furness was
granted three stock options in 1998: (i) a non-qualified stock option to
purchase up to 157,334 shares of the Company's common stock at an exercise price
of $2.00 per share vesting over three years and having a term of ten years, (ii)
an incentive stock option to purchase up to 42,666 shares at an exercise price
of $2.34375 per share vesting immediately upon grant and having a term of ten
years, and (iii) a non-qualified stock option to purchase up to 400,000 shares
at an exercise price of $2.00 per share vesting in six years subject to
accelerated vesting based on stock price appreciation goals and having a term of
ten years. All of these options expired without exercise following Mr. Furness'
resignation of employment. To induce Mr. Nalbantyan to accept employment with
the Company and to link Mr. Nalbantyan's compensation with the Company's
operating results, Mr. Nalbantyan was granted a non-qualified stock option to
purchase up to 200,000 shares of the Company's common stock at an exercise price
of $2.6875 per share vesting in equal annual increments over four years
beginning on the first anniversary of the award date and having a term of ten
years. To induce Mr. Nalbantyan to accept employment as the Company's President
and Chief Executive Officer, Mr. Nalbantyan was also granted in 1998 an
incentive stock option to purchase up to 200,000 shares at an exercise price of
$1.25 per share vesting in four equal annual increments beginning on the first
anniversary of the award date and having a term of ten years. In awarding stock
options, the Compensation Committee considers (i) the contribution to the
performance of the Company of eligible employees, sales representatives and
other eligible persons, (ii) stock options held by and previously awarded to
eligible employees and (iii) stock ownership of eligible employees, in addition
to other factors the Compensation Committee may from time to time deem relevant.
In February, 1998, the Company permitted eligible option holders to exchange
all of their stock options having an exercise price at or above $3.49 for a
lesser number of replacement stock options at a new exercise price equal to the
then current fair market value of a share of common stock. The exchange formula
provided for the reduction in the number of outstanding stock options by a
percentage equal to the product of 50% multiplied by the percentage differential
between the exercise price set forth in the stock option to be cancelled in the
exchange and the new exercise price. The exchange program was made available to
all current employees in the Company except one executive officer. In
considering whether or not to approve the exchange program, the Compensation
Committee considered (i) the morale, incentive and retention issues impacted by
approving or failing to act with respect to the exchange program, (ii) persons
eligible for participation in the program, (iii) the broad-based nature of the
program, (iv) the compensation levels of eligible participants in the program,
(v) Company objectives sought to be achieved by the program, (vi) replenishments
of options available under the Company's stock option plan without requesting
further increases in shares available thereunder and consequent dilution, (vii)
recommendations of management, and (viii) other factors.
16
<PAGE>
One of the factors in the Compensation Committee's consideration of
compensation matters is the anticipated tax treatment to the Company and to its
executive officers of various components of compensation. However, amendments to
and interpretations of the tax laws and other factors beyond the control of the
Compensation Committee affect the tax treatment of compensation. For these
reasons, the Compensation Committee will not necessarily and in all
circumstances limit executive compensation to that deductible under Section
162(m) of the Internal Revenue Code. The Compensation Committee will consider
various alternatives to preserving the deductibility of other components of
compensation to the extent reasonably practicable and to the extent consistent
with other compensation objectives of the Company.
The Compensation Committee intends to continually evaluate the Company's
compensation policies and procedures with respect to executive officers.
Although the Compensation Committee believes that current compensation policies
align the financial interests of executive officers with those of the Company's
shareholders and with Company performance, it will continue to examine what
modifications, if any, should be implemented to further link executive
compensation with both individual and Company performance.
COMPENSATION COMMITTEE
Rosdon Hendrix
Kenneth F. Davis
17
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total returns (changes in stock price
plus reinvested dividends) on a hypothetical investment of $100 in the Common
Stock of Isolyser, the S&P 500 Index and the S&P Health Care Sector Index
(formerly known as the S&P Health Care Composite Index), for the period
commencing October 20, 1994 (the effective date of the Company's initial public
offering) and ending December 31, 1998.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------------------
10/20/94 12/94 12/95 12/96 12/97 12/98
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Isolyser Company, Inc........... 100 100 156 78 26 12
S & P 500....................... 100 100 138 169 226 290
S & P Health Care Sector........ 100 103 163 197 283 408
</TABLE>
18
<PAGE>
ADOPTION OF STOCK OPTION PLAN
In March, 1999, the Board of Directors, subject to the approval of the
shareholders, adopted the 1999 Long-Term Incentive Plan (the "1999 Stock Option
Plan"). The 1999 Stock Option Plan would be effective as of the date of such
approval of the shareholders ("Effective Date").
Options and other stock awards may be granted under the 1999 Stock Option
Plan to employees of the Company and certain subsidiaries and affiliated
businesses ("Related Companies"), and directors, consultants and other persons
providing key services to the Company. The Company estimates that, as of the
date of this Proxy Statement, approximately 1,795 employees (including officers)
and the five non-officer directors are eligible to participate in the 1999 Stock
Option Plan. The following discussion summarizes the 1999 Stock Option Plan.
Such discussion is qualified in its entirety by reference to such Plan, a copy
of which is included at Exhibit A to this Proxy Statement.
SHARES RESERVED FOR THE PLAN
The Company's 1999 Stock Option Plan provides for the grant of options
("Options"), stock appreciation rights ("SARs") and other stock awards ("Stock
Awards") (collectively "Awards") to acquire shares of Common Stock up to a
maximum ("Plan Maximum") of 1,200,000 shares of Common Stock. In addition, the
following provisions are imposed under the 1999 Stock Option Plan: (i) a maximum
of 1,200,000 shares issued under Options intended to be Incentive Stock Options
("ISOs") under Section 422 of the Code, (ii) a maximum of 500,000 shares issued
under Options and SARs to any one individual during any consecutive twelve month
period, (iii) a maximum number of shares under other Awards of 1,200,000 shares,
and (iv) a maximum payment under other Awards of $500,000 to any one individual
for any performance goals established for any fiscal year (including the fair
market value of stock subject to Awards denominated in shares). These maximums
are subject to adjustment in the event of stock dividends, stock splits,
combination of shares, recapitalization, reorganization, merger, consolidation,
split-up, spin-off, exchange of shares or other changes in the outstanding
Common Stock ("Corporate Transactions"). Any such adjustment will be made by the
Committee (as defined below). The Plan Maximum shall not be reduced for shares
subject to plans assumed by the Company in an acquisition of an interest in
another company. Shares subject to Awards that are forfeited or canceled shall
again be available for new Awards under the 1999 Stock Option Plan. Shares
issued under the 1999 Stock Option Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
The 1999 Stock Option Plan permits the grant of ISOs, non-qualified stock
options ("NSOs"), SARs and other Stock Awards. The Compensation Committee will
determine the terms and conditions of options granted under the 1999 Stock
Option Plan, including the exercise price ("Exercise Price"), which may not be
less than the fair market value of the Company's Common Stock on the date of
grant, all subject to certain limitations provided under the 1999 Stock Option
Plan.
Awards may be settled through cash payments, the delivery of shares of
Common Stock, or a combination thereof as the Committee shall determine. Any
Award settlement, including payment deferrals, may be subject to such rules and
procedures as it may establish, which may include provisions for the payment or
crediting of interest, or dividend equivalents, including converting such
credits into deferred Common Stock equivalents.
PURPOSE OF PLAN
The Company desires to (i) attract and retain persons eligible to
participate in the 1999 Stock Option Plan ("Participants"); (ii) motivate
Participants, by means of appropriate incentives, to achieve long-range goals;
(iii) provide incentive compensation opportunities that are competitive with
those of other similar companies; and (iv) further identify Participants'
interests with those of the Company's other shareholders through compensation
that is based on the Company's Common Stock; and thereby promote the long-term
financial interest of the Company and the Related Companies, including the
growth in value of the
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<PAGE>
Company's equity and enhancement of long-term shareholder return. A portion of
the options issued pursuant to the 1999 Stock Option Plan may constitute ISOs
within the meaning of Section 422 of the Code, or any succeeding provisions. The
1999 Stock Option Plan is not qualified under Section 401(a) of the Code and is
not subject to the provisions of the Employee Retirement Income Security Act of
1974.
ADMINISTRATION OF THE PLAN
The 1999 Stock Option Plan is administered by the Compensation Committee
(the "Committee") appointed by the Board of Directors of the Company. Subject to
the terms of the 1999 Stock Option Plan, in administering the 1999 Stock Option
Plan and the Awards granted under the 1999 Stock Option Plan, the Committee will
have the authority to (1) determine the directors, officers and employees of the
Company and its subsidiaries and the consultants and advisors to whom Awards may
be granted and the types of Awards; (2) determine the time or times at which
Awards may be granted; (3) determine the option price for shares subject to each
Option and establish the terms, conditions, performance criteria, restrictions
and other provisions of each Award; (4) determine the extent to which Awards
will be structured to conform to Section 162(m) of the Code; (5) establish terms
and conditions of Awards to conform to requirements of jurisdictions outside the
United States; and (6) interpret the 1999 Stock Option Plan and prescribe and
rescind rules and regulations, if any, relating to and consistent with the 1999
Stock Option Plan.
AMENDMENT OF THE PLAN
The 1999 Stock Option Plan may be terminated or amended by the Board of
Directors at any time, except that the following actions may not be taken
without shareholder approval: (a) increasing the number of shares that may be
issued under the 1999 Stock Option Plan (except by certain adjustments provided
for under the 1999 Stock Option Plan); or (b) amending the 1999 Stock Option
Plan provisions regarding the limitations on the Exercise Price. In addition, no
amendment or termination may, in the absence of written consent to the change by
the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the 1999 Stock Option Plan prior to
the date such amendment is adopted by the Board. Options may not be granted
under the 1999 Stock Option Plan after the date of termination of the 1999 Stock
Option Plan, but Options granted prior to that date shall continue to be
exercisable according to their terms.
ELIGIBILITY FOR PARTICIPATION
Each person who is serving as an officer, director, or employee of the
Company or any of its subsidiaries is eligible to participate in the 1999 Stock
Option Plan. See "Director Compensation" above. Furthermore, certain consultants
and advisors to the Company may also be eligible to participate in the 1999
Stock Option Plan.
Nothing contained in the 1999 Stock Option Plan or in any Option agreement
may confer upon any person any right to continue as director, officer or
employee of the Company or its subsidiaries or as a consultant or advisor, or
limit in any way any right of shareholders or of the Board, as applicable, to
remove such person.
NEW PLAN BENEFITS
No Awards have been granted under the 1999 Stock Option Plan. No
determination has been made by the Board or the Committee regarding the number
of Awards to be granted to any executive officer,
20
<PAGE>
executive officers as a group, non-executive directors or non-executive
employees. During 1998, the following options were granted pursuant to the
Company's existing stock option plans:
<TABLE>
<S> <C>
Current Executive Officers....................................... 996,443
Non-Employee Directors........................................... 155,000
Non-Executive Employees.......................................... 1,074,974
</TABLE>
The foregoing does not include 600,000 options granted to Mr. Furness in
connection with his initial employment with the Company as President and Chief
Executive Officer as such options have since expired.
OPTION EXERCISE PRICE AND VESTING
The Exercise Price per share for the shares subject to NSOs shall be at
whatever price is approved by the Committee, but not less than the greater of
the fair market value or par value per share of the Common Stock on the Pricing
Date (as defined below). The Exercise Price per share for the shares subject to
ISOs shall be not less than the fair market value per share of Common Stock on
the Pricing Date, except that in the case of an ISO to be granted to an employee
owning more than 10% of the total combined voting power of all classes of stock
of the Company, the Exercise Price per share shall be not less than 110% of the
fair market value per share of Common Stock on the Pricing Date. The "fair
market value" shall generally be the closing sale price of the Common Stock on
the date in question. The "Pricing Date" is the date on which the Option or SAR
is granted, except that the Committee may provide that the Pricing Date is the
date on which the recipient is hired or promoted (or similar event), if the
grant of the Option or SAR occurs not more than 90 days after the date of such
hiring, promotion or other event. The Committee determines the vesting
provisions for each Option.
ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES; CHANGE OF CONTROL
In the event of a Corporate Transaction, the Committee may adjust Awards to
preserve the benefits or potential benefits of the Awards. Action by the
Committee may include adjustment of: (i) the number and kind of shares which may
be delivered under the 1999 Stock Option Plan; (ii) the number and kind of
shares subject to outstanding Awards; and (iii) the Exercise Price of
outstanding Options and SARs; as well as any other adjustments that the
Committee determines to be equitable.
In the event of a Change of Control (as defined generally to include the
acquisition by an individual entity or group of more than 15% of the outstanding
Common Stock of the Company, a merger or consolidation of the Company or a sale
by the Company of all or substantially all of the Company's assets), any Award
granted under the 1999 Stock Option Plan shall become exercisable except to the
extent (a) the Award otherwise provides or (b) the exercisability of such Award
will result in an "excess parachute payment" within the meaning of the Code.
DURATION AND TERMINATION OF 1999 STOCK OPTION PLAN AND OPTIONS
The 1999 Stock Option Plan shall be unlimited in duration and, in the event
of 1999 Stock Option Plan termination, shall remain in effect as long as any
Awards under it are outstanding; provided, however, that, to the extent required
by the Code, no ISOs may be granted under the 1999 Stock Option Plan on a date
that is more than ten years from the date the 1999 Stock Option Plan is approved
by shareholders.
Each Option expires on the Expiration Date specified by the Committee. The
"Expiration Date" with respect to an Option means the date established as the
Expiration Date by the Committee at the time of the grant; provided, however,
that the Expiration Date with respect to any Option shall not be later than the
earliest to occur of: (a) the ten-year anniversary of the date on which the
Option is granted; (b) if the Participant's date of termination occurs for
reasons other than retirement or early retirement, the one year
21
<PAGE>
anniversary of such date of termination; or (c) if the Participant's date of
termination occurs by reason of retirement or early retirement, the three year
anniversary of such date of termination.
MEANS OF EXERCISE OF OPTIONS
An Option or an SAR shall be exercisable in accordance with such terms and
conditions and during such periods as may be established by the Committee. The
payment of the Exercise Price of an Option granted under the 1999 Stock Option
Plan shall be subject to the following:
(a) The full Exercise Price for shares of Common Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise (except
that, in the case of an exercise arrangement approved by the Committee
and described below, payment may be made as soon as practicable after the
exercise).
(b) The Exercise Price shall be payable in cash or by tendering shares of
Common Stock (by either actual delivery of shares or by attestation, with
such shares valued at fair market value as of the day of exercise), or in
any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by authorizing a third party to sell
shares of Common Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient portion
of the sale proceeds to pay the entire Exercise Price and any tax
withholding resulting from such exercise, or the Company may choose to
retain sufficient shares from the Option Exercise in satisfaction of the
Exercise Price and tax withholding.
NON-TRANSFERABILITY OF OPTIONS
Except as provided by the Committee, no Option is transferable except by
will or by the laws of descent and distribution. Shares subject to Options
granted under the 1999 Stock Option Plan that have lapsed or terminated may
again be subject to Options granted under the 1999 Stock Option Plan.
RESTRICTIONS ON STOCK AWARDS
Each Stock Award shall be subject to such conditions, restrictions and
contingencies as the Committee shall determine. These may include continuous
service and/or the achievement of performance measures designated by the
Committee. The performance measures that may be used by the Committee for such
Awards shall be measured by revenues, income, or such other criteria as the
Committee may specify.
22
<PAGE>
TAX TREATMENT
The following discussion addresses certain anticipated federal income tax
consequences to recipients of Awards made under the 1999 Stock Option Plan. It
is based on the Code and interpretations thereof as in effect on the date of
this Proxy Statement. This summary is not intended to be exhaustive and, among
other things, does not describe state, local or foreign tax consequences.
A company, such as the Company, for which an individual is performing
services will generally be allowed to deduct amounts that are includable in the
income of such person as compensation income at the time such amounts are so
includable, provided that such amounts qualify as reasonable compensation for
the services rendered. This general rule will apply to the deductibility of a
Participant's compensation income resulting from participation in the 1999 Stock
Option Plan. The timing and amount of deductions available to the Company as a
result of the 1999 Stock Option Plan will, therefore, depend upon the timing and
amount of compensation income recognized by a Participant as a result of
participation in the 1999 Stock Option Plan. The following discusses the timing
and amount of compensation income which will be recognized by Participants and
the accompanying deduction which will be available to the Company.
ISOS. A Participant to whom an ISO which qualifies under Section 422 of the
Code is granted generally will not recognize compensation income (and the
Company will not be entitled to a deduction) upon the grant or the exercise of
the Option. To obtain nonrecognition treatment on exercise of an ISO, however,
the Participant must be an employee of the Company or a subsidiary continuously
from the date of grant of the option until three months prior to the exercise of
the Option. (If termination of employment is due to disability of the
Participant, ISO treatment will be available if the option is exercised within
one year of termination). If an Option originally designated as an ISO is
exercised after those periods, the option will be treated as an NSO for income
tax purposes and compensation income will be recognized by the Participant (and
a deduction will be available to the Company) in accordance with the rules
discussed below concerning NSOs.
The Code provides that ISO treatment will not be available to the extent
that the fair market value of shares subject to ISOs (determined as of the date
of grant of the ISOs) which become exercisable for the first time during any
year exceed $100,000. If the $100,000 limitation is exceeded, the Options in
excess of the limitation are treated as NSOs when exercised.
While a Participant may not recognize compensation income upon exercise of
an ISO, the excess of the fair market value of the shares of Common Stock
received over the exercise price for the option can affect the optionee's
alternative minimum tax liability under applicable provisions of the Code. The
increase, if any, in an optionee's alternative minimum tax liability resulting
from exercise of an ISO will not, however, create a deductible compensation
expense for the Company.
When a Participant sells shares of Common Stock received upon exercise of an
ISO more than one year after the exercise of the Option and more than two years
after the grant of the Option, the Participant will normally not recognize any
compensation income, but will instead recognize capital gain or loss from the
sale in an amount equal to the difference between the sales price for the shares
of Common Stock and the option exercise price. If, however, a Participant sells
the shares of Common Stock within one year after exercising the ISO or within
two years after the grant of the ISO (an "Early Disposition"), the Participant
will recognize compensation income (and the Company will be entitled to a
deduction) in an amount equal to the lesser of (i) the excess, if any, of the
fair market value of the shares of Common Stock on the date of exercise of the
Option over the option exercise price, and (ii) the excess, if any, of the sale
price for the shares over the option exercise price. Any other gain or loss on
such sales (in addition to the compensation income mentioned previously) will
normally be capital gain or loss.
If a Participant exercises an ISO by using shares of Common Stock ("Tendered
Shares") previously acquired by him under another ISO and held by the
Participant for less than one year after the date of exercise or two years after
the grant of the prior ISO, the surrender of the Tendered Shares will be an
Early
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<PAGE>
Disposition. As a result the Participant will recognize ordinary income in an
amount equal to the difference between the exercise price at which the Tendered
Shares were acquired and the fair market value of the Tendered Shares, either at
the time the prior ISO was exercised or at the time of the surrender of the
Tendered Shares, whichever is less. A number of the shares of Common Stock
acquired by exercise of the ISO equal to the number of Tendered Shares will have
a basis equal to the basis of the Tendered Shares, increased, if applicable, by
the amount of ordinary income recognized as a result of the disposition of the
Tendered Shares. Such shares of Common Stock will have a carryover capital gain
holding period. The basis of the number of shares of Common Stock received in
excess of the number of Tendered Shares ("Excess Shares") will be zero and their
capital gain holding period will begin on the date the ISO was exercised.
NSOS. A Participant to whom an NSO is granted will not normally recognize
income at the time of grant of the Option. When a Participant exercises an NSO,
the Participant will generally recognize compensation income (and the Company
will be entitled to a deduction) in an amount equal to the excess, if any, of
the fair market value of the shares of Common Stock when acquired over the
option exercise price. The amount of gain or loss recognized by a Participant
from a subsequent sale of shares of Common Stock acquired from the exercise of
an NSO will be equal to the difference between the sales price for the shares of
Common Stock and the sum of the exercise price of the Option plus the amount of
compensation income recognized by the Participant upon exercise of the Option.
A Participant who exercises a NSO by using Tendered Shares (i) will not
recognize income as a result of the exercise of the NSO with respect to the
number of shares of Common Stock which equal the number of Tendered Shares and
(ii) will receive a carryover of the basis and holding period of the Tendered
Shares for such number of shares of Common Stock. Receipt of Excess Shares will
cause the Participant to recognize ordinary income (and entitle the Company to a
deduction) in an amount equal to the fair market value of the Excess Shares on
the date the NSO was exercised. The Participant's basis for such number of
Excess Shares will equal the amount of ordinary income recognized as a result of
the exercise of the NSO and the capital gain holding period for the Excess
Shares will begin on the date the NSO was exercised.
SARS. The recipient of an SAR generally will not recognize any compensation
income upon grant of the SAR. At the time of exercise of an SAR, however, the
recipient should recognize compensation income in an amount equal to the amount
of cash, or the fair market value of the shares, received.
RESTRICTED STOCK AWARDS. If stock received pursuant to a Stock Award made
through the 1999 Stock Option Plan is subject to a restriction on continued
ownership which is dependent upon the recipient continuing to perform services
for the Company or its affiliated companies (a "risk of forfeiture"), the
Participant should not recognize compensation income upon receipt of the shares
of Common Stock unless he/she makes a so-called "83(b) election" as discussed
below. Instead, the Participant will recognize compensation income (and the
Company will be entitled to a deduction) when the shares of Common Stock are no
longer subject to a risk of forfeiture, in an amount equal to the fair market
value of the stock at that time. Absent a Participant making an 83(b) election,
dividends paid with respect to shares of Common Stock which are subject to a
risk of forfeiture will be treated as compensation income for the Participant
(and a compensation deduction will be available to the Company for the dividend)
until the shares of Common Stock are no longer subject to a risk of forfeiture.
Different tax rules will apply to a Participant who receives shares of
Common Stock subject to a risk of forfeiture if the Participant files an
election pursuant to Section 83(b) of the Code (an "83(b) election"). If, within
30 days of receipt of the shares of Common Stock, a Participant files an 83(b)
election with the Internal Revenue Service and the Company, then,
notwithstanding that the shares of Common Stock are subject to a risk of
forfeiture, the Participant will recognize compensation income upon receipt of
the shares of Common Stock (and the Company will be entitled to a deduction) in
an amount equal to the fair market value of the stock at the time of the award.
If the 83(b) election is made, any dividends paid with respect to the shares of
Common Stock will not result in compensation income for the Participant (and
will
24
<PAGE>
not entitle the Company to a deduction). Rather, the dividends paid will be
treated as any other dividends paid with respect to Common Stock, as
noncompensatory ordinary income.
TAX WITHHOLDING
Whenever the Company proposes, or is required, to distribute shares under
the 1999 Stock Option Plan, the Company may require the recipient to satisfy any
Federal, state and local tax withholding requirements prior to the delivery of
any certificate for such shares or, in the discretion of the Committee, the
Company may withhold from the shares to be delivered shares sufficient to
satisfy all or a portion of such tax withholding requirements.
UNFUNDED STATUS OF THE 1999 STOCK OPTION PLAN
The 1999 Stock Option Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a Participant or optionee by the Company, nothing contained in the 1999 Stock
Option Plan shall give any such Participant or optionee any rights that are
greater than those of a general creditor of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE 1999
STOCK OPTION PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED
UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
ADOPTION OF STOCK PURCHASE PLAN
In March, 1999, the Board adopted, subject to shareholder approval, the
Isolyser Company, Inc. Employee Stock Purchase Plan (the "1999 Stock Purchase
Plan"). If approved by shareholders, the 1999 Stock Purchase Plan will provide
eligible employees (defined below) with an opportunity to purchase the Company's
Common Stock through payroll deductions. The 1999 Stock Purchase Plan is
intended to assist eligible employees in acquiring a stock ownership interest in
the Company pursuant to a plan that is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code, to help eligible employees provide
for their future security and to encourage them to remain in the employment of
the Company and participating subsidiaries. The following discussion contains a
summary of certain material features of the 1999 Stock Purchase Plan. Such
discussion is qualified in its entirety by reference to such Plan, a copy of
which is included at Exhibit B to this Proxy Statement.
SHARES RESERVED FOR THE PLAN
The aggregate number of shares of Common Stock which may be purchased under
the 1999 Stock Purchase Plan shall not exceed 700,000, subject to adjustment in
the event of stock dividends, stock splits, combination of shares,
recapitalizations, or other changes in the outstanding Common Stock. Shares
issued under the 1999 Stock Purchase Plan may consist, in whole or in part, of
authorized and unissued shares, treasury shares or shares purchased on the open
market.
ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). All determinations by the Committee are final and
conclusive.
ELIGIBILITY
All employees (including officers of the Company) who have been continuously
employed for three months or more by the Company or its designated
majority-owned subsidiaries (during which such employee's amortized hours of
employment were 1,000 or more) as of the commencement of any offering period
under the 1999 Stock Purchase Plan are eligible to participate in the 1999 Stock
Purchase Plan. The employee must enroll in the Plan prior to the commencement of
any such offering periods by authorizing
25
<PAGE>
payroll deductions of any percentage from one percent (1%) to ten percent (10%)
of such participant's compensation (as defined to include, without limitation,
overtime, commissions and bonuses) to be applied toward the purchase of the
Company's Common Stock, which my not be increased or decreased during any
offering period unless otherwise allowed by the Committee. No employee shall be
eligible to enroll under the 1999 Stock Purchase Plan who, at the time of
enrollment, owns stock possessing 5% or more of the total combined voting power
of the Company. The Company estimates that approximately 679 employees are
eligible to participate in the 1999 Stock Purchase Plan. Mr. Honeycutt is not
eligible to participate in the Stock Purchase Plan due to his greater than 5%
ownership of Common Stock. All other executive officers and eligible employees
of the Company are entitled to participate in the 1999 Stock Purchase Plan.
PURCHASE TERMS
An employee electing to participate in the 1999 Stock Purchase Plan must
authorize a percentage (not less than 1% nor more than 10%) of the employee's
compensation to be deducted by the Company from the employee's pay during each
pay period included within the offering periods (the "Offering Periods"). Unless
otherwise determined by the Committee, the Offering Periods commence on January
1 of each year and terminate on December 31 of such year (except that the first
Offering Period is expected to be for a period from July 1, 1999 to December 31,
1999). On the first business day of each of the Offering Periods, the Company
will grant to each participant an option to purchase shares of Common Stock of
the Company. On the last day of each of the Offering Periods, the employee will
be deemed to have exercised this option, at the option price, to the extent of
such employee's accumulated payroll deductions. In no event, however, may the
employee purchase either (i) Common Stock having a fair market value (measured
at the commencement of the Offering) in excess of $25,000 in any calendar year
or (ii) more than 50,000 shares of Common Stock in any Offering Period. The
option price under the 1999 Stock Purchase Plan is equal to 85% of the fair
market value of the Common Stock on either the first business day or last
business day of the applicable Offering Period, whichever is lower. No interest
will be paid on amounts deducted from an employee's pay and used to purchase
Common Stock under the 1999 Stock Purchase Plan.
A participant may voluntarily withdraw from the 1999 Stock Purchase Plan at
any time by giving at least 30 days notice to the Company prior to the end of
the Offering Period and shall receive on withdrawal the cash balance (without
interest) then held in the participant's account. Upon termination of employment
for any reason, including resignation, discharge, disability or retirement, or
upon the death of a participant, the balance of the participant's account
(without interest) shall be paid to the participant or his or her designated
beneficiary. However, in the event the participant's death, the participant's
beneficiary may elect to exercise the participant's option to purchase such
number of full shares which such participant's accumulated payroll deductions
will purchase at the applicable purchase price.
AMENDMENT OR TERMINATION
The Board of Directors may at any time amend, suspend or discontinue the
1999 Stock Purchase Plan provided no such suspension or discontinuance may
adversely affect any outstanding options. The 1999 Stock Purchase Plan provides
that, without shareholder approval, no amendment may increase materially the
maximum number of shares issuable under the 1999 Stock Purchase Plan (except for
adjustments as result of corporate changes affecting the Company's Common Stock
specifically authorized in the Stock Purchase Plan). The Stock Purchase Plan
will terminate by its own terms on December 31, 2008.
MISCELLANEOUS
The proceeds received by the Company from the sale of Common Stock pursuant
to the 1999 Stock Purchase Plan will be used for general corporate purposes. The
Company is not obligated to hold the accrued payroll deductions in a segregated
account. The 1999 Stock Purchase Plan will be effective as of the latter to
occur of (a) July 1, 1999 or (b) the date on which each of the following shall
have occurred:
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<PAGE>
(i) the 1999 Stock Purchase Plan shall have been approved by the shareholders of
the Company and (ii) a registration statement for the 1999 Stock Purchase Plan
shall have become effective under the Securities Act of 1933, as amended.
NEW PLAN BENEFITS
It is not possible to determine how many eligible employees will participate
in the 1999 Stock Purchase Plan in the future. Therefore, it is not possible to
determine the dollar value or number of shares of Common Stock that will be
distributed under the 1999 Stock Purchase Plan.
TAX TREATMENT
The following discussion addresses certain anticipated federal income tax
consequences to recipients of awards made under the 1999 Stock Purchase Plan. It
is based on the Code and interpretations thereof as in effect on the date of
this Proxy Statement. This summary is not intended to be exhaustive and, among
other things, does not describe state, local or foreign tax consequences.
The 1999 Stock Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Code. Under the Code, an
employee who elects to participate in an offering under the 1999 Stock Purchase
Plan will not realize income at the time the offering commences or when the
shares purchased under the 1999 Stock Purchase Plan are transferred to him or
her. If an employee disposes of such shares after two years from the date the
offering of such shares is deemed to have been made for federal income tax
purposes (the "Grant Date") or after one year from the date of the transfer of
such shares to him or her or if the employee holds such shares until his or her
death, the employee will be required to include in income, as compensation for
the year in which such disposition or death occurs, an amount equal to the
lesser of (i) the excess of the fair market value of such shares at the time of
disposition or death over the amount paid for the shares under the option or
(ii) the excess of the fair market value of such shares as of the Grant Date
over the option price. The employee's basis in the shares disposed of will be
increased by an amount equal to the amount so includable in his or her income as
compensation. In such event, the Company (or the subsidiary by which the
employee is employed) will not be entitled to any deduction from income.
If any employee disposes of the shares purchased under the 1999 Stock
Purchase Plan within such two-year or one-year period, the employee will be
required to include in income, as compensation for the year in which such
disposition occurs, an amount equal to the excess of the fair market value of
such shares on the date the option to purchase such shares was exercised over
the price paid for the shares by the empoyee. The employee's basis in such
shares disposed of will be increased by an amount equal to the amount includable
in his or her income as compensation, and any gain or loss computed with
reference to such adjusted basis which is recognized at the time of disposition
will be a capital gain or loss, either short-term or long-term, depending on the
holding period for such shares. In the event of a disposition within such
two-year or one-year period, the Company (or the subsidiary by which the
employee is employed) will be entitled to a deduction from income equal to the
amount the employee is required to include in income as a result of such
disposition.
The approval of the adoption of the 1999 Stock Purchase Plan requires the
affirmative vote of a majority of the shares of Common Stock present or
represented by properly executed and delivered proxies, and entitled to vote, at
the Meeting. A copy of the 1999 Stock Purchase Plan, as proposed for adoption,
is attached to this Proxy Statement as Exhibit B.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE 1999
STOCK PURCHASE PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, the Company's independent auditors since 1987, have
been appointed by the Board of Directors as the Company's independent auditors
for 1998. A representative of Deloitte & Touche LLP is expected to be present at
the Meeting, to be available to answer appropriate questions and to make a
statement if desired.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
OF SHAREHOLDERS
Shareholder proposals to be presented at the 2000 Annual Meeting of
Shareholders of Isolyser must be received at Isolyser's executive offices at
4320 International Boulevard, Norcross, Georgia 30093, addressed to the
attention of the Secretary, by December 22, 1999, in order to be included in the
proxy statement and form of proxy relating to such meeting. Appropriate
proposals of shareholders intended to be presented at the Company's 2000 annual
meeting without inclusion in the Company's proxy statement must be received by
the Company, at the above address and attention, by March 28, 2000 in order to
be considered timely. If such shareholder proposals are not timely received,
proxyholders will have discretionary voting authority with regard to any such
shareholder proposals which may come before the 2000 Annual Meeting. If the date
of the next annual meeting is advanced or delayed by more than 30 calendar days
from the date of the annual meeting to which this Proxy Statement relates,
Isolyser shall, in a timely manner, inform its shareholders of the change, and
the date by which proposals of shareholders must be received.
ANNUAL REPORT
Isolyser's 1998 Annual Report is concurrently being mailed to shareholders.
The Annual Report contains consolidated financial statements of Isolyser and the
report thereon of Deloitte & Touche LLP, independent public accountants.
By Order of the Board of Directors
/s/ Travis W. Honeycutt
April 20, 1999
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EXHIBIT A
ISOLYSER COMPANY, INC.
1999 LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL
1.1 PURPOSE. The Isolyser Company, Inc. 1999 Long-Term Incentive Plan (the
"Plan") has been established by Isolyser Company, Inc. (the "Company") to (i)
attract and retain persons eligible to participate in the Plan; (ii) motivate
Participants, by means of appropriate incentives, to achieve long-range goals;
(iii) provide incentive compensation opportunities that are competitive with
those of other similar companies; and (iv) further identify Participants'
interests with those of the Company's other shareholder through compensation
that is based on the Company's common stock; and thereby promote the long-term
financial interest of the Company and the Related Companies, including the
growth in value of the Company's equity and enhancement of long-term shareholder
return.
1.2 PARTICIPATION. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Persons, those persons who will be granted one or more Awards under the
Plan, and thereby become "Participants" in the Plan. In the discretion of the
Committee, a Participant may be granted any Award permitted under the provisions
of the Plan, and more than one Award may be granted to a Participant. Awards may
be granted as alternatives to or replacement of awards outstanding under the
Plan, or any other plan or arrangement of the Company or a Related Company
(including a plan or arrangement of a business or entity, all or a portion of
which is acquired by the Company or a Related Company).
1.3 OPERATION, ADMINISTRATION, AND DEFINITIONS. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 7 of the Plan).
SECTION 2
OPTIONS AND SARS
2.1 DEFINITIONS OF OPTIONS AND SARS.
(a) The grant of an "Option" entitles the Participant to purchase shares
of Stock at an Exercise Price established by the Committee. Options
granted under this Section 2 may be either Incentive Stock Options or
Non-Qualified Stock Options, as determined in the discretion of the
Committee. An "Incentive Stock Option" is an Option that is intended
to satisfy the requirements applicable to an "incentive stock option"
described in section 422(b) of the Code. A "Non-Qualified Option" is
an Option that is not intended to be an "incentive stock option" as
that term is described in section 422(b) of the Code.
(b) To the extent that the aggregate fair market value of Stock with
respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year (under all
plans of the Company and all Related Companies) exceeds $100,000,
such options shall be treated as Non-Qualified Stock Options, to the
extent required by section 422 of the Code.
(c) A stock appreciation right (an "SAR") entitles the Participant to
receive, in cash or Stock (as determined in accordance with
subsection 2.6), value equal to all or a portion of the excess of:
(a) the Fair Market Value of a specified number of shares of Stock at
the time of exercise; over (b) an Exercise Price established by the
Committee.
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2.2 EXERCISE PRICE. The "Exercise Price" of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted. The Exercise Price shall not be less than 100% of the Fair
Market Value of a share of Stock on the date of grant of the Award; provided,
however, that if the Option or SAR is granted in connection with the recipient's
hiring, promotion or similar events, the Option Exercise Price may not be less
than the market value of the Stock on the date on which the recipient is hired
or promoted (or similar event), if the grant of the Option or SAR occurs not
more than ninety days after the date of such hiring, promotion or other event.
2.3 EXERCISE. An Option and an SAR shall be exercisable in accordance with
such terms and conditions and during such periods as may be established by the
Committee.
2.4 PAYMENT OF OPTION EXERCISE PRICE. The payment of the Exercise Price of
an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the full
Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in
the case of an exercise arrangement approved by the Committee and
described in paragraph 2.4(c), payment may be made as soon as
practicable after the exercise).
(b) The Exercise Price shall be payable in cash or by tendering shares of
Stock (by either actual delivery of shares or by attestation, with
such shares valued at Fair Market Value as of the day of exercise),
or in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by authorizing a third party to
sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any
tax withholding resulting from such exercise, or the Company may
choose to retain such shares in satisfaction of the Exercise Price
and any tax withholding.
2.5 EXPIRATION DATE. The "Expiration Date" with respect to an Option means
the date established as the Expiration Date by the Committee at the time of the
grant; provided, however, that unless otherwise established by Committees at the
time of grant, the Expiration Date with respect to any Option shall not be later
than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted;
(b) if the Participant's Date of Termination occurs by reason of death or
disability, the one-year anniversary of such Date of Termination;
(c) if the Participant's Date of Termination occurs by reason of
Retirement or Early Retirement, the three-year anniversary of such
Date of Termination; or
(d) if the Participant's Date of Termination occurs for reasons other
than Retirement, Early Retirement, death or disability, the one year
anniversary of such Date of Termination.
2.6 SETTLEMENT OF AWARD. Distribution following exercise of an Option or
SAR, and shares of Stock distributed pursuant to such exercise, shall be subject
to such conditions, restrictions and contingencies as the Committee may
establish. Settlement of SARs may be made in shares of Stock (valued at their
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in its
discretion, may impose such conditions, restrictions and contingencies with
respect to shares of Stock acquired pursuant to the exercise of an Option or an
SAR as the Committee determines to be desirable.
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SECTION 3
OTHER STOCK AWARDS
3.1 DEFINITION. A Stock Award is a grant of shares of Stock or of a right
to receive shares of Stock (or their cash equivalent or a combination of both)
in the future.
3.2 RESTRICTIONS ON STOCK AWARDS. Each Stock Award shall be subject to
such conditions, restrictions and contingencies as the Committee shall
determine. These may include continuous service and/or the achievement of
performance measures. The performance measures that may be used by the Committee
for such Awards shall be measured by revenues, income, or such other criteria as
the Committee may specify. The Committee may designate a single goal criterion
or multiple goal criteria for performance measurement purposes, with the
measurement based on absolute Company or business unit performance and/or on
performance as compared with that of other publicly-traded companies.
SECTION 4
OPERATION AND ADMINISTRATION
4.1 EFFECTIVE DATE. The Plan is subject to the approval of the
shareholders of the Company at the Company's next annual meeting of its
shareholders; therefore the Plan shall be effective as of the date such approval
is obtained (the "Effective Date"). The Plan shall be unlimited in duration and,
in the event of Plan termination, shall remain in effect as long as any Awards
under it are outstanding; provided, however, that, to the extent required by the
Code, no Incentive Stock Options may be granted under the Plan on a date that is
more than ten years from the date the Plan is approved by shareholders.
4.2 SHARES SUBJECT TO PLAN.
(a) (i) Subject to the following provisions of this subsection 4.2, the
maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be
1,200,000.
(ii) Any shares of Stock granted under the Plan that are forfeited
because of the failure to meet an Award contingency or condition
shall again be available for delivery pursuant to new Awards granted
under the Plan. To the extent any shares of Stock covered by an
Award are not delivered to a Participant or beneficiary because the
Award is forfeited or cancelled, or the shares of Stock are not
delivered because the Award is settled in cash, such shares shall
not be deemed to have been delivered for purposes of determining the
maximum number of shares of Stock available for delivery under the
Plan.
(iii) If the Exercise Price of any stock option granted under the Plan is
satisfied by tendering shares of Stock to the Company (by either
actual delivery or by attestation), only the number of shares of
Stock issued net of the shares of Stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares
of Stock available for delivery under the Plan.
(iv) Shares of Stock delivered under the Plan in settlement, assumption
or substitution of outstanding awards (or obligations to grant
future awards) under the plans or arrangements of another entity
shall not reduce the maximum number of shares of Stock available for
delivery under the Plan, to the extent that such settlement,
assumption or substitution is a result of the Company or a Related
Company acquiring another entity (or an interest in another entity).
(b) Subject to paragraphs 4.2(a) and 4.2(c), the following additional
maximums are imposed under the Plan.
(i) The maximum number of shares of Stock that may be issued by Options
intended to be Incentive Stock Options shall be 1,200,000 shares.
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(ii) The maximum number of shares of Stock that may be issued in
conjunction with Awards granted pursuant to Section 3 (relating to
Stock Awards) shall be 1,200,000 shares.
(iii) The maximum number of shares that may be covered by Awards granted
to any one individual pursuant to Section 2 (relating to Options
and SARs) shall be 500,000 shares during any consecutive 12 month
period.
(iv) The maximum payment that can be made for awards granted to any one
individual pursuant to Section 3 (relating to Stock Awards) shall
be $500,000 for any single or combined performance goals
established for any fiscal year. If an Award granted under Section
3 is, at the time of grant, denominated in shares, the value of the
shares of Stock for determining this maximum individual payment
amount will be the Fair Market Value of a share of Stock on the
first day of the applicable performance period.
(c) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares),
the Committee may adjust Awards to preserve the benefits or potential
benefits of the Awards. Action by the Committee may include adjustment
of: (i) the number and kind of shares which may be delivered under the
Plan; (ii) the number and kind of shares subject to outstanding Awards;
and (iii) the Exercise Price of outstanding Options and SARs; as well as
any other adjustments that the Committee determines to be equitable.
4.3 LIMIT ON DISTRIBUTION. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have
no liability to deliver any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock certificates
to reflect the issuance of shares of Stock, the issuance may be effected
on a non-certificated basis, to the extent not prohibited by applicable
law or the applicable rules of any stock exchange.
4.4 TAX WITHHOLDING. Whenever the Company proposes, or is required, to
distribute Stock under the Plan, the Company may require the recipient to remit
to the Company an amount sufficient to satisfy any Federal, state and local tax
withholding requirements prior to the delivery of any certificate for such
shares or, in the discretion of the Committee, the Company may withhold from the
shares to be delivered shares sufficient to satisfy all or a portion of such tax
withholding requirements. Whenever under the Plan payments are to be made in
cash, such payments may be net of an amount sufficient to satisfy any Federal,
state and local tax withholding requirements.
4.5 PAYMENT IN SHARES. Subject to the overall limitation on the number of
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Related Company, including the plans and arrangements of the
Company or a Related Company acquiring another entity (or an interest in another
entity).
4.6 DIVIDENDS AND DIVIDEND EQUIVALENTS. An Award may provide the
Participant with the right to receive dividends or dividend equivalent payments
with respect to Stock which may be either paid currently or credited to an
account for the Participant, and may be settled in cash or Stock as determined
by the Committee. Any such settlements, and any such crediting of dividends or
dividend equivalents or
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reinvestment in shares of Stock, may be subject to such conditions, restrictions
and contingencies as the Committee shall establish, including the reinvestment
of such credited amounts in Stock equivalents.
4.7 PAYMENTS. Awards may be settled through cash payments, the delivery of
shares of Stock, the granting of replacement Awards, or any combination thereof
as the Committee shall determine. Any Award settlement, including payment
deferrals, may be subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest, or
dividend equivalents, including converting such credits into deferred Stock
equivalents.
4.8 TRANSFERABILITY. Except as otherwise provided by the Committee, Awards
under the Plan are not transferable except as designated by the Participant by
will or by the laws of descent and distribution.
4.9 FORM AND TIME OF ELECTIONS. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.10 AGREEMENT WITH COMPANY. At the time of an Award to a Participant
under the Plan, the Committee may require a Participant to enter into an
agreement with the Company (the "Agreement") in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.
4.11 LIMITATION OF IMPLIED RIGHTS.
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property
of the Company or any Related Company whatsoever, including, without
limitation, any specific funds, assets, or other property which the
Company or any Related Company, in their sole discretion, may set
aside in anticipation of a liability under the Plan. A Participant
shall have only a contractual right to the stock or amounts, if any,
payable under the Plan, unsecured by any assets of the Company or any
Related Company. Nothing contained in the Plan shall constitute a
guarantee that the assets of such companies shall be sufficient to
pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection
as a Participant will not give any employee the right to be retained
in the employ of the Company or any Related Company, nor any right or
claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer upon the
holder thereof any right as a shareholder of the Company prior to the
date on which the individual fulfills all conditions for receipt of
such rights.
4.12 EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
4.13 ACTION BY COMPANY OR RELATED COMPANY. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors, or by action of one or more members of the
board (including a committee of the board) who are duly authorized to act for
the board, or (except to the extent prohibited by applicable law or applicable
rules of any stock exchange) by a duly authorized officer of the Company.
4.14 GENDER AND NUMBER. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
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4.15 CHANGE OF CONTROL. In the event of a Change of Control, any Award
granted under the Plan shall become exercisable except to the extent (i) the
Award otherwise provides or (ii) the exercisability of any such Award will
result in an "excess parachute payment" within the meaning of Section 280G of
the Code, as determined by the Committee based on information available to it at
said time.
4.16 LIABILITY FOR CASH PAYMENT. Each Related Company shall be liable for
payment of cash due under the Plan with respect to any Participant to the extent
that such benefits are attributable to the services rendered for that Related
Company by the Participant. Any disputes relating to liability of a Related
Company for cash payments shall be resolved by the Committee.
4.17 GOVERNING LAW. This Plan and all awards made and actions taken
hereunder shall be governed by and construed in accordance with the laws of the
State of Georgia, excluding its conflict of law provisions.
SECTION 5
COMMITTEE
5.1 ADMINISTRATION. The authority to control and manage the operation and
administration of the Plan shall be vested in a committee (the "Committee") in
accordance with this Section 5.
5.2 SELECTION OF COMMITTEE. The Committee shall be selected by the Board,
and shall consist of two or more members of the Board and may consist of the
entire Board.
5.3 POWERS OF COMMITTEE. The authority to manage and control the operation
and administration of the Plan shall be vested in the Committee, subject to the
following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Persons
those persons who shall receive Awards, to determine the time or
times of receipt, to determine the types of Awards and the number of
shares covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions, and other provisions of such
Awards, and (subject to the restrictions imposed by Section 6) to
cancel or suspend Awards. In making such Award determinations, the
Committee may take into account the nature of services rendered by
the individual, the individual's present and potential contribution
to the Company's success and such other factors as the Committee
deems relevant.
(b) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to determine the extent to which Awards
under the Plan will be structured to conform to the requirements
applicable to performance-based compensation as described in Code
section 162(m), and to take such action, establish such procedures,
and impose such restrictions at the time such Awards are granted as
the Committee determines to be necessary or appropriate to conform to
such requirements.
(c) The Committee will have the authority and discretion to establish
terms and conditions of awards as the Committee determines to be
necessary or appropriate to conform to applicable requirements or
practices of jurisdictions outside of the United States.
(d) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any
agreements made pursuant to the Plan, and to make all other
determinations that may be necessary or advisable for the
administration of the Plan.
(e) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan is final and binding.
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(f) In controlling and managing the operation and administration of the
Plan, the Committee shall act by a majority of its then members, by
meeting or by writing filed without a meeting. The Committee shall
maintain and keep adequate records concerning the Plan and concerning
its proceedings and acts in such form and detail as the Committee may
decide.
5.4 DELEGATION BY COMMITTEE. Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange, the Committee may allocate all
or any portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities and powers to
any person or persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time.
5.5 INFORMATION TO BE FURNISHED TO COMMITTEE. The Company and Related
Companies shall furnish the Committee with such data and information as may be
required for it to discharge its duties. The records of the Company and Related
Companies as to an employee's or Participant's employment (or other provision of
services), termination of employment (or cessation of the provision of
services), leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other persons
entitled to benefits under the Plan must furnish the Committee such evidence,
data or information as the Committee considers desirable to carry out the terms
of the Plan.
SECTION 6
AMENDMENT AND TERMINATION
6.1 BOARD OF DIRECTORS. The Board may, at any time, amend or terminate the
Plan, provided that, subject to subsection 4.2 (relating to certain adjustments
to shares), no amendment or termination may, in the absence of written consent
to the change by the affected Participant (or, if the Participant is not then
living, the affected beneficiary), adversely affect the rights of any
Participant or beneficiary under any Award granted under the Plan prior to the
date such amendment is adopted by the Board; provided, however, that the Board
may not amend the provisions of Section 2.2 hereof to reduce the minimum
Exercise Price, nor may the Board increase the number of shares reserved under
the Plan, unless it obtains shareholder approval. Subject to the foregoing, the
Board shall have broad authority to amend the Plan to take into account changes
in applicable securities and tax laws and accounting rules, as well as other
developments.
6.2 COMMITTEE. The Committee may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to subsection 4.2
(relating to certain adjustments to shares) no amendment or termination may, in
the absence of written consent to the change by the affected Participant (or, if
the Participant is not then living, the affected beneficiary), adversely affect
the rights of any Participant or beneficiary under any Award granted under the
Plan prior to the date such amendment is adopted by the Committee.
SECTION 7
DEFINED TERMS
7.1 For purposes of the Plan, the terms listed below shall be defined as
follows:
(a) AWARD. The term "Award" shall mean any award or benefit granted to
any Participant under the Plan, including, without limitation, the
grant of Options, SARs, and Stock Awards.
(b) BOARD. The term "Board" shall mean the Board of Directors of the
Company.
(c) CHANGE OF CONTROL. The term "Change of Control" shall mean:
(i) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided,
however, that any individual becoming a director subsequent to the
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date hereof whose election, or nomination for election by Company
shareholders, was approved by a vote of at least a majority of the
directors than comprising the Incumbent Board shall be considered
as though such individual was a member of the Incumbent Board, but
excluding, for this purpose, any individual whose initial
assumption of such directorship shall occur as a result of either
an actual or threatened election contest (as such terms are used
in Section 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act")) or other
actual or threatened solicitation of proxies by or on behalf of
any individual, entity or group other than the Board;
(ii) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act),
other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company, of beneficial ownership
(as defined in that certain Shareholder Protection Rights
Agreement dated as of December 20, 1996 between the Company and
SunTrust Bank, as such agreement may be modified or amended from
time to time) of 15% or more of either the then outstanding shares
of common stock of the Company or the combined voting power of the
outstanding voting securities of the Company entitled to vote
generally in the election of directors unless the Incumbent Board
determines that such transaction shall not constitute a "change of
control" hereunder;
(iii) If there occurs any merger or consolidation of the Company with
or into any other corporation or entity (other than a wholly-owned
subsidiary of the Company) unless the Incumbent Board determines
that such transaction shall not constitute a change of control
hereunder; or
(iv) There occurs a sale or disposition by the Company of all or
substantially all of the Company's assets.
(d) CODE. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include
reference to any successor provision of the Code.
(e) DATE OF TERMINATION.The term "Date of Termination" shall mean the
date on which a Participant is no longer actively employed by the
Company or any Related Company unless such date occurs by reason of a
leave of absence approved the Committee in which event the "Date of
Termination" shall occur upon expiration of such approved leave of
absence without the prior return of such Participant to such active
employment status.
(f) EARLY RETIREMENT. The term "Early Retirement" shall mean retirement,
with the express written consent of the Company, approved by the
Committee, of a participant from active employment with the Company
and any Related Company.
(g) ELIGIBLE PERSON. The term "Eligible Person" shall mean any employee
of the Company or a Related Company, any director of the Company, and
any consultant or other person providing key services to the Company
or a Related Company.
(h) FAIR MARKET VALUE. For purposes of determining the "Fair Market
Value" of a share of Stock, the following rules shall apply:
(i) If the Stock is at the time listed or admitted to trading on any
stock exchange (including the NASDAQ National Stock Market), then
the "Fair Market Value" shall be the closing sale price of the
Stock on the date in question on the principal exchange on which
the Stock is then listed or admitted to trading. If no reported
sale of Stock takes place on the date in question on the principal
exchange, then the reported closing asked price of the
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Stock on such date on the principal exchange shall be
determinative of "Fair Market Value."
(ii) If the Stock is not at the time listed or admitted to trading on
a stock exchange, the "Fair Market Value" shall be the mean
between the lowest reported bid price and highest reported asked
price of the Stock on the date in question in the over-the-counter
market, as such prices are reported in a publication of general
circulation selected by the Committee and regularly reporting the
market price of Stock in such market.
(iii) If the Stock is not listed or admitted to trading on any stock
exchange or traded in the over-the-counter market, the "Fair
Market Value" shall be as determined in good faith by the
Committee.
(i) PERMANENT DISABILITY. The term "Permanent Disability" means the
physical or mental condition of a Participant which renders a
Participant incapable of continuing his customary employment with the
Company. The Permanent Disability of a Participant will be determined
by the Committee. In any event, Permanent Disability status shall be
determined in accordance with the requirements of Section 22(e)(3) of
the Code.
(j) RELATED COMPANY. The term "Related Company" means any subsidiary of
the Company, and any business venture in which the Company has a
significant interest, as determined in the discretion of the
Committee.
(k) RETIREMENT. The term "Retirement" shall mean retirement from active
employment with the Company and any Related Company on or after age
65.
(l) STOCK. The term "Stock" shall mean shares of common stock of the
Company.
SECTION 8
UNFUNDED STATUS OF THE PLAN
8.1 The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant or optionee by the Company, nothing contained herein shall give any
such Participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder; provided, however, that, unless the Committee otherwise determines
with the consent of the affected Participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
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EXHIBIT B
ISOLYSER COMPANY, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
Isolyser Company, Inc. 1999 Employee Stock Purchase Plan (the "Plan") is
being established for the benefit of employees of Isolyser Company, Inc., a
Georgia corporation (the "Company"), its wholly owned subsidiaries and any
subsequently designated subsidiaries of the Company. The Plan is intended to
provide the employees of the Employer with an opportunity to purchase common
shares, $0.001 par value, of the Company (the "Shares"), through accumulated
payroll deductions. It is the intention of the Company that the Plan qualify as
an "employee stock purchase plan" within the meaning of Section 423 of the Code,
and the provisions of the Plan shall be construed in a manner consistent with
the requirements of such Section of the Code.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Capitalization" shall mean any increase, reduction, or change
or exchange of Shares for a different number or kind of shares or other
securities of the Company by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, share dividend, share split or reverse
share split, combination or exchange of shares, repurchase of Shares, change in
corporate structure or otherwise.
(c) "Change in Control" of the Company shall have the meaning given in
Section 16(b) hereof.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" shall mean the Compensation Committee or any other committee
of members of the Board appointed by the Board to administer the Plan and to
perform the functions set forth herein.
(f) "Company" shall mean Isolyser Company, Inc., a corporation organized
under the laws of the State of Georgia, or any successor corporation.
(g) "Compensation" shall mean the fixed salary, wages, commissions, overtime
pay and bonuses paid by an Employer to an Employee as reported by the Employer
to the United States government for Federal income tax purposes, including an
Employee's portion of compensation deferral contributions pursuant to Section
401(k) of the Code, any amount excludable pursuant to Section 125 of the Code
and/or any non-qualified compensation deferral, but excluding any foreign
service allowance, severance pay, expenses or any benefit paid by a third-party
payer under any employee plan maintained by the Employer.
(h) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Employee's Employer, if such leave is for a
continuous period of not more than one year or reemployment upon the expiration
of such leave is guaranteed by contract or statute.
(i) "Designated Subsidiaries" shall mean the Subsidiaries of the Company
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan, which may include corporations which
become Subsidiaries of the Company after the adoption of the Plan.
(j) "Effective Date" shall have the meaning set forth in Section 22 hereof.
(k) "Employee" shall mean any person, including an officer, who as of an
Grant Date is regularly employed by the Company or a Designated Subsidiary of
the Company and who has completed Three Months of Service.
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(l) "Employer" shall mean, as to any particular Employee, the corporation
which employs such Employee, whether it is the Company or a Designated
Subsidiary of the Company.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Exercise Date" shall mean the last business day of each Offering
Period, except as the Committee may otherwise provide. For purposes of the Plan,
the term "business day" means a day on which there is permitted trading of the
Shares on The Nasdaq National Market or on a national securities exchange,
whichever is applicable; and if neither is applicable, a day that is not a
Saturday, Sunday or legal holiday in the State of Georgia.
(o) "Fair Market Value" per Share as of a particular date shall mean:
(i) the closing sales price, regular way for the Shares on any national
securities exchange on which the Shares are actively traded on such
date (or if such exchange was not open for trading on such date, the
next preceding date on which it was open); or
(ii) if there is no price as specified in (i), the mean of the last
reported bid-and-asked quotations regular way, for the Shares on
such exchange on such date (or if there was no such quotations on
such date, the next preceding date); or
(iii) if there also is no price as specified in (ii), the closing sales
price, regular way, or in the absence thereof the mean of the last
reported bid-and-asked quotations, for the Shares on the other
exchange on which the Shares are permitted to trade having the
greatest volume of trading in the Shares during the 30-day period
preceding such date, on such date (or if there were no such
quotations on such date, the next preceding date); or
(iv) if there also is no price as specified in (iii), the final reported
sales price, or if not reported in the following manner, the
highest bid quotation, in the over-the-counter market for the
Shares as reported by the National Association of Securities
Dealers Automatic Quotation System, or if not so reported, then as
reported by the National Quotation Bureau Incorporated, or if such
organization is not in existence, by an organization providing
similar services, on such date (or if such date is not a date for
which such system or organization generally provides reports, then
on the next preceding date for which it does so); or
(v) if there also is no price as specified in (iv), the price determined
by the Committee by reference to the bid-and-asked quotations for
the Shares provided by members of an association of brokers and
dealers registered pursuant to subsection 15(b) of the Exchange Act,
which members make a market in the Shares, for such recent dates as
the Committee shall determine to be appropriate for fairly
determining current fair market value; or
(vi) if there also is no price as specified in (v), the price determined
by the Committee for the date in question.
(p) "Grant Date" shall mean the first day of an Offering Period if, as is
the case with this Plan, there is a limit on the number of shares which may be
purchased by a Participant during any Offering Period.
(q) "Offering Period" shall mean each twelve (12) month period commencing on
January 1 and ending December 31 during the Term of the Plan, except that the
Committee shall have the power to change the duration of Offering Periods;
however, no option granted under the Plan shall be exercisable more than
twenty-seven (27) months from its Grant Date. Notwithstanding the foregoing, the
first Offering Period following the adoption of the Plan shall begin on the
Effective Date and end on December 31, 1999.
(r) "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
granting an option, each of the corporations other than the Company owns shares
possessing fifty percent (50%) or more of the total combined voting power of all
classes of shares in one of the other corporations in such chain.
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(s) "Participant" shall mean an Employee who participates in the Plan.
(t) "Plan" shall mean this Isolyser Company, Inc. 1999 Employee Stock
Purchase Plan, as amended from time to time.
(u) "Plan Year" shall mean the calendar year, except that the Committee
shall have the power to change the Plan Year.
(v) "Shares" shall mean common shares, $0.001 par value, of the Company.
(w) "Subsidiary" shall mean any corporation (other than the Company) or
other business organization in an unbroken chain of corporations or business
organizations beginning with the Company, if, at the time of granting an option,
each of the corporations or other business organizations other than the last
corporation or such other business organization in the unbroken chain owns
shares or other voting securities possessing fifty percent (50%) or more of the
total combined voting power of all classes of shares or other voting securities
in one of the other corporations or such business organizations in such chain.
(x) "Three Months of Service" shall mean each successive period of three
consecutive months (from an Employee's original employment date) during which
the Employee's annualized hours of employment are 1,000 hours or more.
3. ELIGIBILITY.
(a) Subject to the requirements of Sections 4(b) and 20(d) hereof, any
person who is an Employee as of a Grant Date shall be eligible to participate in
the Plan and be granted an option for the Offering Period commencing on such
Grant Date.
(b) Notwithstanding any provisions of the Plan to the contrary, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee (or any other person whose shares would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own shares and/or hold
outstanding options to purchase shares possessing five percent (5%) or more of
the total combined voting power or value of all classes of shares of the Company
or of any Subsidiary or Parent of the Company, or (ii) which permits such
Employee's right to purchase shares under all employee stock purchase plans (as
described in Section 423 of the Code) of the Company and any Subsidiary or
Parent of the Company to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) of Fair Market Value of such shares (determined at the time
such option is granted) for any calendar year in which such option would be
outstanding at any time, or (iii) which permits such Employee's right to
purchase shares under this Plan to accrue at a rate which exceeds fifty-thousand
(50,000) shares of stock to be purchased in any one Offering Period. The purpose
of the limitation in (i) and (ii) of the preceding sentence is to comply with
Section 423(b)(8) of the Code. If the Employee's accumulated payroll deductions
on the last day of the Offering Period would otherwise enable the Employee to
purchase Shares in excess of these Section 3(b) limitations, then the excess of
the amount of the accumulated payroll deductions over the aggregate purchase
price of the Shares actually purchased shall be credited towards the next
Offering Period. In the event the Employee elects to discontinue participation
in the Plan, such amount shall be promptly refunded to the Employee by the
Company, without interest.
4. GRANT OF OPTION; PARTICIPATION; PRICE.
(a) On each Grant Date the Company shall commence an offering by granting
each eligible Employee an option to purchase Shares, subject to the limitations
set forth in Section 3(b) and Article 10 hereof.
(b) Each eligible Employee may elect to become a Participant in the Plan
with respect to an Offering Period, by filing an agreement with his or her
Employer authorizing payroll deductions in accordance with
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Article 5 hereof. Such authorization will remain in effect for subsequent
Offering Periods, until modified or terminated by the Participant by giving
written notice to his or her Employer prior to the next occurring Exercise Date.
Such authorization to make payroll deductions must be received by the Company at
least twenty (20) days before the next succeeding Grant Date.
(c) The option price per Share subject to an offering shall be the lesser of
(i) 85% of the Fair Market Value of the Shares on the Grant Date of reference or
(ii) 85% of the Fair Market Value of the Shares on the Exercise Date of
reference; and, provided further that the option price per Share shall never be
less than the par value per Share.
5. PAYROLL DEDUCTIONS.
Subject to Section 4(b) hereof, a Participant may, in accordance with rules
and procedures adopted by the Committee, authorize a payroll deduction of any
percentage from one percent to ten percent of such Participant's Compensation
each pay period (the permissible range and any other limitation applicable to
Participants as a whole within such percentages to be determined by the
Committee from time to time). A Participant may not increase or decrease such
payroll deduction (provided that a Participant may withdraw from the Plan under
Section 8) during each Offering Period (unless otherwise allowed by the
Committee in its sole discretion). All payroll deductions made by a Participant
shall be credited to such Participant's account under the Plan.
6. EXERCISE OF OPTION.
(a) Unless a Participant withdraws from the Plan as provided in Article 8
hereof, or unless the Committee otherwise provides, such Participant's election
to purchase Shares shall be exercised automatically on the Exercise Date, and
the maximum number of Shares (excluding any fractional Share, for which purposes
the purchase amount shall be rounded to the next lower whole number of Shares)
subject to such option will be purchased for such Participant at the applicable
option price with the accumulated payroll deductions.
(b) Any cash balance remaining in a Participant's account after the
termination of an Offering Period will be carried forward to the Participant's
account for the purchase of Shares during the next Offering Period if the
Participant has elected to continue to participate in the Plan. Otherwise the
Participant will receive a cash payment equal to the cash balance of his or her
account.
(c) The Shares purchased upon exercise of an option hereunder shall be
credited to the Participant's account under the Plan within ten (10) business
days after the Exercise Date and shall be deemed to be transferred to the
Participant as of such crediting date. Except as otherwise provided herein, the
Participant shall have all rights of a shareholder with respect to credited
Shares.
7. DELIVERY OF SHARES.
(a) As promptly as practicable after receipt by the Company of a written
request for withdrawal of Shares from any Participant's account (or, in the
discretion of the Committee, at any time after the termination of employment of
any Participant), the Company shall arrange the delivery to such Participant of
a share certificate representing the whole Shares credited to the Participant's
account which the Participant requests to withdraw. Subject to Section 7(b)
hereof, withdrawals may be made no more frequently than once each Offering
Period. Shares received upon share dividends or share splits shall be treated as
having been purchased on the Exercise Date of the Shares to which they relate.
(b) Notwithstanding anything in Section 7(a) hereof to the contrary, Shares
may be withdrawn by a Participant more than once during an Offering Period under
the following circumstances: (i) within sixty
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(60) days following a Change in Control of the Company or (ii) upon the approval
of the Committee, in its sole discretion.
8. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A Participant may withdraw at any time all, but not less than all, cash
amounts in his or her account under the Plan that have not been used to purchase
Shares by giving written notice to the Company at least thirty (30) days prior
to the next occurring Exercise Date or otherwise as may be approved by the
Committee in its sole discretion. All such payroll deductions credited to such
Participant's account shall be paid to such Participant promptly after receipt
of such Participant's notice of withdrawal and such Participant's option for the
Offering Period in which the withdrawal occurs shall be automatically
terminated. No further payroll deductions for the purchase of Shares will be
made for such Participant during such Offering Period.
(b) Upon termination of a Participant's Continuous Status as an Employee
during an Offering Period for any reason, including voluntary termination,
retirement or death, the payroll deductions credited to such Participant's
account that have not been used to purchase Shares shall be returned to such
Participant or, in the case of such Participant's death, to the person or
persons entitled thereto under Article 12 hereof, and such Participant's option
will be automatically terminated. Notwithstanding the foregoing, upon the
termination of a Participant's employment because of the Participant's death,
the Participant's beneficiary (designated by the Participant in accordance with
Article 12 hereof) shall have the right to elect, by written notice given to the
Company prior to the earlier of thirty (30) days prior to the next occurring
Exercise Date (or otherwise as may be determined by the Committee in its sole
discretion) under the Plan or the sixtieth (60th) day after the Participant's
death, to exercise the Participant's option for the purchase of Shares on such
Exercise Date for the purchase of the number of full Shares which the
accumulated payroll deductions in the Participant's account at the date of the
Participant's death will purchase at the applicable option price, and any excess
in such account will be paid to such beneficiary. If no such written notice of
election is duly received by the Company, the first sentence of this Section
8(b) shall control.
(c) A Participant's withdrawal from an offering will not have any effect
upon such Participant's eligibility to participate in a succeeding offering or
in any similar plan which may hereafter be adopted by the Company.
9. INTEREST.
No interest shall accrue on or be payable with respect to the payroll
deductions of a Participant in the Plan.
10. SHARES.
(a) The maximum number of Shares which shall be reserved for sale under the
Plan shall be Seven Hundred Thousand (700,000) Shares, which number shall be
subject to adjustment upon Changes in Capitalization of the Company as provided
in Article 16 hereof. Such Shares shall be either authorized and unissued Shares
or Shares which have been reacquired by the Company. If the total number of
Shares which would otherwise be subject to options granted pursuant to Section 4
hereof on an Grant Date exceeds the number of Shares then available under the
Plan (after deduction of all Shares for which options have been exercised or are
then outstanding), the Committee shall make a pro rata allocation of the Shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Committee shall give written notice to each Participant of such reduction of the
number of option Shares affected thereby and shall similarly reduce the rate of
payroll deductions, if necessary.
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(b) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or, at the election of the
Participant, in the name of the Participant and another person as joint tenants
with rights of survivorship.
(c) Until Shares shall have been credited to a Participant's account in
accordance with Section 6(c) hereof, the Participant shall not have any rights
or privileges of a shareholder with respect to any Shares purchasable hereunder.
11. ADMINISTRATION.
The Plan shall be administered by the Committee, and the Committee may
select administrator(s) to whom its duties and responsibilities hereunder may be
delegated. The Committee shall have full power and authority, subject to the
provisions of the Plan, to promulgate such rules and regulations as it deems
necessary for the proper administration of the Plan, to interpret the provisions
and supervise the administration of the Plan, and to take all action in
connection therewith or in relation thereto as it deems necessary or advisable.
Any decision evidenced by the unanimous written consent of the members of the
Committee shall be fully effective as if it had been made at a meeting duly
held. Except as otherwise provided by the Committee, each Employer shall be
charged with all expenses incurred in the administration of the Plan with
respect to such Employer's Employees. No member of the Committee shall be
personally liable for any action, determination, or interpretation made in good
faith with respect to the Plan, and all members of the Committee shall be fully
indemnified by the Company with respect to any such action, determination or
interpretation. All decisions, determinations and interpretations of the
Committee shall be final and binding on all persons, including the Company, the
Participant (or any person claiming any rights under the Plan from or through
any Participant) and any shareholder.
12. DESIGNATION OF BENEFICIARY.
(a) A Participant may file with the Company, on forms supplied by the
Company, a written designation of a beneficiary who is to receive any Shares and
cash remaining in such Participant's account under the Plan in the event of the
Participant's death.
(b) Such designation of beneficiary may be changed by the Participant at any
time by written notice to the Company, on forms supplied by the Company. In the
event of the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such Participant's death,
the Company shall deliver such Shares and/or cash to the spouse or to any one or
more dependents or relatives of the Participant in accordance with the
applicable laws of descent and distribution, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
13. TRANSFERABILITY.
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of an option or to receive Shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
by the Participant (other than by will, the laws of descent and distribution or
as provided in Article 12 hereof). Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds in accordance with Article 8
hereof.
14. USE OF FUNDS.
All payroll deductions received or held by the Company under the Plan may be
used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such funds.
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15. REPORTS.
Individual accounts will be maintained for each Participant in the Plan.
Statements of account will be given to Participants as soon as practicable
following each Offering Period, which statements will set forth the amounts of
payroll deductions, dividends, dividend reinvestments and additional cash
payments, the per Share purchase price, the number of shares purchased, the
aggregate Shares in the Participant's account and the remaining cash balance, if
any.
16. EFFECT OF CERTAIN CHANGES.
(a) In the event of a Change in Capitalization or the distribution of an
extraordinary dividend, the Committee shall conclusively determine the
appropriate equitable adjustments, if any, to be made under the Plan, including
without limitation adjustments to the number of Shares which have been
authorized for issuance under the Plan but have not yet been placed under
option, as well as the price per Share covered by each option under the Plan
which has not yet been exercised. In the event of a Change in Control of the
Company, the Offering Period shall terminate unless otherwise provided by the
Committee. For purposes of the preceding sentence, (i) the Committee may
establish the date of the event constituting the Change of Control and such date
shall be the Exercise Date for such Offering Period, or (ii) the Committee may
terminate the Plan in which case all Shares and cash amounts in a Participant's
account shall be refunded as elsewhere provided herein.
(b) "Change of Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of 25% or more of the
outstanding voting securities of the Company, (ii) the Company shall be merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 50% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company, (iii) the Company shall sell at least 75% of its
assets by value in a single transaction or in a series of transactions to
another corporation which is not a wholly owned subsidiary of the Company, or
(iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as
in effect on the date hereof) of the Exchange Act, shall acquire 50% or more of
the outstanding voting securities of the Company (whether directly, indirectly,
beneficially or of record). For purposes hereof, ownership of voting securities
shall take into account and shall include ownership as determined by applying
the provisions of Rule 13d-3(d)(1) (as in effect on the date hereof) pursuant to
the Exchange Act.
17. TERM OF PLAN.
Subject to the Board's right to discontinue the Plan (and thereby end its
Term) pursuant to Article 18 hereof, the Term of the Plan (and its last Offering
Period) shall end on December 31, 2008. Upon any discontinuance of the Plan,
unless the Committee shall determine otherwise, any assets remaining in the
Participants' accounts under the Plan shall be delivered to the respective
Participant (or the Participant's legal representative) as soon as practicable.
18. AMENDMENT TO AND DISCONTINUANCE OF PLAN.
(a) Subject to Section 18(b) hereof, the Board may at any time amend,
suspend or discontinue the Plan. Except as provided in Article 16 hereof, no
such suspension or discontinuance may adversely affect options previously
granted and no amendment may make any change in any option theretofore granted
which adversely affects the rights of any Participant which accrued prior to the
date of effectiveness of such amendment without the consent of such Participant.
No amendment shall be effective unless it receives the requisite approval of the
shareholders of the Company if such shareholder approval of such amendment is
required to comply with Rule 16b-3 under the Exchange Act or Section 423 of the
Code or to comply with any other applicable law, regulation or stock exchange
rule.
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(b) Subject to Section 18(a), the Board may amend, modify, suspend or
terminate the Plan at any time. Subject to changes in law or other legal
requirements, the Plan may not be amended without the consent of the holders of
a majority of the shares of Common Stock then outstanding or the vote of the
shareholders of the Company as provided in Section 20(c) hereof, to increase
materially the aggregate number of shares of common stock that may be issued
under the Plan (except for adjustments pursuant to Section 16 of the Plan).
19. NOTICES.
All notices or other communications by a Participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
20. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW; SECTION 16 COMPLIANCE
(a) This Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Georgia
without giving effect to the choice of law principles thereof, except to the
extent that such law is preempted by federal law.
(b) The obligation of the Company to sell or deliver Shares with respect to
options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(c) To the extent applicable hereto, the Plan is intended to comply with
Rule 16b-3 under the Exchange Act, and the Committee shall interpret and
administer the provisions of the Plan in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan. This Plan shall be subject to approval by shareholders
of the Company owning a majority of the issued outstanding shares of common
stock present or represented and entitled to vote at a meeting duly held in
accordance with applicable law.
(d) Shares shall not be issued unless such issuance and delivery shall
comply with all applicable provisions of law, domestic or foreign, and the
requirements of any stock exchange upon which the Shares may then be listed,
including, in each case the rules and regulations promulgated thereunder, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance, which may include a representation and warranty from the
Participant that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares.
(e) Nothing contained in this Plan, or any modification or amendment to the
Plan, or in the creation of any account, or the execution of any subscription
agreement, or the issuance of any Shares under the Plan, shall give any Employee
any right to continue employment or any legal or equitable right against the
Company or any Subsidiary, or any officer, director, or employee thereof, except
as expressly provided by the Plan.
21. WITHHOLDING OF TAXES.
By electing to participate in the Plan, each Employee acknowledges that the
Company and its participating Subsidiaries are required to withhold taxes with
respect to the amounts deducted from the Employee's Compensation and accumulated
for the benefit of the Employee under the Plan, and each Employee agrees that
the Company and its participating Subsidiaries may deduct additional amounts
from the Employee's Compensation, when amounts are added to the Employee's
Account, used to purchase common stock or refunded, in order to satisfy such
withholding obligations. If the Participant makes a disposition, within the
meaning of Section 424(c) of the Code and regulations promulgated thereunder, of
any Share or Shares issued to such Participant pursuant to such Participant's
exercise of an option, and
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such disposition occurs within the two-year period commencing on the day after
the Grant Date or within the one-year period commencing on the day after the
Exercise Date, such Participant shall, within ten (10) days of such disposition,
notify the Company thereof and thereafter immediately deliver to the
Participant's Employer any amount of Federal, state or local income taxes and
other amounts which the Company informs the Participant the Company is required
to withhold. The Participant's Employer may also satisfy any applicable
withholding amounts by deducting the necessary amounts of withholding from the
Participant's wages and, in the Committee's sole discretion, any other amounts
owed to or held for the account of the Participant.
22. EFFECTIVE DATE.
The Plan shall be effective (the "Effective Date") as of the latter to occur
of (a) July 1, 1999 or (b) the date on which each of the following shall have
occurred: (i) this Plan shall have been approved by the shareholders as set
forth in Section 20(c) hereof and (ii) a registration statement for the Plan
shall have become effective under the Securities Act of 1933, as amended.
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PROXY SOLICITED FOR
ANNUAL MEETING OF SHAREHOLDERS OF
ISOLYSER COMPANY, INC.
TO BE HELD MAY 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gene R. McGrevin, Migirdic Nalbantyan and
Travis W. Honeycutt, and each of them, with full power of substitution, proxies
to represent and vote, as indicated below, all of the shares of Common Stock of
Isolyser Company, Inc. that the undersigned would be entitled to vote at the
Annual Meeting of Shareholders to be held May 27, 1999, and at any adjournment,
upon the matters described in the accompanying Notice of Annual Meeting of
Shareholders and Proxy Statement, receipt of which is acknowledged, and upon any
other business that may properly come before the meeting or any adjournment.
Said proxies are directed to vote on the matters described in the Notice of
Annual Meeting of Shareholders and Proxy Statement as follows, and otherwise in
their discretion upon such other business as may properly come before the
meeting or any adjournment thereof.
1. ELECTION OF DIRECTORS
FOR the election as directors of all nominees listed below (EXCEPT AS MARKED
TO THE CONTRARY BELOW) / /
Gene R. McGrevin, Migirdic Nalbantyan, Travis W. Honeycutt, Dan R. Lee, Rosdon
Hendrix, Kenneth F. Davis,
John E. McKinley, Ronald L. Smorada
WITHHOLD AUTHORITY to vote for all nominees listed below / /
Gene R. McGrevin, Migirdic Nalbantyan, Travis W. Honeycutt, Dan R. Lee, Rosdon
Hendrix, Kenneth F. Davis,
John E. McKinley, Ronald L. Smorada
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY OF THE ABOVE LISTED
NOMINEES, PLEASE STRIKE THROUGH THAT INDIVIDUAL'S NAME)
<PAGE>
2. PROPOSAL TO ADOPT THE 1999 LONG-TERM INCENTIVE PLAN RESERVING 1,200,000
SHARES FOR THE AWARD OF STOCK OPTIONS AND OTHER STOCK AWARDS:
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO ADOPT THE 1999 EMPLOYEE STOCK PURCHASE PLAN RESERVING 700,000
SHARES FOR PURCHASE BY EMPLOYEES:
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED "FOR" THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR AND
"FOR" PROPOSALS TWO AND THREE.
Dated _______________________, 1999
___________________________________
___________________________________
Signature of Shareholder
Please sign exactly as your name or
names appear hereon. Where more
than one owner is shown, each
should sign. Persons signing in a
fiduciary or representative
capacity shall give full title. If
this proxy is submitted by a
corporation, please sign in full
corporate name by authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
