EXHIBIT 99.2
                                      ISCO, INC.
                                1996 OUTSIDE DIRECTORS
                                  STOCK OPTION PLAN



 1. NAME. 

    The name of this Plan is the Isco, Inc. 1996 Outside Directors Stock Option
    Plan. 

 2. DEFINITIONS.

    For the purposes of the Plan, the following terms shall be defined as set
    forth below:

    a.   "Affiliate" means any partnership, corporation, firm, joint venture,
         association, trust, limited liability company, unincorporated
         organization or other entity (other than a Subsidiary) that, directly
         or indirectly through one or more intermediaries, is controlled by the
         Company, where the term "controlled by" means the possession, direct
         or indirect, of the power to cause the direction of the management and
         policies of such entity, whether through the ownership of voting
         interests or voting securities, as the case may be, by contract or
         otherwise.

    b.   "Board" means the board of directors of the Company.

    c.   "Chairman" means the individual appointed by the Board to serve as the
         chairman of the Committee.




    d.   "Code" means the Internal Revenue Code of 1986, as amended from time
         to time, and the Treasury regulations promulgated thereunder.


    e.   "Committee" means the committee appointed by the Board to administer
         the Plan as provided in Section 4(a).


    f.   "Common Stock" means the common stock, $.10 par value per share, of
         the Company or any security of the Company identified by the Committee
         as having been issued in substitution or exchange therefor or in lieu
         thereof.


    g.   "Company" means Isco, Inc., a Nebraska corporation.


    h.   "Employee" means an individual whose wages are subject to the
         withholding of federal income tax under Section 3401 of the Code. 


    i.   "Exchange Act" means the Securities Exchange Act of 1934, as amended
         from time to time, or any successor statute.


    j.   "Fair Market Value" of a Share as of a specified date means the
         average of the highest and lowest market prices of a Share on the
         NASDAQ National Market System on such date as reported in the
         Midwestern Edition of THE WALL STREET JOURNAL or, if no trading of
         Common Stock is reported for that day, the next preceding day on which
         trading was reported.  In the event the Common Stock is not then
         traded on the NASDAQ National Market Service, the Fair Market Value of
         a Share shall be determined by reference to the principal market or
         exchange on which the Shares are then traded.


                                         -18-






    k.   "Non-Employee Director" means an individual who: (i) is now, or
         hereafter becomes, a member of the Board; (ii) is not an Employee of
         the Company or of any Subsidiary or Affiliate on the date of the grant
         of the NQSO; and (iii) has not elected to decline to participate in
         the Plan pursuant to the immediately succeeding sentence.  A director
         otherwise eligible to participate in the Plan may make an irrevocable,
         one-time election, by written notice to the Corporate Secretary of the
         Company and the Chairman within thirty days after his initial election
         or appointment to the Board to decline to participate in the Plan. 

    l.   "Non-qualified stock option" (otherwise designated as a NQSO) means an
         option that is not qualified under Section 422 of the Code.

    m.   "Officer" means an individual elected or appointed by the Board or by
         the board of directors of a Subsidiary, or chosen in such other manner
         as may be prescribed by the by-laws of the Company or a Subsidiary, as
         the case may be, to serve as such.

    n.   "Participant" means a Non-Employee Director who is granted a NQSO
         under the Plan. 

    o.   "Plan" means this 1996 Outside Directors Stock Option Plan.

    p.   "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
         Exchange Commission under the Exchange Act, or any successor or
         replacement rule adopted by the Securities and Exchange Commission.

    q.   "Share" means one share of Common Stock, adjusted in accordance with
         Section 9(b), if applicable.


    r.   "Stock Option Agreement" means the written agreement between the
         Company and the Participant that contains the terms and conditions
         pertaining to the NQSO.

    s.   "Subsidiary" means any corporation or entity of which the Company,
         directly or indirectly, is the beneficial owner of fifty percent (50%)
         or more of the total voting power of all classes of its stock having
         voting power, unless the Committee shall determine that any such
         corporation or entity shall be excluded hereunder from the definition
         of the term Subsidiary.

 3. PURPOSE.

    The purpose of the Plan is to enable the Company to provide incentives,
    which are linked directly to increases in stockholder value, to
    Non-Employee Directors in order that they will be encouraged to serve on
    the Board and exert their best efforts on behalf of the Company.


 4. ADMINISTRATION.

    a.   COMPOSITION OF THE COMMITTEE.

         The Plan shall be administered by a Committee appointed by the Board
         consisting of no less than two individuals.  Members of the Committee
         need not be members of the Board, Officers or Employees of the
         Company.  Members of the Committee shall not be entitled to
         participate in the Plan.  The Board may from time to time remove
         members from, or add members to, the Committee.  Vacancies on the
         Committee, however caused, shall be filled by the Board.  The Board
         shall appoint one of the members of the Committee as Chairman.  


                                         -19-




    b.   ACTIONS BY THE COMMITTEE.

         The Committee shall hold meetings at such times and places as it may
         determine.  Acts approved by a majority of the members of the
         Committee present at a meeting at which a quorum is present, or acts
         reduced to or approved in writing by a majority of the members of the
         Committee, shall be the valid acts of the Committee.

    c.   POWERS OF THE COMMITTEE.

         The Committee shall have the authority to administer the Plan in its
         sole and absolute discretion; PROVIDED, HOWEVER, that the Committee
         shall have no authority to grant NQSOs, to determine the number of
         Shares subject to NQSOs or the price at which each Share covered by a
         NQSO may be purchased pursuant to the Plan, all of which shall be
         automatic as described in Section 8.  To this end, the Committee is
         authorized to construe and interpret the Plan and to make all other
         determinations necessary or advisable for the administration of the
         Plan.  Subject to the foregoing, any determination, decision or action
         of the Committee in connection with the construction, interpretation,
         administration or application of the Plan shall be final, conclusive
         and binding upon all Participants and any person validly claiming
         under or through a Participant.  

    d.   LIABILITY OF COMMITTEE MEMBERS.

         No member of the Board or the Committee will be liable for any action
         or determination made in good faith by the Board or the Committee with
         respect to the Plan or any grant or exercise of a NQSO thereunder.

    e.   NQSO ACCOUNTS.

         The Committee shall maintain a journal in which a separate account for
         each Participant shall be established.  Whenever NQSOs are granted to
         or exercised by a Participant, the Participant's account shall be
         appropriately credited or debited.  Appropriate adjustment shall also
         be made in the journal with respect to each account in the event of an
         adjustment pursuant to Section 9(b).  

 5. EFFECTIVE DATE AND TERM OF THE PLAN.



    a.   EFFECTIVE DATE OF THE PLAN.

         The Plan was adopted by the Board and became effective on September
         19, 1996, subject to approval by the stockholders of the Company at a
         meeting duly called and held within twelve months following such date.

    b.   TERM OF PLAN.

         No NQSO shall be granted pursuant to the Plan on or after September
         19, 2006, but NQSOs theretofore granted may extend beyond that date.

 6. SHARES SUBJECT TO THE PLAN.

    The maximum aggregate number of Shares which may be subject to NQSOs
    granted to Non-Employee Directors under the Plan shall be 100,000.  The
    limitation on the number of Shares which may be subject to NQSOs under the
    Plan shall be subject to adjustment as provided in Section 9(b).

    If any NQSO granted under the Plan expires or is terminated for any reason
    without having been exercised in full, the Shares allocable to the



                                         -20-




    unexercised portion of such NQSO shall again become available for grant
    pursuant to the Plan.  At all times during the term of the Plan, the
    Company shall reserve and keep available for issuance such number of Shares
    as the Company is obligated to issue upon the exercise of all then
    outstanding NQSOs.

 7. SOURCE OF SHARES ISSUED UNDER THE PLAN.

    Common Stock issued under the Plan shall be authorized and unissued Shares
    and/or Treasury Shares.  No fractional Shares shall be issued under the
    Plan.

 8. NON-QUALIFIED STOCK OPTIONS.

    a.   GRANT OF NQSOs.

         On the next succeeding business day following election of the Board at
         the 1996 Annual Meeting of Stockholders and each Annual Meeting of
         Stockholders thereafter, all Non-Employee Directors who will serve as
         a Director in the succeeding year shall automatically be granted NQSOs
         to purchase 1,000 Shares.  With respect to any Non-Employee Director
         who is elected other than at the Annual Meeting of Stockholders, said
         Non-Employee Director shall automatically be granted a NQSO to
         purchase a pro-rata portion of the 1,000 Shares for his/her partial
         year of service on the Board.  NQSOs shall be granted in the aforesaid
         manner until the date on which the Shares available for grant shall no
         longer be sufficient to permit grants of NQSOs covering 1,000 Shares
         to be made to each Non-Employee Director entitled to a grant as of
         such date, in which event the Shares then available for grant shall be
         allocated on a PRO RATA basis among the Non-Employee Directors
         entitled to a grant of NQSOs as of such date.  The provisions of this
         Section shall not be amended more than once every six months, other
         than to comport with changes in the Code, the Employee Retirement
         Income Security Act of 1974, as amended ("ERISA"), or the rules
         thereunder.

    b.   EXERCISE PRICE.

         Each Share covered by a NQSO granted may be purchased at a purchase
         price equal to the Fair Market Value of a Share on the date of the
         NQSO grant.  The provisions of this Section shall not be amended more
         than once every six months, other than to comport with changes in the
         Code, ERISA, or the rules thereunder.

    c.   TERMS AND CONDITIONS.


         All NQSOs granted pursuant to the Plan shall be evidenced by a Stock
         Option Agreement (which need not be the same for each Participant or
         NQSO), approved by the Committee which shall be subject to the
         following express terms and conditions and to the other terms and
         conditions specified in this Section 8, and to such other terms and
         conditions as shall be determined by the Committee in its sole and
         absolute discretion which are not inconsistent with the terms of the
         Plan:

         (i)  all NQSOs granted to a Participant shall vest and become first
              exercisable immediately upon grant.

         (ii) the failure of a NQSO to vest for any reason whatsoever shall
              cause the NQSO to expire and be of no further force or effect;


                                         -21-





         (iii)     unless terminated earlier pursuant to Section 8(e), the term
                   of each NQSO shall be ten years from the date of grant;

         (iv)      NQSOs shall not be transferable by the Participant otherwise
                   than by will or by the laws of descent and distribution, and
                   shall be exercisable during the lifetime of the Participant
                   only by him or by his guardian or legal representative;

         (v)       no NQSO or interest therein may be transferred, assigned,
                   pledged or hypothecated by the Participant during his
                   lifetime whether by operation of law or otherwise, or be
                   made subject to execution, attachment or similar process;
                   and

         (vi)      payment for the Shares to be received upon exercise of a
                   NQSO may be made in cash, in Shares (determined with
                   reference to their Fair Market Value on the date of
                   exercise) or any combination thereof.

    d.   EXERCISE.

         The holder of a NQSO may exercise the same by filing with the
         Corporate Secretary of the Company and the Chairman a written
         election, in such form as the Committee may determine, specifying the
         number of Shares with respect to which such NQSO is being exercised. 
         Such notice shall be accompanied by payment in full of the exercise
         price for such Shares.  Notwithstanding the foregoing, the Committee
         may specify a reasonable minimum number of Shares that may be
         purchased on any exercise of an Option, provided that such minimum
         number will not prevent the holder from exercising the Option with
         respect to the full number of Shares as to which the Option is then
         exercisable.


    e.   TERMINATION OF NQSOs.

         NQSOs granted under the Plan shall be subject to the following events
         of termination:


         (i)       in the event a Participant is removed from the Board for
                   cause (as contemplated by the Company's by-laws), all
                   unexercised NQSOs held by such Participant on the date of
                   such removal (whether or not vested) will expire
                   immediately;

         (ii)      in the event a Participant is no longer a member of the
                   Board, other than by reason of removal for cause, all NQSOs
                   which have vested prior to such time shall expire twelve
                   months thereafter unless by their terms they expire sooner;
                   and

         (iii)     in the event a Participant becomes an Officer or Employee of
                   the Company or a Subsidiary (whether or not such Participant
                   remains a member of the Board) all NQSOs which have vested
                   prior to such time shall expire twelve months thereafter
                   unless by their terms they expire sooner.

 9. RECAPITALIZATION.

    a.   CORPORATE FLEXIBILITY.

                   The existence of the Plan and the NQSOs granted hereunder
                   shall not affect or restrict in any way the right or power
                   of the Board or the stockholders of the Company, in their
                   sole and absolute discretion, to make, authorize or
                   consummate any adjustment, recapitalization,



                                         -22-





         reorganization or other change in the Company's capital structure or
         its business, any merger or consolidation of the Company, any issue of
         bonds, debentures, common stock, preferred or prior preference stocks
         ahead of or affecting the Company's capital stock or the rights
         thereof, the dissolution or liquidation of the Company or any sale or
         transfer of all or any part of its assets or business, or any other
         grant of rights, issuance of securities, transaction, corporate act or
         proceeding and notwithstanding the fact that any such activity,
         proceeding, action, transaction or other event may have, or be
         expected to have, an impact (whether positive or negative) on the
         value of any NQSO.

    b.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.

         Except as otherwise provided in Section 10 below and subject to any
         required action by the stockholders of the Company, in the event of
         any change in capitalization affecting the Common Stock of the
         Company, such as a stock dividend, stock split or recapitalization,
         the Committee shall make proportionate adjustments with respect to:
         (i) the aggregate number of Shares available for issuance under the
         Plan; (ii) the number of Shares subject to each grant under the Plan;
         (iii) the number and exercise price of Shares subject to outstanding
         NQSOs; and (iv) such other matters as shall be appropriate in light of
         the circumstances; PROVIDED, HOWEVER, that the number of Shares
         subject to any NQSO shall always be a whole number and that no such
         adjustment shall be made if the adjustment would cause the Plan to
         fail to comply with the "formula award" exception, as set forth in
         Rule 16b-3(c)(2)(ii) of the Exchange Act, for grants of NQSOs to
         non-employee directors.  

10. CHANGE OF CONTROL.

    In the event of a Change of Control (as defined below), the Committee in
    its discretion may make provisions for the assumption of outstanding
    Options, or the substitution for outstanding Options of new incentive
    awards covering the stock of a successor corporation or a parent or
    subsidiary thereof, with appropriate adjustments as to the number and kind
    of shares and prices so as to prevent dilution or enlargement of rights;
    provided, however, that no such adjustment shall be made if the adjustment
    would cause the Plan to fail to comply with the "formula award" exception,
    as set forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for grants of
    NQSOs to non-employee directors.

    A "Change of Control" will be deemed to occur on the date any of the
    following events occur:

    a.   any person or persons acting together which would constitute a "group"
         for purpose of Section 13(d) of the Exchange Act (other than the
         Company, any Subsidiary and any entity beneficially owned by any of
         the foregoing), beneficially own (as defined in Rule 13d-3 under the
         Exchange Act) without Board approval, directly or indirectly, at least
         50% of the total voting power of the Company entitled to vote
         generally in the election of the Board; 

    b.   the stockholders of the Company approve (i) a plan of complete
         liquidation of the Company, or (ii) an agreement providing for the
         merger or consolidation of the Company (A) in which the Company is not
         the continuing or surviving corporation (other than consolidation or
         merger with a wholly owned subsidiary of the Company in which all


                                         -23-




         Shares outstanding immediately prior to the effectiveness thereof are
         changed into or exchanged for the same consideration) or (B) pursuant
         to which the Shares are converted into cash, securities or other
         property, except a consolidation or merger of the Company in which the
         holders of the Shares immediately prior to the consolidation or merger
         have, directly or indirectly, at least a majority of the common stock
         of the continuing or surviving corporation immediately after such
         consolidation or merger or in which the Board immediately prior to the
         merger or consolidation would, immediately after the merger or
         consolidation, constitute a majority of the board of directors of the
         continuing or surviving corporation; or 

    c.   the stockholders of the Company approve an agreement (or agreements)
         providing for the sale or other disposition (in one transaction or a
         series of transactions) of all or substantially all of the assets of
         the Company. 

11. SECURITIES LAW REQUIREMENTS.

    No Shares shall be issued under the Plan unless and until:  (i) the Company
    and the Participant have taken all actions required to register the Shares
    under the Securities Act of 1933, as amended, or perfect an exemption from
    the registration requirements thereof; (ii) any applicable requirement of
    Nasdaq or any stock exchange on which the Common Stock is listed has been
    satisfied; and (iii) any other applicable provision of state or federal law
    has been satisfied.  The Company shall be under no obligation to register
    the Shares under the Securities Act of 1933, as amended, or to effect
    compliance with the registration or qualification requirements of any state
    securities laws. 

12. AMENDMENT AND TERMINATION.

    a.   MODIFICATIONS TO THE PLAN.

         The Board may, insofar as permitted by law, from time to time, with
         respect to any Shares at the time not subject to NQSOs, suspend or
         terminate the Plan or, subject to Sections 8(a) and 8(b), revise or
         amend the Plan in any respect whatsoever.  However, unless the Board
         specifically otherwise provides, any revision or amendment that would
         cause the Plan to fail to comply with Rule 16b-3 or any other
         requirement of applicable law or regulation if such amendment were not
         approved by the stockholders of the Company shall not be effective
         unless and until such approval is obtained.

    b.   RIGHTS OF PARTICIPANT.

         No amendment, suspension or termination of the Plan that would
         adversely affect the right of any Participant with respect to a NQSO
         previously granted under the Plan will be effective without the
         written consent of the affected Participant.

13. MISCELLANEOUS.

    a.   STOCKHOLDERS' RIGHTS.

         No Participant and no beneficiary or other person claiming under or
         through such Participant shall acquire any rights as a stockholder of
         the Company by virtue of such Participant having been granted a NQSO
         under the Plan.  No Participant and no beneficiary or other person
         claiming under or through such Participant will have any right, title



                                         -24-



         or interest in or to any Shares, allocated or reserved under the Plan
         or subject to any NQSO except as to Shares, if any, that have been 
         issued or transferred to such Participant.  No adjustment shall be 
         made for dividends or distributions or other rights for which the 
         record date is prior to the date of exercise.

    b.   OTHER COMPENSATION ARRANGEMENTS.

         Nothing contained in the Plan shall prevent the Board from adopting
         other compensation arrangements, subject to stockholder approval if
         such approval is required.  Such other arrangements may be either
         generally applicable or applicable only in specific cases.  

    c.   TREATMENT OF PROCEEDS.

         Proceeds realized from the exercise of NQSOs under the Plan shall
         constitute general funds of the Company.

    d.   COSTS OF THE PLAN.

         The costs and expenses of administering the Plan shall be borne by the
         Company.

    e.   NO RIGHT TO CONTINUE AS DIRECTOR.

         Nothing contained in the Plan or in any instrument executed pursuant
         to the Plan will confer upon any Participant any right to continue as
         a member of the Board or affect the right of the Company, the Board or
         the stockholders of the Company to terminate the directorship of any
         Participant at any time with or without cause.


    f.   SEVERABILITY.

         The provisions of the Plan shall be deemed severable and the validity
         or unenforceability of any provision shall not affect the validity or
         enforceability of the other provisions hereof.

    g.   BINDING EFFECT OF PLAN.

         The Plan shall inure to the benefit of the Company, its successors and
         assigns. 

    h.   NO WAIVER OF BREACH.

         No waiver by any party hereto at any time of any breach by another
         party hereto of, or compliance with, any condition or provision of the
         Plan to be performed by such other party shall be deemed a waiver of
         the same, any similar or any dissimilar provisions of conditions at
         the same or at any prior or subsequent time.

    i.   GOVERNING LAW.

         The Plan and all actions taken thereunder shall be enforced, governed
         and construed by and interpreted under the laws of the State of
         Nebraska applicable to contracts made and to be performed wholly
         within such State without giving effect to the principles of conflict
         of laws thereof. 


                                         -25-




    j.   HEADINGS.

         The headings contained in the Plan are for reference purposes only and
         shall not affect in any way the meaning or interpretation of the Plan. 

14. EXECUTION.

    To record the adoption of the Plan to read as set forth herein, the Company
    has caused the Plan to be signed by its President and attested by its
    Secretary on September 19, 1996.


                                        ISCO, INC.



                                        By: /s/ Douglas M. Grant              
                                           -------------------------------------
                                              Douglas M. Grant, President


ATTEST:



By: /s/ Philip M. Wittig
    -----------------------------------------
      Philip M. Wittig, Assistant Secretary


                                         -26-