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
[X] Definitive Proxy Statement Commission Only (as permitted by
[_] Definitive Additional Materials Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
(S) 240.14a-11(c) or (S) 240.14a-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):
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ISOLYSER COMPANY, INC,
4320 International Boulevard
Norcross, Georgia 30093
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 18, 2000
To the Shareholders:
The Annual Meeting of Shareholders of Isolyser Company, Inc. (the "Company")
will be held at the W Hotel, 111 Perimeter Center West, Atlanta, Georgia, on
Thursday May 18, 2000 at 3:00 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 2001 and until their successors are elected and
qualified. The Board of Directors' nominees are named in the attached Proxy
Statement.
2. 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 11, 2000, 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
Migirdic Nalbantyan
President and Chief Executive
Officer
Norcross, Georgia
April 17, 2000
ISOLYSER COMPANY, INC.
4320 International Boulevard
Norcross, Georgia 30093
----------------
PROXY STATEMENT
for
Annual Meeting of Shareholders To Be Held May 18, 2000
----------------
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 18, 2000, at 3:00 p.m.,
Atlanta time, at the W Hotel, 111 Perimeter Center West, 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 17, 2000.
At the Meeting, shareholders of Isolyser will vote upon: (1) the election of
eight directors; and (2) 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 11, 2000, 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 41,394,471 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.
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".
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.
1
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 2001 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 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.
Name Age Director Since
- ---- --- --------------
Gene R. McGrevin............................................. 57 1998
Migirdic Nalbantyan.......................................... 57 1998
Travis W. Honeycutt.......................................... 57 1987
Dan R. Lee................................................... 52 1996
Rosdon Hendrix............................................... 60 1994
Kenneth F. Davis............................................. 49 1996
John E. McKinley............................................. 56 1998
Ronald L. Smorada............................................ 53 1999
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 plans to cease acting as Chairman in connection with the
Meeting, at which time it is expected that Mr. Nalbantyan will become Chairman
of the Company. 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, 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.
2
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, 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 was elected a Director of the Company in May 1999. 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.
Listed below is information regarding the executive officers of the Company
who are not also directors.
Michael Mabry (age 37) was elected Executive Vice President in October 1998
after serving as Vice President of Operations of the Company since May, 1997.
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.
James C. "Jim" Rushing III (age 56) was elected Executive Vice President
and Chief Financial Officer in December 1999 after serving in the executive
position of Vice President--Finance since March 1999. Prior to joining
Isolyser in December 1998, 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.
3
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 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, recommends to the Board the firm of independent public accountants
that audits the consolidated financial statements of Isolyser and its
subsidiaries, reviews the financial statements, and reviews matters pertaining
to the audit and the Company's financial statements. 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 three times during 1999.
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
Company's Stock Option Plans and Stock Purchase Plan. The Compensation
Committee's report on executive compensation begins at page 11 of this Proxy
Statement. The Compensation Committee met five times during 1999.
The Board of Directors held seven meetings during 1999. 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.
4
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
1999, 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. Honeycutt filed one Form 4 late to
report sales of direct shares owned.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of March 17, 2000, 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 and Named Executive
Officer identified under "Executive Compensation" below, and (iii) all
directors and executive officers as a group:
Percentage of
Common
Shares Beneficially Stock Beneficially
Name of Beneficial Owner Owned Owned
- ------------------------ ------------------- ------------------
Travis W. Honeycutt(1)................. 2,373,722 5.7%
Gene R. McGrevin(2).................... 285,000 *
Migirdic Nalbantyan(3)................. 223,500 *
Dan R. Lee(4).......................... 330,244 *
Rosdon Hendrix(5)...................... 126,000 *
Kenneth Davis(6)....................... 139,243 *
John E. McKinley(7).................... 160,000 *
Peter Schmitt(8)....................... 159,000 *
Ronald L. Smorada(9)................... 35,000 *
Mike Mabry(10)......................... 100,027 *
Lester J. Berry(11).................... 112,974 *
Dimensional Fund Advisors, Inc.(12).... 2,612,370 6.3%
All directors and executive officers as
a group (12 persons)(13).............. 4,052,210 9.8%
- --------
* Represents less than 1% of the common stock
(1) Includes options to acquire 40,000 shares exercisable within 60 days.
(2) Includes options to acquire 245,000 shares exercisable within 60 days.
(3) Includes options to acquire 212,500 shares exercisable within 60 days and
1,000 shares owned by a family member.
(4) Includes options to acquire 320,179 shares exercisable within 60 days.
(5) Includes options to acquire 96,000 shares exercisable within 60 days.
(6) Includes options to acquire 94,000 shares exercisable within 60 days.
(7) Includes options to acquire 40,000 shares exercisable within 60 days.
(8) Includes options to acquire 157,500 shares exercisable within 60 days.
5
(9) Includes options to acquire 35,000 shares exercisable within 60 days.
(10) Includes options to acquire 99,703 shares exercisable within 60 days.
(11) Includes options to acquire 60,000 shares exercisable within 60 days.
(12) 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, 11th Floor, Santa Monica,
California 90401.
(13) Includes options to acquire 1,407,382 shares exercisable within 60 days.
EXECUTIVE COMPENSATION
Compensation Tables
The following table sets forth the cash and non-cash compensation paid by
the Company to the Company's chief executive officer and each of the four most
highly compensated executive officers of the Company during 1999 other than
such chief executive officer (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
--------------------------------- Compensation
Name and Principal Other Annual Awards All Other
Position Year Salary Bonus Compensation Options(#) Compensation
- ------------------ ---- -------- -------- ------------ ------------ ------------
Migirdic Nalbantyan..... 1999 $181,154 $185,400 -- 250,000 $130,899(1)
President and Chief 1998 $127,112(2) -- -- 400,000 $ 2,077(3)
Executive Officer
Peter Schmitt........... 1999 $153,365 $125,400 -- 205,265 $ 5,983(4)
Former Executive 1998 $136,058 -- -- 150,000 $ 3,863(5)
Vice President and 1997 $122,187 $ 18,000 -- -- $ 9,458(6)
Chief Financial Officer
Michael Mabry........... 1999 $152,885 $130,800 -- 150,000 $ 5,968(7)
Executive 1998 $130,981 -- -- 150,000 $ 4,495(8)
Vice President 1997 $ 97,566 $ 30,000 -- 50,000 $ 4,350(9)
and Secretary
Dan R. Lee.............. 1999 $162,000 $127,044 -- 35,081 $ 7,319(10)
Executive 1998 $150,000 -- -- 122,368 $ 5,133(11)
Vice President 1997 $150,000 -- -- 100,000 $ 4,978(11)
Lester J. Berry......... 1999 $150,000 $ 59,950 -- -- $11,58 5(12)
Former Vice President 1998 $150,000 -- -- 20,000 $ 9,658(13)
1997 $150,000 -- -- -- $ 9,302(13)
- --------
(1) This amount represents $124,337 in reimbursements paid for relocation of
residence, $6,208 in contribution to a 401(k) plan and $354 for $50,000 of
term life insurance.
(2) This amount represents compensation paid from February 1, 1998, the date
Mr. Nalbantyan became an employee of the Company.
(3) This amount represents contributions to a 401(k) plan.
(4) This amount represents $5,923 in contributions to a 401(k) plan and $60
for a $50,000 term life insurance policy.
(5) This represents $3,842 in contributions to a 401(k) plan and $21 for a
$50,000 term life insurance policy.
6
(7) This amount represents $5,908 in contribution to a 401(k) plan and $60 for
a $50,000 term life insurance policy.
(8) This amount represents $4,429 in contributions to a 401(k) plan and $66
for a $50,000 term life insurance policy.
(9) This amount represents $4,284 in contribution to a 401(k) plan and $66 for
a $50,000 term life insurance policy.
(10) This amount represents $5,070 in contributions to a 401(k) plan, $2,036
for $250,000 term life insurance policy and $213 for $50,000 term life
insurance policy.
(11) This amount represents payment ($2,036 per year) for a $250,000 term life
insurance policy and contributions for a 401(k) plan for the balance of
the amount stated.
(12) This amount represents $5,909 for $250,000 term life insurance policy,
$5,625 contribution to a 401(k) plan and $51 for $50,000 term life
insurance policy.
(13) This amount represents the Company's payment ($5,158 per year) for
$250,000 term life insurance and contributions to a 401(k) plan for the
balance of the amount stated.
Employment Arrangements
Messrs. Nalbantyan and Mabry are each parties to a three year employment
agreement with the Company. The term of Mr. Nalbantyan's employment agreement
commenced February 1, 1998 and the term of Mr. Mabry's employment agreement
commenced March 31, 1998. Such employment agreements specify a minimum salary
and benefits payable 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 generally be
entitled to one year of salary as severance. In the event of any termination of
the employee'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 the employee'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.
Mr. Schmitt retired from the Company effective February 1, 2000. In
connection with such planned retirement, the Company and Mr. Schmitt entered
into a severance agreement on December 1, 1999, in which, among other things,
Mr. Schmitt ratified and confirmed the protective covenants contained in his
employment agreement including covenants relating to the protection of
confidential information and restricting competition against the Company. In
addition, the Company agreed to a lump sum severance payment of $162,500 at the
time of retirement, continued health insurance benefits for up to one year
following the date of retirement and the vesting of Mr. Schmitt's stock options
at the date of retirement with up to two years following such retirement to
exercise such stock options.
Mr. Berry retired from the Company on December 31, 1999, and is a party to
an employment agreement with Microtek which expired 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 retirement at the end of 1999.
7
Employee Benefit Plans
1992 Stock Option Plan. In April 1992, the Board of Directors and
shareholders of the Company adopted a Stock Option Plan (the "1992 Stock Option
Plan"). The 1992 Stock Option Plan 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 1992 Stock Option 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 1992 Stock Option 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
1992 Stock Option Plan. The purposes of the 1992 Stock Option Plan are to
ensure the retention of existing executive personnel, key employees and
consultants of the Company, to attract and retain new 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 1992 Stock Option 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 1992 Stock Option Plan.
As of March 17, 2000, options to purchase 2,726,744 shares of common stock
were outstanding under the 1992 Stock Option Plan and approximately 263,673
shares of common stock were available for future awards under that Plan.
1999 Stock Option Plan. In March 1999 the Board approved and in May 1999 the
Company's shareholders ratified, the adoption of the Company's 1999 Long-Term
Incentive Plan (the "1999 Stock Option Plan"). The 1999 Stock Option Plan
currently provides for the issuance of options and other stock awards to
acquire shares of common stock up to a maximum of 1,200,000 shares (subject to
appropriate adjustment in the event of stock splits, stock dividends and other
similar dilutive events). 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, and to directors, consultants and other persons
providing key services to the Company.
The Compensation Committee of the Board of Directors will determine the
terms and conditions of options granted under the 1999 Stock Option Plan,
including the exercise price, which generally may not be less than the fair
market value of the Company's common stock on the date of grant. Awards under
the 1999
8
Stock Option Plan may be settled through cash payments, the delivery of shares
of common stock, or a combination thereof as the Committee shall determine.
Stock options awarded under the 1999 Stock Option Plan which are intended to be
incentive stock options are subject to the same restrictions described above
with respect to the 1992 Stock Option 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 for 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 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 exerciseability of such award will
result in an "excess parachute payment" within the meaning of the Code. The
1999 Stock Option Plan is 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, except no incentive stock options 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
date established by the Compensation Committee at the time of the grant, except
the expiration cannot be later than the earliest of ten years from the date on
which the option was granted, if the participant's date of termination occurs
for reasons other than retirement or early retirement, the one year anniversary
of such date of termination, or if the participant's date of termination occurs
by reason of retirement or early retirement, the three year anniversary of such
date of termination.
As of March 17, 2000, options to purchase 329,000 shares of common stock
were outstanding under the 1999 Stock Option Plan and approximately 871,000
shares of common stock were available for future awards under the 1999 Stock
Option Plan.
Employee Stock Purchase Plan. In March 1999 the Board approved and in May
1999 the Company's shareholders ratified, the adoption of the Company's
Employee Stock Purchase Plan for employees of the Company and its subsidiaries
(the "1999 Stock Purchase Plan"). The 1999 Stock 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 1999
Stock Purchase Plan payroll deductions are used to purchase the Company's
common stock. An aggregate of 700,000 shares of common stock of the Company
were reserved for issuance under the 1999 Stock Purchase Plan.
9
Stock Options
The Company granted options to its Named Executive Officers in 1999 as set
forth in the following table. The Company has no stock appreciation rights
("SARs") outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value
at Assumed Annual
rates of Stock
Price
Appreciation for
Individual Grants Option Term(1)
----------------------------------------------------- -----------------
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Expiration
Name Granted(#) Fiscal Year Base Price($/Sh) Date 5%($) 10%($)
---- ------------ ------------ ---------------- ---------- -------- --------
Migirdic Nalbantyan..... 250,000 16.3% $2.125 2/25/09 $334,100 $840,676
Peter Schmitt........... 205,265 13.4% $2.125 2/25/09 $274,316 $695,172
Michael Mabry........... 150,000 9.8% $2.125 2/25/09 $200,460 $508,005
Dan R. Lee.............. 35,081 2.3% $2.125 2/25/09 $ 46,882 $118,809
Lester J. Berry......... -- -- $2.125 2/25/09 -- --
- --------
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall market conditions.
The following table sets forth the value of options exercised during 1999
and of unexercised options held by the Company's Named Executive Officers at
December 31, 1999.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise(#) Realized($) Unexercisable Unexercisable
- ---- --------------- ----------- --------------- ----------------
Migirdic Nalbantyan..... -- -- 100,000/550,000 $100,000/510,938(1)
Peter Schmitt........... -- -- 118,816/181,184 $ 82,158/171,137(2)
Mike Mabry.............. -- -- 77,425/222,575 $ 24,389/199,730(3)
Dan R. Lee.............. -- -- 386,409/ 63,591 $537,457/ 29,600(4)
Lester J. Berry......... -- -- 87,500/ 15,000 $ 3,939/ -- (5)
- --------
(1) The indicated value is based on exercise prices ranging from $1.25 to
$2.6875 per share on 100,000 of exercisable options and exercise prices
ranging from $1.25 to $2.6875 and 550,000 unexercisable options, and a
value per share on December 31, 1999 of $2.96875.
(2) The indicated value is based on exercise prices ranging from $1.25 to
$3.375 on 118,816 exercisable options and exercise prices ranging from
$1.25 to $2.2813 on 181,184 unexercisable options, and a value per share of
$2.96875 at December 31, 1999.
10
(3) The indicated value is based on exercise prices ranging from $1.25 to
$3.375 on 77,425 exercisable options and exercise prices ranging from $1.25
to $3.375 on 222,575 unexercisable options, and a value per share at
December 31, 1999 of $2.96875.
(4) The indicated value is based on exercise prices ranging from $.83 to $3.49
on 386,409 exercisable options and exercise prices ranging from $2.125 to
$3.375 on 63,591 unexercisable options, and a price per share at December
31, 1999 of $2.96875.
(5) The indicated value is based on exercise prices ranging from $2.73 to
$3.375 on 87,500 exercisable options and an exercise price of $3.375 on
15,000 unexercisable options, and a price per share at December 31, 1999 of
$2.96875.
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").
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.
At each regular annual meeting of shareholders, the Company grants to each
Nonemployee Director a non-qualified stock option covering 5,000 shares of
common stock (except that such stock option covers 25,000 shares of common
stock for Nonemployee Directors upon their initial election as a director of
the Company) at an exercise price equal to the fair market value of the
Company's common stock on such date of grant. 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
abstaining, awarded to each Nonemployee Director a non-qualified stock option
under the Company's 1999 Stock Option Plan covering 10,000 shares of the
Company's common stock at an exercise price of $3.375 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.
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.
11
The Committee oversees three elements of executive compensation: base pay or
salary, annual performance bonus, and long-term compensation, which currently
consists of stock option plans 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. The Committee increased the salary of its Chief
Executive Officer and President, Mr. Nalbantyan, for 1999 from $150,000 per
year to $180,000 per year. The Committee also increased the salary for three
other of the Company's incumbent executive officers for 1999. The salary of all
the Company's remaining executive officers remained unchanged from such salary
for the previous year.
Bonus. Based upon a review by the Committee of a number of factors including
the improved operating results of the Company, improved cash position of the
Company, the successful completion of a number of transactions important to the
Company and other factors, the Committee approved a bonus of $185,400 to
Mr. Nalbantyan in 1999 and a bonus for the Company's other corporate and OTI
divisional executive officers. The Company's executive officers at Microtek
earned a bonus under an executive bonus plan approved by the Committee.
Long-Term Incentive. The Company's only current method of awarding long-term
compensation is its stock option plans, approved by shareholders. All officers
are eligible to receive grants under the stock option plans. Grants under the
plans 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. Six of
the Company's executive officers were granted stock options in 1999. Mr.
Nalbantyan was granted in 1999 a stock option to purchase up to 250,000 shares
at an exercise price of $2.125 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.
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
12
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
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 December 31, 1994 and ending December 31, 1999.
Cumulative Total Return
-----------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
ISOLYSER COMPANY, INC. ..................... 100 156 78 26 12 33
S & P 500................................... 100 138 169 226 290 351
S & P HEALTHCARE SECTOR..................... 100 158 191 274 395 362
13
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 1999. 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 2001 ANNUAL MEETING
OF SHAREHOLDERS
Shareholder proposals to be presented at the 2001 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 19, 2000, 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 2001 annual
meeting without inclusion in the Company's proxy statement must be received by
the Company, at the above address and attention, by March 19, 2001 in order to
be considered timely. 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.
14
ANNUAL REPORT
Isolyser's 1999 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/Michael Mabry
Michael Mabry
Secretary
April 17, 2000
15
PROXY SOLICITED FOR ANNUAL MEETING OF SHAREHOLDERS OF ISOLYSER COMPANY, INC. TO
BE HELD MAY 18, 2000
The undersigned hereby appoints Gene R. McGrevin, Migirdic Nalbantyan and
Michael Mabry, 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 18, 2000, 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.
ELECTION OF DIRECTORS:
FOR the election as directors WITHOLD AUTHORITY to
-- of all nominees listed below --- vote for all nominees listed
(except as marked to the below
contrary below)
Gene R. McGrevin Gene R. McGrevin
Migirdic Nalbantyan Migirdic Nalbantyan
Travis W. Honeycutt Travis W. Honeycutt
Dan R. Lee Dan R. Lee
Rosdon Hendrix Rosdon Hendrix
Kenneth F. Davis Kenneth F. Davis
John E. McKinley John E. McKinley
Ronald L. Smorada Ronald L. Smorada
(INSTRUCTION: To withold authority to vote for any of the above listed
nominees, please strike through that individual's name.)
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.
DATE: ________________________, 2000
------------------------------------
------------------------------------
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
person.
Please mark, sign, date and return this proxy card promptly, using the enclosed
envelope.