===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (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):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
ISOLYSER COMPANY, INC.
4320 International Boulevard
Norcross, Georgia 30093
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 16, 2001
To the Shareholders:
The Annual Meeting of Shareholders of Isolyser Company, Inc. (the "Company")
will be held at the Atlanta Marriott, Gwinnett Place, 1775 Pleasant Hill Road,
Duluth, Georgia, on Wednesday May 16, 2001 at 2:30 p.m. for the following
purposes, all as set forth in the attached Proxy Statement:
1. To elect six directors to serve for one-year terms expiring at the
annual meeting in 2002 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 6, 2001, 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/ Dan R. Lee
Dan R. Lee
President and Chief Executive Officer
Norcross, Georgia
April 16, 2001
ISOLYSER COMPANY, INC.
4320 International Boulevard
Norcross, Georgia 30093
----------------
PROXY STATEMENT
for
Annual Meeting of Shareholders To Be Held May 16, 2001
----------------
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 Wednesday, May 16, 2001, at 2:30 p.m.,
Atlanta time, at the Atlanta Marriott, Gwinnett Place, 1775 Pleasant Hill Road,
Duluth, 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 16, 2001.
At the Meeting, shareholders of Isolyser will vote upon: (1) the election of
six 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 6, 2001, 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 41,583,984 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 six 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 six nominees as
directors to serve until the 2002 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. Mr. Honeycutt has decided to retire from his position as a director of
Isolyser. 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............................................. 58 1997
Dan R. Lee................................................... 53 1996
Rosdon Hendrix............................................... 61 1994
Kenneth F. Davis............................................. 50 1996
John E. McKinley............................................. 57 1998
Ronald L. Smorada............................................ 54 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 served as chairman of P.E.T.Net Pharmaceutical Services,
LLC, a manufacturer and distributor of radiopharmaceuticals, from May 1997
until January 2001 and is currently a consultant for P.E.T.Net. 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 1989. Prior to managing 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.
Dan R. Lee was elected to serve as President and Chief Executive Officer of
the Company in December 2000, in addition to continuing his role as the
President of Microtek Medical, Inc. ("Microtek"), a subsidiary of Isolyser. He
became an executive officer of the Company following the conclusion of
Isolyser's acquisition of 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.
2
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.
John E. McKinley was elected a Director of the Company in May 1998. Between
1991 and 1996, Mr. McKinley was the principal 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.
Listed below is information regarding the executive officers of the Company
who are not also directors.
James Michael Mabry (age 38) was elected Executive Vice President in
October 1998 after serving as Vice President of Operations of the Company
since May 1997. Additionally, he serves as Chief Executive Officer of
MindHarbor, a technology services provider, and as Chief Executive Officer of
Global Resources, Inc. ("GRI"), a material sourcing company. 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. He also
serves as Secretary of the Company.
Donald "Don" E. McLemore, Ph.D. (age 50) was elected Executive Vice
President in December 2000 and President of OREX Technology International, a
division of Isolyser, in April 2000. Dr. McLemore served as Vice President of
Research and Development for the Company from September 1999 until April 2000.
Dr. McLemore joined Isolyser from Raychem Corporation, where he was Director
of Technology and Business Development for the OEM Electronics Division.
Previously, Dr. McLemore was with Dow Chemical Company ("Dow") for 21 years,
holding positions with increasing levels of responsibility for Research and
Development management, including Director of Technology and Business
Development in Dow's New Business unit.
R. G. "Jerry" Wilson (age 56) was elected Chief Financial Officer,
Treasurer and Assistant Secretary of the Company in December 2000 in addition
to serving since December 1999 in the position of Vice President and Chief
Financial Officer of Microtek. Mr. Wilson served as Vice President of Finance
for the White Knight Healthcare subsidiary of Isolyser after its acquisition
by Isolyser in 1995. Prior to accepting such positions, Mr. Wilson had served
as corporate controller of White Knight Healthcare, Inc. since 1987. Mr.
Wilson was also employed by Akzo America, Inc. for twelve years in various
accounting and income tax management positions. Pior to that, Mr. Wilson, who
is a Certified Public Accountant, practiced public accounting for seven years.
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.
3
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 involves oversight functions to support the quality and
integrity of the Company's accounting and financial reporting processes
generally. 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 four times
during 2000. The Board of Directors plans to appoint to the Audit Committee
prior to June 14, 2001, a third qualified member from the Board of Directors.
The report of the Audit Committee begins at page 5 of this Proxy Statement.
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 12 of this Proxy
Statement. The Compensation Committee met five times during 2000.
The Board of Directors held eight meetings during 2000. 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
Report of the Audit Committee
The following Report of the Audit Committee 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 and 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.
The Board of Directors maintains an Audit Committee comprised of two of the
Company's outside directors. The Board of Directors and the Audit Committee
believes that the Audit Committee's current member composition satisfies the
rule of the National Association of Securities Dealers, Inc. ("NASD") that
governs audit committee composition as currently in effect, including the
requirement that audit committee members all be "independent directors" as that
term is defined by NASD Rule 4200(a)(14). The Board has adopted a written
Charter of the Audit Committee, a copy of which is attached as Appendix A
hereto.
The Audit Committee oversees the Company's financial process on behalf of
the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of
internal controls. The independent auditors are responsible for expressing an
opinion on the conformity of the financial statements with United States
generally accepted accounting principles. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the audited financial statements
in the Annual Report on Form 10-K for the year ended December 31, 2000 with
management and the independent auditors, including without limitation, a
discussion with the independent auditors of the matters required to be
discussed with the Audit Committee under Statement on Auditing Standards No.
61.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors the written disclosures
required by the Independence Standards Board Standard No. 1.
In reliance on the reviews and discussion referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 for filing with Securities and Exchange
Commission.
AUDIT COMMITTEE
Rosdon Hendrix
John E. McKinley
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules issued thereunder, Isolyser'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
2000, all of its executive officers, directors and persons owning more than 10%
of its common stock complied with the Section 16(a) requirements, except Dr.
Davis and Mr. Honeycutt each reported exempt sales of shares late, and Dr.
McLemore and Mr. Creizman each filed their Form 3s late.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 16, 2001, 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)................. 2,188,722 5.3%
Gene R. McGrevin(2).................... 440,000 1.0%
Dan R. Lee(3).......................... 211,231 *
Rosdon Hendrix(4)...................... 149,000 *
Kenneth Davis(5)....................... 122,243 *
John E. McKinley(6).................... 175,000 *
Ronald L. Smorada(7)................... 50,000 *
Mike Mabry(8).......................... 166,968 *
Donald E. McLemore(9).................. 10,750 *
R. G. Wilson(10)....................... 22,500 *
Migirdic Nalbantyan(11)................ 361,000 *
James C. Rushing, III(12).............. 31,250 *
Dimensional Fund Advisors, Inc.(13).... 2,690,970 6.5%
All directors and executive officers as
a group (10 persons)(14).............. 3,496,414 8.2%
- --------
* Represents less than 1% of the common stock
(1) Includes options to acquire 5,000 shares exercisable within 60 days.
(2) Includes options to acquire 400,000 shares exercisable within 60 days.
(3) Includes options to acquire 181,166 shares exercisable within 60 days.
(4) Includes options to acquire 119,000 shares exercisable within 60 days.
(5) Includes options to acquire 97,000 shares exercisable within 60 days.
(6) Includes options to acquire 55,000 shares exercisable within 60 days.
(7) Includes options to acquire 50,000 shares exercisable within 60 days.
(8) Includes options to acquire 156,644 shares exercisable within 60 days.
(9) Includes options to acquire 8,750 shares exercisable within 60 days.
(10) Includes options to acquire 12,500 shares exercisable within 60 days.
(11) Includes options to acquire 262,500 shares exercisable within 60 days and
1,000 shares owned by a family member.
(12) Includes options to acquire 31,250 shares exercisable within 60 days.
(13) 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.
(14) Includes options to acquire 1,085,060 shares exercisable within 60 days.
6
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 former chief executive
officer, and each of the four most highly compensated executive officers of the
Company serving at December 31, 2000 other than such chief executive officer,
and one other executive officer of the Company during 2000 not serving as such
at December 31, 2000 (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
- ------------------ ---- -------- -------- ------------ ------------ ------------
Dan R. Lee ............. 2000 $174,634 $ 53,813 -- 50,000 $ 11,894(1)
President and Chief 1999 $162,000 $127,044 -- 35,081 $ 7,319(2)
Executive Officer 1998 $150,000 -- -- 122,368 $ 5,133(3)
Migirdic Nalbantyan..... 2000 $250,288 -- -- -- $ 9,170(4)
Former President and
Chief 1999 $181,154 $185,400 -- 250,000 $130,899(5)
Executive Officer 1998 $127,112(6) -- -- 400,000 $ 2,077(7)
James C. Rushing, III... 2000 $146,538 -- -- -- $ 4,910(8)
Former Executive 1999 $ 97,923 $ 80,000 -- 80,000 $ 319(10)
Vice President and 1998 $ 10,000(9) -- -- 20,000 --
Chief Financial Officer
James Michael Mabry..... 2000 $162,500 $ 8,250 -- -- $ 9,804(11)
Executive Vice
President 1999 $152,885 $130,800 -- 150,000 $ 5,968(12)
and Secretary 1998 $130,981 -- -- 150,000 $ 4,495(13)
Donald E. McLemore...... 2000 $146,538 $ 8,250 -- 145,000 $ 27,734(14)
Executive Vice
President 1999 $ 39,000(15) -- -- 25,000 $ 2,251(16)
R. G. Wilson ........... 2000 $121,539 $ 25,625 -- 25,000 $ 5,120(17)
Chief Financial Officer 1999 $102,809 $ 44,167 -- 5,000 $ 4,104(18)
1998 $ 86,931 $ 89,375 -- 20,000 $ 283(19)
- --------
(1) This amount represents $6,985 in contributions to a 401(k) plan, $2,036
for a $250,000 term life insurance policy, $138 for $100,000 of term life
insurance and a $6,000 automobile allowance.
(2) This amount represents $5,070 in contributions to a 401(k) plan, $2,036
for a $250,000 term life insurance policy and $213 for a $50,000 term life
insurance policy.
(3) This amount represents a $2,036 payment for a $250,000 term life insurance
policy and contributions for a 401(k) plan for the balance of the amount
stated.
(4) This amount represents $8,912 in contributions to a 401(k) plan and $258
for a $100,000 term life insurance policy.
(5) This amount represents $124,337 in reimbursements paid for relocation of
residence, $6,208 in contribution to a 401(k) plan and $354 for $100,000
of term life insurance.
(6) This amount represents compensation paid from February 1, 1998, the date
Mr. Nalbantyan became an employee of the Company.
(7) This amount represents contributions to a 401(k) plan.
(8) This amount represents $258 for a $100,000 term life insurance policy and
$4,652 in reimbursements paid for relocation of residence.
(9) This amount represents compensation paid from December 16, 1998, the date
Mr. Rushing became an employee of the Company.
(10) This amount represents premiums for a $95,000 term life insurance policy.
7
(11) This amount represents $9,750 in contribution to a 401(k) plan and $54
for a $100,000 term life insurance policy.
(12) This amount represents $5,908 in contribution to a 401(k) plan and $60
for a $100,000 term life insurance policy.
(13) This amount represents $4,429 in contributions to a 401(k) plan and $66
for a $100,000 term life insurance policy.
(14) This amount represents $18,804 in reimbursements paid for relocation of
residence, $8,792 in contribution to a 401(k) plan and $138 for a
$100,000 term life insurance policy.
(15) This amount represents compensation paid from September 8, 1999, the date
Dr. McLemore became an employee of the Company.
(16) This amount represents $2,251 in reimbursements paid for relocation of
residence.
(17) This amount represents $4,862 in contribution to a 401(k) plan and $258
for a $100,000 term life insurance policy.
(18) This amount represents $4,104 in contribution to a 401(k) plan.
(19) This amount represents $283 for a $50,000 term life insurance policy.
Employment Arrangements
Messrs. Lee and McLemore are not parties to employment agreements with the
Company.
In connection with their respective resignations from their offices with the
Company effective November 30, 2000, Messrs. Nalbantyan and Rushing entered
into severance agreements in which, among other things, they ratified and
confirmed the protective covenants contained in their respective employment
agreements including covenants relating to the protection of confidential
information and restricting competition against the Company. The Company agreed
to continue their respective salaries for the last month of 2000, and pay a
lump sum severance at the beginning of 2001 in an amount equal to their
respective salaries, pay the premiums for continued group health insurance
coverage for up to six months, and the vesting of a portion of their respective
stock options and the allowance of one year following the date of their
resignation to exercise such stock options.
Mr. Mabry is a party to a three year employment agreement with the Company
which commenced July 1, 2000. Such employment agreement specifies 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 following a change in control (as
defined) of the Company, other than a termination of employment as a result of
death or disability, then the Company is obligated to pay a severance amount
equal to the employee's annual base salary as then in effect.
Mr. Wilson is a party to an employment agreement with Microtek under which
he agreed to continue to serve as an employee until March 31, 2002, and which
specifies a certain minimum salary and benefits. The agreement also includes
certain restrictive covenants including covenants relating to the protection of
confidential information. The agreement is terminable by the Company with or
without cause. In the event of any termination of Mr. Wilson's employment by
the Company without cause, it is obligated to pay the base salary provided in
the agreement through the expiration of the agreement.
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
8
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 16, 2001, options to purchase 2,148,896 shares of common stock
were outstanding under the 1992 Stock Option Plan and approximately 569,028
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 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.
9
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 16, 2001, options to purchase 740,500 shares of common stock
were outstanding under the 1999 Stock Option Plan and approximately 459,500
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.
Stock Options
The Company granted options to its Named Executive Officers in 2000 as set
forth in the following table. The Company has no stock appreciation rights
("SARs") outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
------------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options/SARs Price Appreciation for
Underlying Granted to Option Term(1)
Options/SARs Employees in Exercise or Expiration -----------------------
Name Granted (#) Fiscal Year Base Price ($/Sh) Date 5% ($) 10% ($)
---- ------------ ------------ ----------------- ---------- ----------- -----------
Dan R. Lee.............. 50,000 8.4% $1.1875 11/30/10 $ 37,341 $ 94,628
Migirdic Nalbantyan..... -- -- -- -- -- --
James C. Rushing, III... -- -- -- -- -- --
Mike Mabry.............. -- -- -- -- -- --
Donald E. McLemore...... 10,000 1.7% $ 4.188 5/17/10 $ 26,338 $ 66,746
135,000 22.6% $ 2.25 8/9/10 $ 191,027 $ 484,099
R. G. Wilson............ 25,000 4.2% $1.1875 11/30/10 $ 18,670 $ 47,314
- --------
(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.
10
The following table sets forth the value of options exercised during 2000
and of unexercised options held by the Company's Named Executive Officers at
December 31, 2000.
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
- ---- --------------- ------------ --------------- ---------------
Dan R. Lee.............. 251,295 $288,703 172,394/ 76,311 $0/$0(1)
Migirdic Nalbantyan..... -- -- 262,500/162,500 $0/$0(2)
James C. Rushing, III... -- -- 30,000/ 20,000 $0/$0(3)
Mike Mabry.............. 29,475 $ 38,686 119,143/151,382 $0/$0(4)
Donald E. McLemore...... -- -- 6,250/145,000 $0/$0(5)
R. G. Wilson............ 19,738 $ 34,138 6,250/ 38,750 $0/$0(6)
- --------
(1) The indicated value is based on exercise prices ranging from $2.125 to
$3.49 per share on 172,394 exercisable options and exercise prices ranging
from $1.1875 to $2.125 on 76,311 unexercisable options, and a value per
share on December 29, 2000 of $1.00.
(2) The indicated value is based on exercise prices ranging from $1.25 to
$2.6875 per share on 262,500 exercisable options and exercise prices
ranging from $1.25 to $2.6875 on 162,500 unexercisable options, and a
value per share on December 29, 2000 of $1.00.
(3) The indicated value is based on exercise prices ranging from $1.094 to
$2.813 per share on 30,000 exercisable options and exercise prices ranging
from $2.125 to $2.813 on 20,000 unexercisable options, and a value per
share on December 29, 2000 of $1.00.
(4) The indicated value is based on exercise prices ranging from $1.25 to
$3.375 per share on 119,143 exercisable options and exercise prices
ranging from $1.25 to $2.2813 on 151,382 unexercisable options, and a
value per share on December 29, 2000 of $1.00.
(5) The indicated value is based on an exercise price of $2.813 per share on
6,250 exercisable options and exercise prices ranging from $2.25 to $4.188
on 145,000 unexercisable options, and a value per share on December 29,
2000 of $1.00.
(6) The indicated value is based on exercise prices ranging from $2.125 to
$2.2813 per share on 6,250 exercisable options and exercise prices ranging
from $1.1875 to $2.2813 on 38,750 unexercisable options, and a value per
share on December 29, 2000 of $1.00.
Director Compensation
In consideration of Mr. McGrevin's agreement to serve as Chairman effective
upon the immediately preceding Chairman's resignation, the Chairman receives a
retainer at the rate of $100,000 for the period beginning December 1, 2000
through June 30, 2001.
The other directors who are not also employees of the Company ("Nonemployee
Directors") 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.
11
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 until the earlier of five years after the date
of grant or one year after ceasing to be a director of the Company.
In addition to the foregoing, during 2000 the Company paid Mr. McGrevin
$20,000 in consideration of his services as Chairman during the period from
January 1, 2000 through May 18, 2000. In consideration of special services
provided by the following directors either as chairman of committees of the
Board or for other services, the Company granted stock options to the following
directors with each of such stock options having an exercise price equal to the
fair market value of the Company's common stock on the date of grant, and being
exercisable only by the optionee until the earlier of five (5) years after the
date of grant or one (1) year after ceasing to be a director of the Company:
Name Number of Shares Exercise Price
---- ---------------- --------------
Rosdon Hendrix............................ 20,000 $ 2.25
Gene McGrevin............................. 150,000 $1.1875
John McKinley............................. 10,000 $1.1875
Ronald L. Smorada......................... 10,000 $ 2.25
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 Commission or subject to Regulations 14A or 14C of the
Commission or to the liabilities of Section 18 of 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 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 former Chief
Executive Officer and President, Mr. Nalbantyan, for 2000 from $180,000 per
year to $225,000 per year
12
effective January 5, 2000 and to $275,000 per year effective August 1, 2000.
The Committee also increased the salary for four other of the Company's
incumbent executive officers for 2000. As a part of the implementation of a
restructuring plan for the Company, the Compensation Committee approved
severance arrangements for the Company's former Chief Executive Officer and one
other former executive officer which included thirteen months of salary.
Bonus. Based upon a review by the Committee of a number of factors including
additional duties undertaken by Mr. Lee, the Company's current Chief Executive
Officer and President, and other factors, the Committee approved a bonus of
$53,813 to Mr. Lee in 2000 and a bonus for three others of the Company's
executive officers.
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 persons serving as the Company's executive officers during all or a portion
of 2000 were granted stock options in 2000. Mr. Nalbantyan was granted in 2000
a stock option to purchase up to 50,000 shares at an exercise price of $2.25
per share vesting in four equal annual increments beginning on the first
anniversary of the award date and having a term of ten years. The options were
cancelled in connection with Mr. Nalbantyan's resignation. In connection with
Mr. Lee assuming the additional duties of acting Chief Executive Officer and
President, Mr. Lee was granted in 2000 a stock option to purchase up to 50,000
shares at an exercise price of $1.1875 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
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
13
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, 1995 and ending December 31, 2000.
Cumulative Total Return
-----------------------------------------
12/95 12/96 12/97 12/98 12/99 12/00
------ ------ ------ ------ ------ ------
ISOLYSER COMPANY, INC................. 100.00 50.00 16.74 7.59 21.21 7.14
S & P 500............................. 100.00 122.96 163.98 210.84 255.22 231.98
S & P HEALTH CARE SECTOR.............. 100.00 120.75 173.54 250.28 229.65 312.20
14
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, the Company's independent auditors since 1987, were
appointed by the Board of Directors as the Company's independent auditors for
2000. 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.
Audit Fees
Fees for the year 2000 audit and the review of Forms 10-Q in 2000 were
$129,400, of which an aggregate amount of $70,400 had been billed through
December 31, 2000.
Financial Information Systems Design and Implementation Fees
Deloitte & Touche LLP did not render any services related to financial
information systems design and implementation for the year ended December 31,
2000.
All Other Fees
Aggregate fees billed for all other services rendered by Deloitte & Touche
LLP for the year ended December 31, 2000 were $98,000.
The Audit Committee has not considered whether the payments made to its
independent auditors for non-audit services for 2000 are compatible with
maintaining such auditors' independence.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
OF SHAREHOLDERS
Shareholder proposals to be presented at the 2002 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 18, 2001, 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 2002 annual
meeting without inclusion in the Company's proxy statement must be received by
the Company, at the above address and attention, by March 16, 2002 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.
ANNUAL REPORT
Isolyser's 2000 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/ James Michael Mabry
James Michael Mabry
Secretary
April 16, 2001
15
APPENDIX A
AUDIT COMMITTEE CHARTER
OF
ISOLYSER COMPANY, INC.
I.PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by maintaining a
continuously functional committee of independent directors. The Audit
Committee's primary focus shall involve oversight functions to support the
quality and integrity of the Company's accounting and financial reporting
processes generally. The Audit Committee's functions shall not necessarily be
limited to accounting and financial matters. The Audit Committee's primary
duties and responsibilities are to:
. Serve as an independent and objective party to review the financial
statements and management's discussion and analysis of financial
condition and results of operations contained in the Company's Annual
Report.
. Review and appraise the audit efforts of the Company's independent
public accountants.
. Provide an open avenue of communication among the independent public
accountants, financial and senior management and the Board of Directors.
. Recommend to the Board of Directors appointment of the Company's
independent public accountants.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
In fulfilling its purpose, the Audit Committee shall be an active
participant in some but not all communications between management and the
Company's independent public accountants. It is understood that the Audit
Committee does not provide special assurances on the Company's financial
statements or financial reporting, but rather serves as one among other means
to promote the integrity of the Company's financial statements and financial
reporting.
In fulfilling its duties and responsibilities, the Audit Committee
acknowledges the independent public accountants' ultimate accountability to the
Board of Directors and the Audit Committee, as representatives of shareholders.
In addition, the Audit Committee as representatives of shareholders,
acknowledges that it has the ultimate authority and responsibility to select,
evaluate, and where appropriate, to replace the Company's independent public
accountants.
II.COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board of Directors, each of whom shall be qualified to be a
member of the Audit Committee under the applicable rules set forth by the
Securities and Exchange Commission and the National Association of Securities
Dealers.
The members of the Audit Committee shall be elected by the Board of
Directors. Unless a Chair is elected by the full Board of Directors, the
members of the Audit Committee may designate a chair by majority vote of the
full Committee membership.
III.MEETINGS
The Audit Committee shall meet at least two times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Audit Committee should meet at least annually with
management and the independent public accounts. The Audit Committee shall
consider meeting separately with the auditors and management, and in any event
shall encourage opportunities for such private communications to discuss any
matters that the Audit Committee or each of these groups believe should be
discussed privately. The Audit Committee shall report on its meetings to the
Board of Directors.
A-1
IV.RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review and update this Charter periodically as conditions dictate and
determine whether it has satisfied its responsibilities under this Charter
during the prior year.
2. Review the Company's annual financial statements and oversee reports or
other financial information submitted to the Securities and Exchange
Commission, or the public, including any certification, report, opinion, or
review rendered by the independent public accountants.
3. Monitor with financial management and the independent public
accountants the Company's Forms 10-Q. The Committee shall focus in this regard
shall particularly include any significant adjustments, management judgments
and accounting estimates, significant new accounting policies and disagreements
with management. Monitoring interim reports may be conducted without formal
Audit Committee meetings.
4. Prepare a report to be included in the Company's annual Proxy Statement
regarding the Audit Committee's activities, in accordance with the requirements
set forth by the Securities and Exchange Commission.
Independent Public Accountants
5. Recommend to the Board of Directors the selection of the independent
public accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent public accountants.
6. On an annual basis, the Committee shall ensure the receipt of, and
review, a formal written statement from the independent public accountants
regarding delineating all relationships between the public accountant and the
Company, consistent with Independence Standards Board Standard 1 and to
actively engage in a dialogue with the independent public accountants regarding
any disclosed relationships or services that may impact the objectivity and
independence of the public accountant and for taking, or recommending that the
Board of Directors take appropriate action to oversee the independence of the
public accountant.
7. Review the performance of the independent public accountants and
approve any proposed discharge when circumstances warrant in accordance with
the fact that the independent public accountants are ultimately responsible to
the Board of Directors and to the Audit Committee as representatives of the
Company's shareholders.
8. Periodically consult with the independent public accountants (which, in
the discretion of the Committee, may occur out of the presence of management)
about internal controls and the quality and accuracy of the Company's financial
statements.
Financial Reporting
9. In consultation with the independent public accountants, monitor the
integrity of the Company's financial reporting processes, both internal and
external.
10. Consider the independent public accountants' judgments about the
quality and appropriateness of the Company's accounting principles as applied
in its financial reporting.
11. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent public accountants and management.
A-2
Process Improvement
12. Following completion of the annual audit, review with each of
management and the independent public accountants any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope of work or access to required information.
13. Review any significant disagreement among management and the
independent public accountants in connection with the preparation of the
financial statements.
14. Review with the independent public accountants and management the
extent to which changes or improvements in financial or accounting practices,
as approved by the Audit Committee, have been implemented.
Ethical and Legal Compliance
15. As brought to the attention of the Audit Committee, review conflicts
of interest transactions.
16. Review the activities, organizational structure, and qualifications
of the internal finance and accounting department.
17. Review any legal matter that could have a significant impact on the
Company's financial statements with the Company's counsel.
18. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the Board of Directors
deems necessary or appropriate.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's Code of Conduct.
A-3
PROXY SOLICITED FOR
ANNUAL MEETING OF SHAREHOLDERS OF
ISOLYSER COMPANY, INC.
TO BE HELD MAY 16, 2001
The undersigned hereby appoints Gene R. McGrevin, Dan R. Lee 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 16, 2001, 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 [_] WITHHOLD AUTHORITY to vote for all
directors of all nominees nominees listed below
listed below (except as
marked to the contrary below)
Gene R. McGrevin Kenneth F. Davis Gene R. McGrevin Kenneth F. Davis
Dan R. Lee John E. McKinley Dan R. Lee John E. McKinley
Rosdon Hendrix Ronald L. Smorada Rosdon Hendrix Ronald L. Smorada
(INSTRUCTION: To withhold 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.
DATED: ___________________, 2001
------------------------------------
------------------------------------
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.