Edgar Filing: ISCO INTERNATIONAL INC

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant To Section 14(a) of the Securities
Exchange Act of 1934

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|X| Preliminary Proxy Statement |_| Confidential, for Use of the Commission
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|_| Definitive Proxy Statement

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|_| Soliciting Material Under Rule 14a-12

ISCO INTERNATIONAL, INC.
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(Name Of Registrant As Specified In Its Charter)

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(Name Of Person(S) Filing Proxy Statement, if Other Than the Registrant)

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previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid: __________________________________________________
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[ISCO INTERNATIONAL LOGO]

451 Kingston Court
Mt. Prospect, Illinois 60056

November 17, 2003

Dear Stockholder:

On behalf of the board of directors, I cordially invite you to attend the
2003 Annual Meeting of Stockholders of ISCO International, Inc., to be held on
Monday, December 15, 2003, beginning at 1:00 p.m., local time, at the Doubletree
Guest Suites, 1400 Milwaukee Avenue, Glenview, IL 60025.

The matters that we expect will be acted upon at the meeting are described
in the attached Proxy Statement and include:

(1) To elect one Class I director to the Company's board of directors for
a term of three (3) years and until his successor is duly elected and
qualified;

(2) To approve the Company's 2003 equity incentive plan;

(3) To ratify the appointment by the board of directors of Grant Thornton
LLP as the independent auditors of the Company's financial statements
for the fiscal year ending December 31, 2003; and

(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
ALL OF THE PROPOSALS IN THE PROXY STATEMENT.

It is important that your shares be represented whether or not you are able
to be present at the Annual Meeting. Please sign and date the enclosed proxy
card and promptly return it to us in the enclosed postage paid envelope.

Your vote is very important, regardless of the amount of stock that you
own.

We believe your support for the proposals described in the Proxy Statement
is essential for us to continue with this program. Please return your proxy card
as soon as possible.

Sincerely,

Dr. Amr Abdelmonem
Chief Executive Officer

[ISCO INTERNATIONAL LOGO]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 15, 2003

To the Stockholders of
ISCO International, Inc.

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ISCO
International, Inc. (the "Company"), a Delaware corporation, will be held at the
Doubletree Guest Suites, 1400 Milwaukee Avenue, Glenview, IL 60025 beginning at
1:00 p.m., local time, for the following purposes:

(1) To elect one Class I director to the Company's board of directors for
a term of three (3) years and until his successor is duly elected and
qualified;

(2) To approve the Company's 2003 equity incentive plan;

(3) To ratify the appointment by the board of directors of Grant Thornton
LLP as the independent auditors of the Company's financial statements
for the fiscal year ending December 31, 2003; and

(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

The board of directors has fixed the close of business on October 24, 2003
as the record date for determining stockholders entitled to notice of, and to
vote at, the Annual Meeting. Only stockholders of record of the Company as of
the close of business on October 24, 2003 will be entitled to vote at the Annual
Meeting. The Company will maintain a complete list of its stockholders entitled
to vote at the Annual Meeting at its headquarters located at 451 Kingston Court,
Mt. Prospect, IL for ten days prior to the date of the Annual Meeting. If the
Company has to adjourn the Annual Meeting, then it will take action on the items
described above on the date to which the Annual Meeting is adjourned.

By Order of the Board,
Frank Cesario, Secretary

Mt. Prospect, IL
November 17, 2003

[ISCO INTERNATIONAL LOGO]

451 KINGSTON COURT
MT. PROSPECT, ILLINOIS 60056

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PROXY STATEMENT

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The accompanying proxy is solicited on behalf of the board of directors of
ISCO International, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 1:00 p.m.,
local time, on December 15, 2003 at the Doubletree Guest Suites, 1400 Milwaukee
Avenue, Glenview, IL 60025, and any adjournment or postponement thereof. This
Proxy Statement and accompanying proxy are first being mailed to stockholders on
or about November 17, 2003.

Record Date and Outstanding Shares. The board of directors has fixed the
close of business on October 24, 2003 as the record date (the "Record Date") for
the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement thereof. As of the Record
Date, the Company had outstanding 148,124,927 shares of common stock, par value
$.001 per share, including attached preferred stock purchase rights (the "common
stock").

Each of the outstanding shares of common stock is entitled to one vote on
all matters to come before the Annual Meeting. As of the Record Date, none of
the Company's preferred stock, par value $.001 per share, was outstanding.

Voting of Proxies. Dr. Amr Abdelmonem and Mr. Frank Cesario, the persons
named as proxies on the proxy card accompanying this Proxy Statement, were
selected by the board of directors of the Company to serve in such capacity. Dr.
Abdelmonem and Mr. Cesario are officers of the Company and Dr. Abdelmonem is
also a member of the board of directors. Each executed and returned proxy will
be voted in accordance with the directions indicated thereon, or if no direction
is indicated, such proxy will be voted in accordance with the recommendations of
the board of directors contained in this Proxy Statement.

Each stockholder giving a proxy has the power to revoke it at any time
before the shares it represents are voted. Revocation of a proxy is effective
upon receipt by the Secretary of the Company of either (i) an instrument
revoking the proxy or (ii) a duly executed proxy bearing a later date.
Additionally, a stockholder may change or revoke a previously executed proxy by
voting in person at the Annual Meeting.

Required Vote. The affirmative vote of a plurality of the shares of common
stock voted in person or by proxy is required to elect the nominee for director.
The affirmative vote of a majority of the shares of common stock present, in
person or represented by proxy at the Annual Meeting and entitled to vote on the
matters is required to approve the Company's 2003 equity incentive plan and
ratification of the appointment of Grant Thornton LLP as the Company's
independent auditors.

Quorum; Abstentions and Broker Non-Votes. A majority of the shares of
common stock issued and outstanding as of the Record Date is required to
transact business at the Annual Meeting. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by the inspector of election appointed for the
Annual Meeting.

Abstentions and broker non-votes will be included in determining the
presence of a quorum. Abstentions and broker non-votes will have no effect on
the election of directors. In the case of the approval of the 2003 equity
incentive plan and the ratification of the appointment of the independent
auditors, abstentions will have the effect of votes against the proposal, but
broker non-votes will have no effect on the outcome.

Stockholder List. A list of stockholders entitled to vote at the Annual
Meeting, arranged in alphabetical order, showing the address and number of
shares registered in the name of each stockholder, will be open to the
examination of any stockholder for any purpose germane to the Annual Meeting
during ordinary business hours commencing December 5, 2003 and continuing
through the date of the Annual Meeting at the principal offices of the Company,
451 Kingston Court, Mt. Prospect, Illinois 60056.

Who Can Help Answer Your Questions?

If you have questions about the Annual Meeting or would like additional
copies of this Proxy Statement, you should contact our Corporate Secretary,
Frank Cesario, 451 Kingston Court, Mt. Prospect, Illinois 60056, telephone (847)
391-9400.

Annual Report

The Company's Annual Report to Stockholders for the year ended December 31,
2002, accompanies this Proxy Statement.

A Warning About Forward-Looking Statements

The Company makes forward-looking statements in this document. These
forward-looking statements are subject to risks and uncertainties, including
those that are enumerated under the heading "Risk Factors" in the Company's
Annual Report to Stockholders on Form 10-K/A for the year ended December 31,
2002 and in the Company's other filings with the Securities and Exchange
Commission and the uncertainty as to whether certain discussions by the Company
will lead to, or result in consummation of any strategic business opportunities.
Such risks and uncertainties could cause actual results to differ materially
from those projected. Therefore, there can be no assurance that such statements
will prove to be correct. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "plans," "believes,"
"anticipates," "expects" and "intends," or the negative of such terms and
similar terminology. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to release publicly the results of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of anticipated
events.

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PROPOSAL 1

ELECTION OF DIRECTORS

The board of directors currently consists of six directors. Dan Gropper,
who is currently a Class I director, will not be standing for re-election.
Article Seven of the Certificate of Incorporation provides that the board of
directors shall be classified with respect to the terms for which its members
shall hold office by dividing the members into three classes. At the Annual
Meeting, one Class I director is to be elected for a term of three years
expiring at the 2006 Annual Meeting of Stockholders. The board of directors
recommends that the stockholders vote "FOR" the election of the nominee named in
this Proxy Statement to continue to serve as directors of the Company. See
"Nominee for Election" below.

The Class II and Class III directors whose terms of office expire in 2004
and 2005, respectively, will continue to serve after the Annual Meeting until
such time as their respective terms of office expire or their successors are
duly elected and qualified. See "Other Directors" below. If at the time of the
Annual Meeting a nominee should be unable or decline to serve, a proxy named on
the proxy card accompanying this Proxy Statement will vote for such substitute
nominee as the board of directors recommends, or vote to allow the vacancy
created thereby to remain open until filled by the board of directors, as the
board of directors recommends. The board of directors has no reason to believe
that the nominee will be unable or will decline to serve as a director if
elected.

Nominee for Election

The name of the nominee for the office of Class I director, together with
certain information concerning such nominee, is set forth below:

Name Age Position with the Company Served as Director Since
---------------------------- ----- --------------------------- ------------------------------

George M. Calhoun........ 51 Director 1999

Dr. Calhoun has served as a director since November 1999 and served as the
Chief Executive Officer of the Company from November 1999 to June 2002 and as
Chairman of the Board from November 2000 to September 2002. He has more than 20
years of experience in high-tech wireless systems development, beginning in 1980
as the co-founder of InterDigital Communications Corporation (Nasdaq: IDCC),
where he participated in the development of the first commercial application of
digital TDMA radio technology, and introduced the first wireless local loop
system to the North American telecommunications industry. While at InterDigital,
Dr. Calhoun held a number of executive positions, including Senior
Vice-President of the North American business unit, Senior VP of technology &
strategy, and President of IMM Technology, an intellectual property and
licensing subsidiary. In 1992, Dr. Calhoun joined Geotek Communications to help
lead its technology development program for a spread spectrum frequency hopping
radio system for fleet applications. Dr. Calhoun was a Director and
Vice-Chairman of Geotek (which filed for reorganization under Chapter 11 of the
Federal Bankruptcy Code in 1998), and served as the Chairman of the company's
engineering joint venture in Israel, PowerSpectrum Technologies, Ltd. until
1998. In 1998, Dr. Calhoun founded Davinci Solutions, LLC, a consulting firm
focused on wireless and Internet technology companies. Dr. Calhoun is also
Chairman of ExpertCall LLC, an Internet start-up focused on B2B customer care
applications. He is the author of two technical books on digital wireless
technology, and of the forthcoming Third Generation Wireless Systems: Volume I,
Post-Shannon Architectures. Dr. Calhoun holds a Ph.D. in Systems Science from
the Wharton School at the University of Pennsylvania, as well as a B.A. from the
same university. Dr. Calhoun is a member of the board of directors of Airnet
Communications Corp. (Nasdaq: ANCC).

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Other Directors

The following persons will continue to serve as directors of the Company
after the Annual Meeting until their respective terms expire (as indicated
below) or until their successors are duly elected and qualified.

Served as Term
Name Age Position with the Company Director Since Expires
----------------------------- ------- -------------------------------------- -------------- -------

Tom L. Powers............ 67 Director 1996 2004
Amr Abdelmonem.............. 38 Director, Chief Executive Officer 2002 2004
Stuart Chase Van Wagenen.... 47 Chairman of the Board 2001 2005
James J. Fuentes............ 48 Director 2003 2005

Mr. Powers has served as a director of the Company since October 1996. From
1993 to 1999, he was an Associate Director of the Advanced Manufacturing Center
at New Mexico State University in Las Cruces, New Mexico. He is on the board of
directors of Material Recovery of North America, a start up company in New
Mexico, and is a consultant to a number of companies in the telecommunications
industry. From 1989 to 1991, Mr. Powers was President of the cellular systems
business unit of AT&T Network Systems Group, now known as Lucent Technologies,
Inc. Under his leadership, the business unit became the market leader in
wireless infrastructure equipment in the United States, opened markets
internationally and introduced the industry's first digital cellular system. In
1983, he became Vice President of a joint venture between AT&T and Philips
Telecommunications B.V. located in the Netherlands. He joined AT&T in 1958 as a
member of the technical staff of Bell Laboratories and went on to management
positions in consumer products, customer switching systems engineering and
network planning. Mr. Powers holds a M.E.E. degree in Electrical Engineering for
New York University and a B.S. degree in Electrical Engineering from the
University of Arkansas. Mr. Powers is a member of the Compensation Committee and
serves as its Chairman and is a member of the Audit Committee.

Dr. Abdelmonem joined the Company in January 1995 as a Filter Engineer, and
was promoted to Director of Engineering in August 1998, to Vice President of
Development Engineering in March 1999, to Chief Technology Officer in December
1999 and to Chief Executive Officer in June 2002. Dr. Abdelmonem joined the
Board of directors in July 2002. Before joining the Company, Dr. Abdelmonem was
an engineer with Exxon Corporation in Egypt. Subsequently, he was affiliated
with the University of Maryland in a number of research and teaching positions
where much of his research focused on semi-conductor laser and advanced filter
design. Dr. Abdelmonem earned his B.S. and M.S. degrees in Electrical
Engineering from Ain-Shams University in Cairo, Egypt, and his Ph.D. from the
University of Maryland. Much of his research focused on semi-conductor laser
design, superconducting technology and advanced filter design. Dr. Abdelmonem is
a Senior Member of the IEEE and has published numerous documents for industry
conferences and trade journals. He holds five patents and has ten patent
applications pending. Dr. Abdelmonem holds an executive M.B.A. from the
University of Chicago.

Mr. Van Wagenen was elected to the Board in August 2001 and became Chairman
of the Board in September 2002. Mr. Van Wagenen is president and founder of
Stuart Chase Properties, Inc., Cleveland, Ohio, a wealth management and trust
advisory services firm. Mr. Van Wagenen has extensive investment and operating
experiences, including the formation of Spectral Solutions, Inc. and its
subsequent sale to the Company in June, 1999. His firm's client portfolios
include diverse investments in real estate, technology, oil and gas, fast food
restaurants, managed funds, publicly-traded securities, and other industries. He
is a trustee of the Western Reserve Historical Society and Ronald McDonald House
of Cleveland, Inc. Mr. Van Wagenen received his J.D. from Case Western Reserve
University in 1981 and his B.A. from The Ohio State University. Mr. Van Wagenen
is the Chair of the Audit Committee.

Mr. Fuentes was elected to the Board in November 2003. He is Mr. Fuentes
was elected to the Board in November 2003. He is Founder, President and CEO of
Clarity Communication Systems, Inc., Aurora, Illinois, a wireless software and
systems development company formed in 1998. Previously Mr. Fuentes served at
Lucent Technologies (formerly AT&T Bell Labs) for ten years in various
positions, most recently as a senior manager in software development. Prior to
joining Bell Labs, Mr. Fuentes served four years at Northrop Defense Systems and
six years in Advanced Development Projects (aka the "skunk works") at Lockheed
Aircraft Company. Mr. Fuentes engineering experiences involve design and
development of electronic counter-measures and stability and flight controls
systems. He has six patents in the wireless telecommunications field and also
received the Hispanic Engineer National Achievement Award for Technical
Achievement in Industry in 1995. Currently Mr. Fuentes sits on the WESTEC
Advisory Board. Mr. Fuentes is a

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long-time resident of Chicagoland. He received a B.S. degree majoring in
Aeronautical Engineering with a second major in Computer Science from
Embry-Riddle Aeronautical University. Mr. Fuentes is a member of the Audit
Committee.

Director Compensation. During 2002, the Company did not provide any cash
compensation to its directors for their service on the board of directors.
During 2002, each director of the Company who was not an employee of the Company
(a "Non-Employee Director") participated in the Illinois Superconductor
Corporation 1993 Stock Option Plan (the "1993 Plan"). The 1993 Plan provided for
the automatic grant of non-qualified stock options ("NQSOs") to each
Non-Employee Director who was re-elected or continued to serve as a director
because his or her term had not expired in consideration of his or her service
on the board of directors to purchase 40,000 shares of common stock at the
reported closing price of the common stock on the date of each annual meeting of
the stockholders of the Company, provided that no such automatic grant shall be
made to a Non-Employee Director who was first elected to the board of directors
at the first such meeting or was first elected to the board of directors within
three months prior to such annual meeting. Such options vest monthly over a two
year period from the date of grant.

In addition, the 1993 Plan provided for the automatic grant of NQSOs to
each Non-Employee Director who was appointed or continues to serve on a
committee of the board of directors in consideration of his or her service on a
committee to purchase 5,000 shares of common stock at the reported closing price
of the common stock on the date of each annual meeting of the stockholders of
the Company, provided that no such automatic grant shall be made to a
Non-Employee Director who was first appointed to the committee within three
months prior to such annual meeting. These stock options vest monthly over a two
year period from the date of grant and expire ten years from the date of grant.

Pursuant to the 1993 Plan, Messrs. Van Wagenen and Powers were each granted
an option to purchase 40,000 shares of common stock on June 11, 2002 at an
exercise price of $0.69. In addition, Messrs. Van Wagenen and Powers were
granted options to purchase 5,000 shares of common stock on June 11, 2002 at an
exercise price of $0.69 for their service on committees. In addition, each
Non-Employee Director may was also eligible to receive additional stock options
at the discretion of the board; provided, however, that during any calendar
year, stock options for no more than 500,000 shares of common stock could have
been granted to any individual Non-Employee Director. The terms of such
discretionary stock option grants were to be determined by the board of
directors.

The 1993 Plan expired pursuant to its terms in August 2003 and no
additional grants will be made pursuant to the plan, however, all options
currently outstanding under the plan will remain outstanding in accordance with
the terms of such options. The 2003 Equity Incentive Plan, which is described
below in Proposal 2, does not provide for automatic grants to directors.
However, the Board has established a compensation policy to provide that each
Non-Employee Director who is re-elected or continues to serve as a director
because his or her term had not expired shall be granted an option to purchase
50,000 shares of common stock at the reported closing price of the common stock
on the date of each annual meeting of the stockholders of the Company, provided
that no such automatic grant shall be made to a Non-Employee Director who was
first elected to the board of directors at the first such meeting or was first
elected to the board of directors within three months prior to such annual
meeting. Such options vest monthly over a one year period from the date of
grant.

In addition, the current policy provides for the grant of NQSOs to purchase
25,000 shares of common stock to each Non-Employee Director who is appointed or
continues to serve on the audit committee of the board of directors and the
Chairman of the audit committee receives a grant of NQSOs to purchase 50,000
shares of common stock. Each Non-Employee Director who is appointed or continues
to serve on the compensation committee of the board of directors receives a
grant of NQSOs to purchase 10,000 shares of common stock and the Chairman of the
compensation committee receives a grant of NQSOs to purchase 25,000 shares of
common stock. The Chairman of the Board receives a grant of NQSOs to purchase
50,000 shares of common stock. These options are granted in consideration of
such director's service on a committee or as Chairman. Each of the options are
granted at the reported closing price of the common stock on the date of each
annual meeting of the stockholders of the Company or on the date such director
joins a committee or is named Chairman of such Committee, provided that annual
grants are not made to a Non-Employee Director who was first appointed to the
committee or as chairman within three months prior to such annual meeting. These
stock options vest monthly over a one year period from the date of grant and
expire ten years from the date of grant.

The Company's directors and committee members received option grants as set
forth above in August 2003 and will not receive additional grants on the date of
the 2003 Annual Meeting.

The Company began providing cash compensation to its directors for their
service on the board of directors during 2003. Each Director receives an annual
retention fee of $5,000 on the first business day of each fiscal year. In
addition, the Chairman of the Board and the Chairman of the audit committee each
receive additional $5,000 retention fee and the Chairman of the Compensation
Committee receives a $1,000 retention fee.

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All Non-Employee Directors are reimbursed for their reasonable
out-of-pocket expenses incurred in attending board and committee meetings.

Meetings. During the year ended December 31, 2002, the board of directors
held 15 meetings. Each director attended at least 75% of the aggregate of the
number of board meetings (during the period of his service as a director) and
the total number of meetings of committees on which he served that were held
(during the period of his service as a member of such committee) during 2002.

Committees of the Board. The board of directors has established an Audit
Committee and a Compensation Committee, each of which is comprised entirely of
Non-Employee Directors. The Audit Committee consists of Mr. Van Wagenen
(Chairman), Mr. Powers and as of November 2003, Mr. Fuentes. The Compensation
Committee consists of Mr. Powers. The Company does not have a standing
Nominating Committee.

The Audit Committee generally has responsibility for selecting the
Company's independent auditors, reviewing the plan and scope of the audit,
approving any non-audit services provided by the Company's independent auditors,
reviewing the Company's audit and control functions, oversight of the Company's
insider trading policy and reporting to the full board of directors regarding
all of the foregoing. The Audit Committee held 6 meetings in 2002. See "Report
of the Audit Committee."

The Compensation Committee generally has responsibility for recommending to
the board of directors guidelines and standards relating to the determination of
executive compensation, reviewing the Company's executive compensation policies
and reporting to the full board of directors regarding the foregoing. The
Compensation Committee also has responsibility for administering the Plan,
determining the number of options to be granted to the Company's executive
officers and employees pursuant to the Plan and reporting to the full board of
directors regarding the foregoing functions. The Compensation Committee held 9
meetings in 2002. See "Report of the Compensation Committee".

Compensation Committee Interlocks and Insider Participation

Howard S. Hoffmann and Tom L. Powers served as members of the Compensation
Committee of the board of directors. Neither Mr. Hoffmann nor Mr. Powers
currently serves as an officer of the Company. There are no compensation
committee interlocks between the Company and any other entity involving the
Company's or such entity's executive officers or board members. Mr. Hoffmann
resigned from the Board in June 2003.

Executive Officers

Set forth below is a table identifying executive officers of the Company
who are not identified in the tables entitled "Election of Directors - Nominee
for Election" or "- Other Directors." Biographical information for Dr.
Abdelmonem is set forth above under "Other Directors."

Name Age Position with Company
---- --- ---------------------

Frank Cesario 34 Chief Financial Officer

Mr. Cesario joined the Company during August 2000 as Controller and served
as Acting Chief Financial Officer from April 2002 until December 2002 when Mr.
Cesario was named Chief Financial Officer. Previously, Mr. Cesario was Group
Controller for copper and brass producer Outokumpu Copper, Inc. and
subsidiaries, a U.S. group with approximately $500 million in annual revenue and
owned by Helsinki-based Outokumpu Oyj. Mr. Cesario has an MBA (Finance) from
DePaul University in Chicago, a B.S. in Accountancy from the University of
Illinois, and began his career at KPMG Peat Marwick.

The board of directors elects officers annually and such officers, subject
to the terms of certain employment agreements, serve at the discretion of the
board. See "Executive Compensation". The Company has entered into employment an
employment agreement with Dr. Abdelmonem. There are no family relationships
among any of the directors or executive officers of the Company.

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Section 16(a) Beneficial Ownership Reporting Compliance.

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers (as defined under Section 16(a) of the
Securities Exchange Act), directors and persons who own greater than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Based
solely on a review of the forms it has received and on written representations
from certain reporting persons that no such forms were required for them, the
Company believes that during 2002, all of the Section 16(a) filing requirements
applicable to its officers, directors and 10% beneficial owners were complied
with by such persons other than an option grant to Amr Abdelmonem which was
subsequently reported on a Form 4 filing by Dr. Abdelmonem.

Executive Compensation and Certain Transactions

The following table provides information concerning the annual and
long-term compensation for services in all capacities to the Company for the
years ended December 31, 2002, 2001 and 2000 of (i) each person who served as
the Company's chief executive officer and (ii) the four most highly compensated
executive officers whose salary and bonus for services rendered in all
capacities to the Company for the fiscal year ended December 31, 2002 exceeded
$100,000 (collectively, the "Named Executive Officers").

Summary Compensation Table

Annual Compensation Long-Term Compensation Awards
--------------------------------- -------------------------------
Restricted Securities
Name and Principal Stock Underlying All Other
Position Year Salary Bonus Awards Options Compensation
----------------------------- ---- -------- ----- ----------- ----------- ------------

George M. Calhoun (1) 2002 $158,653 -- -- -- --
Chief Executive Officer 2001 247,115 -- -- 1,200,000 --
2000 163,288 -- -- 500,000 --
--
Amr Abdelmonem (2) 2002 207,194 -- -- 1,050,000
Chief Executive Officer 2001 210,159 -- -- 800,000 --
2000 138,661 -- $502,440(3) 280,000 --
--
Frank Cesario (4) 2002 102,000 -- -- 30,000
Chief Financial Officer 2001 -- -- -- -- --
2000 -- -- -- -- --

Dennis M. Craig (5) 2002 160,000 -- -- -- --
Vice President/General 2001 160,385 -- -- 150,000 --
Manager 2000 150,000 -- $502,440(3) 205,000 --

Charles F. Willes (6) 2002 173,076 -- -- -- --
Chief Financial Officer 2001 200,000 -- -- 800,000 --
2000 66,346 -- -- 300,000 --

Roger Boivin (7) 2002 180,649 -- -- -- --
President and Chief 2001 -- -- -- -- --
Operating Officer 2000 -- -- -- -- --

1) Dr. Calhoun commenced employment with the Company in November 1999 and
served as Chief Executive Officer until June 2002.
2) Dr. Abdelmonem was named Chief Executive Officer in June 2002.
3) Based on 120,000 shares granted to each of Mr. Craig and Dr. Abdelmonem and
the closing price of the common stock ($4.187) on the date of grant,
February 15, 2000. The value of these shares at December 31, 2002, based on
a closing price of $0.32 on that date, was $38,400. Dr. Abdelmonem's shares
vest at the rate of 25% on the first anniversary of the date of the grant
and monthly thereafter, over a three year period and Mr. Craig's shares

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vest at the rate of 10%, 20%, 30% and 40% on the first, second, third and
fourth anniversary, respectively, of the date of the grant. If any
dividends are paid on the common stock, such dividends also would be paid
on the restricted shares granted to each Named Executive Officer.
4) Mr. Cesario was named Chief Financial Officer in December 2002.
5) Mr. Craig's employment with the Company ended in September 2003.
6) Mr. Willes commenced employment with the Company in July 2000 and his
employment with the Company ended in April 2002. Mr. Willes was paid
$100,000 in severance under the terms of an agreement with the Company. The
agreement also provided that 550,000 options exercisable at prices between
$1.20 to $1.94 which would have vested by April 12, 2003 vested as of April
12, 2002 and will remain exercisable through April 12, 2004.
7) Mr. Boivin commenced employment with the Company in October 2001 and his
employment with the Company ended in September 2002.

Option Grants In 2002

The following table contains information concerning the grant of stock
options by the Company to the Named Executive Officers during 2002. There were
no stock appreciation rights granted in 2002. Information provided in this table
is as of December 31, 2002.

Potential Realizable Value at
Number of Percent of Assumed Annual Rates of
Securities Total Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term (1)
Options Employees in Price Expiration -----------------------------
Name Granted Fiscal Year Per Share Date 5% 10%
-------------------------- ---------- ------------- --------- ---------- ----------- -----------

Amr Abdelmonem 150,000 7.8% $0.81 4/1/2012 $33,568 $76,410
900,000 47.1% $0.11 12/30/2012 $201,409 $458,464

(1) Potential realizable value is presented net of the option exercise price
but before any federal or state income taxes associated with exercise. The
assumed stock price appreciation rates used to determine the potential
realize value are prescribed by the Securities and Exchange Commission
rules for illustrative purposes only and are not intended to forecast or
predict future stock prices. Actual gains are dependent on the future
performance of the common stock and the option holder's continued
employment throughout the vesting period.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table provides information concerning the Named Executive
Officers' unexercised options at December 31, 2002. None of the Named Executive
Officers held or exercised any stock appreciation rights, during 2002.

Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-The-Money
On Realized Options at Options at
Name Exercise (#) ($)(1) December 31, 2002 December 31, 2002
---- ------------ -------- ------------------------------ -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------

George M. Calhoun -- -- 770,833 -- -- --
Amr Abdelmonem -- -- 1,459,200 754,229 $189,000 --
Dennis M. Craig -- -- 392,292 236,708 -- --
Frank Cesario -- -- 24,792 30,208 -- --
Charles F. Willes -- -- 550,000 -- -- --
Roger Boivin -- -- -- -- -- --

---------------------

(1) The value per option is calculated by subtracting the exercise price from
the closing price of the common stock on the American Stock Exchange on
December 31, 2002 (the last trading day in 2002) of $0.32.

-8-

Ten Year Option Repricing

In February 2001, the Company lowered the exercise price of all options
granted to employees and directors of the Company under the Plan during the
calendar year of 2000 that had an exercise price above $1.94. The options
subject to this repricing allowed for the purchase of up to an aggregate of
2,676,000 shares of the Company's common stock and included options granted to
those persons listed below. The Company's board of directors lowered the
exercise price of these options because at the time of repricing, the options no
longer provided an incentive to the option holders due to the difference between
the exercise price of the options and the market price of the Company's common
stock arising from to the significant volatility of the Company's share price
during 2000.

In April 2002, the Company lowered the exercise price of all outstanding
options granted to employees (other than Mr. Calhoun) that had an exercise price
above $0.81. The Company also lowered the exercise price of all options granted
to directors (including Mr. Calhoun but excluding Mr. Brodsky) that had an
exercise price above $1.00. The options subject to this repricing allowed for
the purchase of up to an aggregate of 2,967,700 shares of the Company's common
stock and included options granted to those persons listed below. The Company's
board of directors lowered the exercise price of these options in order to
provide additional incentive to the option holders due to the difference between
the exercise price of the options and the market price of the Company's common
stock arising from to the significant volatility of the Company's share price
during 2001 and the first half of 2002.

The following table provides more information concerning the repricing of
the above described options.

Number of Length of
Securities Market Price Original Option
Underlying of Stock at Term Remaining
Name and Principal Date of Options Time of Exercise Price at New Exercise at Date
Position Repricing Repriced Repricing Time of Repricing Price of Repricing
------------------ --------- ---------- ------------ ----------------- ------------ ---------------

Amr Abdelmonem 4/1/02 600 $0.78 $6.75 $0.81 3 years
Chief Executive 1,489 $10.50 3 years
Officer (1) 50 $11.75 4 years
4,000 $17.50 4 years
100 $16.00 4 years
100 $18.25 4 years
550 $26.50 4 years
686 $18.00 5 years
2,083 $1.38 6 years
667 $1.13 7 years
180,000 $1.94 8 years
100,000 $1.34 9 years
800,000 $1.94 9 years
George Calhoun 4/1/02 400,000 $0.78 $1.94 $1.00 9 years
Chief Executive 270,833 $1.94 8 years
Officer (2)
Frank Cesario 4/1/02 25,000 $0.78 $1.94 $0.81 8 years
Chief Financial 30,000 $1.35 9 years
Officer
Dennis Craig 4/1/02 25,000 $0.78 $18.50 $0.81 5 years
Vice President / 70,000 $1.69 6 years
General Manager 205,000 $1.94 8 years
(3) 150,000 $1.94 9 years
George M. Calhoun 2/5/01 500,000 $1.94 $6.61 $1.94 9 years
Chief Executive
Officer (2)
Amr Abdelmonem 2/5/01 180,000 $1.94 $4.91 $1.94 9 years
Chief Executive
Officer (1)
Charles F. Willes 2/5/01 200,000 $1.94 $4.75 $1.94 9 years
Chief Financial
Officer (4)

-9-

Dennis M. Craig 2/5/01 205,000 $1.94 $4.19 $1.94 9 years
Vice President /
General Manager (3)
Shawn P. Doyle 2/5/01 350,000 $1.94 $3.25 $1.94 9 years
Executive Vice
President, Commercial
Division (5)
Richard Herring 2/5/01 350,000 $1.94 $3.25 $1.94 9 years
Chief Operating
Officer (6)

(1) Dr. Abdelmonem was named Chief Executive Officer in June 2002.
(2) Dr. Calhoun served as Chief Executive Officer until June 2002.
(3) Mr. Craig's employment with the Company ended in September 2003.
(4) Mr. Willes's employment with the Company ended in April 2002.
(5) Mr. Doyle's employment with the Company ended in July 2001
(6) Mr. Herring's employment with the Company ended in April 2001.

Employment Agreements.

The Company has an employment agreement with Amr Abdelmonem dated as of
January 1, 2001 to be Chief Technology Officer of the Company. Dr. Abdelmonem
subsequently became the Chief Executive Officer of the Company in June 2002. The
agreement is for a term of three years, with one year renewal options. Dr.
Abdelmonem is paid an annual salary of $200,000 and is paid a severance of one
year's salary if (i) the Company terminates his employment without Cause (as
defined in the agreement) or (ii) Dr. Abdelmonem terminates his employment for
Good Reason (as defined in the agreement), which such severance is offset by any
income received by Dr. Abdelmonem during the severance period. His severance is
increased to two years salary in the case of a change in control (as defined in
the agreement) of the Company and a termination as described previously. Dr.
Abdelmonem also receives a severance of six months salary if his employment
contract expires without renewal. Dr. Abdelmonem's agreement includes a
provision for a bonus to be paid at the discretion of the board of directors and
certain non-competition, non-solicitation, assignment of invention and
confidentiality provisions.

In December 2002, the Board of Directors authorized a bonus pool of up to
$300,000 in which all officers, including Dr. Abdelmonem and Mr. Cesario, shall
be eligible to participate in the event that the Company achieves two
consecutive quarters of positive cash flow results after taking into account the
payment of such bonuses. In the event the condition is achieved, the amount Dr.
Abdelmonem and Mr. Cesario may receive from such pool shall be determined in the
discretion of the Board.

Certain Business Relationships.

During April 2002, the Company entered into an agreement with Mr. Willes
related to Mr. Willes' separation from employment with the Company. Pursuant to
the terms of the agreement, Mr. Willes resigned from his employment with ISCO
effective April 12, 2002 and released the Company from any and all claims,
including, but not limited to any and all claims relating to or in any way
arising out of any aspect of Mr. Willes' employment relationship and / or his
separation from employment with the Company. Mr. Willes was paid $100,000 in
severance under the terms of the agreement and the Company also paid Mr. Willes'
health and other insurance benefits (other than disability insurance benefits)
through October 31, 2002. The agreement also provided that 550,000 options which
would have vested by April 12, 2003 vested as of April 12, 2002 and will remain
exercisable through April 12, 2004.

During June 2002 the Company engaged Nightingale & Associates, LLC to
provide management consulting services. The Company paid $87,765 for such
consulting services during 2002. Mr. Hoffmann, a former director of the Company,
is a principal of Nightingale.

-10-

During October 2002, the Company entered into an Uncommitted Line of Credit
with its two largest shareholders, an affiliate of Elliott Associates, L.P.
(Manchester Securities Corporation) and Alexander Finance, L.P. This line
provided that up to $4 million may be borrowed by the Company, with $1 million
borrowed during October 2002 upon completion of the transaction. $1 million was
borrowed during November 2002, an additional borrowing of $1 million occurred in
March 2003, $300,000 was borrowed in July 2003 and $700,000 was borrowed in
August 2003.

Borrowings on this line bear an interest rate of 9.5% and are
collateralized by all the assets of the Company. Outstanding loans under this
agreement would be required to be repaid on a priority basis should the Company
receive new funding from other sources. Additionally, the lenders are entitled
to receive warrants to the extent funds are drawn down on the line. The warrants
bear a strike price of $0.20 per share of common stock and expire on April 15,
2004. The credit line matures and is due, including accrued interest thereon, on
March 31, 2004. Warrants to purchase 10 million shares of common stock were
issued in connection with the borrowings under the line of credit during the
year ended December 31, 2002. No warrants were issued in connection with the
March 2003, July 2003 or August 2003 borrowings under the line of credit.
Therefore, 10 million warrants were issued as a result of this transaction,
presuming certain antidilutive features are not triggered.

The line of credit was subsequently amended in October 2003 to reflect: (i)
an increase in the aggregate commitment of the Lenders to from $4,000,000 to
$6,000,000; (ii) the elimination of warrant issuances from future drawdowns;
(iii) interest on future loans will bear interest at the rate of 14% per annum;
(iv) that future loans mature on October 31, 2004; (v) and that future loans be
subject to the discretion of the Lenders. The Company borrowed $1,000,000 from
the line of credit agreement upon execution of the amendment. This line is
uncommitted, such that each new borrowing under the facility would be subject to
the approval of the lenders. If approved by the lenders, the Company may borrow
up to an additional $1 million.

-11-

THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE
GRAPH ON PAGE 15 WILL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL
STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE. THE FOLLOWING REPORT SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.

Report of the
Compensation Committee

The objectives of the Compensation Committee in determining the levels and
components of executive compensation are (i) providing executives with both cash
and equity incentives to further the interests of the Company and its
stockholders, (ii) compensating them at appropriate levels with a recognition of
compensation levels of executive officers at other high technology companies at
a comparable stage of development, and (iii) attracting, rewarding and retaining
outstanding executive officers to the Company. Generally, the compensation of
all executive officers is composed of a base salary plus a discretionary bonus
based upon achievement of specified goals. In addition, the Company grants stock
options, from time to time in its discretion, to base potential compensation on
stockholder return and to provide for compensation based upon the common stock
performance over time. The Compensation Committee also recommends stock option
grants to non-executive employees of the Company so as to encourage a team
approach towards the success of the Company to the benefit of the stockholders.

The Compensation Committee recommended to the board of directors the terms
of the employment agreements with Dr. Abdelmonem. In determining the base
salaries of the executive officers, the Compensation Committee considered the
performance of each executive, the nature of the executive's responsibilities,
the salary levels of executives at high technology companies at a comparable
stage of development, including other publicly held companies that are
developing competitive products, and the Company's general compensation
practices.

Discretionary bonuses for each of the Company's executive officers are
based on achievement of specified goals of the Company and are a function of the
criteria which the Compensation Committee believes appropriately take into
account the specific areas of responsibility of the particular officer. After
considering the status of the Company's finances, the board of directors did not
award a bonus to Dr. Calhoun, Dr. Abdelmonem nor to any other officer for 2002.
Furthermore, no raises in salary were approved for Executive Officers in 2002
other than Mr. Cesario who received a salary increase when he was appointed
Chief Financial Officer in December 2002.

The Compensation Committee typically recommends the grant of stock options
to executive officers and other employees with the purpose of aligning the
executive officers and other employees with the interests of stockholders and
encouraging a long-term focus in managing the Company. From time to time, the
Compensation Committee evaluates this policy in light of the market and
competitive factors. The exercise price of these stock options is generally the
fair market value of the common stock on the dates of grant. Vesting periods are
used to retain key employees and to emphasize the long-term aspect of
contribution and performance. In recommending stock option grants to executives
under the Plan, the Compensation Committee considers a number of factors,
including the performance of the executive, achievement of goals, the
responsibilities of the executive, review of compensation of executives in high
technology companies at a comparable stage of development, and review of the
number of stock options each executive currently possesses. Stock options were
granted by the board of directors to Dr. Abdelmonem in April and December 2002,
however no other executive officers received option grants in 2002.

Compensation of Chief Executive Officer. Dr. George Calhoun was appointed
as Chief Executive Officer in November 1999 and served as Chief Executive
Officer until July 2002. His compensation package of salary, stock options and
bonus potential was determined by establishing a base competitive with those
paid by other high-tech wireless systems technology companies. A base salary of
$250,000 was determined for Dr. Calhoun for 2000 and continued through 2001 and
2002 without a raise. A bonus potential up to 50% of his base salary is
contingent upon achieving corporate and individual performance goals set by the
board of directors. In addition, a grant of options to purchase common stock for
1,200,000 shares was approved in February 2001. These grants were designed to
provide Dr. Calhoun with a continuing incentive to remain with the Company and
contribute to corporate success.

Dr. Abdelmonem was appointed as Chief Executive Officer in July 2002. His
compensation package of salary, stock options and bonus potential was not
changed from the compensation he received as the Company's Chief Technology
Officer. A base salary of $200,000 was therefore continued for Dr. Abdelmonem
for the remainder of 2002 and continued through 2003 without a raise. In
addition, a grant of options to purchase common stock for 150,000 and

-12-

900,000 shares was approved in April and December 2002. These grants were
designed to provide Dr. Abdelmonem with a continuing incentive to remain with
the Company and contribute to corporate success.

Compliance with Section 162(m). The Compensation Committee generally
intends for compensation paid to the executive officers to be tax deductible to
the Company pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended ("Section 162(m)"). Section 162(m) provides that compensation paid to
the executive officers in excess of $1,000,000 cannot be deducted by the Company
for Federal income tax purposes. However, this limitation does not apply to
performance-based compensation, provided that certain conditions are satisfied.
Although the Company's policy is generally to preserve the federal income tax
deductibility of compensation paid, the Compensation Committee retains the
authority to approve payments that may not be deductible if it believes that
such payments are in the best overall interests of the Company and its
stockholders.

Option Repricing. In April 2002, the board of directors, upon
recommendation of the Compensation Committee reduced the exercise price of all
outstanding options granted to employees (other than Mr. Calhoun) that had an
exercise price above $0.81. The Company also lowered the exercise price of all
options granted to directors (including Mr. Calhoun but excluding Mr. Brodsky)
that had an exercise price above $1.00. The options were repriced to $0.81,
which was higher than the closing price of the Company's common stock on the OTC
Bulletin Board closing price of $0.78 on the date of the repricing. This action
was taken in order to provide additional incentive to the option holders due to
the difference in price between the exercise price and the market price of the
Company's common stock arising from the significant volatility of the Company's
share price during 2001 and the first half of 2002. The table set forth under
"Ten Year Option" provides more information on the repricing of such options.

Member of the Compensation Committee:

Tom L. Powers (Chairman)

November 17, 2003

-13-

THE FOLLOWING REPORT OF THE AUDIT COMMITTEE WILL NOT BE DEEMED INCORPORATED
BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT WE
SPECIFICALLY INCORPORATE THIS INFORMATION BY REFERENCE. THE FOLLOWING REPORT
SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.

Report of the
Audit Committee

The Audit Committee of the board of directors is composed of three
non-employee directors. The role of the Audit Committee is to assist the board
of directors in its oversight of the Company's financial reporting process. The
board of directors, in its business judgment, has determined that each member of
the audit committee is "independent" as defined in Rule 121A of the listing
standards of The American Stock Exchange. The Committee operates pursuant to a
charter that was last amended and restated by the Board on November 5, 2003, a
copy of which is attached to this Proxy Statement as Appendix B. As set forth in
the charter, management of the Company is responsible for the preparation,
presentation and integrity of the Company's financial statements, the Company's
accounting and financial reporting principles and internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible for
auditing the Company's financial statements and expressing an opinion as to
their conformity with generally accepted accounting principles.

In the performance of its oversight function, the Committee has reviewed
and discussed the audited financial statements with management and its
independent auditors. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as currently in effect. Finally,
the Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as currently in effect, and has
considered whether the provision of non-audit services by the independent
auditors to the Company is compatible with maintaining the auditor's
independence and has discussed with the auditors the auditors' independence.

The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal control
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not assure that the audit of
the Company's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the company's auditors are in fact "independent".

Based upon the review, reports and discussions described in this report,
and subject to the limitations on the role and responsibilities of the Committee
referred to above and in the charter, the Committee recommended to the board of
directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K, as amended, for the year ended December 31, 2002 as
filed with the Securities and Exchange Commission.

Members of the Audit Committee

Tom Powers
Stuart C. Van Wagenen (Chairman)
November 17, 2003

-14-

Performance Graph

Set forth in this section is a line graph comparing the cumulative total
stockholder return on the Company's common stock against the cumulative total
return of the Nasdaq Market Index, the American Stock Exchange ("AMEX") Index,
the JP Morgan H&Q Technology Index and the Nasdaq Telecommunications Index for
the fiscal period of five years commencing December 31, 1997 and ending December
31, 2002. The graph and table assume that $100 was invested on December 31, 1997
in the Company's common stock, the Nasdaq Market Index, the AMEX index, the JP
Morgan H&Q Technology Index and the Nasdaq Telecommunications Index, and that
all dividends were reinvested. The AMEX index is included because on June 7,
2003, the Company's common stock began trading on The American Stock Exchange
(AMEX) under the symbol "ISO." Prior to this date, the Company's common stock
was traded on the OTC Bulletin Board under the symbol "ISCO." The JP Morgan H&Q
Index was discontinued during 2002. Accordingly, the Company has selected the
Nasdaq Telecommunications Index as a replacement for the discontinued index.
This data was furnished by publicly available sources.

The Indices have been selected because the Company has been unable to identify a
peer group of companies for comparison. No single public or private company has
a comparable mix of technologies under development or products which serve the
same markets as the Company.

[REPRESENTATION OF LINE CHART]

H&Q NASDAQ
ISCO NASDAQ AMEX INDEX Telecom
-------- -------- -------- ------- --------

12/31/1997 $ 100.00 $ 100.00 $ 100.00 $ 100.00 $ 100.00
12/31/1998 $ 55.25 $ 139.63 $ 100.64 $ 155.55 $ 241.58
12/31/1999 $ 108.84 $ 259.13 $ 128.10 $ 347.38 $ 431.01
12/31/2000 $ 77.90 $ 157.32 $ 131.13 $ 224.57 $ 183.57
12/29/2001 $ 44.20 $ 124.20 $ 123.81 $ 155.23 $ 122.88
12/31/2002 $ 17.68 $ 85.05 $ 120.42 NA $ 38.77

-15-

PROPOSAL 2

APPROVAL OF THE

ISCO INTERNATIONAL, INC. 2003 EQUITY INCENTIVE PLAN

On November 5, 2003, the board of directors adopted, subject to stockholder
approval, the ISCO International, Inc. 2003 Equity Incentive Plan (the
"Incentive Plan"). The purpose of the Incentive Plan is to enable the Company to
recruit and retain highly qualified employees, directors and consultants and to
provide those employees, directors and consultants with an incentive for
productivity and an opportunity to share in the growth and value of the Company.
The Incentive Plan provides for the award of restricted shares of common stock,
incentive stock options, non-qualified stock options and stock appreciation
rights with respect to shares of common stock, to our employees, directors,
consultants and other individuals who perform services for us.

The Incentive Plan replaces the 1993 Stock Option Plan which terminated in
August 2003. At the time the 1993 Stock Option Plan terminated, awards had not
been granted with respect to 5,038,994 of the 14,011,468 shares authorized for
issuance under that plan. The board of directors believes that a new stock
incentive plan is needed in order to (i) attract and retain qualified
engineering, technical and administrative personnel, as well as Non-Employee
Directors, in the face of an increasingly competitive hiring environment; (ii)
encourage the acquisition by key employees and Non-Employee Directors of a
proprietary interest in the Company; (iii) fashion attractive incentive awards
based upon the performance of the Company and the price for the common stock;
and (iv) better align the interests of employees, consultants and Non-Employee
Directors with the interests of the Company's stockholders.

The Company believes that its growth and long-term success depend in large
part upon attracting, retaining and motivating key personnel, and that such
retention and motivation can be achieved in part through the grant of
stock-based awards. The Company also believes that stock-based awards will play
an important role in our success by encouraging and enabling the directors,
officers and other employees of the Company -- upon whose judgment, initiative
and efforts the Company depends -- to acquire a proprietary interest in the
Company's long-term performance. The Company anticipates that providing these
persons with a direct stake in the Company will ensure a closer identification
of the interests of the participants in the Incentive Plan with those of the
Company, thereby stimulating the efforts of these participants to promote our
future success and strengthen their desire to remain with the Company. The
Company believes that the adoption of the Incentive Plan will help the Company
accomplish these goals and will keep the Company's equity incentive compensation
in line with that of other companies comparable to the Company.

Vote Required. The affirmative vote of a majority of the shares of common
stock present in person or represented by proxy at the meeting and entitled to
vote on the matter is required to approve the adoption of the ISCO
International, Inc. 2003 Equity Incentive Plan.

Recommendation of the Board of Directors. The board of directors recommends
that the stockholders vote "FOR" the adoption of the ISCO International, Inc.
2003 Equity Incentive Plan.

The summary of the Incentive Plan provided below is qualified in its
entirety by the provisions contained in the Incentive Plan, a copy of which is
attached to this Proxy Statement as Appendix A. The essential features of the
Incentive Plan are outlined below:

The maximum number of shares of common stock with respect to which awards
may be made under the Incentive Plan is 5,038,994. No Participant will receive
an award of stock options or stock appreciation rights under the Incentive Plan
with respect to more than 2,000,000 shares of common stock in any calendar year.
In the event of any stock split, reverse stock split, stock dividend,
recapitalization, reclassification or other similar event, adjustments may be
made at the board of directors' discretion to the number of shares reserved for
issuance under the Incentive Plan, to the limit on the number of shares that may
be subject to stock options or stock appreciation rights granted to a single
person in any calendar year and to the number, kind and price of shares covered
by outstanding awards. Shares subject to forfeited, cancelled or expired awards
will again become available for issuance under the Incentive Plan. In addition,
shares surrendered in payment of any exercise price or in satisfaction of any
withholding obligation arising in connection with an award granted under the
Incentive Plan will again become available for issuance under the Incentive
Plan.

The board of directors, or a committee appointed by the board of directors,
administers the Incentive Plan. Under the terms of the Incentive Plan, the
committee must consist of two or more non-employee directors. The board of
directors or the appointed committee interprets the Incentive Plan, selects
award recipients, determines the number of shares subject to each award and
establishes the price, vesting and other terms of each award. While there are no

-16-

predetermined performance formulas or measures or other specific criteria used
to determine recipients of awards under the Incentive Plan, awards are based
generally upon consideration of the grantee's position and responsibilities, the
nature of services provided, the value of the services to us, the present and
potential contribution of the grantee to our success, the anticipated number of
years of service remaining and other factors which the board of directors or the
appointed committee deems relevant.

The Incentive Plan has no specified term, although incentive stock options
will not be granted more than 10 years after the adoption of the Incentive Plan.

Stock Options. The Incentive Plan permits the grant of incentive stock
options to our employees and the employees of our subsidiaries. The Incentive
Plan also provides for the grant of non-qualified stock options to our
employees, directors, and consultants and other individuals who perform services
for us (as well as to employees, directors, consultants and service providers of
our subsidiaries). The exercise price of any incentive stock options granted
under the Incentive Plan may not be less than 100% of the fair market value of
our common stock on the date of grant. Options granted under the Incentive Plan
may be exercised by payment in cash or through an exchange for shares of common
stock owned by the option holder for more than six months that have a fair
market value on the date of exercise equal to the option exercise price.

Under the Incentive Plan, each option is exercisable at such time and to
such extent as specified in the pertinent option agreement between the Company
and the option recipient. However, no option shall be exercisable with respect
to any shares of common stock more than ten years after the date of such award.
Unless otherwise specified by the board of directors or the appointed committee
with respect to a particular option, all options are non-transferable, except
upon death.

Upon or in anticipation of a change of control of the Company, the board of
directors or the appointed committee, may: (i) cause outstanding options to
become immediately exercisable, (ii) provide for the cancellation of options in
exchange for comparable options to purchase shares in a successor corporation,
and/or (iii) provide for the cancellation of options in exchange for a cash
and/or other substitute consideration.

Stock Appreciation Rights. The Incentive Plan also provides for the grant
of stock appreciation rights, either alone or in tandem with stock options. A
stock appreciation right entitles its holder to a cash payment of the excess of
the fair market value of our common stock on the date of exercise, over the fair
market value of our common stock on the date of grant. A stock appreciation
right issued in tandem with a stock option will have the same term as the stock
option. The term of a stock appreciated right granted alone, without an option,
will be established by the board of directors or the appointed committee, in the
award agreement governing the stock appreciation right.

Upon or in anticipation of a change of control of the Company, the board of
directors or the appointed committee, may: (i) cause outstanding stock
appreciation rights to become immediately exercisable, and/or (ii) provide for
the cancellation of stock appreciation rights in exchange for a cash and/or
other substitute consideration.

Restricted Shares. The Incentive Plan also provides for the grant of
restricted shares. Restricted shares are shares of our common stock issued to an
individual that will be forfeited to us if certain vesting conditions
established by the board of directors or the appointed committee at the time of
grant (such as a specified period of continued employment or the fulfillment of
specified individual or corporate performance goals) are not met. Restricted
shares may be sold under the Incentive Plan (at their full value or at a
discount), or may be granted solely in consideration for services.

Upon or in anticipation of an event of a change of control of the Company,
the board of directors or the appointed committee may: (i) cause restrictions on
restricted shares to lapse, (ii) cancel restricted shares in exchange for
restricted shares of a successor corporation, and/or (iii) redeem restricted
shares for cash or other substitute consideration.

Effect of Federal Income Taxation. Stock options granted under the
Incentive Plan may be either incentive stock options intended to qualify under
Section 422 of the Code ("ISOs") or NQSOs. The following summary of tax
consequences with respect to stock options, stock appreciation rights and
restricted shares that may be granted under the Incentive Plan is not
comprehensive and is based upon laws and regulations in effect on the date of
this proxy. Such laws and regulations are subject to change.

There are generally no federal income tax consequences either to the option
holder or to the Company upon the grant of a stock option. On exercise of an
ISO, the option holder will not recognize any income, and the Company will not
be entitled to a deduction for tax purposes, although such exercise may give
rise to liability for the option holder under the alternative minimum tax
provisions of the Internal Revenue Code. Generally, if the option holder
disposes of shares

-17-

acquired upon exercise of an ISO within two years of the date of grant or one
year of the date of exercise, the option holder will recognize ordinary income
and the Company will then be entitled to a tax deduction equal to the excess of
the fair market value of the shares on the date of exercise over the option
exercise price (or the gain on sale, if less). Otherwise, the Company will not
be entitled to any deduction for tax purposes upon disposition of such shares,
and the entire gain for the option holder will be treated as a capital gain.

On exercise of a NQSO, the amount by which the fair market value of the
shares on the date of exercise exceeds the option exercise price will generally
be taxable to the option holder as ordinary income and will generally be
deductible by the Company. The dispositions of shares acquired upon exercise of
a NQSO will generally result in a capital gain or loss for the option holder,
but will have no tax consequence for the Company.

Under federal tax law, there are generally no federal income tax
consequences to an employee of the Company due to the grant of stock
appreciation rights. The employee will generally recognize ordinary income upon
exercise of a stock appreciation right in an amount equal to the amount of cash,
or the fair market value of the shares (determined at the time of exercise), the
employee receives upon exercise.

Under federal tax law, in the absence of an election made under section
83(b) of the Internal Revenue Code, there are generally no federal income tax
consequences to an employee of the Company due to the grant of restricted
shares. The employee will generally recognize ordinary income upon the date on
which the shares are no longer subject to a substantial risk of forfeiture. The
amount of income recognized by the employee will be equal to the excess of the
fair market value of the shares on the date on which they are first free from
the substantial risk of forfeiture over the amount, if any, the employee paid
for the shares. The Company will be entitled to a deduction in the same amount
at that time. The employee will have a basis in the shares equal to the amount,
if any, he or she paid for the shares plus the amount of income he or she
recognized in respect of the shares. The later disposition of restricted shares
will generally result in a capital gain or loss for the employee. Such a
disposition will have no tax consequences for the Company.

The tax treatment of restricted shares is different if the employee makes
an election under section 83(b) of the Internal Revenue Code with respect to the
restricted shares. If an employee makes such an election, he will recognize
compensation income, and the Company will be entitled to a deduction, at the
time the employee receives the restricted shares, even though the shares remain
subject to a substantial risk of forfeiture. The amount of income to be
recognized by the employee, and deducted by the Company, will be the excess of
the fair market value of the restricted shares determined at the time of the
employee's receipt of the shares, (without regard to the restrictions to which
the shares are subject), over the amount, if any, the employee paid for the
shares. The employee will have a basis in the shares equal to the sum of the
amount of income recognized in respect of the shares plus the amount, if any,
the employee paid for the shares. The later disposition of restricted shares
will generally result in a capital gain or loss for the employee. Such a
disposition will have no tax consequences for the Company. An election under
section 83(b) must be made by the employee no later than 30 days after the
employee first receives the restricted shares.

Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation in excess of $1,000,000 paid to the chief executive officer of the
Company or to one of the next-four highest paid executive officers of the
Company, unless the excess compensation is considered to be "performance-based."
Among other requirements contained in Section 162(m), the material terms of a
compensation plan in which such officers participate, including the number of
shares available for grant and the number of shares that may be issued to one
person, must be approved by stockholders for awards or compensation provided
under the plan to be considered "performance-based." The Company intends that
its deductions for amounts paid pursuant to ISOs, NQSOs and stock appreciation
rights granted under the Incentive Plan will not be limited by Section 162(m)
because such awards qualify as performance-based compensation. However,
restricted shares awarded under the Incentive Plan may not qualify as
performance-based compensation for purposes of 162(m) and therefore, may be
subject to the limits of Section 162(m).

If a disqualified individual (i.e., an officer, stockholder or highly
compensated individual) receives any payments or rights which are contingent
upon a "change in control", such payments may constitute "excess parachute
payments" under Section 280G of the Internal Revenue Code. A disqualified
individual will be subject to an excise tax (in addition to ordinary income tax
liability) on the amount of such excess parachute payments and the Company will
not be allowed to deduct such excess parachute payments. A portion of the
payments under the Incentive Plan will be considered contingent on a change in
control to the extent that the change in control accelerates the vesting of
options, stock appreciation rights or restricted shares.

-18-

Equity Compensation Plan Information

The following table gives information about our common stock that may be
issued upon the exercise of options, warrants and rights under our 1993 Plan as
of December 31, 2002. The table does not include the additional shares requested
for issuance under the 2003 Equity Incentive Plan in this Proposal 2.

Number of Securities
remaining available for
Number of Securities Weighted-average future issuance under
to be issued upon exercise price of equity compensation
exercise of outstanding outstanding options, plans (excluding securities
Plan Category options, warrants and rights warrants and rights reflected in second column)
------------- ---------------------------- ------------------- ---------------------------

Equity compensation
plans approved by 7,884,863 $0.96 5,398,673 (1)
securityholders

Equity compensation
plans not approved by -- -- --
securityholders

Total 7,884,863 $0.96 5,398,673 (1)

(1) The 1993 Plan terminated in August 2003.

-19-

PROPOSAL 3

RATIFICATION OF APPOINTMENT OF AUDITORS

The board of directors, upon the recommendation of the Audit Committee, has
appointed Grant Thornton LLP ("Grant Thornton"), independent certified public
accountants, as auditors of the Company's financial statements for 2003. Grant
Thornton has acted as auditors for the Company since December 2000.

The board of directors has determined to afford stockholders the
opportunity to express their opinions on the matter of auditors, and,
accordingly, is submitting to the stockholders at the Annual Meeting a proposal
to ratify the board of directors' appointment of Grant Thornton. If a majority
of the shares voted at the Annual Meeting, in person or by proxy, are not voted
in favor of the ratification of the appointment of Grant Thornton, the board of
directors will interpret this as an instruction to seek other auditors.

Grant Thornton has examined the financial statements of the Company for the
year December 31, 2002 The Company expects representatives of Grant Thornton to
be present at the Annual Meeting and to be available to respond to appropriate
questions from stockholders. The representatives of Grant Thorton will have the
opportunity to make a statement at the meeting if they desire to do so.

Fees Paid to Independent Accountants
------------------------------------

Audit Fees (1).................................................................. $ 111,819
Financial Information Systems Design and Implementation Fees.................... $0
All Other Fees (2).............................................................. $ 28,205
Total........................................................................... $140,024

-----------------------
(1) Audit fees billed by Grant Thornton LLP consisted of the examination of the
Company's annual report on Form 10-K and review of other Company filings
with the Securities and Exchange Commission.
(2) "All Other Fees" by Grant Thornton LLP for non-audit services were tax
related services.

Pursuant to the adoption of the revised Audit Committee Charter (which is
attached to this proxy as Appendix A), the Board of Directors has adopted a
revised policy which prohibits the Company from entering into non-audit related
consulting agreements for financial information systems design and
implementation, for certain other services considered to have an impact on
independence, and for all other services prohibited by the Sarbanes-Oxley Act of
2002 and new Securities and Exchange Commission regulations. The policy also
contains procedures requiring Audit Committee pre-approval of all audit and
permitted non-audit services provided by the Company's independent auditors.

Recommendation of the Board. The board of directors recommends
that the stockholders vote "FOR" the ratification of the appointment of Grant
Thornton LLP as independent auditors of the Company's financial statements for
the fiscal year ending December 31, 2003.

-20-

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial
ownership of Common Sock as of April 1, 2003, except as otherwise indicated in
the relevant footnote, by (1) each person or group that the Company knows
beneficially owns more than 5% of common stock, (2) each of the Company's
directors and the director nominee, (3) the Named Executive Officers, and (4)
all current executive officers and directors as a group. Unless otherwise
indicated, the address of each person identified below is c/o the Company at its
principal executive offices.

The percentages of beneficial ownership shown below are based
on 148,624,927 shares of common stock outstanding as of October 31, 2003, unless
otherwise stated. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes those
securities over which a person may exercise voting or investment power. In
addition, shares of common stock which a person has the right to acquire upon
the exercise of stock options and/or warrants within 60 days of the date of this
table are deemed outstanding for the purpose of computing the percentage
ownership of that person, but are not deemed outstanding for computing the
percentage ownership of any other person. Except as indicated in the footnotes
to this table or as affected by applicable community property laws, the persons
named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned.

Number of Shares
of common stock
Beneficially Percent of
Beneficial Owner Owned Class
---------------- ---------------- ----------

5% Stockholders
---------------

Alexander Finance, LP ........................................ 46,437,079 (1) 31.24%
Elliott Associates, L.P. ..................................... 20,380,238 (2) 13.71
Elliott International, L.P. .................................. 17,567,089 (2) 11.82

Directors and Named Executive Officers
--------------------------------------

Amr Abdelmonem................................................ 1,725,000 (3) 1.15%
Stuart Chase Van Wagenen ..................................... 170,418 (4) *
George M. Calhoun............................................. 971,501 (5) *
Tom L. Powers ................................................ 320,483 (6) *
James Fuentes................................................. -- (7) *
Frank Cesario................................................. 240,953 (8) *
All directors and executive officers as a group (6 persons) .. 3,464,355 (9) 2.33

--------------------
* Less than 1%.

(1) As reflected in a Schedule 13D/A dated August 1, 20003. The address for
Alexander Finance, L.P. is 1560 Sherman Avenue Evanston, IL 60201. Includes
warrant to purchase 4,381,000 shares of common stock.
(2) As reflected in a Schedule 13D/A dated September 19, 2003. The address of
Elliott Associates, L.P. is 712 Fifth Avenue, New York, New York 10019 and
the address of Elliott International, L.P. is c/o Elliot International
Capital Advisors, Inc. 712 Fifth Avenue New York, New York 10019. The
number of shares held by Elliott Associates, L.P. includes warrants to
purchase 5,619,000 shares of common stock held by its wholly-owned
subsidiary Manchester Securities Corporation.
(3) Includes outstanding options to purchase 1,725,000 shares which were
exercisable as of October 31, 2003, or within 60 days from such date.
(4) Represents options to purchase shares which were exercisable as of October
31, 2003, or within 60 days from such date. (5) Includes outstanding
options to purchase 837,501 shares which were exercisable as of October 31,
2003, or within 60 days from such date.
(6) Includes outstanding options to purchase 318,499 shares which were
exercisable as of October 31, 2003, or within 60 days from such date.
(7) Mr. Fuentes became a director in November 2003 and was granted options to
purchase shares of common stock, 4,167 of which were exercisable as of
October 31, 2003, or within 60 days from such date.
(8) Includes outstanding options to purchase 239,583 shares, which were
exercisable as of October 31, 2003, or within 60 days from such date.

-21-

(9) Includes outstanding options to purchase 3,390,586 shares, which were
exercisable as of October 31, 2003, or within 60 days from such date.

MISCELLANEOUS AND OTHER MATTERS

Solicitation. The cost of this proxy solicitation will be borne by the
Company. The regular employees of the Company may solicit proxies in person or
by telephone or facsimile. The Company may request banks, brokers, fiduciaries,
custodians, nominees and certain other record holders to send proxies, proxy
statements and other materials to their principals at the Company's expense.
Such banks, brokers, fiduciaries, custodians, nominees and other record holders
will be reimbursed by the Company for their reasonable out-of-pocket expenses of
solicitation.

Stockholder Proposals for 2004 Annual Meeting. The Company intends to mail
next year's proxy statement to our stockholders on or about December 13, 2004.
Applicable law requires any stockholder proposal intended to be presented at our
2004 Annual Meeting of Stockholders to be received by us at our executive
offices in Mt. Prospect, Illinois on or before July 12, 2004 in order to be
considered for inclusion in our proxy statement and form of proxy for that
annual meeting.

With respect to the Company's 2004 Annual Meeting of Stockholders, if the
Company is not provided notice of a stockholder proposal, which the stockholder
has not previously sought to include in the Company's proxy statement, by
October 12, 2004 then the management proxies will be allowed to use their
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.

Other Business. The board of directors is not aware of any other matters to
be presented at the Annual Meeting other than those mentioned in the Company's
Notice of Annual Meeting of Stockholders enclosed herewith. If any other matters
are properly brought before the Annual Meeting, however, it is intended that the
persons named in the proxy will vote as the board of directors directs.

By Order of the Board,

By: Frank Cesario
Secretary
Mt. Prospect, Illinois
November 17, 2003

-22-

APPENDIX A

ISCO INTERNATIONAL, INC.

2003 EQUITY INCENTIVE PLAN

SECTION 1. Purpose; Definitions. The purposes of the ISCO International,
Inc. 2003 Equity Incentive Plan (the "Plan") are to: (a) enable ISCO
International, Inc. (the "Company") and its affiliated companies to recruit and
retain highly qualified employees, directors and consultants; (b) provide those
employees, directors and consultants with an incentive for productivity; and (c)
provide those employees, directors and consultants with an opportunity to share
in the growth and value of the Company.

For purposes of the Plan, the following initially capitalized words and
phrases will be defined as set forth below, unless the context clearly requires
a different meaning:

(a) "Affiliate" means, with respect to a Person, a Person that directly or
indirectly controls, or is controlled by, or is under common control with such
Person.

(b) "Award" means a grant of Options, SARs or Restricted Shares pursuant to
the provisions of the Plan.

(c) "Award Agreement" means, with respect to any particular Award, the
written document that sets forth the terms of that particular Award.

(d) "Board" means the Board of Directors of the Company, as constituted
from time to time; provided, however, that if the Board appoints a Committee to
perform some or all of the Board's administrative functions hereunder pursuant
to Section 2, references in the Plan to the "Board" will be deemed to also refer
to that Committee in connection with administrative matters to be performed by
that Committee.

(e) "Cause" means (i) alcohol abuse or use of controlled drugs (other than
in accordance with a physician's prescription); (ii) refusal, failure or
inability to perform any material obligation or fulfill any duty (other than any
duty or obligation of the type described in clause (iv) below) to the Company
(other than due to a Disability), which failure, refusal or inability is not
cured within 10 days after delivery of notice thereof; (iii) gross negligence or
willful misconduct in the course of employment; (iv) any breach of any
obligation to or duty to the Company or any of its Affiliates (whether arising
by statute, common law, contract or otherwise) relating to confidentiality,
noncompetition, nonsolicitation or proprietary rights; (v) other conduct
involving any type of disloyalty to the Company or any of its Affiliates,
including, without limitation, fraud, embezzlement, theft or proven dishonesty;
or (vi) conviction of (or the entry of a plea of guilty or nolo contendere to) a
misdemeanor involving moral turpitude or a felony. Notwithstanding the
foregoing, if a Participant and the Company (or any of its Affiliates) have
entered into an employment agreement, consulting agreement or other similar
agreement that specifically defines "cause," then with respect to such
Participant, "Cause" shall

have the meaning defined in that employment agreement, consulting agreement or
other agreement.

(f) "Change in Control" means, with respect to any entity: (i) the sale,
transfer, assignment or other disposition (including by merger or consolidation,
but excluding any sales by stockholders made as part of an underwritten public
offering of the common stock of the entity) by stockholders of the entity, in
one transaction or a series of related transactions, of more than 50% of the
voting power represented by the then outstanding capital stock of the entity to
one or more Persons, (ii) the sale of substantially all the assets of the entity
(other than a transfer of financial assets made in the ordinary course of
business for the purpose of securitization), or (iii) the liquidation or
dissolution of the entity.

(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.

(h) "Committee" means a committee appointed by the Board in accordance with
Section 2 of the Plan.

(i) "Director" means a member of the Board.

(j) "Disability" means a condition rendering a Grantee Disabled.

(k) "Disabled" will have the same meaning as set forth in Section 22(e)(3)
of the Code.

(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(m) "Fair Market Value" means, as of any date: (i) the closing price of the
Shares as reported on the American Stock Exchange or the principal nationally
recognized stock exchange on which the Shares are traded on such date, or if no
Share prices are reported on such date, the closing price of the Shares on the
last preceding date on which there were reported Share prices; or (ii) if the
Shares are not listed or admitted to unlisted trading privileges on a nationally
recognized stock exchange, the closing price of the Shares as reported by The
Nasdaq Stock Market on such date, or if no Share prices are reported on such
date, the closing price of the Shares on the last preceding date on which there
were reported Share prices; or (iii) if the Shares are not listed or admitted to
unlisted trading privileges on a nationally recognized stock exchange or traded
on The Nasdaq Stock Market, the Fair Market Value will be determined by the
Board acting in its discretion, which determination will be conclusive.

(n) "Incentive Stock Option" means any Option intended to be and designated
as an "Incentive Stock Option" within the meaning of Section 422 of the Code.

(o) "Non-Employee Director" will have the meaning set forth in Rule
16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Board or the Committee may, to the
extent that it deems necessary to comply with Section 162(m) of the Code or
regulations thereunder, require that each "Non-Employee

A-2

Director" also be an "outside director" as that term is defined in regulations
under Section 162(m) of the Code.

(p) "Non-Qualified Stock Option" means any Option that is not an Incentive
Stock Option.

(q) "Option" means any option to purchase Shares (including Restricted
Shares, if the Committee so determines) granted pursuant to Section 5 hereof.

(r) "Participant" means an employee, consultant or Director of the Company
or any of its Affiliates to whom an Award is granted.

(s) "Person" means an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated association, or other
entity or association.

(t) "Restricted Shares" means Shares that are subject to restrictions
pursuant to Section 8 hereof.

(u) "SAR" means a share appreciation right granted under the Plan and
described in Section 6 hereof.

(v) "Share" means a share of the Company's common stock, par value $.001,
subject to substitution or adjustment as provided in Section 3(c) hereof.

(w) "Subsidiary" means, in respect of the Company, a subsidiary company,
whether now or hereafter existing, as defined in Sections 424(f) and (g) of the
Code.

SECTION 2. Administration. The Plan will be administered by the Board;
provided, however, that the Board may at any time appoint a Committee to perform
some or all of the Board's administrative functions hereunder; and provided
further, that the authority of any Committee appointed pursuant to this Section
2 will be subject to such terms and conditions as the Board may prescribe and
will be coextensive with, and not in lieu of, the authority of the Board
hereunder.

Any Committee established under this Section 2 will be composed of not
fewer than two members, each of whom will serve for such period of time as the
Board determines; provided, however, that if the Company has a class of
securities required to be registered under Section 12 of the Exchange Act, all
members of any Committee established pursuant to this Section 2 will be
Non-Employee Directors. From time to time the Board may increase the size of the
Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.

The Board will have full authority to grant Awards under this Plan. In
particular, subject to the terms of the Plan, the Board will have the authority:

(a) to select the persons to whom Awards may from time to time be granted
hereunder (consistent with the eligibility conditions set forth in Section 4);

A-3

(b) to determine the type of Award to be granted to any person hereunder;

(d) to establish the terms and conditions of each Award Agreement;

(e) to determine whether and under what circumstances an Option may be
exercised without a payment of cash under Section 5(d); and

(f) to determine whether, to what extent and under what circumstances
Shares and other amounts payable with respect to an Award may be deferred either
automatically or at the election of the Participant.

The Board will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it, from
time to time, deems advisable; to establish the terms of each Award Agreement;
to interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any Award Agreement); and to otherwise supervise the administration of
the Plan. The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and to the extent it
deems necessary to carry out the intent of the Plan.

All decisions made by the Board pursuant to the provisions of the Plan will
be final and binding on all persons, including the Company and Participants. No
Director will be liable for any good faith determination, act or omission in
connection with the Plan or any Award.

SECTION 3. Shares Subject to the Plan.

(a) Shares Subject to the Plan. The Shares to be subject to or related to
Awards under the Plan will be authorized and unissued Shares of the Company,
whether or not previously issued and subsequently acquired by the Company. The
maximum number of Shares that may be subject to Options or Restricted Shares
under the Plan is 5,038,994 and the Company will reserve for the purposes of the
Plan, out of its authorized and unissued Shares, such number of Shares. No
Participant may receive an award of Options or SARs under the Plan with respect
to more than 2,000,000 Shares in any calendar year.

(b) Effect of the Expiration or Termination of Awards. If and to the extent
that an Option expires, terminates or is canceled or forfeited for any reason
without having been exercised in full, the Shares associated with that Option
will again become available for grant under the Plan. Similarly, if and to the
extent any Restricted Share is canceled, forfeited or repurchased for any
reason, or if any Share is withheld pursuant to Section 11(d) in settlement of a
tax withholding obligation associated with an Award, that Share will again
become available for grant under the Plan. Finally, if any Share is received in
satisfaction of the exercise price payable upon exercise of an Option, that
Share will become available for grant under the Plan.

(c) Other Adjustment. In the event of any recapitalization, stock split or
combination, stock dividend or other similar event or transaction affecting the
Shares, equitable

A-4

substitutions or adjustments may be made by the Board, in its sole and absolute
discretion, to the aggregate number, type and issuer of the securities reserved
for issuance under the Plan, to the number, type and issuer of Shares subject to
outstanding Options or SARs, to the exercise price of outstanding Options or
SARs, and to the number, type and issuer of Restricted Shares.

(d) Change in Control. Notwithstanding anything to the contrary set forth
in the Plan, upon or in anticipation of any Change in Control of the Company or
any of its Affiliates, the Board may, in its sole and absolute discretion and
without the need for the consent of any Participant, take one or more of the
following actions contingent upon the occurrence of that Change in Control: (i)
cause any or all outstanding Options and SARs held by Participants affected by
the Change in Control to become vested and immediately exercisable, in whole or
in part; (ii) cause any or all outstanding Restricted Shares held by
Participants affected by the Change in Control to become non-forfeitable, in
whole or in part; (iii) cancel any Option held by a Participant affected by the
Change in Control in exchange for an option to purchase common stock of any
successor corporation, which new option satisfies the requirements of Treas.
Reg. ss. 1.425-1(a)(4)(i) (notwithstanding the fact that the original Option may
never have been intended to satisfy the requirements for treatment as an
Incentive Stock Option), (iv) cancel any Restricted Shares held by a Participant
affected by the Change in Control in exchange for restricted shares of the
common stock of any successor corporation, (v) redeem any Restricted Shares held
by a Participant affected by the Change in Control for cash and/or other
substitute consideration with a value equal to the Fair Market Value of an
unrestricted Share on the date of the Change in Control; or (vi) cancel any
Option or SAR held by a Participant affected by the Change in Control in
exchange for cash and/or other substitute consideration with a value equal to
(A) the number of Shares subject to that Option or SAR, multiplied by (B) the
difference, if any, between the Fair Market Value per Share on the date of the
Change in Control and the exercise price of that Option or SAR; provided, that
if the Fair Market Value per Share on the date of the Change in Control does not
exceed the exercise price of any such Option, the Board may cancel that Option
without any payment of consideration therefor.

SECTION 4. Eligibility. Employees, Directors, consultants, and other
individuals who provide services to the Company or its Affiliates are eligible
to be granted Awards under the Plan. Persons who are not employees of the
Company or a Subsidiary are not eligible to be granted Incentive Stock Options
but are eligible to be granted other types of Awards.

SECTION 5. Options. Options granted under the Plan may be of two types: (i)
Incentive Stock Options or (ii) Non-Qualified Stock Options. Any Option granted
under the Plan will be in such form as the Board may at the time of such grant
approve.

The Award Agreement evidencing any Option will incorporate the following
terms and conditions and will contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board deems appropriate in its
sole and absolute discretion:

(a) Option Price. The exercise price per Share purchasable under a
Non-Qualified Stock Option will be determined by the Board. The exercise price
per Share purchasable under an Incentive Stock Option will be not less than 100%
of the Fair Market Value of the Share on the date of the grant. However, any
Incentive Stock Option granted to any

A-5

Participant who, at the time the Option is granted, owns more than 10% of the
voting power of all classes of shares of the Company or of a Subsidiary will
have an exercise price per Share of not less than 110% of Fair Market Value per
Share on the date of the grant.

(b) Option Term. The term of each Option will be fixed by the Board, but no
Incentive Stock Option will be exercisable more than 10 years after the date the
Option is granted. However, any Incentive Stock Option granted to any
Participant who, at the time such Option is granted, owns more than 10% of the
voting power of all classes of shares of the Company or of a Subsidiary may not
have a term of more than five years. No Option may be exercised by any person
after expiration of the term of the Option.

(c) Exercisability. Options will vest and be exercisable at such time or
times and subject to such terms and conditions as determined by the Board at the
time of grant. If the Board provides, in its discretion, that any Option is
exercisable only in installments, the Board may waive such installment exercise
provisions at any time at or after grant, in whole or in part, based on such
factors as the Board determines, in its sole and absolute discretion.

(d) Method of Exercise. Subject to the exercisability provisions of Section
5(c), the termination provisions set forth in Section 7 and the applicable Award
Agreement, Options may be exercised in whole or in part at any time and from
time to time during the term of the Option, by the delivery of written notice of
exercise by the Participant to the Company specifying the number of Shares to be
purchased. Such notice will be accompanied by payment in full of the purchase
price, either by certified or bank check, or such other means as the Board may
accept. As determined by the Board, in its sole discretion, at or after grant,
payment in full or in part of the exercise price of an Option may be made in the
form of previously acquired Shares based on the Fair Market Value of the Shares
on the date the Option is exercised; provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of previously
acquired Shares may be authorized only at the time the Option is granted.

No Shares will be issued upon exercise of an Option until full payment
therefor has been made. A Participant will not have the right to distributions
or dividends or any other rights of a stockholder with respect to Shares subject
to the Option until the Participant has given written notice of exercise, has
paid in full for such Shares, and, if requested, has given the representation
described in Section 11(a) hereof.

(e) Incentive Stock Option Limitations. In the case of an Incentive Stock
Option, the aggregate Fair Market Value (determined as of the time of grant) of
the Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other plan of the Company or any Subsidiary will not exceed $100,000. For
purposes of applying the foregoing limitation, Incentive Stock Options will be
taken into account in the order granted. To the extent any Option does not meet
such limitation, that Option will be treated for all purposes as a Non-Qualified
Stock Option.

(f) Termination of Employment. Unless otherwise specified in the applicable
Award Agreement, Options will be subject to the terms of Section 7 with respect
to exercise upon or following termination of employment.

A-6

(g) Transferability of Options. Except as may otherwise be specifically
determined by the Board with respect to a particular Option, no Option will be
transferable by the Participant other than by will or by the laws of descent and
distribution, and all Options will be exercisable, during the Participant's
lifetime, only by the Participant or, in the event of his Disability, by his
personal representative.

SECTION 6. Stock Appreciation Rights.

(a) Grant. The grant of an SAR provides the holder the right to receive the
appreciation in value of Shares between the date of grant and the date of
exercise. SARs may be granted alone ("Stand-Alone SARs") or in conjunction with
all or part of any Option ("Tandem SARs"). In the case of a Non-Qualified Stock
Option, a Tandem SAR may be granted either at or after the time of the grant of
such Option. In the case of an Incentive Stock Option, a Tandem SAR may be
granted only at the time of the grant of such Option.

(b) Exercise.

(i) Tandem SARs. A Tandem SAR or applicable portion thereof will
terminate and will no longer be exercisable upon the termination or exercise of
the related Option or portion thereof, except that, unless otherwise determined
by the Board, in its sole discretion at the time of grant, a Tandem SAR granted
with respect to less than the full number of Shares covered by a related Option
will be reduced only after such related Option is exercised or otherwise
terminated with respect to the number of Shares not covered by the Tandem SAR.

A Tandem SAR may be exercised by a Participant by surrendering the
applicable portion of the related Option, only at such time or times and to the
extent that the Option to which such Tandem SAR relates will be exercisable in
accordance with the provisions of Section 5 and this Section 6. Options which
have been so surrendered, in whole or in part, will no longer be exercisable to
the extent the related Tandem SARs have been exercised.

Upon the exercise of a Tandem SAR, a Participant will be entitled to
receive, upon surrender to the Company of all (or a portion) of an Option in
exchange for cash and/or Shares, an amount equal to the excess of (A) the Fair
Market Value, as of the date such Option (or such portion thereof) is
surrendered, of the Shares covered by such Option (or such portion thereof) over
(B) the aggregate exercise price of such Option (or such portion thereof).

Upon the exercise of a Tandem SAR, the Option or part thereof to which
such Tandem SAR is related, will be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan on the number of
Shares to be issued under the Plan, but only to the extent of the number of
Shares issued under the Tandem SAR at the time of exercise based on the value of
the Tandem SAR at such time.

A Tandem SAR may be exercised only if and when the Fair Market Value
of the Shares subject to the Option exceeds the exercise price of such Option.

(ii) Stand-Alone SARs. A Stand-Alone SAR may be exercised by a
Participant giving notice of intent to exercise to the Company, provided that
all or a portion of such Stand-Alone SAR will have become vested and exercisable
as of the date of exercise.

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Upon the exercise of a Stand-Alone SAR, a Participant will be entitled
to receive, in either cash and/or Shares, an amount equal to the excess, if any,
of (A) the Fair Market Value, as of the date such SAR (or portion of such SAR)
is exercised, of the Shares covered by such SAR (or portion of such SAR) over
(B) the Fair Market Value of the Shares covered by such SAR (or a portion of
such SAR) as of the date such SAR (or a portion of such SAR) was granted.

(c) Terms and Conditions. The Award Agreement evidencing any SAR will
incorporate the following terms and conditions and will contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the Board
deems appropriate in its sole and absolute discretion:

(i) Term of SAR. Unless otherwise specified in the Award Agreement,
the term of a Tandem SAR will be identical to the term of the associated Option,
and the term of a Stand-Alone SAR will be ten years.

(ii) Exercisability. SARs will vest and become exercisable at such
time or times and subject to such terms and conditions as will be determined by
the Board at the time of grant; provided that, unless otherwise specified in the
Award Agreement, a Tandem SAR will vest and become exercisable in the same
manner and at the same time as the associated Option.

(iii) Termination of Employment. Unless otherwise specified in the
Award Agreement, SARs will be subject to the terms of Section 7 with respect to
exercise upon termination of employment.

SECTION 7. Termination of Service. Unless otherwise specified with respect
to a particular Award, Options or SARs granted hereunder will remain exercisable
after termination of employment only to the extent specified in this Section 7.

(a) Termination by Reason of Death. If a Participant's service with the
Company or any Affiliate terminates by reason of death, any Option or SAR held
by such Participant may thereafter be exercised, to the extent then exercisable
or on such accelerated basis as the Board may determine, at or after grant, by
the legal representative of the estate or by the legatee of the Participant
under the will of the Participant, for a period expiring (i) at such time as may
be specified by the Board at or after the time of grant, or (ii) if not
specified by the Board, then 12 months from the date of death, or (iii) if
sooner than the applicable period specified under (i) or (ii) above, then upon
the expiration of the stated term of such Option.

(b) Termination by Reason of Disability. If a Participant's service with
the Company or any Affiliate terminates by reason of Disability, any Option or
SAR held by such Participant may thereafter be exercised by the Participant or
his personal representative, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Board may determine at or after
grant, for a period expiring (i) at such time as may be specified by the Board
at or after the time of grant, or (ii) if not specified by the Board, then 12
months from the date of termination of service, or (iii) if sooner than the
applicable period specified under (i) or (ii) above, then upon the expiration of
the stated term of such Option or SAR.

A-8

(c) Cause. If a Participant's service with the Company or any Affiliate is
terminated for Cause: (i) any Option or SAR not already exercised will be
immediately and automatically forfeited as of the date of such termination, and
(ii) any Shares for which the Company has not yet delivered share certificates
will be immediately and automatically forfeited and the Company will refund to
the Participant the Option exercise price paid for such Shares, if any.

(d) Other Termination. If a Participant's service with the Company or any
Affiliate terminates for any reason other than death, Disability or Cause, any
Option or SAR held by such Participant may thereafter be exercised by the
Participant, to the extent it was exercisable at the time of such termination,
or on such accelerated basis as the Board may determine at or after grant, for a
period expiring (i) at such time as may be specified by the Board at or after
the time of grant, or (ii) if not specified by the Board, then 60 days from the
date of termination of service, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, then upon the expiration of the stated term
of such Option or SAR.

SECTION 8. Restricted Shares.

(a) Issuance. Restricted Shares may be issued either alone or in
conjunction with other Awards. The Board will determine the time or times within
which Restricted Shares may be subject to forfeiture, and all other conditions
of such Awards.

(b) Awards and Certificates. The Award Agreement evidencing the grant of
any Restricted Shares will contain such terms and conditions, not inconsistent
with the terms of the Plan, as the Board deems appropriate in its sole and
absolute discretion. The prospective recipient of an Award of Restricted Shares
will not have any rights with respect to such Award, unless and until such
recipient has executed an Award Agreement and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such Award. The purchase price for Restricted Shares
may, but need not, be zero.

A share certificate will be issued in connection with each Award of
Restricted Shares. Such certificate will be registered in the name of the
Participant receiving the Award, and will bear the following legend and/or any
other legend required by this Plan, the Award Agreement, the Company's
stockholders' agreement, if any, or by applicable law:

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY
ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE ISCO INTERNATIONAL, INC.
2003 EQUITY INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN [THE
PARTICIPANT] AND ISCO INTERNATIONAL, INC. (WHICH TERMS AND CONDITIONS MAY
INCLUDE, WITHOUT LIMITATION, CERTAIN TRANSFER RESTRICTIONS, REPURCHASE
RIGHTS AND FORFEITURE CONDITIONS). COPIES OF THAT PLAN AND AGREEMENT ARE ON
FILE IN THE PRINCIPAL

A-9

OFFICES OF ISCO INTERNATIONAL, INC. AND WILL BE MADE AVAILABLE TO THE
HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF
THE COMPANY.

Share certificates evidencing Restricted Shares will be held in custody by
the Company or in escrow by an escrow agent until the restrictions thereon have
lapsed. As a condition to any Restricted Shares award, the Participant may be
required to deliver to the Company a share power, endorsed in blank, relating to
the Shares covered by such Award.

(c) Restrictions and Conditions. The Restricted Shares awarded pursuant to
this Section 8 will be subject to the following restrictions and conditions:

(i) During a period commencing with the date of an Award of Restricted
Shares and ending at such time or times as specified by the Board (the
"Restriction Period"), the Participant will not be permitted to sell, transfer,
pledge, assign or otherwise encumber Restricted Shares awarded under the Plan.
The Board may condition the lapse of restrictions on Restricted Shares upon the
continued employment or service of the recipient, the attainment of specified
individual or corporate performance goals, or such other factors as the Board
may determine, in its sole and absolute discretion.

(ii) Except as provided in this Paragraph (ii) or Section 8(c)(i),
once the Participant has been issued a certificate or certificates for
Restricted Shares, the Participant will have, with respect to the Restricted
Shares, all of the rights of a stockholder of the Company, including the right
to vote the Shares, and the right to receive any cash distributions or
dividends. The Board, in its sole discretion, as determined at the time of
award, may permit or require the payment of cash distributions or dividends to
be deferred and, if the Board so determines, reinvested in additional Restricted
Shares to the extent Shares are available under Section 3 of the Plan. Any
distributions or dividends paid in the form of securities with respect to
Restricted Shares will be subject to the same terms and conditions as the
Restricted Shares with respect to which they were paid, including, without
limitation, the same Restriction Period.

(iii) Subject to the applicable provisions of the Award Agreement, if
a Participant's service with the Company terminates prior to the expiration of
the Restriction Period, all of that Participant's Restricted Shares which then
remain subject to forfeiture will then be forfeited automatically.

(iv) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Shares subject to such Restriction Period (or if
and when the restrictions applicable to Restricted Shares lapse pursuant to
Sections 3(d)), the certificates for such Shares will be replaced with new
certificates, without the restrictive legends described in Section 8(b)
applicable to such lapsed restrictions, and such new certificates will be
promptly delivered to the Participant, the Participant's representative (if the
Participant has suffered a Disability), or the Participant's estate or heir (if
the Participant has died).

SECTION 9. Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but, except as otherwise provided in Section
3(d) of the Plan,

A-10

no amendment, alteration or discontinuation will be made which would impair the
rights of a Participant with respect to an Award, without that Participant's
consent, or which, without the approval of such amendment within one year (365
days) of its adoption by the Board, by a majority of the votes cast at a duly
held stockholder meeting at which a quorum representing a majority of the
Company's outstanding voting shares is present (either in person or by proxy),
would: (i) increase the total number of Shares reserved for the purposes of the
Plan (except as otherwise provided in Section 3(c)), or (ii) change the persons
or class of persons eligible to receive Awards.

SECTION 10. Unfunded Status of Plan. The Plan is intended to be "unfunded."
With respect to any payments not yet made to a Participant by the Company,
nothing contained herein will give any such Participant any rights that are
greater than those of a general creditor of the Company. In its sole discretion,
the Board may authorize the creation of grantor trusts or other arrangements to
meet the obligations created under the Plan to deliver Shares or payments in
lieu of Shares or with respect to Awards.

SECTION 11. General Provisions.

(a) The Board may require each Participant to represent to and agree with
the Company in writing that the Participant is acquiring securities of the
Company for investment purposes and without a view to distribution thereof and
as to such other matters as the Board believes are appropriate. The certificate
evidencing any Award and any securities issued pursuant thereto may include any
legend which the Board deems appropriate to reflect any restrictions on transfer
and compliance with securities laws.

All certificates for Shares or other securities delivered under the Plan
will be subject to such share-transfer orders and other restrictions as the
Board may deem advisable under the rules, regulations, and other requirements of
the Securities Act of 1933, as amended, the Exchange Act, any stock exchange
upon which the Shares are then listed, and any other applicable federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

(b) Nothing contained in the Plan will prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.

(c) Neither the adoption of the Plan nor the execution of any document in
connection with the Plan will (i) confer upon any person any right to continued
employment or engagement with the Company or such Affiliate, or (ii) interfere
in any way with the right of the Company or such Affiliate to terminate the
employment of any of its employees at any time.

(d) No later than the date as of which an amount first becomes includible
in the gross income of the Participant for federal income tax purposes with
respect to any Award under the Plan, the Participant will pay to the Company, or
make arrangements satisfactory to the Board regarding the payment of any
federal, state or local taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Board, the minimum

A-11

required withholding obligations may be settled with Shares, including Shares
that are part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan will be conditioned on such payment or
arrangements and the Company will, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Participant.

SECTION 12. Effective Date of Plan. The Plan will become effective on the
date that it is adopted by the Board; provided, however, that all Options
intended to be Incentive Stock Options will automatically be converted into
Non-Qualified Stock Options if the Plan is not approved by the Company's
stockholders within one year (365 days) of its adoption by the Board in a manner
consistent with Treas. Reg. ss. 1.422-5.

SECTION 13. Term of Plan. The Plan will continue in effect until terminated
in accordance with Section 9; provided, however, that no Incentive Stock Option
will be granted hereunder on or after the 10th anniversary of the date of
stockholder approval of the Plan (or, if the stockholders approve an amendment
that increases the number of shares subject to the Plan, the 10th anniversary of
the date of such approval); but provided further, that Incentive Stock Options
granted prior to such 10th anniversary may extend beyond that date.

SECTION 14. Invalid Provisions. In the event that any provision of this
Plan is found to be invalid or otherwise unenforceable under any applicable law,
such invalidity or unenforceability will not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions will be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.

SECTION 15. Governing Law. The Plan and all Awards granted hereunder will
be governed by and construed in accordance with the laws and judicial decisions
of the State of Delaware, without regard to the application of the principles of
conflicts of laws.

SECTION 16. Board Action. Notwithstanding anything to the contrary set
forth in the Plan, any and all actions of the Board or Committee, as the case
may be, taken under or in connection with the Plan and any agreements,
instruments, documents, certificates or other writings entered into, executed,
granted, issued and/or delivered pursuant to the terms hereof, will be subject
to and limited by any and all votes, consents, approvals, waivers or other
actions of all or certain stockholders of the Company or other persons required
by:

(a) the Company's Certificate of Incorporation (as the same may be amended
and/or restated from time to time);

(b) the Company's Bylaws (as the same may be amended and/or restated from
time to time); and

(c) any other agreement, instrument, document or writing now or hereafter
existing, between or among the Company and its stockholders or other persons (as
the same may be amended from time to time).

SECTION 17. Notices. Any notice to be given to the Company pursuant to the
provisions of the Plan will be addressed to the Company in care of its Secretary
(or such

A-12

other person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to a Participant will be delivered
personally or addressed to him or her at the address given beneath his or her
signature on his or her Award Agreement, or at such other address as such
Participant may hereafter designate in writing to the Company. Any such notice
will be deemed duly given on the date and at the time delivered via personal,
courier or recognized overnight delivery service or, if sent via telecopier, on
the date and at the time telecopied with confirmation of delivery or, if mailed,
on the date five (5) days after the date of the mailing (which will be by
regular, registered or certified mail). Delivery of a notice by telecopy (with
confirmation) will be permitted and will be considered delivery of a notice
notwithstanding that it is not an original that is received.

ADOPTION AND APPROVAL OF PLAN

Date Plan adopted by Board: November 5, 2003

Date Plan approved by Stockholders: _____________

Effective Date of Plan: November 5, 2003

A-13

APPENDIX B

AUDIT COMMITTEE CHARTER
ISCO INTERNATIONAL, INC.

(November 5, 2003)

Purpose

The Audit Committee (the "Committee") of ISCO International, Inc. (the
"Company") shall assist the Board of Directors (the "Board") in monitoring (i)
the integrity of the Company's financial statements in compliance with
Securities and Exchange Commission (the "SEC") and other regulatory
requirements; (ii) the annual independent audit of the Company's financial
statements, (iii) the independent auditors independence and qualifications and
shall also work to provide (i) effective communication between the Board and the
Company's independent public accountants and (ii) support for management's
efforts to enhance the quality of the Company's internal control structure.

The Committee does not plan or conduct audits, nor does it determine that the
Company's financial statements and disclosures are complete, accurate and in
accordance with generally accepted accounting principles and applicable rules
and regulations. These functions are the responsibility of Company management
and the independent auditor.

Composition and Term

The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall (i) be free from any relationship that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Audit Committee, (ii) meet the
independence requirements of Section 10A(m)(3) of the Securities and Exchange
Act of 1934 (the "Exchange Act") and the rules and regulation of the Commission
, (iii) meet the independence and financial literacy requirements of Rule 121A
and 121B(2) of the listing standards of The American Stock Exchange, as modified
or supplemented from time to time; provided, that one (but no more than one)
member of the Audit Committee may be a non-independent director, provided that
the Board determines the appointment of such non-independent director to the
Audit Committee is in the best interests of the Corporation and its
stockholders, the Board discloses the reasons for that determination in the
Corporation's next annual proxy statement, the non-independent director may not
serve as Chairman of the Audit Committee, and the non-independent director may
not serve on the Audit Committee for more than two years. Current employees or
officers, or their immediate family members, however, are not able to serve on
the Audit Committee under this exception. All members of the Audit Committee
shall have a working familiarity with basic finance and accounting practices,
and at least one member of the Audit Committee shall have accounting or related
financial management expertise. Committee members may enhance their familiarity
with finance and accounting by participating in educational programs conducted
by the Corporation or an outside consultant. Audit Committee members shall not
simultaneously serve on the audit committees of more than two other public
companies.

B-1

In addition, at least one member of the Committee will be financially
sophisticated as set forth in Rule 121B(2) of the listing standards of The
American Stock Exchange, as modified or supplemented from time to time.

The members of the Committee shall be appointed by the Board and shall serve
until their successors shall be duly elected and qualified. Unless a Chairman of
the Committee is elected by the full Board, the members of the Committee may
designate a Chairman of the Committee by majority vote of the full Committee
Membership.

Relationship with Independent Accountants

The Company's independent public accountants shall be accountable to the
Committee, and the Committee shall have ultimate authority to select, evaluate
and replace the Company's independent public accountants. The Committee shall be
directly responsible for the compensation and oversight of the work of the
independent auditor (including resolution of disagreements between management
and the independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work. The independent auditor
shall report directly to the Committee.

Meetings

The Committee shall meet at such times and from time to time as it deems to be
appropriate, but not less than four times a year. A majority of the members of
the Committee shall constitute a quorum for the transaction of business.
Approval by a majority of the members present at a meeting at which a quorum is
present shall constitute approval by the Committee. The Committee may also act
by unanimous written consent without a meeting. Minutes of each meeting
reflecting, among other things, all actions taken by the Committee should be
recorded by the Secretary to the Committee. The Committee shall report to the
Board at the first board meeting following each such Committee meeting.

The Company's independent public accountants shall attend at least one of the
Committee's meetings each year. The Committee may request members of management
or others to attend meetings and to provide pertinent information as necessary.
The Committee shall provide each of management and the independent public
accountants with appropriate opportunities to meet privately with the Committee.

Duties and Responsibilities

The duties of the Committee shall include the following:

o Review the results of the quarterly reviews and year-end audit of the
Company, including:

o The Annual Report on Form 10-K and Quarterly Reports on Form 10-Q
to be filed with SEC, the management recommendation letter on
accounting procedures and controls prepared by the independent
public accountants, and any other material written communications
or reports and management's responses concerning such reports.

B-2

o Any material accounting issues identified by management or the
independent public accountants;

o Any transactions between the Company and its officers, directors
or 5% shareholders.; and

o all matters required to be discussed by Statement of Auditing
Standards ("SAS") No. 61, as amended by FAS No.90, by auditors
with audit committees and any other matters required to be
communicated by the independent public accountants to the
Committee under generally accepted auditing standards, as
amended.

o Review with management and the independent public accountants such
accounting policies (and changes therein) of the Company, including
any financial reporting issues which could have a material impact on
the Company's financial statements, as are deemed appropriate for
review by the Committee prior to any interim or year-end filings with
the SEC or other regulators and discuss alternative treatments of
financial information within generally accepted accounting principles
that have been discussed with management, ramifications of the use of
such alternative disclosures and treatments, and the treatment
preferred by the independent auditor.

o Review disclosures made to the Committee by the Company's CEO and CFO
during their certification process for the Form 10-K and Form 10-Q
about any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant role in
the Company's internal controls.

o Discuss with management the Company's use of "pro forma" or "adjusted"
non-GAAP information, as well as financial information and earnings
guidance provided to analysts and rating agencies. Such discussion may
be done generally (consisting of discussing the types of information
to be disclosed and the types of presentations to be made).

o Ensure that the Company's independent public accountants submit on a
periodic, but not less than annual, basis to the Committee a written
statement delineating all relationships between the accountants and
the Company, and discuss with the accountants any disclosed
relationships that may impact the objectivity and independence of the
accountants with the objective of ensuring the continuing objectivity
and independence of the accountants.

o Pre-approval of all auditing services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Company
by its independent auditor, subject to the de minimus exceptions for
non-audit services described in Section 10A(i)(1)(B) of the Exchange
Act which are approved by the Committee prior to the completion of the
audit. The Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the
authority to grant preapprovals of audit and permitted non-audit
services, provided that decisions of such subcommittee to grant
preapprovals shall be presented to the full Committee at its next
scheduled meeting.

B-3

o Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law.

o Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent auditor who participated in any
capacity in the audit of the Company.

o Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.

o Meet annually with counsel when appropriate to review legal and
regulatory matters, if any, that could have a material impact on the
financial statements.

o Establish, review, and update periodically a Code of Ethical Conduct,
and ensure that management has established a system to enforce this
Code.

o Make a periodic, but not less than annual, review of this Charter.

o Review the effectiveness of the Committee on an annual basis.

o Review and approve any transactions between the Corporation and its
officers, directors or 5% shareholders which would be reportable in
the Corporation's proxy statement.

o Prepare a report to the stockholders of the Company to be included in
the Company's annual proxy statement.

The Committee shall also undertake such additional activities within the scope
of its primary function as the Committee from time to time determines. The
Committee may retain independent counsel, accountants or others to assist it in
the conduct of any investigation. The Company shall provide for appropriate
funding, as determined by the Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report and
to any advisors employed by the Committee.

B-4

ISCO INTERNATIONAL, INC.

|X| Please mark your votes as in this example.

1. Election of Directors:

For Withhold
Nominee Authority

George M. Calhoun |_| |_|

FOR AGAINST ABSTAIN

2. Approval of the ISCO International, Inc. 2003 Equity |_| |_| |_|
Incentive Plan.
3. Ratify the Appointment of Grant Thornton LLP as the |_| |_| |_|
Company's Independent Auditors.

In their discretion, the proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournments
thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NOS. 1, 2 AND 3 IN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ABOVE. THIS PROXY
WILL BE VOTED FOR PROPOSAL NOS. 1, 2, AND 3 IF NO SPECIFICATION IS MADE AND WILL
BE VOTED AT THE DISCRETION OF THE PROXY HOLDERS ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.

Attendance of the undersigned at the meeting, or at any adjournment or
postponement thereof, will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate at such meeting or session the
intention of the undersigned to vote said share(s) in person. If the undersigned
hold(s) any of the shares of the Company in a fiduciary, custodial or joint
capacity or capacities, this proxy is signed by the undersigned in every such
capacity, as well as individually.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

SIGNATURE _____________________________________________ DATE: ______________

(if jointly owned)

Note: Please sign name(s) exactly as appearing hereon. When signing as attorney,
executor, administrator or other fiduciary, please give your full title as such.
Joint owners should each sign personally. When signing as a corporation or a
partnership, please sign in the name of the entity by an authorized person.

|_| Please check this box if you plan to attend the meeting.

PROXY PROXY

ISCO INTERNATIONAL, INC.
451 KINGSTON COURT - MT. PROSPECT, ILLINOIS 60056

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

PROXY FOR THE DECEMBER 15, 2003 ANNUAL MEETING OF STOCKHOLDERS

The undersigned hereby appoints Dr. Amr Abdelmonem and Mr. Frank Cesario
and either of them as proxies, each with power of substitution, and hereby
authorizes them to represent the undersigned and to vote, as designated below,
all the shares of common stock held of record by the undersigned on October 24,
2003 at the Annual Meeting of Stockholders of ISCO International, Inc., to be
held on December 15, 2003, at the Doubletree Guest Suites, 1400 Milwaukee
Avenue, Glenview, IL 60025, beginning at 1:00 p.m. local time, or at any
adjournment or postponement thereof, upon the matters set forth in the Notice of
Annual Meeting of Stockholders and Proxy Statement, receipt of which is hereby
acknowledged.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE AS TO ANY
PARTICULAR ITEM, THIS PROXY WILL BE VOTED "FOR" THE NOMINEE LISTED ON THIS
PROXY, "FOR" THE PROPOSAL TO APPROVE THE ISCO INTERNATIONAL, INC. 2003 EQUITY
INCENTIVE PLAN AND "FOR" THE RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP
AS THE INDEPENDENT AUDITORS OF THE COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2002.

PLEASE SIGN, DATE AND RETURN THIS PROXY IMMEDIATELY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.

(Continued and to be signed on reverse side.)