ISCO International Form 14-A 06/08//2007
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
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ISCO
INTERNATIONAL, INC.
(Name
Of Registrant As Specified In Its Charter)
(Name
Of Person(S) Filing Proxy Statement, if Other Than the
Registrant)
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of Filing Fee (Check the appropriate box):
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Form,
Schedule or Registration Statement
No.:
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1001
Cambridge Drive
Elk
Grove
Village, Illinois 60007
April 27,
2007
Dear
Stockholder:
On
behalf
of the board of directors, I cordially invite you to attend the 2006 Annual
Meeting of Stockholders of ISCO International, Inc., to be held on Friday,
June 8, 2007, beginning at 10:00 a.m., local time, at the Marriott Suites
Chicago O’Hare, 6155 North River Road, Rosemont, IL 60018.
The
matters that we expect will be acted upon at the meeting are described in the
attached Proxy Statement and include:
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(1)
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To
elect six (6) directors to the Company’s board of directors for a
term of one (1) year and until his successor is duly elected and
qualified;
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(2)
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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, 2007;
and
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(3)
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To
transact such other business as may properly come before the meeting
or
any adjournment or postponement
thereof.
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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 our business strategy. Please return your
proxy card as soon as possible.
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Sincerely, |
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By: |
/s/ John
Thode |
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John
Thode |
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Chief
Executive Officer |
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 8, 2007
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 on Friday, June 8, 2007 beginning at 10:00
a.m., local time, at the Marriott Suites Chicago O’Hare, 6155 North River Road,
Rosemont, IL 60018 for the following purposes:
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(1)
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To
elect six (6) directors to the Company’s board of directors for a
term of one (1) year and until his successor is duly elected and
qualified;
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(2)
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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, 2007;
and
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(3)
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To
transact such other business as may properly come before the meeting
or
any adjournment or postponement
thereof.
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The
board
of directors has fixed the close of business on April 16, 2007 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 April 16, 2007 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 1001 Cambridge
Drive, Elk Grove Village, 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.
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By: |
/s/ Order
of the Board, |
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Frank
Cesario |
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Corporate
Secretary |
Elk
Grove
Village, IL
1001
CAMBRIDGE DRIVE
ELK
GROVE
VILLAGE, ILLINOIS 60007
PROXY
STATEMENT
The
accompanying proxy is solicited on behalf of the board of directors (the
“Board”) of ISCO International, Inc., a Delaware corporation (the “Company”),
for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held
at 10:00 a.m., local time, on June 8, 2007 at the Marriott Suites Chicago
O’Hare, 6155 North River Road, Rosemont, IL 60018, and any adjournment or
postponement thereof. This Proxy Statement and accompanying proxy are first
being mailed to stockholders on or about April 28, 2007.
Record
Date and Outstanding Shares
The
Board has fixed the close of business on April 16, 2007 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 190,600,000 shares of common
stock, par value $0.001 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 $0.001 per share, was outstanding.
Voting
of Proxies
Mr. John Thode and Mr. Frank Cesario, the persons named as proxies on
the proxy card accompanying this Proxy Statement, were selected by the Board
of
the Company to serve in such capacity. Mr. Thode and Mr. Cesario are
officers of the Company and Mr. Thode 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 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 a 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 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 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 May
25,
2007 and
continuing through the date of the Annual Meeting at the principal offices
of
the Company, 1001 Cambridge Drive, Elk Grove Village, Illinois
60007.
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,
1001
Cambridge Drive, Elk Grove Village, Illinois 60007, telephone
(847) 391-9400.
Annual
Report
The
Company’s Annual Report to Stockholders for the year ended December 31,
2006, as filed on Form 10K, 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 for the year ended December 31, 2006 and in the
Company’s other filings with the Securities and Exchange Commission. 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,” “looks,” 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.
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board
currently consists of seven directors (see Powers comment, below). At the Annual
Meeting, six directors are to be elected for a term of one year expiring at
the
2008 Annual Meeting of Stockholders. See “Nominees for Election”
below.
ISCO
International acknowledges and appreciates the contributions of Tom Powers
for
his service as a director from 1996-2007. Mr. Powers reached the retirement
age
of 70 and, in accordance with the Company’s Governance Guidelines, will not
stand for re-election. Consistent with this event, the Board has reduced its
number from seven members to six members. Therefore, only six positions are
available for election.
If
at the
time of the Annual Meeting a nominee is unable or declines to serve, a proxy
named on the proxy card accompanying this Proxy Statement will vote for such
substitute nominee as the Board recommends, or vote to allow the vacancy created
thereby to remain open until filled by the board of directors, as the Board
recommends. The Board has no reason to believe that any nominee will be unable
or will decline to serve as a director if elected.
Dr.
Martin Singer joined the Board during October 2006 and resigned from the Board
during April 2007 and is therefore not discussed in this Proxy Statement except
as it pertains to historical compensation of Board members.
Vote
Required
The
affirmative vote of a plurality of the shares of common stock in person or
by
proxy is required to elect a nominee
for director.
Nominees
for Election
The
name
of the nominees for the office of director, together with certain information
concerning such nominees, is set forth below:
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Name
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Age
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Position
with the Company
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Served as Director Since
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John
Thode
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49
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Director,
Chief Executive Officer
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2005
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Amr
Abdelmonem
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41
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Director,
Chief Technology Officer
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2002
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James
Fuentes
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51
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Chairman
of the Board of Directors
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2003
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George
Calhoun
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54
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Director
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1999
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Michael
Fenger
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40
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Director
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2004
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Ralph
Pini
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54
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Director
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2004
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Mr. Thode
received his BSEE from the University of Illinois, his MSEE from Illinois
Institute of Technology, and his Master of Management/Master of Business
Administration from J.L. Kellogg School of Management at Northwestern
University. He joined Motorola in 1979, and for the next 25 years held numerous
titles throughout its wireless industry businesses, including the Wireless
Network Systems Group and the CDMA Systems Group. He has broad experience in
wireless network infrastructure and handsets. He has led large product
development and engineering teams. He has also negotiated substantial supplier
and customer contracts and structured numerous strategic relationships. Most
recently he served as Vice President & General Manager, 3G Consumer
Products, Personal Communications Sector, where he created Motorola’s UMTS
product lines. Before that, he was Senior Director & General Manager,
Wireless Access Systems Division.
Dr. Abdelmonem
joined the Company in January 1995 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 additionally served as Chief
Executive Officer from June 2002 through January 2005. Dr. Abdelmonem
joined the Board 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 M.B.A. from
the University of Chicago.
Mr. Fuentes
was elected to the Board in November 2003 and has served as Chairman of the
Board since January 2006. He is Founder, President and CEO of Clarity
Communication Systems, Inc., an Aurora, IL 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 at Lockheed Aircraft
Company. Mr. Fuentes’ engineering experiences involve design and
development of electronic counter-measures and stability of 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. He received a B.S. degree majoring in Aeronautical Engineering
with a second major in Computer Science from Embry-Riddle Aeronautical
University. Mr. Fuentes serves as Chairman of the Board and is a member of
the Board’s Corporate Governance and Compensation Committees.
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. Dr. Calhoun joined the Stevens
Institute of Technology in July 2003 as Executive-in-Residence, where he teaches
in the Undergraduate Program for Business & Technology, at the Howe
School of Technology Management. Dr. Calhoun has spent 25 years in the
high-tech segment of the wireless communications industry. He previously worked
for InterDigital Communications Corporation (NASDAQ: IDCC), where he was
involved for twelve years in the pioneering development of digital cellular
technology. Subsequently, he was Vice-Chairman of Geotek Communications, and
was
Chairman of an engineering joint venture based in Israel, to develop a spread
spectrum frequency-hopping radio system for fleet radio communications. He
also
served as Chairman of both the Board and Audit Committee for Airnet
Communications, a smart antenna and software-defined radio technology company.
He is also a member of the Board of Clearstory Systems (NASDAQ: CSYS.OB), a
company in the business of electronic content management and digital archiving
software. In 2005, he joined the Board of PlayLogic Entertainment, Inc. (NASDAQ:
PLGC.OB), a company in the business of developing and publishing videogames.
Dr. Calhoun holds one patent (on wireless system architectures), and has
published several books on wireless communications, including the best-selling
Digital
Cellular Radio
(Artech,
1988). His most recent book is Third
Generation Wireless Systems: Post-Shannon Signal Architectures
(Artech,
2003). He has also been a Visiting Professor at the Leiden University School
of
Management in the Netherlands. Dr. Calhoun has a BA degree from the
University of Pennsylvania, and a Ph.D. from the Wharton School.
Dr. Calhoun is the Chairman of the Board’s Audit Committee.
Mr. Fenger
was elected to the Board in 2004 and is Corporate Vice President of Customer
Advocacy and Chief Quality Officer of Motorola, Inc. In this capacity he has
helped Motorola in its effort to focus on the most promising initiatives and
improve the return of those projects. Previously, he served twelve years at
General Electric with GE Capital and the Lighting Business Group, where he
most
recently served as general manager of global supply chain operations for GE
Lighting. He holds one patent and a degree in economics from Miami University
in
Ohio. Mr. Fenger serves on the Board’s Audit and Corporate Governance
Committees.
Mr. Pini
was elected to the Board in 2004 and is currently Associate Dean at the
University of Illinois, Chicago, and the former Senior Vice President and Chief
Technology Officer, Personal Communications Sector, Motorola, Inc. He has spent
twenty-eight years in the global wireless industry. During this period he has
been with Motorola’s Personal Communications Group, where he managed the global
R&D organization and, prior to retirement, was the CTO for the group
responsible for innovation, technology platforms, and advanced technologies.
He
has broad experiences across GSM, CDMA, and UMTS platforms. He received his
MBA
from Lake Forest Graduate School of Management, and both his MS in Electrical
Engineering and his BS in Electrical and Computer Science from the University
of
Illinois, Chicago. Mr. Pini serves as Chairman of the Board’s Corporate
Governance Committee and is also a member of the Compensation
Committee.
Director
Compensation
The
following Director Compensation table sets forth information concerning
compensation for services rendered by directors of the Company for fiscal year
2006.
Name
|
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Fees Earned or
Paid in Cash
($)
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Stock
Awards
($)
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Option Awards
($)
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Non-Equity
Incentive
Plan
Compensation
($)
|
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Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
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All
Other
Compensation
($)
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Total
($)
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James
Fuentes
|
$
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33,600
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18,900
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None
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None
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None
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None
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52,500
|
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Dr.
George Calhoun
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$
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26,400
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13,500
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None
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None
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None
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None
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39,900
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Michael
Fenger
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$
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28,800
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14,400
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None
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None
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None
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None
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43,200
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Ralph
Pini
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$
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30,000
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16,200
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None
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None
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None
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None
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46,200
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Thomas
Powers
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$
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30,000
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16,200
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None
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None
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None
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None
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46,200
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Dr.
Martin Singer
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$
|
4,200
|
-
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None
|
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None
|
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None
|
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None
|
4,200
|
|
Stock
award value is based on the price of the Company’s stock on the date of grant,
consistent with the Company’s accounting expense for such grants under FAS
123(R). Directors are paid for service, capacity and committee involvement.
The
Company does not pay for meetings, beyond reimbursement of reasonable expenses,
nor does the Company penalize directors for failing to attend a minimum number
or percentage of meetings.
During
2006 the Company provided Non-Employee Directors, in addition to certain cash
payments as described below, a grant of 25,000 restricted shares of the
Company’s common stock, a grant of 12,500 restricted shares of common stock for
service as the chairman of the Board of Directors or one of the Board’s three
committees, and a grant of 7,500 restricted shares of common stock for service
on a Board committee. All such grants vest over one year on a quarterly basis
on
September 15, December 15, March 15 and June 15 of the service year.
This compensation is intended to vest as closely as practical to the relevant
service period, in this case from the June 2006 annual meeting of shareholders
until the June 2007 annual meeting of shareholders.
During
2006 the Board also provided cash payments to Non-Employee Directors for their
service to the Company. Under this program, non-employee directors received
$1,800 per month for serving on the Board. In addition, the respective Chairmen
of the Board and the three committees (Audit, Compensation, and Governance)
each
received $400 per month for such service. Non-Employee Directors who serve
on
these committees in roles other than chairman each received $300 per month.
This
2006 program was, and is, intended to be an annual program until such time
as
the program is changed.
The
Company provided stock options as its primary equity vehicle prior to 2006.
The
change in accounting rules under FAS 123(R) influenced this change, as options
would be expected to be valued relatively higher for financial purposes as
compared to grants of restricted stock than the expected perception differential
from the recipient. Providing grants of restricted stock allowed the Company
to
enjoy a greater compensation benefit from its equity compensation program
relative to the related non-cash financial charge and number of shares provided
to the recipient.
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, 2006, the Board held 16 meetings. Except for
Mr. Fenger, who each attended 69% of the Board 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). The Audit Committee held 5 meetings
during 2006. Dr. Calhoun attended at least 75% of the meetings while Mr. Powers
attended 60% and Mr. Fenger 40%. The Company does not have a formal policy
regarding director attendance at Annual Meetings of Stockholders. However,
the
Company does ask directors to use their best efforts to be available for, and
attend, the Annual Meeting of Stockholders. All directors except Mr. Fenger
attended the 2006 Annual Meeting of Stockholders.
Independent
Directors
The
Board has determined that Messrs. Fenger, Fuentes, Pini, and Powers, and
Drs. Calhoun and Singer, are each “independent” pursuant to
Section 121A of the American Stock Exchange (“AMEX”) rules.
Committees
of the Board
The
Board has established an Audit Committee, a Compensation Committee, and a
Corporate Governance Committee each of which is comprised entirely of
“independent directors” as that term is defined under Securities and Exchange
Commission (“SEC”) and AMEX rules.
The
Audit
Committee, established in accordance with Section 3(a)(58)(A) of the Exchange
Act, consisted of three directors during 2006, Dr. Calhoun (Chairman), Mr.
Powers and Mr. Fenger. Mr. Powers will retire from the Committee on or before
June 8, 2007. All of these directors are “independent” as defined by the rules
of the SEC and AMEX. The Board of Directors has determined that Dr. Calhoun
is an “Audit Committee financial expert” as defined in regulations of the
Securities and Exchange Commission under the Sarbanes-Oxley Act of 2002. The
Audit Committee 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 regarding all of the foregoing. The Audit
Committee held five meetings in 2006. See “Report of the Audit Committee” in
this Proxy Statement. A copy of the Audit Committee’s charter is attached as
Appendix A to this Proxy Statement.
The
Compensation Committee consisted of Mr. Powers (Chairman), Mr. Fuentes
and Mr. Pini during 2006. In addition, Dr. Singer was a member of the
Compensation Committee from November 2006 until March 2007. Mr. Powers will
retire from the Committee on or before June 8, 2007. The Compensation Committee
has responsibility for recommending to the Board guidelines and standards
relating to the determination of executive compensation, reviewing the Company’s
executive compensation policies and reporting to the full Board regarding the
foregoing. The Compensation Committee also has responsibility for administering
the 2003 Plan, determining the number of options and shares of restricted stock
to be granted to the Company’s executive officers and employees pursuant to the
2003 Plan and reporting to the full Board regarding the foregoing functions.
The
Compensation Committee has responsibility for approving all executive
compensation, has oversight authority over Management recommendations for the
compensation of other employees, and must specifically approve each award under
the Company’s 2003 Equity Incentive Plan, regardless of the award level or
recipient. The CEO will from time to time prepare analyses of Company and/or
individual performance, including of Named Executive Officers (NEOs) and may
recommend a specific course of action. Ultimately the Compensation Committee,
in
conjunction with the full Board for significant items as it and the Board deem
appropriate (such as final approval of a new employment agreement with the
CEO),
has the authority to accept, change, or reject these analyses and/or
recommendations. The Compensation Committee may retain and terminate
compensation consultants and/or attorneys to assist in the evaluation of
director, CEO, executive officer, or other compensation, including the sole
authority to approve related consultant/legal fees and other retention terms.
The
Compensation Committee held 31 meetings in 2006. A copy of the Compensation
Committee’s charter is attached as Appendix B to this Proxy
Statement.
The
Corporate Governance Committee was formed during 2004 and consists of
Mr. Pini (Chairman), Mr. Fenger and Mr. Fuentes. The Corporate
Governance Committee acts as both the Board’s corporate governance committee and
nominating committee. The Corporate Governance Committee reviews and makes
recommendations to the Board regarding Board organization, membership (including
the identification and recommendation of potential candidates for election
to
the Board), function and effectiveness, and committee structure, membership,
function and effectiveness. The Corporate Governance Committee evaluates the
performance of the Board as a whole, the Committees and the individual
directors. The Corporate Governance Committee held four meetings during
2006.
Director
Nominations
The
Corporate Governance Committee currently serves as our nominating committee.
The
Corporate Governance Committee seeks director candidates based upon a number
of
qualifications, including their independence, knowledge, judgment, character,
leadership skills, education and experience. The Corporate Governance Committee
particularly emphasizes significant experience in the wireless
telecommunications industry. The Corporate Governance Committee operates through
a charter which is attached to this Proxy Statement as Appendix C.
As
part
of the process of selecting Board candidates, the Corporate Governance Committee
reviews the appropriate skills and characteristics required of Board members.
The Corporate Governance Committee does not generally rely upon third-party
search firms to identify board candidates. Instead, it relies on recommendations
from a wide variety of its business contacts, including current executive
officers, directors and stockholders, as a source for potential Board
candidates. The Corporate Governance Committee evaluates the above criteria
as
well as the current composition of the Board and the need for audit committee
expertise. The Corporate Governance Committee then recommends to the Board
for
nomination the candidates which it believes best suit the needs of the Company.
The Corporate Governance Committee has recommended to the Board for nomination
Drs. Abdelmonem and Calhoun and Messrs. Fenger, Fuentes, Pini, and Thode to
serve as directors for 2007 and until their respective successors are duly
elected and qualified.
In
accordance with the provisions of our By-Laws, a stockholder entitled to vote
at
such meeting may nominate candidates for election to the board of
directors.
A
stockholder who wishes to nominate a director candidate must timely deliver
a
notice to the Secretary of the Company delivered to, or mailed and received
by,
the Secretary of the Company at the principal executive offices of the Company
at 1001 Cambridge Drive, Elk Grove Village, IL 60007. To be timely, the notice
must be delivered not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that if the Company has not publicly disclosed
(in
the manner provided in the By-Laws) the date of the meeting at least 70 days
prior to the meeting date, the notice must be received not later than the close
of business on the tenth day following the day on which the Company publicly
discloses the meeting date.
To
be in
proper written form, a stockholder’s notice to the Secretary must set forth
(a) as to each person whom the stockholder proposes to nominate for
election as a director all information relating to the person that would be
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), including such
person’s written consent to being named in the proxy statement as a nominee and
to serving as director if elected; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder as they appear
on the Company’s books and (ii) the number of shares of the Company which
are beneficially owned by such stockholder, by class and series.
Stockholders’
nominees that comply with these procedures will receive the same consideration
at the Annual Meeting of Stockholders that other nominees receive.
Policy
for Stockholder Communication with Directors
Stockholders
may communicate with the members of the board of directors, either individually
or collectively, by writing to the Board at 1001 Cambridge Drive, Elk Grove
Village, IL 60007. These communications will be reviewed by the office of the
Company’s Corporate Secretary as agent for the non-management directors in
facilitating direct communication to the board of directors. The Secretary’s
office will treat communications containing complaints relating to accounting,
internal accounting controls, or auditing matters as reports under the Company’s
Whistleblower Policy. Further the Secretary’s office will disregard
communications that are bulk mail, solicitations to purchase products or
services, not directly related either to the Company or to the non-employee
directors’ roles as members of the board, sent other than by stockholders in
their capacities as such or from particular authors or regarding particular
subjects that the non-employee directors may specify from time to time, and
all
other communications which do not meet the applicable requirements or criteria
described below, consistent with the instructions of the non-employee
directors.
General
Communications
The
Secretary’s office will summarize all stockholder communications directly
relating to the Company’s business operations, its Board, its officers, its
activities or other matters and opportunities closely related to the Company.
This summary and copies of the actual stockholder communications will then
be
circulated to the Chairman of the Corporate Governance Committee on a biweekly
basis.
Stockholder
Proposals and Nominations
Stockholder proposals are reviewed by the Secretary’s office for compliance with
the requirements for such proposals set forth in the Company’s Bylaws and in
Rule 14a of the Securities Exchange Act of 1934 and as described in this Proxy
Statement. Stockholder proposals that meet these requirements will be summarized
by the Secretary’s office. Summaries and copies of the stockholder proposals are
circulated to the Chairman of the Corporate Governance Committee.
Stockholder
nominations for directors are reviewed by the Secretary’s office for compliance
with the requirements for such nominations that are set forth in the Company’s
Bylaws and as described in this Proxy Statement. Stockholder nominations that
meet these requirements are summarized by the Secretary’s office. Summaries and
copies of the nominations are circulated to the Chairman of the Corporate
Governance Committee.
Retention
of Shareholder Communications
Any
stockholder communications which are not circulated to the Chairman of the
Corporate Governance Committee because they do not meet the applicable
requirements or criteria described above will be retained by the Secretary’s
office for at least ninety calendar days from the date on which they are
received, so that these communications may be reviewed by the non-employee
directors to whom they were addressed should any of the non-employee directors
elect to do so.
Distribution
of Shareholder Communications
Except
as otherwise required by law or upon the request of a non-employee director,
the
Chairman of the Corporate Governance Committee will determine when and whether
a
stockholder communication should be circulated among one or more members of
the
Board and/or Company management.
Compensation
Committee Interlocks and Insider Participation
During
the year ended December 31, 2006, Mr. Powers (Chairman),
Mr. Fuentes and Mr. Pini served as members of the Compensation
Committee of the Board. Dr. Singer also served on the Compensation Committee
from November 2006 until March 2007. None of these individuals 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.
The
Board recommends that the stockholders vote “FOR” the election of the nominees
named in this Proxy Statement to continue to serve as directors of the
Company.
Executive
Officers
Set
forth
below is a table identifying executive officers of the Company who are not
identified in the table entitled “Election of Directors - Nominees for Election”
Biographical information for Mr. John Thode and Dr. Abdelmonem are set
forth above under “Nominees for Election.”
Name
|
|
Age
|
|
Position
with Company
|
Frank
Cesario
|
|
37
|
|
Chief
Financial Officer
|
Mr. Cesario
joined the Company during 2000 as Controller and was named Chief Financial
Officer during 2002. 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
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 agreements with
Mr. Thode, Dr. Abdelmonem and Mr. Cesario. There are no family
relationships among any of the directors or executive officers of the
Company.
Section 16(a)
Beneficial Ownership
Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires the Company’s
executive 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 SEC. 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 the period
of 2006 through the date hereof, except for a the initial filing for Dr. Singer
upon becoming a director, subsequently reported on Form 3 by Dr. Singer; an
award of restricted shares to Dr. Singer; an award of restricted shares to
and a
purchase of common stock by Mr. Thode; two separate awards of restricted shares
to Mr. Powers; two separate awards of restricted shares to Mr. Pini; two
separate awards of restricted shares to Mr. Fenger; two separate awards of
restricted shares to Mr. Fuentes; two separate awards of restricted shares
to
Dr. Calhoun; an award of restricted shares to Mr. Cesario, all of which awards
and purchases were reported on Form 4 by the respective purchasers and awardees,
all of the Section 16(a) filing requirements applicable to its officers,
directors and 10% beneficial owners were complied with by such persons.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
of Compensation Program
The
Compensation Committee of the Board has responsibility for establishing,
implementing and maintaining the Company’s compensation programs, particularly
for three Named Executive Officers (NEOs). The Compensation Committee’s role is
to ensure that the compensation offered to the Company’s personnel,
particularly NEOs, is reasonable, fair, and competitive, serving to align the
goals and actions of team members to the goals and objectives of the Company.
The Company’s compensation programs are intended to maximize shareholder value
over the long-term by attracting and retaining superior employees and by
providing rewards to recognize superior performance. The Compensation Committee
is tasked with providing the appropriate mix of cash and equity incentives,
coupled with the correct mix of time-based and performance-based criteria for
earnings those incentives.
Role
of Executive Officers in Compensation
Decisions
The
Compensation Committee has responsibility for approving all compensation
for the
NEOs, and has oversight authority over Management recommendations for other
employees. The Compensation Committee must specifically approve each award
under
the Company’s 2003 Equity Incentive Plan, regardless of the award level or
recipient. NEOs, particularly the CEO in conjunction with the CFO, will often
prepare analyses of Company and individual performance for the Compensation
Committee, often recommending a particular course of action. NEOs may also
suggest new or revised compensation policies to the Compensation Committee
from
time to time. Ultimately the Compensation Committee, in conjunction with
the
full Board for significant items as it and the Board deem appropriate (such
as
the final approval of a new employment agreement with the CEO), has the
authority to accept, change, or reject these analyses and/or recommendations.
Finally, NEOs may be involved in negotiations with the Compensation Committee,
such as is the case of an individual officer negotiating an employment
agreement. Also, the CEO will often make recommendations regarding the
performance and recommended compensation of other NEOs to the Compensation
Committee and will provide the primary evaluation of those NEOs to the
Compensation Committee. Again, the Compensation Committee makes the final
decisions on behalf of the Company in all cases.
Setting
Executive Compensation
The
Compensation Committee, consistent with the objectives illustrated above,
structures the executive compensation program based on its review of the
market
and specific situations involved. Market indicators include the publicly
available compensation data from available reports and from peer companies
(public companies as close as possible to the Company’s size, geography,
products and markets served). The Compensation Committee attempts to interpret
this data and apply it to the Company based on the size and type of comparable
entity (peer as defined above) or category (by definition provided in report
or
analysis), the level of applicability to the Company’s business, and a broader
view of the current market for executive talent in high-technology, growth
industries. In making these interpretations, the Compensation Committee looks
at
the total compensation of the comparable entity or group, as well as individual
aspects of that compensation, and compares those values against the Company’s
specific capabilities, assets and needs. The Company believes it typically
provides less cash compensation and fewer perquisites than comparables, so
that
cash may be used in other areas of the business, and attempts to close that
gap
using equity. Beginning in 2006, the Compensation Committee determined that
grants of restricted stock would be superior to stock options generally,
a view
that is applied to executive compensation. The Compensation Committee feels
that
the required manner to be used in calculating share-based compensation expense
disproportionately values stock options more highly than shares of restricted
stock, relative to the expected perceived value assigned by the recipient.
The
Compensation Committee observed this as a broad trend, the use of grants
of
restricted stock in place of stock options or other equity compensation
mechanisms. Awarding shares of restricted stock also allows fewer shares
to be
issued and for restricted shares to provide recipients with less volatile
benefits, thus increasing the expected perceived compensation value and better
matching financial cost with the benefit to the Company. As such, the typical
form of equity compensation today is in the form of restricted shares.
During
the first quarter of 2006, employment agreements were reached with Mr. Thode,
Dr. Abdelmonem, and Mr. Cesario. Companies and reports that were used as
comparables for those negotiations include:
· |
Publicly
available compensation surveys showing compensation ranges by job
title,
location, and company size
|
· |
A
survey of compensation levels and types for 293
Computer/Electronics/Telecom
manufacturers
|
· |
Executive
compensation arrangements publicly filed by entities including
Superconductor Technologies, Inc., Airnet Communications Corporation,
American Superconductor Corporation, PCTEL, Inc., Universal Display
Corporation, and TriQuint Semiconductor,
Inc.
|
· |
Compensation
and Governance trend reports presented by many entities such as Aon
consulting and The Delves Group through the American Electronics
Association
|
ISCO
typically is smaller than its peers in terms of revenue and market
capitalization, and as such compares itself with the lowest strata of the
reported ranges and particular contract data reported by individual entities.
Data is aggregated with average statistics calculated, and then compared with
entities the closest in size and organization type.
Beyond
salary and fixed compensation, incentive compensation was reviewed across this
available data. An average compensation determined as a percentage of fixed
compensation was calculated. Similarly, equity value as a percentage of fixed
and variable cash compensation was calculated. These norms were used to create
a
final agreement that was determined by the Compensation Committee to be less
in
cash compensation than peers on a relative basis, higher in equity compensation
than peers on a relative basis, and offered incentive compensation at the high
end of peers for high levels of performance as defined below. These factors
are
consistent with the equity and incentive-based compensation preferences as
described in this document.
The
Compensation Committee looks at this and other available information, such
as
internal precedent (the compensation provided that particular NEO and/or
position in the recent past) or external precedent (such as the compensation
provided that particular NEO in another capacity or another entity).
The
Compensation Committee has no formal policy on the topic, but relies on its
judgment to allocate cash and equity awards between current and long-term
incentives. Its goal is to provide sufficient current incentive to encourage
the
NEO to serve in the appropriate position and to have sufficient long-term
incentive to motivate the NEO to remain with the Company beyond the upcoming
year, all with the expectation of achieving the performance objectives
established by the Compensation Committee. The Company typically provides for
equity awards consistent with its annual performance review program (as in
the
case of Mr. Cesario) or as specified in the applicable employment agreement
(as
in the case of Mr. Thode and Dr. Abdelmonem), which is structured to match
the
applicable employment term if one is defined in the agreement (or over such
period of time as the Compensation Committee deems is long term if such
employment term is not defined).
2006
Executive Compensation Components
The
components of compensation for the NEOs include base salary, guaranteed bonus,
bonus based on performance criteria, equity compensation based on time of
service, equity compensation based on performance criteria, and other
contractual terms and benefits such as a change in control or termination,
and
certain other benefits that are provided broadly to all of the Company’s
employees. The Compensation Committee reviewed comparable data as described
above to analyze the base, or expected total compensation of comparable
executives as a benchmark for the Company’s NEOs.
Base Salary and Equity Compensation Based on Time of Service
The
Compensation Committee reviewed comparable data as described above to analyze
the base, or expected, compensation of comparable executives to its own
executive team members. Base salary levels are compared against comparables
and
typically set below those comparables but within a close enough range for the
perceived value of equity and performance-based compensation to attract
desirable NEOs. Because the Company desires to conserve cash, bonuses are
typically linked to substantial or extraordinary events, and not guaranteed.
Basic equity compensation is then set at a rate at or higher than comparables,
thus allowing Company performance as reflected in its share price to provide
the
additional incentive to the entrepreneurial executive attracted by such a
program. The Compensation Committee feels this approach properly bridges the
gap
between the Company’s need to spend cash in other areas with its need to attract
and retain executive talent.
Mr.
Thode’s contract, for example, provides for base salary during 2006 of $300,000
and no guaranteed bonus beyond a one-time signing bonus of $50,000. The
Compensation Committee recommended, and our stockholders approved, a grant
of
one million shares of restricted stock that vest based on his time of service
during 2006. The value of this stock grant at the market price on the date
of
grant was roughly $320,000, and vested 50% on June 30, 2006 and 50% on December
30, 2006. Pursuant to his employment agreement, Mr. Thode’s salary will be
$350,000 during 2007 and he will receive no guaranteed bonus. Pursuant to the
same recommendation of the Compensation Committee and approval of the
stockholders described above, Mr. Thode received a grant of one million
shares of restricted stock that will vest based on time during 2007, 50% on
June
30, 2007 and 50% on December 30, 2007. The Compensation Committee does not
expect to review Mr. Thode’s salary during 2007, nor does it intend to review
his equity compensation earned over time. The Compensation Committee does intend
to review Mr. Thode’s arrangement with respect to service during 2008 and
beyond.
Bonus
and Equity Compensation Based on Performance Criteria
As
further described in the Executive Compensation sections of this Proxy
Statement, the Compensation Committee believed that exceptional performance
should be rewarded exceptionally, and thus devised a program based on
performance against its goals. Goals were set based on a number of factors,
but
primarily revenue and EBITDA (earnings before interest, taxes, depreciation
and
amortization; often a proxy for cash basis results) targets. Achieving these
goals would allow the entire Company, but particularly the executive team,
to
realize substantial rewards. Achieving all plan targets would result in payouts
of cash bonuses to Mr. Thode and Dr. Abdelmonem in the amount of 25% of the
executive’s annual salary, and restricted share vesting of an additional two
million shares of restricted stock for Mr. Thode and one million shares of
restricted stock for Dr. Abdelmonem. Achievement of 150% of annual operating
plan amounts would result in cash bonuses of 100% of the annual salary instead
of 25%. Results between 100% and 150% would be pro-rated by the Compensation
Committee. No payout of performance-based compensation would be achieved for
results less than 100% of annual operating plan targets.
As
the
Compensation Committee views this payout as substantial, the targets are
similarly substantial. The Company does not provide financial forecast
information and thus cannot disclose specific plan values for future periods.
For 2006, it can disclose that revenue of $16 million and a positive EBITDA
were
the primary criteria for consideration under this program. 2005 revenue was
$10
million and cash flow was negative, as a point of comparison. The plan,
therefore, called for a 60% increase in revenue and related improvement in
cash
flow. As 2006 revenue was $15 million and cash flow remained negative, no
amounts were earned under these performance-based arrangements.
Contractual
Terms and Benefits, such as Change in Control or Termination
As
further described in the Executive Compensation sections of this Proxy
Statement, the Compensation Committee considers other contractual terms and
benefits typically found in employment agreements or otherwise deemed
appropriate for given circumstances. The Compensation Committee considers
historical contracts for NEOs with the Company in that or similar positions,
publicly available contracts for peer entities as described above, the
reasonability of item, the relative weighting given by the NEO in question
if
such item is being negotiated, the potential liability to the Company, the
market price and relative ease or difficulty in finding replacement NEOs, and
what sort of behavior would reasonably be incented by such provision. The
Company’s preferred candidates for CEO and CTO, for example, had severance
rights in prior agreements (with a prior employer and with the Company), such
rights are common among other entities and generally across industries, and
are
heavily weighted by our preferred candidates. Payments upon termination by
the
Company without cause or by the NEO for good reason, as those terms are defined
in the applicable agreements, would result in cash payouts equal to a percentage
of annual salary and bonus earned, possible accelerated vesting of equity,
and
an extension of medical insurance benefits. Similarly, termination upon a change
in control may include accelerated vesting of equity. Specific terms are
provided in the section entitled “Potential Payments Upon Termination or Change
In Control”.
Other
Benefits
The
NEOs
are typically entitled to participate in company-wide benefit programs on a
non-preferential basis. Those programs include $50,000 in
term
life insurance, disability insurance, medical plan participation and a 401(k)
program with a Company match of the lesser of 3% of employee salary or 50%
of
the employee contribution. The Executive Officers are eligible to participate
in
a Company-wide bonus program that may be funded based on certain funding events,
such 5% of cash flows during a fiscal year in excess of the Company’s annual
operating plan. Such funding status is typically uncertain until January of
the
following year by determination of the Compensation Committee and then paid.
Dr.
Abdelmonem and Mr. Cesario received bonus payments of $7,500 and $15,000,
respectively, for 2005 paid in 2006 and disclosed on the Executive Compensation
Table to follow. No such amounts were earned during 2006 for payment during
2007.
Stock
Ownership Guidelines
The
Company has a Share Ownership Policy in place, effective January 1, 2006, that
covers officers and directors (“Covered Person”), including the NEOs. Within one
year of the effective date of the policy (January 1, 2007) or one year after
becoming a Covered Person, each Covered Person must own at least the lesser
of
20,000 shares or $5,000 worth of the Company’s common stock. Within three years,
each Covered Person must own at least the lesser of 100,000 shares or $25,000
worth of the Company’s common stock. While specific penalties for failing to
perform under this policy are not specifically included, this policy does
constitute an expectation on anyone who wishes to remain an officer or director
of the Company. Stock options are not considered in the determination of
satisfying these requirements, regardless of vesting status.
Tax
and Accounting Implications
Deductibility
of Executive Compensation
As
part
of its role, the Committee reviews and considers the deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code, which provides
that the Company may not deduct compensation of more than $1,000,000 that is
paid to certain individuals. The Company believes that compensation paid under
the management incentive plans is generally fully deductible for federal income
tax purposes. However, in certain situations, the Committee may approve
compensation that will not meet these requirements in order to ensure
competitive levels of total compensation for its executive officers. In this
regard, for fiscal 2006, there was no payment to a NEO that was not deductible
for federal income tax purposes.
Nonqualified
Deferred Compensation
On
October 22, 2004, the American Jobs Creation Act of 2004 was signed into law,
changing the tax rules applicable to nonqualified deferred compensation
arrangements (which, for this purpose, include various equity-based incentive
and severance arrangements). While the final regulations have not become
effective yet, the Company believes it is operating in good faith compliance
with the statutory provisions which were effective January 1, 2005 and has
not
seen the need to materially alter its compensation programs as a result of
these
rules.
Accounting
for Stock-Based Compensation
Beginning
on January 1, 2006, the Company began accounting for stock-based payments
including its Stock Option Program, Long-Term Stock Grant Program, Restricted
Stock Program and Stock Award Program in accordance with the requirements of
FASB Statement 123(R). As discussed above, the Compensation Committee determined
that the financial cost of grants of restricted stock better matched perceived
benefits to the recipients and therefore value to the Company, than stock
options. As such, this was a factor in shifting equity-based compensation from
primarily stock options to grants of restricted stock.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee of the Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.
THE
COMPENSATION COMMITTEE
Tom
Powers, Chairman
Jim
Fuentes
Ralph
Pini
--------------------------------------------------------------------------------
SUMMARY
COMPENSATION TABLE
The
table
below summarizes the total compensation paid or earned by each of the named
executive officers for the fiscal year ended December 31, 2006. The Company
has
entered into employment agreements with all of the named executive officers.
When setting total compensation for each of the named executive officers, the
Committee reviews tally sheets which show the executive’s current compensation,
including equity and non-equity based compensation.
|
|
Salary
($)
|
Bonus
($)
(2)
|
Stock
Awards
($)
(1)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
(3)
|
Total
($)
|
|
John
Thode
|
|
|
|
|
|
|
|
|
|
|
President
and Chief
|
|
|
|
|
|
|
|
|
|
|
Executive
Officer
|
|
300,000
|
50,000
|
320,000
|
-
|
-
|
-
|
7,614
|
677,614
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Amr Abdelmonem
|
|
|
|
|
|
|
|
|
|
|
Chief
Technology Officer
|
|
250,000
|
7,500
|
277,500
|
-
|
-
|
-
|
7,614
|
542,614
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Cesario
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
|
172,000
|
15,000
|
47,675
|
-
|
-
|
-
|
5,257
|
239,932
|
|
Footnotes
after table:
(1) |
Stock
award values are shown reflect the accounting expense recognized
by the
Company under FAS 123(R), which is the greater of the benefit on
a
straight-line basis from date of grant or amount vested during 2006.
More
information is presented in the following table, “Grants of Plan-Based
Awards”.
|
(2) |
Mr.
Thode’s bonus is a signing bonus pursuant to the execution of his
employment agreement during January 2006.
|
(3) |
All
other compensation is comprised of benefits made available to employees
on
a non-discriminatory basis including standard term life insurance
coverage
and a partial match on 401(k) plan contributions.
|
2006
GRANTS OF PLAN-BASED AWARDS:
|
|
|
|
|
|
|
|
All Other
|
All Other
|
|
|
|
|
|
|
|
|
|
|
Stock
|
Option
|
|
|
|
|
|
|
|
|
Awards:
|
Awards:
|
Closing
|
Grant
Date
|
|
|
Estimated
Future Payouts
|
Estimated Future Payouts
|
Number
of
|
Number
of
|
Price
|
Fair
|
|
|
Under
Non-Equity
|
Under
Equity
|
Shares
of
|
Securities
|
on
|
Value
of
|
|
Grant/
|
Incentive Plan Awards
|
Incentive
Plan Awards
|
Stock
or
|
Underlying
|
Grant
|
Stock
and
|
|
Approval
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
Units
|
Options
|
Date
|
Option
|
|
Date
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
($/Sh)
|
Awards
($)
|
John
Thode
|
6/16
|
-
|
75,000
|
300,000
|
|
|
|
2,000,000
|
-
|
0.32
|
640,000
|
John
Thode
|
6/16
|
|
|
|
-
|
4,000,000
|
4,000,000
|
|
|
0.32
|
1,280,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Amr Abdelmonem
|
1/12
|
-
|
62,500
|
250,000
|
|
|
|
1,500,000
|
|
0.37
|
555,000
|
Dr.
Amr Abdelmonem
|
1/12
|
|
|
|
|
2,000,000
|
2,000,000
|
|
|
0.37
|
740,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Cesario
|
2/6
|
-
|
43,750
|
43,750
|
-
|
125,000
|
250,000
|
250,000
|
|
0.38
|
95,000
|
Frank
Cesario
|
12/27
|
|
|
|
|
|
|
250,000
|
|
0.35
|
87,500
|
All
awards were made under the Company’s 2003 Equity Incentive Plan, as amended.
Incentive
Plan awards are established to provide zero benefits unless the objectives
determined by the Compensation Committee are met 100%. Should this occur, then
incentives are paid at the target levels. Should the individual and company
achieve 150% or more of the intended result, then the maximum benefit would
be
earned. Performance between 100% and 150% would be pro-rated by the Compensation
Committee. The two primary measures of performance are Revenue and EBITDA (Cash
Flow) based on annual operating plan. As the Company did not achieve 100% of
its
annual operating plan during 2006, no such incentives were earned.
Mr.
Thode
and Dr. Abdelmonem also received grants of Restricted Stock that vest
semi-annually during 2006 and 2007, and are not expected to receive additional
grants prior to 2008. Mr. Thode’s grant was approved by stockholders during the
June 2006 annual meeting of stockholders. Mr. Thode and Dr. Abdelmonem also
were
granted shares of performance-vested Restricted Stock, 50% of which were subject
to vesting based on 2006 performance and 50% subject to vesting based on 2007
performance. During January 2007 the Compensation Committee determined that
2006
performance goals were not achieved at the 100% level, and thus the related
incentive shares were forfeited.
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2006:
|
|
Option
Awards
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
|
Equity
Incentive
Plan Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares
or
Units
of
Stock That
Have
Not
Vested
(#)
|
Market
Value of
Shares or
Units
of
Stock That
Have
Not
Vested
($)
|
Equity Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|
|
|
|
|
Exercisable
|
Unexercisable
|
|
John
Thode
|
|
1,100,000
|
-
|
-
|
$
0.43
|
1/10/2015
|
1,000,000
|
$
340,000
|
2,000,000
|
$
680,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Amr Abdelmonem
|
|
262,499
|
-
|
-
|
$
0.11
|
1/1/2013
|
750,000
|
$
255,000
|
1,000,000
|
$
340,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Cesario
|
|
-
|
-
|
-
|
-
|
-
|
375,000
|
$
127,500
|
-
|
-
|
|
Equity
award market value determined using the closing price of the Company’s common
stock on the American Stock Exchange on December 31, 2006, which was $0.34
per
share.
2006
OPTION EXERCISES AND STOCK VESTED:
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
Value Realized
on
Exercise
($)
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
Value Realized
on
Vesting
($)
|
|
John
Thode
|
|
-
|
$
|
|
|
1,000,000
|
$
|
340,000
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Amr Abdelmonem
|
|
875,001
|
$
|
173,904
|
|
750,000
|
$
|
255,000
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Cesario
|
|
150,000
|
$
|
25,500
|
|
125,000
|
$
|
42,500
|
|
PENSION
BENEFITS
The
Company does not have a defined-benefit pension or similar program. It maintains
a Defined Contribution 401(k) program as described in the Summary Compensation
Table.
2006
NON-QUALIFIED DEFERRED COMPENSATION
The
Company had no such programs to disclose during 2006.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Mr.
Thode
and the Company entered into an employment agreement during January 2006. The
agreement, and his employment, may be terminated at any time. If the Company
terminates Mr. Thode without cause or Mr. Thode resigns for good reason (as
defined in the Thode Employment Agreement), he will receive a lump sum payment
equal to his base salary, an annual bonus for the fiscal year of termination,
and waiver of the applicable premium for COBRA continuation coverage in the
Company’s health plan(s) for a period of twelve months. If the Company
terminates Mr. Thode for cause (as defined in the Thode Employment Agreement),
he will be entitled only to the payment of accrued and unpaid salary through
the
date of such termination. Upon a change in control, and presuming continuous
service through that change of control, Mr. Thode would vest upon the change
of
control any unvested grants of restricted stock that would subsequently vest
due
to the passage of time or that had been earned on a performance basis on the
prorated period before the change of control. If Mr. Thode were terminated
on
December 31, 2006, due to a change in control, he would receive not only one
year of salary and bonus ($350,000 in total) but also would accelerate the
vesting of one million shares of restricted stock that would be expected to
vest
during 2007 as a result of the passage of time ($340,000 in total value
accelerated from 2007 vesting dates to the change of control date).
Dr.
Abdelmonem and the Company entered into an employment agreement during January
2006. The agreement, and his employment, may be terminated at any time. If
the
Company terminates Dr. Abdelmonem without cause or Dr. Abdelmonem resigns for
good reason (as defined in the Abdelmonem Employment Agreement), he will receive
a lump sum payment equal to 50% of his base salary, an annual bonus for the
fiscal year of termination, and waiver of the applicable premium for COBRA
continuation coverage in the Company’s health plan(s) for a period of six
months. If the Company terminates Mr. Abdelmonem for cause (as defined in the
Abdelmonem Employment Agreement), he will be entitled only to the payment of
accrued and unpaid salary through the date of such termination.
Mr.
Cesario and the Company entered into an employment agreement during February
2006. The agreement, and his employment, may be terminated at any time. If
the
Company terminates Mr. Cesario without cause (as defined in the Cesario
Employment Agreement), he will receive three months of his base salary and
any
bonus earned during his employment period.
Certain
Relationships and Related Transactions
The Company has two credit facilities with related parties, including
affiliates. The larger amount is the 2002 credit line described below in the
amount of $8.5 million in outstanding principal and $2.8 million in accrued
interest.
Uncommitted
Line of Credit (2002 Credit Line)
As of the reporting date, we have drawn $8.5 million of debt financing under
a
credit line, as described below. During October 2002, we entered into an
uncommitted line of credit with our two largest shareholders, an affiliate
of
Elliott Associates, L.P. (Manchester Securities Corporation) and Alexander
Finance, L.P. This line initially provided up to $4 million to us. This line
was
uncommitted, such that each new borrowing under the facility would be subject
to
the approval of the lenders. Borrowings on this line bore an initial interest
rate of 9.5% and were collateralized by all the assets of the Company.
Outstanding loans under this agreement would be required to be repaid on a
priority basis should we receive new funding from other sources. Additionally,
the lenders were entitled to receive warrants to the extent funds were drawn
down on the line. The warrants bore a strike price of $0.20 per share of common
stock and were to expire on April 15, 2004. The credit line was to mature and
be
due, including accrued interest thereon, on March 31, 2004. Due to a subsequent
agreement between the parties no warrants were issued with subsequent
borrowings.
According to existing accounting pronouncements and SEC guidelines, we allocated
the proceeds of these borrowings between their debt and equity components.
As a
result of these borrowings during 2002, we recorded a non-cash charge of $1.2
million through the outstanding term of the warrants (April, 2004). $250,000
and
$862,000 of that amount were recorded during 2004 and 2003, respectively. These
warrants were valued at $1.2 million of the $2 million debt instrument based
on
a Black-Scholes valuation that included the difference between the value of
our
common stock and the exercise price of the warrants on the date of each warrant
issuance and a 30% discounted face value of the notes, leaving the remaining
$0.8 million as the underlying value of the debt. This $1.2 million was
amortized over the vesting period of the warrants (six quarters from the fourth
quarter 2002 through the first quarter 2004).
During
October 2003, we entered into an agreement with our lenders to supplement
the
credit line with an additional $2 million, $1 million of which was drawn
immediately and $1 million subsequently drawn upon our request and subject
to
the approval of the lenders. This supplemental facility bore a 14% rate of
interest and was due October 31, 2004. The term of the previous credit line
was
not affected by this supplement, and as such the $4 million borrowed under
that
line, plus accrued interest, remained due March 31, 2004.
During
February 2004, the credit line was extended to a due date of April 2005,
with
interest after the initial periods to be charged at 14%. No warrants or other
inducements were issued with respect to this extension. Additionally, lenders
exercised their 10 million warrants during February 2004, agreeing to let
us use
the funds for general purposes as opposed to repaying debt.
During
July 2004, we and our lenders agreed to increase the aggregate loan commitments
under the credit line from $6,000,000 to $6,500,000. Simultaneously, we drew
the
remaining $1,500,000 of the financing.
During
November 2004, we and our lenders agreed to increase the line of credit to
up to
an additional $2 million to an aggregate loan commitment of $8,500,000, $1
million of which was drawn immediately by us with the remaining $1 million
drawable upon our request and subject to the approval of the lenders, which
occurred during January 2005.
During
February 2005, the credit line was extended until April 2006. Interest during
the extension period was to be charged at 9%. No warrants or other inducements
were issued with respect to this extension.
On
August
2, 2005, we and our lenders agreed to extend the due date from April 2006
until
August 2007, and the lenders also agreed to waive the Company’s obligation to
repay its debt with proceeds from an equity financing transaction with its
lenders, including affiliates, in August 2005. No warrants or other inducements
were issued as a result of this transaction.
As
of
December 31, 2006, both the outstanding principal balance of $8.5 million
and
accrued interest of $2.8 million were outstanding. Pursuant to the terms
of the
financing, interest is payable upon the termination of the
facility.
2006
Convertible Debt
During
June 2006 we entered into a Securities Purchase Agreement (the “Agreement”) and
convertible notes (the “Notes”) with Alexander Finance, L.P., and Manchester
Securities Corporation L.P. (together, the “Lenders”), pursuant to which the
Lenders have agreed, to each loan us $2,500,000, or an aggregate of $5,000,000,
in convertible debt. The Lenders, including affiliates, are our two largest
shareholders and the lenders of the 2002 Credit Line referenced above. The
transaction is structured as a private placement of securities pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”)
and Rule 506 promulgated thereunder.
The
Notes
will mature on June 22, 2010 and bear an interest rate of 5% due at maturity.
Both the principal amount and any accrued interest on the Notes are convertible
into our common stock at a rate of $0.33 per share, subject to certain
anti-dilution adjustments. The Lenders have the right to convert the Notes,
both
principal and accrued interest, into shares of common stock at the rate of
$0.33
per share at any time. We have the right to redeem the Notes in full in cash
at
any time beginning two years after the date of the Agreement. The conversion
rate of the Notes will be subject to customary anti-dilution protections,
provided that the number of additional shares of common stock issuable as
a
result of changes to the conversion rate will be capped so that the aggregate
number of shares of common stock issuable upon conversion of the Notes will
not
exceed 19.99% of the aggregate number of shares of common stock presently
issued
and outstanding.
The
Notes
are secured on a first priority basis by all of our intangible and tangible
property and assets. Payment of the Notes is guaranteed by our two inactive
subsidiaries, Spectral Solutions, Inc. and Illinois Superconductor Canada
Corporation. The Agreement contains customary representations, warranties
and
covenants. We filed a registration statement covering the resale of the
shares
of common stock issuable upon conversion of the Notes with the Securities
and
Exchange Commission. Concurrently with the execution of the Agreement,
the
Lenders have waived their right under the existing line of credit arrangement
(see 2002 Credit Line, above) to receive the financing proceeds from
the
issuance of the Notes, allowing us to use the funds for product development
or
general working capital purposes. No fees were paid to any financial
advisor,
placement agent, broker or finder in connection with the transactions
contemplated by the Agreement and the Notes.
Assuming
the Notes are held for the full four year term, 18,505,719 shares of
common
stock would be required upon settlement, for both principal and interest.
This
amount is approximately 10% of the then approximately 186 million shares
of
common stock currently issued and outstanding. As of December 31, 2006,
the
Lenders, including their affiliates, owned approximately 43% of the Company’s
outstanding shares. As a result of this transaction, the combined holdings
of
the Lenders would be approximately 48% of the Company’s outstanding common
stock.
As
of
December 31, 2006, both the $5 million principal and $0.1 million in
accrued
interest were outstanding.
Related
Party Transaction Approval Process
Statement
of Principles
The
Board
of Directors (the “Board”) of ISCO International (the “Company”) is required to
pre-approve any transactions with related parties, as those terms are defined
by
the American Stock Exchange, the Public Company Accounting Oversight Board,
the
Securities and Exchange Commission (e.g., Item 404 of Regulation S-K), or
any
other qualified entity.
When
in
doubt, all members of the organization are required to disclose the information
and the Board will determine the appropriate course of action, if any. In
making
this determination the Board has the authority to engage the Company’s counsel
or other legal counsel as it deems appropriate and necessary.
Company
Management is prohibited from engaging in any related party transaction
without
the express approval of the Board.
Procedures
Requests
or applications to enter into related party transactions must be submitted
to
the Chairman of the Board, who will then process the request using reasonable
judgment, including but not limited to submission for review to the full
Board.
The Chairman will enter any such communications into the minutes of the next
Board meeting and include a current status and/or resolution. In addition,
NEOs
and directors fill out annual disclosure questionnaires, in which they must
specify any related party dealings with respect to the Company and confirm
in
writing that no other events have occurred. In addition, the Audit Committee
must review and approve any such transaction, as is noted in its charter
(attached as Appendix A).
Events
during 2006
Only
the
Convertible Debt transaction described above would qualify as a transaction
with
a related party. Such transaction was approved by the Audit Committee and
the full Board of Directors prior to execution.
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 is composed of three non-employee directors. The role
of
the Audit Committee is to assist the Board in its oversight of the Company’s
financial reporting process. The Board, 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 Audit Committee
operates pursuant to a charter that was last amended and restated by the Board
during March 2007, a copy of which is attached as Appendix A to this Proxy
Statement. 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 or that the financial statements are presented in accordance with
generally accepted accounting principles.
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 that the
audited financial statements be included in the Company’s Annual Report on Form
10-K, for the year ended December 31, 2006 as filed with the Securities and
Exchange Commission.
|
|
|
|
Members
of
the Audit Committee |
|
|
|
Date: April
23, 2007 |
|
Dr.
George Calhoun (Chairman) |
|
Mike Fenger |
|
Tom
Powers |
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF AUDITORS
The
Board, 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 the fiscal year ending
December 31, 2007. Grant Thornton has acted as auditors for the Company since
December 2000.
Vote
Required.
The
affirmative vote of a majority of the shares of common stock preset in person
or
represented by proxy at the Annual Meeting and entitled to vote on the matter
is
required to ratify the appointment of Grant Thornton as auditors of the
Company’s financial statements for the fiscal year ending December 31,
2007.
The
Board
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’s 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 will interpret this as an instruction to seek other
auditors.
Grant
Thornton has examined the financial statements of the Company for the fiscal
year ended December 31, 2006. 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 Thornton
will have the opportunity to make a statement at the meeting if they desire
to
do so.
During
the fiscal years ended December 31, 2006 and 2005, fees in connection with
services rendered by Grant Thornton LLP, the Company’s independent registered
accounting firm, were as set forth below:
Fee
Category
|
|
Fiscal
2006
|
|
Fiscal
2005
|
|
Audit
Fees
|
$
|
189,396
|
$
|
135,528
|
|
Audit-Related
Fees
|
|
7,040
|
|
-
|
|
Tax
Fees
|
|
39,422
|
|
34,906
|
|
All
Other Fees
|
|
-
|
|
-
|
|
TOTAL
|
$
|
235,858
|
$
|
170,434
|
|
Audit
fees consisted of fees for the audit of the Company’s annual financial
statements and review of quarterly financial statements as well as services
normally provided in connection with statutory and regulatory filings or
engagements, consents and assistance with and review of the Company’s documents
filed with the SEC.
Tax
fees
consisted primarily of fees for tax compliance, tax advice and tax planning
services.
The
Company made no other payments to Grant Thornton LLP during 2006 which
constituted Audit-Related Fees or Other Fees.
Policy
for Pre-Approval of Audit and Non-Audit Services
The
Audit
Committee’s policy is to pre-approve all audit services and all non-audit
services that the Company’s independent auditor is permitted to perform for us
under applicable federal securities regulations. As permitted by the applicable
regulations, the Committee’s policy utilizes a combination of specific
pre-approval on a case-by-case basis of individual engagements of the
independent auditor and pre-approval of certain engagements up to predetermined
dollar thresholds that are reviewed annually by the Committee. Specific
pre-approval is mandatory for the annual financial statement audit engagement,
among others.
All
engagements of the independent auditor to perform any audit services and
non-audit services have been pre-approved by the Audit Committee in accordance
with the pre-approval policy. The policy has not been waived in any
instance.
The
Audit
Committee may delegate pre-approval authority to the Chairman of the Audit
Committee. The Chairman of the Audit Committee must report any decisions to
the
Audit Committee at the next scheduled meeting.
The
Board recommends that the stockholders vote “FOR” the ratification of Grant
Thornton LLP as the Company’s auditors as described
herein.
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The
following table sets forth information regarding the beneficial ownership of
Common Sock as of April 28, 2007, 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 director nominees, (3) the Named Executive Officers, and
(4) all current Named 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 190,600,000 shares
of Common Stock outstanding as of April 28, 2007, 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
|
|
|
|
|
Name
|
|
of
Common Stock
|
|
|
|
|
|
|
Beneficially
Owned
|
|
|
Percent
of Class
|
|
Alexander
Finance L.P.
|
|
53,398,179
|
(1)
|
|
26.7%
|
|
Elliott
Associates L.P.
|
|
24,857,168
|
(2)
|
|
12.4%
|
|
Elliott
International L.P.
|
|
19,904,159
|
(2)
|
|
10.0%
|
|
|
|
|
|
|
|
|
John
Thode
|
|
4,872,500
|
(3)
|
|
2.6%
|
|
Amr
Abdelmonem
|
|
2,494,499
|
(4)
|
|
1.3%
|
|
George
Calhoun
|
|
1,041,083
|
(5)
|
|
*
|
|
Frank
Cesario
|
|
751,370
|
(6)
|
|
*
|
|
Mike
Fenger
|
|
192,000
|
(7)
|
|
*
|
|
James
Fuentes
|
|
238,750
|
(8)
|
|
*
|
|
Ralph
Pini
|
|
186,500
|
(9)
|
|
*
|
|
Tom
Powers
|
|
556,688
|
(10)
|
|
*
|
|
All
Directors and Officers as a Group
|
|
10,333,390
|
(11)
|
|
5.4%
|
|
*
|
Less
than 1%.
|
(1)
|
Includes
affiliates. As reflected in an SEC filing dated July 26, 2006. The
address for Alexander Finance, L.P. is 1560 Sherman Avenue Evanston,
IL
60201. Also presumes conversion of 9.5 million shares in convertible
debt.
|
(2)
|
Includes
affiliates. As reflected in SEC filings dated August 2, 2006 for
Elliott Associates, L.P. and Elliott International, L.P. Also presumes
conversion of 9.5 million shares in convertible debt. 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 Elliott International
Capital Advisors, Inc. 712 Fifth Avenue New York, New York
10019.
|
(3)
|
Includes
a restricted stock grant of 3,000,000 shares that were not vested
as of
April 28, 2007, or within 60 days from such date, and outstanding
options to purchase 1,100,000 shares of common stock that were vested
as
of April 28, 2007, or within 60 days from such
date.
|
(4)
|
Includes
a restricted stock grant of 1,750,000 shares that were not vested
as of
April 28, 2007, or within 60 days of such date, and outstanding options
to
purchase 262,499 shares which were exercisable as of April 28,
2007.
|
(5)
|
Includes
outstanding options to purchase 920,833 shares which were exercisable
as
of April 28, 2007.
|
(6)
|
Includes
a restricted stock grant of 312,500 shares that were not vested as
of
April 28, 2007, or within 60 days of such date.
|
(7)
|
Includes
outstanding options to purchase 110,000 shares which were exercisable
as
of April 28, 2007.
|
(8)
|
Includes
outstanding options to purchase 160,000 shares which were exercisable
as
of April 28, 2007.
|
(9)
|
Includes
outstanding options to purchase 110,000 shares which were exercisable
as
of April 28, 2007.
|
(10)
|
Includes
outstanding options to purchase 486,000 shares which were exercisable
as
of April 28, 2007.
|
(11)
|
Includes
outstanding restricted stock grants and options as described
above.
|
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 2008 Annual Meeting.
The
Company intends to mail next year’s proxy statement to our stockholders on or
about April 30, 2008. Applicable law requires any stockholder proposal
intended to be presented at our 2008 Annual Meeting of Stockholders to be
received by us at our executive offices in Elk Grove Village, Illinois on or
before January 30, 2008 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 2008 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
January 30, 2008 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 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 directs.
|
|
|
|
|
|
|
|
|
By: |
/s/ Order
of the Board |
|
Frank
Cesario |
|
Corporate
Secretary |
Elk
Grove
Village, Illinois
April 27,
2007
AUDIT COMMITTEE
CHARTER
ISCO
INTERNATIONAL, INC.
(revised
2007)
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.
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 Committee
meeting each quarter. The Committee shall use best efforts to ensure that one
or
more members are available in person during this quarterly meeting. 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:
|
•
|
|
Review
the results of the quarterly reviews and year-end audit of the Company,
including:
|
|
•
|
|
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.
|
|
•
|
|
Any
material accounting issues identified by management or the independent
public accountants;
|
|
•
|
|
Any
transactions between the Company and its officers, directors or 5%
shareholders.; and
|
|
•
|
|
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.
|
|
•
|
|
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.
|
|
•
|
|
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.
|
|
•
|
|
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).
|
|
•
|
|
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.
|
|
•
|
|
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
pre-approvals of audit and permitted non-audit services, provided
that
decisions of such subcommittee to grant pre-approvals shall be presented
to the full Committee at its next scheduled
meeting.
|
|
•
|
|
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.
|
|
•
|
|
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.
|
|
•
|
|
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.
|
|
•
|
|
Meet
annually with counsel when appropriate to review legal and regulatory
matters, if any, that could have a material impact on the financial
statements.
|
|
•
|
|
Establish,
review, and update periodically a Code of Ethical Conduct, and ensure
that
management has established a system to enforce this
Code.
|
|
•
|
|
Make
a periodic, but not less than annual, review of this
Charter.
|
|
•
|
|
Review
the effectiveness of the Committee on an annual
basis.
|
|
•
|
|
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.
|
|
|
|
|
|
•
|
|
Review
Company disclosures of financial information (such as financial results
press release and related commentary in conference call script) prior
to
such disclosure. As the time window may not be long or flexible,
communication with the Committee Chairman would be satisfactory to
meet
this requirement in the event of a minor disclosure (e.g., revenue
pre-release).
|
|
•
|
|
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.
APPENDIX
B
COMPENSATION
COMMITTEE CHARTER
ISCO
INTERNATIONAL, INC.
(January
2007)
Purpose
The
purpose of the Compensation Committee (the "Committee") of the board of
directors (the "Board") of ISCO International, Inc. (the "Corporation") is:
· |
to
discharge the Board's responsibilities relating to compensation of
the
Corporation's directors and executive officers, including approving
individual executive officer compensation;
|
· |
to
manage awards under the 2003 Equity Incentive
Plan;
|
· |
to
review and recommend to the Board compensation plans, policies and
benefit
programs for employees generally; and
|
· |
to
prepare the report on executive compensation required to be included
in
the Corporation's annual proxy statement.
|
Composition
and Term of Office
· |
The
Committee will consist of not fewer than two members, each of whom
shall
be a director who satisfies the independence requirements of the
American
Stock Exchange (the "AMEX") Listed Company Manual, as interpreted
by the
Board in its business judgment.
|
· |
One
member shall serve as Chairman of the Committee. The members of the
Committee shall serve one-year terms, and shall be appointed by the
Board
annually on the day of the Annual Meeting of Stockholders or on such
other
date as the Board shall determine. Members of the Committee may be
removed
or replaced by the Board.
|
Committee
Meetings - Operating Principles
· |
The
Committee shall meet with such frequency and at such intervals as
it shall
determine is necessary to carry out its duties and responsibilities,
but
in any case, at least two times each year.
|
· |
Meetings
of the Committee may be called as needed by the Chairman of the Committee
or the Chairman of the Board.
|
· |
The
Chairman will preside, when present, at all meetings of the Committee.
The
Committee may meet by telephone or videoconference and may take action
by
written consent.
|
· |
The
Committee shall have the sole right to retain and terminate compensation
consultants to assist in the evaluation of director, CEO or executive
officer compensation, including the sole authority to approve the
consultant's fees and other retention terms.
|
· |
The
Committee shall have the authority to obtain advice and assistance
from
any officer or employee of the Corporation or from any outside legal
expert or other advisor.
|
· |
Summaries
of key Committee conclusions shall be provided to the Board from
time to
time.
|
Compensation/Employee
Benefits Responsibilities
The
Committee shall perform the following functions:
· |
Provide
oversight and guidance for compensation and benefit philosophy for
all
employees of the Corporation.
|
· |
Review
and approve corporate goals and objectives relevant to CEO compensation,
evaluate the CEO's performance in light of those goals and objectives,
and
have the sole authority to recommend to the Board for approval the
CEO's
compensation level based on this evaluation. This includes salary,
annual
incentive and long term incentive programs, whether stock or cash,
and
determinations relating to the deductibility of compensation under
Section
162(m) of the Internal Revenue Code of 1986.
|
· |
Review
and approve other significant terms of employment for the CEO.
|
· |
Review
and approve the compensation, including base salary and incentive
awards
and other significant terms of employment, for individuals reporting
directly to the CEO and holding a position classified as Executive
Vice
President and any other Section 16 officer of the Corporation.
|
· |
Review
and make recommendations to the Board with respect to incentive
compensation plans and equity-based plans for all employees.
|
· |
Review
and make recommendations to the Board on matters concerning the
independent directors' annual retainer, as well as any other compensation
programs relating to the Board.
|
· |
Prepare
the report on executive compensation for inclusion in the Corporation's
proxy statement in accordance with applicable rules and regulations.
|
· |
Exercise
any fiduciary, administrative or other function assigned to the Committee
under any of the Corporation's health, benefit or welfare plans.
|
Other
Responsibilities
· |
Report
to the full Board all significant items discussed at Committee meetings.
|
· |
Review
and reassess the adequacy of this Charter annually and recommend
any
proposed changes to the Board for approval.
|
· |
Conduct
an annual performance evaluation of the Committee.
|
· |
Take
such further actions or provide such further advice as the full Board
may
from time to time delegate to the Committee.
|
CORPORATE
GOVERNANCE COMMITTEE CHARTER
ORGANIZATION
Membership
The
Corporate Governance Committee consists of three or more independent directors.
Membership on the Corporate Governance Committee is determined annually by
the
Board upon the recommendation of the Corporate Governance Committee. The
Corporate Governance Committee Chairman is appointed by the Board.
Meetings
The
Corporate Governance Committee meets at least once each year. Additional
meetings are scheduled as needed. A majority of the members of the Corporate
Governance Committee shall constitute a quorum for the transaction of business.
Minutes are recorded by the Secretary to the Corporate Governance Committee.
Approval by a majority of the members present at a meeting at which a quorum
is
present shall constitute approval by the Corporate Governance Committee. The
Corporate Governance Committee may also act by unanimous written consent without
a meeting.
BASIC
FUNCTION AND PURPOSE
The
Corporate Governance Committee acts as the Board’s Corporate Governance
Committee and, in addition, reviews and makes recommendations to the Board
regarding Board organization, membership, function and effectiveness; and
committee structure, membership, function and effectiveness. The Corporate
Governance Committee evaluates the performance of the Board as a whole, the
Committees and the individual directors.
RESPONSIBILITIES
The
Corporate Governance Committee, in consultation with the Chairman of the Board
and Chief Executive Officer, shall:
1. |
Periodically
review and recommend any changes in the size, composition, organization
and operational structure of the Board and its standing
committees.
|
2. |
Review
and make recommendations on the range of skills and expertise which
should
be represented on the Board, and the eligibility criteria for individual
Board membership.
|
3. |
Identify
and recommend potential candidates for election to the
Board.
|
4. |
Make
recommendations to the Board on committee assignments and the position
of
chairman of each committee, taking into account the applicable
independence requirements of any stock exchange on which the Company
is
listed and the rules and regulations of the Securities and Exchange
Commission.
|
5. |
Have
sole authority to retain and terminate any search firm to be used
to
identify director candidates, including sole authority to approve
the
search firm, fees, and other retention
terms.
|
6. |
Evaluate
the effectiveness of the Board, each committee and individual
director.
|
REPORTING
RESPONSIBILITY
All
action taken by the Corporate Governance Committee shall be reported to the
Board at the next Board meeting following such action.
In
addition, corporate governance matters may be discussed in executive session
with the full Board during the course of the year.
ISCO
INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
þ
|
|
Please
mark your votes as in this example.
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
Election
of Directors:
|
|
For
Nominee
|
|
Withhold
Authority
|
|
|
|
|
John
Thode
|
|
¨
|
|
¨
|
|
|
|
|
Amr
Abdelmonem
|
|
¨
|
|
¨
|
|
|
|
|
George
Calhoun
|
|
¨
|
|
¨
|
|
|
|
|
Michael
Fenger
|
|
¨
|
|
¨
|
|
|
|
|
James
Fuentes
|
|
¨
|
|
¨
|
|
|
|
|
Ralph
Pini
|
|
¨
|
|
¨
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
2.
|
|
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 AND 2 IN THIS PROXY,
WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ABOVE. THIS PROXY WILL BE
VOTED FOR PROPOSAL NOS. 1 AND 2 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.
PLEASE
MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
|
|
|
|
/s/ |
|
|
/s/ |
|
|
|
|
Name Title More
Title |
|
|
Name Title More
Title |
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.
1001
CAMBRIDGE DRIVE - ELK GROVE VILLAGE, ILLINOIS 60089
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FOR THE JUNE 8, 2007 ANNUAL MEETING OF STOCKHOLDERS
The
undersigned hereby appoints Mr. John Thode 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 April 16, 2007 at the
Annual Meeting of Stockholders of ISCO International, Inc., to be held on June
8, 2007 at the Marriott Suites Chicago O’Hare, 6155 North River Road, Rosemont,
IL 60018, beginning at 10:00 a.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 NOMINEES LISTED ON THIS PROXY 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,
2007.
PLEASE
SIGN, DATE AND RETURN THIS PROXY IMMEDIATELY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
(Continued
and to be signed on reverse side.)