===========================================================================
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
-----
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
INDUSTRIAL SERVICES OF AMERICA, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant))
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------
(3) Filing Party:
---------------------------------------------
(4) Date Filed:
---------------------------------------------
===========================================================================
INDUSTRIAL SERVICES OF AMERICA, INC.
--------------
Notice of Annual Meeting of Shareholders
To Be Held on May 23, 1997
--------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
INDUSTRIAL SERVICES OF AMERICA, INC. (the "Company") will be held at
Building No. 4, 7100 Grade Lane, Louisville, Kentucky, on Friday, May 23,
1997 at 10:00 A.M. (Eastern Daylight Time), for the following purposes:
(1) To elect five directors for a term expiring in 1998;
(2) To consider and approve the 1997 Employee Stock Option Plan;
(3) To ratify the selection of Mather, Hamilton & Co., LLP as the
Company's independent auditors for the fiscal year ending
December 31, 1997; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 15, 1997
are entitled to notice of and to vote at the Annual Meeting. In the event
the Annual Meeting should be adjourned to a date or dates later than May
23, 1997, the Board of Directors will establish a new record date for
purposes of determining those shareholders entitled to notice of and to
vote at any such adjournments. The transfer books will not be closed.
By Order of the Board of Directors
MATTHEW L. KLETTER
Vice President of Legal Affairs
and Secretary
7100 Grade Lane
Louisville, Kentucky 40213
April 21, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE,
WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ARE ABLE TO ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU
MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
INDUSTRIAL SERVICES OF AMERICA, INC.
7100 Grade Lane
Louisville, Kentucky 40213
---------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with
the solicitation of proxies on behalf of the Board of Directors
of Industrial Services of America, Inc., a Florida corporation
(the "Company"), to be used at the Annual Meeting of Shareholders
of the Company to be held at 10:00 A.M. (Eastern Daylight Time),
on Friday, May 23, 1997, at Building No. 4 of the Company's
offices located at 7100 Grade Lane, Louisville, Kentucky 40213,
and at any and all adjournments thereof, for the purposes set
forth in the accompanying Notice of the meeting.
Shares represented by duly executed proxies in the
accompanying form received prior to the meeting and not revoked
will be voted at the meeting or at any adjournments within 120
days thereof in accordance with the choices specified on the
ballot. If no choices are specified, it is the intention of the
persons named as proxies in the accompanying form of proxy to
vote for the nominees for election as directors, for approval of
the 1997 Employee Stock Option Plan and for the ratification of
independent auditors for the 1997 fiscal year. Such proxy may be
revoked by the person executing it at any time before the
authority thereby granted is exercised by giving written notice
to the Secretary of the Company, by delivery of a duly executed
proxy bearing a later date or by voting in person at the meeting.
Attendance at the meeting will not have the effect of revoking a
proxy unless the shareholder so attending so notifies the
secretary of the meeting in writing prior to voting of the proxy.
The expenses of soliciting proxies for the Annual
Meeting, including the cost of preparing, assembling and mailing
this proxy statement and the accompanying form of proxy, will be
borne by the Company. In addition to the solicitation of proxies
by mail, certain officers and regular employees of the Company,
without additional compensation, may use their personal efforts,
by telephone or otherwise, to obtain proxies. The Company will
also request persons, firms and corporations holding shares in
their names, or in the names of their nominees, which shares are
beneficially owned by others, to send this proxy material to and
obtain proxies from such beneficial owners, and will reimburse
such holders for their reasonable expenses in so doing.
The presence in person or by proxy of shareholders
holding a majority of the outstanding shares of the Company's
Common Stock will constitute a quorum for the transaction of all
business at the Annual Meeting. A shareholder voting for the
election of directors may withhold authority to vote for all
nominees for directors or may withhold authority to vote for
certain nominees for directors. A shareholder may also abstain
from voting on the proposals to approve the 1997 Employee Stock
Option Plan and to ratify the selection of independent auditors
for the 1997 fiscal year. Votes withheld from the election of
any nominee for director and abstentions from any other proposal
will be treated as shares that are present and entitled to vote
for purposes of determining the presence of a quorum, but will
not be counted in the number of votes cast on any matter. If a
broker does not receive voting instructions from the beneficial
owner of shares on a particular matter and indicates on the proxy
that it does not have discretionary authority to vote on that
matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
This proxy statement and the accompanying form of proxy
are being mailed to shareholders commencing on or about April 21,
1997.
VOTING SECURITIES
Only shareholders of record at the close of business on
April 15, 1997 are entitled to vote at the Annual Meeting or any
adjournments within 120 days thereof. As of March 20, 1997,
there were 1,929,600 shares of the Company's Common Stock
outstanding and entitled to vote plus an additional 27,900 shares
of Common Stock held by the Company as Treasury Stock.
Each share of Common Stock entitles the holder to one
vote on all matters presented at the Annual Meeting.
The following table sets forth certain information
regarding those persons known to management of the Company to own
of record or beneficially more than five percent of the
outstanding shares of the Company's Common Stock and the
ownership of such Common Stock by all directors and officers of
the Company as a group:
AMOUNT AND NATURE PERCENT
OF BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP (1)(2)(3) CLASS (1)
---------------- ------------------- ---------
Harry Kletter ........................ 874,300(4) 45.3%
1208 Park Hills Court
Louisville, Kentucky 40207
K & R Corporation .................... 483,800(5) 25.1%
7100 Grade Lane
Louisville, Kentucky 40213
Roberta Kletter ...................... 200,000(6) 10.4%
1208 Park Hills Court
Louisville, Kentucky 40207
All directors and officers
as a group (5 persons) ............. 1,113,300 57.7%
- ---------------
(1) The table reflects share ownership and the percentage of
such share ownership as of March 20, 1997. The percentages
are determined on the basis of 1,929,600 shares of Common
Stock outstanding and exclusive of the additional 27,900
shares of Common Stock held by the Company as Treasury
Stock.
(2) Except as otherwise indicated, each person or entity shown
has sole voting and investment power with respect to the
shares of Common Stock owned by him or it.
(3) Information with respect to beneficial ownership has been
obtained from the Company's shareholder records and from
information provided by shareholders.
(4) Includes 483,800 shares of Common Stock beneficially owned
by K & R Corporation, the sole shareholder of which is Harry
Kletter. Does not include 200,000 shares of Common Stock
2
beneficially owned by Roberta Kletter, the spouse of Harry
Kletter, as to which shares he disclaims beneficial
ownership.
(5) Harry Kletter as the sole shareholder of K & R Corporation
is deemed to have shared voting and investment power of the
shares of Common Stock beneficially owned by K & R
Corporation.
(6) Does not include 390,500 shares of Common Stock beneficially
owned by Harry Kletter, spouse of Roberta Kletter, or
473,800 shares of Common Stock beneficially owned by K & R
Corporation, the sole shareholder of which is Harry Kletter,
as to all of which shares Roberta Kletter disclaims
beneficial ownership.
See "ELECTION OF DIRECTORS" below for share ownership
information with respect to nominees for election as directors.
ITEM I. ELECTION OF DIRECTORS
The nominees for election as directors are Harry
Kletter, Matthew L. Kletter, Roberta Kletter, Timothy W. Myers
and Debbie P. Prewitt. Messrs. Harry and Matthew Kletter and
Roberta Kletter were most recently elected by the shareholders at
the 1996 annual meeting for a term expiring at the 1997 Annual
Meeting. Mr. Myers and Ms. Prewitt have been nominated to serve
their first terms as directors of the Company. If elected, all
directors will hold office until the 1998 Annual Meeting and
until their respective successors have been elected and
qualified.
Shareholders voting at the Annual Meeting may not vote
for more than the number of nominees listed in this Proxy
Statement. Directors will be elected by a plurality of the total
votes cast at the Annual Meeting. That is, the five nominees
receiving the greatest number of votes for Class I directors will
be deemed elected directors. It is the intention of the persons
named as proxies in the accompanying form of proxy (unless
authority to vote therefor is specifically withheld) to vote for
the election of the five nominees for directors. In the event
that any of the nominees becomes unavailable (which is not now
anticipated by the Company), the persons named as proxies have
discretionary authority to vote for a substitute nominee
designated by the present Board of Directors. The Board of
Directors has no reason to believe that any of said nominees will
be unwilling or unable to serve if elected.
The following table contains certain information
regarding each of the nominees for election as directors at this
year's annual meeting. Each of these individuals has furnished
the respective information shown. Except as otherwise indicated,
each of the persons listed below has sole voting and investment
power with respect to the shares of Common Stock owned by him.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED AS
NAME AND YEAR FIRST OF MARCH 20, 1997
PRINCIPAL OCCUPATION BECAME --------------------------------------
OR EMPLOYMENT AGE DIRECTOR NUMBER OF SHARES PERCENT OF CLASS(1)
-------------------- --- ---------- ---------------- -------------------
Harry Kletter ............ 70 1983 874,300 45.3%
Chairman of the Board, President
and Chief Executive Officer
3
SHARES OF COMMON STOCK
BENEFICIALLY OWNED AS
NAME AND YEAR FIRST OF MARCH 20, 1997
PRINCIPAL OCCUPATION BECAME --------------------------------------
OR EMPLOYMENT AGE DIRECTOR NUMBER OF SHARES PERCENT OF CLASS(1)
-------------------- --- ---------- ---------------- -------------------
Matthew L. Kletter ........ 37 1994(2) -0- --
Vice President of Legal
Affairs, Secretary
Roberta Kletter ........... 63 1983 200,000 10.4
Vice President of Shareholder
Relations and Corporate
Communications
Timothy W. Myers .......... 45 -- 37,000 1.9
Senior Vice President and
Chief Operating Officer
Debbie P. Prewitt ......... 39 -- -- --
- ---------------
(1) Based on 1,929,600 shares of Common Stock outstanding and
exclusive of an additional 27,900 shares of Common Stock
held by the Company as Treasury Stock.
(2) Matthew L. Kletter also served as a director from 1990 to
1991.
NOMINEES FOR DIRECTORS
HARRY KLETTER has been a director of the Company since
-------------
1983. In October, 1983 he was elected Chairman of the Board and
Chief Executive Officer and has served as President and Chief
Executive Officer of the Company since 1992. Mr. Kletter
previously served as President and Chief Executive Officer of the
Company from October 1983 until January 1988 and again from
January 1990 until July 1991. Mr. Kletter resumed the position
of President and Chief Executive Officer in July 1992 subsequent
to the resignation of his predecessor. Prior to his involvement
with the Company, Mr. Kletter was President and Chief Executive
Officer of K & R Corporation, a waste handling manufacturing
company. Mr. Kletter currently owns 100% of the stock in K & R
Corporation which is a real estate holding and materials
processing company. See "EXECUTIVE COMPENSATION - Certain
Transactions." Prior thereto, Mr. Kletter was the President of
Tri-City Industrial Services, Inc., which corporation was
involved in the transportation, disposal and management of solid
waste. From 1980 to present, Mr. Kletter has been an investor in
various other business ventures including Outer Loop Business
Park and Outer Loop Industrial Park which were each real estate
ventures in the Louisville, Kentucky area. Mr. Kletter is the
husband of Roberta Kletter and uncle of Matthew L. Kletter.
MATTHEW L. KLETTER was a Director of the Company from
------------------
1990 to 1991 and has been a Director of the Company since 1994.
Mr. Kletter was a Director of Legal Affairs of the Company from
1989 to 1991 and from 1994 to January 1997. Mr. Kletter has been
a Vice President of Legal Affairs and Secretary of the Company
since January 1997. Mr. Kletter is an attorney who practices law
primarily in New York City with an emphasis in entertainment law.
Mr. Kletter has provided services, on an independent contractor
4
basis, for the Company since 1989. See "EXECUTIVE COMPENSATION -
Certain Transactions."
ROBERTA KLETTER has been a Director of the Company
---------------
since 1983. Roberta Kletter has been Vice President of
Shareholders Relations and Corporate Communications since 1995.
Prior to her current position with the Company, Roberta Kletter
was Secretary and Marketing Director of the Company.
TIMOTHY W. MYERS has been Senior Vice President of the
----------------
Company since 1996. Mr. Myers served as Vice President of
Operations of the Company from 1989 to January 1996. Prior to
that date and since 1973, Mr. Myers has served in various
capacities with the Company and its predecessors, including waste
equipment coordinator for WESSCO, Operations Manager of the
transfer station and recycling center of the Company, and Manager
of the Waste Equipment and Manufacturing Division of the Company.
DEBBIE P. PREWITT has been an employee of the
-----------------
Mid-America Bank of Louisville and Trust Company (the "Bank of
Louisville") since 1987, presently serving as Senior Vice
President - Corporate Banking of the Bank of Louisville since
April 1994; and having served as Vice President - Corporate
Banking/Private of the Bank of Louisville from January 1992
through April 1994. Ms. Prewitt served in other various lending
capacities with the Bank of Louisville prior to January 1992.
Ms. Prewitt received her bachelors degree in Business
Administration in 1981 from Western Kentucky University in
Bowling Green, Kentucky.
None of the directors hold another directorship in a
company with a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended (the
"Act"), or subject to the requirements of Section 15(d) of that
Act or in a company registered as an investment company under the
Investment Company Act of 1940, as amended.
MEETINGS OF THE BOARD
During 1996, the Board of Directors met one time and
took actions on six other occasions by unanimous written consent
of the directors. All incumbent directors attended at least 75%
of the aggregate number of meetings of the Board and the
committees of which they were members.
COMMITTEES OF THE BOARD
The Board of Directors does not have any Compensation
Committee, Audit Committee and Nominating Committee.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the
Company receive no fees for their services as a director.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors, certain officers and persons
who own more than 10% of the outstanding Common Stock of the
5
Company, to file with the Securities and Exchange Commission
reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater
than 10% shareholders are also required to furnish the Company
with copies of all forms they file under this regulation. To the
Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and representations that no
other reports were required, all Section 16(a) filing
requirements applicable to all of its officers and directors were
complied with during fiscal 1996 with the following exceptions:
Each of Timothy L. Myers and Alan Schroering, the Director of
Finance and Treasurer of the Company, did not timely file their
Form 3 reports within the prescribed time period after the
registration of the Common Stock of the Company under the
Securities Exchange Act of 1934, as amended on July 17, 1996.
Messrs. Myers and Schroering subsequently filed these reports.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth cash and other
compensation information for the fiscal years ended December 31,
1996, 1995 and 1994 paid or accrued by the Company, to the
Company's Chief Executive Officer.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------
NAME AND OTHER ANNUAL TOTAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- ------------------- ---- -------- ----- ------------ ------------
Harry Kletter 1996(1) $975** $ 975
President and Chief 1995 $100,000 $975** $100,975
Executive Officer 1994 $200,000 $975** $200,975
- ---------------
* Long Term Compensation, Awards and all other Compensation
are not applicable.
** Includes taxable use of Company vehicle.
(1) K & R Corporation ("K & R"), the sole shareholder of which
is Mr. Kletter, conducts significant business with the
Company. Mr. Kletter receives compensation from K & R. See
"EXECUTIVE COMPENSATION - Certain Transactions."
All other executive officers of the Company earned less
than $100,000.
CERTAIN TRANSACTIONS
In April 1992 the Company entered into a management
agreement with K & R Corporation ("K & R") a Kentucky
corporation. K & R is an affiliate of the Company and solely
owned by the Company's principal stockholder, Harry Kletter.
Under this management agreement, the Company is responsible for
the management of the scrap and corrugated paper recycling for K
& R and in addition purchased certain rental equipment and scrap
metal inventories from K & R. For its management efforts, the
Company retains 80% of the profits generated from the K & R
operation(s) pursuant to an amendment to this management
6
agreement, dated as of October 30, 1995, and effective January 1,
1996. From July 1, 1994 to December 31, 1995, the management
agreement provided that the Company was to retain 60% of such
profits. During 1996, revenue derived under this arrangement
resulted in income before provision for income taxes to the
Company totaling $712,765.
Effective January 1, 1997, the Company leased from K &
R, an affiliate of the Company, a 23,000 square foot
office/warehouse building located adjacent to the Louisville,
Kentucky headquarters facility of the Company. The lease
payments are $20,000 per month representing a per month rental
less than the rental paid by the previous tenant of this space.
This previous tenant is unaffiliated with either the Company or K
& R. The Sales and Marketing Group, operational management of
the Leasing division and the WESSCO division of the Company
occupy the office space.
Matthew L. Kletter, Esq., a director, Secretary and
Vice President of Legal Affairs of the Company, maintains a law
practice in New York, New York. During 1996, he provided legal
services to both the Company and K & R, the sole shareholder of
which is Harry Kletter, the President and Chief Executive Office
of the Company. For those services, the Company and K & R paid
Mr. Matthew Kletter $30,700.
Debbie P. Prewitt, a nominee to the Board of Directors
of the Company, is a Senior Vice President - Corporate Banking of
the Bank of Louisville. The Company and K & R are parties to a
Credit Agreement (the "Credit Agreement"), dated June 30, 1995,
with the Bank of Louisville, under which the Company has
principal outstanding of $600,000 on a credit line of $750,000
(the "Loan"). The terms of the Loan provide for interest payable
monthly at .5% above the prime rate of the Bank of Louisville
with the principal due and payable on June 30, 1997, the maturity
date. The security for this Loan includes Company and K & R
assets, rent assignments, an assignment of a life insurance
policy on the life of Harry Kletter, and a personal guaranty of
Harry Kletter. Management of the Company affirms that the terms
of this Loan were negotiated on an arms length basis with the
Bank of Louisville.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
Harry Kletter, as the Chief Executive Officer of the
Company, has made the decisions regarding compensation for the
executive officers of the Company. The determination as to base
salary paid to executive officers is in part a function of the
performance of the Company and in greater part the diligence and
performance of the individual executive officer whose salary Mr.
Kletter is establishing. Generally, the Board of Directors does
not participate in the decisions regarding executive
compensation, including that paid to Mr. Kletter.
As noted under "EXECUTIVE COMPENSATION - Summary
Compensation Table," Harry Kletter elected not to take a salary
in 1996 from the Company. However, Mr. Kletter received
compensation from K & R, the sole shareholder of which is Harry
Kletter. K & R in turn conducts significant levels of business
with the Company. See "EXECUTIVE COMPENSATION - Certain
Transactions."
7
PERFORMANCE GRAPH
The following performance graph compares the
performance of the Company's Common Stock to the Russell 2000
Index and to a peer group for the Company's last five fiscal
years. Since there is no nationally recognized industry index
consisting of consultants in the business of retail and
industrial waste management and sales and service of waste
handling equipment to be used as a peer group index, the Company
constructed its own peer group. This peer group is comprised of
six companies which represent the other public companies in the
industry -- Allied Waste Industries, Johnson Controls, Inc.,
Republic Industries, Inc., TransAmerica Waste, Inc., United Waste
Systems, Inc., and USA Waste Services, Inc. The returns of each
member of the peer group are weighted according to each member's
stock market capitalization as of the beginning of the period
measured. The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at December
31, 1996 and that all dividends were reinvested.
COMPARATIVE ANNUAL TOTAL RETURN
Industrial Services of America, Inc.,
Standard & Poors 500 and Peer Group
(Performance Results Through 12/31/96)
VALUE LINE INSTITUTIONAL SERVICES
1-800-531-1425
TOTAL RETURNS
ISSUE TICKER 1995 1996
- ----- ------ ---- ----
ALLIED WASTE INDS INC AWIN -3.39 29.82
JOHNSON CTLS INC. JCI -0.13 23.35
REPUBLIC INDS INC. RWIN 34.42 72.67
TRANSAMERICAN WASTE IN WSTE 9.09 -27.08
UNITED WASTE SYS INC UWST -6.58 84.56
USA WASTE SVCS INC. UW -10.12 68.87
MARKET CAPITALIZATIONS
ISSUE TICKER 1995 1996
- ----- ------ ---- ----
ALLIED WASTE INDS INC. AWIN 214,641,000 214,641,000
INDUSTRIAL SVCS AMER INC IDSA 15,026,484 16,760,240
JOHNSON CTLS INC. JCI 2,827,069,000 2,827,069,000
REPUBLIC INDS INC RWIN 2,226,709,000 2,226,709,000
TRANSAMERICAN WASTE IN WSTE 44,471,000 44,471,000
UNITED WASTE SYS INC UWST 583,335,000 583,335,000
USA WASTE SVCS INC UW 1,144,939,000 1,144,939,000
SUMMARY DATA
NAME 1995 1996
- ---- ---- ----
INDUSTRIAL SVCS AMER INC FLA 11.54 55.17
Standard & Poors 500 1.85 23.25
Peer Group 8.60 51.30
GRAPH PLOT POINTS
NAME 11/30/95 1995 1996
- ---- -------- ---- ----
INDUSTRIAL SVCS AMER INC FLA 100.00 111.54 173.07
Standard & Poors 500 100.00 101.85 125.52
Peer Group 100.00 108.60 164.31
Assumes $100 invested at the close of trading 11/30/95 in
Industrial Services of America, Inc. common stock, Standard &
Poors 500 and Peer Group.
*Cumulative total return assumes reinvestment of dividends
SOURCE: VALUE LINE, INC.
Factual material is obtained from sources believed to be reliable,
but the publisher is not responsible for any errors or omissions
contained herein.
8
ITEM II. APPROVAL OF THE 1997 EMPLOYEE STOCK OPTION PLAN
Pursuant to resolutions adopted by unanimous written
consent of the Directors as of April 11, 1997, the Board of
Directors adopted the Company's 1997 Employee Stock Option Plan
(the "Plan"), and (subject to shareholder approval) the Plan will
become effective as of such date. The Board recommends that the
shareholders of the Company approve the Plan. A copy of the Plan
is attached hereto as Exhibit "A".
The purpose of the Plan is to promote the interests of
the Company by providing its key employees with an additional
incentive to work to increase the value of the Common Stock which
is inherent in an opportunity to participate in the ownership of
the Company and its future growth. The Plan provides for the
granting of either incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or non-qualified stock options ("NQOs").
There are 100,000 shares of Common Stock reserved under the Plan
for the granting of options. If an option granted under the Plan
to purchase any shares of Common Stock expires, is cancelled or
is exchanged for a new option before being exercised in full, the
shares reserved for the unexercised portion of such option will
again be available for use under the Plan. Any shares underlying
an option that is surrendered and any shares used to satisfy an
option price or withholding obligation shall not again become
available for use under the Plan. The shares shall be reserved
to the extent the Company deems appropriate from authorized but
unissued shares of Common Stock and from shares of Common Stock
which have been reacquired by the Company. The terms of any
options shall be determined under the Plan and under the related
certificate between the Company and the key employee (the "Option
Certificate").
The following discussion summarizes the principal
features of the Plan. This discussion does not purport to be
complete and is qualified in its entirety by reference to the
Plan.
Administration. The Plan will be administered by the
--------------
Board of Directors or a committee of the Board of Directors
comprised of solely and at least two members who are "Non-
employee Directors" for purposes of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the
"Committee").
Participants. Any employee of the Company, any
------------
subsidiary of which the Company owns, directly or indirectly, 50%
of its outstanding common stock or any affiliate of the Company
(including any officer or employee director of the Company) may
participate in the Plan provided the Board of Directors or the
Committee, as applicable, acting in its absolute discretion,
determines such employee to be key, directly or indirectly, to
the success of the Company. Only such employees who are employed
by the Company or such a subsidiary or a parent corporation may
be granted an ISO. The Company estimates that approximately 87
employees of the Company and its subsidiaries presently are
eligible to participate in the Plan.
The Board of Directors or the Committee, as applicable,
may grant options under the Plan to such key employees as the
Board of Directors or the Committee, as applicable, may
determine, provided however, that if the aggregate fair market
value of Common Stock subject to all ISOs and other incentive
stock options granted to a key employee under the Plan and any
other stock option plan adopted by the Company which first became
exercisable in any calendar year exceed $100,000, such options
shall be treated as NQOs. The Board of Directors or the
Committee, as applicable, shall have the right to grant new
options in exchange for the cancellation of options or under any
other circumstances which the Board of Directors or the
Committee, as applicable, deems appropriate. The Option
9
Certificate under which an option is granted shall incorporate
the terms and conditions which the Board of Directors or the
Committee, as applicable, deems consistent with the terms of the
Plan and, if the Board of Directors or the Committee, as
applicable, intends such option to be an ISO, which are not
inconsistent with Section 422 of the Code.
Option Price. The option price of options granted
------------
under the Plan will be determined by the Board of Directors or
the Committee, as applicable, but such price will be no less than
the fair market value of the Common Stock on the date the option
is granted; provided, however, if a key employee owns more than
10% of the total combined voting power of all classes of stock of
the Company or a subsidiary ("Ten Percent Shareholder"), the
option price for an ISO will be no less than 110% of the fair
market value of the Common Stock on such date. The Option
Certificate may, at the discretion of the Board of Directors or
the Committee, as applicable, provide for payment of the option
price in cash, Common Stock, or a combination of cash and Common
Stock. Any payment made in Common Stock shall be made either by
tendering shares of Common Stock held by the key employee or, to
the extent allowed, by the Board of Directors or the Committee,
as applicable, in its sole discretion by having the Company
withhold Common Stock (that otherwise would be transferred to the
key employee upon the exercise of any option). The Company will
receive no payment upon the granting of options pursuant to the
Plan.
Option Period. Each option granted under the Plan will
-------------
be exercisable in whole or in part as set forth in the particular
Option Certificate under which such option is granted, but in no
event before the date such option is granted or after the earlier
of (1) the date such option is exercised in full, (2) the date
which is the tenth anniversary of the date such option is
granted, or (3) the date which is the fifth anniversary of the
date such option is granted if the option is granted to a key
employee who is a Ten Percent Shareholder and the Board of
Directors or the Committee, as applicable, intends that such
option qualify as an ISO.
Non-transferability. No option granted under the Plan
-------------------
shall be transferable by a key employee other than by will or by
the laws of descent and distribution, and such option shall be
exercisable during a key employee's lifetime only by the key
employee.
Surrender of Options. The Board of Directors or the
--------------------
Committee, as applicable, in its discretion may incorporate a
provision in an Option Certificate to allow a key employee to
surrender his or her option in whole or in part (in lieu of the
exercise of such option) on any date that the fair market value
of the Common Stock subject to that option exceeds the option
price for such Common Stock and the option is otherwise
exercisable. In exchange for his or her surrendered shares, a
key employee shall (to the extent consistent with the exemption
under Rule 16b-3) receive the payment in cash or in Common Stock,
or in a combination of cash and Common Stock, equal to the excess
of the fair market value of the surrendered shares on the date
such surrender is effective over the option price for the
surrendered shares. The Board of Directors or the Committee, as
applicable, in its discretion shall determine the form and timing
of such payment. An Option Certificate which incorporates the
surrender provision will also incorporate such additional
restrictions as the Board of Directors or the Committee, as
applicable, deems necessary to satisfy the conditions to the
exemption under Rule 16b-3.
Plan Not Registered under Securities Act of 1933. Each
------------------------------------------------
Option Certificate will provide that the shares of Common Stock
received as a result of the exercise of an option under the Plan
must be held for investment and not with a view to resale or
distribution to the public. The Company has no obligation to
register the Plan or the Common Stock issued under the Plan under
the Securities Act of 1933, as amended. As a result, the
recipients of the options and the related Common Stock will have
restricted securities for purposes of the Securities Act of 1933,
as amended.
10
Adjustment of Shares. The Plan provides for
--------------------
adjustments by the Board of Directors in an equitable manner, of
the number of shares of Common Stock available for the grant of
options, the number of shares of Common Stock covered by options
and the option price to reflect any changes in the capitalization
of the Company, including, but not limited to, changes such as
stock splits or stock dividends and in the event of certain
transactions which provide for the substitution or assumption of
such options.
Sale or Merger of the Company. If the Company agrees
-----------------------------
to sell all or substantially all of its assets or agrees to any
merger, consolidation, reorganization, division or other
corporate transaction in which Common Stock is converted into
another security or into the right to receive securities or
property and such agreement does not provide for the assumption
or substitution of options granted under the Plan on a basis that
is fair and equitable to such option holders as determined by the
Board of Directors, each option, at the direction and discretion
of the Board of Directors, may be cancelled unilaterally by the
Company if (1) any restrictions on the exercise of the option are
waived before the Option Certificate is cancelled such that the
key employee has the opportunity to exercise the option in full
before such cancellation, (2) the Company transfers to the key
employee shares of Common Stock, the number of which shall be the
number of whole shares of Common Stock, if any, which the key
employee would have received if he or she had the right to
surrender his or her outstanding option in full under the Plan
and exercised that right on the date set by the Board of
Directors exclusively for Common Stock, (3) the Company gives the
key employee advance written notice of such cancellation and the
transactions described in (1) and (2) above would violate Section
16 of the Securities Exchange Act of 1934, as amended, or (4) the
option price equals or exceeds the fair market value of a share
of Common Stock on a date set by the Board of Directors.
Change in Control. If there is a change in control of
-----------------
the Company or a tender or exchange offer is made for Common
Stock other than by the Company, the Board of Directors shall
have the right to take such action with respect to any
unexercised options granted to key employees, or all such
options, as the Board of Directors deems appropriate under the
circumstances to protect the interest of the Company in
maintaining the integrity of the grants under the Plan, including
following the procedure under the Plan for a sale or merger of
the Company with respect to such options. The Board of Directors
shall have the right to take different action with respect to
different key employees or different groups of key employees as
the Board of Directors determines appropriate.
Term of the Plan. The Plan shall terminate on the
----------------
tenth anniversary of the Plan's effective date ("Tenth
Anniversary") or, if earlier, on the date on which all of the
Common Stock reserved under the Plan has been issued. No option
shall be granted under the Plan after the date the Plan
terminates but, as for any options granted pursuant to the Plan
which are outstanding on such Tenth Anniversary, such options
will remain until they have been exercised, surrendered or no
longer are exercisable.
Amendment to the Plan. The Plan may be amended by the
---------------------
Board of Directors from time to time to the extent that the Board
of Directors deems necessary or appropriate; however, no
amendment shall be made without approval of the shareholders of
the Company to the extent required under Section 422 of the Code.
The Board of Directors may also suspend the granting of options
under the Plan at any time and may terminate the Plan at any
time; provided, however, the Board of Directors may only modify,
amend or cancel any options theretofore granted if the key
employee consents in writing to such modification, amendment or
cancellation or there is a dissolution or liquidation of the
Company or in a transaction described under the headings
"Adjustment of Shares," "Sale or Merger of the Company," or
"Change in Control."
11
Federal Income Tax Consequences. A brief description
-------------------------------
of the federal income tax consequences of the Plan under present
law is set forth below. This brief description is only a general
summary based on current federal income tax laws, regulations
(including certain proposed regulations), and judicial and admin-
istrative interpretations thereof and the related federal
securities laws and rules and regulations. The federal income
tax laws and regulations and the related federal securities laws
and rules and regulations are frequently amended, and such
amendments may or may not be retroactive with respect to
transactions described herein. This summary is not intended to
be exhaustive and, among other things, does not describe state,
local or foreign tax consequences. Accordingly, a participant
should consult a tax advisor with respect to the tax aspects of
the Plan.
As identified by the Board of Directors or the
Committee, as applicable, each option granted under the Plan is
either an ISO or an NQO. A key employee is not subject to any
federal income tax upon the grant of an option pursuant to the
Plan nor will the grant of an option result in an income tax
deduction for the Company.
Upon the exercise of an ISO and the related transfer of
Common Stock to a key employee, the key employee normally will
not recognize any income for federal income tax purposes and the
Company normally will not be entitled to any federal income tax
deduction. However, the excess of the fair market value of the
shares transferred upon the exercise of an ISO over the option
price of such shares (the "spread") generally will constitute an
item of alternative minimum tax adjustment to the key employee.
Thus, notwithstanding that a key employee will not recognize
income for regular income tax purposes upon exercise of an ISO,
the key employee's federal income tax liability may be increased
as a result of such exercise under the alternative minimum tax
rules of the Code. The portion of a key employee's minimum tax
liability, if any, attributable to the spread may give rise to a
credit against such employee's regular tax liability in later
years.
If the Common Stock transferred pursuant to the
exercise of an ISO is disposed of within two years from the date
of the grant of the option or within one year from the date of
exercise (the "holding periods"), the key employee generally will
recognize ordinary income equal to the lesser of (1) the gain
recognized (i.e., the excess of the amount realized on the
disposition over the option price) or (2) the spread. The
balance, if any, of the key employee's gain over the amount
treated as ordinary income on a disposition generally will be
long-or short-term capital gain depending upon whether the
holding period applicable to long-term capital assets is
satisfied. The Company normally will be entitled to a federal
income tax deduction equal to any ordinary income recognized by
the key employee.
Following satisfaction of the holding periods, the
disposition of shares of Common Stock acquired by the exercise of
an ISO generally will result in long-term capital gain or loss
treatment with respect to the difference between the amount
realized on the disposition and the option price. The Company
will not be entitled to any federal income tax deduction as a
result of a disposition of such shares after the holding periods.
Upon the exercise of an NQO, the key employee generally
will recognize ordinary income in an amount equal to the excess,
if any, of the fair market value of the shares transferred to the
key employee upon exercise over the option price. Such fair
market value will generally be determined on the date the shares
are transferred pursuant to the exercise. Income will be
recognized in the year such fair market value is determined, and
the Company generally will be entitled to a corresponding federal
income tax deduction. The sale or other taxable disposition of
shares of Common Stock acquired through the exercise of an NQO
generally will result in a short-or long-term capital gain or
12
loss equal to the difference between the amount realized on the
disposition and the fair market value of the shares of Common
Stock when the NQO was exercised.
Special rules will apply to a key employee who
exercises an option by paying the option price, in whole or in
part, by the transfer to the Company of shares of Common Stock.
With respect to an Option Certificate which includes
the right to surrender an option (in lieu of exercise), no income
is recognized by a key employee upon the grant of the surrender
right. Upon the surrender of the option, the key employee will
have ordinary income in an amount equal to the cash received plus
the fair market value of any Common Stock received. The Company
will be entitled to a deduction for such amount at the time it is
includable in the income of the key employee.
Special rules may apply to a key employee who is
subject to Section 16(b) of the Securities Exchange Act of 1934,
as amended.
VOTE REQUIRED
Approval of the Plan requires the affirmative vote of
the holders of a majority of the outstanding shares of the
Company's Common Stock presented or represented at the Annual
Meeting. Abstentions will not be counted as votes cast either
for or against the proposal. Shares of Common Stock covered by
proxies executed and received in the accompanying form will be
voted in favor of the Plan, unless otherwise specified on the
proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE PLAN.
ITEM III. RATIFICATION OF INDEPENDENT AUDITORS
The Company's Form 10-K Annual Report to Shareholders
for the fiscal year ended December 31, 1996, including financial
statements and the report of Mather, Hamilton & Co., LLP thereon,
is being mailed with this Proxy Statement to each of the
Company's shareholders of record at the close of business on
April 15, 1997. The Board of Directors, upon recommendation of
the Audit Committee, has selected Mather, Hamilton & Co., LLP .
as independent auditors of the Company's accounts for the fiscal
year ending December 31, 1997. Mather, Hamilton & Co., LLP has
audited the accounts of the Company since 1993. This selection
will be presented to shareholders for ratification at the Annual
Meeting. If the shareholders fail to ratify this selection, the
matter of the selection of independent auditors will be
reconsidered by the Board of Directors. Representatives of
Mather, Hamilton & Co., LLP are not expected to be present at the
Annual Meeting.
The selection of Mather, Hamilton & Co., LLP will be
deemed ratified if the votes cast in favor of the proposal exceed
the votes cast against the proposal. Abstentions and broker non-
votes will not be counted as votes cast either for or against the
proposal.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at
the next annual meeting of shareholders must be received by the
Company at its principal executive offices in Louisville,
13
Kentucky on or before December 23, 1997 for inclusion in the
Company's proxy statement and form of proxy relating to that
meeting and must comply with the applicable requirements of the
federal securities laws.
OTHER MATTERS
The Board of Directors knows of no business which will
be presented for consideration at the Annual Meeting other than
that described above. However, if any such other business should
properly come before the Annual Meeting, it is the intention of
the persons named in the accompanying form of proxy to vote the
proxies in respect of any such business in accordance with their
best judgment.
By Order of the Board of Directors
Matthew L. Kletter
Vice President of Legal Affairs
and Secretary
Louisville, Kentucky
April 21, 1997
14
Exhibit A
INDUSTRIAL SERVICES OF AMERICA, INC.
1997 EMPLOYEE STOCK OPTION PLAN
TABLE OF CONTENTS
-----------------
Sec 1. BACKGROUND AND PURPOSE . . . . . . . . . . . . . . . . 1
Sec 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 1
2.1. Board . . . . . . . . . . . . . . . . . . . . . 1
2.2. Change in Control . . . . . . . . . . . . . . . 1
2.3. Code. . . . . . . . . . . . . . . . . . . . . . 1
2.4. Committee . . . . . . . . . . . . . . . . . . . 1
2.5. Fair Market Value . . . . . . . . . . . . . . . 1
2.6. Insider . . . . . . . . . . . . . . . . . . . . 2
2.7 ISA . . . . . . . . . . . . . . . . . . . . . . . 2
2.8. ISO . . . . . . . . . . . . . . . . . . . . . . 2
2.9. Key Employee. . . . . . . . . . . . . . . . . . 2
2.10. NQO . . . . . . . . . . . . . . . . . . . . . . 2
2.11. Option. . . . . . . . . . . . . . . . . . . . . 2
2.12. Option Certificate. . . . . . . . . . . . . . . 2
2.13. Option Price. . . . . . . . . . . . . . . . . . 2
2.14. Parent Corporation. . . . . . . . . . . . . . . 2
2.15. Plan. . . . . . . . . . . . . . . . . . . . . . 2
2.16. Rule 16b-3. . . . . . . . . . . . . . . . . . . 3
2.17. Stock . . . . . . . . . . . . . . . . . . . . . 3
2.18. Subsidiary. . . . . . . . . . . . . . . . . . . 3
2.19. Surrendered Shares. . . . . . . . . . . . . . . 3
2.20. Ten Percent Shareholder . . . . . . . . . . . . 3
Sec 3. SHARES RESERVED UNDER PLAN . . . . . . . . . . . . . . 3
Sec 4. EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . 3
Sec 5. BOARD OR COMMITTEE . . . . . . . . . . . . . . . . . . 4
Sec 6. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . 4
Sec 7. OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . 4
7.1. Board or Committee Action. . . . . . . . . . . . 4
7.2. $100,000 Limit . . . . . . . . . . . . . . . . . 4
Sec 8. OPTION PRICE . . . . . . . . . . . . . . . . . . . . . 5
Sec 9. EXERCISE PERIOD. . . . . . . . . . . . . . . . . . . . 5
Sec 10. NONTRANSFERABILITY . . . . . . . . . . . . . . . . . . 6
Sec 11. SURRENDER OF OPTIONS . . . . . . . . . . . . . . . . . 6
11.1. General Rule. . . . . . . . . . . . . . . . . . 6
11.2. Procedure . . . . . . . . . . . . . . . . . . . 6
11.3. Payment . . . . . . . . . . . . . . . . . . . . 6
11.4. Restrictions. . . . . . . . . . . . . . . . . . 7
i
Sec 12. SECURITIES REGISTRATION. . . . . . . . . . . . . . . . 7
Sec 13. LIFE OF PLAN . . . . . . . . . . . . . . . . . . . . . 7
Sec 14. ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . 8
Sec 15. SALE OR MERGER OF ISA; CHANGE IN CONTROL . . . . . . . 8
15.1. Sale or Merger. . . . . . . . . . . . . . . . . 8
15.2. Change in Control . . . . . . . . . . . . . . . 9
Sec 16. AMENDMENT OR TERMINATION . . . . . . . . . . . . . . . 9
Sec 17. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 10
17.1. Shareholder Rights. . . . . . . . . . . . . . . 10
17.2. No Contract of Employment . . . . . . . . . . . 10
17.3. Withholding . . . . . . . . . . . . . . . . . . 10
17.4. Construction. . . . . . . . . . . . . . . . . . 10
17.5. Other Conditions. . . . . . . . . . . . . . . . 10
ii
INDUSTRIAL SERVICES OF AMERICA, INC.
1997 EMPLOYEE STOCK OPTION PLAN
Section 1.
BACKGROUND AND PURPOSE
----------------------
The purpose of this Plan is to promote the interest of ISA
through grants to Key Employees of Options to purchase Stock in
order (1) to attract Key Employees, (2) to provide an additional
incentive to each Key Employee to work to increase the value of
Stock and (3) to provide each Key Employee with a stake in the
future of ISA which corresponds to the stake of each of ISA's
stockholders.
Section 2.
DEFINITIONS
-----------
Each term set forth in this Section 2. shall have the
meaning set forth opposite such term for purposes of this Plan
and, for purposes of such definitions, the singular shall include
the plural and the plural shall include the singular.
2.1. Board -- means the board of directors of ISA.
-----
2.2. Change in Control -- means (1) the acquisition of the
-----------------
power to direct, or cause the direction of, the management and
policies of ISA by a person (not previously possessing such
power), acting alone or in conjunction with others, whether
through the ownership of Stock, by contract or otherwise, or (2)
the acquisition, directly or indirectly, of the power to vote
more than 50% of the outstanding Stock by any person or by two or
more persons acting together, except an acquisition from ISA or
by ISA, ISA's management or an ISA sponsored employee benefit
plan, where (3) the term "person" means a natural person,
corporation, partnership, joint venture, trust, government or
instrumentality of a government, and (4) customary agreements
with or between underwriters and selling group members with
respect to a bona fide public offering of Stock shall be
disregarded for purposes of this definition.
2.3. Code -- means the Internal Revenue Code of 1986, as
----
amended.
2.4. Committee -- means a committee comprised of solely and
---------
at least 2 members of the Board who are "Non-employee Directors",
as defined under Rule 16b-3.
2.5. Fair Market Value -- means (1) the closing price on
-----------------
any date for a share of Stock as reported by The Wall Street
---------------
Journal under the New York Stock Exchange Composite Transactions
- -------
1
quotation system (or under any successor quotation system) or, if
Stock is not traded on the New York Stock Exchange, under the
quotation system under which such closing price is reported or,
if The Wall Street Journal no longer reports such closing price,
-----------------------
such closing price as reported by a newspaper or trade journal
selected by the Board or the Committee, as applicable, or, if no
such closing price is available on such date, (2) such closing
price as so reported or so quoted in accordance with Section
2.5(l) for the immediately preceding business day, or, if no
newspaper or trade journal reports such closing price or if no
such price quotation is available, (3) the price which the Board
or the Committee, as applicable, acting in good faith determines
through any reasonable valuation method that a share of Stock
might change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or to sell and both
having reasonable knowledge of the relevant facts.
2.6. Insider -- means any individual who is subject to
-------
Section 16(a) of the Securities Exchange Act of 1934, as amended.
2.7 ISA -- means Industrial Services of America, Inc., a
---
Florida corporation, and any successor to such corporation.
2.8. ISO -- means an option granted under this Plan to
---
purchase Stock which is intended to satisfy the requirements of
Section 422 of the Code.
2.9. Key Employee -- means an employee (including all
------------
officers and employee directors of ISA) of ISA or any Subsidiary
or any affiliate of ISA designated by the Board or the Committee,
as applicable, who, in the judgment of the Board or the
Committee, as applicable, acting in its absolute discretion, is
key, directly or indirectly, to the success of ISA.
2.10. NQO-- means an option granted under this Plan to
---
purchase Stock which is intended to fail to satisfy the
requirements of Section 422 of the Code.
2.11. Option -- means an ISO or a NQO.
------
2.12. Option Certificate -- means the written certificate
------------------
which sets forth the terms of an Option granted to a Key Employee
under Section 7 of this Plan.
2.13. Option Price -- means the price which shall be paid
------------
to purchase one share of Stock upon the exercise of an option
granted under this Plan.
2.14. Parent Corporation -- means any corporation which is
------------------
a parent of ISA within the meaning of Section 424(e) of the Code.
2
2.15. Plan -- means this Industrial Services of America,
----
Inc. 1997 Employee Stock Option Plan, as amended from time to
time.
2.16. Rule 16b-3 -- means Rule 16b-3 as promulgated
----------
pursuant to Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any successor to such rule.
2.17. Stock -- means $.01 par value common stock of ISA.
-----
2.18. Subsidiary -- means a corporation which is a
----------
subsidiary corporation (within the meaning of Section 424(f) of
the Code) of ISA.
2.19. Surrendered Shares -- means the shares of Stock
------------------
described in Section 11 which (in lieu of being purchased) are
surrendered for cash or Stock, or for a combination of cash and
Stock, in accordance with Section 11.
2.20. Ten Percent Shareholder -- means a person who owns
-----------------------
(after taking into account the attribution rules of Section
424(d) of the Code) more than ten percent of the total combined
voting power of all classes of stock of either ISA, a Subsidiary
or a Parent Corporation.
Section 3.
SHARES RESERVED UNDER PLAN
--------------------------
There shall be 100,000 shares of Stock reserved for use
under this Plan. All such shares of Stock shall be reserved to
the extent that ISA deems appropriate from authorized but
unissued shares of Stock and from shares of Stock which have been
reacquired by ISA. Furthermore, any shares of Stock subject to
an Option which remain unissued after the cancellation,
expiration or exchange of such Option thereafter shall again
become available for use under this Plan, but any Surrendered
Shares which remain unissued after the surrender of an Option
under Section 11 and any shares of Stock used to satisfy the
option price or a withholding obligation under Section 17.3 shall
not again become available for use under this Plan.
Section 4.
EFFECTIVE DATE
--------------
The effective date of this Plan shall be the date of its
adoption by the Board, provided the shareholders of ISA (acting
at a duly called meeting of such shareholders) approve such
adoption within twelve (12) months of such effective date and
such approval satisfies the requirements for shareholder approval
under Rule 16b-3. If such effective date comes before such
shareholder approval, any Option granted under this Plan before
3
such date automatically shall be granted subject to such
approval.
Section 5.
BOARD OR COMMITTEE
------------------
This Plan shall be administered by the Board or the
Committee. The Board or, if applicable, the Committee acting in
its absolute discretion shall exercise such powers and take such
action as expressly called for under this Plan and, further, the
Board or the Committee, as applicable, shall have the power to
interpret this Plan and (subject to Section 14, Section 15 and
Section 16 of this Plan and Rule 16b-3) to take such other action
in the administration and operation of this Plan as the Board or
the Committee, as applicable, deems equitable under the
circumstances, which action shall be binding on ISA, on each
affected Key Employee and on each other person directly or
indirectly affected by such action.
Section 6.
ELIGIBILITY
-----------
Eligibility for the grant of NQOs shall be limited to Key
Employees. Eligibility for the grant of ISOs shall be limited to
Key Employees who are employed by ISA or a Parent Corporation or
a Subsidiary.
Section 7.
OPTIONS
-------
7.1. Board or Committee Action. The Board or the
-------------------------
Committee, as applicable, acting in its absolute discretion shall
have the right to grant Options to Key Employees under this Plan
from time to time to purchase shares of Stock and, further, shall
have the right to grant new Options in exchange for outstanding
Options which have a higher or lower Option Price; provided,
however, that no grants of ISOs shall be made to Key Employees
who are not employed by ISA or a Parent Corporation or a
Subsidiary. Each grant of an Option to a Key Employee shall be
evidenced by an Option Certificate, and each Option Certificate
shall set forth whether the Option is an ISO or a NQO and shall
set forth such other terms and conditions of such grant as the
Board or the Committee, as applicable, acting in its absolute
discretion deems consistent with the terms of this Plan; however,
if the Board or the Committee, as applicable, grants an ISO and a
NQO to a Key Employee on the same date, the right of the Key
Employee to exercise or surrender one such Option shall not be
conditioned on his or her failure to exercise or surrender the
other such Option.
7.2. $100,000 Limit. To the extent that the aggregate Fair
--------------
Market Value of Stock (determined as of the date the ISO is
granted) with respect to which ISOs first become exercisable in
any calendar year exceeds $100,000, such Options shall be treated
4
as NQOs. The Fair Market Value of Stock subject to any other
option (determined as the date such option was granted) which (1)
satisfies the requirements of Section 422 of the Code and (2) is
granted to a Key Employee under a plan maintained by ISA, a
Subsidiary or a Parent Corporation shall be treated (for purposes
of this $100,000 limitation) as if granted under this Plan. The
Board or the Committee, as applicable, shall interpret and
administer the limitation set forth in this Section 7.2 in
accordance with Section 422(d) of the Code.
Section 8.
OPTION PRICE
------------
The Option Price for each share of Stock subject to an
option which is granted to a Key Employee shall be no less than
the Fair Market Value of a share of Stock on the date the option
is granted; provided, however, if the Option is an ISO granted to
a Key Employee who is a Ten Percent Shareholder, the Option Price
for each share of Stock subject to such ISO shall be no less than
110% of the Fair Market Value of a share of Stock on the date
such ISO is granted. The Option Price shall be payable in full
upon the exercise of any Option, and at the discretion of the
Board or the Committee, as applicable, an Option Certificate can
provide for the payment of the Option Price either in cash, by
check or in Stock acceptable to the Board or the Committee, as
applicable, or in any combination of cash, check and Stock
acceptable to the Board or the Committee, as applicable. Any
payment made in Stock shall be treated as equal to the Fair
Market Value of such Stock on the date the properly endorsed
certificate for such Stock is delivered to the Board or the
Committee, as applicable, or its delegate. Any payment made in
Stock shall be made either by tendering shares of Stock held by
the Key Employee or, to the extent allowed by the Board or the
Committee, as applicable, in its sole discretion, by having ISA
withhold Stock (that otherwise would be transferred to the Key
Employee upon the exercise of such Option).
Section 9
EXERCISE PERIOD
---------------
Each Option granted under this Plan to a Key Employee shall
be exercisable in whole or in part at such time or times as set
forth in the related Option Certificate, but no Option
Certificate shall make an Option granted to a Key Employee
exercisable after the earlier of
(1) the date such Option is exercised in full, or
(2) the date which is the fifth anniversary of the
date the Option is granted, if the Option is an
ISO and the Key Employee is a Ten Percent
5
Shareholder on the date the Option is granted, or
(3) the date which is the tenth anniversary of the
date the Option is granted, if the Option is (a)
an NQO or (b) an ISO which is granted to a Key
Employee who is not a Ten Percent Shareholder on
the date the Option is granted.
An Option Certificate may provide for the exercise of an Option
after the employment of a Key Employee has terminated for any
reason whatsoever, including death or disability.
Section 10.
NONTRANSFERABILITY
------------------
Neither an Option granted under this Plan nor any related
surrender rights under Section 11 shall be transferable by a Key
Employee other than by will or by the laws of descent and
distribution, and any such Option and any such surrender rights
shall be exercisable during the lifetime of a Key Employee only
by such Key Employee. The person or persons to whom an Option or
any related surrender rights is transferred by will or by the
laws of descent and distribution thereafter shall be treated as
the Key Employee under this Plan.
Section 11.
SURRENDER OF OPTIONS
--------------------
11.1. General Rule. The Board or the Committee, as
------------
applicable, acting in its absolute discretion may incorporate a
provision in an Option Certificate to allow a Key Employee to
surrender his or her Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that
(1) the Fair Market Value of the Stock subject to such
Option exceeds the Option Price for such Stock,
and
(2) the Option to purchase such Stock is otherwise
exercisable.
11.2. Procedure. The surrender of an Option in whole or in
---------
part shall be effected by the delivery of the Option Certificate
to the Board or the Committee, as applicable (or to its delegate)
together with a statement signed by the Key Employee which
specifies the number of shares of Stock as to which the Key
Employee surrenders his or her Option and (at the Key Employee's
option) how he or she desires payment be made for such
Surrendered Shares.
11.3. Payment. A Key Employee in exchange for his or her
-------
6
Surrendered Shares shall (to the extent consistent with the
exemption under Rule 16b-3) receive a payment in cash or in
Stock, or in a combination of cash and Stock, equal in amount on
the date such surrender is effected to the excess of the Fair
Market Value of the Surrendered Shares on such date over the
Option Price for the Surrendered Shares. The Board or the
Committee, as applicable, acting in its absolute discretion shall
determine the form and timing of such payment, and the Board or
the Committee, as applicable, shall have the right (1) to take
into account whatever factors the Board or the Committee, as
applicable, deems appropriate under the circumstances, including
any written request made by the Key Employee and delivered to the
Board or the Committee, as applicable (or to its delegate) and
(2) to forfeit a Key Employee's right to payment of cash in lieu
of a fractional share of stock if the Board or the Committee, as
applicable, deems such forfeiture necessary in order for the
surrender of his or her Option under this Section 11 to come
within the exemption under Rule 16b-3.
11.4. Restrictions. Any Option Certificate which
------------
incorporates a provision to allow a Key Employee to surrender his
or her Option in whole or in part also shall incorporate such
additional restrictions, if any, as the Board or the Committee,
as applicable, deems necessary to satisfy the conditions to the
exemption under Rule 16b-3.
Section 12.
SECURITIES REGISTRATION
-----------------------
Each Option Certificate shall provide that, upon the receipt
of shares of Stock as a result of the surrender or exercise of an
Option, the Key Employee shall, if so requested by ISA, hold such
shares of Stock for investment and not with a view of resale or
distribution to the public and, if so requested by ISA, shall
deliver to ISA a written statement satisfactory to ISA to that
effect. ISA shall not have any obligation to take any action to
register the Plan or the issuance of Stock pursuant to this Plan
under the Securities Act of 1933, as amended, or under any other
applicable securities laws or to qualify such Stock for an
exemption under any such laws.
Section 13.
LIFE OF PLAN
------------
No Option shall be granted under this Plan on or after the
earlier of
(1) the tenth anniversary of the effective date of this
Plan (as determined under Section 4 of this Plan), in
which event this Plan shall continue in effect until
all outstanding Options have been surrendered or exercised
7
in full or no longer are exercisable, or
(2) the date on which all of the Stock reserved under
Section 3 of this Plan has (as a result of the
surrender or exercise of Options granted under this
Plan) been issued or no longer is available for use
under this Plan, in which event this Plan also shall
terminate on such date.
Section 14.
ADJUSTMENT
----------
The number, kind or class (or any combination thereof) of
shares of Stock reserved under Section 3 of this Plan, and the
number, kind or class (or any combination thereof) of shares of
Stock subject to Options granted under this Plan and the Option
Price of such options shall be adjusted by the Board in an
equitable manner to reflect any change in the capitalization of
ISA, including, but not limited to, such changes as stock
dividends or stock splits. Furthermore, the Board shall have the
right to adjust (in a manner which satisfies the requirements of
Section 424(a) of the Code) the number, kind or class (or any
combination thereof) of shares of Stock reserved under Section 3
of this Plan, and the number, kind or class (or any combination
thereof) of shares subject to Options granted under this Plan and
the Option Price of such Options in the event of any corporate
transaction described in Section 424(a) of the Code which
provides for the substitution or assumption of such Option grants
in order to take into account on an equitable basis the effect of
such transaction. If any adjustment under this Section 14 would
create a fractional share of Stock or a right to acquire a
fractional share of Stock, such fractional share shall be
disregarded and the number of shares of Stock reserved under this
Plan and the number subject to any Options granted under this
Plan shall be the next lower number of shares of Stock, rounding
all fractions downward. An adjustment made under this Section 14
by the Board shall be conclusive and binding on all affected
persons and, further, shall not constitute an increase in "the
number of shares reserved under Section 3" within the meaning of
Section 16(a) of this Plan.
Section 15.
SALE OR MERGER OF ISA; CHANGE IN CONTROL
----------------------------------------
15.1. Sale or Merger. If ISA agrees to sell all or
--------------
substantially all of its assets for cash or property or for a
combination of cash and property or agrees to any merger,
consolidation, reorganization, division or other corporate
transaction in which Stock is converted into another security or
into the right to receive securities or property and such
agreement does not provide for the assumption or substitution of
the Options granted under this Plan in accordance with Section 14
on a
8
basis that is fair and equitable to holders of such Options as
determined by the Board, each Option granted to a Key Employee at
the direction and discretion of the Board (a) may (subject to
such conditions, if any, as the Board deems appropriate under the
circumstances) be cancelled unilaterally by ISA (i) in exchange
for (A) a transfer to such Key Employee of the number of whole
shares of Stock, if any, which he or she would have received if
he or she had the right to surrender his or her outstanding
Option in full under Section 11 of this Plan and he or she
exercised that right on the date set by the Board exclusively for
Stock or (B) the right to exercise his or her outstanding Option
in full on any date before the date as of which the Board
unilaterally cancels such Option in full or, if the exchange
described in this Section 15.1(i) would result in a violation of
Section 16 of the Securities Exchange Act of 1934, as amended,
for a Key Employee, (ii) may be cancelled unilaterally by ISA
after advance written notice to such key Employee or (b) may be
cancelled unilaterally by ISA if the Option Price equals or
exceeds the Fair Market Value of a share of Stock on a date set
by the Board.
15.2. Change in Control. If there is a Change in Control
-----------------
of ISA or a tender or exchange offer is made for Stock other than
by ISA, the Board thereafter shall have the right to take such
action with respect to any unexercised Options granted to Key
Employees, or all such Options, as the Board deems appropriate
under the circumstances to protect the interest of ISA in
maintaining the integrity of such grants under this Plan,
including following the procedure set forth in Section 15.1 for a
sale or merger of ISA with respect to such Options. The Board
shall have the right to take different action under this
Section 15.2 with respect to different Key Employees or different
groups of Key Employees, as the Board deems appropriate under the
circumstances.
Section 16.
AMENDMENT OR TERMINATION
------------------------
This Plan may be amended by the Board from time to time to
the extent that the Board deems necessary or appropriate;
provided, however, no such amendment shall be made absent the
approval of the shareholders of ISA required under Section 422 of
the Code (a) to increase the number of shares of stock reserved
under Section 3, or (b) to change the class of employees eligible
for Options grants under Section 6. Any amendment which
specifically applies to NQOs shall not require shareholder
approval unless such approval is necessary to comply with Section
16 of the Securities Exchange Act of 1934, as amended. The Board
also may suspend the granting of Options under this Plan at any
time and may terminate this Plan at any time; provided, however,
the Board shall not have the right unilaterally to modify, amend
or cancel any Option granted before such suspension or
termination unless (1) the Key Employee
9
consents in writing to such modification, amendment or
cancellation or (2) there is a dissolution or liquidation of ISA
or a transaction described in Section 14 or Section 15 of this
Plan.
Section 17.
MISCELLANEOUS
-------------
17.1. Shareholder Rights. No Key Employee shall have any
------------------
rights as a shareholder of ISA as a result of the grant of an
Option under this Plan or his or her exercise or surrender of
such Option pending the actual delivery of the Stock subject to
such Option to such Key Employee.
17.2. No Contract of Employment. The grant of an Option to
-------------------------
a Key Employee under this Plan shall not constitute a contract of
employment and shall not confer on a Key Employee any rights upon
his or her termination of employment in addition to those rights,
if any, expressly set forth in the Option Certificate which
evidences his or her Option.
17.3. Withholding. The exercise or surrender of any Option
-----------
granted under this Plan shall constitute a Key Employee's full
and complete consent to whatever action the Board or the
Committee, as applicable, deems necessary to satisfy the federal
and state tax withholding requirements, if any, which the Board
or the Committee, as applicable, in its discretion deems
applicable to such exercise or surrender. The Board or the
Committee, as applicable, also shall have the right to provide in
an Option Certificate that a Key Employee may elect to satisfy
federal and state tax withholding requirements through a
reduction in the number of shares of Stock actually transferred
to him or to her under this Plan, and if the Key Employee is
subject to the reporting requirements under Section 16 of the
Securities Exchange Act of 1934, as amended, any such election
shall be effected so as to satisfy the conditions to the
exemption under Rule 16b-3.
17.4. Construction. This Plan shall be construed under the
------------
laws of the State of Florida.
17.5. Other Conditions. Each Option Certificate may
----------------
require that a Key Employee (as a condition to the exercise of an
Option) enter into any agreement or make such representations
prepared by ISA, including any agreement which restricts the
transfer of Stock acquired pursuant to the exercise of an Option
or provides for the repurchase of such Stock by ISA under certain
circumstances.
10
IN WITNESS WHEREOF, Industrial Services of America, Inc. has
caused its duly authorized officer to execute this Plan this 11th
day of April, 1997 to evidence its adoption of this Plan.
INDUSTRIAL SERVICES OF AMERICA, INC.
By: /s/ Harry Kletter
------------------------------------
Title: President
---------------------------------
11
PROXY
INDUSTRIAL SERVICES OF AMERICA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Tina List and Alan
Schroering, and each of them, as proxies, with full power of
substitution, and authorizes them, and each of them, to vote and
act with respect to all shares of common stock of Industrial
Services of America, Inc. which the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held on Friday,
May 23, 1997, at 10:00 A.M. EDST, at Building No. 4, 7100 Grade
Lane, Louisville, Kentucky, and at any and all adjournments
within 120 days thereof.
The Board of Directors recommends a vote FOR each of the
following proposals:
1. ELECTION OF DIRECTORS
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY
BELOW (EXCEPT AS MARKED TO VOTE FOR ALL
TO THE CONTRARY BELOW) NOMINEES LISTED
BELOW
NOMINEES: Harry Kletter, Matthew L. Kletter, Roberta
Kletter, Timothy W. Myers, Debbie P. Prewitt
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE
INDIVIDUAL NOMINEES, WRITE SUCH NAME OR NAMES IN THE SPACE
PROVIDED BELOW. UNLESS AUTHORITY TO VOTE FOR ALL THE
NOMINEES LISTED ABOVE IS WITHHELD, THIS PROXY WILL BE DEEMED
TO CONFER AUTHORITY TO VOTE FOR EVERY NOMINEE WHOSE NAME IS
NOT ENTERED BELOW.)
------------------------------------------------------------
2. PROPOSAL TO APPROVE THE 1997 EMPLOYEE STOCK OPTION
PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF MATHER, HAMILTON &
CO., LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote
upon such other matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE
- -- -- -- -- -- -- -- -- -- --
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF
A CHOICE IS NOT SPECIFIED, THEY SHALL VOTE FOR THE ELECTION OF
ALL NOMINEES FOR DIRECTORS AND IN FAVOR OF PROPOSAL 2.
Dated: , 19
----------------------- --
-----------------------------------
Signature
-----------------------------------
Signature
Name(s) should be signed exactly as
shown to the left hereof. Title
should be added if signing as
executor, administrator, trustee,
etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ACCOMPANYING ENVELOPE