UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
 
Date of Report (Date of earliest event reported): June 15, 2016
 
INDUSTRIAL SERVICES OF AMERICA, INC.

(Exact name of registrant as specified in its Charter)


Florida
 
0-20979
 
59-0712746
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation)
 
File Number)
 
Identification No.)


7100 Grade Lane, Louisville, Kentucky
40213
(Address of principal executive offices)
(Zip Code)

Company's telephone number, including area code: (502) 366-3452
 
 
Not applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 3.02    Unregistered Sale of Equity Securities.

As further described in Item 5.07 below, on June 15, 2016, the shareholders of Industrial Services of America, Inc. (the “ Company ”) approved (i) an amendment to the Company’s 2009 Long Term Incentive Plan (the “ 2009 Plan ”) to provide that a repricing or exchange of stock options would require shareholder approval; and (ii) a one-time stock option exchange by Todd L. Phillips, the Company’s Chief Financial Officer (the “ CFO ”).

On June 15, 2016, the Company cancelled 170,000 stock options previously granted to the CFO in exchange for the grant of 90,000 restricted stock units (“ RSUs ”) to the CFO pursuant to a Restricted Stock Unit Grant Agreement (the “ RSU Agreement ”).

Unless the RSUs are forfeited pursuant to the 2009 Plan or the RSU Agreement, the RSUs vest as follows if and to the extent that the CFO remains employed by the Company through each of the following dates: (i) on July 1, 2016, 50.00% (45,000) of the RSUs vest and become nonforfeitable; (ii) on December 31, 2016, 12.50% (11,250) of the RSUs vest and become nonforfeitable; (iii) on June 30, 2017, 12.50% (11,250) of the RSUs vest and become nonforfeitable; (iv) on December 31, 2017, 12.50% (11,250) of the RSUs vest and become nonforfeitable; and (v) on June 15, 2018, 12.50% (11,250) of the RSUs vest and become nonforfeitable. Each RSU represents the right to receive one share of the Company’s common stock upon the vesting of the RSU. All of the RSUs will immediately vest upon a change in control of the Company. Vesting may also be accelerated in certain cases upon the death or disability of the CFO. The RSUs were granted to the CFO for the purposes described in the Company’s definitive proxy statement dated April 29, 2016.

The RSUs and the underlying common stock are issued to the CFO in reliance on the exemption from registration provided under Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving any public offering. The securities were not offered pursuant to a general solicitation, no underwriter participated in the offer and sale of these securities, and no commission or other remuneration was paid or given directly or indirectly in connection therewith.

The foregoing description of the RSU Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the RSU Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 5.02    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e)    As further described in Item 5.07 below, the Company’s shareholders approved (i) an amendment to the Company’s 2009 Long Term Incentive Plan to provide that a repricing or exchange of stock options would require shareholder approval; and (ii) a one-time stock option exchange by the CFO. The information set forth in Item 3.02 above is hereby incorporated into this Item 5.02.

Item 5.07    Submission of Matters to a Vote of Security Holders.

At the annual meeting of shareholders of the Company on June 15, 2016, shareholders (1) elected each of the six Company nominees to serve a one year term on the Company's Board of Directors, (2) ratified the appointment of Mountjoy Chilton Medley LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2016, (3) approved, on an advisory basis, the compensation paid to the Company’s named executive officers, and (4) approved an amendment to the 2009 Plan and a one-time stock option exchange for the CFO, as disclosed in the Company’s definitive proxy statement dated April 29, 2016.

The results of the voting are shown below.






Proposal 1-Election of Board of Directors
Company Nominees
 
Votes For
 
Votes Withheld
 
Broker Non-Votes
Orson Oliver
 
4,463,181
 
363,491
 
2,643,710
Albert Cozzi
 
4,649,722
 
176,950
 
2,643,710
Ronald Strecker
 
4,635,643
 
191,029
 
2,643,710
Sean Garber
 
4,479,325
 
347,347
 
2,643,710
Vince Tyra
 
4,772,525
 
54,147
 
2,643,710
William Yarmuth
 
4,593,197
 
233,475
 
2,643,710


Proposal 2-Ratification of Appointment of Independent Registered Public Accounting Firm
Votes For
 
Votes Against
 
Abstain
 
Broker Non-Votes
7,442,499
 
20,271
 
7,612
 
0


Proposal 3-Approval of Executive Compensation
Votes For
 
Votes Against
 
Abstain
 
Broker Non-Votes
4,280,867
 
363,292
 
182,513
 
2,643,710


Proposal 4-Approval of Amendment to 2009 Plan and Stock Option Exchange
Votes For
 
Votes Against
 
Abstain
 
Broker Non-Votes
3,008,942
 
1,807,998
 
9,732
 
2,643,710

Item 8.01    Other Events.

On June 15, 2016, the Company's Board of Directors approved the amendment and restatement of the 2009 Plan to reflect the amendment to the 2009 Plan described in Item 5.07 above. The foregoing description of the 2009 Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the 2009 Plan, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.
 
Item 9.01    Financial Statements and Exhibits.
 
(d)       Exhibits

Exhibit No.     Description                                                                                                                
10.1
Restricted Stock Unit Grant Agreement, dated as of June 15, 2016, between Industrial Services of America, Inc. and Todd L. Phillips.

10.2
Industrial Services of America, Inc. Amended and Restated Long Term Incentive Plan, restated as of June 15, 2016.

 

 
 





SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
INDUSTRIAL SERVICES OF AMERICA, INC.
 
 
 
 
Date: June 16, 2016
By:
/s/ Todd L. Phillips
 
 
Todd L. Phillips
 
 
Chief Financial Officer
 

 
 
INDEX TO EXHIBITS
 
Exhibit No.     Description                                                                                                                
10.1
Restricted Stock Unit Grant Agreement, dated as of June 15, 2016, between Industrial Services of America, Inc. and Todd L. Phillips.

10.2
Industrial Services of America, Inc. Amended and Restated Long Term Incentive Plan, restated as of June 15, 2016.





Exhibit 10.1

INDUSTRIAL SERVICES OF AMERICA, INC.

RESTRICTED STOCK UNIT
GRANT AGREEMENT

This Restricted Stock Unit (“ RSU ”) Grant Agreement (this “ Agreement ” or “ Award ”) dated as of June 15, 2016 (the “ Grant Date ”), is between Industrial Services of America, Inc. (the “ Company ”) and Todd L. Phillips (the “ Grantee ”).

RECITALS

A.
The Company has adopted the Industrial Services of America, Inc. 2009 Long Term Incentive Plan (the “ Plan ”), which provides for the issuance of equity incentive awards, such as stock options, restricted stock, restricted stock units and stock appreciation rights, in order to retain qualified personnel. The Plan is administered by the Compensation Committee of the Board of Directors (the “ Committee ”).

B.
The Company previously entered into two Stock Option Agreements with the Grantee, dated December 31, 2014 and January 2, 2015, respectively, whereby the Grantee received a grant of an aggregate of 170,000 non-incentive stock options (the “ Options ”) which vest over a three-year period, with 1/3 vesting on the first anniversary of the grant date and 1/6 vesting every six months thereafter until the three-year anniversary of the grant date.

C.
The challenging metal commodity markets, ferrous metal recycling markets, and other macro-economic factors in the industry have contributed to the decline in the trading price of the Company’s common stock (“ Stock ”), leaving all of the Grantee’s Options with an exercise price that greatly exceeds the current market price of the Stock. Consequently, the Committee believes the Options no longer provide the Grantee the long-term incentive and retention objectives that they were originally intended to provide.

D.
On June 15, 2016, the Company obtained the approval of its shareholders to adopt a one-time stock option exchange, allowing the Company to cancel the Options currently held by the Grantee in exchange for the grant of 90,000 RSUs to the Grantee on the terms and conditions contained herein to reward the Grantee for his previous services in lieu of other compensation, motivate him by means of appropriate incentives, and encourage retention of his services.

E.
The Committee desires to document in this Agreement issuance to the Grantee of 90,000 RSUs on the terms and conditions contained herein in exchange for the cancellation and termination of the Options. Each RSU represents the right to receive one share of the Company’s common stock (“ Stock ”) upon the vesting of the RSU, subject to the terms and conditions set forth in this Agreement and the Plan.

AGREEMENTS

Accordingly, the Grantee and the Company agree as follows:

1.     Termination of Options; Grant of Restricted Stock Units . The 170,000 non-incentive stock options that were awarded to the Grantee on December 31, 2014 and January 2, 2015, respectively, are hereby

1



terminated and cancelled, and the Company hereby grants to the Grantee 90,000 RSUs (the “ Maximum Number ”) on the terms and conditions set forth below and in the Plan.

2.     Transfer Restriction . Until the delivery of shares of Stock with respect to the RSUs in accordance with the terms of this Award, neither the RSUs nor the Stock to be issued upon vesting of the RSUs may be sold, transferred, pledged, exchanged, hypothecated or otherwise disposed of, other than by will or pursuant to the applicable laws of descent and distribution. Any attempted sale, transfer, pledge, exchange, hypothecation or other disposition of the RSUs or the Stock to be issued upon vesting of the RSUs not specifically permitted by the Plan or this Award shall be null and void and without effect.

3.      Investment Representations . Grantee understands that upon delivery of shares of Stock with respect to the RSUs in accordance with the terms of this Award, (i) the shares of Stock to be delivered have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”) and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the shares of Stock to be delivered cannot be sold, transferred, or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available, and (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months from the issuance date of the Stock and unless the other terms and conditions of Rule 144 are satisfied.

4.     Vesting and Payment . Except as provided in Sections 5 and 6 below regarding Termination of Service or a Change of Control, and unless the RSUs are previously forfeited pursuant to the Plan or this Agreement, the RSUs will vest as follows if and to the extent that Grantee remains employed by the Company through each of the following dates: (i) on July 1, 2016, one-third (30,000) of the RSUs shall vest and become nonforfeitable; (ii) on December 31, 2016, one-sixth (15,000) of the RSUs shall vest and become nonforfeitable; (iii) on June 30, 2017, one-sixth (15,000) of the RSUs shall vest and become nonforfeitable; (iv) on December 31, 2017, one-sixth (15,000) of the RSUs shall vest and become nonforfeitable; and (v) on June 15, 2018, one-sixth (15,000) of the RSUs shall vest and become nonforfeitable. The Company shall cause its transfer agent to issue the shares of Stock with respect to the RSUs to the Grantee promptly upon vesting, but not later than 30 days after vesting of the RSUs in accordance with this Section 4. For purposes of this Agreement, the “Service Period” means the 24-month period beginning on the Grant Date and ending on June 15, 2018.

5.      Termination of Service Before the End of the Service Period . For purposes of this Agreement, “Termination of Service” shall be deemed to have occurred at the close of business on the last day on which an employee is carried as an active employee on the records of the Company. In the event of the Grantee’s Termination of Service before the end of the Service Period, the following provisions shall apply:

5.1     Except as expressly provided below in Section 5.2 or Section 7, in the event of Grantee's Termination of Service for any reason before the end of the Service Period, the RSUs held by Grantee and not yet vested shall be automatically forfeited by the Grantee as of the date of Grantee’s Termination of Service. Neither the Grantee nor any of the Grantee’s successors, heirs, assigns or personal representatives shall have any rights or interests in any RSUs that are so forfeited.

5.2     Notwithstanding Section 5.1, if a Grantee experiences a Termination of Service during the Service Period as the result of the Grantee’s death or Disability (as defined below) (a “ Qualifying Termination ”), a pro rata portion of Stock with respect to the RSUs shall be issued as set forth below:

5.2.1     In the event of a Qualifying Termination before completion of the Service Period, the number of RSUs to be settled and paid in Stock shall be determined as follows: (i) the number of RSUs subject to the Award that have not yet vested shall be multiplied by (ii) a service fraction, the numerator of which is the number of full months the Grantee was employed or rendering services following the Grant Date through the date of Grantee’s Termination of Service, and the denominator of which is 24, the number of months in

2



the Service Period. For purposes of calculating a “full month,” the Grantee shall be deemed to have been employed a “full month” if he is employed or rendering services on the 15 th day of the month. The Company shall deliver the shares of Stock with respect to the RSUs to the Grantee (in the case of Grantee’s Disability) or to the executor, administrator, or other personal representative of the Grantee’s estate (in the case of Grantee’s death) within 30 days of the date of the Qualifying Termination. Any RSUs that do not vest in accordance with the foregoing provisions of this Section 5.2.1 shall terminate and be forfeited as of the date of the Qualifying Termination.

5.2.2     “Disability” means a condition of the Grantee which, by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of at least 12 months: (a) makes the Grantee unable to engage in any substantial gainful activity; or (b) as a result of which the Grantee is receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company. If at any time a physician appointed by the Company or its agent or insurer, or the Social Security Administration, makes a determination with respect to the Grantee’s Disability, that determination shall be final, conclusive, and binding upon the Company, the Grantee, and their successors in interest.

6.     Change of Control . In the event a Change of Control which also constitutes a change in ownership or effective control or a change in ownership of a substantial portion of the assets of the Company within the meaning of Section 409A of the Code (a “ 409A Change ”) occurs before both completion of the Service Period and a Termination of Service, the number of RSUs subject to the Award that have not yet vested shall vest and become nonforfeitable on the date of such 409A Change. Each such vested RSU shall be paid by delivery within 45 days following such 409A Change of the same consideration that each Company shareholder receives in connection with such 409A Change, or, at the Committee’s option, in cash based on the Fair Market Value received by shareholders of record for Stock in the 409A Change.

7.     Tax Withholding . The Company shall withhold from wages otherwise due, or retain from any payment to Grantee in respect of the RSUs, or take such other action which Company deems necessary to satisfy any income or other tax withholding requirements as a result of the vesting of RSUs and issuance of Stock related thereto. Unless an affirmative election is made by the Grantee before the end of the Service Period (or Change of Control, if earlier) to (i) remit already-owned shares of Stock, (ii) remit a cash payment, (iii) have amounts debited from other wages due, or (iv) some combination thereof, the Grantee shall be deemed to have elected to satisfy any federal and state tax withholding requirements through a reduction in the number of shares of Stock issuable upon vesting, equal to their Fair Market Value based on the amount of withholding taxes reasonably estimated by the Company to be due upon vesting. A form of withholding election, which may be used to notify the Company of the Grantee’s election to pay the tax withholding by one of the means set forth above, is attached hereto as Exhibit A .

8.     Definitions . Unless provided to the contrary in this Agreement, the definitions contained in the Plan and any amendments thereto shall apply to this Agreement.

9.     Restrictions Imposed by Law . Notwithstanding any other provision of this Agreement, the Grantee agrees that the Company will not be obligated to deliver any shares of Stock if counsel to the Company determines that such exercise, delivery or payment would violate any law or regulation of any governmental authority or any agreement between the Company and any national securities exchange upon which the Stock is listed. As a condition to the settlement of the RSUs, the Company may require the Grantee to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.

10.      No Shareholder Status; No Dividends . Grantee shall have no rights as a shareholder with respect to any RSUs or shares of Stock under this Agreement until such shares of Stock have been duly issued and delivered to Grantee. Except for adjustments made as provided in subsection 4.2(e) of the Plan, no adjustment

3



shall be made for dividends of any kind or description whatsoever or for distributions of other rights of any kind or description whatsoever respecting the shares of Stock before such issuance.

11.      Delay in Payment to Specified Employees . Notwithstanding anything herein to the contrary, the date of delivery of the Stock (or cash in lieu thereof if required hereby) to the Grantee shall be delayed if payment would otherwise be required hereunder after Termination of Service (other than on account of death) and before 6 months have elapsed from the date of the Termination of Service, if the Grantee is a Specified Employee and the circumstances of payment require delay under 409A of the Code. “Specified Employee” shall have the meaning given in Treas. Reg. § 1.409A-1(i) (or any successor thereto) using the prior calendar year as the determination period.

12.     Provisions Consistent with Plan . This Agreement is intended to be construed to be consistent with all applicable provisions of the Plan, which is incorporated herein by reference. The Grantee acknowledges receipt contemporaneously herewith of a copy of the Plan, and the Grantee represents that he is familiar with the terms and provisions thereof and hereby accepts the Award herein subject to all the terms and provisions thereof. The Grantee acknowledges that nothing contained in the Plan or this Agreement shall (a) confer upon the Grantee any additional rights to continued employment by the Company or any corporation related to the Company; or (b) interfere in any way with the right of the Company to terminate the Grantee’s employment at any time. In the event of a conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall prevail.

IN WITNESS WHEREOF , the parties have executed and delivered this Agreement as of the date set forth in the preamble hereto, but actually on the dates set forth below.

INDUSTRIAL SERVICES OF AMERICA, INC.
 
By:         /s/ Orson Oliver
    
Title:     Chairman and Interim CEO

Date:     6/15/2016

GRANTEE:

/s/ Todd L. Phillips
Todd L. Phillips
(acknowledging receipt and conditions set out above)

Date: 6/15/2016


4



EXHIBIT A
Withholding Election for RSUs that are Vesting
INSTRUCTIONS: If you want shares that would otherwise vest to be deemed tendered back to the Company in an amount equal (based on their Fair Market Value on the vesting date) to the withholding due, and the net number of vested shares issued in your name, you do not need to submit this form. If you prefer to satisfy your withholding obligation in a different way, please check the appropriate line below and return this form with any required other materials (cash or check, or a stock power or other stock certificates, if you elect Method No. 1 or No. 2 in whole or part).
Depending on the choice elected, cash or other documents need to accompany the election. The amount remitted or withheld will be a reasonable estimate of the tax withholding obligations due by reason of the vesting of the RSUs, and your notice must acknowledge and allow debit from your next paycheck any reconciliation of that estimate to the exact tax withholding due, as soon as such amount is precisely calculable by the Company.


Method No. 1
____
I elect to pay the taxes due by tendering other shares of Company stock that I already own. Attached is a stock certificate, signed on the back to tender, or a stock power to authorize the transfer agent to transfer the shares that I think will be sufficient to pay the withholding, based on the actual market value of the shares at the close of the market on the vesting date, and a ___% withholding rate. If any more or less tax withholding is due, I authorize the Company to reconcile the value of the shares I have tendered and either issue me a check for the difference, or take the additional taxes due from my next paycheck.
Method No. 2
____
I elect to pay withholding in cash. Attached is a check for __% of the value of the shares that are vesting as of the latest close of the market before I submitted this form. I understand that the Company will determine the actual market value of the shares at the close of the market on the vesting date, and if any more or less tax withholding is due, will reconcile that amount by either issuing me a check for the difference, or taking the additional taxes due from my next paycheck, and I authorize that deduction.
Method No. 3
____
I authorize the Company to withhold the taxes related to this vesting of RSUs from my next regular paycheck. I understand that, if one paycheck will not be large enough to cover these taxes and all other regular deductions, the Company will debit any difference by issuing to me fewer than the total number of vested shares (the number subtracted will depend on the amount of taxes still due and the Fair Market Value of the shares on the vesting date).
Method No. 4
____
I elect a combination of the above methods, as follows (please describe):
________________________________________________________________
________________________________________________________________
SIGNATURE
OF GRANTEE:    __________________________________________ DATE: ______________________



Exhibit 10.2
Industrial Services of America, Inc.
Amended and Restated Long Term Incentive Plan
Restated by the Board of Directors on June 15, 2016, reflecting the
Long Term Incentive Plan as amended through that date.

SECTION 1
GENERAL
1.1.     PURPOSE. Industrial Services of America, Inc. Long Term Incentive Plan (the “Plan”) has been established by Industrial Services of America, Inc. (the “Company”) to (i) attract and retain persons eligible to participate in the Plan; (ii) motivate Participants, by means of appropriate incentives, to achieve long-range goals; (iii) provide incentive compensation opportunities that are competitive with those of other similar companies; and (iv) align the interests of Participants with those of the Company’s shareholders.
1.2.     PARTICIPATION. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Individuals, those persons who will be granted one or more Awards under the Plan, and thereby become “Participants” in the Plan.
1.3.     OPERATION, ADMINISTRATION, AND DEFINITIONS. The operation and administration of the Plan, including the Awards made under the Plan, shall be subject to the provisions of Section 4 (relating to operation and administration). Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Section 8 of the Plan).
SECTION 2
OPTIONS AND SARS
2.1.     DEFINITIONS.
(a)     The grant of an “Option” entitles the Participant to purchase shares of Stock at an Exercise Price and during a specified time established by the Committee. Any Option granted under this Section 2 may be either a non-qualified option (an “NQO”) or an incentive stock option (an “ISO”), as determined in the discretion of the Committee. An “NQO” is an Option that is not intended to be an “incentive stock option” as that term is described in section 422(b) of the Code. An “ISO” is an Option that is intended to satisfy the requirements applicable to an “incentive stock option” described in section 422(b) of the Code.
(b)     A stock appreciation right (an “SAR”) entitles the Participant to receive, in cash or Stock (as determined in accordance with subsection 2.5), value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of shares of Stock at the time of exercise; over (b) an Exercise Price established by the Committee.
2.2.     EXERCISE PRICE. The “Exercise Price” of each Option and SAR granted under this Section 2 shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; except that the Exercise Price shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant.
2.3.     EXERCISE. An Option and an SAR shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee.
2.4.     PAYMENT OF OPTION EXERCISE PRICE. The payment of the Exercise Price of an Option granted under this Section 2 shall be payable in cash.
2.5.     SETTLEMENT OF AWARD. Settlement of Options and SARs is subject to subsection 4.7.
2.6.     NO REPRICING, CANCELLATION, OR EXCHANGE OF OPTIONS WITHOUT SHAREHOLDER APPROVAL. Notwithstanding any other provision of the Plan to the contrary, the Exercise Price for any outstanding Option granted under the Plan may not be decreased after the date of grant, except for adjustments pursuant to subsection 4.2(e) relating to adjustment of shares, unless such a decrease is first approved by the Company's shareholders. This includes, without limitation, a repricing of any outstanding Option as well as an Option exchange program whereby the Participant agrees to cancel or exchange an existing Option for the grant of a new Award with a lower (or no) purchase price.



SECTION 3
OTHER STOCK AWARDS
3.1.     DEFINITIONS.
(a)    A “Stock Unit” Award is the grant of a right to receive shares of Stock in the future.
(b)     A “Performance Share” Award is a grant of a right to receive shares of Stock or Stock Units which is contingent on the achievement of performance or other objectives during a specified period.
(c)     A “Performance Unit” Award is a grant of a right to receive a designated dollar value amount of Stock which is contingent on the achievement of performance or other objectives during a specified period.
(d)     A “Restricted Stock” Award is a grant of shares of Stock, and a “Restricted Stock Unit” Award is the grant of a right to receive shares of Stock in the future, with such shares of Stock or right to future delivery of such shares of Stock subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by the Committee.
3.2.     RESTRICTIONS ON AWARDS. Each Stock Unit Award, Restricted Stock Award, Restricted Stock Unit Award, Performance Share Award, and Performance Unit Award shall be subject to the following:
(a)     Any such Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine.
(b)    If the right to become vested in a Restricted Stock Award, Restricted Stock Unit Award, Performance Share Award or Performance Unit Award is conditioned on the completion of a specified period of service with the Company or the Subsidiaries, without achievement of Performance Measures or other performance objectives being required as a condition of vesting, and without it being granted in lieu of other compensation, then the required period of service for full vesting of the Award shall be not less than two years (subject to acceleration of vesting, to the extent permitted by the Committee, in the event of the Participant’s death, disability, retirement, change in control or involuntary termination).
(c)     The Committee may designate whether any such Award being granted to any Participant is intended to be “performance-based compensation” as that term is used in section 162(m) of the Code. Any such Awards designated as intended to be “performance-based compensation” shall be conditioned on the achievement of one or more Performance Measures, to the extent required by Code section 162(m). The Performance Measures that may be used by the Committee for such Awards shall be based on any one or more of the following Company, Subsidiary, operating unit or division performance measures, as selected by the Committee: cash flow; earnings; earnings per share; market value added or economic value added; profits; return on assets; return on equity; return on investment; revenues; stock price; or total shareholder return. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, shareholders’ equity and/or shares outstanding, investments or to assets or net assets. For Awards under this Section 3 intended to be “performance-based compensation,” the grant of the Awards and the establishment of the Performance Measures shall be made during the period required under Code section 162(m).
SECTION 4
OPERATION AND ADMINISTRATION
4.1.     EFFECTIVE DATE. The Plan shall be effective as of July 1, 2009 (the “Effective Date”). The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that no Awards may be granted under the Plan after the ten-year anniversary of the Effective Date (except for Awards granted pursuant to commitments entered into prior to such ten-year anniversary).
4.2     The shares of Stock for which Awards may be granted under the Plan shall be subject to the following:
(a)    The shares of Stock with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares (to the extent permitted by law), including shares purchased in the open market or in private transactions. The shares of Stock must be held for a period of six months before a Participant may dispose of such shares.
(b)     Subject to the following provisions of this subsection 4.2, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be 2,400,000.



(c)     To the extent provided by the Committee, any Award may be settled in cash rather than Stock. To the extent any shares of Stock covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the shares of Stock are not delivered because the Award is settled in cash or used to satisfy the applicable tax withholding obligation, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan.
(d)     Subject to paragraph 4.2(e), the following additional maximums are imposed under the Plan.
(i) The maximum number of shares that may be covered by Awards granted to any one individual pursuant to Section 2 (relating to Options and SARs) shall be 150,000 shares during any calendar-year period. If an Option is in tandem with an SAR, such that the exercise of the Option or SAR with respect to a share of Stock cancels the tandem SAR or Option right, respectively, with respect to such share, the tandem Option and SAR rights with respect to each share of Stock shall be counted as covering one share of Stock for purposes of applying the limitations of this paragraph (i).
(ii) For Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and Performance Share Awards that are intended to be “performance-based compensation” (as that term is used for purposes of Code section 162(m)), no more than 150,000 shares of Stock may be subject to such Awards granted to any one individual during any calendar-year period (regardless of when such shares are deliverable). If, after shares have been earned, the delivery is deferred, any additional shares attributable to dividends during the deferred period shall be disregarded.
(e)     In the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Committee may adjust Awards to preserve the benefits or potential benefits of the Awards. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the Exercise Price of outstanding Options and SARs; and (iv) any other adjustments that the Committee determines to be equitable.
4.3.     GENERAL RESTRICTIONS. Delivery of shares of Stock or other amounts under the Plan shall be subject to the following:
(a)     Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity.
(b)     To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
4.4.     TAX WITHHOLDING. All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Participant.
4.5.     GRANT AND USE OF AWARDS. In the discretion of the Committee, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be granted to a Participant. Awards may be granted as alternatives to or replacement of awards granted or outstanding under the Plan, or any other plan or arrangement of the Company or a Subsidiary (including a plan or arrangement of a business or entity, all or a portion of which is acquired by the Company or a Subsidiary). Subject to the overall limitation on the number of shares of Stock that may be delivered under the Plan, the Committee may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations.
4.6.     DIVIDENDS. Only participants that have been issued stock will receive dividend payments
4.7.     SETTLEMENT AND PAYMENTS. Awards may be settled through cash payments, the delivery of shares of Stock, the granting of replacement Awards, or combination thereof as the Committee shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including



converting such credits into deferred Stock equivalents. Each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee.
4.8.     TRANSFERABILITY. Except as otherwise provided by the Committee, Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution.
4.9.     FORM AND TIME OF ELECTIONS. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.
4.10.     AGREEMENT WITH COMPANY. An Award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant shall be reflected in such form of written document as is determined by the Committee. A copy of such document shall be provided to the Participant, and the Committee may, but need not require that the Participant sign a copy of such document. Such document is referred to in the Plan as an “Award Agreement” regardless of whether any Participant signature is required.
4.11.     ACTION BY COMPANY OR SUBSIDIARY. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution of its board of directors or by action of one or more non-employee members of the board (including a committee of the board) who are duly authorized to act for the board.
4.12.     GENDER AND NUMBER. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
4.13.     LIMITATION OF IMPLIED RIGHTS.
(a)     Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(b)     The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating employee or other individual the right to be retained in the employ of the Company or any Subsidiary or the right to continue to provide services to the Company or any Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any rights as a shareholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.
4.14.     EVIDENCE. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
SECTION 5
CHANGE IN CONTROL
          Subject to the provisions of paragraph 4.2(e) (relating to the adjustment of shares), and except as otherwise provided in the Plan or the Award Agreement reflecting the applicable Award, the Committee may provide under the terms of any Award that upon the occurrence of a Change in Control:
(a)     All outstanding Options (regardless of whether in tandem with SARs) shall become fully exercisable.
(b)     All outstanding SARs (regardless of whether in tandem with Options) shall become fully exercisable.
(c)     All Stock Units, Restricted Stock, Restricted Stock Units, and Performance Shares (including any Award payable in Stock which is granted in conjunction with a Company deferral program) shall become fully vested.



SECTION 6
COMMITTEE
6.1.     ADMINISTRATION. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the “Committee”) in accordance with this Section 6. The Committee shall be selected by the Board, and shall consist solely of two or more non-employee members of the Board. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee. As of the date this Plan is adopted, the Committee shall mean the Compensation Committee of the Board of Directors.
6.2.     POWERS OF COMMITTEE. The Committee’s administration of the Plan shall be subject to the following:
(a)     Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Section 7) to cancel or suspend Awards.
(b)     To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.
(c)     The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any Award Agreement made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(d)     Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
(e)     In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and by-laws of the Company, its own Committee charter and applicable state corporate law.
6.3.     DELEGATION BY COMMITTEE. Except to the extent prohibited by applicable law, its Committee charter or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time.
6.4.     INFORMATION TO BE FURNISHED TO COMMITTEE. The Company and Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and Subsidiaries as to an employee’s or Participant’s employment (or other provision of services), termination of employment (or cessation of the provision of services), leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
6.5     MISCONDUCT. If the Committee determines that a present or former employee has (i) used for profit or disclosed to unauthorized persons, confidential or trade secrets of the Company; (ii) breached any contract with or violated any fiduciary obligation to the Company; or (iii) engaged in any conduct which the Committee determines is injurious to the Company, the Committee may cause that employee to forfeit his or her outstanding awards under the Plan, provided, however, that during the pendency of a Potential Change in Control and as of and following the occurrence a Change in Control, no outstanding awards under the Plan shall be subject to forfeiture pursuant to this Section 6.5. A “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
          A “Potential Change in Control” shall exist during any period in which the circumstances described in items (i), (ii), (iii) or (iv), below, exist (provided, however, that a Potential Change in Control shall cease to exist not later than the occurrence of a Change in Control):
(i) The Company or any successor or assign thereof enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; provided that a Potential Change in Control described in this item (i) shall cease to exist upon the expiration or other termination of all such agreements.



 (ii) Any Person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; provided that a Potential Change in Control described in this item (ii) shall cease to exist upon the withdrawal of such intention, or upon a reasonable determination by the Board that there is no reasonable chance that such actions would be consummated.
(iii) Any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its affiliates). However, a Potential Change in Control shall not be deemed to exist by reason of ownership of securities of the Company by any person, to the extent that such securities of the Company are acquired pursuant to a reorganization, recapitalization, spin-off or other similar transactions (including a series of prearranged related transactions) to the extent that immediately after such transaction or transactions, such securities are directly or indirectly owned in substantially the same proportions as the proportions of ownership of the Company’s securities immediately prior to the transaction or transactions.
(iv) The Board adopts a resolution to the effect that, for purposes of this Plan, a potential change in control exists; provided that a Potential Change in Control described in this item (iv) shall cease to exist upon a reasonable determination by the Board that the reasons that give rise to the resolution providing for the existence of a Potential Change in Control have expired or no longer exist.
SECTION 7
AMENDMENT AND TERMINATION
          The Board may, at any time, amend or terminate the Plan, provided that (i) no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board; (ii) no amendments may increase the limitations on the number of shares set forth in subsections 4.2(b) and 4.2(e) or decrease the minimum Option or SAR Exercise Price set forth in subsection 2.2 unless any such amendment is approved by the Company’s shareholders; (iii) the provisions of subsection 2.6 (relating to Option repricing) may not be amended, unless any such amendment is approved by the Company’s shareholders; (iv) no amendment may expand the definition of Eligible Individual in subsection 8(e), unless any such amendment is approved by the Company’s shareholders; (v) no amendment may decrease the minimum restriction or performance period set forth in section 3.2, unless any such amendment is approved by the Company’s shareholders; and (vi) adjustments pursuant to subsection 4.2(e) shall not be subject to the foregoing limitations of this Section 7.
SECTION 8
DEFINED TERMS
          In addition to the other definitions contained herein, the following definitions shall apply:
(a)     AWARD. The term “Award” shall mean any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards, Performance Unit Awards, and Performance Share Awards.
(b)     BOARD. The term “Board” shall mean the Board of Directors of the Company.
(c)     CHANGE IN CONTROL. Except as otherwise provided by the Committee, a “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (I) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving; individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company), whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (⅔) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or



(iii) there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary with any other corporation, other than (I) a merger or consolidation immediately following which those individuals who immediately prior to the consummation of such merger or consolidation, constituted the Board, constitute a majority of the board of directors of the Company or the surviving or resulting entity or any parent thereof, or (II) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company’s then outstanding securities.
          Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
          “Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of the Exchange Act.
          “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act, except that a Person shall not be deemed to be the Beneficial Owner of any securities which are properly filed on a Form 13-G.
          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
          “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Affiliates; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(d)    CODE. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.
(e)    ELIGIBLE INDIVIDUAL. For purposes of the Plan, the term “Eligible Individual” shall mean any employee of the Company or a Subsidiary, including any officer of the Company, any director of the Company or any consultant to the Company who is a natural person. An Award may be granted to an employee, in connection with hiring, retention or otherwise, prior to the date the employee first performs services for the Company or the Subsidiaries, provided that such Awards shall not become vested prior to the date the employee first performs such services. An Award may be granted to a consultant who is a natural person so long as the consultant provides bona fide services to the Company, which services (i) may not be in connection with the offer or sale of Stock or other securities in a capital-raising transaction, and (ii) do not directly or indirectly promote or maintain a market for the Stock or other securities of the Company.
(f)    FAIR MARKET VALUE. For purposes of determining the “Fair Market Value” of a share of Stock as of any date, Fair Market Value shall mean the average between the lowest and highest reported sale prices of the Stock on that date on the principal exchange or NASDAQ on which the Stock is then listed or admitted to trading. If the day is not a business day, the Fair Market Value of the Stock shall be determined as of the last preceding business day.
(g)    SUBSIDIARIES. The term “Subsidiary” means any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent voting or profits interest is owned, directly or indirectly, by the Company (or by any entity that is a successor to the Company), and any other business venture designated by the Committee in which the Company (or any entity that is a successor to the Company) has a significant interest, as determined in the discretion of the Committee.
(h)    STOCK. The term “Stock” shall mean shares of common stock of the Company.





This Amended and Restated Long Term Incentive Plan
was adopted by the Board effective as of June 15, 2016

INDUSTRIAL SERVICES OF AMERICA, INC.

By:      /s/ Todd L. Phillips
    Todd L. Phillips,
    Secretary & Chief Financial Officer