1
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.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)Title of each class of securities to which transaction applies:
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(2)Aggregate number of securities to which transaction applies:
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(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):
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(4)Proposed maximum aggregate value of transaction:
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(5)Total fee paid:
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[ ] 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:
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(2)Form, Schedule or Registration Statement No.:
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(3)Filing Party:
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(4)Date Filed:
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<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
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Notice of Annual Meeting of Shareholders
To Be Held on May 21, 1998
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
INDUSTRIAL SERVICES OF AMERICA, INC. (the "Company") will be held at Building
No. 1, 7100 Grade Lane, Louisville, Kentucky, on Thursday, May 21, 1998 at 10:00
A.M. (Eastern Daylight Time), for the following purposes:
(1) To elect five directors for a term expiring in 1999;
(2) To ratify the selection of Crowe, Chizek and Company, LLC as the
Company's independent auditors for the fiscal year ending December
31, 1998; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at close of business on April 23, 1998 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 21, 1998, 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
CHERYL BENNETT
Corporate Secretary
7100 Grade Lane
Louisville, Kentucky 40213
April 23, 1998
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.
<PAGE>
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 by the Board of Directors of Industrial Services of America, Inc., a
Florida corporation (the "Company"), to be used at the 1998 Annual Meeting of
Shareholders of the Company to be held at 10:00 A.M. (Eastern Daylight Time) on
May 21, 1998, 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 and for the ratification of independent
auditors for the 1998 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 proposal to ratify
the selection of independent auditors for the 1998 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 27, 1998.
VOTING SECURITIES
Only shareholders of record at the close of business on April 23, 1998 are
entitled to vote at the Annual Meeting or any adjournments within 120 days
thereof. As of March 16, 1998 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 as of March 16, 1998 of the Company to own of record or
beneficially more than five percent of the outstanding shares of the Company's
Common Stock and 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 Adress Ownership (1)(2)(3) Class (1)
--------------- ------------------- ---------
Harry Kletter 822,304 (4)(5)(6) 42.62% 1208 Park
Hills Court
Louisville, Kentucky 40207
K & R Corporation 472,304 (7) 24.48%
7100 Grade Lane
Louisville, Kentucky 40213
Roberta Kletter 200,000 (8) 10.36% 1208 Park
Hills Court
Louisville, Kentucky 40207
All directors and officers
As a group 1,022,304 52.98%
(1)The table reflects share ownership and the percentage of such share ownership
as of March 16, 1998. 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 472,304 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 beneficially owned by Roberta Kletter, the
spouse of Harry Kletter, as to which shares he disclaims beneficial
ownership.
(5)Exclusive of a non-qualified option to purchase 500,000 shares of the Common
Stock at an exercise price of $5.00 per share granted by the Board on
February 16, 1998 to Harry Kletter since the option is not presently
exercisable within 60 days. The vesting schedule is as follows: (i) Following
July 1, 1998, an option to purchase 200,000 shares may be exercised; (ii)
Following October 1, 1998, an option to purchase an additional 200,000 shares
may be exercised; and (iii) Following January 1, 1999, an option to purchase
an additional 100,000 shares may be exercised.
See "CERTAIN TRANSACTIONS."
(6)Harry Kletter has granted to third parties not affiliated with the Company
options to purchase 400,000 shares of Common Stock at $4.00 per share. These
options are currently exercisable. If all of the options were exercised,
Harry Kletter would beneficially own 422,304 shares of the Common Stock, the
resulting percent of class becoming 21.89%.
(7)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. Harry Kletter is President and Chief Executive
Officer of K & R Corporation and Timothy Myers is Vice President of K & R
Corporation.
(8)Does not include 350,000 shares of Common Stock beneficially owned by Harry
Kletter, spouse of Roberta Kletter, or 472,304 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 Joseph H. Cohen, R. Michael
Devereaux, Sean M. Garber, Harry Kletter and Dr. Barry N. Naft. Mr. Harry
Kletter was elected by the shareholders at the 1997 Annual Meeting for a term
expiring at 1998 Annual Meeting. The remaining members of the Board of
Directors (the "Board") of the Company on November 15, 1997 filled the
vacancy created by Roberta F. Kletter with Sean M. Garber and on February 12,
1998 filled the vacancies created by the resignations of Matthew L. Kletter,
Timothy W. Myers and Peter V. Cullinan with Messrs. Cohen, Devereaux, and
Naft. The Board accepted the resignations of Messrs. Cullinan, Myers and
Matthew Kletter effective on February 12, 1998, and Mrs. Kletter on November
15, 1997. The Board elected each of Messrs. Cohen, Devereaux, Garber and Naft
to serve a term expiring at the 1998 Annual Meeting. Messrs. Cohen,
Devereaux, Garber and Naft have been nominated to serve their first full
terms as directors of the Company. If elected, all directors will hold
office until the 1999 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 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. The Board 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
Name and Year First Beneficially Owned as
Principal Occupation Became of March 16, 1998
with Company Age Director Number of Shares Percent of Class(1)
Joseph H. Cohen 52 1998 -- --
Director
R. Michael Devereaux 51 1998 -- --
Director
Sean M. Garber 31 1997 5,500 0.29%
President and Chief
Executive Officer
Harry Kletter 71 1983 822,304(2)(3) 42.62%
Chairman of the Board,
and Chief Executive Officer
Dr. Barry N. Naft 52 1998 -- --
Director
(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)Exclusive of a non-qualified option to purchase 500,000 shares of the Common
Stock at an exercise price of $5.00 per share granted by the Board on
February 16, 1998 to Harry Kletter since the option is not presently
exercisable within 60 days. The vesting schedule is as follows: (i) Following
July 1, 1998, an option to purchase 200,000 shares may be exercised; (ii)
Following October 1, 1998, an option to purchase an additional 200,000 shares
may be exercised; and (iii) Following January 1, 1999, an option to purchase
an additional 100,000 shares may be exercised.
(3)Harry Kletter has granted to third parties not affiliated with the Company
options to purchase 400,000 shares of Common Stock at $4.00 per share. These
options are currently exercisable. If all of the options were exercised,
Harry Kletter would beneficially own 422,304 shares of the Common Stock, the
resulting percent of class becoming 21.89%.
Nominees for Directors
JOSEPH H. COHEN has been a director of the Company since February, 1998. He is a
managing partner of the law firm of Morris, Garlove, Waterman & Johnson PLLC,
Louisville, Kentucky. He has practiced with this firm for 28 years and has been
a practicing attorney for 28 years, specializing in Commercial Real Estate and
Zoning Law, Corporate Law (including Mergers and Acquisitions), Health Law,
Commercial Litigation, Transportation Law, Energy Law and Financial and Estate
Planning. Mr. Cohen is a 1967 graduate of the University of Louisville School of
Business and a 1970 graduate of the University of Louisville Brandeis College of
Law. Mr. Cohen also serves as Counsel to K & R and Mr. Kletter on certain
personal matters.
R. MICHAEL DEVEREAUX has been a director of the Company since February, 1998. He
is the President of The Devereaux Company, Inc., a financial advisory and
consulting firm, recently relocated to Louisville, Kentucky, after 10 years in
Memphis, Tennessee. Prior to this time, Mr. Devereaux worked for 17 years in the
corporate finance and accounting areas, last serving as Chief Financial Officer
of Hunter Melnor, Inc. ("Hunter Melnor") in Memphis, Tennessee from 1984 to
1988. While at Hunter Melnor, Mr. Devereaux directed the management buyout of
Hunter Fan Company, the acquisition of Kenroy International and Melnor
Industries and the sale of Hunter Melnor in 1988. Mr. Devereaux has an
undergraduate degree in Accounting from the University of Louisville and a
Masters in Business Administration from the University of Memphis.
SEAN M. GARBER has been a director of the Company since December, 1997, when
he also became Interim President. Mr. Garber became President effective
February 5, 1998, and Chief Operating Officer on October 16, 1997. Mr.
Garber joined the Company in November, 1996 as Vice President of Recycling.
From 1989 to November 1996, Mr. Garber was an employee of, and held positions
of general manager and marketing manager with, OmniSource, Inc. of Fort
Wayne, Indiana, a waste disposal and recycling company. Mr. Garber graduated
from Indiana University with a degree in Business Management.
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. Mr. Kletter
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 duties of President and Chief Executive Officer on August 1, 1992
upon Edward List's resignation from this position. Mr. Sean M. Garber became
Interim President on December 1, 1997, upon Harry Kletter's resignation from
this position. Mr. Kletter continues to serve as Chief Executive Officer of the
Company. Mr. Kletter is the sole shareholder of K & R. Prior to his involvement
with the Company, Mr. Kletter was President and Chief Executive Officer of K &
R, which is now a real estate holding company and materials processing company.
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 businesses including Outer Loop Industrial Park, Outer
Loop Business Park, and Outer Loop Company, LLC., which are each real estate
ventures.
DR. BARRY N. NAFT has been a director of the Company since February, 1998. He is
President and Chief Executive Officer of ARInternational, Inc. ("ARI") of
Potomac, Maryland. ARI provides engineering, technology and project development
services for facilities engaged in the remanufacturing of industrial materials
from waste products. From 1989 to 1996, he was President and Chief Executive
Officer of Dow Environmental, Inc., a wholly owned subsidiary of the Dow
Chemical Company. During that time, he led that company's expansion as a
provider of environmental services from a financially troubled start-up to $100
million in revenues and 500 employees. Dr. Naft earned a doctorate in Nuclear
Engineering from Purdue University (1968), and a Master of Science Degree (1966)
and Bachelor of Science Degree in Chemical Engineering, both from Clarkson
University.
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 "Exchange Act"), or subject to the requirements of
Section 15(d) of the Exchange Act or in a company registered as an investment
company under the Investment Company Act of 1940, as amended. None of the
directors of the Company has any family relationship with any other director or
executive officer of the Company.
Meetings and Committees of the Board of Directors
During 1997, the Board met one time and took action on eleven other
occasions by unanimous written consent of the directors. The Board held two
meetings in 1998 and took action on two other occasions by unanimous written
consent. All incumbent directors attended at least 75% of the aggregate number
of meetings of the Board and the committees of which they were members.
The Compensation Committee is responsible for making recommendations to
the Board regarding salaries and bonuses to be paid to Company executive
officers. During the year ended December 31, 1997, this committee held no
meetings. Harry Kletter (Chairman), Joseph H. Cohen and Dr. Barry N. Naft are
presently members of this committee. The appointment of members to this
committee occurred at the Board meeting on February 16, 1998.
The Audit Committee confers with the Corporation's independent auditors
regarding the scope and adequacy of annual audits; reviews reports from such
independent auditors; and meets with the independent auditors to review the
adequacy of the Company's accounting principles, financial controls and
policies. The committee held no meetings during the year ended December 31,
1997. Sean M. Garber, R. Michael Devereaux and Dr. Barry N. Naft are presently
members of this committee. The appointment of members to this committee occurred
at the Board meeting on February 16, 1998.
The Nominating Committee is empowered to recommend to the Board nominees
for election as directors and persons to fill directors' vacancies and newly
created directorships; recruit potential director candidates; recommend changes
to the Board concerning the responsibilities and composition of the Board and
committees; and review proxy comments received from shareholders in writing to
the Nominating Committee, at the address of the Company's principal executive
offices, not less than 45 days in advance of the date the Company's Proxy
Statement was released to shareholders. Harry Kletter and Sean M. Garber
currently serve as members of this committee. The appointment of members to this
committee occurred at the Board meeting on February 16, 1998.
Compensation of Directors
Mr. Harry Kletter, Chairman of the Board and Chief Executive Officer and
Mr. Sean Garber, President and Chief Operating Officer granted a per diem of
one thousand dollars ($1,000) per meeting for all non-employee directors,
i.e. Messrs. Cohen, Devereaux and Naft.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors,
certain officers and persons who own more than ten percent (10%) of the
outstanding Common Stock of the 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 from reporting persons that no other reports including Forms 5
were required, all Section 16(a) filing requirements applicable to all of its
officers and directors were complied with during fiscal 1997 with the following
exceptions: K & R did not timely file a Form 4 covering one transaction; Mr.
Harry Kletter did not timely file a Form 4 covering one transaction; Dr. Naft
did not timely file a Form 3 upon his election to the Board; and Mr. Garber did
not timely file a Form 4 covering one transaction. These reporting persons have
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, 1997, 1996 and 1995 paid or accrued by the
Company, to (i) the Company's Chief Executive Officer, (ii) the President of the
Company (the Chief Executive Officer and President being the two most highly
compensated executive officers of the Company at December 31, 1997), and (iii) a
former officer of the Company who ceased to be an executive officer of the
Company during 1997, but would have been the only other executive officer of the
Company whose total annual salary and bonus would have exceeded $100,000.
Summary Compensation Table
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Long Term Compensation
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Annual Compensation Awards
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Name and Restricted Securities
Principal Other Annual Stock Underlying All Other
Position Year Salary Bonus Compensation Awards Options Compensation
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Glenn Bierman 1997 $40,000 100,000(4)
Acting Chief
Executive Officer
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Sean M. Garber 1997 $75,562 $7,000 $3,868(6) 125,000(4) $3,000 (5)
President and
Chief Operating
Officer (1)
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Harry Kletter 1997 (2) (3) $975**
President and 1996 (2) $975**
Chief Execut 1995 $100,000 $975**
Officer
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** Includes taxable use of Company vehicle.
(1)Mr. Kletter served as both President and Chief Executive Officer of the
Company until December 1, 1997 at which time Mr. Garber became Interim
President. Mr. Kletter remains as Chief Executive Officer. See "ELECTION
OF DIRECTORS - Nominees for Directors".
(2)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."
(3)The Board granted to Mr. Kletter an option to purchase 500,000 shares of the
Common Stock at $5.00 per share on February 16, 1998 for past years services
rendered, when he did not take a salary. See "EXECUTIVE COMPENSATION -
Certain Transactions."
(4)The Securities Underlying Options granted are non-qualified stock options
under the 1997 Employee Stock Option Plan.
(5)Mr. Garber received a bonus contribution to his 401K in the amount of $3,000.
The total amount of compensation vests immediately and would not be affected
by a change in control of the Company.
(6)The Garber Employment Agreement provides for a $1,000,000 life insurance
policy, the quarterly premium is $817, equal to $3,268 annually, and the
taxable use of a Company vehicle equal to $600.
All other executive officers of the Company earned less than $100,000.
<PAGE>
Stock Options Granted
Following is a summary of stock option activity and number of shares reserved
for outstanding options for the years ended December 31, 1997, 1996 and 1995:
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Grant Date
Individual Grants Value
- ---------------------------------------------------------------------------
% of
Number of Total
Securitie Options/
Under- SARs
lying Granted to Exercise Grant
Options/ Employees or Base Date
SARs in Fiscal Price Expiration Present
Name Granted(#)Year ($/Share) Date Value $(1)
- ---------------------------------------------------------------------------
Sean M. Garber 100,000(2) 1.00% $5.00 10/31/1999 $4.75
25,000(2) 1.00% $1.00 10/26/2002 $5.50
- ---------------------------------------------------------------------------
Glenn Bierman 100,000(2) 1.00% $5.00 10/31/1999 $4.75
- ---------------------------------------------------------------------------
(1)In the table above the column titled "Grant Date Present Value $" the
valuation is based on the Nasdaq Market Price for the Company's Common Stock.
(2)The Securities Underlying Options granted are non-qualified stock options
under the 1997 Employee Stock Option Plan.
<PAGE>
Stock Option Exercises and Holdings
- -------------------------------------------------------------------------
Aggregated Option/SAR Exercise in Last Fiscal Year and
FY-End Option/SAR Values
- -------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired On Value FY-End (#) FY-End (#)
Name Exercise(#) Realized ($) Exercisable Exercisable (1)
- -------------------------------------------------------------------------
Sean M.Garber 100,000 - 100,000 - (2)
25,000 - 25,000 $87,500
- -------------------------------------------------------------------------
Glenn Bierman 100,000 - 100,000 - (2)
- -------------------------------------------------------------------------
All of the Aggregated Options listed above were exercisable at year ended
December 31, 1997. To date the options remain unexercised.
(1)The dollar values for column heading "Value of Unexercised In-the-Money
Options/SARs at FY-End ($) Exercisable" are calculated by determining the
difference between the fair market value of the securities underlying the
options and the exercise or base price of the options at exercise.
(2)The exercise price of these options is $5.00 per Share, the market value at
the close of December 31, 1997 was $4.50 per Share; therefor these options
were not in the money.
Employment Contracts
In October 1997, the Company issued options to purchase 25,000 shares of
the Common Stock and an additional option to purchase 100,000 shares of Common
Stock to its Interim President and Chief Operating Officer, Sean M. Garber as a
component of a five-year employment agreement (the "Garber Employment
Agreement"), dated October 15, 1997, as amended on February 5, 1998, by and
between the Company and Mr. Garber. The exercise price related to the options to
purchase (i) the 25,000 shares is $1.00 per share and (ii) the 100,000 shares is
$5.00 per share. Both such options are exercisable over a five year period.
Compensation cost charged to operations in 1997 related to the option to
purchase 25,000 shares was $14,974. The option to purchase 100,000 shares was at
market value the day of the grant therefore no charges were associated with this
option.
The term of the Garber Employment Agreement is five years with salary
measured on an annual basis from the date of Garber Employment Agreement as
follows: First Year $104,000, Second Year at $110,000, Third Year at $120,000,
Fourth Year at $130,000, and Fifth Year and thereafter $140,000 with incentive
pay to be established by the Compensation Committee of the Board. The Garber
Employment Agreement includes a covenant not to compete with the Company for a
period of two years from the date of termination of the Garber Employment
Agreement in a territory within a radius of 100 miles of the business operations
of the Company. The Garber Employment Agreement provides for a $1,000,000 life
insurance policy on the life of Mr. Garber, the beneficiaries of which are to be
designated by Mr. Garber in addition to medical, dental, pension, retirement and
disability benefits, vacation and other comparable benefits customarily made
available to Company employees. The failure of the Company to review the Garber
Employment Agreement, the disability of Mr. Garber, the resignation of Mr.
Garber within 180 days of a change in control or the termination of Mr. Garber
without cause will result in (i) the Company obligation to pay Mr. Garber twice
his current annual salary payable in 24 equal monthly installments except for a
change in control where the payment in full is due within 30 days of the change
in control, and (ii) the immediate vesting of all options to purchase Common
Stock held by Mr. Garber. Change in control means a transaction or series of
transactions as a result of which (i) any person who does not currently own a
majority of the outstanding voting stock of the Company acquires a majority of
the outstanding voting stock of the Company; or (ii) the Company sells or
otherwise disposes of all or substantially all of the assets or business
operations of the Company to any other person; or (iii) the Company merges or
consolidates with any other person; unless, in any such case, shareholders
owning the outstanding voting stock of the Company immediately prior to the
consummation of such transaction or transactions will own, upon consummation of
such transaction or transactions, at least a majority of the outstanding shares
of voting stock of the person acquiring the shares or assets of the Company or
surviving the merger or consolidation of the Company in the transaction(s). The
Garber Employment Agreement terminates upon the death or disability (at the end
of the Company's long-term disability coverage) of Mr. Garber, subject to the
rights of Mr. Garber with respect to disability described above. Mr. Garber may
resign and terminate the Garber Employment Agreement upon 90 days prior written
notice. The Board may terminate the Garber Employment Agreement for cause, which
shall terminate 30 days after notice to Mr. Garber from the Board. Causes for
termination are (i) Mr. Garber engaging in competition with the Company or its
subsidiaries, which is substantially harmful to their business, (ii) abuse of
intoxicants so as to affect the ability of Mr. Garber to conduct Company
business in a proper and prudent manner; (iii) felony conviction of Mr. Garber,
or (iv) material breach by Mr. Garber of the Garber Employment Agreement and a
failure or refusal to remedy such breach within 30 days of written notice of
such breach. The Company may terminate the Garber Employment Agreement without
cause at any time, however Mr. Garber is entitled to the benefits described
above.
In August 1997, the Company entered into an Engagement of Services
Agreement (the "Services Agreement"), with Glenn Bierman of Tycon Equity
Partners. The Services Agreement provided for Bierman to receive $20,000 per
month retainer as Acting Chief Executive Officer, including office space
overhead, and staff expenses (including but not limited to one secretary and one
assistant). The Company also provided Mr. Bierman with a $5,000 per month
expense retainer and granted to Bierman an option to purchase 100,000 shares of
Common Stock at $5.00 per share, such option to expire on October 31, 1999. This
option vested in full at the date of grant. The Services Agreement outlined the
terms, compensation, option, bonus and 401K if Bierman became Chief Executive
Officer. For his compensation, Mr. Bierman agreed, among other items to provide
overall management and business consulting services to the Company. However, the
Company did not extend an offer to Mr. Bierman to become Chief Executive Officer
within the four month period, terminating the Services Agreement in November,
1997.
Amendment to Employee Stock Option Plan
On February 11, 1998 the Board of the Company ratified an action to
reserve an additional 230,000 authorized but unissued Shares of Common Stock to
the Company's 1997 Employee Stock Option Plan (the "Plan"), dated April 11,
1997. The Board action only approves the additional reservation to the portion
of the Plan providing for non-qualified stock options.
Certain Transactions
Matthew L. Kletter, Esq., formerly a director, Secretary and Vice
President of Legal Affairs of the Company, maintains a law practice in New York,
New York. During 1997, he provided legal services to both the Company and K & R,
the sole shareholder of which is Harry Kletter, the President until December 1,
1997 and Chief Executive Officer of the Company. For his legal services during
1997 to the Company, Mr. Matthew Kletter received $8,000. Matthew L. Kletter
resigned as Director, Secretary and Vice President of Legal Affairs of the
Company effective February 1998. There were no disagreements between Matthew L.
Kletter and the Company.
In April 1992 the Company entered into a management agreement with K & R.
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 was
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 retained 80% of
the profits generated from the K & R operation(s) pursuant to an amendment to
this management agreement, dated as of October 30, 1995, and effective January
1, 1996 through December 31, 1997.
Effective January 1, 1997, the Company leased from K & R, an affiliate of
the Company and K & R, the sole shareholder of which is Harry Kletter (the Chief
Executive Officer 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. Company
management, operational management of the Leasing division and the WESSCO
division of the Company occupy the office space.
In February 1998, the Board of the Company ratified a Lease Agreement by
and between K & R, an affiliate of the Company and the sole shareholder of which
is Harry Kletter (the Chief Executive Officer of the Company), and the Company
for a term of five years with an effective date of January 1, 1998. The rent is
in the amount of $37,500 paid per month or equal to $450,000 annually ("The
Fixed Minimum Rent") for approximately 24.5 acres of land and the improvements
thereon, which are located at 7100 Grade Lane in Louisville, Kentucky. The Fixed
Minimum Rent is consistent with the terms of a 1997 Appraisal Report prepared by
a member of the Appraisal Institute for use by a lender of K & R, employing the
Income Capitalization Approach in its fair rental valuation of the Leased
Premises. The principal improvements consist of an approximately 22,750 square
foot building used as the Corporate Office, an approximately 8,286 square foot
building used for Computerized Waste Systems offices (a division of the
Company), an approximately 13,995 square foot building used as the paper
recycling plant, and an approximately 51,760 square foot building used as the
recycling offices and warehouse space, with a remaining 15,575 square feet of
space contained in five (5) buildings ranging in size from approximately 8,000
to 256 square feet.
The Fixed Minimum Rent adjusts each five years, including each of the
Option Periods, in accordance with the Consumer Price Index. The Fixed Minimum
Rent also increases to $750,000 per annum and $62,500 per month in the event of
a "change in control" of the Company. Under the Lease, "change in control" means
a transaction or series of transactions as a result of which (i) any person who
does not currently own a majority of the outstanding stock of the Company
acquires a majority of the outstanding stock of the Company, (ii) the Company
sells or otherwise disposes of all or substantially all of the assets or
business operations of the Company to any other person; or (iii) the Company
merges or consolidates with any other person; unless, in any such case,
shareholders owning the outstanding voting stock of the Company immediately
prior to the consummation of such transaction or transactions will own, upon
consummation of such transaction or transactions, at least a majority of the
outstanding shares of the voting stock of the person acquiring the shares or
assets of the person acquiring the Company or surviving the merger or
consolidation of the Company in the transaction(s).
The Lease provides that the Leased Premises may be used by the Company in
its metal recycling and recycled paper sorting and bailing businesses, and for
its corporate offices. The Company covenants to use and occupy the Leased
Premises in a careful, safe and proper manner, among other covenants the Company
agrees to and typically contained in a net lease to a tenant. Without the prior
consent of K & R (and in the case of (ii) below the prior consent of any
mortgagee of K & R) the Company may not (i) make any structural alterations,
improvements or additions to the Leased Premises, or (ii) assign (including a
change of control) or sublet the Leased Premises. The Lease provides for
indemnification of K & R by the Company for all damages arising out of the
Company's use or condition of the Leased Premises excepting therefrom K & R's
negligence. The Lease further provides that the Company will agree to
subordinate its leasehold interest to the mortgage interest of any mortgagee of
K & R.
The Lease provides for termination by the Company upon damage (the
"Damage") by fire or other casualty that cannot be reasonably repaired within,
in most instances, 120 days of the Damage. All rent ceases as of the "injury
date" under these circumstances. The Lease also terminates upon condemnation of
the Leased Premises in whole, with a condemnation of a portion of the Leased
Premises resulting in an equitable adjustment of the Fixed Minimum Rent. Events
of Default under the Lease include (i) failure by the Company to pay the Fixed
Minimum Rent for 10 days after written demand therefor, (ii) any other default
in the observance or performance by the Company of any of the other covenants,
agreements or conditions of the Lease, which shall continue for 30 days after
written notice, unless the Company shall have commenced and shall be diligently
pursuing curing such default, (iii) certain bankruptcy or related events
affecting the Company, (iv) vacation of the Leased Premises by the Company, or
(v) the transfer or devolution whether by operation of law or otherwise of the
Lease or the Company's estate or of any of the Company's interest to anyone
other than K & R. Upon the occurrence of an event of default, K & R may, at its
option, terminate the Lease and enter into and take possession of the Leased
Premises with the right to sue for and collect all amounts due, including
damages.
Also, in February 1998, the Board of the Company ratified a Consulting
Agreement effective as of January 2, 1998, by and between K & R, as consultant,
and the Company, which remains in effect until December 31, 2007, with automatic
annual renewals thereafter unless one party provides written notice to the other
party of its intent not to renew at least six months in advance of the next
renewal date. K & R is an affiliate of the Company and the sole shareholder of K
& R is Harry Kletter, the Chief Executive Officer of the Company. K & R shall
provide strategic planning and development to the Company, including advice on
management activities, advertising, financial planning and mergers and
acquisitions. The Company shall be responsible for all of K & R's expenses and
pay to K & R $240,000 in equal monthly installments of $20,000 in connection
with the consulting activities.
On February 16, 1998, the Board of the Company granted to Harry Kletter an
option to purchase 500,000 shares of Common Stock at an exercise price of $5.00
per share for past services rendered to the Company. The vesting schedule of the
option is as follows: (i) Following July 1, 1998, the option to purchase 200,000
shares may be exercised; (ii) Following October 1, 1998 the option to purchase
an additional 200,000 shares may be exercised; and (iii) Following January 1,
1999, the option to purchase an additional 100,000 shares may be exercised. The
options expire on January 16, 2003.
<PAGE>
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
This report reflects the Company's compensation policies with respect to
its executive officers, as endorsed by the Board, and the resulting actions
taken by the Company for the reporting periods shown.
The Company through its executive compensation policies seeks to provide
compensation that will enable the Company to attract and maintain quality
executives in the competitive market place. The Company believes in a
pay-for-performance policy, to align results for the executive, the Company and
the shareholder. Currently, the executive compensation program of the Company is
comprised of salary, annual cash incentive bonus opportunity, long term
incentives such as stock options and the employee 401K in which executives can
participate.
To further establish and standardize the Company's compensation program
policies the Board of Directors elected a Compensation Committee in February
1998. The Board established the Compensation Committee to review current
policies, as well as to enact new policies. In this way the Company believes
that it will be able to maintain its competitive edge when recruiting, as well
as to retain valuable employees.
The compensation for both Harry Kletter as the Company's Chief Executive
Officer and to Sean Garber as the President of the Company was determined by the
Board considering the criteria set forth in this report. Additionally the Board
granted to Mr. Kletter the option to purchase 500,000 shares of Common Stock at
$5.00 per share. See "CERTAIN TRANSACTIONS."
Submitted by the Board of Directors,
Joseph H. Cohen Harry Kletter
R. Michael Devereaux Dr. Barry N. Naft
Sean M. Garber
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 period
commencing November 30, 1995. Since there is no nationally recognized industry
index consisting of consultants in the business of retail and industrial waste
management 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 five companies which represent the other public companies in the
industry - Allied Waste Industries, Johnson Controls, Inc., Republic Industries,
Inc., TransAmerica Waste, 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 November 30, 1995 and that all dividends were reinvested. The only
change to this peer group from the peer group used in the proxy statement for
the Company dated April 21, 1997 is the deletion of United Waste Systems, Inc.
This deletion is due to United Waste Systems, Inc. merger with another public
company.
<PAGE>
VALUE LINE INSTITUTIONAL
SERVICES
1-800-531-1425
Total Returns
Issue Ticker 1995 1996 1997
- ----- ------ ---- ---- ----
ALLIED WASTE INDS INC AWIN -3.39 29.82 152.03
JOHNSON CTLS INC JCI -0.13 23.35 17.52
REPUBLIC INDS INC RII 34.42 72.67 -25.25
TRANSAMERICAN WASTE WSTE 9.09 -27.08 39.95
USA WASTE SVCS INC UW -10.12 68.87 23.14
Market Capitalizations
Issue Ticker 1995 1996 1997
- ----- ------ ---- ---- ----
ALLIED WASTE INDS INC AWIN 214,641,000 214,641,000 568,153,500
INDUSTRIAL SVCS AMER IDSA 11,244,914 12,542,353 19,462,500
JOHNSON CTLS INC JCI 2,827,069,000 2,827,069,000 3,472,462,500
REPUBLIC INDS INC RII 2,226,709,000 2,226,709,000 7,089,469,032
TRANSAMERICAN WASTE WSTE 44,471,000 44,471,000 33,336,368
USA WASTE SVCS INC UW 1,144,939,000 1,144,939,000 4,547,415,000
Summary Data
Name 1995 1996 1997
- ---- ---- ---- ----
INDUSTRIAL SVCS AMER 11.54 55.17 -60.00
Standard & Poors 500 1.85 23.25 33.38
Peer Group 9.97 48.30 4.76
Graph Plot Points
Name 11/30/95 1995 1996 1997
- ---- -------- ---- ---- ----
INDUSTRIAL SVCS AMER 100.00 111.54 173.08 69.23
Standard & Poors 500 100.00 101.85 125.52 167.42
Peer Group 100.00 109.97 163.08 170.84
<PAGE>
PERFORMANCE GRAPH
(Description for EDGAR)
Line Graph of the Following Points Comparison
11/30/95 1995 1996 1997
Industrial Services of 100.00 111.54 173.08 69.23
America
Standard & Poors 500 100.00 101.85 125.52 167.42
Peer Group 100.00 109.97 163.08 170.84
<PAGE>
ITEM II. RATIFICATION OF INDEPENDENT AUDITORS
The Company's Form 10-K Annual Report to Shareholders for the fiscal year
ended December 31, 1997, including financial statements and the report of Crowe,
Chizek and Company, LLC thereon, is being mailed with this Proxy Statement to
each of the Company's shareholders of record at the close of business on April
23, 1998. The Board has selected Crowe, Chizek and Company, LLC as independent
auditors of the Company's accounts for the fiscal year ending December 31, 1998.
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.
Representatives of Crowe, Chizek and Company, LLC are not expected to be present
at the Annual Meeting.
The selection of Crowe, Chizek and Company, LLC 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, Kentucky on or before December 23, 1998 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 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
Cheryl A. Bennett
Corporate Secretary
Louisville, Kentucky
April 23, 1998
