Document:

Exhibit

Exhibit 10.39

INDUSTRIAL SERVICES OF AMERICA, INC.

RESTRICTED STOCK UNIT 
GRANT AGREEMENT

This Restricted Stock Unit (“RSU”) Grant Agreement (this “Agreement” or “Award”) dated as of March 25, 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 Committee has designated the Grantee as a Participant in the Plan to recognize the Grantee for his hard work and significant efforts in leading the Company through a difficult period, and wishes to set forth in this Agreement the Grantee's right to receive up to that number of RSUs set forth herein in lieu of a cash bonus.  Each RSU represents the right to receive one share of the Company's common stock (“Common Stock”), subject to the terms and conditions set forth in this Agreement and the Plan.  

AGREEMENTS

The Grantee and the Company agree as follows:

1.     Grant of Restricted Stock Units.  The Company grants to Grantee 32,000 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 Common Stock with respect to the RSUs in accordance with the terms of this Award, the RSUs may not 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 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 Common Stock with respect to the RSUs in accordance with the terms of this Award, (i) the shares of Common 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 Common 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, (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months and unless the other terms and conditions of Rule 144 are complied with.

4.     Vesting and Payment.  If and to the extent that Grantee remains employed by the Company on March 31, 2016, seven (7) days from the Grant Date (the “Service Period”), the Maximum Number of RSUs shall vest and become nonforfeitable.  

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5.     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 Common Stock related thereto.  Unless an affirmative election is made by the Participant before the end of the Service Period to remit already-owned shares of Common Stock or a cash payment or to have amounts debited from other wages due, or some combination thereof, 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 Common Stock issuable upon vesting, equal to their Fair Market Value (as defined in the Plan) based on the amount of withholding taxes reasonably estimated by the Company to be due upon vesting.

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

7.     Restrictions Imposed by Law.  Notwithstanding any other provision of this Agreement, Grantee agrees that the Company will not be obligated to deliver any shares of Common 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 Common Stock is listed. 

8.     No Shareholder Status; No Dividends.  Grantee shall have no rights as a shareholder with respect to any RSUs or shares of Common Stock under this Agreement until such shares have been duly issued and delivered to Grantee, and no adjustment 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 prior to such issuance.  

9.     Provisions Consistent with Plan.  This Agreement is intended to be construed to be consistent with, and is subject to, all applicable provisions of the Plan, which is incorporated herein by reference.  In the event of a conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall prevail.

INDUSTRIAL SERVICES OF AMERICA, INC.
 

By:           /s/ Sean Garber
             Sean Garber

Title:         President    

Date:         March 25, 2016

GRANTEE:

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

Date:  March 25, 2016

2Exhibit

Exhibit 10.39

RETENTION AGREEMENT

This is a Retention Agreement (the “Agreement”) entered into between Industrial Services of America, Inc. (“ISA”) and Todd L. Phillips (“Phillips”) effective as of March 25, 2016.

Recital

ISA wishes to avoid the serious disruption to the business that would occur if Phillips terminated his employment with ISA to pursue other opportunities, by providing a strong incentive to Phillips to remain employed with ISA.  Under this Agreement, Phillips will receive retention bonus payments for a period of two years as an inducement to continue employment with ISA.  

Agreement
1.    Amount and Timing of Retention Payments. 

(a)ISA will pay Phillips two retention payments, subject to his continued employment by ISA on each payment date (collectively, the “Retention Bonus”).  The first payment of one hundred thousand dollars ($100,000) (the “First Payment”) will be made if Phillips is employed with ISA through December 31, 2016.  The First Payment will be made on the first payroll period after December 31, 2016, but no later than January 12, 2017.  The second payment of one hundred twenty-five thousand dollars ($125,000) (the “Second Payment”) will be made if Phillips is employed with ISA through December 31, 2017.  The Second Payment will be made on the first payroll period after December 31, 2017, but no later than January 11, 2018.  

(b)Each retention payment under paragraph 1(a) above is conditioned on Phillips’ continued employment with ISA until, in the case of the First Payment, December 31, 2016 and, in the case of the Second Payment, December 31, 2017.  Except as set forth in paragraph 1(c) or 1(d) below, if Phillips’ employment with ISA terminates (including by Phillips’ resignation), Phillips will not be entitled to any retention payments scheduled to be earned after the last day Phillips is an employee of ISA.  

(c)If Phillips’ employment is terminated by ISA without Cause or if Phillips resigns for Good Reason on or before December 31, 2016, ISA will pay Phillips an amount equal to the product of (i) $100,000 times (ii) the quotient of the number of full months employed in 2016 divided by 12.  ISA will pay Phillips the amount due in equal installments over the 12 months following such termination without Cause but no later than March 14, 2017, with each installment on ISA’s regular payroll schedule and the last installment on or before March 14, 2017 containing the full amount remaining to be paid; provided, however, that payments will cease or not be made, as applicable, if Phillips violates any restrictive covenants in Sections 8 through 11 of the Executive Employment Agreement dated December 31, 2014, between Phillips and ISA (the “Employment Agreement”).  Installment payments of the retention pay will be treated as a series of separate payments.  For purposes of this Agreement, Cause and Good Reason shall have the meaning set forth in the Executive Employment Agreement.

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(d)If Phillips’ employment is terminated by ISA without Cause or if Phillips resigns for Good Reason after December 31, 2016, but on or before December 31, 2017, ISA will pay Phillips an amount equal to the product of (i) $125,000 times (ii) the quotient of the number of full months employed in 2017 divided by 12.  ISA will pay Phillips the amount due in equal installments over the 12 months following such termination without Cause but no later than March 14, 2018, with each installment on ISA’s regular payroll schedule and the last installment on or before March 14, 2018 containing the full amount remaining to be paid; provided, however, that payments will cease or not be made, as applicable, if Phillips violates any restrictive covenants in Sections 8 through 11 of the Executive Employment Agreement.  Installment payments of the retention pay will be treated as a series of separate payments.    

2.    Tax Withholding.  ISA will withhold all applicable taxes and amounts from payments under this Agreement as required by law.

3.    No Change in Employment Terms.    This Agreement supplements the Executive Employment Agreement, and is subject to the terms of that agreement, including ISA's right to terminate Phillips’ employment at any time (subject to any severance obligations under that Executive Employment Agreement).  

4.    Exemptions and Compliance Under Code Section 409A.  The Retention Bonus under this Agreement is exempt from Code §409A deferred compensation requirements as a short term deferral.  This Agreement shall be interpreted, construed, and administered in accordance with this agreed intent.  However, ISA makes no commitment regarding tax treatment of obligations hereunder.

5.    Entire Agreement.  ISA has made no promises to Phillips with respect to the subject matter hereof other than those set forth in this Agreement.  

ISA, by its duly authorized representative, and Phillips, have caused this Agreement to be signed on the dates set forth below.  

Industrial Services of America, Inc.

By:    /s/ Sean Garber
           Sean Garber
    
Title:     President                    

Date:     March 25, 2016

                    
/s/ Todd Phillips
Todd Phillips, Chief Financial Officer

Date:     March 25, 2016

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