Exhibit 10.1
DIRECTOR DESIGNATION AGREEMENT
THIS DIRECTOR DESIGNATION AGREEMENT (this "Agreement") is made and
entered into as of June 13, 2014, by and between Recycling Capital Partners,
LLC, an Indiana limited liability company (the "Investor") and Industrial
Services of America, Inc., a Florida corporation (the "Company"). Unless
otherwise indicated herein, capitalized terms used herein are defined in
Section 1 hereof.
WHEREAS, as of the date hereof, the Investor has purchased 857,143
shares of the Company's Common Stock, together with the Warrant to purchase
an additional 857,143 shares pursuant to the terms of a Securities Purchase
Agreement dated as of the date hereof (the "Securities Purchase Agreement");
and
WHEREAS, as a condition to the purchase, the Investor required the
right to designate certain directors of the Company; and
WHEREAS, the parties hereto desire to enter into this Agreement to
set forth certain rights and obligations of the Investor with respect to the
designation of directors for the Company.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. Definitions. Capitalized terms used herein but not otherwise
defined herein shall have their respective meanings as set forth in the
Securities Purchase Agreement. As used herein, the following terms shall
have the following respective meanings:
"Board" means the board of directors of the Company.
"Business Day" means a day, other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by
law to close.
"Investor's Ownership Percentage" means, at any time, the fraction
(expressed as a percentage) that results from dividing (i) the number of
shares of Common Stock owned by the Investor and its Affiliates at such time
by (ii) the number of shares of Common Stock issued and outstanding at such
time.
"Securities Laws" means the Securities Act of 1933 and the Securities
Exchange Act of 1934, each as amended, and the rules promulgated thereunder.
2. Board Nomination Rights.
(a) From and after the date hereof and until the provisions of this
Section 2 cease to be effective and subject to the terms and conditions of
this Agreement, the Investor shall have the right to designate persons for
appointment and/or election to the Board (each a "Nominee") in accordance
with the terms of this Agreement.
(b) The number of Nominees to be designated by the Investor shall be
determined by multiplying the total number of Board seats by the Investor's
Ownership Percentage and rounding that product up to the next whole number.
For example, if the number of Board seats is seven (7) and the Investor's
Ownership Percentage is sixteen percent (16%), the Investor would be entitled
to designate two (2) Nominees (.16 x 7 = 1.12/rounded up to 2). If the
total number of Board seats is nine or less, the maximum number of nominees
the Investor is entitled to designate is two (2).
(c) From and after the date hereof and until the provisions of this
Section 2 cease to be effective, the number of directors of the Company shall
be no less than five (5). The Investor may request an increase in the number
of directors only if (i) the Board has not otherwise designated existing
Board seats to be filled by the Investor's allowed Nominees, and (ii) as a
result of the requested increase in the number of directors, the Investor is
entitled to and does designate an additional Nominee to fill the open seat or
seats created at the request of the Investor. The Board shall increase its
size in accordance with the request within sixty (60) days of receipt of the
Investor's request.
(d) Subject to the limitations set forth herein, the Board shall
appoint any Nominee to fill any Board seat created upon the request of the
Investor or designated by the Board for filling by the Investor. Any Nominee
appointed as a director shall be appointed to a term expiring at the next
election of directors.
(e) The Company shall use commercially reasonable efforts to assure
that (i) any Nominee for election is included in the Board's slate of
nominees to the stockholders for the election of directors, and (ii) the
Nominee is included in the proxy statement prepared by management of the
Company in connection with soliciting proxies for every meeting of the
stockholders of the Company called with respect to the election of members of
the Board, and at every adjournment or postponement thereof, and on every
action or approval by written consent of the stockholders of the Company or
the Board with respect to the election of members of the Board.
(f) At the expiration of the term of a director who is a Nominee
designated by the Investor, the Investor shall be entitled to designate that
Nominee or an alternative Nominee for election to the Board for the following
term.
(g) If a vacancy occurs because of the death, disability,
disqualification, resignation or removal of a Nominee (including by virtue
of a removal of a Nominee at the discretion of the Investor), the
Investor shall be entitled, at any time within sixty (60) days of such
vacancy, to nominate such person's successors in accordance with this
Agreement, and the Board shall fill the vacancy with such successor Nominee
by appointment. The successor Nominee shall be appointed to a term expiring
at the next election of directors.
(h) If a Nominee is not nominated or elected to the Board because of
the Nominee's death, disability, disqualification, withdrawal as a nominee
or for other reason is unavailable or unable to serve on the Board, the
Investor shall be entitled to designate another Nominee.
(i) Notwithstanding anything to the contrary contained herein, at
such time as the Investor's Ownership Percentage is less than five percent
(5%) the rights of the Investor under this Section 2 to nominate any Nominee
shall terminate automatically and cease to have any further force or effect.
3. Limitation on Company Obligations. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to cause to be
appointed to the Board, nominated for election to the Board or recommend to
the stockholders the election of any Nominee (i) who fails to submit to the
Company on a timely basis such questionnaires as the Company may reasonably
require of its directors generally and such other information as the Company
may reasonably request in connection with the preparation of its filings
under the Securities Laws, or (ii) the Board or the Nominating Committee (and
any successor thereto performing the nominating and governance committee
functions of the Board) determines in good faith, after consultation with
outside legal counsel, that such action would constitute a breach of
applicable law or result in the Common Stock becoming ineligible for listing
on any Trading Market; provided, however, that upon the occurrence of either
(i) or (ii) above, the Company shall promptly notify the Investor of the
occurrence of such event and use commercially reasonable efforts to permit
the Investor to provide an alternate Nominee sufficiently in advance of any
Board action, meeting of the stockholders called or written action of
stockholders with respect to such election of Nominees, and the Company shall
use commercially reasonable efforts to perform its obligations under Section
2(e) with respect to such alternate Nominee (provided that if the Company
provides at least thirty (30) days advance notice of the occurrence of any
such event such alternative Nominee must be designated by the Investor not
less than thirty (30) days in advance of any Board action, notice of meeting
of the stockholders or written action of stockholders with respect to such
election of Nominees). The Company shall use commercially reasonable efforts
to perform its obligations under Section 2(e) with respect to such alternate
Nominee, provided that in no event shall the Company be obligated to
postpone, reschedule or delay any scheduled meeting of the stockholders with
respect to such election of Nominees.
4. Prohibition against Circumvention by the Company. At any time
that the Investor shall have any nomination rights under Section 2, the
Company shall not take any action, including making or recommending any
amendment to the Articles of Incorporation or the Bylaws that could
reasonably be expected to adversely affect the Investor's rights under
this Agreement, without the prior written consent of the Investor.
5. Amendment and Waiver. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by law.
6. Benefit of Parties. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except as otherwise expressly provided herein,
nothing herein contained shall confer or is intended to confer on any third
party or entity that is not a party to this Agreement any rights under this
Agreement.
7. Headings. Headings are for ease of reference only and shall not
form a part of this Agreement.
8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be construed in accordance with the laws of State of
Indiana, without regard to the principles of conflicts of laws. The parties
further agree that any action between them shall be heard in and expressly
consent to the jurisdiction and venue of the state court sitting in Auburn,
Indiana and the federal court sitting in the City of Fort Xxxxx, Indiana for
the adjudication of any civil action asserted pursuant to this Agreement.
EACH OF THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES,
IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT EXECUTED OR
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE
OF CONDUCT OR COURSE OF DEALING IN WHICH THE INVESTOR AND THE COMPANY ARE
ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE INVESTOR TO
ENTER INTO THIS AGREEMENT.
9. Entire Agreement. This Agreement and any other writing signed by
authorized representatives of each of the parties after the date hereof
that specifically references this Agreement, constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both
written and oral between the parties with respect to the subject matter
hereof.
10. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when each party shall have received a
counterpart hereof signed by each of the other parties. An executed copy or
counterpart hereof delivered by email or facsimile shall be deemed an
original instrument.
11. Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other Persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
law.
12. Specific Performance. The parties hereto agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement or to
enforce specifically the performance of the terms and provisions, in
addition to any other remedy to which they are entitled at law or in equity.
13. Notices. All notices, requests and other communications to any
party or to the Company shall be in writing and shall be given via email and
overnight delivery service:
If to the Company:
Industrial Services of America, Inc.
0000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Email: xxxxxxx@xxxxxxxxx.xxx
With a copy to (which shall not constitute notice):
Xxxxx Xxxxx Xxxx LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
Email:xxxxxxx@xxxxxx.xxx
If to the Investor:
Recycling Capital Partners, LLC
000 X. Xxxxxxxx Xx.
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Manager
Email:xxxxxxx@xxxxxx.xxx
With a copy to (which shall not constitute notice):
Xxxxxxx & McNagny LLP
000 X. Xxxxx Xx.
Xxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Email: Xxx@xxxxxxxxxx.xxx
or to such other address and email addresses as such party or the
Company may hereafter specify for the purpose by notice to the other
parties and the Company. Each such notice, request or other communication
shall be effective when delivered at the address specified in this Section
13 during regular business hours.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Director
Designation Agreement on the day and year first above-written.
RECYCLING CAPITAL PARTNERS, LLC
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. RifkinTitle: Manager
INDUSTRIAL SERVICES OF AMERICA, INC.
By:/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Interim Chief Executive Officer
[Signature Page to Director Designation Agreement]
