EXHIBIT 10.34

Fifth Third Bank

 

PROMISSORY NOTE

 

______________________________________________________________________________

 

$2,000,000.00                                                                                                              
June __, 2006

 

            FOR VALUE RECEIVED, INDUSTRIAL SERVICES OF AMERICA, INC, a
corporation organized under the laws of the State of Kentucky and having a
principal place of business at 7100 Grade Lane, Louisville, Jefferson County,
Kentucky 40232 ("Borrower") hereby promises to pay to the order of FIFTH THIRD
BANK, a Michigan banking corporation ("Lender") the principal amount of Two
Million and 00/100 Dollars ($2,000,000.00), on July 27, 2011 ("Maturity Date"),
with interest at the Interest Rate (as defined below).

 

            Lender and Borrower have entered into that certain Loan and Security
Agreement dated as of June 27, 2006 (the "Loan Agreement"), pursuant to which
Lender has agreed to make the Loan to Borrower.  The Obligations of the Borrower
are secured by the Collateral as provided in the Loan Agreement and this Note
shall be entitled to the benefits of the Loan Agreement.  Capitalized terms used
herein and not otherwise defined shall have the meaning attributed thereto in
the Loan Agreement.

 

            As used herein, "Interest Rate" shall mean the percentage per annum
equal to six and 83/100 percent (6.83%); provided, however, if this note is not
funded by Lender on or before July 3, 2006, then (A) such Interest Rate is based
on an interest rate swap rate for a term most closely corresponding to the
maturity of this Note as quoted in the Federal Reserve Statistical H15 Release
(reported at www.federalreserve.gov/releases/H15/current) and (B) such Interest
Rate may be adjusted based upon a corresponding interest rate swap rate quoted
in such Release as in effect on the date the Loan is made.  Lender will provide
Borrower with notice of any such adjustment.  Interest shall be computed on the
basis of a year of 360 days for the actual number of days elapsed and shall
accrue on the outstanding principal amount hereunder from and including the date
each Advance is made to but excluding the date the entire principal amount
hereunder is paid in full.

 

            Except as otherwise provided in the Loan Agreement, principal and
interest due hereunder shall be payable in sixty (60) equal monthly installments
of $23,046.84 each on the 27th day of each calendar month commencing on the 27th
day of July, 2006, with the entire unpaid principal amount hereof due on the
Maturity Date.

 

            Except for a prepayment contemplated by Section 8 of the Loan and
Security Agreement following the occurrence of an Event of Loss, Borrower may
not prepay, in whole or in part, the principal outstanding hereunder; provided,
however, that from and after the first (1st) anniversary of the date the Loan is
made hereunder, Borrower may prepay, in whole but not in part, the principal
outstanding hereunder by paying to Lender such outstanding principal, together
with all accrued and unpaid interest thereon at the Interest Rate, plus, as
liquidated damages for the cost of making funds available to Borrower hereunder
and not as a penalty, a prepayment premium equal to the percent of such
outstanding principal set forth below corresponding to the date of such
prepayment:

 

            Date of Prepayment (from Date of Loan):               Premium

            On or before December 27, 2007                                 3.0%

            On or after December 28, 2007                                   
0.0%

 

            Upon the occurrence of an Event of Default, Lender shall have all
the rights and remedies specified in the Loan Agreement.

 

            Borrower waives presentment for payment, demand, notice of demand,
notice of nonpayment or dishonor, protest and notice of protest of this Note,
and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note.

 

            This Note shall be governed by and construed in accordance with the
laws of the State of Ohio.  Any judicial proceeding arising out of or relating
to this Note may be brought in any court of competent jurisdiction in Hamilton
County, Ohio and each of the parties hereto (i) accepts the nonexclusive
jurisdiction of such courts and any related appellate court and agrees to be
bound by any judgment rendered by any such court in connection with any such
proceeding and (ii) waives any objection it may now or hereafter have as to the
venue of any such proceeding brought in such court or that such court is an
inconvenient forum.  EACH OF THE BORROWER AND LENDER HEREBY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING ARISING OUT OF OR IN ANY WAY RELATING
TO THIS NOTE

 

            All notices delivered hereunder shall be made and delivered in
accordance with the terms of the Loan Agreement.

 

            Borrower acknowledges and agrees that time is of the essence with
respect to its performance under this Note.  Any failure of Lender to require
strict performance by Borrower or any waiver by Lender of any provision herein
shall not be construed as a consent or waiver of any provision of this Note. 
This Note shall be binding upon, and inure to the benefit of, the parties
hereto, their permitted successors and assigns; provided, however that Borrower
may not assign or transfer any of its rights, interest or obligations hereunder
without the prior written consent of Lender.

 

            Any provision of this Note which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability shall not
invalidate or render unenforceable such provision in any other jurisdiction. 
Captions are intended for convenience or reference only, and shall not be
construed to define, limit or describe the scope or intent of any provisions
hereof.

 

            IN WITNESS WHEREOF, the Borrower has executed this Note as of the
27th day of June, 2006.

 

                                                                       
BORROWER:

 

                                                                       
INDUSTRIAL SERVICES OF AMERICA, INC

 

 

 

                                                                        By: /s/
Alan Schroering

 

                                                                        Name:
Alan Schroering

 

                                                                        Title:
CFO

 

                                                                        June 29,
2006

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------