Exhibit 10.2

 

BB&T

LOAN AGREEMENT

 

                                                           

Account Number

 

This Loan Agreement (the "Agreement") is made this 11th day of February, 2009,
by and between BRANCH BANKING AND TRUST COMPANY, a North Carolina banking
corporation ("Bank"), and:

 

Industrial Services of America, Inc., a Florida corporation ("Borrower"), having
its chief executive office at 7100 Grade Lane in Louisville, Kentucky.

 

The Borrower has applied to Bank for and the Bank has agreed to make, subject to
the terms of this Agreement, the following loan(s) (hereinafter referred to,
singularly or collectively, if more than one, as "Loan");

 

Line of Credit ("Line of Credit") in the maximum principal amount not to exceed
$12,000,000 for the purpose of financing Borrower's acquisition of inventory and
equipment from Venture Metals, LLC and real estate at 3409 Camp Ground Road,
Jefferson County, Kentucky from Luca Investments, LLC, which shall be evidenced
by the Borrower's Promissory Note dated on or after the date hereof which shall
mature February 11, 2010, when the entire unpaid principal balance then
outstanding plus accrued interest thereon shall e paid in full.  Prior to
maturity or the occurrence of any event of Default hereunder and subject to any
Loan Base Report limitations, as applicable, the Borrower may borrow under the
Line of Credit through maturity.  The Line of Credit shall bear interest at the
rate set forth in any such Note evidencing all or any portion of the Line of
Credit, the terms of which are incorporated herein by reference.

 

Other Credit Relationship (collectively, "Other Credit Relationship"):  (a) in
the maximum principal amount not to exceed $10,000,000 outstanding at any time
pursuant to the terms and conditions of a loan agreement between Bank and
Borrower dated December 22, 2006 (the "2006 Revolver"), and (b) in the maximum
principal amount not to exceed $2,500,000 outstanding at any time pursuant to
the terms and conditions of the BB&T Bankcard Corporation Commercial Card Plan
Agreement for the purpose described in that agreement, dated December 8, 2003,
as the same has been amended from time to time, by and between Borrower and BB&T
Bankcard Corporation.

 

The promissory notes evidencing the Loan and/or the Other Credit Relationship
are referred to as the "Note(s)" and shall include all extensions, renewals,
modifications and substitutions thereof.  The Loan and/or the Other Credit
Relationship shall be secured by the some or all of the collateral described in
the security documents described below.

 

Additional terms, conditions and covenants of this Agreement are described in
Schedule DD, or other schedule attached hereto, the terms of which are
incorporated herein by reference.

 

Section 1 Conditions Precedent

 

The Bank shall not be obligated to make any disbursement of Loan proceeds until
all of the following conditions have been satisfied by proper evidence,
execution, and/or delivery to the Bank of the following items in addition to
this Agreement, all in force and substance satisfactory to the Bank and the
Bank's counsel in their sole discretion:

 

USA Patriot Act Verification Information:  Information or documentation,
including but not limited to the legal name, address, tax identification number,
driver's license, and date of birth (if the Borrower is an individual) of the
Borrower sufficient for the Bank to verify the identity of the Borrower in
accordance with the USA Patriot Act.

Note(s):  The Note(s) evidencing the Loan(s) duly executed by the Borrower.

Security Agreement(s):  Security Agreement(s) in which Borrower and any other
owner (a "Debtor") of personal property collateral shall grant to Bank a first
priority security interest in the personal property specified therein.  (If Bank
has or will have a security interest in any collateral which is inferior to the
security interest of another creditor, Borrower must fully disclose to Bank any
and all prior security interests, and Bank must specifically approve any such
security interest which will continue during the Loan.)

UCC Financing Statements:  Acknowledged copies of UCC Financing Statements duly
filed in Borrower's or other owner's state of incorporation, organization or
residence, and in all jurisdictions necessary, or in the opinion of the Bank
desirable, to perfect the security interests granted in the Security
Agreement(s), and certified copies of Information Requests identifying all
previous financing statements on record for the Borrower or other owner, as
appropriate from all jurisdictions indicating that no security interest has
previously been granted in any of the collateral described in the Security
Agreement(s), unless prior approval has been given by the Bank.

Authorization and Certificate:  An Authorization and Certificate executed by
each Debtor under which such Debtor authorizes Bank to file a UCC Financing
Statement describing collateral owned by such Debtor.

Corporate Resolution:  A Corporate Resolution duly adopted by the Board of
Directors of the Borrower authorizing the execution, delivery, and performance
of the Loan Documents on or in a form provided by or acceptable to Bank.

Articles of Incorporation:  A copy of the Articles of Incorporation and all
other charter documents of the Borrower, all filed with and certified by the
Secretary of State of the State of the Borrower's incorporation.

By-Laws:  A copy of the By-Laws of the Borrower, certified by the Secretary of
the Borrower as to their completeness and accuracy.

Certificate of Incumbency:  A certificate of the Secretary of the Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign the Loan Documents.

Certificate of Existence:  A certification of the Secretary of State (or other
government authority) of the State of the Borrower's Incorporation or
Organization as to the existence or good standing of the Borrower and its
charter documents on file.

Opinion of Counsel:  An opinion of counsel for the Borrower satisfactory to the
Bank and the Bank's counsel.

 

Additional Documents:  Receipt by the Bank of other approvals, opinions, or
documents as the Bank may reasonably request.

 

Section 2 Representations and Warranties

 

The Borrower and Guarantor(s) represent and warrant to Bank that:

2.01.  Financial Statements.  The balance sheet of the Borrower and its
subsidiaries, if any, and the related Statements of Income and Retained Earnings
of the Borrower and its subsidiaries, the accompanying footnotes together with
the accountant's opinion thereon, and all other financial information previously
furnished to the Bank, are true and correct and fairly reflect the financial
condition of the Borrower and its subsidiaries as stated therein has not changed
materially and adversely since the date thereof.  Each Guarantor further
represents and warrants that all financial statements provided by such Guarantor
to Bank concerning such Guarantor's financial condition are true and correct and
fairly represent such Guarantor's financial condition as of the dates thereof.

2.02.  Name, Capacity and Standing.  The Borrower's exact legal name is
correctly stated in the initial paragraph of the Agreement.  If the Borrower
and/or any Guarantor is a corporation, general partners, limited partnership,
limited liability partnership, or limited liability company, each warrants and
represents that it is duly organized and validly existing under the laws of its
respective state of incorporation or organization; that it and/or its
subsidiaries, if any, are qualified and in good standing in every other state in
which the nature of their business shall require such qualification, and are
each duly authorized by their board of directors, general partners or
member/manager(s), respectively, to enter into and perform the obligations under
the Loan Documents.

2.03.  No Violation of Other Agreements.  The execution of the Loan Documents,
and the performance by the Borrower, by any and all pledgors (whether the
Borrower or other owners of collateral property securing payment of the Loan
(hereinafter sometimes referred to as the "Pledgor")) or by the Guarantor(s)
thereunder will not violate any provision, as applicable, of its articles of
incorporation, by-laws, articles of organization, operating agreement, agreement
of partnership, limited partnership or limited liability partnership, or, of any
law, other agreement, indenture, note, or other instrument binding upon the
Borrower, Pledgor or Guarantor(s), or give cause for the acceleration of any of
the respective obligations of the Borrower or Guarantor(s).

2.04.  Authority.  All authority from and approval by any federal, state or
local governmental body, commission or agency necessary to the making, validity,
or enforceability of this Agreement and the other Loan Documents has been
obtained.

2.05.  Asset Ownership.  The Borrower and each Guarantor have good and
marketable title to all of the properties and assets reflected on the balance
sheets and financial statements furnished to the Bank, and all such properties
and assets are free and clear of mortgages, deeds of trust, pledges, liens, and
all other encumbrances except as otherwise disclosed by such financial
statements.  In addition, each other owner of collateral has good and marketable
title to such collateral, free and clear of any liens, security interests and
encumbrances, except as otherwise disclosed to Bank.

2.06.  Discharge of Liens and Taxes.  The Borrower and its subsidiaries, if any,
and each Guarantor have filed, paid, and/or discharged all taxes or other claims
which may become a lien on any of their respective properties or assets,
excepting to the extent that such items are being appropriately contested in
good faith and for which an adequate reserve (in an amount acceptable to Bank)
for the payment thereof is being maintained.

2.07.  Regulation U.  None of the Loan proceeds shall be used directly or
indirectly for the purpose of purchasing or carrying any margin stock in
violation of the provisions of Regulation U of the Board of Governors of the
Federal Reserve System.

2.08.  ERISA.  Each employee benefit plan, as defined by the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained by the Borrower or
by any subsidiary of the Borrower or Guarantor(s) meets, as of the date hereof,
the minimum funding standards of Section 302 of ERISA, all application
requirements of ERISA and of the Internal Revenue Code of 1986, as amended, and
no "Reportable Event" nor "Prohibited Transaction" (as defined by ERISA) has
occurred with respect to any such plan.

2.09.  Litigation.  There is no claim, action, suit or proceeding pending,
threatened or reasonably anticipated before any court, commission,
administrative agency, whether State or Federal, or arbitration which will
materially adversely affect the financial condition, operations, properties, or
business of the Borrower or its subsidiaries, if any, or the Guarantor(s), or
the ability of the Borrower or the Guarantor(s) to perform their obligations
under the Loan Documents, except as set forth on Exhibit A attached hereto and
incorporated herein by reference.

2.10.  Other Agreements.  The representations and Warranties made by Borrower to
Bank in the other Loan Documents are true and correct in all respects on the
date hereof.

2.11.  Binding and Enforceable.  The Loan Documents, when executed, shall
constitute valid and binding obligations of the Borrower and Guarantors
respectively, the execution of such Loan Documents has been duly authorized by
the parties thereto, and are enforceable in accordance with their terms, except
as may be limited by bankruptcy, insolvency, moratorium, or similar laws
affecting creditors' rights generally.

2.12.  Commercial Purpose.  The Loan(s) are not "consumer transactions", as
defined in the Kentucky Uniform Commercial Code, and none of the collateral was
or will be purchased or held primarily for personal, family or household
purposes.

 

Section 3  Affirmative Covenants

 

The Borrower covenants and agrees that from the date hereof and until payment in
full of all indebtedness and performance of all obligations owed under the Loan
Documents, Borrower shall:

3.01.  Maintain Existence and Current Legal Form of Business.  (a) Maintain its
existence and good standing in the state of its incorporation or organization,
(b) maintain its current legal form of business indicated above, (c) as
applicable, qualify and remain qualified as a foreign corporation, general
partnership, limited partnership, limited liability partnership or limited
liability company in each jurisdiction in which such qualification is required;
(d) maintain its current management and ownership; and (e) in the event of its
merger with any other entity, be the surviving entity.

3.02. Maintain Records.  Keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Borrower.

3.03.  Maintain Properties.  Maintain, keep and preserve all of its properties
(tangible and intangible) including the collateral necessary or useful in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted.

3.04.  Conduct of Business.  Continue to engage in an efficient, prudent, and
economical manner in a business of the same general type as now conducted.

3.05.  Maintain Insurance.  Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or a similar
business, and business interruption insurance if required by Bank, which
insurance may provide for reasonable deductible(s).  The Bank shall be named as
loss payee (Long Form) on all policies which apply to the Bank's collateral, and
the Borrower shall deliver certificates of insurance at closing evidencing
same.  All such insurance policies shall provide, and the certificates shall
state, that no policy will be terminated without 20 days prior written notice to
Bank.

3.06.  Comply with Laws.  Comply in all respects with all applicable laws,
rules, regulations, and orders, including, without limitation, paying before the
delinquency of all taxes, assessments, and governmental charges imposed upon it
or upon its property, and all Environmental Laws.

3.07.  Right of Inspection.  Permit the officers and authorized agents of the
Bank, at any reasonable time or times in the Bank's sole discretion, to examine
and make copies of the records and books of account of, to visit the properties
of the Borrower, and to discuss such matters with any officers, directors,
managers, members or partners, limited or general of the Borrower, and the
Borrower's independent accountant as the Bank deems necessary and proper.
3.08.  Reporting Requirements.  Furnish to the Bank.

Quarterly Financial Statements:  As soon as available and not more than twenty
(20) days after the end of each quarter, balance sheets, statements of income,
cash flow, and retained earnings for the period ended and a statement of changes
in the financial position, all in reasonable detail, and all prepared in
accordance with GAAP consistently applied and certified as true and correct by
an officer, general partner or manager (or member(s)) of the Borrower, as
appropriate.

Annual Financial Statements:  As soon as available and not more than one hundred
twenty (120) days after the end of each fiscal year, balance sheets, statements
of income, and retained earnings for the period ended and a statement of changes
in the financial position, all in reasonable detail, and all prepared in
accordance with GAAP consistently applied.  The financial statements must be of
the following quality or better:  Audited.

Loan Base Report:  On or before the fifteenth (15th) day of each month, a Loan
Base Report in a form acceptable to Bank signed by the president, chief
financial officer, general partner or manager (or member(s)) of the Borrower, as
appropriate.

Notice of Litigation:  Promptly after the receipt by the Borrower, or by any
Guarantor of which Borrower has knowledge, of notice or complaint of any action,
suit, and proceedings before any court or administrative agency of any type
which, if determined adversely, could have a material adverse effect on the
financial condition, properties or operations of the Borrower or Guarantor, as
appropriate.

Tax Returns:  As soon as available each year, complete copies (including all
schedules) of all state and federal tax returns filed by Borrower.

Notice of Default:  Promptly upon discovery or knowledge thereof, notice of the
existence of any event of default under this Agreement or any other Loan
Documents.

USA Patriot Act Verification Information:  Information or documentation,
including but not limited to the legal name, address, tax identification number,
driver's license, and date of birth (if the Borrower is an individual) of the
Borrower sufficient for the Bank to verify the identity of the Borrower in
accordance with the USA Patriot Act.  Borrower shall notify Bank promptly of any
change in such information.

Other Information:  Such other information as the Bank may from time to time
reasonably request including, but not limited to, the following information: 
annual corporate income tax returns (including all schedules) for K&R, LLC and
K&R Resources, LLC.

3.09.  Deposit Accounts.  Maintain substantially all of its demand
deposit/operating accounts with the Bank.

3.10  Affirmative Covenants from other Loan Documents.  All affirmative
covenants contained in any Deed of Trust, Security Agreement, Assignment of
Leases and Rents, or other security document executed by the Borrower which are
described in paragraph 2 hereof are hereby incorporated by reference herein.

3.11  Indemnification.  Borrower agrees to indemnify and hold harmless Bank from
and against any and all claims, costs, damages, liabilities and expenses which
may be incurred by or asserted against Bank in connection with any proceeding
arising out of or related to this Loan or the Other Credit Relationship.

3.12  Filings.  Borrower represents and warrants that its standard practice,
with regard to equipment owned by Borrower and leased to its customers, is to
provide public notice of the ownership of the equipment and existence of said
leases by filing UCC Financing Statements for items so leased.  Borrower agrees
to follow said practice for the term of this Agreement as to all its equipment
so leased, regardless of whether said equipment is collateral for the Loan or
any other indebtedness owing Bank by Borrower.

 

Section 4 Guarantor(s) Covenants

N/A

 

Section 5 Financial Covenants

The Borrower covenants and agrees that from the date hereof until payment in
full of all indebtedness and the performance of all obligations under the Loan
Documents, the Borrower shall at all times maintain the following financial
covenants and ratios all in accordance with GAAP unless otherwise specified:

Minimum Tangible Net Worth.  A minimum tangible net worth of not less than
$6,000,000.00 as of December 31, 2005, and increasing annually by 50% of all net
income, plus 100% of all new equity, minus $0 for net losses.  Tangible Net
Worth is defined as net worth, plus obligations contractually subordinated to
debts owed to Bank, minus goodwill, contract rights, and assets representing
claims on stockholders or affiliated entities.

EBITDA Ratio.  Ratio of EBITDA to the preceding twelve (12) months interest
expense plus the projected maturities of long-term debt for the next succeeding
twelve months on a rolling basis, of not less than 1.25:1.00, to be measured
annually.

Debt/Tangible Net Worth.  Maximum of 4.00:1.00, to be measured annually.

Limitation on Loans and Advances to Owners.  Not to exceed $500,000 per calendar
year.

 

Section 6  Negative Covenants

 

The Borrower covenants and agrees that from the date hereof and until payment in
full of all indebtedness and performance of all obligations under the Loan
Documents, the Borrower shall not, without the prior written consent of the
Bank:

6.01.  Liens.  Create, incur, assume, or suffer to exist any lien upon or with
respect to any of Borrower's properties, or the properties of any Pledgor
securing payment of the Loan, now owned or hereafter acquired, except:

(a)   Liens and security interests in favor of the Bank;

(b)   Liens for taxes not yet due and payable or otherwise being contested in
good faith and for which appropriate reserves are maintained;

(c)   Other liens imposed by law not yet due and payable, or otherwise being
contested in good faith and for which appropriate reserves are maintained;

(d)   Liens securing obligations to any creditor other than Bank not to exceed
$1,000,000 per year;

(e)   purchase money security interests on any property hereafter acquired,
provided that such lien shall attach only to the property acquired.

(f)   The Permitted Liens, as set forth on Exhibit B attached hereto and
incorporated herein by reference.

6.02. Debt.  Create, incur, assume, or suffer to exist additional funded debt,
except:

(a)   Debt to the Bank;

(b)   Debt outstanding on the date hereof and shown on the most recent financial
statements submitted to the Bank;

(c)   Accounts payable to trade creditors incurred in the ordinary course of
business, not to exceed $1,000,000.

(d)   Debt secured by purchase money security interests secured only by the
asset purchased, not to exceed $1,000,000.

(e)   Debt to any creditor other than Bank not to exceed $1,000,000 per year.

6.03.  Change of Legal Form of Business or management; Purchase of Assets. 
Change Borrower's name or the legal form of Borrower's business as shown above,
whether by merger, consolidation, conversion or otherwise, or change its current
management, and Borrower shall not purchase all or substantially all of the
assets or business of any Person.

6.04.  Leases.  Create, incur, assume, or suffer to exist any leases, except:

(a)   Leases outstanding on the date hereof and showing on the most recent
financial statement submitted to the Bank;

(b)   Operating Leases for machinery and equipment which do not in the aggregate
require payments in excess of $N/A in any fiscal year of the Borrower.

6.05.  Dividends or Distributions; Acquisition of Capital Stock or Other
Ownership Interests.  Declare or pay any dividends or distributions of any kind,
or purchase or redeem, retire, or otherwise acquire any of Borrower's capital
stock or other ownership interests, now or hereafter outstanding, in excess of
$N/A in any fiscal year of the Borrower.

6.06.  Salaries.  Salaries and any other cash compensation to
owners/officers/partners/managers shall be limited as follow:  N/A.

6.07.  Guaranties.  Assume, guarantee, endorse, or otherwise be or become
directly or contingently liable for obligations of any Person, except guaranties
by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.

6.08  Loans.  Loans to directors, officers, partners, members, shareholders,
subsidiaries and affiliates shall be limited as follows:  Limited to $500,000 in
the aggregate per year.  All such loans to directors, officers, partners,
members, shareholders, subsidiaries and affiliates shall be subordinated to the
Loan pursuant to subordination agreements in force and substance satisfactory to
Bank.

6.09.  Disposition of Assets.  Sell, lease, or otherwise dispose of any of its
assets or properties except in the ordinary and usual course of its business.

6.10.  Transfer of Ownership.  If Borrower is a corporation, 9a) issue, transfer
or sell any new class of stock, or (b) issue, transfer or sell, in the
aggregate, from its treasury stock and/or currently authorized but unissued
shares of any class of stock, more than 10% of the total number of all such
issued and outstanding shares as of the date of this Agreement.  If Borrower is
a general partnership, limited partnership, limited liability partnership or
limited liability company, issue, transfer or sell any interest in Borrower.

6.11.  Negative Covenants from other Loan Documents.  All negative covenants
contained in any Mortgage, Deed of Trust, Security Agreement, Assignment of
Leases or Rents, or other security document executed by the Borrower which are
described in paragraph 2 hereof are hereby incorporated by reference herein.

 

Section 7 Hazardous Materials and Compliance with Environmental Laws

 

7.01.  Investigation.  Borrower hereby certifies that it has exercised due
diligence to ascertain whether its real property is or has been affected by the
presence of asbestos, oil, petroleum or other hydrocarbons, urea formaldehyde,
PCBs, hazardous or nuclear waste, toxic chemicals and substances, or other
hazardous materials (collectively, "Hazardous Materials"), as defined in
applicable Environmental Laws.  Provided, however, the foregoing certification
shall not apply to the real estate to be acquired by Borrower from Luca
Investments, LLC at 3409 Camp Ground Road, Jefferson County, Kentucky.  Borrower
represents and warrants that, to Borrower's knowledge, there are no such
Hazardous Materials contaminating its real property, nor, to Borrower's
knowledge, have any such materials been released on or stored on or improperly
disposed of on its real property during its ownership, occupancy or operation
thereof.  Borrower hereby agrees that, except in strict compliance with
applicable Environmental Laws, it shall not knowingly permit any release,
storage or contamination as long as any indebtedness or obligations to Bank
under the Loan Documents remains unpaid or unfulfilled.  In addition, Borrower
does not have or use any undergrounds storage tanks on any of its real property
which are not registered with the appropriate Federal and/or State agencies and
which are not properly equipped and maintained in accordance with all
Environmental Laws. Provided, however, the foregoing representation relative to
storage tanks shall not apply to 3409 Camp Ground Road, Jefferson County,
Kentucky.  If requested by Bank, Borrower shall provide Bank with all necessary
and reasonable assistance required for purposes of determining the existence of
Hazardous Materials on Borrower's real property.

7.02. Compliance.  Borrower agrees to comply with all applicable Environmental
Laws, including, without limitation, all those relating to Hazardous Materials. 
Borrower further agrees to provide Bank, and all appropriate Federal and State
authorities, with immediate notice in writing of any release of Hazardous
Materials on any of its real property and to pursue diligently to completion all
appropriate and/or required remedial action in the event of such release.

 

Section 8  Events of Default

 

The following shall be "Events of Default" by Borrower or any Guarantor:

8.01.  The failure to make prompt payment of any installment of principal or
interest on any of the Note(s) when due or payable.

8.02.  Should any representation or warranty made in the Loan Documents prove to
be false or misleading in any material respect.

8.03.  Should any report, certificate, financial statements, or other document
furnished prior to the execution of or pursuant to the terms of this Agreement
prove to be false or misleading in any material respect.

8.04.  Should the Borrower or any Guarantor default on the performance of any
other obligation of indebtedness when due or in the performance of any
obligation incurred in connection with money borrowed.

8.05.  Should the Borrower, any Guarantor or any Pledgor breach any covenant,
condition, or agreement made under any of the Loan Documents.

8.06.  Should a custodian be appointed for or take possession of any or all of
the assets of the Borrower or any Guarantor, or should the Borrower or any
Guarantor either voluntarily or involuntarily become subject to any insolvency
proceeding, including becoming a debtor under the United States Bankruptcy Code,
any proceeding to dissolve the Borrower or any Guarantor, any proceeding to have
a receiver appointed, or should the Borrower or any Guarantor make an assignment
for the benefit of creditors, or should there be an attachment, execution, or
other judicial seizure of all or any portion of the Borrower's or any
Guarantor's assets, including an action or proceeding to seize any funds on
deposit with the Bank, and such seizure is not discharged within 30 days.

8.07.  Should final judgment for the payment of money be rendered against the
Borrower or any Guarantor which is nto covered by insurance and shall remain
undischarged for a period of 30 days unless such judgment or execution thereon
be effectively stayed.

8.08.  Upon the death of, or termination of existence of, or dissolution of, any
Borrower, Pledgor or Guarantor.

8.09.  Should the Bank in good faith deem itself, its liens and security
interests, if any, or any debt thereunder unsafe or insecure, or should the Bank
believe in good faith that the prospect of payment of any debt or other
performance by the Borrower or any Guarantor is impaired.

8.10.  Should any lien or security interest granted to Bank to secure payment of
the Note(s) terminate, fail for any reason to have the priority agreed to by
Bank on the date granted, or become unperfected or invalid for any reason.

 

Section 9  Remedies Upon Default

 

Upon the occurrence of any of the above listed Events of Default, the Bank may
at any time thereafter, at its option, take any or all of the following actions,
at the same or at different times:

9.01.  Declare the balance(s) of the Note(s) to be immediately due and payable,
both as to principal and interest, without presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived by Borrower and
each Guarantor, and such balance(s) shall accrue interest at the Default Rate as
provided herein until paid in full;

9.02.  Require the Borrower or Guarantor(s) to pledge additional collateral to
the Bank from the Borrower's or any Guarantor's assets and properties, the
acceptability and sufficiency of such collateral to be determined in the Bank's
sole discretion;

9.03.  Take immediate possession of and foreclose upon any or all collateral
which may be granted to the Bank as security for the indebtedness and
obligations of Borrower or any Guarantor under the Loan Documents;

9.04.  Exercise any and all other rights and remedies available to the Bank
under the terms of the Loan Documents and applicable law, including the Kentucky
Uniform Commercial Code;

9.05.  Any obligation of the Bank to advance funds to the Borrower or any other
Person under the terms of under the Note(s) and all other obligations, if any,
of the Bank under the Loan Documents shall immediately cease and terminate
unless and until Bank shall reinstate such obligation in writing.

 

Section 10  Miscellaneous Provisions

 

10.01.  Definitions.

            "Availability" for the Line of Credit and the 2006 Revolver
collectively shall mean the lesser of (i) $22,000,000 or (ii) the Collateral
Loan Value shown on the Loan Base Report furnished by Borrower to Bank on or
before the fifteenth (15th) day of each month as long as this Agreement shall
remain in force.  The percentages of acceptable collateral, as defined by Bank,
which will be used to determine the Collateral Loan Value, shall be the
following (unless otherwise set forth in Schedule DD and/or DD-IFA hereto): 
Eligible Inventory - 35%; Eligible Accounts - 80%; Net Book Value of Eligible
Equipment (less the principal balance of any outstanding loans secured by the
Eligible Equipment) - 100%; Eligible Real Estate, being the real estate at 3409
Camp Ground Road, Jefferson County, Kentucky - 80%.  The aggregate Line of
Credit advances against Eligible Equipment shall not exceed at any time
$5,000,000.

            "Default Rate" shall mean a rate of interest equal to Bank's Prime
Rate plus five percent (5%) per annum (not to exceed the legal maximum rate)
from and after the date of an Event of Default hereunder which shall apply, in
the bank's sole discretion, to all sums owing, including principal and interest,
on such date.

            "Environmental Laws" shall mean all federal and state laws and
regulations which affect or may affect the Borrower's real property, including
without limitation the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Sections 9601 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. Sections 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Sections 1251 et seq.), the Cealn Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
260.1, et seq.), all such applicable environmental laws and regulations of the
State of Kentucky, as such laws and regulations may be amended from time to
time.

            "Loan Documents" shall mean this Agreement including any schedule
attached hereto, the "Note(s), the Security Agreement(s), all UCC Financing
Statements, and all other documents, certificates, and instruments executed in
connection therewith, and all renewals, extensions, modifications, substitutions
and replacements thereto and therefore.

            "Person" shall mean an individual, partnership, corporation, trust,
unincorporated organization, limited liability company, limited liability
partnership, association, joint venture, or a government agency or political
subdivision thereof.

            "GAAP" shall mean generally accepted accounting principles as
established by the Financial Account Standards Board or the American Institute
of Certified Public Accountants, as amended and supplemented from time to time.

            "Prime Rate"  shall mean the rate of interest per annum announced by
the Bank from time to time and adopted as its Prime Rate, which is one of
several rate indexes employed by the Bank when extending credit, and may not
necessarily be the Bank's lowest lending rate.

10.02.  Non-impairment.  If any one or more provisions contained in the Loan
Documents shall be held invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
therein shall not in any way be affected or impaired thereby and shall otherwise
remain in full force and effect.

10.03.  Applicable Law.  The Loan Documents shall be construed in accordance
with and governed by the laws of the Commonwealth of Kentucky.

10.04.  Waiver.  Neither the failure or any default on the part of the Bank in
exercising any right, power or privilege granted in the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise of any other right, power, or privilege
which may be provided by law.

10.05.  Modification.  No modification, amendment, or waiver of any provision of
any of the Loan Documents shall be effective unless in writing and signed by the
Borrower and Bank.

10.06.  Payment Amount Adjustment.  In the event that any Loan(s) referenced
herein has a variable (floating) interest rate and the interest rate increases,
Bank, at its sole discretion, may at any time adjust the Borrower's payment
amount(s) to prevent the amount of interest accrued in a given period to exceed
the periodic payment amount or to cause the Loan(s) to be repaid within the same
period of time as originally agreed upon.

10.07.  Stamps and Fees.  The Borrower shall pay all federal or state stamps,
taxes, or other fees or charges, if any are payable or are determined to be
payable by reason of the execution, delivery, or issuance of the Loan Documents
or any security granted to the Bank; and the Borrower and Guarantor agree to
indemnify and hold harmless the Bank against any and all liability in respect
thereof.

10.08.  Attorneys' Fees.  In the event the Borrower or any Pledgor or Guarantor
shall default in any of its obligations hereunder and the Bank believes it
necessary to employ an attorney to assist in the enforcement or collection of
the indebtedness of the Borrower to the Bank, to enforce the terms and
provisions of the Loan Documents, to modify the Loan Documents, or in the event
the Bank voluntarily or otherwise should become a party to any suit or legal
proceeding (including a proceeding conducted under the Bankruptcy Code), the
Borrower and Guarantors agree to pay the reasonable attorneys' fees of the Bank
and all related costs of collection or enforcement that may be incurred by the
Bank.  The Borrower and Guarantor shall be liable for such attorneys' fees and
costs whether or not any suit or proceeding is actually commenced.

10.09.  Bank Making Required Payments.  In the event Borrower shall fail to
maintain insurance, pay taxes or assessments, costs and expenses which Borrower
is, under any of the terms hereof or of any Loan Documents, required to pay, or
fail to keep any of the properties and assets constituting collateral free from
new security interests, liens, or encumbrances, except as permitted herein, Bank
may at its election make expenditures for any or all such purposes and the
amounts expended together with interest thereon at the Default Rate, shall
become immediately due and payable to Bank, and shall have benefit of and be
secured by the collateral; provided, however, the Bank shall be under no duty or
obligation to make any such payments or expenditures.

10.10.  Right of Offset.  Any indebtedness owing from Bank to Borrower may be
set off and applied by Bank on any indebtedness or liability of Borrower to
Bank, at any time and from time to time after maturity, whether by acceleration
or otherwise, and without demand or notice to Borrower.  Bank may sell
participations in or make assignments of any Loan made under this Agreement, and
Borrower agrees that any such participant or assignee shall have the same right
of setoff as is granted to the Bank herein.

10.11.  UCC Authorization.  Borrower authorizes Bank to file such UCC Financing
Statements describing the collateral in any location deemed necessary and
appropriate by Bank.

10.12.  Modification and Renewal Fees.  Bank may, at its option, charge any fees
for modification, renewal, extension, or amendment of any terms of the Note(s)
not prohibited by Kentucky law, and as otherwise permitted by law if Borrower is
located in another state.

10.13.  Conflicting Provisions.  If provisions of this Agreement shall conflict
with any terms or provisions of any of the Note(s) or Security Agreement(s), the
provisions of such Note(s) or Security Agreement(s), as appropriate, shall take
priority over any provisions in this Agreement.

10.14.  Notices.  Any notice permitted or required by the provisions of this
Agreement shall be deemed to have been given when delivered in writing to the
City Executive or any Vice President of the Bank at its offices in Louisville,
Kentucky, and to the President of the Borrower at its offices in Louisville,
Kentucky, when sent by certified mail and return receipt requested.

10.15.  Consent to Jurisdiction.  Borrower hereby irrevocably agrees that any
legal action or proceeding arising out of or relating to this Agreement may be
instituted in any Kentucky state court or federal court sitting in the state of
Kentucky, or in such other appropriate court and venue as bank may choose in its
sole discretion.  Borrower consents to the jurisdiction of such courts and
waives any objection relating to the basis for personal or in rem jurisdiction
or to venue which Borrower may now or hereafter have in any such legal action or
proceedings.

10.16.  WAIVER OF JURY TRIAL.  UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW,
THE UNDERSIGNED HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS OR CLAIMS
ARISING OUT OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS EXECUTED IN
CONNECTION HEREWITH OR OUT OF THE CONDUCT OF THE RELATIONSHIP BETWEEN THE
UNDERSIGNED AND BANK.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO MAKE
THE LOAN AND ENTER INTO THIS AGREEMENT.  FURTHER, THE UNDERSIGNED HEREBY CERTIFY
THAT NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK'S COUNSEL, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT SEEK TO ENFORCE THIS WAIVER OR RIGHT
TO JURY TRIAL PROVISION.  NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK'S
COUNSEL, HAS THE AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.

10.17.  Counterparts.  This Agreement may be executed by one or more parties on
any number of separate counterparts and all of such counterparts taken together
shall be deemed to constitute on and the same instrument.

10.18.  Entire Agreement.  The Loan Documents embody the entire agreement
between Borrower and Bank with respect to the Loans, and there are no oral or
parol agreements existing between Bank and Borrower with respect to the Loans
which are not expressly set forth in the Loan Documents.

 

 

[SIGNATURES ON FOLLOWING PAGE]

 

 

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

 

SIGNATURE PAGE

 

IN WITNESS WHEREOF, the Bank, Borrower and Guarantor(s) have caused this
Agreement to be duly executed under seal all on the date first above written.

 

Borrower is a Corporation:

 

WITNESS:

 

Industrial Services of America, Inc.

     

/s/ Sharon Hardy

By:

/s/ Harry Kletter

   

Harry Kletter

 

Title:

Chief Executive Officer and President

 

Additional Co-Borrowers or Guarantors:

 

WITNESS

           

(SEAL)

     

(SEAL)

     

(SEAL)

     

(SEAL)

 

 

 

 

 

WITNESS:

 

BRANCH BANKING AND TRUST COMPANY

     

/s/ Sharon Hardy

By:

/s/ Johnny L. Perry

   

Johnny L. Perry

 

Title:

Senior Vice President

     

WITNESS:

 

BB&T BANKCARD CORPORATION

     

/s/ Sharon Hardy

By:

/s/ Johnny L. Perry

       

Title:

Senior Vice President

 

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

 

BB&T
SCHEDULE "DD" TO BB&T LOAN AGREEMENT

 

This Schedule "DD" is an attachment to and a part of the Loan Agreement (the
"Loan Agreement") dated February 11, 2009, between Branch Banking and Trust
Company, BB&T Bankcard Corporation (collectively, "Bank") and Industrial
Services of America, Inc. ("Borrower").

 

DD-01.  Definitions.  In addition to the words and terms defined elsewhere in
this Schedule DD, the Loan Agreement and the Uniform Commercial Code of
Kentucky, as amended from time to time, (the "UCC") the following terms shall
have the following specified meanings:

 

(a)                Account Debtor.  Any Person obligated to Borrower on an
Account.

 

(b)               Account(s).  Any right to payment of a monetary obligation,
whether or not earned by performance, including without limitation any
receivable, contract right, note, draft, instrument, acceptance, chattel paper,
lease, or other writing or open account resulting from the sale, lease, license,
assignment or other disposal of property by Borrower, or from services rendered
or to be rendered by Borrower.

 

(c)                Advance Rate.  The percentage of the total value of Eligible
Accounts, Eligible Inventory, Eligible Equipment, Eligible Real Estate or Other
Collateral Bank will lend to Borrower, as set forth in Section DD.02.

 

(d)               Asset Based Lending Credit Line Sweep Service Agreement
Attachment.  That agreement between Bank and Borrower whereby Borrower agrees
that all remittances in payment of Accounts' shall be deposited in its
designated Operating Account and shall be administered and applied in accordance
with the ABL Credit Line Sweep Services Agreement Attachment.  This agreement is
to be read in conjunction with, and is a part of, the Treasury Services
Agreement and the Loan Agreement; and this Schedule DD.

 

(e)                Asset Based Sweep Services Attachment.  That agreement
between Bank and Borrower whereby Borrower agrees that all remittances in
payment of Accounts which are deposited to the Collateral Reserve Account will
be applied to the outstanding, Line of Credit, as well as other provisions of
the Loan Documents.  This agreement is to be read in conjunction with, and is
apart of, the Treasury Services Agreement, the Loan Agreement, and this Schedule
DD.

 

(f)                Audit.  Audit means those examinations on the premises of
Borrower or wherever books, records, or Collateral are located, however
maintained, including but not limited to the inspection of Inventory, and
standard testing of such books and records by Banks representatives, at any time
during normal business hours of Borrower, with or without prior notice to
Borrower from Bank, as provided in Section DD.06(b).

 

(g)               Availability.  The lesser of the Bank's Line of Credit or
Collateral Loan Value reduced by (i) the principal balance outstanding under the
Line of Credit, (ii) the Letter of Credit Exposure Reserve, and (iii) the
Availability Reserve.

 

(h)               Availability Reserve.  A reserve against Availability
determined by Bank in its sole discretion from time to time to reflect events,
conditions, contingencies or risks or other loans of Bank which without
limitation do or may affect the Collateral Loan Value, the business prospects of
Borrower or any Account Debtor, or the security interest of Bank, including
enforceability, perfection and the priority thereof.

 

(i)                 Bill and Hold.  An Account generated by the sale of goods
for which an invoice has been issued to the buyer, but the, goods represented by
such Account remain undelivered to the buyer and/or under the control of
Borrower or Borrower's representative.

 

(j)                 Collateral.  Collateral shall mean the assets and property
described in the Security Agreement including, without limitation, Borrower's
Accounts, Inventory and Other Collateral.

 

(k)               Contra Account.  An Account subject to offset, in the sole
discretion of Bank, by an Account Debtor of Borrower.

 

(l)                 Collateral Loan Value.  The aggregate value of the Advance
Rate as applied to the Eligible Accounts, the Advance Rate as applied to the
Eligible Inventory, the Advance Rate as applied to the Eligible Equipment, the
Advance Rate as applied to the Eligible Real Estate and the Advance Rate applied
to the value of Other Collateral, if any.

 

(m)             Collateral Reserve Account.  The demand deposit account
maintained with Bank by Borrower into which all proceeds of the Collateral shall
be deposited' and to which only Bank will have access.  On the date hereof, the
Collateral Reserve Account Number is N/A.

 

(n)               Cross Aging Rule.  Should any Account due Borrower from an
Account Debtor have 50% or more of their total aggregate Accounts aged in excess
of the Eligibility Period, then all Accounts from such Account Debtor shall be
deemed ineligible.

 

(o)               Eligible Account and/or Eligible Inventory and/or Eligible
Equipment and/or Eligible Real Estate.  An Eligible Account is an Account which
is not an Ineligible Account, as defined in Section DD.03 hereof, Eligible
Inventory is Inventory which is not ineligible Inventory, as defined in Section
DD.04 hereof; Eligible Equipment as defined in Section DD.02(d) hereof and
Eligible Real Estate shall mean that real estate owned; by Borrower at 3409 Camp
Ground Road, Jefferson County, Kentucky.

 

(p)               Eligibility Period.  The Eligibility Period for any Account
shall mean not more than 90 days from the original invoice date.

 

(q)               Fees.  Those fees which Borrower will pay to Bank in
conjunction with Bank's asset based lending services or any other fees
associated with the Line of Credit, whether or not actual loan obligations
exist, while' the Loan Agreement is in force.

 

(r)                 Foreign Accounts.  Any Account due from any Person located
outside the fifty states comprising' the United States of America and the
District of Columbia.

 

(s)                Ineligible Accounts and/or Ineligible Inventory.  Shall have
the meanings given in Sections DD.03 and DD.04 hereof.

 

(t)                 Inter-Company Account.  Any Account from any Account Debtor
with Borrower in any manner including, without limitation, as owner, member,
partner, shareholder, officer, director, employee, agent, or which is an
affiliate of Borrower.

 

(u)               Inventory.  Goods which are leased or held by Borrower for
sale or lease as lessor or furnished under a contract of service, and shall
include goods, finished goods, raw materials, work-in-process, and materials to
be used and/or consumed in a business.

 

(v)               Inventory Cap.  The maximum loan amount Bank may lend against
the Eligible Inventory, as set forth in Section DD.02(d).

 

(w)             Letter of Credit.  Any Letter of Credit issued by Bank on behalf
of Borrower, as Applicant; provided, however, inclusion of this definition shall
not imply, or be construed as, a commitment by Bank to issue any Letters of
Credit.

 

(x)               Letter of Credit Exposure Reserve.  At any given date, the
aggregate face amount of outstanding Letters of Credit on such date plus the
aggregate amount of drafts drawn under or purporting to be drawn under Letters
of Credit that have been paid by Bank and for which Bank has not been
reimbursed.

 

(y)               Line of Credit.  The amount of the Line of Credit approved by
Bank and set forth in the Loan Agreement.

 

(z)                Loan Base Report.  That report on Bank's standard form, or in
a form otherwise acceptable to Bank, to be prepared, signed, dated and delivered
by Borrower in accordance with Bank's instructions, and submitted to Bank by
Borrower at specified intervals and/or occasions, and detailing pertinent
information as regards Accounts and/or Inventory and/or Equipment and/or Real
Estate and/or Other Collateral, Reserves, Collateral Loan Value, outstanding
Line of Credit balance, and Availability.

 

(aa)            Lockbox Agreement.  That agreement on Bank's standard form, or
in a form otherwise acceptable to Bank, to be executed by Borrower relating to
the provision for lockbox services and requirements.

 

(bb)           Operating Account.  Operating Account shall mean the Borrower's
demand deposit account at any time with Bank, currently account number
5280498205.

 

(cc)            Other Collateral.  Collateral that shall be included in
Collateral Loan Value, other than Accounts, Inventory, Equipment and Real Estate
as specifically approved and determined by Bank in its sole discretion.

 

(dd)          Person.  Any individual, corporation, general or limited
partnership, limited liability company or partnership, limited liability limited
partnership, trust, unincorporated organization, association, joint venture, or
a state or federal government agency or political subdivision thereof.

 

(ee)            Proceeds.  Proceeds shall have the meaning given to it under the
UCC and shall include without limitation the collections and distributions of
Collateral, cash or non-cash.

 

(ff)             Reserves.  Aggregate deductions from the Collateral Loan Value
and/or Availability as determined by Bank from time to time, including, but not
limited to, Letter of Credit Exposure Reserve and the Availability Reserve.

 

DD-02.  Advance Rates/Advances/Prepayment. 

Bank agrees that the Advance Rates to be used to calculate the Collateral Loan
Value shall be:

 

(a)                80% against the Eligible Accounts.

(b)               80% against Eligible Real Estate.

(c)                Against the Eligible Inventory as follows:

0%       Finished Inventory

35%     Raw Materials Inventory

0%       Work in Process Inventory

0%       Other Inventory

 

(d)               100% against the net book value (updated at least annually as
of Borrower's fiscal year end) of Eligible Equipment, less the principal balance
of any loans other than those evidenced by the Note(s) and secured by the
Equipment.  The aggregate Line advances against Eligible Equipment shall not
exceed at any time $5,000,000.  Eligible Equipment is defined as all recycling
equipment' and all other equipment of Borrower (except Borrower's Rental Fleet
Equipment), which has not teen fully depreciated and which is in service as of
the date on which the relevant Loan Base Report is submitted.  Rental Fleet
Equipment is defined as all Equipment held by Borrower in its rental fleet, and
consisting of Equipment which is currently leased by Borrower to third party
lessees, or held by Borrower for lease to third patty lessees.

 

Inventory values will not exceed the lower of cost or market and, if applicable,
will be reduced by the LIFO reserve.  The aggregate loan advances against
Eligible Inventory shall not exceed at any time $N/A (the "Inventory Cap").

 

Bank reserves the right, upon notice, in its sole discretion, to amend the
Eligibility Period or Reserves at any time; and, the Loan Base Report, upon
receipt by Bank, shall be subject to Bank's satisfactory review, acceptance or
correction.

 

Bank agrees to (i) make advances under the Line of Credit automatically, without
any request by Borrower upon the presentment of items drawn against Borrower's
operating account, provided the Availability, as shown upon a current acceptable
Loan Base Report as required herein, is sufficient to cover such advances, or
(ii) fund the operating account based on request(s)) for advances from Borrower
orally or in writing provided the Availability is sufficient to cover such
advances.  Borrower shall submit a completed Loan Base Report to Bank as
required, so long as the Line of Credit shall exist, regardless of the
outstanding balance thereof.  It is further provided that Borrower releases Bank
from any liability or obligation for and agrees to indemnify and hold Bank
harmless from and against any loss, cost, damage or expense (including Bank's
reasonable attorneys' fees) incurred or suffered as a, result of the payment by
Bank of any item drawn against Borrower's checking account that is subsequently
determined to have been improperly paid for any reason, except for the gross
negligence or willful misconduct of Bank.  Bank also reserves the right, upon
notice, in its sole discretion, to discontinue the automatic payment of items
presented to Bank, and to require written or oral advance requests to be made by
Borrower.

 

Bank is authorized (without any further request from Borrower) to advance; on
behalf of Borrower as a Loan all sums required to be paid by Borrower to Bank in
respect of any Letter of Credit pursuant to the terms of the Application for
Letter of Credit (including all fees associated therewith), but Bank shall have
no obligation to make such a Loan.

 

Bank may debit the amount of any payment due under the Loan Agreement and this
Schedule DD from the Operating Account, any deposit account or loan account of
Borrower maintained with Bank, but Bank shall have no obligation to do so.

 

If the principal balance of the, Line of Credit exceeds the lesser of the Line
of Credit or the Collateral Loan Value reduced by the Reserves, Borrower shall
immediately prepay the Line of Credit to the extent necessary to reduce such
excess; and, should at any time the principal balance of the Line of Credit
exceed the approved amount of the Line of Credit, Borrower shall immediately pay
such excess to Bank.

 

DD-03.  Ineligible Accounts. 

            Ineligible Accounts shall include the following:

(a)                The amount of any Account outside of the Eligibility Period.

(b)               Any Account which is a Contra Account.

(c)                Any Account subject to the Cross Aging Rule.

(d)               Any Inter-Company Account.

(e)                Any Foreign Account.

(f)                Any Account representing a Bill and Hold or similar
arrangement.

(g)               Any Account due from any branch, agency, or political
subdivision of the State or Federal Government, including without limitation,
any municipality, county, or board for which the proper Assignment of Claims
form, governmental consents, approvals, or Notice of Assignment form have not
been fully executed or warrant issued for payment thereof, unless otherwise
expressly approved by Bank in writing.

(h)               Any Account due from any government agency which, by contract,
precludes and/or prohibits the assignment of such Account.

(i)                 Any Account which, at the discretion of Bank, is deemed
doubtful for collection for any reason, including but not limited to, those
involving disputes, returns, credit worthiness, legal proceedings, whether in
process, pending or threatened, conditional payments, is not free of all liens,
encumbrances, charges, rights and interest except those in favor of Bank; or
represent deposits or progress billings, or are not payable in U.S. Dollars.

(j)                 That portion of Accounts due from an Account Debtor which is
in excess of N/A percent (N/A%) of Borrower's aggregate dollar amount of all
outstanding Accounts.

(k)               That portion of Accounts which represent a net credit balance
after excluding Account amounts within the Eligibility Period.

(l)                 Any Chattel Paper unless expressly made an Eligible Account
in writing by Bank.

 

            Bank reserves the right, upon notice, in its sole discretion, to
amend the terms of the Ineligible Accounts at any time.

 

DD-04.  Ineligible Inventory. 

Ineligible Inventory shall include the following:

(a)                Inventory not legally owned by Borrower, including but not be
limited to, goods on consignment from any supplier, vendor, and/or individual,
or goods on demonstration and/or for trial, and not subject to the first lien
priority security interest in favor of Bank.

(b)               Inventory not in new and/or salable condition, including but
not limited to, damaged goods, goods used by Borrower and/or potential buyers,
goods with missing components/parts and not in a whole condition.

(c)                Inventory which has been held by Borrower more than N/A
months without being sold and/or leased.

(d)               Inventory representing work-in-process unless authorized by
Bank pursuant to DD.02(c).

(e)                Inventory deemed by Bank, at its sole discretion, to cause
and/or represent unusual danger to the health and/or safety of individual(s)
and/or the environment.

(f)                inventory which violates any federal law and/or laws of the
city, county, or state where the goods are stored.

(g)               Inventory of which Borrower is the legal owner but which is
being stored and/or housed at a location other than the place of business of
Borrower.

(h)               Inventory deemed otherwise ineligible by Bank in its sole
discretion.

(i)                 Inventory subject to a security interest, lien or other
encumbrance in favor of any other Person.

            Bank reserves the right, upon notice, in its sole discretion, to
amend the terms of the Ineligible Inventory at anytime.

 

DD-05.  Proceeds of Collateral and Application or Proceeds.  (Check either (b)
or (c); and (a) if applicable.)

[  ]  (a)    Borrower shall, execute a Lockbox Agreement with Bank: and shall
notify, or cause to be notified, all Account Debtors to forward all remittances
to the lockbox in accordance with such Lockbox Agreement.  Customer shall pay
all costs of such lockbox, including set up and administration thereof.

[  ]  (b)    Borrower agrees to deposit all Proceeds of the Collateral in a
Collateral Reserve Account at Bank.

[X] (c)    Borrower Agrees to deposit all Proceeds of the Collateral in an,
Operating Account at Bank.

 

Borrower agrees that all Proceeds shall be applied as described in the Loan
Documents (including the Asset-Based Sweep Services Attachment or the ABL Credit
Line Sweep Services Agreement Attachment, if applicable).  Bank reserves the
right, in its sole discretion, to require Borrower to implement DD.05 (b) and/or
DD.05 (a) immediately upon written notification from Bank.

 

DD-06.  Reporting / Audit. 

(a)                  Reporting.  (Check all that apply)

Borrower shall provide the following reports, financial statements,; list of
Account Debtors and addresses and other report to Bank upon execution hereof and
thereafter as indicated below:

Weekly

Annually

Month-End

 

[  ]

 

[X]

Loan Base Reports.  Loan Base Reports, prepared as of the end of each reporting
period.  Unless otherwise agreed: in writing by Bank, monthly Loan Base Reports
are required for all loans covered by this Agreement no later than 15 days
following each month-end.  If weekly Loan Base Reports are also required, sales
& cash receipts jot mats shall accompany each report.  The information on which
the weekly Loan Base, Report is based (the "as or' date on the Loan Base Report
form) shall be no more than three business days old when received by Bank.

   

[X]

Accounts Aging based upon invoice date by the fifteenth (15th) day of each
month.

   

[X]

Inventory Report by the Fifteenth (15th) day of each month.

   

[X]

Accounts Payable Aging by the fifteenth (15th) day of each month.

   

[X]

Financial Statements, which shall be due within 20 days of each quarter end.

 

[X]

 

A list of Account Debtors with current addresses.

[  ]

[  ]

[  ]

Other:  _______

 

Borrower shall forward to Bank any of these reports at such other times as Bank
may require them and/or any other reports deemed necessary by Bank in its
discretion to monitor the Collateral for the Line of Credit.  Notwithstanding
any provision to the contrary, if any, in the Loan Agreement, the foregoing
reporting requirements shall not be subject to notice of default by Bank, or
right to cure by Borrower, it being expressly understood and agreed that timely
receipt of same are material and fundamental to the Bank's administration and
funding of the Line of Credit.

 

(b)               Audit.  From time to time, as deemed necessary by Bank in its
soles discretion to monitor Collateral, but in no event less frequently than
semiannually, Borrower hereby authorizes Bank or any agent or representative
thereof' to, inspect, audit and verify the Accounts, Inventory, and Other
Collateral, examine and make copies of and make abstracts from all the records
and books of account of, and visit the properties of Borrower, and to discuss
the affairs, finances, and Collateral generally of Borrower with any of its
respective owners, officers, directors, shareholders, members, or partners and
Borrower's independent accountants and consultants.  Without expense to Bank,
Bank may use any of Borrower's personnel, equipment, including computer
equipment, programs and computer readable media as deemed necessary by Bank to
conduct such Audit.

 

DD-07.  Fees. 

(a)                Borrower shall pay to Bank the sum of $N/A per N/A as a fee
for the use of Bank's asset based lending services.  This fee may be changed by
written notice to Borrower.

(b)               Borrower shall pay to Bank for each Audit of Borrower, an
audit fee of $750.00 per day plus expense(s) such as, but not limited to, travel
expense(s), specialized equipment needed to count and/or value goods pledged as
Collateral to Bank, the use of outside Firms to perform any Audit as deemed
necessary by Bank in its sole discretion to monitor Collateral, with said
reimbursement being represented by receipts and/or listing of expense(s)
submitted to Borrower by Bank along with Bank's invoice for reimbursement.  Bank
reserves the right to change die audit fee upon notice to Borrower.

(c)                Bank reserves the right to debit all Fees from the Operating
Account of Borrower.

 

DD-08.  Events of Default.  In addition to those Events of Default appearing
elsewhere in the Loan Agreement, each of the following shall constitute an
additional Event of Default under the Loan Agreement:

 

(a)                The refusal by Borrower to permit Bank to inspect, examine,
verify or audit, the books and records in accordance with the Audit provisions
of this Loan Agreement.

(b)               Failure to execute a Lockbox Agreement and notify Account
Debtors to remit payments to the Lockbox, if required by Bank.

(c)                Failure to deposit checks or other remittances received in
payment of Accounts into a Collateral Reserve Account at Bank, if required by
Bank.

(d)               If the outstanding principal balance under the Line of Credit
plus the Reserves exceeds the Collateral Loan Value or the amount of the Line of
Credit and Borrower fails immediately to prepay the Line of Credit by an amount
sufficient to bring Borrower in compliance with this Schedule DD.

(e)                If Borrower fails to comply with the Reporting requirements
of DD.06(a).

(f)                If Borrower fails to otherwise comply with any of the
provisions of this Schedule "DD" or the Loan Agreement.

 

DD-09.  Other Provisions. 

(a)                Notice.  Any notice required to be given herein shall be
effective when made and, notwithstanding any provisions in the Loan Agreement to
the contrary, may be made by hand delivery, confirmed facsimile transmission,
overnight courier, first class or certified mail return receipt requested.

(b)               Operating Account.  Notwithstanding any provision- in the Loan
Agreement to the contrary, Borrower shall establish and maintain its Operating
Account with Bank during the term hereof.

(c)                Certain Events.  Upon execution hereof and with each
borrowing made hereunder pursuant to the Loan Base Report, Borrower shall be
deemed to certify to Bank that (i) no Event of Default shall have, occurred and
be continuing, and no event shall have occurred and be continuing that, with the
giving, of notice or passage of time or both, would be an Event of Default; (ii)
no material adverse change shall' have occurred in the financial or operating
condition or prospects of Borrower since the date of the Loan Agreement; (iii)
all Loan Documents shall have remained in full force and effect; and (iv) the
representations and warranties contained in the Loan Agreement shall be true and
correct as of such date.

(d)               Electronic Transactions.  By separate written agreement,
Borrower and Bank may agree to conduct transactions contemplated herein,
including reporting, by electronic means.

(e)                Describe Any Other Provisions, or Delete.

 

This agreement is made and entered; into for the sole protection and benefit of
Bank and Borrower, their successors and assigns, and no third person or persons
shall have any right(s) to action hereon.

 

IN WITNESS WHEREOF, Borrower and Bank have executed this Schedule "DD" as of
this date and have adopted as their respective seal the "seal" appearing beside
or near their signatures below.

 

Borrower is a Corporation:

 

WITNESS:

 

Industrial Services of America, Inc.

     

/s/ Sharon Hardy

By:

/s/ Harry Kletter

   

Harry Kletter

 

Title:

Chief Executive Officer and President

 

Additional Co-Borrowers or Guarantors:

 

WITNESS

           

(SEAL)

     

(SEAL)

     

(SEAL)

     

(SEAL)

 

 

 

WITNESS:

 

BRANCH BANKING AND TRUST COMPANY

     

/s/ Sharon Hardy

By:

/s/ Johnny L. Perry

   

Johnny L. Perry

 

Title:

Senior Vice President

     

WITNESS:

 

BB&T BANKCARD CORPORATION

     

/s/ Sharon Hardy

By:

/s/ Johnny L. Perry

       

Title:

Senior Vice President

 

 

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