Exhibit 10.4

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into effective as
of January 15, 2015 by WESSCO, LLC, a Delaware limited liability company
(“Debtor”), and THE BANK OF KENTUCKY, INC., a Kentucky banking corporation, its
successors and assigns, as secured party (“Secured Party”).

 

RECITALS:

 

A.                               Secured Party has agreed to loan the following
to Debtor a loan in the principal amount of One Million and 00/100 DOLLARS
($1,000,000.00) (the “Loan”).

 

B.                               As a condition precedent to Secured Party’s
extension of the Loan to Debtor and in consideration therefor, Secured Party has
required the execution and delivery of, among other things: (i) this Agreement,
(ii) that certain Promissory Note of even date herewith from Debtor to the order
of Secured Party in the principal amount of up of One Million and 00/100 DOLLARS
($1,000,000.00) (the “Note”), and (iii) various other Loan Documents (as defined
in the Note).

 

D.                               Debtor: (i) will or is expected to benefit from
the Loan, (ii) understands that Secured Party would not make the Loan to Debtor
but for the execution and delivery of this Agreement, (iii) acknowledges that
this Agreement is being executed and delivered to Secured Party in exchange for
valuable consideration which is legally sufficient to support and justify
Debtor’s obligations hereunder, and (iv) has knowingly and voluntarily executed
and delivered this Agreement to Secured Party after having had the opportunity
to review the same with legal counsel.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which hereby are acknowledged, Debtor and Secured Party hereby agree and
covenant as follows:

 

1.                                 Debtor does hereby grant to Secured Party a
security interest in all personal property owned by Debtor, including, without
limitation, each item of Equipment, each Third Party Agreement, all of the other
property described in Exhibit A, attached hereto and made a part hereof; all
property hereafter acquired by Debtor, and all accessions thereto and the
proceeds thereof (collectively referred to herein as the “Collateral”).

 

2.                                 The security interest granted pursuant to
this Security Agreement is given by Debtor to Secured Party to secure: (a) the
payment of the Loan and all interest, late charges, reimbursement obligations,
and other indebtedness evidenced by or owing, now or in the future, under the
Note, the Loan Agreement, and any of the other Loan Documents, together with all
extensions, modifications, renewals or refinancings of any of the foregoing;
(b) all amounts and other obligations owed to Secured Party by Debtor as
described in the Loan Documents (defined in the Note); (c) all amounts and other
obligations owed to Secured Party by Debtor under or pursuant to any other
financing, loan, or credit facility, including, without limitation, the loans
previously made by Secured Party to Debtor pursuant to certain Promissory Notes,
each dated as of October 15, 2013, in the original principal or face amounts of
$1,000,000.00 and $3,000,000.00, respectively, and all documents and agreements
evidencing and securing the

 

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same; and (d) the performance and observance of the covenants, conditions,
agreements, representations, warranties and other liabilities and obligations of
the Debtor or any other obligor to or benefiting the Secured Party which are
evidenced or secured by or otherwise provided in the Note, this Agreement or any
of the other Loan Documents.

 

3.                                      Debtor hereby represents, warrants, and
covenants to Secured Party that:

 

A.                                    The Collateral is or is to be used by the
Debtor primarily for business use.

 

B.                                    The Collateral will be kept in the
Commonwealth of Kentucky except such of the Collateral as is subject to any
Third Party Agreement approved by Secured Party that requires certain Equipment
to be kept in a different location, in which case the Collateral shall be kept
in the location(s) described in each approved Third Party Agreement. The
Debtor’s principal place of business is located in the Commonwealth of Kentucky.
Debtor will promptly notify Secured Party of any change in the location of the
Collateral and Debtor will not remove the Collateral from the above described
locations without the written consent of the Secured Party. The Debtor shall not
change its name, its principal place of business or its state of organization or
registration or merge with another entity without first providing written notice
to Secured Party.

 

C.                                    Except for the security interest granted
herein, Debtor is or will be the owner of the Collateral free from any prior
lien, security interest or encumbrance other than the interests described in the
Third Party Agreements, and Debtor will defend the Collateral against all claims
and demands of any and all persons at any time claiming the same or any other
interest therein.

 

D.                                    Except in the ordinary course of business
for reasonable consideration, Debtor will not sell, exchange, lease or otherwise
dispose of any interest in the Collateral without the written consent of the
Secured Party and will not permit any lien, security interest or encumbrance to
attach to the Collateral.

 

E.                                     Other than financing statements in favor
of Secured Party, no financing statement covering the Collateral is on file in
any public office and, at the request of Secured Party, Debtor will join with
Secured Party in executing and/or authorizing one or more financing statements,
covering the Collateral generally and/or any particular item of Collateral if
Secured Party elects, from time to time, to file separate financing statements
for each such items, pursuant to the Uniform Commercial Code of Kentucky in form
satisfactory to the Secured Party and Debtor will pay the cost of filing in all
public offices wherever tiling is deemed necessary by Secured Party. A carbon,
photographic or other reproduction of this Agreement or a financing statement
will be sufficient as a financing statement.

 

F.                                      Debtor will maintain the Collateral in
good condition and repair; will maintain insurance on the Collateral with a
coverage amount at least equal to the replacement value of the Collateral
against fire, theft, and such other hazards and in such form and amount as
Secured Party may require (but in no event less than replacement

 

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value of such Collateral) and for the benefit of Debtor and Secured Party as
their interest shall appear and will pay and discharge all taxes imposed on the
Collateral. Debtor assigns to Secured Party all right to proceeds of any
insurance not exceeding the unpaid balance hereunder, and directs any insurer to
pay all proceeds directly to Secured Party and authorizes Secured Party to
indorse any draft for the proceeds. Such policy or policies (or certificates
thereof) shall be delivered to the Secured Party and shall be with a company or
companies satisfactory to Secured Party.

 

G.                                    At its option, Secured Party may discharge
taxes, liens or other encumbrances at any time levied or placed on the
Collateral, pay for insurance on the Collateral, and pay for the maintenance and
preservation of the Collateral should Debtor fail to do so. Debtor agrees to
reimburse Secured Party on demand for any payment so made and until such
reimbursement, the amount so paid by Secured Party shall be added to the
principal amount of the indebtedness.

 

H.                                   Upon happening of any of the following
events or conditions: (a) a default in the payment or performance of any of the
obligations or of any covenant or liability contained or referred to in the Note
or any of the other Loan Documents; (b) loss, theft, destruction, sale or
encumbrance of or to the Collateral; (c) death, dissolution, termination of
existence, insolvency, business failure, appointment of a receiver of any part
of the property of, assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy or insolvency laws by or
against Debtor; or (d) any default under the terms hereunder; Secured Party may
at its election, declare the entire amount of the indebtedness then outstanding
under the Note and other Loan Documents due and payable at once and Secured
Party shall have the rights and remedies of a secured party under any applicable
Uniform Commercial Code, including the right to enter any premises of the
Debtor, without legal process and take possession of and remove the Collateral
and the right to act in Debtor’s place under any of the Third Party Agreements.
Debtor agrees, upon request of the Secured Party, to assemble the Collateral and
to make it available at the place designated by Secured Party. Any requirement
of reasonable notice of any disposition of the Collateral shall be satisfied if
such notice is mailed to the address of the Debtor shown in this Agreement at
least ten (10) days before the time of such disposition.

 

4.                                      No waiver by Secured Party of any
default shall be effective unless in writing nor shall operate as a waiver of
any other default or of the same default on a subsequent occasion. Secured Party
is hereby authorized to fill any blank spaces hereunder. All rights of Secured
Party hereunder shall inure to the benefit of the heirs, executors,
administrators, successors and assigns of Secured Party; and all obligations of
Debtor shall bind the heirs, executors, administrators, successors and assigns
of Debtor. If there is more than one Debtor, their obligations hereunder shall
be joint and several. This Agreement constitutes the entire agreement between
the parties. This Agreement shall be governed by Kentucky law.

 

5.                                      Any notice that Secured Party or Debtor
is required or entitled to give to the other party hereunder shall be in writing
and shall be deemed given when sent by certified mail, return receipt requested,
postage prepaid or upon receipt, if hand delivered or sent by facsimile, at the
addresses specified below:

 

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Secured Party:

The Bank of Kentucky, Inc.

 

111 Lookout Farm Drive

 

Crestview Hills, Kentucky 41017

 

Attn: Brett Blackwell

 

 

With a copy to:

Strauss Troy Co., LPA

 

50 E. Rivercenter Blvd., Suite 1400

 

Covington, KY 41011

 

Attn: William O. Williamson, Esq.

 

 

Debtor:

Wessco, LLC

 

7100 Grade Lane

 

Louisville, KY 40213

 

Attn: Sean Garber

 

 

With a copy to:

Frost Brown Todd LLC

 

400 West Market Street, 32nd

 

Floor Louisville, KY 40202

 

Attn: John S. Egan, Esq.

 

The addresses set forth above may be changed as to any party by such party
delivering to the other parties written notice as to such change of address.

 

6.                                 Upon the payment in full of all amounts
secured by this Security Agreement, Secured Party agrees that it will promptly
terminate this Agreement and cause, at Debtor’s reasonable expense, all
financing statements filed to perfect Secured Party’s security interest in the
Collateral to be released.

 

7.                                 DEBTOR AND SECURED PARTY (BY ITS ACCEPTANCE
HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITION-ALLY WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY
WAY RELATED TO THIS INSTRUMENT, THE NOTE, ANY OTHER LOAN DOCUMENT OR ANY
RELATIONSHIP BETWEEN DEBTOR AND SECURED PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT TO SECURED PARTY TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE
OTHER RELATED DOCUMENTS. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT,
AMEND OR MODIFY SECURED PARTY’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY
CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN THIS INSTRUMENT, ANY
NOTE OR ANY OTHER GUARANTY OF PAYMENT, AGREEMENT, INSTRUMENT OR DOCUMENT RELATED
THERETO.

 

8.                                 This Agreement may be executed in one or more
original or facsimile counterparts, each of which, when taken together, shall
constitute a single enforceable instrument.

 

Executed effective as of the date first set forth above.

 

[SIGNATURE PAGES FOLLOW]

 

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SIGNATURE PAGE OF SECURED PARTY FOR SECURITY AGREEMENT

 

 

THE BANK OF KENTUCKY INC., a Kentucky banking corporation

 

 

 

By:

/s/ Brett Blackwell

 

Printed Name:

Brett Blackwell

 

Title:

Vice President

 

STATE OF OHIO

SS.

COUNTY OF HAMILTON

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Brett Blackwell, the Vice President of The
Bank of Kentucky, Inc., a Kentucky banking corporation, who is personally known
to me to be the same person whose name is subscribed to the foregoing instrument
as such, appeared before me this day in person and acknowledged that he signed
and delivered the said instrument as his own free and voluntary act and as the
free and voluntary act of said entity, for the uses and purposes therein set
forth.

 

GIVEN under my hand and notarial seal this 14th day of January, 2015.

 

 

 

/s/ Anthony M. Barlow

 

Notary Public

 

 

My Commission Expires:  

N/A

 

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SIGNATURE PAGE OF DEBTOR FOR SECURITY AGREEMENT

 

 

WESSCO, LLC, a Delaware limited liability company

 

 

 

 

 

 

By:

Industrial Services of America, Inc., a

 

 

Florida corporation, its Manager

 

 

 

 

 

 

 

 

By:

/s/ Sean Garber

 

 

Printed Name:

Sean Garber

 

 

Title:

President

 

STATE OF KENTUCKY

) SS.

COUNTY OF JEFFERSON

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Sean Garber, the President on behalf of
Industrial Services of America, Inc., a Florida corporation, which corporation
is the Manger on behalf of Wessco, LLC, a Delaware corporation, who is
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as such, appeared before me this day in person and
acknowledged that he/she signed and delivered the said instrument as his/her own
free and voluntary act and as the free and voluntary act of said company, for
the uses and purposes therein set forth.

 

GIVEN under my hand and notarial seal this 15th day of January, 2015.

 

 

/s/ LeAnders L. Jones

 

Notary Public

 

 

My Commission Expires:  

9-29-15

 

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EXHIBIT A

TO

SECURITY AGREEMENT

 

Debtor:

 

Secured Party:

 

 

 

Wessco, LLC
7100 Grade Lane
Louisville, KY 40213

 

The Bank of Kentucky, Inc.
111 Lookout Farm Drive
Crestview Hills, Kentucky 41017

 

Collateral Description

 

All of Debtor’s right, title and interest in and to the following:

 

All leases and other agreements (“Third Party Agreements”) between or among
Debtor and other persons related to any Equipment (defined below) leased, sold,
or serviced by Debtor, including, without limitation, all of the following to
the extent produced by or from or otherwise related to said Equipment or Third
Party Agreements: (a) all monies, revenues, rent, rent equivalents, receipts,
deposits, letters of credit, income and profits due and to become due to Debtor
thereunder; (b) all claims, demands, and causes of action that Debtor has now or
which may arise in the future; (c) all rights and options, including, without
limitation, the full power and authority possessed by Debtor to exercise the
same pursuant to their terms; (d) all permits, approvals, and consents,
previously granted and those granted in the future; (e) all plans, reports,
appraisals, investigations, and examinations; (0 all licenses; and (g) all
leases to or from Debtor whether existing now or in the future; and

 

All Accounts, Equipment, General Intangibles, Intellectual Property, Inventory,
Deposit Accounts, all products and proceeds thereof, and the items set forth in
subparagraphs (g) and (h) below, whether now owned or existing or hereafter
acquired or arising. The following definitions apply to the terms used in this
Exhibit and any corresponding UCC Financing Statement:

 

(a)                                 Accounts: All accounts, accounts receivable,
other receivables, contract rights, chattel paper, instruments and documents,
and notes; any other obligations or indebtedness owed to Debtor from whatever
source arising; all rights of Debtor to receive any performance or any payments
in money or kind; all guaranties of the foregoing and security therefor; all of
the right, title and interest of Debtor in and with respect to the goods,
services, or other property that gave rise to or that secure any of the
foregoing and insurance policies and proceeds relating thereto, and all rights
of Debtor as an unpaid seller of goods and services. including but not limited
to, the rights to stoppage in transit, replevin, reclamation, and resale; and
all of the foregoing whether now owned or existing or hereafter created or
acquired (the “Accounts”).

 

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(b)                       Equipment: All of Debtor’s now owned or hereafter
acquired machinery, equipment, furniture, furnishings and fixtures, together
with tools and motor vehicles of every kind and description, all parts therefor,
and all improvements, accessions or appurtenances thereto (the “Equipment”).

 

(c)                        General Intangibles: All chosen in action and causes
of action and all other intangible personal property of Debtor of every kind and
nature (other than Accounts) now owned or hereafter acquired by Debtor,
including, without limitation, corporate or other business records, trademarks,
trade names, brand names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, tax refund claims, insurance proceeds, including without
limitation, insurance covering the lives of key employees on which the Debtor is
beneficiary, and any letter of credit, guarantee, claim, security interest or
other security held by or granted to Debtor to secure payment by an account
debtor of any of the Accounts (the “Intangibles”).

 

(d)                            Intellectual Property: All of Debtor’s present
and future: trade secrets and other proprietary information; trademarks, service
marks and business names and the goodwill of the business relating thereto;
copyrights (including without limitation copyrights for computer programs) and
all tangible property embodying the copyrights; unpatented inventions (whether
or not patentable); patent applications and patents, license agreements related
to any of the foregoing and income therefrom; books, records, computer tapes or
disks, flow diagrams, specification sheets, source codes, object codes and other
physical manifestations of the foregoing; the right to sue for all past, present
and future infringements of’ the foregoing; and proceeds of the foregoing (the
“Intellectual Property”).

 

(e)                             Inventory: Any and all now owned or hereafter
acquired goods, merchandise, or other personal property, raw materials, parts,
supplies, work-in-process and finished products intended for sale, of every kind
and description, in the custody or possession, actual or constructive, of
Debtor, including such inventory as is temporarily out of the custody or
possession of Debtor, including insurance proceeds from insurance on any of the
above, any returns upon any Accounts and other proceeds, resulting from the sale
or disposition of any of the foregoing, including without limitation, raw
materials, work-in-process, and finished goods (the “Inventory”).

 

Deposit Accounts:                                             All deposit
accounts of Debtor maintained with Secured Party or any other bank, savings and
loan association, credit union or like organization, including all demand, time,
savings, passbook or other accounts.

 

(g)                             All products and proceeds of the collateral
described in this Exhibit A and all additions and accessions to, replacements
of, insurance or condemnation proceeds of, and documents covering said
collateral, all property received wholly or partly in trade or exchange for said
collateral, and all rents, revenues, issues, profits and proceeds arising from
the sale, lease, license, encumbrance, collection, or any other temporary or
permanent disposition of, said collateral or any interest therein.

 

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(h)                                 In addition, all ledger sheets, books,
records and documents concerning any of the collateral described in this
Exhibit A, including all formulations, manufacturing procedures, quality control
procedures, product specifications, computer records, programs, storage media
and computer software useful or required in connection therewith.

 

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