Exhibit 10.38

INTERCREDITOR AND SUBORDINATION AGREEMENT

THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this “Agreement” as further
defined below) is entered into as of this 29th day of February, 2016 by 7100
GRADE LANE LLC, a Kentucky limited liability company (“Subordinated Lender” as
further defined below), INDUSTRIAL SERVICES OF AMERICA, INC., a Florida
corporation (“Company”) and the other “Debtors” signatory hereto, for the
benefit of MIDCAP BUSINESS CREDIT LLC, a Texas limited liability company
(“Senior Lender” as further defined below).
RECITALS

WHEREAS, Borrowers (as defined below), Guarantors (as defined below) and Senior
Lender have entered into the Senior Loan Agreement (as defined below) pursuant
to which Senior Lender has agreed to extend, or continue to extend, a revolving
credit facility (as the same may be amended, amended and restated, modified,
extended, renewed, replaced and/or restructured from time to time, the “Senior
Loan Facility”) to Borrowers, upon the terms and conditions set forth in the
Senior Loan Agreement; and
WHEREAS, Company is or is about to become indebted to Subordinated Lender; and
Debtors and Subordinated Lender have requested that Senior Lender provide the
Senior Loan Facility to Borrowers; and Senior Lender is willing to do so,
provided Subordinated Lender agrees that all present and future indebtedness of
Debtors to Subordinated Lender shall be subordinated to all present and future
indebtedness of Debtors to Senior Lender.
NOW THEREFORE, the parties hereto, intending to be legally bound hereby, agree
as follows:
1.Definitions
(a)    Unless otherwise defined herein, terms defined in the Senior Loan
Agreement and used herein shall have the meanings given to them in the Senior
Loan Agreement.
(b)    The following terms shall have the following meanings:
“Agreement” means this Intercreditor and Subordination Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time.
“Bankruptcy Code” means Title 11 of the United States Code, as amended from time
to time, and any successor statute and all rules and regulations promulgated
thereunder.
“Bankruptcy Law” means the Bankruptcy Code and any similar Federal, state or
foreign law for the relief of debtors.
“Borrowers” means, collectively, (i) Company, (ii) any other person that at any
time after the date hereof becomes a borrower party in respect of any of the
Senior Debt, and (iii) the respective

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successors and assigns of each of the foregoing; sometimes being referred to
herein individually as a “Borrower”.
“Collateral” means the collective reference to any and all property from time to
time subject to security interests to secure payment or performance of the
Senior Obligations or the Subordinated Obligations.
“Company” shall have the meaning set forth in the preamble to this Agreement.
“Debtors” means, collectively, (i) Borrowers, (ii) Guarantors, (iii) any other
person that at any time becomes a party to a guarantee in favor of Senior Lender
in respect of any of the Senior Debt, and (iv) the respective successors and
assigns of each of the foregoing; sometimes being referred to herein
individually as a “Debtor”.
“Guarantors” shall have the meaning set forth in the Senior Loan Agreement.
“Insolvency Event” means (i) the Debtors or any of their Subsidiaries commencing
any Proceeding; (ii) there being commenced against the Debtors or any of their
Subsidiaries any Proceeding which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; (iii) there being
commenced against the Debtors or any of their Subsidiaries any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within sixty (60)
days from the entry thereof; (iv) the Debtors or any of their Subsidiaries
taking any action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii)
above; or (v) the Debtors or any of their Subsidiaries generally not paying, or
being unable to pay, or admitting in writing its inability to pay, its or their
debts as they become due.
“Person” means any natural person, corporation, general or limited partnership,
limited liability company, firm, trust, association, government, governmental
agency or other entity, whether acting in an individual, fiduciary or other
capacity.
“Proceeding” means any (i) voluntary or involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization,
compromise, composition, arrangement or assignment for the benefit of creditors
(or any class of creditors); (ii) appointment of a custodian, receiver,
conservator, administrator, trustee, liquidator or other officer with similar
powers or any other proceeding for the liquidation, dissolution or other winding
up of a Person under any Bankruptcy Law; or (iii) marshalling of the assets of a
Person.
“Senior Event of Default” means an “Event of Default” under the Senior Loan
Agreement.
“Senior Lender” means, individually and collectively, (i) MidCap Business Credit
LLC, a Texas limited liability company, and (ii) its successors and assigns.

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“Senior Loan Facility” shall have the meaning set forth in the recitals to this
Agreement.
“Senior Loan Agreement” means that certain Loan and Security Agreement (All
Assets) dated as of the date of this Agreement among Borrowers, the other
Debtors party thereto and Senior Lender, as the same may be amended, modified or
supplemented from time to time, including, without limitation, amendments,
modifications, supplements and restatements thereof giving effect to increases,
renewals, extensions, refundings, deferrals, restructurings, replacements or
refinancings of, or additions to, the arrangements provided in such Loan and
Security Agreement (All Assets) (whether provided by the original Senior Lender
or a successor Senior Lender or other lenders).
“Senior Loan Documents” means the collective reference to the Senior Loan
Agreement, the Senior Security Documents and all other agreements, documents and
instruments that from time to time evidence the Senior Obligations or secure
payment or performance thereof.
“Senior Obligations” means all “Obligations” as such term is defined in the
Senior Loan Agreement, including, without limitation, obligations, liabilities
and indebtedness of every kind, nature and description owing by any Debtor to
Senior Lender, including principal, interest, charges, fees, premiums,
indemnities and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, arising under any of the Senior Loan
Documents, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Senior Loan Documents or
after the commencement of any Proceeding with respect to any Debtor under any
Bankruptcy Law (and including, without limitation, any principal, interest,
fees, costs, expenses and other amounts, which would accrue and become due but
for the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case or similar proceeding), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured.
“Senior Security Documents” means the collective reference to all agreements,
documents and instruments, now existing or hereafter arising, which create or
purport to create a security interest in property to secure payment or
performance of the Senior Obligations.
“Subordinated Lender” means, individually and collectively, (i) 7100 Grade Lane
LLC, a Kentucky limited liability company, and (ii) its successors and assigns.
“Subordinated Loan Documents” means the collective reference to all promissory
notes, agreements, documents and instruments at any time executed and/or
delivered by any Debtor or any other Person to, with or in favor of Subordinated
Credit in connection with or relating to the Subordinated Obligations, as all of
the foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated, refinanced, replaced or restructured.
“Subordinated Loans” means the loans and other financial accommodations made by
Subordinated Lender pursuant to the Subordinated Loan Documents.
“Subordinated Obligations” means all of the obligations, liabilities and
indebtedness (primary, secondary, direct, contingent, sole, joint or several)
heretofore, now or hereafter contracted

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or acquired of the Debtors and/or the Debtors and others to Subordinated Lender,
which as of the date of this Agreement, is in the original principal amount of
$883,800.00.
(c)    The words “hereof,” “herein” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section and paragraph references
are to this Agreement unless otherwise specified.
(d)    The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.
(e)    Any terms not otherwise defined in this Agreement shall have the
respective meanings ascribed to such terms in the Senior Loan Agreement.
2.    Subordination.
(a)    Each of the Debtors and Subordinated Lender agree, for itself and each
future holder of the Subordinated Obligations, that the Subordinated Obligations
are expressly “subordinate and junior in right of payment” (as that phrase is
defined in Section 2(b)) to all Senior Obligations.
(b)    “Subordinate and junior in right of payment” means that (i) no part of
the Subordinated Obligations shall have any claim to the assets of the Debtors
on a parity with or prior to the claim of the Senior Obligations; and (ii)
unless and until the Senior Obligations have been paid in full and the
obligation of Senior Lender to extend credit to Borrowers under the Senior Loan
Documents shall have been irrevocably terminated, without the express prior
written consent of Senior Lender, Subordinated Lender will not take, demand or
receive from the Debtors, and the Debtors will not make, give or permit,
directly or indirectly, by set-off, redemption, purchase or in any other manner,
any payment of (of whatever kind or nature, whether in cash, property,
securities or otherwise) or security for the whole or any part of the
Subordinated Obligations, including, without limitation, any letter of credit or
similar credit support facility to support payment of the Subordinated
Obligations; except, that, the Debtors may make, and Subordinated Lender may
receive and retain, regularly scheduled payments of interest, on an
unaccelerated non-default basis, in respect of the Subordinated Obligations in
accordance with the terms of the Subordinated Loan Documents as in effect on the
date hereof, so long as, with respect to any such payment, immediately prior to
and after giving effect to any such payment, no Senior Event of Default has
occurred.
(c)    The expressions “prior payment in full”, “payment in full”, “paid in
full” and any other similar terms or phrases when used herein with respect to
the Senior Obligations shall mean the payment in full, in immediately available
funds, of all of the Senior Obligations in accordance with the terms of the
Senior Loan Agreement.
3.    Additional Provisions Concerning Subordination.
(a)    Each of the Debtors and Subordinated Lender agree that upon the
occurrence of any Insolvency Event:

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(iii)    all Senior Obligations shall be paid in full before any payment or
distribution of whatever kind or nature is made with respect to the Subordinated
Obligations; and
(iv)    any payment or distribution of assets of the Debtors, whether in cash,
property or securities, to which Subordinated Lender would be entitled except
for the provisions hereof, shall be paid or delivered by the Debtors, or any
receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other
Person making such payment or distribution, directly to Senior Lender, to the
extent necessary to pay in full all Senior Obligations, before any payment or
distribution of any kind or nature shall be made to Subordinated Lender.
(b)    Upon the occurrence of any Insolvency Event:
(i)    Subordinated Lender irrevocably authorizes and empowers Senior Lender (A)
to demand, sue for, collect and receive every payment or distribution on account
of the Subordinated Obligations payable or deliverable in connection with such
event or proceeding and give acquittance therefor, and (B) to file claims and
proofs of claim in any statutory or non-statutory proceeding and take such other
actions, in its own name as Senior Lender, or in the name of Subordinated Lender
or otherwise, as Senior Lender may deem necessary or advisable for the
enforcement of the provisions of this Agreement; provided, however, that the
foregoing authorization and empowerment imposes no obligation on Senior Lender
to take any such action;
(ii)    Subordinated Lender shall take such action, duly and promptly, as Senior
Lender may request from time to time (A) to collect the Subordinated Obligations
for the account of Senior Lender and (B) to file appropriate proofs of claim in
respect of the Subordinated Obligations; and
(iii)    Subordinated Lender shall execute and deliver such powers of attorney,
assignments or proofs of claim or other instruments as Senior Lender may request
to enable Senior Lender to enforce any and all claims in respect of the
Subordinated Obligations and to collect and receive any and all payments and
distributions which may be payable or deliverable at any time upon or in respect
of the Subordinated Obligations.
(c)    If any payment or distribution, whether consisting of money, property or
securities, shall be collected or received by Subordinated Lender in respect of
the Subordinated Obligations, Subordinated Lender forthwith shall deliver the
same to Senior Lender, in the form received, duly indorsed to Senior Lender, if
required, to be applied to the payment or prepayment of the Senior Obligations
until the Senior Obligations are paid in full. Until so delivered, such payment
or distribution shall be held in trust by Subordinated Lender as the property of
Senior Lender, segregated from other funds and property held by Subordinated
Lender.
4.    Rights in Collateral.
(a)    Notwithstanding anything to the contrary contained in the Senior Loan
Agreement, any Senior Security Document, any other Senior Loan Document or any
Subordinated Loan Document and irrespective of:

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(iv)    the time, order or method of attachment or perfection of the security
interests created by any Senior Security Document or any Subordinated Loan
Document;
(v)    the time or order of filing or recording of financing statements or other
documents filed or recorded to perfect security interests in any Collateral;
(vi)    anything contained in any filing or agreement to which Senior Lender or
Subordinated Lender now or hereafter may be a party; and
(vii)    the rules for determining perfection or priority under the Uniform
Commercial Code or any other law governing the relative priorities of secured
creditors,
any security interest in any Collateral pursuant to any Senior Security Document
has and shall have priority, to the extent of any unpaid Senior Obligations,
over any security interest in such Collateral pursuant to any Subordinated Loan
Document.
(b)    So long as the Senior Obligations have not been paid in full and any
Senior Loan Document remains in effect, whether or not any Insolvency Event has
occurred:
(i)    Debtors shall not grant to Subordinated Creditor, and Subordinated
Creditor shall not have, seek to have, or take or accept any lien on or security
interest in any Debtors’ assets or properties, now owned or hereafter acquired
or created.
(ii)    Subordinated Lender will not (A) exercise or seek to exercise any rights
or exercise any remedies with respect to any Collateral or (B) institute any
action or proceeding with respect to such rights or remedies, including without
limitation, any action of foreclosure or (C) contest, protest or object to any
foreclosure proceeding, postpetition financing, use of cash collateral or action
brought by Senior Lender or any other exercise by Senior Lender of any rights
and remedies under any Senior Loan Documents; and
(iii)    Senior Lender shall have the exclusive right to enforce rights and
exercise remedies with respect to the Collateral and Senior Lender shall not be
required to marshal any Collateral.
(c)    In exercising rights and remedies with respect to the Collateral, Senior
Lender may enforce the provisions of the Senior Loan Documents and exercise
remedies thereunder and under any other Senior Loan Documents, all in such order
and in such manner as it may determine in the exercise of their sole business
judgment. Such exercise and enforcement shall include, without limitation, the
rights to sell or otherwise dispose of Collateral, to incur expenses in
connection with such sale or disposition and to exercise all the rights and
remedies of a secured lender under the Uniform Commercial Code of any applicable
jurisdiction.
(d)    When all Senior Obligations have been paid in full and the Senior Loan
Documents no longer are in effect, Subordinated Lender shall have the right to
enforce the provisions of the Subordinated Loan Documents and exercise remedies
thereunder. Notwithstanding the foregoing,

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no failure to exercise, nor any delay in exercising, on the part of Subordinated
Lender, any right, power or privilege under the Subordinated Loan Documents
shall operate as a waiver thereof.
(e)    Any money, property or securities realized upon the sale, disposition or
other realization by Senior Lender upon all or any part of the Collateral shall
be applied by Senior Lender in the following order:
(i)    First, to the payment in full of all costs and expenses (including,
without limitation, attorneys’ fees and disbursements) paid or incurred by
Senior Lender in connection with the such realization on the Collateral or the
protection of their rights and interests therein;
(ii)    Second, to the payment in full of all Senior Obligations in such order
as Senior Lender may elect in its sole discretion;
(iii)    Third, to the payment in full of all Subordinated Obligations then due
and which are secured by such Collateral; and
(iv)    Fourth, to pay to the Debtors, or its representative or as a court of
competent jurisdiction may direct, any surplus then remaining.
(f)    Senior Lender’s rights with respect to the Collateral include, without
limitation, the right to release any or all of the Collateral from the Lien of
any Senior Security Document or Subordinated Loan Document (if applicable) in
connection with the sale of such Collateral, notwithstanding that the net
proceeds of any such sale may not be used to permanently prepay any Senior
Obligations or Subordinated Obligations. If Senior Lender shall determine, in
connection with any sale of Collateral, that the release of the Lien (if
applicable) of any Subordinated Loan Document on such Collateral in connection
with such sale is necessary or advisable, Subordinated Lender shall execute such
release documents and instruments and shall take such further actions as Senior
Lender shall request. Subordinated Lender hereby irrevocably constitutes and
appoints Senior Lender and any officer or Senior Lender, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Subordinated Lender and in the
name of Subordinated Lender or in Senior Lender’s own name, from time to time in
Senior Lender’s discretion, for the purpose of carrying out the terms of this
paragraph, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this paragraph, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer or
release. Subordinated Lender hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
this paragraph.
5.    Consent of Subordinated Lender
(a)    Subordinated Lender consents that, without the necessity of any
reservation of rights against Subordinated Lender, and without notice to or
further assent by Subordinated Lender:

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(iv)    any demand for payment of any Senior Obligations made by Senior Lender
may be rescinded in whole or in part by Senior Lender, and any Senior Obligation
may be continued, and the Senior Obligations, or the liability of the Debtors or
any guarantor or any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, or any
obligation or liability of the Debtors or any other party under the Senior Loan
Agreement or any other agreement, may, from time to time, in whole or in part,
be renewed, extended, modified, accelerated, compromised, waived, surrendered,
or released by Senior Lender; and
(v)    the Senior Loan Agreement and any other Senior Loan Document may be
amended, modified, supplemented or terminated, in whole or in part, as Senior
Lender may deem advisable from time to time, and any collateral security at any
time held by Senior Lender for the payment of any of the Senior Obligations may
be sold, exchanged, waived, surrendered or released,
in each case, all without notice to or further assent by Subordinated Lender,
which will remain bound under this Agreement, and all without impairing,
abridging, releasing or affecting the subordination provided for herein.
(b)    Subordinated Lender waives any and all notice of the creation, renewal,
extension or accrual of any of the Senior Obligations and notice of or proof of
reliance by Senior Lender upon this Agreement. The Senior Obligations, and any
of them, shall be deemed conclusively to have been created, contracted or
incurred in reliance upon this Agreement, and all dealings between the Debtors
and Senior Lender shall be deemed to have been consummated in reliance upon this
Agreement. Subordinated Lender acknowledges and agrees that Senior Lender has
relied upon the subordination provided for herein in entering into the Senior
Loan Agreement and in making funds available to Borrowers thereunder.
Subordinated Lender waives notice of or proof of reliance on this Agreement and
protest, demand for payment and notice of default.
6.    Negative Covenants of Subordinated Lender. So long as any of the Senior
Obligations shall remain outstanding or the obligation of Senior Lender to
extend credit to Borrowers remains in effect, Subordinated Lender shall not,
without the prior written consent of Senior Lender:
(a)    sell, assign, or otherwise transfer, in whole or in part, the
Subordinated Obligations or any interest therein to any other Person (a
“Transferee”) or create, incur or suffer to exist any security interest, lien,
charge or other encumbrance whatsoever upon the Subordinated Obligations in
favor of any Transferee unless (i) such action is made expressly subject to this
Agreement and (ii) the Transferee expressly acknowledges to Senior Lender, by a
writing in form and substance satisfactory to Senior Lender, the subordination
provided for herein and agrees to be bound by all of the terms hereof;
(b)    permit any of the Subordinated Loan Documents to be amended, modified or
otherwise supplemented; or
(c)    commence, or join with any creditors other than Senior Lender in
commencing any Proceeding.

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7.    Senior Obligations Unconditional. All rights and interests of Senior
Lender hereunder, and all agreements and obligations of Subordinated Lender and
the Debtors hereunder, shall remain in full force and effect irrespective of:
(a)    any lack of validity or enforceability of any Senior Security Documents
or any other Senior Loan Documents;
(b)    any change in the time, manner or place of payment of, or in any other
term of, all or any of the Senior Obligations, or any amendment or waiver or
other modification, whether by course of conduct or otherwise, of the terms of
the Senior Loan Agreement or any other Senior Loan Document;
(c)    any exchange, release or non-perfection of any security interest in any
Collateral, or any release, amendment, waiver or other modification, whether in
writing or by course of conduct or otherwise, of all or any of the Senior
Obligations or any guarantee thereof; or
(d)    any other circumstances which otherwise might constitute a defense
available to, or a discharge of, the Debtors in respect of the Senior
Obligations, or of either Subordinated Lender or the Debtors in respect of this
Agreement.
8.    Representations and Warranties. Subordinated Lender represents and
warrants to Senior Lender that:
(a)    the Subordinated Loan Documents (v) have been issued to it for good and
valuable consideration, (vi) are owned by the Subordinated Lender free and clear
of any security interests, liens, charges or encumbrances whatsoever arising
from, through or under Subordinated Lender, other than the interest of Senior
Lender under this Agreement, (vii) are payable solely and exclusively to
Subordinated Lender and to no other Person and are payable without deduction for
any defense, offset or counterclaim, and (viii) constitute the only evidence of
the obligations evidenced thereby;
(b)    Subordinated Lender has the organizational power and authority and the
legal right to execute and deliver and to perform its obligations under this
Agreement and has taken all necessary corporate or other organizational action
to authorize its execution, delivery and performance of this Agreement;
(c)    this Agreement constitutes a legal, valid and binding obligation of
Subordinated Lender;
(d)    the execution, delivery and performance of this Agreement will not
violate any provision of any applicable law or contractual obligations of
Subordinated Lender and will not result in the creation or imposition of any
Lien on any of the properties or revenues of Subordinated Lender pursuant to any
applicable law affecting or any contractual obligation of Subordinated Lender,
except the interest of Senior Lender under this Agreement; and
(e)    no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without

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limitation, any stockholder or creditor of Subordinated Lender), is required in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement.
9.    No Representation by Senior Lender. Senior Lender has not made and does
not hereby or otherwise makes to Subordinated Lender, any representations or
warranties, express, or implied, nor does Senior Lender assume any liability to
Subordinated Lender with respect to: (a) the financial or other condition of
obligors under any instruments of guarantee with respect to the Senior
Obligations,;(b) the enforceability, validity, value or collectibility of the
Senior Obligations or the Subordinated Obligations, any collateral therefor, or
any guarantee or security which may have been granted in connection with any of
the Senior Obligations or the Subordinated Obligations; or 10. the Debtors’
title or right to transfer any collateral or security.
11.    Waiver of Claims. To the maximum extent permitted by law, Subordinated
Lender waives any claim it might have against Senior Lender with respect to, or
arising out of, any action or failure to act or any error of judgment,
negligence, or mistake or oversight whatsoever on the part of Senior Lender, or
its directors, officers, employees or agents with respect to any exercise of
rights or remedies under the Senior Loan Documents or any transaction relating
to the Collateral. Neither Senior Lender, nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Debtors or Subordinated Lender or any other Person or to take any other
action whatsoever with regard to the Collateral or any part thereof.
12.    Provisions Applicable After Bankruptcy: No Turnover. The provisions of
this Agreement shall continue in full force and effect notwithstanding the
occurrence of any Insolvency Event. To the extent that Subordinated Lender has
or acquires any rights under Section 362, 363 or 364 of the Bankruptcy Code with
respect to the Collateral, Subordinated Lender hereby agrees not to assert such
rights without the prior written consent of Senior Lender; provided, that, if
requested by Senior Lender, Subordinated Lender shall seek to exercise such
rights in the manner requested by Senior Lender, including the rights in
payments in respect of such rights. Subordinated Lender (both in its capacity as
Subordinated Lender and in its capacity as a party which may be obligated to
Debtors or any of Debtors’ Affiliates with respect to contracts which are part
of Senior Lender’s Collateral) agrees not to initiate or prosecute or encourage
any other Person to initiate or prosecute any claim, action, objection or other
proceeding (a) challenging the enforceability of Senior Lender’s claim (b)
challenging the enforceability of any liens or security interests in assets
securing the Senior Obligations or (c) asserting any claims which the Debtors
may hold with respect to Senior Lender, (d) objecting to any sale or other
disposition of Debtors’ assets consented to by Senior Lender in any Proceeding
or any borrowing or grant of any lien by Debtors consented to by Senior Lender
in any such Proceeding.
13.    Further Assurances. Subordinated Lender and the Debtors, at their own
expense and at any time from time to time, upon the written request of Senior
Lender will promptly and duly execute and deliver such further instruments and
documents and take such further actions as Senior Lender reasonably may request
for the purposes of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted.

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14.    Expenses.
(a)    The Debtors will pay or reimburse Senior Lender, upon demand, for all its
costs and expenses in connection with the enforcement or preservation of any
rights under this Agreement, including, without limitation, fees and
disbursements of counsel to Senior Lender.
(b)    The Debtors will pay, indemnify, and hold each Senior Lender harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions (whether sounding in contract, tort or on any other ground),
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of, or in any other way arising out of or relating to this
Agreement or any action taken or omitted to be taken by any Senior Lender with
respect to any of the foregoing.
15.    Provisions Define Relative Rights. This Agreement is intended solely for
the purpose of defining the relative rights of Senior Lender on the one hand and
Subordinated Lender on the other, and no other Person shall have any right,
benefit or other interest under this Agreement.
16.    Legend. Subordinated Lender and the Debtors will cause each of the
Subordinated Loan Documents (including, without limitation, any promissory notes
evidencing the Subordinated Obligations) to bear upon its face a legend
referring to this Agreement and indicating that such documents are subordinated
as provided herein.
17.    Powers Coupled With An Interest. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until the Senior Obligations are paid in full and the obligation of Senior
Lender to extend credit under the Senior Loan Documents is irrevocably
terminated.
18.    Notices. All notices, requests and demands to or upon Senior Lender, the
Debtors or Subordinated Lender to be effective shall be in writing (or by telex,
fax or similar electronic transfer confirmed in writing) and shall be deemed to
have been duly given or made (a) when delivered by hand or (b) if given by mail,
when deposited in the mails by certified mail, return receipt requested, or (c)
if by telex, fax or similar electronic transfer, when sent and receipt has been
confirmed, addressed as follows:
If to Senior Lender:        MidCap Business Credit LLC
                    433 South Main Street
                    West Hartford, CT 06110
                    Attention:    Portfolio Manager for Industrial
                            Services of America, Inc.
                    Fax No.:     (800) 217-0500
with a copy to:            Stradley Ronon Stevens & Young, LLP
                    100 Park Avenue, Suite 3210
                    New York, NY 10017
                    Attention:     Gary P. Scharmett, Esq.
                    Fax No.:     (646) 862-7180

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If to Subordinated Lender:    7100 Grade Lane LLC
                    1208 Park Hills Court
                    Louisville, Kentucky 40207
                    Attention:     Orson Oliver
                    Fax No.:     None
                    E-mail:        ooliver@aljsco.com
If to the Debtors:        Industrial Services Of America, Inc.
                    7100 Grade Lane
                    Louisville, Kentucky 40213
                    Attention:     Todd Phillips
                    Fax No.:     None
                    E-mail:        TPhillips@isa-inc.com
Senior Lender, the Debtors and Subordinated Lender may change their respective
addresses and transmission numbers for notices by notice in the manner provided
in this Section.
19.    Counterparts. This Agreement may be executed by one or more of the
parties on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
Delivery of an executed signature page to this Agreement by facsimile
transmission or other electronic communication shall be as effective as delivery
of a manually signed counterpart of this Agreement.
20.    Severability. Any provision of this Agreement 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 in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
21.    Integration. This Agreement represents the agreement of Senior Lender and
Subordinated Lender with respect to the subject matter hereof and there are no
promises or representations by Senior Lender or Subordinated Lender relative to
the subject matter hereof not reflected herein.
22.    Amendments in Writing; No Waiver: Cumulative Remedies.
(a)    None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
Senior Lender, the Debtors and Subordinated Lender; provided that any provision
of this Agreement may be waived by Senior Lender in a letter or agreement
executed by Senior Lender or by telex or facsimile transmission from Senior
Lender.
(b)    No failure to exercise, nor any delay in exercising, on the part of
Senior Lender or Subordinated Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.

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(c)    The rights and remedies herein provided are cumulative, may be exercised
singly or concurrently and are not exclusive of any other rights or remedies
provided by law.
23.    Section Headings. The section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
24.    Successors and Assigns.
(a)    This Agreement shall be binding upon the successors, heirs,
administrators, executors and assigns of the Debtors and Subordinated Lender and
shall inure to the benefit of Senior Lender and their successors and assigns.
(b)    Upon a successor Senior Lender becoming Senior Lender under the Senior
Loan Agreement, such successor Senior Lender automatically shall become Senior
Lender hereunder with all the rights and powers of Senior Lender hereunder
without the need for any further action on the part of any party hereto.
25.    Invalidated Payments. To the extent that Senior Lender receives payments
on, or proceeds of Collateral for, the Senior Obligations which are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Debtors, a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law, or equitable cause, then
to the extent of such payment or proceeds received, the Senior Obligations, or
part thereof, intended to be satisfied shall be revived and continue in full
force and effect as if such payments or proceeds had not been received by Senior
Lender.
26.    Specific Performance. Senior Lender is hereby authorized to demand
specific performance of this Agreement at any time when Subordinated Lender
shall have failed to comply with any of the provisions of this Agreement
applicable to Subordinated Lender whether or not the Debtors shall have complied
with any of the provisions hereof applicable to the Debtors, and Subordinated
Lender hereby irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of specific performance.
27.    GOVERNING LAW: CONSENT TO JURISDICTION AND VENUE. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CONNECTICUT APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. EACH OF THE DEBTORS, SUBORDINATED LENDER AND SENIOR LENDER HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CONNECTICUT
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
AMONG THE DEBTORS, SUBORDINATED LENDER AND SENIOR LENDER PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS

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AGREEMENT OR ANY OF THE SENIOR LOAN DOCUMENTS, PROVIDED, THAT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF CONNECTICUT AND, PROVIDED, FURTHER THAT NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE SENIOR LENDER FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SENIOR OBLIGATIONS, OR TO ENFORCE A
JUDGEMENT OR OTHER COURT ORDER IN FAVOR OF SENIOR LENDER. EACH OF THE DEBTORS
AND SUBORDINATED LENDER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH OF THE
DEBTORS AND SUBORDINATED LENDER HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. EACH OF THE DEBTORS AND SUBORDINATED LENDER HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINTS AND OTHER PROCESS ISSUED IN ANY SUCH ACTION
OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO IT AT THE ADDRESS SET
FORTH IN THE CREDIT AGREEMENT OR BENEATH ITS SIGNATURE LINE BELOW, AS THE CASE
MAY BE, AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
THE DEBTORS’ OR SUBORDINATED LENDER’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
28.    MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE PARTIES ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE SENIOR
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound jointly
and/or severally, have duly executed this Agreement the day and year first
written above.
SUBORDINATED LENDER:

7100 GRADE LANE LLC

By: The Harry Kletter Family Limited Partnership,
a Kentucky limited partnership

By: Kletter Holding, LLC,
a Delaware limited liability company,
its General Partner

By:    /s/ Orson Oliver    
Name:    Orson Oliver
Title: President

[Signatures Continued on Following Page]

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[Signatures Continued from Previous Page]

SENIOR LENDER:

MIDCAP BUSINESS CREDIT LLC

By:      /s/ Steven A. Samson
Name: Steven A. Samson
Title: President

[Signatures Continued on Following Page]

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DEBTORS:

INDUSTRIAL SERVICES OF AMERICA, INC.

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

ISA INDIANA INC.
    
By:    /s/ Sean Garber
Name:    Sean Garber
Title: President

ISA LOGISTICS LLC

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

ISA REAL ESTATE, LLC

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

ISA INDIANA REAL ESTATE, LLC

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

7021 GRADE LANE LLC,
a Kentucky limited liability company

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

[Signatures Continued on Following Page]

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[Signatures Continued from Previous Page]

DEBTORS:

7124 GRADE LANE LLC,
a Kentucky limited liability company

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

7200 GRADE LANE LLC,
a Kentucky limited liability company

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