ex10-1.htm


    Exhibit
10.1

    FORBEARANCE
AGREEMENT

     

    This
FORBEARANCE AGREEMENT
(the “Agreement”) is made this as of the 23rd day of May, 2008 (the “Forbearance
Effective Date”), by and among SOVEREIGN BANK (the “Lender”),
INDUSTRIAL ENTERPRISES OF
AMERICA, INC. (the “Parent”), UNIFIDE INDUSTRIES, LIMITED LIABILITY
COMPANY (“Unifide”), PITT PENN OIL CO., LLC, (“Pitt
Penn”), EMC PACKAGING,
INC. (“EMC”), TODAYS WAY
MANUFACTURING LLC (“Today’s Way”), and PITT PENN HOLDING CO., LLC
(“Pitt Holding”, together with Parent, Unifide, Pitt Penn, EMC and Todays Way,
each a “Borrower” and collectively, the “Borrowers”).

     

    BACKGROUND

     

    A.           On
or about October 11, 2007, the Borrowers and the Lender entered into that
certain Credit Agreement (as amended from time to time through the date hereof,
the “Credit Agreement”) whereby the Lender agreed to extend to the Borrower
certain credit accommodations (the “Loan”).  Capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement.

     

    B.           Concurrently
with the execution of the Credit Agreement, the Borrowers executed and delivered
to the Lender that certain Note in the original principal amount of $5,000,000
(the “Revolving Credit Note”)

     

    C.           Concurrently
with the execution of the Credit Agreement, the Borrowers and the Lender entered
into that certain First Continued, Amended and Restated Security Agreement dated
as of October 11, 2007 (the “Security Agreement”) pursuant to which, among other
things, the Borrowers granted the Lender a first priority lien on, and security
interest in, substantially all of the Borrowers’ assets whether real and
personal, tangible and intangible and now existing or thereafter acquired
(collectively, the “Collateral”).

     

    D.           The
documents, instruments, agreements, certificates and statements that memorialize
and/or were executed in connection with the Loan, including, but not limited to,
the Credit Agreement, the Revolving Credit Note, Security Agreement, as the same
may have been or may be amended from time to time, are collectively referred to
as the “Loan Documents”.

     

    E.           The
following Events of Default have occurred and are continuing under the Credit
Agreement (collectively, the “Specified Events of Default”)
including:  (i) John Mazzuto ceasing to serve in the position of
Chairman of Parent’s Executive Committee, (ii) permitting Funded Debt to exist
in the sum of $3,700,000 in violation of the Credit Agreement, (iii) the failure
to provide enumerated items in the Post-Closing Letter; (iv) the failure to
timely deliver financial statements, or filing Form 10-K and 10-Q for the Parent
and its Subsidiaries as and when due; and (v) the occurrence and nonpayment of
an Overadvance as of March 31, 2008 in the amount of $
1,189,476.15.

     

    F.           On
or about February 8, 2008, the Lender notified the Borrowers of the occurrence
of certain of the Specified Events of Default.

     

    G.           As
a result of the occurrence of certain of the Specified Events of Default, on or
about March 26, 2008, the Lender terminated the Borrowers’ right to seek
Revolving Credit Loans.

     

    H.           The
Borrowers have requested the Lender to forbear from further exercising its
rights and remedies under the Loan Documents for a limited period of time to
enable the Borrowers to prepare a business plan and to pursue alternatives to
repay the Indebtedness under the Loan Documents in full.  Subject to
the terms and conditions contained herein, the Lender has agreed to the
Borrowers’ request,

     

    NOW,
THEREFORE, incorporating the Background section herein, and in consideration of
the mutual promises contained herein, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound, hereby, the Lender and the
Borrowers agree as follows:

     

    1. Acknowledgments.  To
induce the Lender to enter into this Agreement, the Borrowers, individually and
together, joint and severally, each acknowledge, agree, warrant, and represent
that:

     

    a. Acknowledgment of Specified
Events of Default; Termination Date; Waiver of Claims.  (1) the
Specified Events of Default enumerated in the Background Section of this
Agreement have occurred and are continuing, have not and cannot be cured, and
are material in nature; (2) the Lender is presently entitled to exercise its
rights and remedies under the Loan Documents and applicable law including but
not limited to acceleration of the Obligations; (3) as of March 26, 2008, the
Borrowers may not request, and the Lender is not obligated in any way to make
any Revolving Credit Loans; (4) the Loan Documents are valid and enforceable
against, and all of the terms and conditions of the Loan Documents are binding
as to, each such Borrower who is a party to such documents; (5) the Lender’s
liens and security interests in and to the Collateral as set forth in the
Background Section hereto are valid, legal, binding and properly recorded or
filed; (6) to the extent that any of the Loan Documents require notification by
the Lender to the Borrowers or any other party of the existence of any of the
Specified Events of Default and an opportunity to cure such Specified Events of
Default, such notice and period for cure were properly given by the Lender or
are hereby waived by the Borrowers; and (7) the Borrowers have no defenses,
set-offs or counterclaims against the Lender or, alternatively, to the extent
that any defenses, set-offs or counterclaims exist, the Borrowers hereby waive
any and all defenses, set-offs and counterclaims which they may have or claim to
have as of the date of this Agreement,

     

    b. Acknowledgment of
Obligations.  As of April 16, 2008, the following amounts
remain, outstanding under the Loan Documents (in addition to late fees,
activation fees, unused line fees, and all other sums recoverable by the Lender
thereunder), all without offset, counterclaims, or other defenses of any kind:
(i) $4,975,852.00 in unpaid principal Revolving Credit Loans, (ii) $15,091.17 in
accrued and unpaid interest under the Revolve Credit Loan Facility; and (iii)
accrued and unpaid attorneys’ fees and costs (collectively, the
“Obligations”).

     

    c. Adequate
Representation.  The Borrowers have each been represented by
legal counsel of their choice, understand and are fully aware of the terms
contained in this Agreement and have voluntarily, without coercion or duress of
any kind, entered into this Agreement and the documents executed in connection
with this Agreement.

     

    2. Forbearance
by Lender.  Without waiving the Specified Events of Default or
the Lender’s rights and remedies with respect thereto, and subject to the terms
and conditions set forth herein, the Loan Documents, and the documents executed
in connection with this Agreement, the Lender agrees to forbear in the exercise
of its rights and remedies under the Loan Documents as a result of the Specified
Events of Default until the earlier of (i) October 30, 2008 or (ii) the
occurrence of an Event of Default under this Agreement (the “Forbearance
Termination Date”).  On the Forbearance Termination Date, all the
Obligations will be deemed immediately due and payable, in full, with no further
notice or opportunity to cure.

     

    3. Release
by the Borrowers.  Each of the Borrowers, jointly and
severally, on behalf of themselves and any person or entity claiming by or
through any or all of them (collectively, the “Releasors”), hereby
unconditionally remise, release and forever discharge the Lender, its past and
present officers, directors, shareholders, agents, parent corporations,
subsidiaries, affiliates, trustees, administrators, attorneys, predecessors,
successors and assigns and the heirs, executors, administrators, successors and
assigns of any such person or entity, as releasees (collectively, the
“Releasees”), of and from any and all manner of actions, causes of action,
suits, debts, dues, accounts, bonds, covenants, contracts, agreements, promises,
warranties, guaranties, representations, liens, mechanics’ liens, judgments,
claims, counterclaims, crossclaims, defenses and/or demands whatsoever,
including claims for contribution and/or indemnity, whether now known or
unknown, past or present, asserted or unasserted, contingent or liquidated, at
law or in equity, or resulting from any assignment, if any (collectively, the
“Claims”), which any of Releasors ever had, now have, or may have against any of
the Releasees, for or by reason of any cause, matter or thing whatsoever,
arising from the beginning of time to the date hereof, including but not limited
to, any and all Claims relating to or arising from the lending or any other
relationship between any of the Releasees and any or all of the
Borrowers.  Each of the Borrowers warrants and represents that it has
not assigned, pledged, hypothecated and/or otherwise divested itself and/or
encumbered all or any part of the Claims being released hereby and that it
hereby agrees to indemnify and hold harmless any and all of Releasees against
whom any Claim so assigned, pledged, hypothecated, divested and/or encumbered is
asserted.

     

    4. Representations
and Warranties.  To induce the Lender to enter into this
Agreement, and as partial consideration for the terms and conditions contained
herein, the Borrowers make the following representations and warranties to the
Lender, each and all of which shall survive the execution and delivery of this
Agreement:

     

    a. Organization and
Authority.  Each Borrower is duly organized, validly existing
and in good standing under the laws of its state of
organization.  Each such Borrower has taken all necessary
organizational action to duly authorize the execution, delivery and
implementation of this Agreement and all documents, agreements and instruments
executed by such entity in connection herewith.

     

    b. Other
Consents.  No consent, waiver, approval or other authorization
of or by any court, administrative agency or other governmental or
quasi-governmental authority is required in connection with the execution and
delivery of or compliance with this Agreement or any other document or
instrument relating to this Agreement.

     

    c. No
Conflict.  The execution and delivery of this Agreement and all
other documents and instruments executed in connection herewith will not
conflict with, or result in a breach of (i) the terms, conditions or provisions
of the Borrowers’ respective organizational documents; or (ii) any mortgage,
lease, agreement, or other instrument, or any applicable law, judgment, order,
writ, injunction, decree, rule or regulation of any court, administrative agency
or other governmental authority to which any Borrower is a party or by which any
of the Borrowers’ respective properties are bound.

     

    d. Valid and Binding
Agreement.  This Agreement and each of the documents executed
pursuant hereto are legal, valid, and binding obligations of the Borrowers,
enforceable against each such party in accordance with their respective
terms.

     

    e. Compliance with
Laws.  The Borrowers are in compliance in all material respects
with all laws, regulations and requirements applicable to their business and
have not received, and have no knowledge of, any order or notice of any
governmental investigation or any violations or claims of violation of any law,
regulation or any governmental requirement applicable to any of
them.

     

    f. No Untrue or Misleading
Statements.  Neither this Agreement nor any other document
executed in connection herewith contains any untrue statement of a material fact
and/or omits any material fact necessary in order to make the statement, made,
in light of the circumstances under which it was made, accurate.

     

    g. Other Representations,
Warranties, and Covenants/Schedules.  Except with respect to
the Specified Events of Default, the Borrowers reaffirm all of their respective
representations, warranties, and covenants to the Lender contained in the Loan
Documents and the Borrowers warrant that all such representations, warranties,
and covenants are true and correct as of the Forbearance Effective
Date.

     

    5. Forbearance
Covenants.  The Borrowers, jointly and severally, covenant and
agree from the Forbearance Effective Date, and until satisfaction of the
Obligations, to do the following:

     

    a. Execution of Other
Documents.  At the Lender’s request, the Borrowers shall
execute and deliver or cause to be delivered to the Lender and/or file with the
appropriate offices, such documents, instruments, agreements, financing
statements, amendments and/or other things deemed necessary by the Lender, in
its sole discretion, to implement the substance and intent of this Agreement,
the Loan Documents, and the other documents executed in connection herewith or
therewith.

     

    b. Existing
Covenants.  The Borrowers shall continue to comply with all
covenants contained in the Loan Documents (except with respect to those which,
by their terms, specifically were satisfied as of certain dates prior to the
date hereof).

     

    c. Use of Cash or Other
Proceeds.  Until the Forbearance Termination Date, no Borrower
shall use any cash or other proceeds from the Borrowers’ businesses to pay any
personal expenses of any employee, shareholder, officer or director of the
Borrowers, or any personal expenses of any nature whatsoever of any affiliated
entity or person.  The Borrowers shall use said cash or other proceeds
only for actual and necessary operating expenses of the Borrowers (as described
on the Budget (defined herein) and payments to the Lender.

     

    d. Deposit and Disbursement
Accounts/Auto-Debit.  The Borrowers shall maintain all of their
deposit and disbursement accounts at the Lender.  The Lender is hereby
authorized to charge any account of the Borrowers at the Lender for any payment
due by the Borrower hereunder or under the Loan Documents.

     

    e. Mortgage.  On
the Forbearance Effective Date, Pitt Penn shall execute and deliver to the
Lender a mortgage (the “Mortgage”) against the real property owned, by Pitt Penn
located in Creighton PA (the “Property”) on terms and in form and substance
satisfactory to the Lender which such Mortgage shall create a first priority
mortgage lien against the Property.

     

    f. Default
Rate.  In addition to all other remedies available to the
Lender, interest shall accrue on the Obligations at the Default Rate from and
after March 26, 2008.  The Lender reserves, and the Borrowers’
acknowledge, the Lender’s right on the Forbearance Termination Date to collect
the difference between the Default Rate as accrued and the interest on the
Obligations actually paid hereunder,

     

    g. Replacement
Financing.  On or before one (1) business day after receipt by
the Borrowers, the Borrowers shall provide the Lender with a copy of any
financing or equity commitment, term sheet, or agreement regarding the
refinancing of the Obligations, and copies, on an ongoing basis, of all
non-privileged correspondence and other documentation relating to such
refinancing efforts,

     

    h. Access.  The
Borrower shall provide the Lender and its consultants (if any) with reasonable
access to all financial books, records and files (whether such information is
stored on any computer or disk) to, among other things, verify cash receipts,
collateral levels, and results of operations.  In particular, but
without limitation, Borrower shall provide the Lender access to its facilities
and all of its financial information every two weeks to allow the Lender to
verify the information in the Borrowing Base Certificate and the amount of
payments made to the Lender.  Reasonable fees and expenses incurred by
the Lender in connection with the foregoing shall be paid or reimbursed by the
Borrowers.

     

    i. Cash Flow
Budget.  Attached hereto, and incorporated by reference as
Exhibit A, is a cash flow statement, prepared by the Borrowers which enumerates
in detail on a weekly basis Pitt Penn and EMC’s (together, the “Operating
Borrowers”) projected, collections and cash expenses of operations from the
Forbearance Effective Date through the week ending August 1, 2008 (the
“Budget”).

     

    j. [reserved]

     

    k. Reporting
Requirements.  In addition to the reporting requirements set
forth in the Loan Documents, on the first (1st) and fifteenth (15th) day of each
month (each such day, a “Reporting Date”), the Operating Borrowers shall provide
to the Lender:

     

    (1) A
comparison statement, as approved by the Borrowers’ chief financial officer,
comparing actual results of operations to the Budget for all prior periods and
projecting operations for an additional two (2) week period; provided that the
Borrowers’ actual expenditures for any two (2) week period (calculated on a
rolling basis) shall not exceed 10% of the aggregate expenditures on the Budget
for any such two (2) week period;

     

    (2) a report
listing all of the Borrowers’ outstanding accounts receivable and accounts
payable and respective agings thereof as of the last day of the immediately
preceding two (2) week period;

     

    (3) A
Borrowing Base Certificate (the last such Certificate having been provided by
the Borrowers to the Lender as of March 31, 2008), signed by the chief financial
officer of the Operating Borrowers, reflecting, as of the last day of the
immediately preceding week, the amount of Obligations compared to the Borrowing
Base; and

     

    (4) On August
1, 2008 and each Reporting Date thereafter, the Operating Borrowers shall
confirm that the Operating Borrowers’ aggregate operating revenue actually
received for the immediately preceding two (2) week period exceeds the Operating
Borrowers’ aggregate operating expenses actually paid during such
period.

     

    l. Financial
Reports.

     

    (1) On or
before June June 30, 2008, the Parent shall file its Form 10K for fiscal year
ended June 30, 2007 with the Securities and Exchange Commission;

     

    (2) On or
before July 31, 2008, the Parent shall file its Form 10Qs for fiscal quarters
ended September 30, 2007, December 31, 2007; and March 31, 2008 with Securities
and Exchange Commission; and

     

    (3) On or
before September 30, 2008, the Parent shall file its Form 10K for fiscal year
ended June 30, 2008 with Securities and Exchange Commission.

     

    m. Payments.

     

    (1) On the
last day of each calendar month, the Borrowers shall pay the Lender interest on
the then outstanding principal amount of the Revolving Credit Loans at rate
equal to the Prime Rate plus one percent (1%) in arrears;

     

    (2) On each
date below, the Borrowers shall pay the following additional amounts to the
Lender to be applied as a permanent reduction of the Obligations:

     

    (A) On August
1, 2008, 50% of all Excess Cash Proceeds received by the Borrowers during the
weeks beginning July 14, 2008 and July 21, 2008;

     

    (B) On August
15, 2008, 50% of all Excess Cash Proceeds received by the Borrowers during the
weeks beginning July 28, 2008 and August 4, 2008;

     

    (C) On
September 1, 2008, 50% of all Excess Cash Proceeds received by the Borrowers
during the weeks beginning August 11, 2008 and August 18, 2008;

     

    (D) On
September 15, 2008, 50% of all Excess Cash Proceeds received by the Borrowers
during the weeks beginning August 25, 2008 and September 1, 2008;

     

    (E) On
October 1, 2008, 50% of all Excess Cash Proceeds received by the Borrowers
during the weeks beginning September 8, 2008 and September 15, 2008;
and

     

    (F) On
October 15, 2008, 50% of all Excess Cash Proceeds received by the Borrowers
during the weeks beginning September 22, 2008 and September 29,
2008;

     

    provided however,
that the term “Excess Cash Proceeds” as used above shall mean the Operating
Borrower’s aggregate cash proceeds received during any two (2) week period noted
less the Operating Borrowers’ aggregate expenses reflected on the Budget and
actually paid during such period.

     

    n. No Additional Liens or
Indebtedness.  No Borrower shall become an obligor or guarantor
with respect to any Indebtedness owed to any entity other than the
Lender.  Further, no Borrower shall pledge any of its assets to any
entity other than the Lender or allow, voluntary or involuntary, any liens or
security interests to attach to any of its assets other than liens and security
interests in favor of the Lender.

     

    o. Retention of Investment
Banker.  The Borrowers shall provide the Lender copies of any
proposal for the engagement of an investment banker or business broker received
by the Borrowers relating to any Borrower or division thereof.  On or
before September 30, 2008, the Borrowers shall retain an investment banker on
terms and conditions satisfactory to the Lender.  Such retention shall
authorize the investment banker, on behalf of the Borrowers and its
shareholders, to commence a marketing effort for all, or substantially all, of
the assets of the Borrowers, to evaluate any proposals made pursuant to such
efforts, to identify the highest and best proposal and facilitate such sales or
other transactions on behalf of the Borrower as the Consultant may deem
necessary to repay the Obligations, in full on or before the Forbearance
Termination Date.

     

    6. Conditions
Precedent.  The effectiveness of this Agreement, and the
Lender’s obligations hereunder, are conditioned upon the fulfillment by the
Borrowers, as the case may be, of all of the following conditions
precedent:

     

    a. Delivery of
Documents.  The Borrowers shall deliver to the Lender the
following documents, in form and substance satisfactory to the Lender, and if
such documents require signatures, then executed by the appropriate
parties:

     

    
      	
              i)  

            	
              This
      Agreement;

            


    

     

    
      	
              ii)  

            	
              a
      Mortgage in form and substance satisfactory to the Lender duly executed by
      Pitt Penn;

            


    

     

    
      	
              iii)  

            	
              Corporate
      authority documents for each Borrower regarding this Agreement;
      and

            


    

     

    
      	
              iv)  

            	
              Such
      other documents as requested by the
Lender.

            


    

     

    b. Payment of Outstanding
Interest.  The Borrower shall pay the Lender accrued and unpaid
interest on the Loans through the date of execution of this
Agreement;

     

    c. [reserved]

     

    d. Payment of Forbearance
Fee.  The Borrower shall pay the Lender a Forbearance Fee in
the aggregate amount of $25,000.00, the full amount of which shall be deemed
earned by the Lender upon execution of this Agreement.  The Borrower
shall pay $12,500.00 of the Forbearance Fee upon execution of this
Agreement.  The balance of the Forbearance Fee shall be paid on or
before the Forbearance Termination Date; and

     

    e. Payment of Attorneys’
Fees.  The Borrower shall have paid all amounts necessary to
reimburse the Lender for the reasonable fees and costs incurred by the Lender,
including, without limitation, any fees and costs incurred by the Lender’s
attorneys and accountants in connection with the drafting, negotiation and
execution of this Agreement and the other documents executed in connection
herewith.

     

    7. Events of
Default.  Each of the following shall constitute an event of
default (“Event of Default”) under this Agreement:

     

    a. Payment.  Failure
of any Borrower to pay any amount as and when due hereunder or under this
Agreement or the Loan Documents;

     

    b. Representations and
Warranties.  Any representation or warranty made by any of the
Borrowers in this Agreement or under the Loan Documents shall be false or
misleading in any material respect as of the date made;

     

    c. Covenants.  Failure
of the Borrowers to observe any covenant set forth in this Agreement or the Loan
Documents;

     

    d. Agreements
Invalid.  The validity, binding nature of, or enforceability of
any term or provision of this Agreement or any of the Loan Documents is disputed
by, on behalf of, or in the right or name of any Borrower or any material term
or provision of this Agreement or any of the Loan Documents is found or declared
to be invalid, avoidable, or unenforceable by any court of competent
jurisdiction;

     

    e. Cross-Defaults.  The
occurrence of a default or event of default (other than the Specified Events of
Default) under any of the Loan Documents; or

     

    f. Material Adverse
Change.  A material adverse change occurs in the financial
condition or credit worthiness of any Borrower or with respect to any of the
Collateral, with such determination to be made by the Lender in its sole and
absolute discretion, including, but, not limited to, any change or potential
change that occurs or which could occur in any Borrower’s financial condition or
assets as a result of any action taken by, or on behalf of, any creditor or
group of creditors of any Borrower.

     

    8. Remedies.  An
Event of Default hereunder shall constitute an Event of Default under the Loan
Documents.  Upon the Forbearance Termination Date, the Lender’s
obligations hereunder shall terminate, and the Lender shall have and may
exercise, at its option, all of the remedies set forth herein, in any of the
documents executed in connection herewith, in any of the Loan Documents and for
under applicable law, including, without limitation, the following:

     

    Confession of
Judgment.  EACH BORROWER HEREBY IRREVOCABLY
AUTHORIZES AND EMPOWERS THE LENDER, BY ITS ATTORNEY, OR THE PROTHONOTARY OR THE
CLERK OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA, OR IN ANY
JURISDICTION WHERE PERMITTED BY LAW, UPON THE FORBEARANCE TERMINATION DATE OR AT
ANY TIME THEREAFTER, TO APPEAR FOR SUCH BORROWER AND CONFESS AND ENTER JUDGMENT
AGAINST IT IN FAVOR OF THE LENDER FOR THE AMOUNT OF ALL OF THE OBLIGATIONS UNDER
THE LOAN DOCUMENTS, TOGETHER WITH REASONABLE COSTS OF SUIT AND WITH REASONABLE
AND ACTUAL COLLECTION COSTS (INCLUDING REASONABLE ATTORNEYS’ FEES), WITH OR
WITHOUT DECLARATION, AND WITHOUT STAY OF EXECUTION, AND WITH RELEASE OF ERRORS
AND THE RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS AGREEMENT OR A
COPY VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT.  EACH
BORROWER HEREBY WAIVES AND RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT,
STAY OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR HEREAFTER
ENACTED.  THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY THE
EXERCISE THEREOF AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE FULLY PAID,
PERFORMED, DISCHARGED AND SATISFIED.

     

    BEING FULLY AWARE OF ITS RIGHTS TO
PRIOR NOTICE AND HEARING ON THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED
AGAINST IT BY THE LENDER HEREUNDER BEFORE JUDGMENT CAN BE ENTERED AND BEFORE ANY
OF ITS ASSETS CAN BE GARNISHED AND ATTACHED, EACH BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND
CONSENTS TO THE LENDER, UPON THE FORBEARANCE TERMINATION DATE OR AT ANY TIME
THEREAFTER, ENTERING JUDGMENT AGAINST SUCH BORROWER BY CONFESSION AND ATTACHING
AND GARNISHING THE ACCOUNTS AND OTHER ASSETS OF SUCH BORROWER WITHOUT PRIOR
NOTICE OR OPPORTUNITY FOR A HEARING.  EACH BORROWER ACKNOWLEDGES THAT
IT HAS HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS
AGREEMENT AND FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING
PROVISIONS CONCERNING CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO IT BY
SUCH COUNSEL.

     

    9. Miscellaneous.

     

    a. Ratification and
Confirmation.  Except as amended and supplemented hereby, all
of the terms and provisions of the Loan Documents shall remain in full force and
effect and, except as expressly amended hereby, are hereby ratified and
confirmed.  The Borrowers hereby ratify and confirm that the Loan
Documents are valid and binding obligations and enforceable in accordance with
their respective terms.  All Indebtedness to the Lender presently or
hereafter outstanding under the Loan Documents shall continue to be secured by
the Collateral, and this Agreement does not constitute a novation of the Loan or
the Loan Documents.  All Indebtedness to the Lender is cross-defaulted
and cross-collateralized with all other obligations of the Borrowers to the
Lender.

     

    b. Reaffirmation of Jury Trial
Waiver Clauses.  The Borrowers reaffirm the Jury Trial Waiver
clauses contained in the Loan Documents.  Further, each party waives
any right it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to actual damages.  EACH BORROWER
ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF
THIS AGREEMENT AND THAT THE LENDER WOULD NOT EXTEND CREDIT TO THE BORROWERS IF
THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF THIS
AGREEMENT.

     

    c. Conflict.  In
the event and to the extent of any conflict between the provisions of this
Agreement or the documents executed in connection with this Agreement and the
provisions of the Loan Documents, the provisions of this Agreement or the
documents executed in connection with this Agreement with respect thereto shall
govern.

     

    d. Costs, Expenses and
Attorneys’ Fees.  The Borrowers agree to pay, on or before the
Forbearance Termination Date, all costs and expenses incurred by the Lender in
connection with the negotiation, preparation, administration and/or enforcement
under Loan Documents, this Agreement and all other matters related thereto,
including, without limitation, all fees and out-of-pocket expenses of counsel
for the Lender.  The foregoing costs, expenses and fees shall survive
any termination of this Agreement.

     

    e. Survival of Representations
and Warranties.  All representations and warranties contained
in this Agreement, the documents executed in connection herewith and the Loan
Documents shall survive the execution of this Agreement and are material and
have been or will be relied upon by the Lender, notwithstanding any
investigation made by any person, entity or organization on either the Lender’s
or any of the Borrowers’ behalf.  No implied representations or
warranties are created or arise as a result of this Agreement.  For
purposes of the foregoing, all statements in any certificate or other writing
required by this Agreement to be delivered to the Lender on or after the
execution of this Agreement by or on behalf of any Borrower pursuant to and in
accordance with this Agreement or in connection with the transactions
contemplated thereby shall be deemed to be representations and warranties
contained in this Agreement.

     

    f. No
Waiver.  No failure or delay on the part of the Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy.

     

    g. Notices.  Any
notice given pursuant to this Agreement, or pursuant to any other Loan Document
shall be in writing, including telexes, telegrams, telecopies or electronic
mail.  Notice given by telegrams, telecopies or other electronic mail,
or by telex, shall be deemed to have been given and received when
sent.  Notice given by overnight mail courier shall be deemed to have
been given and received on the date delivered by such overnight
courier.  Notice by mail shall be deemed to have been given and
received three (3) days after the date deposited, when sent by certified mail,
first class, postage prepaid, and addressed as follows:

     

    If to the
Borrowers:

    


    Industrial
Enterprises of America, Inc., et al.

    426
Freeport Rd.

    Creighton,
PA 15030

    Attn:
James W. Margulies, CEO

    Telephone:

    Telecopy:

    


    With a
copy to:

    Margulies
& Levinson LLP

    24300
Chagrin Boulevard

    Cleveland,
Ohio 44122

    Attn:
Jeffrey M. Levinson, Esquire

    Telephone:
216-514-4935

    Telecopy:
216-514-4936

    


    If to the
Lender:

    


    Sovereign
Bank

    Two
Aldwyn Lane

    East
Lancaster Ave. & Sproul Rd.

    Villanova,
PA 19085-1420

    Attn:
Thomas Young, VP

    Telephone:
610-526-6429

    Telecopy:

    


    


    With a
copy to:

    


    REED
SMITH LLP

    2500 One
Liberty Place

    1650
Market Street

    Philadelphia,
PA 19103-7301

    Attn:
Derek J. Baker, Esquire

    Telephone
No.: 215-851-8100

    Telecopy
No.: 215-851 -1420

    


    A party
may change its address by giving written notice of the changed address to the
other party, as specified herein.

     

    h. Headings.  The
headings and underscoring of articles, sections and clauses have been included
herein for convenience only and shall not be considered in interpreting this
Agreement.

     

    i. Governing
Law.  This Agreement and all of the Loan Documents shall be
construed in accordance with and governed by the internal laws of the
Commonwealth of Pennsylvania, irrespective of the governing law clauses in the
Loan Documents.

     

    j. Consent to Jurisdiction and
Service of Process.  Each Borrower irrevocably appoints each
and every officer of such Borrower as its attorneys upon whom may be served, by
regular or certified mail at the address set forth herein, any notice, process
or pleading in any action or proceeding against it arising out of or in
connection with this Agreement or any of the other Loan Documents, and, with
respect to any action or proceeding respecting this Agreement, each Borrower
hereby (i) consents that any action or proceeding against it be commenced and
maintained in any court within the Commonwealth of Pennsylvania or any the
United Slates District Court in the Commonwealth of Pennsylvania by service of
process on any such officer; (ii) agrees that the said courts shall have
jurisdiction with respect to the subject mailer hereof and the person of each
Borrower; and (iii) waives any objection that such Borrower may now or hereafter
have as to the venue of any such suit, action or proceeding brought in such a
court or that such court is an inconvenient forum.  Notwithstanding
the foregoing, the Lender, in its absolute discretion, may also initiate
proceedings in the courts of any other jurisdiction in which any Borrower may be
found or in which any of the Borrowers’ properties or the Collateral may be
located.

     

    k. Integration.  This
Agreement and the documents referred to comprising or relating to this Agreement
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof.

     

    l. Amendment and
Waiver.  No amendment of this Agreement, and no waiver,
discharge or termination of any one or more of the provisions hereof, shall be
effective unless set forth in writing and signed by all of the parties
hereto.

     

    m. Successors and
Assigns.  This Agreement (i) shall be binding upon the Lender
and the Borrowers and upon their respective nominees, successors and assigns,
and (ii) shall inure to the benefit of the Borrowers and the Lender and to
their respective nominees, successors and assigns; provided however,
that the Borrowers may not assign their rights hereunder or any interest herein
without obtaining the prior written consent of the Lender, and any such
assignment, or attempted assignment shall be void and of no effect with respect
to the Lender.

     

    n. Severability of
Provisions.  Any provision of this Agreement that is held to be
inoperative, unenforceable, void or invalid in any jurisdiction shall, as to
that jurisdiction, be ineffective, unenforceable, void or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability or validity of that provision in any other jurisdiction, and to
this end the provisions of this Agreement are declared to be
severable.

     

    o. No Third-Party
Beneficiaries.  Notwithstanding anything to the contrary
contained herein, no provision of this Agreement or any other document executed
in connection herewith is intended to benefit any party other than the
signatories hereto nor shall any such provision be enforceable by any other
party.

     

    p. Indemnification.

     

    (1) If, after
receipt of any transfer or payment of all or any part of any one or all of the
Obligations, the Lender is compelled to surrender such transfer or payment to
any person or entity for any reason (including, without limitation, a
determination that such payment is void or voidable as a preference or
fraudulent conveyance, an impermissible setoff, or a diversion of trust funds),
then this Agreement and the other documents executed in connection herewith
shall continue in full force and effect, and the Borrowers shall be liable
jointly and severally, for, and shall indemnify, defend and hold harmless the
Lender with respect to the full amount so surrendered.

     

    (2) The
provisions of this section shall survive the termination of this Agreement and
shall be and remain effective notwithstanding the payment of any or all of the
Obligations to the Lender, the cancellation of any of the Loan Documents, the
release of any encumbrance securing the Obligations or any other action, which
the Lender may have taken in reliance upon its receipt of such
payment.  Any cancellation of any of the Loan Documents, release of
any encumbrance or other such action shall be deemed to have been conditioned
upon any payment of any or all of the Obligations having become final and
irrevocable.

     

    q. Counterparts.  This
Agreement may be executed in any number of counterparts and by the different
parties on separate counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same Agreement.  This Agreement shall be deemed to have been executed
and delivered when the Lender has received counterparts hereof executed by all
parties listed on the signature pages below.

     

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    IN
WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be
executed individually, or by their duly authorized officers on the date first
written above.

     

    
      	
              WITNESS:

            	
              INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.

            
	 
      	 
      
	
              By:                                                                

              Name:

            	
              By:                                                                

              Name:

              Title:                                                                

            
	 
      	 
      
	
              WITNESS:

               

            	
              UNIFIDE
      INDUSTRIES, LIMITED LIABILITY COMPANY

            
	 
      	 
      
	
              By:                                                                

              Name:

            	
              By:                                                                

              Name:

              Title:                                                                

            
	 
      	 
      
	
              WITNESS:

               

            	
              PITT
      PENN OIL CO., LLC

               

            
	 
      	 
      
	
              By:                                                                

              Name:

            	
              By:                                                                

              Name:

              Title:                                                                

            
	 
      	 
      
	
              WITNESS:

               

            	
              EMC
      PACKAGING, INC.

            
	 
      	 
      
	
              By:                                                                

              Name:

            	
              By:                                                                

              Name:

              Title:                                                                

            
	 
      	 
      
	
              WITNESS:

            	
              TODAYS
      WAY MANUFACTURING LLC

            
	 
      	 
      
	
              By:                                                                

              Name:

            	
              By:                                                                

              Name:

              Title:                                                                

            


    

    


    (Signatures
continue on following page)


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	 
      	 
      
	
              WITNESS:

               

            	
              PITT
      PENN HOLDING CO., LLC

            
	 
      	 
      
	
              By:                                                                

              Name:

            	
              By:                                                                

              Name:

              Title:                                                                

            
	 
      	 
      
	
              WITNESS:

               

            	
              NEWCO

            
	 
      	 
      
	
              By:                                                                

              Name:

            	
              By:                                                                

              Name:

              Title:                                                                

            
	 
      	 
      
	 
      	
              SOVEREIGN
      LENDER

            
	 
      	 
      
	 
      	
              By:                                                                

              Name:

              Title: