Exhibit 10.7

TERM LOAN NOTE

|           |              
|---------- | -------------
|$8,800,000 | July 30, 2010

For value received, the undersigned, INDUSTRIAL
SERVICES OF AMERICA, INC., a Florida corporation (ISA), ISA INDIANA,
INC., an Indiana corporation (ISA Indiana), and each of the other
Persons that become a Borrower under the Credit Agreement after the Closing
Date (such Persons, together with ISA and ISA Indiana, are each a Borrower
and, collectively, Borrowers), hereby jointly and severally promise to
pay to the order of FIFTH THIRD BANK, an Ohio banking corporation (Lender),
the principal sum of EIGHT MILLION EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS
($8,800,000), on the dates and in the principal amounts provided in the Credit
Agreement of even date herewith (as the same may be hereafter amended,
supplemented or restated from time to time, the Credit Agreement) by
and among Borrowers, the Persons party thereto as Lenders (including, without
limitation, Lender), and Fifth Third Bank, as Agent and LC Issuer, in lawful
money of the United States of America and in immediately available funds, and
to pay interest on the unpaid principal balance of this Term Loan Note (this Note),
in like money and funds, for the period commencing on the date of this Note
until such Indebtedness evidenced by this Note shall be paid in full, at the
rates per annum and on the dates and at the offices provided in the Credit
Agreement. The entire unpaid principal balance of this Note, together with all
accrued but unpaid interest, shall, if not sooner paid or required to be paid
pursuant to the Credit Agreement, be due and payable on July 31, 2013.

This Note is one of the Term Loan Notes referred to
in the Credit Agreement and is entitled to the benefits and security, and is
subject to the terms and conditions, of the Credit Agreement, including,
without limitation, acceleration upon the terms provided therein and in the
other Loan Documents. All capitalized terms used herein which are defined in
the Credit Agreement and not otherwise defined herein shall have the meanings
given in the Credit Agreement.

The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for voluntary and mandatory
prepayments of Loans upon the terms and conditions specified therein. This Note
is subject to voluntary prepayment, in full or in part, in accordance with, and
subject to the terms of, the Credit Agreement.

If, at any time, the rate of interest contracted for, and computed in
the manner provided, in the Credit Agreement (Applicable Rate),
together with all fees and charges as provided for in the Credit Agreement or
in any other Loan Document (collectively, the Charges), which are
treated as interest under applicable law, exceeds the maximum lawful rate (the
Maximum Rate) allowed under applicable law, it is agreed that such
contracting for, charging or receiving of such excess amount was an accidental
and bona fide error and the provisions of this paragraph will govern and
control. The rate of interest payable under the Credit Agreement and this Note,
together with all Charges, shall be limited to the Maximum Rate; provided,
however, that any subsequent reduction in the Daily LIBOR-Based Rate
or the LIBOR Tranche-Based Rate (or in the interest rate equal to the Prime Rate
plus the Applicable Prime Rate Margin in the event LIBOR Rate Loans are no
longer permitted or available under the Credit Agreement) shall not

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reduce the Applicable Rate below the Maximum Rate until the total
amount of interest earned under the Credit Agreement and this Note, together
with all Charges, equals the total amount of interest which would have accrued
at the Applicable Rate if the Applicable Rate had at all times been in effect.
If any payment hereunder, for any reason, results in Borrowers having paid
interest in excess of that permitted by applicable law, then all excess amounts
theretofore collected by Lender shall be credited on the principal balance of
the Obligations (or, if all sums owing hereunder have been paid in full,
refunded to Borrowers), and the amounts thereafter collectible hereunder shall
immediately be deemed reduced, without the necessity of the execution of any
new document, so as to comply with applicable law and permit the recovery of
the fullest amount otherwise called for hereunder.

Borrowers
hereby agree to pay all costs of collection, including, without limitation,
Attorneys Fees, if this Note is not paid when due, whether or not legal
proceedings are commenced.

All of the obligations of Borrowers hereunder
are joint, several and primary. No Borrower shall be, or be deemed to be, an
accommodation party with respect to this Note.

Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.

THIS NOTE HAS BEEN DELIVERED AND ACCEPTED AT AND SHALL BE DEEMED TO
HAVE BEEN MADE AT CINCINNATI, OHIO. THIS NOTE SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF OHIO (WITHOUT REFERENCE TO OHIO CONFLICTS OF LAW
PRINCIPLES).

AS A SPECIFICALLY BARGAINED INDUCEMENT FOR AGENT AND LENDERS TO ENTER INTO
THE CREDIT AGREEMENT AND EXTEND CREDIT TO BORROWERS, BORROWERS, AGENT AND
LENDERS AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT
OF THIS NOTE, ITS VALIDITY OR PERFORMANCE, AND WITHOUT LIMITATION ON THE
ABILITY OF AGENT OR ANY LENDER, OR ITS RESPECTIVE SUCCESSORS AND ASSIGNS, TO
EXERCISE ALL RIGHTS AS TO THE LOAN COLLATERAL AND TO INITIATE AND PROSECUTE IN
ANY APPLICABLE JURISDICTION ACTIONS RELATED TO REPAYMENT OF THE OBLIGATIONS,
SHALL BE INITIATED AND PROSECUTED AS TO BORROWERS, AGENT AND LENDERS AND THEIR
SUCCESSORS AND ASSIGNS AT CINCINNATI, OHIO. AGENT, LENDERS AND BORROWERS EACH
CONSENT TO AND SUBMIT TO THE EXERCISE OF JURISDICTION OVER THEIR RESPECTIVE
PERSONS BY ANY COURT SITUATED AT CINCINNATI, OHIO HAVING JURISDICTION OVER THE
SUBJECT MATTER, AND EACH CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY
CERTIFIED MAIL DIRECTED TO BORROWERS, AGENT AND LENDERS AT THEIR RESPECTIVE
ADDRESSES SET FORTH IN SECTION 12.2 OF THE CREDIT AGREEMENT OR AS
OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO. EACH BORROWER WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE
OF ANY ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

AS A SPECIFICALLY BARGAINED INDUCEMENT FOR
AGENT AND LENDERS TO ENTER INTO THE CREDIT AGREEMENT AND EXTEND CREDIT TO
BORROWERS, BORROWERS, AGENT AND LENDERS EACH WAIVE TRIAL BY JURY WITH RESPECT
TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS
NOTE OR THE CONDUCT OF THE RELATIONSHIP AMONG AGENT, LENDERS AND BORROWERS.

[Signature Page Follows]

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In
Witness Whereof, Borrowers, intending to be legally bound, have caused this
Note to be executed and delivered by its duly authorized officer as of the day
and year and at the place set forth above.

| |  |                                       |                                         | 
| |  | ------------------------------------- | --------------------------------------- | 
| |  | INDUSTRIAL
 SERVICES OF AMERICA, INC.
| |  |                                       |                                         | 
| |  | By:                                   | /s/ Harry
 Kletter                      | 
| |  |                                       |                                         | 
| |  |                                       | Harry Kletter, Chief
 Executive Officer | 
| |  |                                       |                                         | 
| |  | ISA INDIANA,
 INC.                    |                                        
| |  |                                       |                                         | 
| |  | By:                                   | /s/ Harry
 Kletter                      | 
| |  |                                       |                                         | 
| |  |                                       | Harry
 Kletter, Chief Executive Officer | 

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