**EXHIBIT 10.33**

Fifth Third Bank

**LOAN AND SECURITY AGREEMENT**

 

                                                                                                                                                        

 

            This Loan and Security Agreement (this "Agreement") dated as of June27, 2006 is made by and between FIFTH THIRD BANK , a Michigan bankingcorporation, having an office at 401 South 4th Avenue, Louisville, Kentucky40202 ("Lender"), and INDUSTRIAL SERVICES OF AMERICA, INC, a corporationorganized under the laws of the State of Kentucky and having a principal placeof business at 7100 Grade Lane, Louisville, Jefferson County, KY 40232("Borrower").

 

            1.         Loan.  Subject to the terms and conditions of thisAgreement, Lender agrees to make a loan in a single advance (the "Loan") to theBorrower in an amount not to exceed Two Million Dollars and No Cents($2,000,000.00) (the "Commitment").  Such Loan shall be made on or before, andthe Lender's Commitment shall expire on February 19, 2007.  The Borrower shallgive Lender notice (which shall be irrevocable) not later than 10:00 am (Easterntime) on the third Business Day prior to the requested day for the making ofsuch Loan.  Such notice shall specify (a) the requested date for the making ofsuch Loan which shall be a Business Day, and (b) the amount of such Loan whichshall be an amount not to exceed the Commitment.  As used herein, the term"Business Day" means any day other than Saturday or Sunday or other days onwhich banks are authorized or required to close in Cincinnati, Ohio.

 

            2.         Principal and Interest.  The obligation to repaythe Loan hereunder shall be evidenced by one or more promissory notes payable byBorrower to the order of Lender in substantially the form attached hereto asExhibit A (as any such promissory note may be amended, amended and restated,supplemented or modified from time to time collectively referred to as the"Note").  The Note shall bear interest, be payable and mature as set forth inthe Note.  Time is of the essence with respect to the payment and performance ofthe Obligations (as defined below) to be paid or otherwise performed under thisAgreement, the Note and all of the other Loan Documents (as defined below). Once repaid no loan proceeds may be reborrowed hereunder.  If Borrower fails topay any amount due hereunder, Borrower shall pay to Lender a late payment feeequal to five (5%) of the amount of such payment.  Such fee shall be payable ondemand and shall constitute part of the Obligations.  All amounts due hereunderand under the Note will be due on the dates or at the times specified hereunderor under the Note regardless of whether the Borrower has received any noticethat such amounts are due.  Principal and interest payments, and any otheramounts due hereunder, shall be made to Lender at the address specified above orsuch other address as Lender may designate from time to time, in writing.

 

            3.         Security.  As, security for the payment as andwhen due of the indebtedness of Borrower to Lender hereunder (and any renewals,extensions and modifications thereof) and under any other agreement orinstrument (as the same may be renewed, extended or modified and hereinaftercollectively referred to as the "Loan Documents"), both now in existence andhereafter created relating to Borrower's acquisition of Equipment (as defined inthe Uniform Commercial Code), and the performance as and when due of allobligations of Borrower under this Agreement, the Note and the other LoanDocuments (as the same may be renewed, extended or modified; and hereinaftercollectively referred to as the "Obligations").  Borrower hereby grants toLender a first priority security interest in and lien upon all Debtor'sEquipment whether now owned or hereafter acquired and wherever located.  Toextent not otherwise included, all Proceeds of each of the forgoing and allaccessions to, substitutions and replacements therefor, and rents, profits andproducts of each of the foregoing and all attachments, accessories, accessions,replacements substitutions, additions or improvements to any of the foregoing,and products and proceeds of the foregoing including without limitation proceedsof insurance policies insuring the foregoing an all books and records withrespects thereto (all of the foregoing personal property is hereinaftersometimes individually and sometimes collectively referred to as "Collateral"). Debtor shall make appropriate entries upon its financial statements and itsbooks and records disclosing Secured Party's security interest in theCollateral.  Collateral shall also include all of Borrower's right, title andinterest in all subleases (including the right to receive any payment thereunderand the right to make any election or determination or give any consent orwaiver thereunder) of Equipment, and all chattel paper, accounts, securitydeposits and bills of sale relating thereto, and all insurance and requisitionproceeds and all other payments of any kind with respect to the Equipment. Borrower agrees that, with respect to the Collateral, Lender shall have all ofthe rights and remedies of a secured party under the Uniform Commercial Code asin effect in the applicable jurisdiction from time to time.

 

Conditions Precedent.

 

                        (a)        Concurrently with the execution hereof, or onor prior to the date on which Lender is to make the Loan hereunder, Borrowershall cause to be provided to Lender the following: (1) a certificate of thesecretary or assistant secretary of Borrower dated the date of such hereof (orof the Loan, if after the date of this Agreement) certifying (A) the incumbencyof each of the officers executing the applicable Loan Documents, (B) a copy ofthe articles or certificate of incorporation, by-laws or code of regulations,and other applicable organizational documents of Borrower and (C) copies of anyother documents evidencing the authorization of the corporate officers on behalfof the Borrower to execute, deliver and perform this Agreement and each otherLoan Document; if requested by Lender, an opinion of counsel for Borrower inform and substance satisfactory to Lender as to the matters set forth in Section11 and as to such other matters as Lender may reasonably request

 

                        (b)        The obligation of Lender to make the Loanhereunder is subject to the satisfaction (or waiver by Lender) of each of thefollowing conditions prior to the date specified for the Loan: (i) Lender shallhave received each of the following documents in form and substance satisfactoryto Lender: (A) a certificate executed by the president or chief financialofficer of Borrower certifying that the representations and warranties ofBorrower contained herein and in each of the Loan Documents remain true andcorrect as of such date, and no Default or Event of Default (as defined inSection 12) has occurred both with and without giving effect to the transactionscontemplated hereby; (B) copies of the invoice(s) or other evidence satisfactoryto Lender, related to the acquisition cost of the Equipment to which the Loanrelates; (C) a supplement to Schedule A (if applicable), describing theEquipment to which the Loan relates, to be attached to the Note issued inconnection herewith; (D) upon delivery of such Equipment, copies of the bills ofsale evidencing chain of title from the manufacturer or supplier to the Borrowerwith respect to such Equipment; (E) a Certificate of Acceptance (as defined inSection 4) relating to such Equipment; (ii) Lender shall have received, evidencesatisfactory to Lender of the filing of Uniform Commercial Code financingstatements or other records relating to the Equipment in form and substancesatisfactory to Lender in the jurisdiction in which Borrower is a registeredorganization and such other jurisdictions as Lender may reasonably request;(iii) Lender shall have received evidence of insurance policies covering theEquipment which comply with the requirements of Section 6 hereof; (iv) therepresentations and warranties of Borrower contained herein and in each of theother Loan Documents shall be true and correct on and as of the date specifiedfor the Loan both with and without giving effect to the making of the Loan, (v)no Default or Event of Default shall have occurred and be continuing or resultfrom the transactions contemplated by the making of the Loan; (vi) Borrowershall have paid the fees and reasonable out-of-pocket expenses of Lender(including the fees and expenses of counsel to the Lender and any filing orrecordation fees) incurred in connection with the negotiation, execution anddelivery of the Loan documents relating thereto shall have been paid; and (h) nomaterial adverse change in the existing or prospective financial condition orresults of operations of Borrower or any guarantor of Borrower's obligationshereunder (a "Guarantor") which may affect the ability of Borrower to performits obligations under the Loan Documents, or the ability of any Guarantor toperform its obligations under any Guaranty, shall have occurred since the dateof the most recent audited financial statements of Borrower delivered to Lender.

 

            4.         Acceptance.  Upon delivery of any Equipment,Borrower shall execute and deliver to Lender a Certificate of Acceptance forsuch Equipment in form and substance satisfactory to the Lender (a "Certificateof Acceptance").  Such Certificate of Acceptance shall constitute Borrower'srepresentation that such Equipment (a) was received by Borrower, (b) issatisfactory to Borrower in all respects, (c) is suitable for Borrower'spurposes, (d) is in good order, repair and condition, (e) has been installed andoperates properly, and (t) is subject to all of the terms and conditions of theLoan Documents.  Borrower's execution and delivery of a Certificate ofAcceptance shall be conclusive evidence as between Lender and Borrower that theItems of Equipment described therein are in all of the foregoing respectssatisfactory to Borrower, and Borrower shall not assert any claim of any naturewhatsoever against Lender based on any of the foregoing matters; provided,however, that nothing contained herein shall in any way bar, reduce or defeatany claim that Borrower may have against the any manufacturer or supplier ofsuch Equipment or any other person (other than Lender).

 

            5.         Use and Maintenance; Alterations.

 

                        (a)        Borrower covenants and agrees that it (i)shall use the Equipment solely in the conduct of its business, for the purpose,and in the manner, for which the Equipment was designed, (and shall notpermanently discontinue use of the Equipment); (ii) shall operate, maintain,service and repair the Equipment, and maintain all records and other materialsrelating thereto, (A) in accordance and consistent with (1) the supplier's ormanufacturer's recommendations all maintenance and operating manuals or serviceagreements, whenever furnished or entered into, including any subsequentamendments or replacements thereof, issued by the supplier or manufacturerthereof or other service provider (including requiring all components, fuels andfluids installed in or used on the Equipment to meet the standards specified bysuch service provider from time to time), (2) the requirements of all applicableinsurance policies, (3) the supply contract or purchase order, so as to preserveall of Borrower's and Lender's rights thereunder, including all rights to anywarranties, indemnities or other rights or remedies, (4) all applicable laws,and (5) the prudent practice of other similar companies in the same business asBorrower, but in any event, to no lesser standard than that employed by Borrowerfor comparable equipment owned or leased by it; and (B) without limiting theforegoing, so as to cause the Equipment to be in good repair and operatingcondition and in at least the same condition as when delivered to Borrowerhereunder, except for ordinary wear and tear resulting despite Borrower's fullcompliance with the terms hereof, (iii) shall not discriminate against theEquipment with respect to scheduling of maintenance, parts or service; (iv)shall not change the location of any Equipment from that specified on Schedule A(or otherwise as Borrower informed Lender at the time the Loan was made) withoutthe prior written consent of Lender and (v) to the extent requested by Lender,shall cause each item of Equipment to be continually marked, in a plain anddistinct manner, with the following: "Subject to a Security Interest in favor ofFIFTH THIRD BANK" or such other words designated by Lender on labels furnishedby Lender.  If the location for any Equipment comprising collateral for the Loanis a facility leased by Borrower or owned by Borrower subject to one or moremortgage liens, upon the request of Lender, Borrower will obtain a real propertywaiver or waivers in form and substance satisfactory to Lender from the lendersor mortgagees of such facility.

 

                        (b)        Borrower, at its own cost and expense, willpromptly replace all parts, appliances, systems, components, instruments andother equipment incorporated in, or installed on, the Equipment which may fromtime to time become worn out, lost, stolen, destroyed, seized, confiscated,damaged beyond repair or permanently rendered unfit for use for any reasonwhatsoever.  In addition, in the ordinary course of maintenance, service repair,overhaul or testing, Borrower may remove any parts, whether or not worn out,lost, stolen, destroyed, seized, confiscated, damaged beyond repair orpermanently rendered unfit for use, provided that Borrower shall replace suchparts as promptly as practicable.  All replacement parts shall be free and clearof all Liens (as defined in Section 5(c)) and shall be in as good an operatingcondition as, and shall have a value and utility at least equal to, the partsreplaced, assuming such replaced parts were in the condition and repair requiredto be maintained by the terms hereof.  Any replacement part installed, orincorporated on, the Equipment shall be considered an accession to suchEquipment.

 

                        (c)        Borrower will keep the Equipment and itsinterest therein free and clear of all liens, claims, mortgages, charges andencumbrances of any type regardless of how arising ("Liens") other than the Lienof the Lender hereunder.  If any Lien shall attach to any Equipment, Borrowerwill provide written notification to Lender within five (5) days after Borrowerreceives notice of any such attachment stating the full particulars thereof andthe location of such Equipment on the date of such notification.

 

                        (d)        At its sole option, Borrower may make anyalteration, modification or attachment to the Equipment deemed appropriate byBorrower, provided that such alteration, modification, attachment is of a typewhich is readily removable without damage to the Equipment does not decrease thevalue, condition, utility or useful life of the Equipment or cause suchEquipment to become a fixture (as defined in the Uniform Commercial Code as ineffect in any applicable jurisdiction), or real property or affect theinsurability or impair any manufacturer's warranty with respect to theEquipment.  All alterations, modifications and attachments of whatsoever kind ornature made to any Equipment that cannot be removed without damaging or reducingthe functional capability, economic value or insurability of the Equipment orimpairing any manufacturer's warranty shall only be made with the prior writtenconsent of the Lender and shall be deemed to be part of the Equipment andsubject to the Lien of this Agreement.  Under no circumstance shall anyalteration, modification or attachment be subjected by Borrower to anyencumbrance other than the Lien of the Lender hereunder.

 

            6.         Insurance

 

                        (a)        Borrower shall provide, maintain and pay forinsurance coverage with respect to the Equipment, insuring against, among otherthings, the loss, theft, damage, or destruction of the Equipment, in amountsacceptable to Lender, and public liability and property damage with respect tothe use or operation of the Equipment in amounts acceptable to Lender.  Allinsurance against loss shall name Lender as the sole loss payee and allliability insurance shall name Lender and its successors and assignees and theirsubsidiaries and affiliated companies, and their successors and assigns asadditional insureds.  All of such insurance shall be in form (including allendorsements required by Lender), and with companies, reasonably satisfactory toLender.

 

                        (b)        All policies of insurance required hereundershall (i) provide that any cancellation, expiration, lapse, or materialmodification shall not be effective as to the Lender for a period of thirty (30)days after receipt by Lender of written notice thereof; (ii) provide thatpremiums may be paid by the Lender, but without liability on the part of theLender for such premiums; (iii) be primary without any right of set-off or rightof contribution from any other insurance carried by the Lender (iv) containbreach of warranty provisions providing that, in respect of the interests of theLender, the insurance shall not be invalidated by any action, inaction or breachof warranty, declaration, or condition by the Borrower or any other person or byany fact or information known to Lender; and (v) waive any right of subrogationagainst Lender.

 

            7.         Risk of Loss; Damage to Equipment.

 

                        (a)        Borrower shall bear the entire risk of lossand damage to any and all items of Equipment from any cause whatsoever, whetheror not insured against.  No loss or damage shall relieve Borrower of theobligation to pay any amounts due under the Note or of any other Obligations. An "Event of Loss" shall be deemed to have occurred with respect to any item ofEquipment if such Item of Equipment or any material part thereof has been lost,stolen, requisitioned or condemned by any governmental authority, damaged beyondrepair or damaged in such a manner that results in an insurance settlement onthe basis of an actual or arranged total loss.

 

                        (b)        Upon any loss or damage to any item ofEquipment not constituting an Event of Loss, Borrower will promptly notifyLender of such loss or damage, and in any event within thirty (30) days of suchloss or damage (or such longer period as Lender shall determine in its solediscretion), place such item of Equipment in good condition and repair asrequired by the terms of this Agreement.  If an Event of Loss to any Item ofEquipment has occurred, Borrower shall immediately notify Lender of same, and atthe option of Lender, Borrower shall: (i) not more than thirty (30) daysfollowing such Event of Loss (or such longer period as Lender shall determine inits sole discretion) replace such Item of Equipment with replacement equipment(acceptable to Lender) in as good condition and repair, and with the same valueremaining useful economic life and utility, as such replaced Item of Equipmentimmediately preceding the Event of Loss (assuming that such replaced Item ofEquipment was in the condition required by this Agreement), which replacementequipment shall immediately, and without further act, be deemed to constituteEquipment and be fully subject to this Agreement as if it originally constitutedpart of the Equipment hereunder and shall be free and clear of all Liens; or(ii) prepay on the next succeeding Payment Date (as defined in the Note) (the"Prepayment Date"), together with all other amounts due and payable on suchPayment Date, an amount equal to each installment of principal and interestpayable under the Note on each Payment Date after the Prepayment Date, in eachcase, discounted from the Payment Date on which such payment would have been dueto the Prepayment Date at a rate per annum equal to the then current yield, asreasonably determined by the Lender, on United States Treasury securities with aremaining life to maturity equal to or approximately equal to the period fromthe Prepayment Date to the Maturity Date.  Upon Lender's receipt of the paymentrequired under clause (ii) above, Lender shall release its security interest inthe Item of Equipment to which such payment relates.

 

            8.         Application of Proceeds.  Notwithstanding anythingherein to the contrary, all funds received at any time by Lender, whether as aresult of any loss of the Equipment, as a result of the exercise of any remedyor otherwise shall be applied as follows: (i) if the Note has not beenaccelerated pursuant to Section 12, in the following manner: first to thepayment of all fees, charges and other sums (with exception of principal andinterest) due and payable hereunder and under the Note, second, to the paymentof all interest (including default interest) then due and payable on theoutstanding principal of the Note, third, to the payment of all principal thendue and payable on the Note, fourth, to the payment of the remaining principalon the Note in inverse order of maturity, and fifth, to the Borrower or suchother person as may have an interest in such proceeds, as their interests mayappear, and (ii) if the Note has been accelerated pursuant to Section 12, or ifa Default or an Event of Default hereunder shall have occurred, in the followingmanner: first, to the payment or reimbursement of Lender for all costs, expensesand losses incurred or sustained by Lender in or incidental to the collection ofthe Obligations, or the exercise, protection or enforcement of all or any of therights and remedies of Lender under the Loan Documents, and second, to thepayment of all of the Obligations in the manner and order as provided in clause(i) above.

 

            9.         Financial, Other Information and Notices.

 

                        (a)        Borrower shall maintain a standard and modemsystem for accounting and shall furnish to Lender.

 

            (i)         Within thirty (30) daysafter the end of each quarter, a copy of Borrower's financial statements forthat quarter and for the year to date compiled by a firm of independentcertified public accountants acceptable to Lender, (which acceptance shall notbe unreasonably withheld) and certified as complete and correct, subject tochanges resulting from year-end adjustments, by the chief financial officer ofBorrower.

 

            (ii)        Within one hundred twenty(120) days after the end of each fiscal year, a copy of Borrower's consolidatedyear end financial statements audited by a firm of independent certified publicaccountants acceptable to Lender (which acceptance shall not be unreasonablywithheld) and accompanied by an audit opinion of such accountants withoutqualification.

 

All such financial statements shall be prepared inaccordance with generally accepted accounting principles, consistently applied.

 

                        (b)        Borrower shall provide prompt written noticeto Lender (i) of any Event of Default (ii) of any loss or damage to any of theEquipment, and (iii) any existing or threatened investigation, claim or actionby any governmental authority which could adversely affect the Equipment or thisLoan.

 

                        (c)        Borrower shall furnish such other informationas Lender may reasonably request from time to time relating to the Equipment,this Loan or the operation or condition of Borrower including, withoutlimitation, such additional financial statements of the Borrower for suchperiods as Lender may request.

 

            10.       Inspections.  Lender may from time to time duringBorrower's normal business hours, inspect the Equipment and Borrower's recordswith respect thereto.  Borrower shall cooperate with Lender in scheduling suchinspection and in making the Equipment available for inspection by Lender or itsdesignee at a single location as reasonably specified by Borrower.  Borrowerwill, upon reasonable request, provide a report on the condition of theEquipment, a record of its maintenance and repair, a summary of all itemssuffering any loss or damage, a certificate of no Event of Default, or suchother information or evidence of compliance with Borrower's obligations underthis Agreement as Lender may reasonably request.

 

            11.       Borrower's Representations and Warranties. Borrower represents and warrants as of the date of execution and delivery ofthis Agreement and as of the date of the Loan as follows: (a) Borrower is acorporation organized under the laws of the State of Kentucky, having aprincipal place of business at 7100 Grade Lane, Louisville, Jefferson County,Kentucky, 40232, duly organized, validly existing under the laws of thejurisdiction of its organization with full power to enter into and to pay andperform its obligations under this Agreement and the other Loan Documents, andis duly qualified or licensed in all other jurisdictions where its failure to soqualify would adversely affect the conduct of its business or its ability toperform any of its obligations under or the enforceability of this Agreement;(b) this Agreement and all other Loan Documents have been duly authorized,executed and delivered by Borrower, are valid, legal and binding obligations ofBorrower, are enforceable against Borrower in accordance with their terms and donot and will not contravene any provisions of or constitute a default underBorrower's organization documents, any agreement to which it is a party or bywhich it or any of its property is bound, or any applicable law, regulation ororder of any governmental authority; (c) the proceeds of the Loan will be usedexclusively to finance the acquisition of the Equipment; (d) Borrower is (orupon the acquisition thereof will be) the sole owner of, and has good andmarketable title to, and all necessary rights in, and power to transfer pursuantto the terms hereof, all of the Equipment, free and clear of all liens andencumbrances (excepting only the Lien of the Lender), and upon the filing withthe Secretary of State of Kentucky of a Uniform Commercial Code financingstatement naming Lender, as secured party, Borrower, as debtor, and theEquipment as the collateral, Lender shall have a valid, perfected, firstpriority security interest in the Equipment; (e) no approval of, or filing with,any governmental authority or other person is required in connection withBorrower's entering into, or the payment or performance of its obligationsunder, this Agreement and the other Loan Documents; (f) there are no suits orproceedings pending or, to the knowledge of Borrower, threatened, before anycourt or governmental agency against or affecting Borrower which, if decidedadversely to Borrower, would adversely affect the conduct of its business or itsability to perform any of its obligations under or the enforceability of thisAgreement and the other Loan Documents; (g) the financial statements of Borrowerwhich have been delivered to Lender have been prepared in accordance withgenerally accepted accounting principals consistently applied, and fairlypresent Borrower's financial condition and the results of its operations as ofthe date of and for the period covered by such statements (subject to customaryyear-end adjustments), and since the date of such statements there has been noadverse change in such financial condition or operations; (h) Borrower's fulland correct legal name is set forth on the signature page hereof and Borrowerwill not change its legal name or the location of its jurisdiction oforganization without giving to Lender at least thirty (30) days prior writtennotice thereof; (i) the Equipment will always be used for business orcommercial, and not personal purposes; (j) Borrower is not in default under anyobligation for borrowed money, for the deferred purchase price of property orany lease agreement which, either individually or in the aggregate, would havean adverse effect on the condition of its business or its ability to perform anyof its obligations under or the enforceability of this Agreement; (k) under thelaws of the jurisdiction(s) in which the Equipment is to be located, theEquipment consists solely of personal property and not fixtures; and (i)Borrower is, and will remain, in full compliance with all laws and regulationsapplicable to it including without limitation, (i) ensuring that no person whoowns a controlling interest in or otherwise controls Borrower is or shall be (A)listed on the Specially Designated National and Blocked Person List maintainedby the Office of Foreign Assets Control ("OFAC"), Department of the Treasuryand/or any other similar lists maintained by OFAC pursuant to any authorizingstatute, executive order or regulations or (C) a person designated under Section1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any relatedenabling legislation or any other similar executive order and (ii) compliancewith all applicable Bank Secrecy Act ("BSA") laws, regulations and governmentguidance on BSA compliance and on the prevention and detection of moneylaundering violations.

 

Borrower's representations and warranties shall survive termination orexpiration of this Agreement.

 

            12.       Events of Default and Remedies.

 

                        (a)        Each of the following events constitutes an"Event of Default" hereunder and any event that, with the passage of time or thegiving of notice, or both, would constitute an Event of Default shall constitutea "Default" hereunder.  (i) Borrower fails to pay any amount of principal andinterest when due under the Note and such failure continues for a period of ten(10) days; (ii) any representation or warranty made by Borrower in thisAgreement or in any other Loan Document shall at any time prove to have beenincorrect in any material respect as and when made; (iii) Borrower fails (A) toobtain and maintain the insurance coverage required herein; or (B) fails toobserve or perform any other covenant, condition or agreement under thisAgreement or any other Loan Document and, in the case of clause (B), suchfailure continues unremedied for a period of fifteen (15) days; (iv) Borrowershall have consolidated with, merged with or into, or conveyed, sold orotherwise transferred all or substantially all of its assets or shall havefailed to maintain its corporate existence; (v) Borrower (A) ceases doingbusiness as a going concern; (B) makes an assignment for the benefit ofcreditors or admits in writing its inability to pay its debts as they mature orgenerally fails to pay its debts as they become due; (C) initiates any voluntarybankruptcy, reorganization, insolvency or similar proceeding; (D) fails toobtain the discharge of any bankruptcy, reorganization, insolvency or similarproceeding initiated against it by others within sixty (60) days of the datesuch proceedings were initiated; (E) requests or consents to the appointment ofa trustee, custodian or receiver or other officer with similar powers for itselfor a substantial part of its property; or (F) a trustee, custodian or receiveror other officer with similar powers is appointed for itself or for asubstantial part of its property; (vi) a default shall have occurred and becontinuing under any contract, agreement or document between Borrower and Lenderor any affiliate of Lender; (vii) if Borrower's obligations are guaranteed byany other party, an "Event of Default" (under and as defined in the Guarantyexecuted by such Guarantor) shall occur; or (viii) a material adverse change inBorrower's existing or prospective financial condition or results of operationssince the date hereof which may affect the ability of Borrower to perform itsobligations under the Loan Documents shall occur and be continuing.

 

                        (b)        Upon the occurrence of an Event of Default,Lender may, (i) at its option, declare all of the Obligations, including theentire unpaid principal of the Note, all of the unpaid interest accrued therein,and all of the other sums (if any) payable by Borrower under this Agreement, theNote, or any of the other Loan Documents, to be immediately due and payable, and(ii) proceed to exercise any one or more of the following remedies and anyadditional rights and remedies permitted by law (none of which shall beexclusive), all of which are hereby authorized by Borrower:

 

(i)         Borrower shall upon demand assemble orcause to be assembled any or all of the Equipment at a location designated byLender, and/or to return promptly, at Borrower's expense, any or all of theEquipment to Lender at such location;

 

(ii)        Lender may itself or by its agents enterupon the premises of Borrower or any other location where the Equipment islocated and take possession of and render unusable by Borrower any or all of theEquipment, wherever it may be located, without any court order or other processof law and without liability for any damages occasioned by such taking ofpossession;

 

(iii)       Sell, re-lease or otherwise dispose ofany or all of the Equipment, whether or not in Lender's possession, at public orprivate sale with or without notice to Borrower, with the right of Lender topurchase and apply the net proceeds of such disposition, after deducting allcosts of such disposition (including but not limited to costs of transportation,possession, storage, refurbishing, advertising and brokers' fees), to theobligations of Borrower under the Note and the other Loan Documents, withBorrower remaining liable for any deficiency and with any excess being retainedby Lender, or retain any and all of the Equipment;

 

(iv)       Proceed by appropriate court action,either at law or in equity (including an action for specific performance), toenforce performance by Borrower or to recover damages associated with such Eventof Default; or exercise any other right or remedy available to Lender at law orin equity;

 

(v)        By offset, recoupment or other manner ofapplication, apply any security deposit, monies held in deposit or other sumsthen held by Lender or any affiliate of Lender, and with respect to whichBorrower has an interest, against any obligations of Borrower arising under thisAgreement or any other Loan Document, whether or not Borrower has pledged,assigned or granted a security interest to Lender in any or all such sums ascollateral for said obligations.

 

                        (c)        Borrower shall indemnify, defend and holdLender harmless for any loss, personal injury (including death), or damage toproperty, suffered by Lender, its employees or any of its agents in connectionwith its entry onto the premises of Borrower or any third party hereunder.  Eachof the rights and remedies of Lender hereunder and under the other LoanDocuments is in addition to all of its other rights and remedies hereunder,under the other Loan Documents and under applicable law and nothing in thisAgreement or any other Loan Document shall be construed as limiting any suchright or remedy.  Lender's failure to exercise or delay in exercising any right,power or remedy available to Lender shall not constitute a waiver or otherwiseaffect or impair its rights to the future exercise of any such right, power orremedy.  Waiver by Lender of any Event of Default shall not be a waiver byLender of any other or subsequent Events of Default,

 

            13.       General Indemnification.  Borrower shall pay, andshall indemnify and hold Lender, its directors, officers, agents, employees,successors and assigns (each an "Indemnitee") harmless on an after-tax basisfrom and against, any and all liabilities, causes of action, claims, suits,penalties, damages, losses, costs or expenses (including attorneys' fees),obligations, liabilities, demands and judgments, and Liens, of any naturewhatsoever (collectively, a "Liability") arising out of or in any way relatedto: (a) the Loan Documents, (b) the manufacture, purchase, ownership, title,selection, acceptance, rejection, possession, lease, sublease, operation, use,maintenance, documenting, inspection, control, loss, damage, destruction,removal, storage, surrender, sale, use, condition, delivery, nondelivery, returnor other disposition of or any other matter relating to any Item of Equipment orany part or portion thereof (including, in each case and without limitation,latent or other defects, whether or not discoverable, any claim for patent,trademark or copyright infringement) and any and all Liabilities in any wayrelating to or arising out of injury to persons, properties or the environmentor any and all Liabilities based on strict liability in tort, negligence, breachof warranties or violations of any regulatory law or requirement, (c) a failureto comply fully with applicable law and (d) Borrower's failure to perform anycovenant, or Borrower's breach of any representation or warranty, hereunder;provided, that the foregoing indemnity shall not extend to the Liabilities tothe extent resulting solely from the gross negligence or willful misconduct ofan Indemnitee.

 

            14.       Additional Costs; No Reduction.

 

                        (a)        If Lender shall reasonably determine that anyfuture applicable law, rule or regulation, or any change in any present law orin the interpretation or administration thereof by any governmental authority,central bank or comparable agency charged with the interpretation oradministration thereof, or compliance by Lender with any request or directiveregarding capital adequacy (whether or not having the force of law) from anysuch authority, central bank or comparable agency, has or would have the effectof reducing the rate of return on Lender's capital, as a consequence of itsobligations hereunder, to a level below that which Lender could have achievedbut for such adoption, change or compliance by any amount deemed by Lender to bematerial and is not otherwise reflected in the interest and other chargespayable by Borrower hereunder then Borrower shall pay to Lender upon demand suchamount or amounts, in addition to the amounts payable under the other provisionsof this Agreement, or the Note, as will compensate Lender for such reduction. Determinations by Lender of the additional amount or amounts required tocompensate Lender in respect of the foregoing shall be conclusive in the absenceof manifest error.  In determining such amount or amounts, Lender may use anyreasonable averaging and attribution methods.

 

                        (b)        All payments due to the Lender under the LoanDocuments, and all other terms, conditions, covenants and agreements to beobserved and performed by the Borrower thereunder, shall be made, observed orperformed by the Borrower without any reduction or deduction whatsoever,including any reduction or deduction for any set-off, recoupment, counterclaim(whether sounding in tort, contract or otherwise) or for any tax, levy orimpost.

 

 

            15.       Filing Authority.  Borrower hereby authorizesLender to file, solely at the expense of Borrower, any Uniform Commercial Codefinancing statements or other similar documents that Lender reasonably deemsnecessary or advisable to protect its interest.  Borrower agrees promptly toexecute and deliver to Lender such further documents or other assurances, and totake such further action, including obtaining landlord and mortgagee waivers, asLender may from time to time reasonably request.

 

            16.       Successors and Assigns.  This Agreement shall inureto the benefit of Lender, its successors and assigns.  Borrower shall notsublease or otherwise relinquish possession of any Equipment, or assign,transfer or encumber its rights, interest or obligation hereunder.  Lenderreserves the right to sell, assign, transfer, negotiate or grant any interest inall or any part of, or any interest in, Lender's rights and obligations in,under and to this Agreement, any one or more of the Loan Documents, in theEquipment and/or the Obligations, at any time and from time to time.  Borrowerwill fully cooperate with Lender in connection with any such conveyance and willexecute and deliver such consents and acceptances to any such conveyance,amendments to this Agreement in order to effect any such conveyance (including,without limitation, the appointment of Lender as agent for itself and allassignees) and new or replacement promissory notes for any Note (in an aggregateprincipal amount not to exceed the Lender's Commitment) in conjunction with anysuch conveyance.

 

            17.       Miscellaneous.

 

                        (a)        Borrower shall pay all costs and expenses ofLender, including, without limitation, reasonable attorneys' and otherprofessional fees, incurred by Lender in the preparation, negotiation, executionand enforcement of this Agreement or any amendment or supplement hereto,enforcing any of the terms, conditions or provisions hereof and in protectingLender's rights hereunder.

 

                        (b)        This Agreement shall be governed by andconstrued in accordance with the laws of the State of Ohio.  Any judicialproceeding arising out of or relating to this Agreement may be brought in anycourt of competent jurisdiction in Hamilton County, Ohio and each of the partieshereto (i) accepts the nonexclusive jurisdiction of such courts and any relatedappellate court and agrees to be bound by any judgment rendered by any suchcourt in connection with any such proceeding and (ii) waives any objection itmay now or hereafter have as to the venue of any such proceeding brought in suchcourt or that such court is an inconvenient forum.  EACH OF THE BORROWER ANDLENDER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDINGARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOANDOCUMENTS.

 

                        (c)        All notices delivered hereunder shall be Inwriting (including facsimile) and shall be delivered to the following addresses:

 

If to Borrower:

 

INDUSTRIAL SERVICES OF AMERICA, INC 

7100 Grade Lane

Louisville, KY 40232

AM: ***Lessee Contact Name*** 

Facsimile: ***Lessee Fax Number***

 

If to Lender:

 

FIFTH THIRD BANK 

401 South 4th Avenue

Louisville, Kentucky 40202 

Attn: Commercial Leasing Dept. 

Facsimile: (502) 562-5540

 

                        (d)        Borrower acknowledges and agrees that time isof the essence with respect to its performance under the Loan Documents.  Anyfailure of Lender to require strict performance by Borrower or any waiver byLender of any provision herein shall not be construed as a consent or waiver ofany provision of this Agreement.  This Agreement shall be binding upon, andinure to the benefit of, the parties hereto, their permitted successors andassigns.

 

                        (e)        This Agreement, together with all other Loandocuments, constitutes the entire understanding or agreement between Lender andBorrower with respect to the Loan, and supersedes all prior agreements,representations and understandings relating to the subject matter hereof.

 

                        (f)         Neither this Agreement nor any other LoanDocument may be amended except by a written instrument signed by Lender andBorrower.

 

                        (g)        This Agreement may be executed in any numberof counterparts, each of which shall be an original and all of which shallconstitute but one and the same instrument.

 

                        (h)        Any provision of this Agreement which isprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability shall not invalidate or render unenforceable such provision inany other jurisdiction.  Captions are intended for convenience or referenceonly, and shall not be construed to define, limit or describe the scope orintent of any provisions hereof.

 

            IN WITNESS WHEREOF, Lender and Borrower have executed this Agreementas of the day and year first above written.

LENDER:

 

FIFTH THIRD BANK

 

By: /s/ Henry Kelsey

 

Name: Henry Kelsey

 

Title:                                                                          

 

 

BORROWER:

 

INDUSTRIAL SERVICES OF AMERICA, INC

 

By:  /s/ Alan Schroering

 

Name: Alan Schroering

 

Title: CFO

 

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