**EXHIBIT 10.34**

**Fifth Third Bank**

 

**PROMISSORY NOTE**

 

______________________________________________________________________________

 

$2,000,000.00                                                                                                              June __, 2006

 

            FOR VALUE RECEIVED, INDUSTRIAL SERVICESOF AMERICA, INC, a corporation organized under the laws of the State of Kentuckyand having a principal place of business at 7100 Grade Lane, Louisville,Jefferson County, Kentucky 40232 ("Borrower") hereby promises to pay to theorder of FIFTH THIRD BANK, a Michigan banking corporation ("Lender") theprincipal amount of Two Million and 00/100 Dollars ($2,000,000.00), on July 27,2011 ("Maturity Date"), with interest at the Interest Rate (as defined below).

 

            Lender and Borrower have entered intothat certain Loan and Security Agreement dated as of June 27, 2006 (the "LoanAgreement"), pursuant to which Lender has agreed to make the Loan to Borrower. The Obligations of the Borrower are secured by the Collateral as provided in theLoan Agreement and this Note shall be entitled to the benefits of the LoanAgreement.  Capitalized terms used herein and not otherwise defined shall havethe meaning attributed thereto in the Loan Agreement.

 

            As used herein, "Interest Rate" shallmean the percentage per annum equal to six and 83/100 percent (6.83%); provided,however, if this note is not funded by Lender on or before July 3, 2006, then(A) such Interest Rate is based on an interest rate swap rate for a term mostclosely corresponding to the maturity of this Note as quoted in the FederalReserve Statistical H15 Release (reported at www.federalreserve.gov/releases/H15/current)and (B) such Interest Rate may be adjusted based upon a corresponding interestrate swap rate quoted in such Release as in effect on the date the Loan ismade.  Lender will provide Borrower with notice of any such adjustment. Interest shall be computed on the basis of a year of 360 days for the actualnumber of days elapsed and shall accrue on the outstanding principal amounthereunder from and including the date each Advance is made to but excluding thedate the entire principal amount hereunder is paid in full.

 

            Except as otherwise provided in the LoanAgreement, principal and interest due hereunder shall be payable in sixty (60)equal monthly installments of $23,046.84 each on the 27th day of each calendarmonth commencing on the 27th day of July, 2006, with the entire unpaid principalamount hereof due on the Maturity Date.

 

            Except for a prepayment contemplated bySection 8 of the Loan and Security Agreement following the occurrence of anEvent of Loss, Borrower may not prepay, in whole or in part, the principaloutstanding hereunder; provided, however, that from and after the first (1st)anniversary of the date the Loan is made hereunder, Borrower may prepay, inwhole but not in part, the principal outstanding hereunder by paying to Lendersuch outstanding principal, together with all accrued and unpaid interestthereon at the Interest Rate, plus, as liquidated damages for the cost of makingfunds available to Borrower hereunder and not as a penalty, a prepayment premiumequal to the percent of such outstanding principal set forth below correspondingto the date of such prepayment:

 

**            Date of Prepayment (from Date of Loan):               Premium**

            On or before December 27, 2007                                 3.0%

            On or after December 28, 2007                                   0.0%

 

            Upon the occurrence of an Event ofDefault, Lender shall have all the rights and remedies specified in the LoanAgreement.

 

            Borrower waives presentment for payment,demand, notice of demand, notice of nonpayment or dishonor, protest and noticeof protest of this Note, and all other notices in connection with the delivery,acceptance, performance, default or enforcement of the payment of this Note.

 

            This Note shall be governed by andconstrued in accordance with the laws of the State of Ohio.  Any judicialproceeding arising out of or relating to this Note may be brought in any courtof 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 NOTE

 

            All notices delivered hereunder shall bemade and delivered in accordance with the terms of the Loan Agreement.

 

            Borrower acknowledges and agrees thattime is of the essence with respect to its performance under this Note.  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 Note.  This Note shall be binding upon, and inure to thebenefit of, the parties hereto, their permitted successors and assigns;provided, however that Borrower may not assign or transfer any of its rights,interest or obligations hereunder without the prior written consent of Lender.

 

            Any provision of this Note 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, the Borrower has executed this Note as of the27th day of June, 2006.

 

                                                                        **BORROWER**:

 

                                                                       INDUSTRIAL SERVICES OF AMERICA, INC

 

 

 

                                                                        By: /s/ Alan Schroering

 

                                                                        Name:Alan Schroering

 

                                                                        Title:CFO

 

                                                                        June 29,2006

 

----

----