Document:

Exhibit 10.8

SECURITY AGREEMENT

          THIS
SECURITY AGREEMENT (this “Agreement”), dated as of July 30, 2010 (the “Effective
Date”), by and among FIFTH THIRD BANK, an Ohio banking corporation, as
Agent for the benefit of the Secured Creditors (as defined below) (“Agent”),
and 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”), is as follows: 

1. DEFINITIONS.

          1.1 Credit
Agreement. Any capitalized term used but not defined herein shall have the
meaning ascribed thereto in the Credit Agreement dated as of the date of this
Agreement among the Secured Creditors and Borrowers (the “Credit Agreement”).

          1.2 Defined
Terms. In addition to the other terms defined in this Agreement, whenever
the following capitalized terms (whether or not underscored) are used, they
shall be defined as follows:

          “Code”
means the Uniform Commercial Code, as enacted in the State of Ohio, Section
1301.01 et seq. of the Ohio
Revised Code, as amended from time to time.

          “Collateral”
means all of each Borrower’s rights, titles and interests in and to all of each
Borrower’s assets and Property, tangible and intangible, real and personal,
including:

                    (i)
all of each Borrower’s accounts, chattel paper, deposit accounts, documents,
equipment (including all Motor Vehicles), fixtures, instruments, inventory,
investment property, general intangibles, goods, and letter-of-credit rights;

                    (ii)
all of each Borrower’s rights, titles and interests in and to the commercial
tort claims listed, or required to be listed, in Exhibit A to this
Agreement;

                    (iii)
without limiting the description of the Property or any rights or interests in
the Property described above in this definition of Collateral, all of each
Borrower’s rights, titles and interests in and to (a) all of each Borrower’s
money, cash, credit card receivables, and other funds; (b) all attachments,
accessions, parts and appurtenances to, all substitutions for, and all replacements
of any and all of each Borrower’s equipment, fixtures and other goods; (c) all
of each Borrower’s agreements, securities, warrants, dividends, distributions,
as-extracted collateral, tangible chattel paper, electronic chattel paper,
health-care-insurance receivables, leases, lease contracts, lease agreements,
payment intangibles, letters of credit, proceeds of letters of credit,
promissory notes, records, choses in action, causes of actions, and software;
and (d) all of each Borrower’s franchises, customer lists, insurance refunds,
insurance refund claims, tax refunds, tax refund claims, pension plan refunds,
pension plan reversions, patents, patent applications, service marks, service
mark applications, trademarks, trademark applications, trade names, trade
secrets, goodwill, copyrights, copyright applications, and licenses;

                    (iv)
all supporting obligations;

                    (v)
all of the products and proceeds of all of the foregoing described Property and
interests in Property, including cash proceeds and noncash proceeds, and
including proceeds of any insurance, whether in the form of original collateral
or any of the Property or rights or interests in Property described above in
this definition of Collateral; and

                    (vii)
all of the foregoing, whether now owned or existing or hereafter acquired or
arising, or in which any and each Borrower now has or hereafter acquires any
rights, titles or interests. 

          “Motor
Vehicles” means all of each Borrower’s automobiles, buses, vans, trucks,
trailers, and other motor vehicles.

          “Secured
Creditor Affiliate” means an Affiliate of a Secured Creditor.

          “Secured
Creditors” means, collectively, Agent, each Lender, and the LC Issuer.

          1.3 Other
Definitional Provisions; Construction. Unless otherwise specified, 

                    (i)
As used in this Agreement, accounting terms relating to Borrowers not defined
in this Agreement have the respective meanings given to them in accordance with
GAAP. 

                    (ii)
The definition of any document, instrument or agreement includes all schedules,
attachments and exhibits thereto and all renewals, extensions, supplements,
restatements and amendments thereof. All Exhibits and Schedules attached to
this Agreement are incorporated into, made and form an integral part of, this
Agreement for all purposes. 

                    (iii)
“Hereunder,” “herein,” “hereto,” “this Agreement” and words of similar import
refer to this entire document; “including” is used by way of illustration and
not by way of limitation, unless the context clearly indicates the contrary;
the singular includes the plural and conversely; and any action required to be
taken by any Borrower is to be taken promptly, unless the context clearly
indicates the contrary.

                    (iv)
All of the uncapitalized terms contained in this Agreement which are now or
hereafter defined under the Code will, unless the context indicates otherwise,
have the meanings provided for now or hereafter in the Code.

2.  GRANT OF SECURITY INTEREST; SET-OFF AND RELATED MATTERS.

          2.1 Security
Interest. As security for the full, prompt and complete payment and
performance by Borrowers of the Obligations, each Borrower hereby grants to,
and creates in favor of, Agent, for the benefit of the Secured Creditors, a
continuing security interest in, and Lien on, all of the Collateral.

          2.2 Set-Off.
All cash, moneys, investment property and other Properties of Borrowers and the
proceeds thereof now or hereafter held or received by any Secured Creditor from
or for the account of Borrowers, including any and all deposits (general or
special), account balances and credits of Borrowers with any Secured Creditor
or any Secured Creditor Affiliate at any time existing: (i) are part of the
Collateral, (ii) will be held as security for the Obligations, and (iii) may be
set-off and applied without notice to any Borrower (such notice being expressly
waived by Borrowers) against any or all Obligations at any time following the
occurrence and during the continuance of an Event of Default which has not been
waived by the Secured Creditors, and each Secured Creditor or Secured Creditor
Affiliate has the right at any time following the occurrence and during the continuance
of an Event of Default which has not been waived by the Secured Creditors to
refuse to allow withdrawals from any account of any Borrower without notice to
any Borrower (such notice being expressly waived by Borrowers). Upon the
occurrence and during the continuance of an Event of Default which has not been
waived by the Secured Creditors, each Borrower authorizes each Secured Creditor
Affiliate to pay or to deliver to Agent any deposits, financial assets, or
other sums credited by, or due from, such Secured Creditor Affiliate to any
Borrower for application against any or all Obligations, all without notice to
Borrowers (such notice being expressly waived by Borrowers) and without any
necessity on Agent’s part to resort to other security or sources of
reimbursement for the Obligations; however, nothing in this Section 2.2
will impair or affect Agent’s rights under Sections 2.8(a) and 3.4(c)
of the Credit Agreement. Agent will promptly notify Borrowers of Agent’s
receipt of such funds for application against the Obligations, but Agent’s
failure to do so will not affect the validity or enforceability thereof. Agent
may give notice of the above grant of a security interest in, and assignment
of, such deposits and other sums to any Secured Creditor Affiliate. 

3. PERFECTION OF AGENT’S SECURITY INTEREST; DUTY OF CARE.

          3.1 Required
Borrowers Actions. Until the termination of this Agreement, Borrowers shall
perform any and all steps and take all actions requested by Agent, in its
discretion exercised in good faith, from time to time to perfect, maintain,
protect, and enforce Agent’s security interest in, and Lien on, the Collateral,
including (i) executing and delivering all appropriate documents and
instruments as Agent, in its discretion exercised in good faith, may determine
are necessary or desirable to perfect, preserve, or enforce Agent’s interest in
the Collateral, including financing statements, all in form and substance
satisfactory to Agent in its discretion exercised in good faith, (ii)
delivering and indorsing to Agent any warehouse receipts or other documents of
title covering that portion of the Collateral which, with Agent’s consent, may
be located in warehouses and in respect of which warehouse receipts are issued,
(iii) upon the occurrence and during the continuance of any Event of Default
which has not been waived by the Secured Creditors, transferring inventory to
warehouses approved by Agent, (iv) placing notations on Borrowers’ books of
account to disclose Agent’s security interest and Lien therein, and (v) taking
such other steps and actions as deemed necessary or desirable by Agent to
perfect and enforce Agent’s security interest in, and Lien on, and other rights
and interests in, the Collateral.

          3.2 Financing
Statements; Notices. Each Borrower hereby irrevocably authorizes Agent at
any time and from time to time to file in any filing office required under
applicable law any initial financing statements and amendments thereto that:
(i) indicate the Collateral (a) as all assets of Borrowers, whether now owned
or hereafter acquired or arising, and all proceeds and products thereof and (b)
as being of an equal or lesser scope or with greater detail, and (ii) provide
any other information required by Part 5 of Article 9 of the Uniform Commercial
Code or required under applicable law for the sufficiency or filing office
acceptance of any financing statement or amendment, including whether such
Borrower is an organization, the type of organization and any organizational
identification number issued to such Borrower. Each Borrower hereby irrevocably
authorizes Agent at any time and from time to time to correct or complete, or
to cause to be corrected or completed, any financing statements, continuation
statements or other such documents as have been filed naming such Borrower as
debtor and Agent as secured party. Each Borrower agrees to furnish any such
information to Agent promptly upon request. At Agent’s request, each Borrower
will execute notices appropriate under any applicable requirements of law that
Agent, in its discretion exercised in good faith, deems desirable to evidence,
perfect, or protect its security interest in and other Liens on the Collateral
in such form(s) as are satisfactory to Agent, in its discretion exercised in
good faith. Each Borrower will pay the cost of filing all financing statements
and other notices in all public offices where filing is deemed by Agent, in its
discretion exercised in good faith, to be necessary or desirable to perfect,
protect or enforce the security interest and Lien granted to Agent hereunder. A
carbon, photographic, photostatic or other reproduction of this Agreement or of
a financing statement is sufficient as a financing statement. Agent is hereby
authorized to give notice to any creditor, landlord or any other Person as may
be necessary or desirable under applicable laws to evidence, protect, perfect,
or enforce the security interest and Lien granted to Agent in the Collateral. 

          3.3 Bailees;
Consignees; Warehousemen; Landlords. No Borrower shall store any inventory
at any leased location, or place any inventory with or in the possession or
control of any bailee, processor, warehouseman, consignee or any other like
Person who is not then a party to a Waiver Agreement (as defined below) (each “Non-Waiving
Third Party”) under any arrangement, practice or agreement (oral or
written), except, in each case under this Section 3.3, to the extent
that: (i) Agent has consented in writing to such action, (ii) the applicable
landlord, bailee, processor, warehouseman, consignee or other like Person, if
requested by Agent, has executed in favor of Agent a landlord waiver and access
agreement or a bailee, processor, consignee, warehouseman or similar written
waiver and access agreement (each, a “Waiver Agreement”), or (iii) the
value of such inventory, when added to all inventory then in the possession of
all Non-Waiving Third Parties, (a) does not exceed $200,000 in the aggregate
(as to all Borrowers), as of any date, and (b) does not result in an
Overadvance (i.e., after reducing Eligible Inventory by the amount of
such inventory in the possession of all Non-Waiving Third Parties). Nothing
permitted by this Section 3.3, however, may be construed to alter in any
way the criteria for Eligible Receivables or Eligible Inventory provided in the
Credit Agreement.

          3.4 Impositions;
Protection of Agent’s Interests. To protect, perfect, or enforce, from time
to time, Agent’s rights or interests in the Collateral, Agent may, in its discretion
(but without any obligation to do so), (i) discharge any Liens (other than
Permitted Liens so long as no Event of Default, which has not been waived by
the Secured Creditors, has occurred and is continuing) at any time levied or
placed on the Collateral, (ii) pay any insurance to the extent any Borrower has
failed to timely pay the same, (iii) maintain guards where any Collateral is 

located if an Event of Default has occurred, which has not been waived
by the Secured Creditors, and is continuing, and (iv) obtain any record from
any service bureau and pay such service bureau the cost thereof. All costs and
expenses incurred by Agent in exercising its discretion under this Section
3.4 will be part of the Obligations, payable on Agent’s demand and secured
by the Loan Collateral.

          3.5 Agent’s
Duty of Care. Agent shall have no duty of care with respect to the
Collateral except that Agent shall exercise reasonable care with respect to the
Collateral in Agent’s custody. Agent shall be deemed to have exercised
reasonable care if (i) such Property is accorded treatment substantially equal
to that which Agent accords its own Property or similar Property of other
Persons held by Agent or (ii) Agent takes such action with respect to the
Collateral as Borrowers shall reasonably request in writing. Agent will not be
deemed to have, and nothing in this Section 3.5 may be construed to deem
that Agent has, failed to exercise reasonable care in the custody or
preservation of Collateral in its possession merely because either (a) Agent
failed to comply with any request of Borrowers or (b) Agent failed to take
steps to preserve rights against any Persons in such Property. Each Borrower
agrees that Agent has no obligation to take steps to preserve rights against any
prior parties.

          3.6 Verification.
At any time and from time to time, Agent, in its own name or in the name of
others, may periodically communicate with each Borrower’s account debtors,
customers and other obligors to verify with them, to Agent’s satisfaction, the
existence, amount and terms of any sums owed by such account debtors, customers
or other obligors to any Borrower. 

          3.7 Equipment.
Borrowers will, on Agent’s request, deliver to Agent any and all evidences of
ownership of Borrowers’ equipment, including all certificates of title and
applications for title pertaining to each Borrower’s equipment, so that Agent
may cause its security interest and Lien to be noted on such certificates of
title. Each Borrower will not permit any of its equipment to become an
accession to other personal property not constituting part of the Collateral. 

          3.8 Control
Agreement. With respect to any of the Collateral for which control of such
Collateral is a method of perfection under the Uniform Commercial Code,
including all of Borrowers’ rights, titles and interests in deposit accounts
(other than any deposit accounts expressly permitted under Section 6.14
of the Credit Agreement), investment property, electronic chattel paper and
letter-of-credit rights, and without limiting the obligations of Borrowers
under the provisions of Sections 3.9, 3.10, and 3.11,
Borrowers will, on Agent’s request, use commercially reasonable efforts to
cause to be executed, by each Person that Agent determines is appropriate, a
control agreement in a form acceptable to Agent, in its discretion exercised in
good faith. 

          3.9 Promissory
Notes and Tangible Chattel Paper. If any Borrower shall at any time hold or
acquire any promissory notes or tangible chattel paper, such Borrower shall
forthwith indorse, assign and deliver the same to Agent, accompanied by such
instruments of transfer or assignments duly executed in blank as Agent may from
time to time specify.

          3.10. Electronic
Chattel Paper and Transferable Records. If any Borrower at any time holds
or acquires an interest in any electronic chattel paper or any “transferable
record,” as that term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act, or in §16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction,
Borrowers shall promptly notify Agent thereof and, at the request and option of
Agent, shall take such action as Agent, in its discretion exercised in good
faith, may request to vest in Agent control, under §9-105 of the Uniform
Commercial Code, of such electronic chattel paper or control under Section 201
of the Federal Electronic Signatures in Global and National Commerce Act or, as
the case may be, §16 of the Uniform Electronic Transactions Act, as so in
effect in such jurisdiction, of such transferable record. 

          3.11. Letter-of-Credit
Rights. If any Borrower at any time is a beneficiary under a letter of
credit now or hereafter, Borrowers shall promptly notify Agent thereof and, at
the request and option of Agent, Borrowers shall, pursuant to an agreement in
form and substance satisfactory to Agent, in its discretion exercised in good
faith, will either, at the option of Agent: (i) arrange for the issuer and any
confirmer or other nominated person of such letter of credit to consent to an
assignment to Agent of the proceeds of the letter of credit or (ii) arrange for
Agent to become the beneficiary of the letter of credit, with Agent agreeing,
in each case, that the proceeds of the letter of credit are to be applied as
provided in the Credit Agreement.

          3.12. Commercial
Tort Claims. If any Borrower shall at any time hold or acquire a commercial
tort claim, Borrowers shall immediately notify Agent in a writing signed by
Borrowers of the particulars thereof and grant to Agent in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Agent, in its discretion exercised in good faith.

4. POWER OF ATTORNEY.

          4.1 Grant
of Power. Each Borrower does hereby make, constitute and appoint Agent (or
any officer or agent of Agent) as such Borrower’s true and lawful
attorney-in-fact, with full power of substitution, in the name of such Borrower
or in the name of Agent or otherwise, for the use and benefit of Agent, but at
the cost and expense of such Borrower, (i) upon the occurrence and during the
continuance of any Event of Default which has not been waived by the Secured
Creditors, or otherwise in connection with Remittances received in the Lock
Box, to indorse the name of such Borrower on any instruments, notes, checks,
drafts, money orders, or other media of payment (including payments payable
under any policy of insurance on the Collateral) or Collateral that may come
into the possession of Agent or any Affiliate of Agent in full or part payment
of any of the Obligations; (ii) upon the occurrence and during the continuance
of any Event of Default which has not been waived by the Secured Creditors, to
sign and indorse the name of such Borrower on any invoice, freight or express
bill, bill of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with any Collateral, and
any instrument or document relating thereto or to any of such Borrower’s rights
therein; (iii) to file financing statements pursuant to the Uniform Commercial
Code and other notices appropriate under applicable law as Agent in its
discretion exercised in good faith deems necessary to perfect, preserve, and
protect Agent’s rights and interests under this Agreement; (iv) upon the
occurrence and during the continuance of any Event of Default which has not
been waived by the Secured Creditors, to obtain the insurance referred to in Section
6.2 of the Credit Agreement and indorse any drafts and cancel any insurance
so obtained by Agent; (v) upon the occurrence and during the continuance of any
Event of Default which has not been waived by the Secured Creditors, to give
written notice to the United States Post Office to effect change(s) of address
so that all mail addressed to such Borrower may be delivered directly to Agent;
and (vi) to do any and all things necessary or desirable in Agent’s discretion
exercised in good faith to perfect Agent’s security interest in, and Lien on,
and other rights and interests in, the Collateral, to preserve and protect the
Collateral and to otherwise carry out this Agreement.

          4.2 Duration;
Ratification of Acts. This power of attorney, being coupled with an
interest, will be irrevocable for the term of this Agreement and all
transactions under this Agreement and thereafter so long as any of the
Obligations (other than the contingent obligations for indemnification or
reimbursement for which Agent has not then given notice of a claim thereof
against any Borrower) remain in existence or any Commitments of the Lenders
remain in effect. Except for actions where Agent or its attorney has acted
grossly negligent or with willful misconduct, each Borrower ratifies and
approves all acts of such attorney, and neither Agent nor its attorney will be
liable for any acts or omissions or for any error of judgment or mistake of
fact or law. Each Borrower will execute and deliver promptly to Agent all
instruments necessary or appropriate, as determined in Agent’s discretion
exercised in good faith, to further Agent’s good faith exercise of the rights
and powers granted to it in this Section 4.

5. WARRANTIES AND REPRESENTATIONS. To induce the Secured
Creditors to make the Loans and other extensions of credit pursuant to the Loan
Documents, each Borrower represents to the Secured Creditors that the following
statements are, and will continue throughout the term of this Agreement to be,
true: 

          5.1 Jurisdiction
of Organization; Places of Business, etc. Each Borrower’s (i) jurisdiction
of organization is as set forth on Exhibit A, (ii) exact legal name is as set
forth on Exhibit A (as may be updated from time to time as provided in Section
6.2), (iii) chief executive office and principal place of business are set
forth on Exhibit A (as may be updated from time to time as provided in Section
6.2), (iv) offices or locations where any Borrower keeps the Collateral
(except for inventory in transit) or conducts any of its business are listed on
Exhibit A (as may be updated from time to time as provided in Section
6.2), (v) federal tax identification number is identified on Exhibit A,
and (vi) organizational identification number in its jurisdiction of
organization is identified on Exhibit A.  

          5.2 Prior
Locations Of Collateral. Except for inventory and motor vehicles in
transit, none of the inventory or equipment constituting part of the Collateral
has been at, or has been removed from, any location during the one year period
preceding the date of this Agreement other than those locations set forth on Exhibit
A.

          5.3 Names.
All trade names, assumed names, fictitious names and other names used by
Borrowers during the four month period preceding the date of this Agreement are
set forth on Exhibit A, and no Borrower has, during the preceding one
year period, except as may be set forth on Exhibit A, acquired any of
its assets in any bulk transfer.

          5.4 Investment
Property. Except as set forth on Exhibit A, no Borrower has any
rights, titles or interests in, or with respect to, any investment property.

          5.5 Letter-of-Credit
Rights. Except as set forth on Exhibit A, no Borrower has any
rights, titles or interests in, or with respect to, any letters of credit.

          5.6 Electronic
Chattel Paper. Except as set forth on Exhibit A, no Borrower has any
rights, titles or interests in, or with respect to, any electronic chattel
paper.

          5.7 Commercial
Tort Claims. Except as set forth on Exhibit A, no Borrower has any
rights, titles or interests in, or with respect to, any commercial tort claims.

          5.8 Instruments.
Except as set forth on Exhibit A, no Borrower has any rights, titles or
interests in, or with respect to, any instruments, including promissory notes
but exclusive of checks and other items of payment received in the ordinary
course of business as presently conducted by Borrowers.

          5.9 State
of Title. Each Borrower has good and indefeasible title to, and ownership
of, the Collateral, free and clear of all Liens except to the extent, if any,
of the Permitted Liens, and exclusive of any Property for which a Borrower only
has a leasehold estate.

          5.10 Priority.
Agent has a first priority security interest in, and Lien on, the Collateral
except to the extent, if any, of the Permitted Liens. 

6. COLLATERAL COVENANTS. Until the Obligations (other than
contingent obligations for indemnification or reimbursement for which Agent has
not then given notice of a claim thereof against any Borrower) are fully paid,
performed and satisfied and this Agreement is terminated, Borrowers will:

          6.1 Claims
Against Collateral. Maintain the Collateral, as the same is constituted
from time to time, free and clear of all Liens, except to the extent, if any,
of the Permitted Liens, and Borrowers will defend or cause to be defended the
Collateral against all of the claims and demands of all Persons whomsoever
(except to the extent, if any, of the Permitted Liens).

          6.2 Notice
of Change in Place of Business; Names, etc. (i) Give Agent, and Agent’s
counsel, Vorys, Sater, Seymour & Pease LLP, Suite 2000 Atrium Two, 221 East
Fourth Street, Cincinnati, Ohio 45202, Attention: Hani R. Kallas, at least 15
Business Days advance notice in writing of (a) any change in any Borrower’s (1)
chief executive office, principal place of business, or other places of
business, or the opening of any new places of business, (2) registered agent’s
address in the jurisdiction of such Borrower’s organization, (4) exact legal
names as set forth on Exhibit A, or (4) trade names, assumed names or
fictitious names from those set forth on Exhibit A, and (b) the adoption
by any Borrower of any new trade names, assumed names or fictitious names and
(ii) not, without the prior written consent of Agent, change a Borrower’s
jurisdiction of, or form of, organization.

          6.3 Notice
of Governmental or Foreign Accounts. Upon the written request by Agent and
in addition to Borrowers’ obligations to notify Agent pursuant to each
Borrowing Base Certificate submitted under the Credit Agreement, promptly
notify Agent in writing of any contract giving rise to any Receivable with
respect to which the account debtor is (i) any Governmental Authority or (ii) a
business which is located in a foreign country. 

          6.4 Notice
of Adverse Information. Immediately notify Agent in writing of any
information which any Borrower has or may receive with respect to any portion
of the Collateral, having an aggregate value of $100,000 or more, which would
materially and adversely affect the value thereof or the rights of Agent with
respect thereto.

          6.5 Equipment.
Maintain the equipment in good operating condition and repair, ordinary wear
and tear excepted, make all commercially reasonable replacements thereof to
maintain the value and operating efficiency thereof, and, upon the request of
Agent, promptly inform Agent of any additions to or, subject to the terms of
the Credit Agreement, deletions from the equipment. 

          6.6 Inventory.
Maintain the inventory in good and salable condition exclusive of slow-moving,
obsolete or damaged inventory for which reserves or write-downs have been made
on Borrowers’ books and records in accordance with GAAP and will handle,
maintain and store the inventory in a safe and careful manner in accordance
with all applicable laws, rules, regulations, ordinances and governmental
orders.

          6.7 Insurance.
Insure the Collateral in accordance with the terms of the Credit Agreement.

          6.8 Removal
of Collateral. Not remove any of the Collateral (except for inventory and
motor vehicles in transit) from the locations set forth in Exhibit A of
this Agreement or keep any of the Collateral (except for inventory and motor
vehicles in transit) at any other office or location without giving Agent and
Agent’s counsel, as set forth in Section 6.2, at least 15 Business Days
prior notice of such action and complying with the other terms of this
Agreement; and provided that such location is within the continental United
States. Borrower will not locate any inventory in any warehouse which has or
will issue a negotiable warehouse receipt for such Inventory without Agent’s
prior consent. 

          6.9 No
Liens. Not create or permit to be created or to exist any Lien on any of
the Collateral except to the extent, if any, of the Permitted Liens.

7. TERM. Subject to Section 11.6 below, this Agreement
will terminate on the later to occur of: (i) the full performance, payment and
satisfaction of the Obligations (and all Letter of Credit Obligations are
expired or terminated, but exclusive of any contingent obligations for
indemnification or reimbursement for which Agent has not then given notice of a
claim thereof against any Borrower) and (ii) the termination of all Commitments
of each Lender under the Credit Agreement. Upon such termination, Agent shall,
at Borrowers’ expense, promptly execute and deliver to Borrowers proper documentation
to release the Liens on the Collateral granted hereunder or similar instrument
of re-conveyance prepared by Agent, and Agent shall duly deliver to Borrowers
such of the Collateral as has been released and is in the possession of Agent. 

8. AGENT’S RIGHTS AND REMEDIES.

          8.1 Remedies.
(i) On the occurrence of an Event of Default which has not been waived, Agent
may immediately, at any time, while such Event of Default is continuing, take
any one or more of the following actions, without notice, demand or legal
process of any kind (except as may be required by law), all of which each
Borrower waives to the fullest extent permitted by law:

                    (a)
proceed to enforce payment of the Obligations and to exercise all of the rights
and remedies afforded to Agent by the Code, the Uniform Commercial Code as in
effect in any applicable jurisdiction, under the terms of the Loan Documents
and by law and in equity provided, including those set forth below in this Section
8.1;

                    (b)
take possession of the Collateral and maintain such possession on any of any
Borrower’s premises at no cost to Agent, or remove the Collateral, or any part
thereof, to such other place(s) as Agent may desire;

                    (c)
enter on any premises on which the Collateral, or any part or records thereof,
may be situated and remove the same therefrom, for which action Borrowers will
not assert against Agent any claim for 

trespass or breach of the peace or similar claim, and Borrowers will
not hinder Agent’s efforts to effect such removal;

                    (d)
require each Borrower, at such Borrower’s cost, to assemble the Collateral and
make it available at a place designated by Agent;

                    (e)
collect, compromise, take, sell or otherwise deal with the Collateral and
proceeds thereof in its own name or in the name of Borrowers, including (1)
bringing suit on any one or more of the accounts, chattel paper, instruments,
documents, leases or other agreements (collectively, “Contracts”) in the
name of Borrowers or Agent, and exercise all such other rights respecting the
Contracts, in the name of Borrowers or Agent, including the right to accelerate
or extend the time of payment, settle, release in whole or in part any amounts
owing on any Contract and issue credits in the name of Borrowers or Agent, and
including proceeding against any collateral or security provided in respect of
any Contract and (2) bringing suit on any one or more of the general
intangibles, in the name of Borrowers or Agent, and exercise all such other
rights respecting the general intangibles, including the right to accelerate or
extend the time of payment, settle, release in whole or in part any amounts
owing on any general intangible and issue credits in the name of Borrowers or
Agent, and including proceeding against any collateral or security provided in
respect of any general intangible;

                    (f)
sell part or all of the Collateral at public or private sale(s), for cash, upon
credit or otherwise, at such prices and upon such terms as Agent deems
advisable, in Agent’s discretion, and Agent may, if Agent deems it reasonable,
postpone or adjourn any sale of the Collateral from time to time by an
announcement at the time and place of sale or by announcement at the time and
place of such postponed or adjourned sale, without being required to give a new
notice of sale, and without being obligated to make any sale of the Collateral
regardless of notice of sale having been given;

                    (g)
to the extent Agent has not so acted or is currently not so acting pursuant to
the other terms of this Agreement, notify Borrowers’ customers, account debtors
and any other Persons (1) obligated on the Collateral to make payment or
otherwise render performance to or for the benefit of Agent and (2) that,
without limiting the generality of clause (1), the Contracts and general
intangibles have been assigned to Agent and that payments should be made
directly to Agent;

                    (h)
require Borrowers, using such form as Agent may approve, to notify Borrowers’
customers, account debtors and any other Persons, and to indicate on all of
Borrowers’ correspondence to such customers, account debtors and other Persons,
that the Contracts and general intangibles must be paid to Agent directly;

                    (i)
sign any indorsements, assignments or other writings of conveyance or transfer
in connection with any disposition of the Collateral;

                    (j)
sell, assign, transfer or otherwise dispose of all or any part of the
Collateral in any manner permitted by law and do any other thing and exercise
any other right or remedy which Agent may, with or without judicial process, do
or exercise under applicable law, and in any such sale Agent may sell, assign,
transfer or otherwise dispose of all or any part of the Collateral without
giving any warranties and Agent may specifically disclaim any warranties of
title and similar warranties; 

                    (k)
apply for and have a receiver appointed under state or federal law by a court
of competent jurisdiction in any action taken by Agent to enforce its rights
and remedies under this Agreement and, as applicable, the other Loan Documents
in order to manage, protect, preserve, sell and otherwise dispose of all or any
portion of the Collateral and continue the operation of the business of
Borrowers, and to collect all revenues and profits thereof and apply the same
to the payment of all expenses and other charges of such receivership,
including the compensation of the receiver, and to the payment of the
Obligations until a sale or other disposition of such Collateral is finally
made and consummated;

                    (l)
enforce the obligations of an account debtor or other Person obligated on collateral
and exercise the rights of Borrowers with respect to the obligations of the
account debtor or other Person obligated on 

collateral to make payment or otherwise render performance to
Borrowers, and with respect to any Property that secures the obligations of the
account debtor or other Person obligated on collateral, in any case directly or
through collection agencies or other collection specialists; and

                    (m)
without limiting the provisions of Section 2.2, apply (or instruct another
Person to apply) to the Obligations the balance of any deposit account that is
part of the Collateral.

          (ii) Each
Borrower acknowledges that portions of the Collateral could be difficult to
preserve and dispose of and be further subject to complex maintenance and
management. Accordingly, Agent, in exercising its rights under this Section
8.1, shall have the widest possible latitude to preserve and protect the
Collateral and Agent’s security interest in and Lien thereon. Moreover, each
Borrower acknowledges and agrees that Agent shall have no obligation to, and
each Borrower hereby waives to the fullest extent permitted by law any right
that it may have to require Agent to, (a) clean up or otherwise prepare any of
the Collateral for sale, (b) pursue any Person to collect any of the
Obligations or (c) exercise collection remedies against any Persons obligated
on the Collateral. Agent’s compliance with applicable local, state or federal
law requirements, in addition to those imposed by the UCC, in connection with a
disposition of any or all of the Collateral will not be considered to adversely
affect the commercial reasonableness of any disposition of any or all of the
Collateral under the UCC.

          8.2 Notice
of Disposition; Allocations. If any notice is required by law to effectuate
any sale or other disposition of the Collateral, (i) Agent will give Borrowers
written notice of the time and place of any public sale or of the time after
which any private sale or other intended disposition thereof will be made, and
at any such public or private sale, Agent may purchase all or any of the
Collateral; and (ii) Agent and each Borrower agree that such notice will not be
unreasonable as to time if given in compliance with this Agreement ten days
prior to any sale or other disposition. The proceeds of the sale will be
applied first to all costs and expenses of such sale including Attorneys’ Fees
and other costs and expenses, and second to the payment of all Obligations in
the manner and order provided in the Credit Agreement. Each Borrower shall
remain liable to Agent for any deficiency. Unless otherwise directed by law,
Agent will return any excess to Borrowers.

          8.3 Payment
of Expenses. Each Borrower shall pay to Agent, on its demand, all out-of-pocket
costs and expenses, including court costs, reasonable Attorneys’ Fees and costs
of sale, incurred by Agent in exercising any of its rights or remedies
hereunder, all of which constitute part of the Obligations and are secured by
the Loan Collateral.

9. INDEMNIFICATION. In consideration of the execution and
delivery of the Credit Agreement and extensions of credit made to Borrowers
thereunder, Borrowers will indemnify and hold each Secured Creditor and each
Secured Creditor’s directors, Affiliates, and agents (for the purposes of this Section
9 each is an “Indemnified Party”) harmless from and against any and
all claims, losses, obligations and liabilities arising out of or resulting
from any or all of (i) this Agreement and (ii) the transactions contemplated by
this Agreement (including enforcement of this Agreement), except for claims,
losses or liabilities to the extent arising out of or resulting from an
Indemnified Party’s gross negligence or willful misconduct. The indemnification
provided for in this Section 9 is in addition to, and not in limitation
of, any other indemnification or insurance provided by any Borrower to any
Secured Creditor.

10. NOTICE. Any notice, certificate, request, notification and
other communication required, permitted or contemplated hereunder must be in
writing and given in accordance with the Credit Agreement.

11. GENERAL.

          11.1 Severability.
If any term of this Agreement is found invalid under Ohio law or other laws of
mandatory application by a court of competent jurisdiction, the invalid term
will be considered excluded from this Agreement and will not invalidate the
remaining terms of this Agreement.

          11.2 GOVERNING
LAW. THIS AGREEMENT HAS BEEN DELIVERED AND ACCEPTED AT AND SHALL BE DEEMED
TO HAVE BEEN MADE AT CINCINNATI, OHIO. THIS AGREEMENT SHALL 

BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF OHIO (WITHOUT REGARD TO OHIO CONFLICTS OF LAW PRINCIPLES).

          11.3 WAIVER
OF JURISDICTION. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE SECURED
CREDITORS TO EXTEND CREDIT TO BORROWERS, BORROWERS AND THE SECURED CREDITORS
AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS
AGREEMENT, ITS VALIDITY OR PERFORMANCE AND WITHOUT LIMITATION ON THE ABILITY OF
THE SECURED CREDITORS, AND THEIR SUCCESSORS AND ASSIGNS, TO INITIATE AND
PROSECUTE IN ANY APPLICABLE JURISDICTION ACTIONS RELATED TO THE REPAYMENT AND
COLLECTION OF THE OBLIGATIONS AND THE EXERCISE OF ALL OF THE SECURED CREDITORS’
RIGHTS AGAINST ANY BORROWER WITH RESPECT THERETO AND ANY SECURITY OR PROPERTY
OF ANY BORROWER, INCLUDING DISPOSITIONS OF THE COLLATERAL, SHALL BE INITIATED
AND PROSECUTED AS TO ALL PARTIES AND THEIR SUCCESSORS AND ASSIGNS AT
CINCINNATI, OHIO. EACH SECURED CREDITOR AND EACH BORROWER 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 AND THE SECURED CREDITORS AT THEIR RESPECTIVE ADDRESSES SET FORTH IN
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.

          11.4 Survival
and Continuation of Representations and Warranties. All of Borrowers’
representations and warranties contained in, or incorporated by reference in,
this Agreement shall be true and correct in all material respects when made and shall,
for all purposes of this Agreement, be deemed to be repeated on and as of the
date of Borrowers’ request
for each Loan and shall be true and correct in all material respects as of each
such date.

          11.5 Agent’s
Additional Rights Regarding Collateral. All of the Obligations shall
constitute one obligation secured by all of the Collateral. In addition to
Agent’s other rights and remedies under the Loan Documents, Agent may, in its
discretion exercised in good faith, following the occurrence and during the
continuance of any Event of Default which has not been waived by the Secured
Creditors: (i) exchange, enforce, waive or release any of the Collateral or
portion thereof, (ii) apply the proceeds of the Collateral against the
Obligations and direct the order or manner of the liquidation thereof
(including any sale or other disposition) in accordance with the Credit
Agreement and the other Loan Documents, and (iii) settle, compromise, collect
or otherwise liquidate any such security in accordance with the Credit
Agreement and the other Loan Documents without affecting or impairing its right
to take any other further action with respect to any security or any part
thereof.

          11.6 Application
of Payments; Revival of Obligations. Agent shall have the continuing right
to apply or reverse and reapply any payments to any portion of the Obligations.
To the extent any Borrower makes a payment or payments to any Secured Creditor
or any Secured Creditor receives any payment or proceeds of the Collateral or
any other security for Borrowers’ benefit, which payment(s) or proceeds or any
part thereof are subsequently voided, invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy act, state or federal law, common law or
equitable cause, then, to the extent of such payment(s) or proceeds received,
the Obligations or part thereof intended to be satisfied shall be revived and
shall continue in full force and effect, as if such payment(s) or proceeds had
not been received by the affected Secured Creditor. 

          11.7 Additional
Waivers by Borrowers. Each Borrower waives presentment and protest of any
instrument and notice thereof, and, except as expressly provided in the Loan
Documents, demand, notice of default and all other notices to which Borrowers
might otherwise be entitled. Borrowers shall not assert any claim against any
Secured Creditor under any theory of liability for consequential, special,
indirect or punitive damages. 

          11.8 Equitable
Relief. Each Borrower recognizes that, in the event any Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to Agent;
therefore, each Borrower agrees that Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages. 

          11.9 Entire
Agreement; Amendments; Counterparts; Fax Signatures. This Agreement and the
other Loan Documents set forth the entire agreement of the parties with respect
to subject matter of this Agreement and supersede all previous understandings,
written or oral, in respect thereof. Any request from time to time by Borrowers
for the Secured Creditors’ amendment, modification or waiver of any provision
in this Agreement must be in writing. The terms of this Agreement may be
amended, waived or modified only by an instrument in writing duly executed by
Borrowers and Agent (with the consent of the Lenders as specified in Section
12.4 of the Credit Agreement). The Secured Creditors will have no
obligation to provide any amendment, modification or waiver of, or under this
Agreement, requested by Borrowers, and the Secured Creditors may, for any
reason in their discretion exercised in good faith, elect to withhold consent
to the requested amendment, modification or waiver. Any such amendment, waiver
or modification shall be binding upon the Secured Creditors, each holder of the
Obligations, and Borrowers. Two or more duplicate originals of this Agreement
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument. Any documents
delivered by, or on behalf of, Borrowers by fax transmission or other
electronic delivery of an image file reflecting the execution hereof, and, if
so signed: (i) may be relied on by Agent as if the document were a manually
signed original and (ii) will be binding on Borrowers for all purposes of the
Loan Documents.

          11.10 Headings.
Section headings in this Agreement are included for convenience of reference
only and shall not relate to the interpretation or construction of this
Agreement.

          11.11 Cumulative
Remedies. The remedies provided in this Agreement and the other Loan
Documents are cumulative and not exclusive of any remedies provided by law.
Exercise of one or more remedy(ies) by Agent does not require that all or any
other remedy(ies) be exercised and does not preclude later exercise of the same
remedy. 

          11.12 No
Deemed Waiver. Failure by Agent to exercise any right, remedy or option
under this Agreement or in any Loan Documents or delay by Agent in exercising
the same shall not operate as a waiver by Agent of its right to exercise any
such right, remedy or option. 

          11.13 Recourse to Directors or Officers. The obligations of the Secured Creditors under
this Agreement are solely the corporate obligations of the Secured Creditors.
No recourse shall be had for any obligation or claim arising out of or based
upon this Agreement against any stockholder, employee, officer, or director of
any of the Secured Creditors. 

          11.14 Assignment.
Agent shall have the right to assign this Agreement and the other Loan
Documents. Borrowers may not assign, transfer or otherwise dispose of any of
their rights or obligations hereunder, by operation of law or otherwise, and
any such assignment, transfer or other disposition without Agent’s written
consent (with the consent of the Lenders as specified in Section 12.4 of
the Credit Agreement) shall be void. All of the rights, privileges, remedies
and options given to any Secured Creditor under the Loan Documents shall inure
to the benefit of the successors and assigns of the applicable Secured
Creditor, and all the terms, conditions, covenants, provisions and warranties
herein shall inure to the benefit of and bind the permitted successors and
assigns of Borrowers and each Secured Creditor, respectively. 

          11.15 Agent.
(i) As between the Lenders, the LC Issuer and Agent, (a) Agent will hold all
items of the Collateral at any time received under this Agreement in accordance
with the terms of this Agreement and the Credit Agreement and (b) by accepting
the benefits of this Agreement, each Lender and the LC Issuer acknowledge and
agree that (1) the obligations of Agent as holder of the Collateral and any
interests therein and with respect to any disposition of any of the Collateral
or any interests therein are only those obligations expressly set forth in this
Agreement and the Credit Agreement and (2) this Agreement may be enforced only
by the action of Agent and that no other Secured Creditor shall have any right
individually to seek to enforce or to enforce this Agreement, it being
understood and agreed that such rights and remedies may be exercised by Agent,
for the benefit of the Secured 

Creditors, upon the terms of this Agreement and the Credit Agreement.
(ii) As between any Borrower and Agent, Agent shall be conclusively presumed to
be acting as agent for the Lenders and the LC Issuer with full and valid
authority to so act or refrain from acting. 

          11.16 Conflict.
If there is any conflict, ambiguity, or inconsistency, in Agent’s judgment,
between the terms of this Agreement and any of the other Loan Documents, then
the applicable terms and provisions, in Agent’s judgment, providing the Secured
Creditors with greater rights, remedies, powers, privileges, or benefits will
control.

          11.17 WAIVER
OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE SECURED
CREDITORS TO EXTEND CREDIT TO BORROWERS, EACH BORROWER AND EACH SECURED
CREDITOR WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR
PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT OR THE CONDUCT OF THE
RELATIONSHIP BETWEEN OR AMONG THE SECURED CREDITORS AND BORROWERS.

          11.18 Joint
and Several Obligations. The obligations of Borrowers under this Agreement
are joint, several and primary. No Borrower shall be or be deemed to be an
accommodation party with respect to this Agreement. 

[Signature Page Follows]

          IN WITNESS
WHEREOF, Agent and Borrowers, intending to be legally bound, have executed and
delivered this Agreement by their duly authorized officers as of the Effective
Date.

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 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

 	
  

 

	
  

 	
  

 	
  

 
	
 Accepted at
 Cincinnati, Ohio,

 	
  

 
	
 as of the
 Effective Date.

 	
  

 
	
  

 	
  

 	
  

 
	
 FIFTH THIRD
 BANK, as Agent

 	
  

 
	
  

 	
  

 	
  

 
	
 By:

 	
         /s/
 Anne B. Kelly

 	
  

 
	
  

 	

 

 	
  

 
	
  

 	
 Anne B.
 Kelly, Vice President 

 	
  

 

Exhibit A

                    Borrowers’
Exact Legal Names,

                    Jurisdictions
of Organization,

                    Organizational
Identification Numbers,

                    and
Federal Tax Identification Numbers: 

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Exact Legal
 Name

 	
  

 	
 Jurisdiction

 of Organization

 	
  

 	
 Organizational

 ID Number

 	
  

 	
 Federal

 Tax ID Number

 	
  

 
	
  

 	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Industrial
 Services of America, Inc.

 	
  

 	
 Florida

 	
  

 	
 175517

 	
  

 	
 59-0712746

 	
  

 
	
  

 	
 ISA Indiana,
 Inc.

 	
  

 	
 Indiana

 	
  

 	
 1998070906

 	
  

 	
 35-2052295

 	
  

 

Borrowers’ Chief Executive Office and
Principal Place of Business:

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 ISA

 	
  

 	
 7100 Grade
 Lane, Building #1, Louisville, Kentucky 40213

 
	
  

 	
 ISA Indiana

 	
  

 	
 7100 Grade
 Lane, Building #1, Louisville, Kentucky 40213

 

Borrowers’ Offices or Locations Where any
Collateral is Located:
(other than any chief executive office address set forth above)

	
  

 	
  

 
	
 A.

 	
 7110 Grade
 Lane, Louisville, Kentucky 40213

 
	
 B.

 	
 6709 Grade
 Lane, Louisville, Kentucky 40213

 
	
 C.

 	
 7124 Grade
 Lane, Louisville, Kentucky 40213

 
	
 D.

 	
 7200 and
 7210 Grade Lane, Louisville, Kentucky 40219

 
	
 E.

 	
 1617 State
 Road 111, New Albany, Indiana 47150

 
	
 F.

 	
 1565 E. 4th
 Street, Seymour, Indiana 47274

 
	
 G.

 	
 7023, 7025,
 7101, and 7103 Grade Lane, Louisville, Kentucky 40213

 
	
 H.

 	
 1400 Cahill
 Drive, Lexington, Kentucky 40504

 
	
 I.

 	
 7100 Grade
 Lane, Louisville, Kentucky 40213

 
	
 J.

 	
 7020 Grade
 Lane, Louisville, Kentucky 40213

 

Trade Names, Assumed Names and Fictitious
Names:

	
  

 	
  

 
	
 A.

 	
 Currently in
 Use: None.

 
	
  

 	
  

 
	
 B.

 	
 Used During
 Last Five Years but not Currently in Use: Fitzpatrick.

 

Assets Acquired in Bulk Transfer:
None, other than the acquisition of certain fixed assets from Venture Metals,
LLC (“Venture Metals”) pursuant to the terms of that certain Lease Agreement
dated as of February 18, 2009, by and between Venture Metals and ISA.

Investment Property:
Membership interest in Subsidiaries.

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Issuer:

 	
  

 	
 Certificate
 Number:

 	
  

 	
 Number
 of Shares:

 	
  

 	
 Owner:

 	
  

 
	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 
	
  

 	
  

 
	
 7021 Grade

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 7124 Grade

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 7200 Grade

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 IN Real Estate

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 CWS

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 ISA Real Estate

 	
  

 	
 N/A

 	
  

 	
 100%
 Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 Logistics

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 Recycling

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 
	
  

 	
  

 
	
 Waste Equipment

 	
  

 	
 N/A

 	
  

 	
 100% Interest

 	
  

 	
 ISA

 	
  

 

Letter of Credit Rights:
None.

Electronic Chattel Paper:
None.

Commercial Tort Claims:
None.

Instruments:
None.Exhibit 10.9

GUARANTY

          THIS
GUARANTY (this “Guaranty”), dated as of July 30, 2010 (the “Effective
Date”), made by COMPUTERIZED WASTE SYSTEMS, LLC, a Kentucky limited
liability company (“CWS”), ISA INDIANA REAL ESTATE, LLC, a Kentucky
limited liability company (“Indiana Real Estate”), ISA LOGISTICS LLC, a
Kentucky limited liability company (“Logistics”), ISA REAL ESTATE, LLC,
a Kentucky limited liability company (“ISA Real Estate”), ISA RECYCLING,
LLC, a Kentucky limited liability company (“Recycling”), WASTE EQUIPMENT
SALES & SERVICE CO., LLC, a Kentucky limited liability company (“Waste
Equipment”), 7021 GRADE LANE LLC, a Kentucky limited liability company (“7021
Grade”), 7124 GRADE LANE LLC, a Kentucky limited liability company (“7124
Grade”), and 7200 GRADE LANE LLC, a Kentucky limited liability company (“7200
Grade”) (CWS, Indiana Real Estate, Logistics, ISA Real Estate, Recycling,
Waste Equipment, 7021 Grade, 7124 Grade and 7200 Grade are each a “Guarantor
and, collectively, (“Guarantors”), to, and for the benefit of, the
Secured Creditors (as defined below), is as follows:

1. GUARANTY.

          1.1 Guaranty.
For value received and in consideration of any loan, advance, letter of credit
or financial accommodation of any kind whatsoever heretofore, now or hereafter
made, given or granted to any one or more of Borrowers (as defined below) by
any or all of the Secured Creditors (as defined below), pursuant to the Credit
Agreement dated as of the Effective Date (the “Credit Agreement”), by and
among Borrowers, the Lenders party thereto, Fifth Third Bank, an Ohio banking
corporation, in its capacity as Agent for the LC Issuer and the Lenders (in
such capacity, “Agent”) and as LC Issuer thereunder (Agent, the LC
Issuer and the Lenders are, collectively, the “Secured Creditors” and
each, individually, a “Secured Creditor”), each Guarantor hereby
absolutely, irrevocably, unconditionally, and jointly and severally guarantees
to each Secured Creditor the full and prompt payment and performance when due
of (i) the principal of, all interest on, and all fees in respect of, all of
the Loans, (ii) the Letter of Credit Obligations and all fees in respect
thereof, and (iii) any and all other Obligations, whether all or any portion of
such Loans, Letter of Credit Obligations, and other Obligations are now or
hereafter existing, direct or indirect, related or unrelated, joint or several,
or absolute or contingent, whether or not for the payment of money, and whether
arising by reason of an extension of credit, opening of a letter of credit,
loan or guarantee or in any other manner (all of the indebtedness, liabilities
and obligations described in the foregoing clauses (i), (ii) and (iii) of this Section
1.1 which are outstanding from time to time are, collectively, the “Guaranteed
Obligations”). Each Guarantor hereby absolutely, irrevocably,
unconditionally, and jointly and severally guarantees to each Secured Creditor
the full and prompt payment and performance of the Guaranteed Obligations when
any of the Guaranteed Obligations are due under the terms of the Credit
Agreement or the other Loan Documents, including upon the occurrence and during
the continuance of an Event of Default beyond any applicable grace period (and
which has not been waived in writing by, or cured to the written satisfaction
of, Agent in accordance with the Credit Agreement), by reason of the maturity
or acceleration of any of the Guaranteed Obligations, on the demand for cash
collateral for the Letter of Credit Obligations, on the occurrence of a default
under the terms of this Guaranty, or otherwise, and at any times after the date
when due.

          1.2 Capitalized
Terms. Capitalized terms used, but not defined, in this Guaranty, and the
term “good faith” have the meanings attributed to them in the Credit Agreement.

          1.3 Other
Definitional Provisions; Construction. Unless otherwise specified in this
Guaranty, as used in this Guaranty:

                    (i)
“Borrowers” means each of Industrial Services of America, Inc., a
Florida corporation (“ISA”), and ISA Indiana, Inc., an Indiana
corporation (“ISA Indiana”). 

                    (ii)
Accounting terms relating to Guarantors not defined in this Guaranty or the
Credit Agreement have the respective meanings given to them in accordance with
GAAP. 

                    (iii)
The definition of any document, instrument or agreement includes all schedules,
attachments and exhibits thereto and all renewals, extensions, supplements,
restatements and amendments thereof. 

                    (iv)
“Hereunder,” “herein,” “hereto,” “this Guaranty” and words of similar import
refer to this entire document; “including” is used by way of illustration and
not by way of limitation, unless the context clearly indicates the contrary;
the singular includes the plural and conversely; and any action required to be
taken by Borrowers or Guarantors is to be taken promptly, unless the context
clearly indicates the contrary.

2. NATURE OF THE GUARANTY.

          2.1 Absolute
Obligations. The obligations of each Guarantor under this Guaranty are
absolute, unconditional, and will be continuing and remain in full force and
effect subject to Sections 2.2 and 2.6. This is a continuing guaranty of
payment and not of collection. No Guarantor’s obligations under this Guaranty
will be released, discharged, affected, modified or impaired by any event,
including any of the following events:

                    (i)
the compromise, settlement, release, discharge or termination of any or all of
the Guaranteed Obligations by operation of law or otherwise, except as may
result from the full and prompt performance and payment of the Guaranteed
Obligations;

                    (ii)
the extension of the time for payment of any Guaranteed Obligation, the waiver,
modification or amendment (whether material or otherwise) of any Guaranteed
Obligation, or the acceptance of partial payments of the Guaranteed
Obligations;

                    (iii)
the taking or failure to take any action under the Credit Agreement, the
Security Document, any of the other Loan Documents or this Guaranty;

                    (iv)
the invalidity or unenforceability of any provision of the Credit Agreement,
the Security Document, any of the other Loan Documents, or this Guaranty or any
other defense Borrowers or any other guarantor of the Guaranteed Obligations
may assert to the payment or performance of the Guaranteed Obligations other
than the payment and satisfaction in full of all of the Guaranteed Obligations;

                    (v)
any (a) failure by any Secured Creditor, to take any steps to perfect,
maintain, or enforce its Liens on any of the Loan Collateral, (b) subordination
of any of the Guaranteed Obligations and any security therefor to any other
Indebtedness of Borrowers to any Person, or (c) loss, release, substitution of,
or other dealings with, any collateral or other security given to any Secured
Creditor with respect to the Guaranteed Obligations;

                    (vi)
the voluntary or involuntary liquidation, dissolution, sale or other disposition
of all or substantially all of the assets, marshaling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment, composition with
creditors or readjustment of, or other similar proceedings affecting Borrowers,
any Guarantor, or any other guarantor of any or all of the Guaranteed
Obligations;

                    (vii)
any allegation of invalidity or contest of the validity of this Guaranty in any
of the proceedings described in clause (vi) of this Section 2.1;

                    (viii)
any act, election or remedy, or other occurrence or circumstance of any nature,
whether or not under any Secured Creditor’s control, that may affect or impair
any subrogation right of any Guarantor or the effectiveness or value thereof;

                    (ix)
the default or failure of any Guarantor to perform fully any of its obligations
set forth in this Guaranty;

                    (x)
any Secured Creditor’s election, in any proceeding instituted under Chapter 11
of Title 11 of the United States Code (the “Bankruptcy Code”), of the
application of Section 1111(b)(2) of the Bankruptcy Code;

                    (xi)
any borrowing or grant of a security interest by any Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code;

                    (xii)
the disallowance of all or any portion of any Secured Creditor’s claim(s) for
repayment of the Guaranteed Obligations under Section 502 of the Bankruptcy
Code; or

                    (xiii)
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor other than payment and satisfaction in full
of all of the Guaranteed Obligations.

          2.2 Revival
of Guaranty. If (i) any demand is made at any time on any Secured Creditor
for the repayment of any amount received by it or as proceeds of any collateral
or security which have been applied in payment of any of the Guaranteed
Obligations, and (ii) any Secured Creditor makes any repayment by reason of any
judgment, decree or order of any court or administrative body or by reason of
any settlement or compromise of such demand, each Guarantor will be liable
under this Guaranty for all amounts so repaid to the same extent as if such
amounts had never been received originally by each affected Secured Creditor. 

          2.3 Waivers
By Guarantors. Each Guarantor hereby covenants that this Guaranty will not
be discharged except by complete performance of the Obligations and the
Guaranteed Obligations, other than contingent obligations for indemnification
or reimbursement for which Agent has not given notice thereof to Borrowers.
Each Guarantor waives all setoffs and counterclaims and all presentments,
demands for performance, notices of nonperformance, notices of intention to
accelerate and notices of acceleration, protests, notices of protest, notices
of dishonor, and notices of acceptance of, and reliance on, this Guaranty. Each
Guarantor further waives all (i) notices of the existence, creation or
incurring of new or additional Indebtedness, arising either from additional
loans extended to, or letters of credit issued for the benefit of, Borrowers,
or otherwise, (ii) notices that the principal amount, or any portion thereof
(and any interest thereon), of the Loans or any of the other Guaranteed Obligations
is due, (iii) notices of any and all proceedings to collect from Borrowers, any
indorser or any other guarantor of all or any part of the Guaranteed
Obligations, or from anyone else, (iv) to the extent permitted by law, notices
of exchange, sale, surrender or other handling of any security or collateral
given to Agent, for the benefit of the Secured Creditors, to secure payment of
all or any part of the Guaranteed Obligations and (v) defenses based on
suretyship or impairment of collateral.

          2.4 Application
of Proceeds by Agent. Subject to the terms of the Credit Agreement, Agent
will have the exclusive right to determine, in its discretion exercised in good
faith, the order and method of application of payments from and credits to, if
any, Guarantors, Borrowers or any other Person on account of the Guaranteed
Obligations or of any other liability of any Guarantor to any Secured Creditor.

          2.5 Responsibility
of Guarantors. Each Guarantor hereby assumes responsibility for keeping
itself informed of the financial condition of Borrowers, and any and all
indorsers and other guarantors of any instrument or document evidencing all or
any part of the Guaranteed Obligations and of all other circumstances bearing
on the risk of nonpayment of the Guaranteed Obligations or any part thereof
that diligent inquiry would reveal. No Secured Creditor will have any duty to
advise Guarantors of information known to a Secured Creditor regarding such
condition or any such circumstances.

          2.6
Termination of Guaranty. Subject to Section 2.2, each Guarantor’s
obligations under this Guaranty for the Guaranteed Obligations will terminate
on the later to occur of: (i) the full performance, payment and satisfaction of
the Guaranteed Obligations (and all Letter of Credit Obligations are expired or
terminated, but exclusive of any contingent obligations for indemnification or
reimbursement for which Agent has not then given notice of a claim thereof
against any Borrower) and (ii) the termination of all Commitments of each
Lender under the Credit Agreement. 

          2.7 Security.
This Guaranty and the Guaranteed Obligations are secured by a Security
Agreement of even date herewith given by Guarantors to Agent for the benefit of
the Secured Creditors (the “Security Document”).

          2.8 Taxes.
All payments to be made hereunder by Guarantors shall be made without setoff,
counterclaim or other defense. All such payments shall be made free and clear
of and without deduction for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority (collectively, “Taxes”) excluding Taxes
imposed on or measured by Agent’s, or any Lender’s, gross or net income,
franchise taxes, branch profits taxes, taxes on doing business or taxes
measured by or imposed upon the overall 

capital or net worth of Agent or any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed by the
jurisdiction under the laws of which Agent, any Lender, or any applicable
lending office, branch or affiliate is organized or is located, or any nation
within which such jurisdiction is located or any political subdivision thereof.
If any Taxes are imposed and required to be withheld from any amount payable by
any Guarantor hereunder, Guarantors shall be obligated to (i) pay such
additional amount so that the Secured Creditors will receive a net amount
(after giving effect to the payment of such additional amount and to the
deduction of all Taxes) equal to the amount due hereunder, (ii) pay such Taxes
to the appropriate taxing authority for the account of the Secured Creditors,
and (iii) as promptly as possible thereafter, send Agent a certified copy of
any original official receipt showing payment thereof, together with such
additional documentary evidence as Agent may from time to time require in its
discretion exercised in good faith. If any Guarantor fails to pay any Taxes
when due (taking into account all valid and lawful extensions) to the
appropriate taxing authority or fails to remit to Agent the required receipts
or other required documentary evidence, Guarantors shall be obligated to indemnify
the Secured Creditors for any incremental taxes, interest or penalties that may
become payable by the Secured Creditors as a result of such failure. The
obligations of Guarantors under this Section 2.8 shall survive the
repayment of the Guaranteed Obligations and the termination of the Commitments
under the Credit Agreement. 

3. REPRESENTATIONS AND WARRANTIES. To induce the Secured
Creditors to extend the Guaranteed Obligations, and for other good and valuable
consideration, each Guarantor hereby represents and warrants to each Secured
Creditor that: 

          (i) this
Guaranty is the legal, valid and binding obligation of such Guarantor,
enforceable in accordance with its terms, except as such enforceability may be
affected by any Insolvency Laws affecting the enforcement of creditors’ rights
generally and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);

          (ii) the
execution, delivery and performance of this Guaranty by such Guarantor do not
and will not, by the lapse of time, by the giving of notice, or the
satisfaction of any other condition, violate or contravene any authority having
the force of law or any Material Agreement to which such Guarantor is a party
or by which such Guarantor or any of its Properties is or may be bound or
affected; 

          (iii) the
execution, delivery and performance of this Guaranty by such Guarantor do not:
(a) require any consent or approval of any Person other than to the extent
disclosed in Section 5.2(c) of the Credit Agreement, (b) violate or
contravene any rule or provision of such Guarantor’s Articles of Organization,
any resolution of its members or managers or other agreement, document or
instrument (including any member agreement to which such Guarantor is a party
or by which such Guarantor or any of such Guarantor’s Properties is or may be
bound or affected), or (c) result in the creation or imposition of any Lien on
any of the Properties of such Guarantor except in favor of Agent for the
benefit of the Secured Creditors; 

          (iv) except
with respect to those claims that are covered fully by available insurance
coverage for which the insurer has admitted in writing its liability for the
full amount thereof, there is no action or proceeding pending before any court
or Governmental Authority which materially, adversely affects the condition
(financial or otherwise) of such Guarantor or any of its Properties; 

          (v) such
Guarantor does not have any Indebtedness other than as expressly permitted by Section
8.11 of the Credit Agreement; and 

          (vi) as of
the Closing Date, each of the representations applicable to such Guarantor, or
made on behalf of such Guarantor by Borrowers, in the Credit Agreement is true
and correct in all material respects. 

4. COVENANTS. From the Effective Date until the termination of
this Guaranty in accordance with Section 2.6:

          4.1 Security
Document. Guarantors will perform, observe and comply with all of the terms
and conditions of the Security Document.

          4.2 Expenses.
Each Guarantor will pay all of the reasonable costs, expenses and fees,
including, without limitation, all Attorneys’ Fees, incurred by any Secured
Creditor in enforcing or attempting to enforce this Guaranty, whether the same
is enforced by suit or otherwise, and all amounts recoverable by law, including
interest on any unpaid amounts due under this Guaranty.

          4.3 Incorporation
of Credit Agreement. Each Guarantor will observe, perform and fulfill, and
will be bound by, each provision in the Credit Agreement applicable to such
Guarantor (including those which Borrowers have agreed to cause such Guarantor
to observe, perform and fulfill) (the “Incorporated Provisions”), with
the effect that the Secured Creditors will have the benefit of each of the
Incorporated Provisions (including affirmative and negative covenants,
representations and warranties, delivery of financial statements and other
notices and information). The Incorporated Provisions are hereby incorporated
by reference and made a part of this Guaranty to the same extent as if the
Incorporated Provisions were fully set forth herein. Notwithstanding anything
to the contrary in this Section 4.3, none of Guarantors nor any
successor or assignee of any Guarantor, by operation of law or otherwise, is a
party to the Credit Agreement or any of the other Loan Documents (other than
this Guaranty, the Security Document and those certain Landlord Waivers and
Negative Pledge Agreements, as applicable, made by Guarantors in favor of
Agent), and Guarantors will not have any (i) right in or to enforcement of the
Credit Agreement or any of such other Loan Documents as against Borrowers or
any Secured Creditor, (ii) claim of damage if Borrowers or any Secured Creditor
defaults under the Credit Agreement or any of such other Loan Documents, or
(iii) right to object or consent to any amendment, modification, or supplement
to, or any restatement or replacement of, the Credit Agreement or any of such
other Loan Documents undertaken by Borrowers and Agent.

5. DEFAULT; SUBORDINATION; SUBROGATION AND CONTRIBUTION.

          5.1 Payment
of Guaranteed Obligations. At any time after all or any portion of the
Guaranteed Obligations are due and payable, whether on maturity, after the
acceleration of any of the Obligations, on the occurrence and continuance of an
Event of Default, on the occurrence and continuance of any default under this
Guaranty, or otherwise: (i) Agent will have the right: (a) to proceed directly
against any and each Guarantor under this Guaranty without first exhausting any
other remedy it may have and without resorting to any security or guaranty held
by Agent for the benefit of the Secured Creditors and (b) to compromise,
settle, release, discharge or terminate any of the obligations of any other
guarantor(s) of the Guaranteed Obligations as Agent, in its discretion
exercised in good faith, determines without thereby in any way affecting,
limiting or diminishing its rights thereafter to enforce the obligations of any
Guarantor under this Guaranty; (ii) Guarantors will, on the demand of Agent,
immediately deposit with Agent, for the benefit of the Secured Creditors, in
U.S. Dollars the total amount of the Guaranteed Obligations due and payable
(whether due as a result of the maturity, acceleration, or otherwise); (iii)
Agent will have the right to sell, collect, or otherwise dispose of and to
apply the proceeds of any collateral or other security given to Agent, for the
benefit of the Secured Creditors, with respect to the Guaranteed Obligations in
satisfaction of the Guaranteed Obligations; and (iv) Agent will have the right
to exercise all of the Secured Creditors’ other powers, rights and remedies
under this Guaranty, the Security Document, and the other Loan Documents and
under applicable law. No Secured Creditor will have any obligation to marshal
any assets in favor of Guarantors or against or in payment of any or all of the
Guaranteed Obligations.

          5.2 Subordination.
Until the Guaranteed Obligations have been fully paid, performed and satisfied,
(i) any and all claims of each Guarantor against Borrowers, any indorser or any
other guarantor of all or any part of the Guaranteed Obligations, or against
any of their respective Properties are, by the signing of this Guaranty, made
subordinate and subject in right of payment and performance to the prior
payment and performance to the Secured Creditors in full of all of the
Guaranteed Obligations and (ii) no Guarantor will exercise any right to enforce
any remedy which such Guarantor now has or may have in the future against
Borrowers, any indorser or any other guarantor of all or any part of the
Guaranteed Obligations.

          5.3 Subrogation;
Contribution. 

                    5.3.1
It is the intent of Guarantors and Borrowers that this Guaranty not be subject
to challenge on any basis. Accordingly, as of the date of this Guaranty, the
probable liability of each Guarantor under this Guaranty, together with all of
its other Liabilities to all Persons as of the date of this Guaranty and as of
any other date on which a transfer is deemed to occur by virtue of the Loan
Documents, calculated in amount sufficient to pay its probable net liabilities
on its existing debts as the same become absolute and matured (“Guarantor’s
Dated 

Liabilities”) is, and is to be, less than the
amount of the aggregate of the present fair salable value of its Property, and,
if different, at a fair valuation thereof, as of such corresponding date (“Guarantor’s
Dated Assets”). To this end each Guarantor (i) grants to and recognizes in
the other Guarantors rights of contribution and subrogation in the amount, if
any, by which such Guarantor’s Dated Assets, but for the aggregate of
subrogation and contribution rights in its favor recognized in this Guaranty
and from Borrowers pursuant to the Credit Agreement, would exceed such
Guarantor’s Dated Liabilities or (ii) as the case may be, acknowledges receipt
of and recognizes rights of contribution and subrogation ratably from Borrowers
and the Guarantors in the amount, if any, by which such Guarantor’s Dated
Liabilities, but for the aggregate of subrogation and contribution rights in
its favor granted and recognized in this Guaranty and from Borrowers pursuant
to the Credit Agreement, would exceed such Guarantor’s Dated Assets. In
recognizing the value of such Guarantor’s Dated Assets and such Guarantor’s
Dated Liabilities, it is understood that each Guarantor will recognize, to at
least the same extent of its aggregate recognition of liabilities under this
Guaranty, its rights (including each Secured Creditor’s obligations) under the
Loan Documents and its rights to subrogation and contribution under this
Guaranty and from Borrowers pursuant to the Credit Agreement. It is expressly
recognized and agreed to by each Guarantor that such Guarantor’s rights of
contribution and subrogation against the other Guarantors and Borrowers are
expressly junior and subordinate to the prior payment and performance in full
of the Guaranteed Obligations. 

                    5.3.2
It is a material objective of this Section 5.3 that each Guarantor
recognize rights of subrogation and contribution rather than be deemed to be
insolvent (or in contemplation thereof) by reason of an arbitrary
interpretation of this Guaranty or any of the other Loan Documents.

                    5.3.4
Borrowers grant to and recognize in each Guarantor rights of contribution and
subrogation in the amount, if any, by which such Guarantor’s Dated Liabilities
would exceed such Guarantor’s Dated Assets as a result of the probable
liability of such Guarantor under this Guaranty.

                    5.3.5
The provisions of this Guaranty are severable, and in any action or proceeding
involving any state corporate law, or any state, federal or foreign bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of any Guarantor under this Guaranty would
otherwise be held or determined to be avoidable, invalid or unenforceable on
account of the amount of such Guarantor’s liability under this Guaranty, then,
notwithstanding any other provision of this Guaranty to the contrary, the
amount of such liability shall, without any further action by any Guarantor or
any Secured Creditor, be automatically limited and reduced to the highest
amount that is valid and enforceable as determined in such action or proceeding
(such highest amount determined hereunder being “Maximum Liability”).
This Section with respect to the Maximum Liability of Guarantors is intended
solely to preserve the rights of Secured Creditors to the maximum extent not
subject to avoidance under applicable law, and none of Guarantors or any other
Person shall have any right or claim under this Section with respect to such
Maximum Liability, except to the extent necessary so that the obligations of
Guarantors hereunder shall not be rendered voidable under applicable law. Each
Guarantor agrees that the Guaranteed Obligations may at any time and from time
to time exceed the Maximum Liability of Guarantors without impairing this
Guaranty or affecting the rights and remedies of any Secured Creditor
hereunder; provided
that nothing in this sentence shall be construed to increase any
Guarantor’s obligations hereunder beyond its Maximum Liability.

6. GENERAL.

          6.1 Cumulative
Remedies. The remedies provided in this Guaranty, the Security Document and
the other Loan Documents are cumulative and not exclusive of any remedies
provided by law. Exercise of one or more remedy(ies) by Agent does not require
that all or any other remedy(ies) be exercised and does not preclude later
exercise of the same remedy. If there is any conflict, ambiguity, or
inconsistency, in Agent’s judgment, between the terms of this Guaranty, the
Security Document, and any of the other Loan Documents, then the applicable
terms and provisions, in Agent’s judgment, providing the Secured Creditors with
the greater rights, remedies, powers, privileges, or benefits will control. 

          6.2
Waivers. Failure by Agent to exercise any right, remedy or
option under this Guaranty or in any of the other Loan Documents or delay by
Agent in exercising the same shall not operate as a waiver by Agent of its
right to exercise any such right, remedy or option. 

          6.3 Entire
Agreement; Amendments; Counterparts; Fax Signatures. This Guaranty, together with the other Loan
Documents to which Guarantors are a party, constitutes the entire agreement
between the parties with respect to the subject matter of this Guaranty, and
supersedes all prior written and oral agreements and understandings. Any
request from time to time by any Guarantor for the Secured Creditors’
amendment, modification or waiver of any provision in this Guaranty must be in
writing. No amendment, modification or waiver by the Secured Creditors shall be
effective unless it is in writing, signed by Guarantors and Agent (with the
consents that may be required pursuant to Section 12.4 of the Credit
Agreement). The Secured Creditors will have no obligation to provide any amendment,
modification or waiver requested by any Guarantor, and the Secured Creditors
may, for any reason in their discretion exercised in good faith, elect to
withhold consent to the requested amendment, modification or waiver. Two or
more duplicate originals of this Guaranty may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same instrument. Any documents delivered by, or on behalf of, any Guarantor
by fax transmission or other electronic delivery of an image file reflecting
the execution hereof (i) may be relied on by the parties as if the document
were a manually signed original and (ii) will be binding on such Guarantor for
all purposes of the Loan Documents. 

          6.4 Survival
and Continuation of Representations and Warranties. All of Guarantors’
representations and warranties contained in, or incorporated by reference in,
this Guaranty shall be true and correct in all material respects when made (or such
other date as may be specifically stated in such representation and warranty)
and shall, for all purposes of this Guaranty, be deemed to be repeated on and
as of the date that each representation and warranty set forth in the Credit
Agreement is required to be, or is deemed to be, remade pursuant thereto,
subject to any changes to such representations and warranties that (a) are not
prohibited hereby, (b) do not constitute an Event of Default or a default under
this Guaranty, or (c) have been consented to by Agent in writing.

          6.5 Headings;
Construction. Section headings in this Guaranty are included for
convenience of reference only and shall not relate to the interpretation or
construction of this Guaranty. Any and all
references in this Guaranty to any other document or documents will be
references to that other document or documents as they may, from time to time,
be modified, amended, renewed, consolidated, extended or replaced.

          6.6 Separate
Instrument. This Guaranty constitutes a separate instrument, enforceable in
accordance with its terms, and neither this Guaranty nor the obligations of any
Guarantor under this Guaranty will, under any circumstance or in any legal
proceeding, be deemed to have merged into any other agreement or obligation of
any Guarantor.

          6.7 Severability.
If any term of this Guaranty is found invalid under Ohio law or laws of
mandatory application by a court of competent jurisdiction, that invalid term
will be considered excluded from this Guaranty and will not invalidate the remaining
terms of this Guaranty.

          6.8 CHOICE OF LAW. THIS GUARANTY HAS BEEN DELIVERED AT AND ACCEPTED AT AND SHALL BE
DEEMED TO HAVE BEEN MADE AT CINCINNATI, OHIO. THIS GUARANTY SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO
(WITHOUT REFERENCE TO OHIO CONFLICTS OF LAW PRINCIPLES), EXCEPT TO THE
EXTENT OF THE APPLICATION OF OTHER LAWS OF MANDATORY APPLICATION.

          6.9 CHOICE
OF FORUM. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE SECURED CREDITORS
TO ACCEPT THIS GUARANTY AND TO EXTEND CREDIT TO BORROWERS, EACH GUARANTOR AND
THE SECURED CREDITORS AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF
OR ARISING OUT OF THIS GUARANTY, ITS VALIDITY OR PERFORMANCE, WITHOUT
LIMITATION ON THE ABILITY OF THE SECURED CREDITORS, THEIR SUCCESSORS AND
ASSIGNS, TO INITIATE AND PROSECUTE IN ANY APPLICABLE JURISDICTION ACTIONS
RELATED TO THE REPAYMENT AND COLLECTION OF THE GUARANTEED OBLIGATIONS AND THE
EXERCISE OF ALL OF THE SECURED CREDITORS’ RIGHTS AGAINST GUARANTORS WITH
RESPECT THERETO AND ANY SECURITY OR PROPERTY OF ANY GUARANTOR, INCLUDING
DISPOSITIONS OF THE COLLATERAL, SHALL BE INITIATED AND PROSECUTED AS TO ALL
PARTIES AND THEIR SUCCESSORS AND ASSIGNS AT CINCINNATI, OHIO. EACH SECURED
CREDITOR AND EACH GUARANTOR 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
MAY BE MADE BY CERTIFIED MAIL DIRECTED TO GUARANTORS AND THE SECURED CREDITORS
AT THEIR RESPECTIVE ADDRESSES AS SET FORTH BELOW (OR SUCH OTHER ADDRESS AS A
PARTY MAY FROM TIME TO TIME DESIGNATE FOR ITSELF BY NOTICE TO THE OTHER PARTY)
OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO. EACH GUARANTOR
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO
VENUE OF ANY ACTION INSTITUTED UNDER THIS GUARANTY, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. 

          6.10 Successors
and Assigns. This Guaranty will inure to the benefit of the Secured
Creditors, and their respective successors and assigns, and will be binding on
the successors and assigns of each Guarantor.

          6.11
Notices. Any notice required, permitted or contemplated
hereunder shall be in writing and addressed to the party to be notified at the
address set forth below or at such other address as each party may designate
for itself from time to time by notice hereunder, and shall be deemed validly
given: (i) three days following deposit in the U.S. certified mails (return
receipt requested), with proper postage prepaid, or (ii) the next Business Day
after such notice was delivered to a regularly scheduled overnight delivery
carrier with delivery fees either prepaid or an arrangement satisfactory with
such carrier made for the payment thereof, or (iii) upon receipt of notice
given by telecopy (fax), mailgram, telegram, telex or personal delivery:

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 To the Secured Creditors or Agent:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Fifth Third
 Bank, as agent

 
	
  

 	
  

 	
  

 	
 38 Fountain
 Square Plaza

 
	
  

 	
  

 	
  

 	
 MD#10AT63

 
	
  

 	
  

 	
  

 	
 Cincinnati,
 Ohio 45263

 
	
  

 	
  

 	
  

 	
 Attn: Anne
 B. Kelly, Vice President

 
	
  

 	
  

 	
  

 	
 Fax Number:
 (513) 534-8400

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 To Guarantors:

 	
 c/o Industrial Services of America, Inc.

 
	
  

 	
  

 	
  

 	
 7100 Grade Lane

 Louisville, Kentucky 40232

 Attn: Mr. Alan Schroering, Chief Financial Officer
Fax Number: (502) 515-1700

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 With a copy
 to Guarantors’ counsel (“Counsel”):

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Stites &
 Harbison PLLC

 400 W. Market Street, Suite 1800

 Louisville, Kentucky 40202-3352

 Attn: Alex P. Herrington, Jr., Esq.

 Fax Number: (502) 779-8234

 

          provided
that (i) notice given to Counsel is not deemed notice to Guarantors and (ii)
Agent’s failure to deliver any notice to Counsel will not affect the validity
or effectiveness of any notice or notification given to Guarantors.

          6.12 Separate
Action. Each default in payment of any amount due under this Guaranty will,
at Agent’s sole option, give rise to a separate cause of action under this
Guaranty, and separate suits, at Agent’s sole option, may be brought under this
Guaranty as each cause of action arises. 

          6.13 Equitable
Relief. Each Guarantor recognizes that, in the event any Guarantor fails to
perform, observe or discharge any of its obligations or liabilities under this
Guaranty, any remedy at law may prove to be inadequate relief to the Secured
Creditors; therefore, each Guarantor agrees that the Secured Creditors, if the
Secured Creditors so request, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages. 

          6.14 Recourse to Directors or Officers. The obligations of the Secured Creditors, if
any, under this Guaranty are solely the corporate obligations of the Secured Creditors.
No recourse shall be had for any obligation or claim arising out of or based
upon this Guaranty against any stockholder, employee, officer, or director of
any Secured Creditor.

          6.15 Indemnification.
Without limiting the provisions of Section
12.5 of the Credit Agreement or any other provision for indemnification in
any other Loan Document, each Guarantor absolutely, irrevocably and
unconditionally hereby agrees to indemnify and hold harmless each Secured
Creditor against any and all claims, demands, suits, actions, causes of action,
damages, losses, settlement payments, obligations, costs, expenses and all
other liabilities whatsoever, INCLUDING,
WITHOUT LIMITATION, AS A RESULT OF ANY SECURED CREDITOR’S OWN NEGLIGENCE
(collectively, “Indemnified Liabilities”) which shall at any
time or times be incurred or sustained by any Secured Creditor or by any of
their respective shareholders, directors, officers, employees, Subsidiaries,
Affiliates or agents on account or in relation to, or in any way in connection
with, any of the arrangements or transactions contemplated by, associated with,
arising out of, or ancillary to this Guaranty or any of the other Loan
Documents to which such Guarantor is a party, whether or not all or any of the
transactions contemplated by, associated with or ancillary to this Guaranty or
any of such Loan Documents are ultimately consummated, provided that Guarantors will not be
obligated to indemnify an indemnified party in accordance with this Section
6.15 to the extent such Indemnified Liabilities resulted from a breach by
such indemnified party of its express obligations under this Guaranty or the
gross negligence or willful misconduct of such indemnified party. NOTICE IS HEREBY GIVEN THAT THIS
GUARANTY CONTAINS
INDEMNIFICATION PROVISIONS IN THIS SECTION 6.15 THAT APPLY TO, AND EACH
GUARANTOR HEREBY ACKNOWLEDGES AND AGREES THAT THE FOREGOING INDEMNITY SHALL BE
APPLICABLE TO, ANY INDEMNIFIED LIABILITIES (AS DEFINED IN THIS SECTION 6.15)
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF ANY SECURED
CREDITOR OR ANY OTHER INDEMNIFIED PARTY UNDER THIS SECTION 6.15. The
indemnification provided for in this Section 6.15 is in addition to, and
not in limitation of, any other indemnification or insurance provided by any
Guarantor to any Secured Creditor.

          6.16 Limitation
of Liability. No claim may be made by any Guarantor or any other Person
against the Secured Creditors or any of their Affiliates for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Guaranty or any other Loan Document or any
act, omission or event occurring in connection therewith, and each Guarantor
hereby waives, releases and agrees not to sue upon any claim for such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor and agree that the only liability therefor against the Secured Creditors
shall be for direct damages determined in a final nonappealable judgment by a
court of competent jurisdiction to have resulted from such Person’s breach of
its express obligations under this Guaranty, or such Person’s gross negligence,
bad faith or willful misconduct. 

          6.18 WAIVER
OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE SECURED
CREDITORS TO ENTER INTO THIS GUARANTY AND EXTEND CREDIT TO BORROWERS,
GUARANTORS AND THE SECURED CREDITORS EACH WAIVE TRIAL BY JURY WITH RESPECT TO
ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS
GUARANTY. 

          6.19 Maximum
Aggregate Liability; Termination. The maximum aggregate liability of
Guarantors under this Guaranty is $48,800,000. In addition to such maximum
aggregate liability, Guarantors shall be liable under this Guaranty for
interest accruing on the Guaranteed Obligations and fees, charges, and costs of
collecting the Guaranteed Obligations, including reasonable attorneys’ fees.
Notwithstanding anything to the contrary in Section 2.6 but subject to Section
2.2, this Guaranty shall terminate on July 31, 2013 (the “Termination
Date”); provided,
however, that if this Guaranty terminates at a time as of when the
Guaranteed Obligations have not been paid in full, such termination shall not
affect any Guarantor’s liability with respect to: (a) Guaranteed Obligations
created or incurred prior to the Termination Date, or (b) extensions or
renewals of, interest accruing on, or fees, costs or expenses incurred with
respect to, such Guaranteed Obligations on or after the Termination Date. For
purposes of this provision, the outstanding balance of the Notes as of the
Termination Date shall be deemed to be the amount of each Note which is used to
calculate the aggregate amount of Guaranteed Obligations on the Termination
Date and at all times thereafter. This Section 6.19 is included in this
Guaranty as a precaution in the event that, 

notwithstanding the intentions of the parties as expressed in Section
6.8, this Guaranty is determined to be governed by the laws of the
Commonwealth of Kentucky. If, in accordance with Section 6.8, this
Guaranty is governed by the laws of the State of Ohio, this Section 6.19
shall be disregarded and of no force or effect.

          6.20
Joint Obligations. All of the obligations of Guarantors hereunder are
joint, several and primary. 

[Signature Page Follows]

          IN WITNESS
WHEREOF, Guarantors, intending to be legally bound, have duly executed this
Guaranty as of the Effective Date.

	
  

 	
  

 
	
  

 	
 ISA Indiana Real Estate, LLC

 
	
  

 	
 ISA Logistics LLC

 
	
  

 	
 ISA Real Estate, LLC

 
	
  

 	
 7021 Grade Lane LLC

 
	
  

 	
 7124 Grade Lane LLC

 
	
  

 	
 7200 Grade Lane LLC

 
	
  

 	
 Computerized
 Waste Systems, LLC

 
	
  

 	
 ISA
 Recycling LLC

 
	
  

 	
 Waste
 Equipment Sales & Service Co., LLC

 
	
  

 	
  

 
	
  

 	
 By: Industrial
 Services of America, Inc., sole member

 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Harry Kletter 

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
  

 	
 Harry Kletter, Chief Executive Officer

 	
  

 

Accepted at
Cincinnati, Ohio,

as of the Effective Date.

FIFTH THIRD
BANK, as Agent

	
  

 	
  

 	
  

 
	
 By:

 	
 /s/ Anne B. Kelly

 	
  

 
	
  

 	

 

 	
  

 
	
  

 	
 Anne B. Kelly, Vice President

 	
  

 

ACKNOWLEDGMENT OF GUARANTY 

          Each of the
undersigned, intending to be legally bound, has executed and delivered this
Acknowledgment of Guaranty (this “Acknowledgment”). Without limiting any
provision of any Loan Document, each of the undersigned specifically agrees to
be bound by Sections 5.2 and 5.3 of the foregoing Guaranty.

          Capitalized
terms used but not defined herein will have the meanings given to them in the
Credit Agreement (as defined in the foregoing Guaranty). This Acknowledgment
may be executed in multiple counterparts, each of which shall constitute an
original, but all of which together shall constitute one and the same
agreement. This Acknowledgment may be signed by facsimile signatures or other
electronic delivery of an image file reflecting the execution hereof, and if so
signed, (i) may be relied on by the parties as if the document were a manually
signed original and (ii) will be binding on the parties for all purposes. 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
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

 	
  

 

Accepted at
Cincinnati, Ohio,

as of the Effective Date.

FIFTH THIRD
BANK, as Agent

	
  

 	
  

 	
  

 
	
 By:

 	
 /s/ Anne B. Kelly

 	
  

 
	
  

 	

 

 	
  

 
	
  

 	
 Anne B. Kelly, Vice President

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