Document:

Exhibit 10.1 

 
	
  

 	
  

 
	

 	
  

 
	
 LOAN AND SECURITY AGREEMENT

 	
  

 
	

 

 	
  

 

                    This
Loan and Security Agreement (this “Agreement”) dated as of August 9, 2011 is
made by and between FIFTH THIRD BANK, an Ohio banking corporation, having an
office at 401 South 4th Avenue, Louisville, Kentucky 40202, for itself and as
agent for any affiliate of Fifth Third Bancorp (together with its successors
and assigns, the “Lender”), and INDUSTRIAL SERVICES OF AMERICA, INC., a
corporation organized under the laws of the State of Florida and having a
principal place of business at 7100 Grade Lane, Louisville, Jefferson County,
KY 40232 (“Borrower”). 

	
  

 	
  

 	
  

 
	
  

 	
 1.

 	
 Loan. Subject to the terms and conditions of
 this Agreement, Lender agrees to make a loan in a single advance (the “Loan”)
 to the Borrower in an amount not to exceed One Hundred Fifteen Thousand Ten
 Dollars and No Cents ($115,010.00) (the “Commitment”). Such Loan shall be
 made on or before, and the Lender’s Commitment shall expire on November 9,
 2011. The Borrower shall give Lender notice (which shall be irrevocable) not
 later than 10:00 am (Eastern Time) on the third Business Day prior to the
 requested day for the making of such Loan. Such notice shall specify (a) the
 requested date for the making of such Loan which shall be a Business Day, and
 (b) the amount of such Loan which shall be an amount not to exceed the
 Commitment. As used herein, the term “Business Day” means any day other than
 Saturday or Sunday or other days on which banks are authorized or required to
 close in Cincinnati, Ohio. 

 
	
  

 	
  

 	
  

 
	
  

 	
 2.

 	
 Principal
 and Interest. The
 obligation to repay the Loan hereunder shall be evidenced by one or more
 promissory notes payable by Borrower to the order of Lender in substantially
 the form attached hereto as Exhibit A (as any such promissory note may be
 amended, amended and restated, supplemented or modified from time to time
 collectively referred to as the “Note”). The Note shall bear interest, be
 payable and mature as set forth in the Note. Upon the occurrence and during the
 continuance of an Event of Default (as hereinafter defined), or if the Note
 is accelerated in accordance with the terms of this Loan Agreement, the
 outstanding principal and all accrued interest, as well as any other charges
 due Lender hereunder, shall bear interest from the date on which such amount
 shall have first become due and payable to Lender to the date on which such
 amount shall be paid to Lender (whether before or after judgment), at a
 default rate, to be determined by Lender in its sole discretion from time to
 time, equal to up to six (6.0) percentage points in excess of the otherwise
 applicable rate of interest. Time is of the essence with respect to the
 payment and performance of the Obligations (as defined below) to be paid or
 otherwise performed under this Agreement, the Note and all of the other Loan
 Documents (as defined below). Once repaid no loan proceeds may be reborrowed
 hereunder. If Borrower fails to pay any amount due hereunder, after the
 expiration of any applicable grace period, Borrower shall pay to Lender a
 late payment fee equal to five (5%) of the amount unpaid. Such fee shall be
 payable on demand and shall constitute part of the Obligations. All amounts
 due hereunder and under the Note will be due on the dates or at the times specified
 hereunder or under the Note regardless of whether the Borrower has received
 any notice that such amounts are due. Principal and interest payments, and
 any other amounts due hereunder, shall be made to Lender at the address
 specified above or such other address as Lender may designate from time to
 time, in writing. 

 
	
  

 	
  

 	
  

 
	
  

 	
 3.

 	
 Security. 

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 As
 security for the payment as and when due of the indebtedness of Borrower to
 Lender hereunder (as the same may be renewed, extended or modified and hereinafter,
 collectively referred to as the “Loan Documents”), both now in existence and
 hereafter created relating to Borrower’s acquisition of the equipment
 described on Schedule A hereto (as supplemented from time to time)
 (collectively, the “Equipment” and, individually, an “Item of Equipment”),
 and the performance as and when due of all obligations of Borrower under this
 Agreement, the Note and the other Loan Documents (as the same may be renewed,
 extended or modified; and hereinafter collectively referred to as the
 “Obligations”), Borrower hereby grants to Lender a first priority security
 interest in all of Borrower’s right, title and interest in the following
 (whether now existing or hereafter created and whether now owned or hereafter
 acquired): (i) the Equipment (including, without limitation, all inventory,
 equipment, fixtures or other property comprising the same), and general
 intangibles relating thereto, (ii) additions, attachments, accessories and
 accessions thereto whether or not furnished by the Supplier of such
 Equipment, (iii) all subleases (including the right to receive any payment
 there under and the right to make any election or determination or 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 give
 any consent or waiver there under), chattel paper, accounts, security
 deposits and bills of sale relating thereto, (iv) any and all substitutions,
 replacements or exchanges for any such Equipment or other collateral, and (v)
 any and all products and proceeds of any collateral hereunder (including all
 insurance and requisition proceeds and all other payments of any kind with
 respect to the Equipment and other collateral in and against which a security
 interest is granted hereunder (collectively, the “Collateral”).

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

 	
 Borrower
 agrees that, with respect to the Collateral, Lender shall have all of the
 rights and remedies of a secured party under the Uniform Commercial Code as
 in effect in the applicable jurisdiction from time to time. To the extent
 that any proceeds of the Loan are used to acquire equipment which is not
 described on Schedule A, the Lender is authorized to supplement Schedule A
 with a description of such equipment. Upon the acquisition of any such
 equipment, without further action by Lender or Borrower (i) the equipment
 described on such supplement to Schedule A shall constitute part of the
 Equipment and (ii) Schedule A shall be deemed to have been amended to include
 such supplement. 

 
	
  

 	
  

 	
  

 
	
  

 	
 4.

 	
 Conditions
 Precedent. 

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 Concurrently
 with the execution hereof, or on or prior to the date on which Lender is to
 make the Loan hereunder, Borrower shall cause to be provided to Lender the
 following: (i) a certificate of the secretary or assistant secretary of
 Borrower dated the date of such hereof (or of the Loan, if after the date of
 this Agreement) certifying (A) the incumbency of each of the officers
 executing the applicable Loan Documents, (B) a copy of the articles or
 certificate of incorporation, by-laws or code of regulations, and other
 applicable organizational documents of Borrower and (C) copies of any other
 documents evidencing the authorization of the corporate officers on behalf of
 the Borrower to execute, deliver and perform this Agreement and each other
 Loan Document; if requested by Lender, an opinion of counsel for Borrower in
 form and substance satisfactory to Lender as to the matters set forth in
 Section 12 and as to such other matters as Lender may reasonably request. 

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

 	
 The
 obligation of Lender to make the Loan hereunder is subject to the
 satisfaction (or waiver by Lender) of each of the following conditions prior
 to the date specified for the Loan: (i) Lender shall have received each of
 the following documents in form and substance satisfactory to Lender: (A) a
 certificate executed by the president or chief financial officer of Borrower
 certifying that the representations and warranties of Borrower contained
 herein and in each of the Loan Documents remain true and correct as of such
 date, and no Default or Event of Default (as defined in Section 13) has
 occurred both with and without giving effect to the transactions contemplated
 hereby; (B) copies of the invoice(s) or other evidence satisfactory to
 Lender, related to the acquisition cost of the Equipment to which the Loan
 relates; (C) a supplement to Schedule A (if applicable), describing the
 Equipment to which the Loan relates, to be attached to the Note issued in
 connection herewith; (D) upon delivery of such Equipment, copies of the bills
 of sale evidencing chain of title from the manufacturer or supplier to the
 Borrower with respect to such Equipment; (E) a Certificate of Acceptance (as
 defined in Section 5) relating to such Equipment; (ii) Lender shall have
 received, evidence satisfactory to Lender of the filing of Uniform Commercial
 Code financing statements or other records relating to the Equipment in form
 and substance satisfactory to Lender in the jurisdiction in which Borrower is
 a registered organization and such other jurisdictions as Lender may
 reasonably request; (iii) Lender shall have received evidence of insurance
 policies covering the Equipment which comply with the requirements of Section
 7 hereof; (iv) the representations and warranties of Borrower contained
 herein and in each of the other Loan Documents shall be true and correct on
 and as of the date specified for the Loan both with and without giving effect
 to the making of the Loan, (v) no Default or Event of Default shall have
 occurred and be continuing or result from the transactions contemplated by
 the making of the Loan; (vi) Borrower shall have paid the fees and reasonable
 out-of-pocket expenses of Lender (including the fees and expenses of counsel
 to the Lender and any filing or recordation fees) incurred in connection with
 the negotiation, execution and delivery of the Loan documents relating
 thereto shall have been paid; and (h) no material adverse change in the
 existing or prospective financial condition or results of operations of
 Borrower or any guarantor of Borrower’s obligations hereunder (a “Guarantor”)
 which may affect the ability of Borrower to perform its obligations under the
 Loan Documents, or the ability of any Guarantor to perform its obligations
 under any Guaranty, shall have occurred since the date of the most recent
 audited financial statements of Borrower delivered to Lender.

 
	
  

 	
  

 	
  

 
	
  

 	
 5.

 	
 Acceptance. Upon delivery of any Equipment, Borrower
 shall execute and deliver to Lender a Certificate of Acceptance for such
 Equipment in form and substance satisfactory to the Lender (a “Certificate of
 Acceptance”). Such Certificate of Acceptance shall constitute Borrower’s
 representation that such Equipment (a) was received by Borrower, (b) is
 satisfactory to Borrower in all respects, (c) is suitable for Borrower’s
 purposes, (d) is in good order, repair and condition, (e) has been installed
 and operates properly, and (f) is subject to all of the terms and conditions
 of the Loan Documents. Borrower’s execution and delivery of a Certificate of
 Acceptance shall be conclusive evidence as between Lender and Borrower that
 the 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Items
 of Equipment described therein are in all of the foregoing respects
 satisfactory to Borrower, and Borrower shall not assert any claim of any
 nature whatsoever against Lender based on any of the foregoing matters; provided, however, that nothing
 contained herein shall in any way bar, reduce or defeat any claim that
 Borrower may have against the any manufacturer or supplier of such Equipment
 or any other person (other than Lender).

 
	
  

 	
  

 	
  

 
	
  

 	
 6.

 	
 Use
 and Maintenance; Alterations. 

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 Borrower
 covenants and agrees that it: (i) shall use the Equipment solely in the
 conduct of its business, for the purpose, and in the manner, for which the
 Equipment was designed, (and shall not permanently discontinue use of the
 Equipment); (ii) shall operate, maintain, service and repair the Equipment,
 and maintain all records and other materials relating thereto, (A) in
 accordance and consistent with (1) the supplier’s or manufacturer’s
 recommendations all maintenance and operating manuals or service agreements,
 whenever furnished or entered into, including any subsequent amendments or
 replacements thereof, issued by the supplier or manufacturer thereof or other
 service provider (including requiring all components, fuels and fluids
 installed in or used on the Equipment to meet the standards specified by such
 service provider from time to time), (2) the requirements of all applicable
 insurance policies, (3) the supply contract or purchase order, so as to
 preserve all of Borrower’s and Lender’s rights there under, including all
 rights to any warranties, indemnities or other rights or remedies, (4) all
 applicable laws, and (5) the prudent practice of other similar companies in
 the same business as Borrower, but in any event, to no lesser standard than
 that employed by Borrower for comparable equipment owned or leased by it; and
 (B) without limiting the foregoing, so as to cause the Equipment to be in
 good repair and operating condition and in at least the same condition as
 when delivered to Borrower hereunder, except for ordinary wear and tear
 resulting despite Borrower’s full compliance with the terms hereof; (iii)
 shall not discriminate against the Equipment with respect to scheduling of
 maintenance, parts or service; (iv) shall not change the location of any
 Equipment from that specified on Schedule A (or otherwise as Borrower informed
 Lender at the time the Loan was made) without the prior written consent of
 Lender and (v) to the extent requested by Lender, shall cause each item of
 Equipment to be continually marked, in a plain and distinct manner, with the
 following: “Subject to a Security Interest in favor of FIFTH THIRD BANK” or
 such other words designated by Lender on labels furnished by Lender. If the
 location for any Equipment comprising collateral for the Loan is a facility
 leased by Borrower or owned by Borrower subject to one or more mortgage
 liens, upon the request of Lender, Borrower will obtain a real property
 waiver or waivers in form and substance satisfactory to Lender from the
 lenders or mortgagees of such facility. 

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

 	
 Borrower,
 at its own cost and expense, will promptly replace all parts, appliances,
 systems, components, instruments and other equipment incorporated in, or
 installed on, the Equipment which may from time to time become worn out,
 lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
 permanently rendered unfit for use for any reason whatsoever. In addition, in
 the ordinary course of maintenance, service repair, overhaul or testing,
 Borrower may remove any parts, whether or not worn out, lost, stolen,
 destroyed, seized, confiscated, damaged beyond repair or permanently rendered
 unfit for use, provided that Borrower shall replace such parts as promptly as
 practicable. All replacement parts shall be free and clear of all Liens (as
 defined in Section 6(c)) and shall be in as good an operating condition as, and
 shall have a value and utility at least equal to, the parts replaced,
 assuming such replaced parts were in the condition and repair required to be
 maintained by the terms hereof. Any replacement part installed, or
 incorporated on, the Equipment shall be considered an accession to such
 Equipment. 

 
	
  

 	
  

 	
  

 
	
  

 	
 c.

 	
 Borrower
 will keep the Equipment and its interest therein free and clear of all liens,
 claims, mortgages, charges and encumbrances of any type regardless of how
 arising (“Liens”) other than the Lien of the Lender hereunder. If any Lien
 shall attach to any Equipment, Borrower will provide written notification to
 Lender within five (5) days after Borrower receives notice of any such
 attachment stating the full particulars thereof and the location of such
 Equipment on the date of such notification. 

 
	
  

 	
  

 	
  

 
	
  

 	
 d.

 	
 At
 its sole option, Borrower may make any alteration, modification or attachment
 to the Equipment deemed appropriate by Borrower, provided that such
 alteration, modification, attachment is of a type which is readily removable
 without damage to the Equipment does not decrease the value, condition,
 utility or useful life of the Equipment or cause such Equipment to become a
 fixture (as defined in the Uniform Commercial Code as in effect in any
 applicable jurisdiction), or real property or affect the insurability or
 impair any manufacturer’s warranty with respect to the Equipment. All
 alterations, modifications and attachments of whatsoever kind or nature made
 to any Equipment that cannot be removed without damaging or reducing the
 functional capability, economic value or insurability of the Equipment or
 impairing any manufacturer’s warranty shall only be made with the prior
 written consent of the Lender and shall be deemed to be part of the Equipment
 and subject to 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 the
 Lien of this Agreement. Under no circumstance shall any alteration,
 modification or attachment be subjected by Borrower to any encumbrance other
 than the Lien of the Lender hereunder.

 
	
  

 	
  

 	
  

 
	
  

 	
 7.

 	
 Insurance. 

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 Borrower
 shall provide, maintain and pay for insurance coverage with respect to the
 Equipment, insuring against, among other things, the loss, theft, damage, or
 destruction of the Equipment, in amounts acceptable to Lender; and public
 liability and property damage with respect to the use or operation of the
 Equipment in amounts acceptable to Lender. All insurance against loss shall
 name Lender as the sole loss payee and all liability insurance shall name
 Lender and its successors and assignees and their subsidiaries and affiliated
 companies, and their successors and assigns as additional insureds. All of
 such insurance shall be in form (including all endorsements required by
 Lender), and with companies, reasonably satisfactory to Lender. 

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

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

 
	
  

 	
  

 	
  

 
	
  

 	
 8.

 	
 Risk
 of Loss; Damage to Equipment. 

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 Borrower
 shall bear the entire risk of loss and damage to any and all Items of
 Equipment from any cause whatsoever, whether or not insured against. No loss
 or damage shall relieve Borrower of the obligation to pay any amounts due
 under the Note or of any other Obligations. An “Event of Loss” shall be
 deemed to have occurred with respect to any Item of Equipment if such Item of
 Equipment or any material part thereof has been lost, stolen, requisitioned
 or condemned by any governmental authority, damaged beyond repair or damaged
 in such a manner that results in an insurance settlement on the basis of an
 actual or arranged total loss. 

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

 	
 Upon
 any loss or damage to any Item of Equipment not constituting an Event of
 Loss, Borrower will promptly notify Lender of such loss or damage, and in any
 event within thirty (30) days of such loss or damage (or such longer period
 as Lender shall determine in its sole discretion), place such Item of
 Equipment in good condition and repair as required by the terms of this
 Agreement. If an Event of Loss to any Item of Equipment has occurred,
 Borrower shall immediately notify Lender of same, and at the option of
 Lender, Borrower shall: (i) not more than thirty (30) days following such
 Event of Loss (or such longer period as Lender shall determine in its sole
 discretion) replace such Item of Equipment with replacement equipment
 (acceptable to Lender) in as good condition and repair, and with the same
 value remaining useful economic life and utility, as such replaced Item of
 Equipment immediately preceding the Event of Loss (assuming that such
 replaced Item of Equipment was in the condition required by this Agreement),
 which replacement equipment shall immediately, and without further act, be
 deemed to constitute Equipment and be fully subject to this Agreement as if
 it originally constituted part of the Equipment hereunder and shall be free
 and clear of all Liens; or (ii) prepay on the next succeeding Payment Date
 (as defined in the Note) (the “Prepayment Date”), together with all other
 amounts due and payable on such Payment Date, an amount equal to each
 installment of principal and interest payable under the Note on each Payment
 Date after the Prepayment Date, in each case, discounted from the Payment
 Date on which such payment would have been due to the Prepayment Date at a
 rate per annum equal to the then current yield, as reasonably determined by
 the Lender, on United States Treasury securities with a remaining life to
 maturity equal to or approximately equal to the period from the Prepayment
 Date to the Maturity Date. Upon Lender’s receipt of the payment required
 under clause (ii) above, Lender shall release its security interest in the
 Item of Equipment to which such payment relates. 

 
	
  

 	
  

 	
  

 
	
  

 	
 9.

 	
 Application
 of Proceeds.
 Notwithstanding anything herein to the contrary, all funds received at any
 time by Lender, whether as a result of any loss of the Equipment, as a result
 of the exercise of any remedy or otherwise shall be applied as follows: (i)
 if the Note has not been accelerated pursuant to Section 13, in the following
 manner: first, to the payment of all fees, charges and other sums
 (with exception of principal and interest) due and payable hereunder and
 under the Note, second, to the payment of all interest (including
 default interest) then due and payable on the outstanding principal of the 

 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Note,
third, to the payment of all principal then due and payable on the
Note, fourth, to the payment of the remaining principal on the Note in
inverse order of maturity, and fifth, to the Borrower or such other person as
may have an interest in such proceeds, as their interests may appear, and
(ii) if the Note has been accelerated pursuant to Section 13, or if a Default
or an Event of Default hereunder shall have occurred, in the following
manner: first, to the payment or reimbursement of Lender for all costs,
expenses and losses incurred or sustained by Lender in or incidental to the
collection of the Obligations, or the exercise, protection or enforcement of
all or any of the rights and remedies of Lender under the Loan Documents, and
second, to the payment of all of the Obligations in the manner and order as provided
in clause (i) above.  

 
	
  

 	
  

 	
  

 
	
  

 	
 10.

 	
 Financial,
Other Information and Notices.  

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 Borrower
 shall maintain a standard and modern system for accounting and shall furnish
 to Lender: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (i)

 	
 Within
 forty-five (45) days after the end of each quarter, a copy of Borrower’s
 internally prepared consolidated financial statements for that quarter and
 for the year to date in a form reasonably acceptable to Lender, prepared and
 certified as complete and correct, subject to changes resulting from year-end
 adjustments, by the chief financial officer of Borrower. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (ii)

 	
 Within
 ninety (90) days after the end of each fiscal year, a copy of Borrower’s
 consolidated yearend financial statements audited by a firm of independent
 certified public accountants acceptable to Lender (which acceptance shall not
 be unreasonably withheld) and accompanied by an audit opinion of such
 accountants without qualification. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

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

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

 	
 Borrower
 shall provide prompt written notice to Lender (i) of any Event of Default
 (ii) of any loss or damage to any of the Equipment, and (iii) any existing or
 threatened investigation, claim or action by any governmental authority which
 could adversely affect the Equipment or this Loan. 

 
	
  

 	
  

 	
  

 
	
  

 	
 c.

 	
 Borrower
 shall furnish such other information as Lender may reasonably request from
 time to time relating to the Equipment, this Loan or the operation or
 condition of Borrower including, without limitation, such additional
 financial statements of the Borrower for such periods as Lender may request. 

 
	
  

 	
  

 	
  

 
	
  

 	
 11.

 	
 Inspections. Lender may from time to time during
 Borrower’s normal business hours, inspect the Equipment and Borrower’s
 records with respect thereto. Borrower shall cooperate with Lender in
 scheduling such inspection and in making the Equipment available for
 inspection by Lender or its designee at a single location as reasonably
 specified by Borrower. Borrower will, upon reasonable request, provide a
 report on the condition of the Equipment, a record of its maintenance and
 repair, a summary of all items suffering any loss or damage, a certificate of
 no Event of Default, or such other information or evidence of compliance with
 Borrower’s obligations under this Agreement as Lender may reasonably request.
 

 
	
  

 	
  

 	
  

 
	
  

 	
 12.

 	
 Borrower’s
 Representations and Warranties. Borrower represents and warrants as of the date of execution and
 delivery of this Agreement and as of the date of the Loan as follows: (a)
 Borrower is a corporation organized under the laws of the State of Florida,
 having a principal place of business at 7100 Grade Lane, Louisville,
 Jefferson County, Kentucky, 40232, duly organized, validly existing under the
 laws of the jurisdiction of its organization with full power to enter into
 and to pay and perform its obligations under this Agreement and the other
 Loan Documents, and is duly qualified or licensed in all other jurisdictions
 where its failure to so qualify would adversely affect the conduct of its
 business or its ability to perform any of its obligations under or the
 enforceability of this Agreement; (b) this Agreement and all other Loan
 Documents have been duly authorized, executed and delivered by Borrower, are valid,
 legal and binding obligations of Borrower, are enforceable against Borrower
 in accordance with their terms and do not and will not contravene any
 provisions of or constitute a default under Borrower’s organization
 documents, any agreement to which it is a party or by which it or any of its
 property is bound, or any applicable law, regulation or order of any
 governmental authority; (c) the proceeds of the Loan will be used exclusively
 to finance the acquisition of the Equipment; (d) Borrower is (or upon the
 acquisition thereof will be) the sole owner of, and has good and marketable
 title to, and all necessary rights in, and power to transfer pursuant to the
 terms hereof, all of the Equipment, free and clear of all liens and
 encumbrances (excepting only the Lien of the Lender), and 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 upon
 the filing with the Secretary of State of Florida of a Uniform Commercial
 Code financing statement naming Lender, as secured party, Borrower, as
 debtor, and the Equipment as the collateral, Lender shall have a valid,
 perfected, first priority security interest in the Equipment; (e) no approval
 of, or filing with, any governmental authority or other person is required in
 connection with Borrower’s entering into, or the payment or performance of
 its obligations under, this Agreement and the other Loan Documents; (f) there
 are no suits or proceedings pending or, to the knowledge of Borrower,
 threatened, before any court or governmental agency against or affecting
 Borrower which, if decided adversely to Borrower, would adversely affect the
 conduct of its business or its ability to perform any of its obligations
 under or the enforceability of this Agreement and the other Loan Documents;
 (g) the financial statements of Borrower which have been delivered to Lender
 have been prepared in accordance with generally accepted accounting
 principles consistently applied, and fairly present Borrower’s financial
 condition and the results of its operations as of the date of and for the
 period covered by such statements (subject to customary year-end
 adjustments), and since the date of such statements there has been no adverse
 change in such financial condition or operations; (h) Borrower’s full and
 correct legal name is set forth on the signature page hereof and Borrower
 will not change its legal name or the location of its jurisdiction of
 organization without giving to Lender at least thirty (30) days prior written
 notice thereof; (i) the Equipment will always be used for business or
 commercial, and not personal purposes; (j) Borrower is not in default under
 any obligation for borrowed money, for the deferred purchase price of
 property or any lease agreement which, either individually or in the
 aggregate, would have an adverse effect on the condition of its business or
 its ability to perform any of its obligations under or the enforceability of
 this Agreement; (k) under the laws of the jurisdiction(s) in which the
 Equipment is to be located, the Equipment consists solely of personal
 property and not fixtures; and (l) Borrower is, and will remain, in full
 compliance with all laws and regulations applicable to it including without
 limitation, (i) ensuring that no person who owns a controlling interest in or
 otherwise controls Borrower is or shall be (A) listed on the Specially
 Designated National and Blocked Person List maintained by the Office of
 Foreign Assets Control (“OFAC”), Department of the Treasury and/or any other
 similar lists maintained by OFAC pursuant to any authorizing statute,
 executive order or regulations or (C) a person designated under Section 1(b),
 (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related
 enabling legislation or any other similar executive order and (ii) compliance
 with all applicable Bank Secrecy Act (“BSA”) laws, regulations and government
 guidance on BSA compliance and on the prevention and detection of money
 laundering violations.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Borrower’s
 representations and warranties shall survive termination or expiration of
 this Agreement.

 
	
  

 	
  

 	
  

 
	
  

 	
 13.

 	
 Events
 of Default and Remedies. 

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 Each
 of the following events constitutes an “Event of Default” hereunder and any
 event that, with the passage of time or the giving of notice, or both, would
 constitute an Event of Default shall constitute a “Default” hereunder: (i)
 Borrower fails to pay any amount of principal and interest when due under the
 Note and such failure continues for a period of ten (10) days; (ii) any
 representation or warranty made by Borrower in this Agreement or in any other
 Loan Document shall at any time prove to have been incorrect in any material
 respect as and when made; (iii) Borrower fails (A) to obtain and maintain the
 insurance coverage required herein; or (B) fails to observe or perform any
 other covenant, condition or agreement under this Agreement or any other Loan
 Document and, in the case of clause (B), such failure continues unremedied
 for a period of fifteen (15) days; (iv) Borrower shall have consolidated
 with, merged with or into, or conveyed, sold or otherwise transferred all or
 substantially all of its assets or shall have failed to maintain its
 corporate existence; (v) Borrower (A) ceases doing business as a going
 concern; (B) makes an assignment for the benefit of creditors or admits in
 writing its inability to pay its debts as they mature or generally fails to
 pay its debts as they become due; (C) initiates any voluntary bankruptcy,
 reorganization, insolvency or similar proceeding; (D) fails to obtain the
 discharge of any bankruptcy, reorganization, insolvency or similar proceeding
 initiated against it by others within sixty (60) days of the date such
 proceedings were initiated; (E) requests or consents to the appointment of a
 trustee, custodian or receiver or other officer with similar powers for
 itself or a substantial part of its property; or (F) a trustee, custodian or
 receiver or other officer with similar powers is appointed for itself or for
 a substantial part of its property; (vi) a default shall have occurred and be
 continuing under any contract, agreement or document between Borrower and
 Lender or any affiliate of Lender; (vii) a default shall have occurred and be
 continuing under any contract, agreement or document between Borrower and any
 of its other creditors, (viii) if Borrower’s obligations are guaranteed by
 any other party, an “Event of Default” (under and as defined in the Guaranty
 executed by such Guarantor) shall occur; (ix) a material adverse change in
 Borrower’s existing or prospective financial condition or results of
 operations since the date hereof which may affect the ability of Borrower to
 perform its obligations under the Loan Documents shall occur and be
 continuing; or (x) the owners of the capital stock or other units of
 ownership on the date of this Agreement entitled to vote for the election of
 the board of directors of the 

 

	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Borrower
 or other similar governing body cease to own or do not have the unencumbered
 right to vote in the aggregate at least ninety percent (90%) of such capital
 stock or other ownership interest of Borrower.

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

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

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (i)

 	
 Borrower
 shall upon demand assemble or cause to be assembled any or all of the
 Equipment at a location designated by Lender; and/or to return promptly, at
 Borrower’s expense, any or all of the Equipment to Lender at such location; 

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (ii)

 	
 Lender
 may itself or by its agents enter upon the premises of Borrower or any other
 location where the Equipment is located and take possession of and render
 unusable by Borrower any or all of the Equipment, wherever it may be located,
 without any court order or other process of law and without liability for any
 damages occasioned by such taking of possession; 

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (iii)

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

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (iv)

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

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (v)

 	
 By
 offset, recoupment or other manner of application, apply any security
 deposit, monies held in deposit or other sums then held by Lender or any
 affiliate of Lender, and with respect to which Borrower has an interest,
 against any obligations of Borrower arising under this Agreement or any other
 Loan Document, whether or not Borrower has pledged, assigned or granted a
 security interest to Lender in any or all such sums as collateral for said
 obligations. 

 
	
  

 	
  

 	
  

 
	
  

 	
 c.

 	
 Borrower
 shall indemnify, defend and hold Lender harmless for any loss, personal
 injury (including death), or damage to property, suffered by Lender, its
 employees or any of its agents in connection with its entry onto the premises
 of Borrower or any third party hereunder. Each of the rights and remedies of
 Lender hereunder and under the other Loan Documents is in addition to all of
 its other rights and remedies hereunder, under the other Loan Documents and under
 applicable law and nothing in this Agreement or any other Loan Document shall
 be construed as limiting any such right or remedy. Lender’s failure to
 exercise or delay in exercising any right, power or remedy available to
 Lender shall not constitute a waiver or otherwise affect or impair its rights
 to the future exercise of any such right, power or remedy. Waiver by Lender
 of any Event of Default shall not be a waiver by Lender of any other or
 subsequent Events of Default. 

 
	
  

 	
  

 	
  

 
	
  

 	
 14.

 	
 General
 Indemnification.
 Borrower shall pay, and shall indemnify and hold Lender, its directors,
 officers, agents, employees, successors and assigns (each an “Indemnitee”)
 harmless on an after-tax basis from and against, any and all liabilities,
 causes of action, claims, suits, penalties, damages, losses, costs or
 expenses (including attorneys’ fees), obligations, liabilities, demands and
 judgments, and Liens, of any nature whatsoever (collectively, a “Liability”)
 arising out of or in any way related to: (a) the Loan Documents, (b) the
 manufacture, purchase, ownership, title, selection, acceptance, rejection,
 possession, lease, sublease, operation, use, maintenance, documenting,
 inspection, control, loss, damage, destruction, removal, storage, surrender,
 sale, use, condition, delivery, nondelivery, return or other disposition of
 or any other matter relating to any Item of Equipment or any part or portion
 thereof (including, in each case and without limitation, latent or other
 defects, whether or not discoverable, any claim for patent, trademark or
 copyright infringement) and any and all Liabilities in any way relating to or
 arising out of injury to persons, properties or the environment or any and
 all 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Liabilities
 based on strict liability in tort, negligence, breach of warranties or
 violations of any regulatory law or requirement, (c) a failure to comply
 fully with applicable law and (d) Borrower’s failure to perform any covenant,
 or Borrower’s breach of any representation or warranty, hereunder; provided, that the foregoing indemnity
 shall not extend to the Liabilities to the extent resulting solely from the
 gross negligence or willful misconduct of an Indemnitee.

 
	
  

 	
  

 	
  

 
	
  

 	
 15.

 	
 No
 Reduction. All
 payments due to the Lender under the Loan Documents, and all other terms,
 conditions, covenants and agreements to be observed and performed by the
 Borrower there under, shall be made, observed or performed by the Borrower
 without any reduction or deduction whatsoever, including any reduction or
 deduction for any set-off, recoupment, counterclaim (whether in tort,
 contract or otherwise) or for any tax, levy or impost. 

 
	
  

 	
  

 	
  

 
	
  

 	
 16.

 	
 Power
 of Attorney and Filing Authority. Borrower hereby authorizes Lender to file, solely at the expense of
 Borrower, any Uniform Commercial Code financing statements or other similar
 documents that Lender reasonably deems necessary or advisable to protect its
 interest. Borrower agrees promptly to execute and deliver to Lender such
 further documents or other assurances, and to take such further action,
 including obtaining landlord and mortgagee waivers, as Lender may from time
 to time reasonably request. Lender shall have the right to receive, endorse,
 assign and/or deliver in the name of Borrower any and all checks, drafts and
 other instruments for the payment of money relating to the Collateral, and
 Borrower hereby waives notice of presentment, protest and non-payment of any
 instrument so endorsed. Borrower hereby unconditionally and irrevocably
 constitutes Lender or the Lender’s designee as Borrower’s true and lawful
 attorney-in-fact, to the extent permitted by applicable law, with full power
 of substitution and the power at any time (i) to endorse Borrower’s name upon
 any notes, acceptances, checks, drafts, money orders or other evidences of
 payment or Collateral; (ii) to sign Borrower’s name on any invoice or bill of
 lading relating to any of the Collateral or Equipment, including any title
 documents, applications for title, registrations or transfer instrument,
 drafts against customers, assignments and verifications of receivables; (iii)
 to send verifications of receivables to any customer; (iv) to demand payment
 of receivables, contract and payments rights on behalf of Borrower; (v) to
 enforce payments due with respect to the Collateral by legal proceedings or otherwise;
 (vi) to exercise all of Borrower’s rights and remedies with respect to the
 collection of any Collateral; (vii) to settle, adjust, compromise, extend or
 renew any obligations of any third party to Borrower; (viii) to settle,
 adjust or compromise any legal proceedings brought to collect any obligations
 of any third party to Borrower; (ix) to prepare, file and sign Borrower’s
 name on a proof of claim in bankruptcy or similar proceeding; (x) to prepare,
 file and sign Borrower’s name on any notice of Lien, assignment or
 satisfaction of Lien or similar document in connection with any Collateral;
 (xi) to execute and deliver all such deeds, bills of sale, assignments,
 releases (including, without limitation, releases of any lease on the records
 of any governmental agency) and other proper instruments as Lender may
 reasonably consider necessary or appropriate, in furtherance of any sale,
 foreclosure or other disposition of the Collateral, and (xii) to do all other
 acts and things necessary to carry out this Agreement. All acts of said
 attorney or designee are hereby ratified and approved, and said attorney or
 designee shall not be liable for any acts of omission or commission nor for
 any error of judgment or mistake of fact or of law, unless done with gross (not
 mere) negligence or willful misconduct; this power being coupled with an
 interest is irrevocable while any of the Obligations remain unpaid. Lender
 shall have the right at any time following the occurrence of an Event of
 Default or Default, to change the address for delivery of mail addressed to
 Borrower to such address as Lender may designate to facilitate collection of
 proceeds of the Collateral and to receive, open and dispose of all mail
 addressed to Borrower. 

 
	
  

 	
  

 	
  

 
	
  

 	
 17.

 	
 Successors
 and Assigns. This
 Agreement shall inure to the benefit of Lender, its successors and assigns.
 Borrower shall not sublease or otherwise relinquish possession of any
 Equipment, or assign, transfer or encumber its rights, interest or obligation
 hereunder. Lender reserves the right to sell, assign, transfer, negotiate or
 grant any interest in all or any part of, or any interest in, Lender’s rights
 and obligations in, under and to this Agreement, any one or more of the Loan
 Documents, in the Equipment and/or the Obligations, at any time and from time
 to time. Borrower will fully cooperate with Lender in connection with any
 such conveyance and will execute and deliver such consents and acceptances to
 any such conveyance, amendments to this Agreement in order to effect any such
 conveyance (including, without limitation, the appointment of Lender as agent
 for itself and all assignees) and new or replacement promissory notes for any
 Note (in an aggregate principal amount not to exceed the Lender’s Commitment)
 in conjunction with any such conveyance. 

 
	
  

 	
  

 	
  

 
	
  

 	
 18.

 	
 Miscellaneous. 

 
	
  

 	
  

 	
  

 
	
  

 	
 a.

 	
 Borrower
 shall pay all costs and expenses of Lender, including, without limitation,
 reasonable attorneys’ and other professional fees, incurred by Lender in the
 preparation, negotiation, execution and enforcement of this Agreement or any 

 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 amendment
 or supplement hereto, enforcing any of the terms, conditions or provisions
 hereof and in protecting Lender’s rights hereunder.

 
	
  

 	
  

 	
  

 
	
  

 	
 b.

 	
 This
 Agreement shall be governed by and construed in accordance with the laws of
 the State of Ohio. Any judicial proceeding arising out of or relating to this
 Agreement may be brought in any court of competent jurisdiction in Hamilton
 County, Ohio and each of the parties hereto (i) accepts the nonexclusive
 jurisdiction of such courts and any related appellate court and agrees to be
 bound by any judgment rendered by any such court in connection with any such
 proceeding and (ii) waives any objection it may now or hereafter have as to
 the venue of any such proceeding brought in such court or that such court is
 an inconvenient forum. EACH OF THE BORROWER AND LENDER HEREBY WAIVES THE
 RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING ARISING OUT OF OR IN ANY
 WAY RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. 

 
	
  

 	
  

 	
  

 
	
  

 	
 c.

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

 

	
  

 	
  

 
	
  

 	
 If to Borrower:

 
	
  

 	
  

 
	
  

 	
 INDUSTRIAL SERVICES OF
 AMERICA, INC.

 
	
  

 	
 7100 Grade Lane

 Louisville, KY 40232

 Attn: Alan Schroering

 Facsimile: (_____) _____ - ___________

 
	
  

 	
  

 
	
  

 	
 If to Lender:

 
	
  

 	
  

 
	
  

 	
 Fifth Third Equipment
 Finance Company

 Mail Drop 10904A

 38 Fountain Square Plaza

 Cincinnati, Ohio 45263

 Facsimile: (513) 534-6706

 

	
  

 	
  

 	
  

 
	
  

 	
 d.

 	
 Borrower
 acknowledges and agrees that time is of the essence with respect to its
 performance under the Loan Documents. Any failure of Lender to require strict
 performance by Borrower or any waiver by Lender of any provision herein shall
 not be construed as a consent or waiver of any provision of this Agreement.
 This Agreement shall be binding upon, and inure to the benefit of, the
 parties hereto, their permitted successors and assigns. 

 
	
  

 	
  

 	
  

 
	
  

 	
 e.

 	
 This
 Agreement, together with all other Loan documents, constitutes the entire
 understanding or agreement between Lender and Borrower with respect to the
 Loan, and supercedes all prior agreements, representations and understandings
 relating to the subject matter hereof. 

 
	
  

 	
  

 	
  

 
	
  

 	
 f.

 	
 Neither
 this Agreement nor any other Loan Document may be amended except by a written
 instrument signed by Lender and Borrower. 

 
	
  

 	
  

 	
  

 
	
  

 	
 g.

 	
 This
 Agreement may be executed in any number of counterparts, each of which shall
 be an original and all of which shall constitute but one and the same
 instrument. 

 
	
  

 	
  

 	
  

 
	
  

 	
 h.

 	
 Any
 provision of this Agreement which is prohibited or unenforceable in any
 jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
 such prohibition or unenforceability without invalidating the remaining
 provisions hereof, and any such prohibition or unenforceability shall not
 invalidate or render unenforceable such provision in any other jurisdiction.
 Captions are intended for convenience or reference only, and shall not be
 construed to define, limit or describe the scope or intent of any provisions
 hereof. 

 

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

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 LENDER:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 FIFTH THIRD BANK

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Henry Kelsey

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
 Name:

 	
 Henry Kelsey 

 	
  

 
	
  

 	
 Title:

 	
 Vice President 

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 BORROWER:

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 INDUSTRIAL SERVICES OF
 AMERICA, INC.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Alan Schroering

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
 Name:

 	
 Alan Schroering 

 	
  

 
	
  

 	
 Title:

 	
 Chief Financial OfficerExhibit
10.2

Promissory
Note

	
  

 	
  

 
	

 

 
	
 $115,010.00

 	
 Promissory
 Note Date: August 9, 2011

 

Date of
Advance:________________ (to be inserted by Lender)

          FOR VALUE
RECEIVED, INDUSTRIAL SERVICES OF AMERICA, INC., a corporation organized under
the laws of the State of Kentucky and having a principal place of business at
7100 Grade Lane, Louisville, Kentucky 40232 (“Borrower”) hereby promises to pay
to the order of FIFTH THIRD BANK, an Ohio banking corporation, for itself and
as agent for any affiliate of Fifth Third Bancorp(together with its successors and assigns, the “Lender”) the
principal amount of One Hundred Fifteen Thousand Ten and 00/100 Dollars
($115,010.00), with interest at the Interest Rate (as defined below) and all
other Obligations on or before August 12, 2015 (“Maturity Date”) pursuant to
the Loan Agreement (as defined below).

          Lender and
Borrower have entered into that certain Loan and Security Agreement dated as of
August 9, 2011 (the “Loan Agreement”), pursuant to which Lender has agreed to
make the Loan to Borrower. The Obligations of Borrower are secured by the
Collateral as provided in the Loan Agreement and this Note shall be subject to
the terms and conditions of the Loan Agreement. Capitalized terms used herein
and not otherwise defined shall have the meaning attributed thereto in the Loan
Agreement. This Note relates to the Equipment described on Schedule A hereto.

          Borrower
agrees that Lender may insert the date(s) of “Advance” (above) after Borrower
executes this Promissory Note as the date(s) on which the proceeds of this Note
are disbursed by Lender.

          As used
herein, “Interest Rate” shall mean the percentage per annum equal to five and
95/100 percent (5.95%); provided, however, that (A) such Interest
Rate is based on an interest rate swap rate for a term approximating the
weighted average life of this Note as quoted in the Bloomberg SWAP Rate report
as of the date of this Note and (B) such Interest Rate may be adjusted by
Lender based upon a corresponding increase in the interest rate swap rate
quoted in such Release as in effect on the date of the Advance. Lender will
provide Borrower with written notice of any such adjustment. Interest shall be
computed on the basis of a year of 360 days consisting of twelve 30-day months,
and shall accrue on the outstanding principal amount hereunder from and
including the date each Advance is made to but excluding the date the entire
principal amount hereunder is paid in full. 

          Lender may
charge, and Borrower agrees to pay on the Advance date, a note processing fee
in the amount of $400.00. Lender may deduct the amount of the note processing
fee from the proceeds of this Note or debit any deposit account of Borrower
with Lender to collect the note processing fee.

          Except as
otherwise provided in the Loan Agreement, principal and interest due hereunder
shall be payable as follows:

          Principal
and interest shall be payable in 48 equal monthly installments, each on the
12th day of each calendar month, in the amount of $2,698.38 commencing on the
12th day of September, 2011, with the entire unpaid principal amount hereof,
together with all accrued and unpaid interest, charges, fees or other Advances,
if any, due on the Maturity Date. Interest that accrues from the date of each
Advance through but not including the above payment commencement date shall be
payable in arrears on the first day of the calendar month following the date of
Advance. 

          Borrower
may prepay this Note only (1) pursuant to Section 8 of the Loan Agreement
following the occurrence of an Event of Loss; or (2) from and after the first
(1st) anniversary of the date the Loan is made hereunder, Borrower may prepay,
in whole but not in part, the principal outstanding hereunder by paying to
Lender such outstanding principal, together with all accrued and unpaid
interest thereon at the Interest Rate and other Obligations, plus, as
liquidated damages for the cost of making funds available to Borrower hereunder
and not as a penalty, a prepayment premium equal to five and 0/100ths percent
(5%) of such outstanding principal.

          The first
anniversary date occurs on the date which is twelve (12) months from the date
of the Advance.

          Upon
the occurrence of an Event of Default, Lender shall have all the rights and
remedies specified in the Loan Agreement.

          Borrower
waives presentment for payment, demand, notice of demand, notice of nonpayment
or dishonor, protest and notice 

of protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default or enforcement of the payment of
this Note.

          This Note
shall be governed by and construed in accordance with the laws of the State of
Ohio. Any judicial proceeding arising out of or relating to this Note may be
brought in any court of competent jurisdiction in Hamilton County, Ohio and
each of the parties hereto (i) accepts the nonexclusive jurisdiction of such
courts and any related appellate court and agrees to be bound by any judgment
rendered by any such court in connection with any such proceeding and (ii)
waives any objection it may now or hereafter have as to the venue of any such
proceeding brought in such court or that such court is an inconvenient forum.
EACH OF THE BORROWER AND LENDER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
LAWSUIT OR PROCEEDING ARISING OUT OF OR IN ANY WAY RELATING TO THIS NOTE.

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

          Borrower
acknowledges and agrees that time is of the essence with respect to its
performance under this Note. Any failure of Lender to require strict
performance by Borrower or any waiver by Lender of any provision herein shall
not be construed as a consent or waiver of any provision of this Note. This
Note shall be binding upon, and inure to the benefit of, the parties hereto,
their permitted successors and assigns; provided, however that Borrower may not
assign or transfer any of its rights, interest or obligations hereunder without
the prior written consent of Lender.

          Notwithstanding
any provision to the contrary in this Note, in no event shall the interest rate
charged on this Note exceed the maximum rate of interest permitted under
applicable state and/or federal usury law. Any payment of interest that would
be deemed unlawful under applicable law for any reason shall be deemed received
on account of, and will automatically be applied to reduce, the principal sum
outstanding and any other sums (other than interest) due and payable to Lender
under this Note, and the provisions hereof shall be deemed amended to provide
for the highest rate of interest permitted under applicable law.

          Any
provision of this Note which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability shall not invalidate or
render unenforceable such provision in any other jurisdiction. Captions are
intended for convenience or reference only, and shall not be construed to
define, limit or describe the scope or intent of any provisions hereof.

                    IN
WITNESS WHEREOF, the Borrower has executed this Note as of the 9th day of
August, 2011.

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 BORROWER:

 
	
  

 	
 INDUSTRIAL SERVICES OF AMERICA, INC.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
 /s/ Alan
 Schroering

 	
  

 
	
  

 	
  

 	

 

 	
  

 
	
  

 	
 Name: 

 	
 Alan
Schroering 

 	
  

 
	
  

 	
 Title:

 	
 Chief
Financial Officer 

 	
  

 

SCHEDULE A

TO

PROMISSORY NOTE DATED AUGUST 9, 2011

DESCRIPTION OF EQUIPMENT

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
Manuf.
and/or Vendor Name & Invoice No. 

 	
  

 	
Description
of Equipment 

 	
  

 	
Quantity 

 	
  

 	
Per
Item Cost

(If applicable) 

 	
  

 	
Sales
Tax, 

Delivery, 

Installation & 

Other Charges 

 	
  

 	
Invoice

Total 

 	
  

 
	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 	

 

 	
  

 
	
 Rudd Equipment UC00171

 	
  

 	
 Volvo wheel loader, model
 L70F, serial number L070FV62374

 	
  

 	
  

 	
 1

 	
  

 	
 $

 	
 108,500.00

 	
  

 	
 $

 	
 6,510.00

 	
  

 	
 $

 	
 115,010.00
 

 	
  

 
	

  

 	
  

 	

  

 	
  

 	

  

 	
  

 	

  

 	
  

 	

  

 	
  

 	

 

 	
  

 
	
 Total:

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
 $

 	
 115,010.00

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