Document:

Exhibit 10.3

 

AMENDED AND RESTATED SUBORDINATION AGREEMENT

 

This Amended and Restated Subordination Agreement (this “Agreement”) is made and entered into effective as of the 15th day of January, 2015 (the “Effective Date”), by and among THE BANK OF KENTUCKY, a Kentucky banking corporation, with an address of 111 Lookout Farm Drive, Crestview Hills, Kentucky 41017 (“Bank of Kentucky”), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, with an address of 1100 Abernathy Road, NE, Suite 1600, Atlanta, Georgia 30328, Attention: Joseph L. White (the “Subordinated Lender”), and WESSCO, LLC, a Delaware limited liability company, with an address of 7100 Grade Lane Louisville, Kentucky 40213 (the “Borrower”).

 

RECITALS:

 

A.                                    The parties hereto previously entered into that certain Subordination Agreement, dated as of June 13, 2014 (the “Original Subordination Agreement”), pursuant to which the parties made various agreements relative to the “Liabilities” (as defined in the Original Subordination Agreement) owed by Borrower to each of Bank of Kentucky and Subordinated Lender.

 

B.                                    On the Effective Date of this Agreement, Bank of Kentucky has made additional financing, more particularly described below as the “New Loan”, available to Borrower and in order to reflect their new agreements relative to all of Borrower’s Liabilities (as defined below in this Agreement below), including, without limitation, the New Loan, the parties now wish to amend and restate in its entirety the Original Subordination Agreement as set forth in this Agreement.

 

C.                                    Bank of Kentucky previously made two (2) loans in the aggregate amount of Four Million and No/100 Dollars ($4,000,000.00) (the “2013 Loans”) to the Borrower as evidenced by (i) that certain Promissory Note dated October 15, 2013 made by the Borrower in favor of Bank of Kentucky in the original principal amount of Three Million and No/100 Dollars ($3,000,000.00) (the “Term Note”) and (ii) that certain Promissory Note dated October 15, 2013 made by the Borrower in favor of Bank of Kentucky in the face principal amount of One Million and No/100 Dollars ($1,000,000.00) (the “Revolver Note”) (collectively, the “2013 Notes”, and together with all related agreements, documents and instruments collateral thereto or contemplated thereby, including, without limitation, all amendments, renewals or extensions to any of the foregoing hereafter entered into between such parties, the “Bank of Kentucky 2013 Loan Documents”). As of the Effective Date hereof the outstanding balance under the Term Note is $2,313,942.00 and the outstanding balance under the Revolver Note is $566,796.02, subject to the terms of the Bank of Kentucky 2013 Loan Documents, including, without limitation, revolving line of credit terms in the Revolver Note which permit repayment and reborrowings under the Revolver Note on the terms set forth therein. The Borrower’s indebtedness owed to Bank of Kentucky pursuant to the Bank of Kentucky 2013 Loan Documents is secured by all assets of the Borrower, whether now owned or hereafter acquired, and the proceeds and products thereof (collectively, the “2013 Wessco Collateral”).

 

D.                                    On the Effective Date of this Agreement, Bank of Kentucky made a new loan in the maximum principal amount of One Million and No/100 Dollars ($1,000,000.00) (the “New Loan”) to the Borrower as evidenced by that certain Promissory Note dated as of the Effective Date hereof made by the Borrower in favor of Bank of Kentucky in the face principal amount of One Million and No/100 Dollars ($1,000,000.00) (the “New Revolver Note” and together with all related agreements, documents and instruments collateral thereto or contemplated thereby, including, without limitation, all amendments, renewals or extensions to any of the foregoing hereafter entered into between such parties, the “Bank of

 

 

Kentucky New Loan Documents”). The Borrower’s indebtedness owed to Bank of Kentucky pursuant to the Bank of Kentucky New Loan Documents is secured by all assets of the Borrower, whether now owned or hereafter acquired, and the proceeds and products thereof (collectively, the “New Wessco Collateral”).

 

E.                                     The 2013 Notes and the New Revolver Note are sometimes collectively referred to herein as the “Notes”. The Bank of Kentucky 2013 Loan Documents and the Bank of Kentucky New Loan Documents are sometimes collectively referred to herein as the “Bank of Kentucky Loan Documents”. The 2013 Wessco Collateral and the New Wessco Collateral are sometimes collectively referred to herein as the “Wessco Collateral”.

 

F.                                      Industrial Services of America, Inc. (“ISA”), together with Borrower and all of ISA’s other subsidiaries, are currently indebted to the Subordinated Lender pursuant to the terms of that certain Credit Agreement dated as of June 13, 2014 (as modified, extended, amended or restated from time to time, the “ISA Credit Agreement” and together with all related agreements, documents and instruments collateral thereto or contemplated thereby, including, without limitation, all amendments, renewals or extensions to any of the foregoing hereafter entered into between such parties, the “ISA Loan Documents”).

 

G.                                    It is a condition to Subordinated Lender’s approval of Borrower borrowing the New Loan from Bank of Kentucky that Borrower, Subordinated Lender and Bank of Kentucky enter into this Agreement.

 

NOW, THEREFORE, in consideration of the Recitals set forth above and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and notwithstanding anything to the contrary in the Original Subordination Agreement, the parties hereto, intending to be legally bound hereby, hereby amend in its entirety and replace the Original Subordination Agreement, and further agree as follows:

 

Introduction: The parties to this Agreement hereby acknowledge that, to their knowledge, the above Recitals accurately reflect their respective loans and agreements and such Recitals are therefore, hereby incorporated herein by reference as if fully set forth herein. Without limiting the general nature of the immediately-preceding sentence, the parties hereby amend and restate in its entirety the Original Subordination Agreement and replace the same with this Agreement.

 

1.                                      All obligations of the Borrower, howsoever created, arising or evidenced, whether as principal obligor, guarantor, surety, accommodation party, or otherwise, direct or indirect, absolute or contingent or now or hereafter existing or due or to become due are hereinafter called “Liabilities.” All Liabilities of the Borrower to Bank of Kentucky arising pursuant to the Bank of Kentucky Loan Documents are hereinafter called “Bank of Kentucky Liabilities”; and all Liabilities of the Borrower to the Subordinated Lender arising under or pursuant to the ISA Loan Documents are hereinafter called “Subordinated Lender Liabilities.”

 

2.    (a)                   Except as set forth in Section 3 or as Bank of Kentucky may hereafter otherwise expressly consent in writing, the payment of all Subordinated Lender Liabilities and all right, title, and interest of Subordinated Lender in and to the Wessco Collateral is hereby absolutely and unconditionally postponed and subordinated to the indefeasible payment in full of all Bank of Kentucky Liabilities and to Bank of Kentucky’s right, title, and interest in and to the Wessco Collateral, and no payments or other distributions whatsoever in respect of any Subordinated Lender Liabilities shall be made by the Borrower, nor shall any property or assets of Borrower, including, without limitation, the Wessco

 

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Collateral, be applied to the purchase or other acquisition or retirement of any Subordinated Lender Liabilities.

 

(b)                                 Notwithstanding the date, manner or order of creation, attachment or perfection of those security interests, liens, mortgages, and other encumbrances in favor of the Subordinated Lender now or hereafter existing in the Wessco Collateral, and notwithstanding any provisions of the Uniform Commercial Code or other applicable law or of any agreement(s) granting such security interests, liens, mortgages, deeds of trust and other encumbrances to Bank of Kentucky and the Subordinated Lender, the security interests, liens, mortgages, and other encumbrances held by the Subordinated Lender in the Wessco Collateral shall be, in all respects, and at all times, unconditionally subject to and subordinate to the security interests, liens, mortgages, deeds of trust and other encumbrances of Bank of Kentucky in the Wessco Collateral to the full extent of the Bank of Kentucky Liabilities and the Bank of Kentucky Loan Documents secured thereby.

 

3.                                      The Borrower shall not make any payments to the Subordinated Lender pursuant to the ISA Loan Documents nor may the Subordinated Lender pursue any enforcement or collection action against the Borrower or the Wessco Collateral under the ISA Loan Documents, or otherwise, until such time as all Bank of Kentucky Liabilities are indefeasibly paid in full and all of Borrower’s obligations under the Bank of Kentucky Loan Documents are satisfied (such time is referred to herein as the “Satisfaction of the BoK Liabilities”). In the event the Subordinated Lender shall receive any amount, payment or distribution of any kind from Borrower prior to the Satisfaction of the BoK Liabilities, such amounts, payments and distributions shall be held in trust by the Subordinated Lender for the benefit and on account of Bank of Kentucky, and shall be promptly remitted to Bank of Kentucky for application by Bank of Kentucky to the Bank of Kentucky Liabilities in such order as Bank of Kentucky shall elect in its sole and absolute discretion until the Satisfaction of the BoK Liabilities. Notwithstanding the foregoing or any provision of the Bank of Kentucky Loan Documents to the contrary, so long as Bank of Kentucky has not delivered to Subordinated Lender written notice that an event of default has occurred and, as of the date of said notice, is continuing under the Bank of Kentucky Loan Documents, Borrower may remit to Subordinated Lender (or distribute to ISA for subsequent remission to Subordinated Lender), and Subordinated Lender may accept and retain, payments in respect of the Subordinated Lender Liabilities and collections of Borrower’s accounts receivable and proceeds of other Wessco Collateral for application to the Subordinated Lender Liabilities; provided, however, that the provisions of this sentence shall not be construed to authorize Subordinated Lender to foreclose upon, sell, or take other lien or secured interest enforcement action against, any Wessco Collateral in violation of any other provision of this Agreement.

 

4.                                      Upon the occurrence of any default or event of default under the Bank of Kentucky Loan Documents, the Subordinated Lender shall have the option (but shall have no obligation) to purchase all, but not less than all, of the Bank of Kentucky Loan Documents for a purchase price equal to the outstanding principal of the Notes and any accrued but uncollected interest and any uncollected fees owed to Bank of Kentucky under the Bank of Kentucky Loan Documents, plus all reasonable out of pocket costs and expenses incurred by Bank of Kentucky, all of the foregoing calculated as of the “Loan Transfer Date” (as defined below) (the “Purchase Option”). The Purchase Option shall be exercised by Subordinated Lender by providing written notice to Bank of Kentucky (the “Purchase Notice”). The Subordinated Lender and Bank of Kentucky shall execute a Loan Purchase Agreement in form and substance reasonably acceptable to both parties and close the purchase and sale of the Bank of Kentucky Loan Documents within thirty (30) days of the Purchase Notice (such closing date being referred to herein as the “Loan Transfer Date”). Notwithstanding anything contained in this Section 4 to the contrary, the Purchase Option shall only extend to the Bank of Kentucky Liabilities (as evidenced by the

 

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Bank of Kentucky Loan Documents) currently in existence as of the Effective Date hereof, and expressly excludes any Bank of Kentucky Liabilities incurred by the Borrower after the Effective Date hereof, unless otherwise agreed in writing by Subordinated Lender and Bank of Kentucky; provided, however, that for purposes of the limitation described above in this sentence, any disbursements made after the Effective Date hereof under either the Revolver Note or the New Revolver Note up to their respective maximum principal amounts available (as set forth in the Notes on the Effective Date hereof) shall be deemed to be included in the Purchase Option and shall not trigger the exclusion in this sentence.

 

5.                                      The Subordinated Lender agrees that it will at no time contest, directly or indirectly, the validity or the amount of the Bank of Kentucky Liabilities or the Bank of Kentucky Loan Documents, the existence, validity, enforceability or perfection of the security interest and liens of Bank of Kentucky in the Wessco Collateral, the priority of the security interests and liens of Bank of Kentucky in the Wessco Collateral securing the Bank of Kentucky Liabilities over the security interests and liens of the Subordinated Lender in the Wessco Collateral securing the Subordinated Lender Liabilities, or the existence or the adequacy of the consideration for the security interests and liens in the Wessco Collateral granted to Bank of Kentucky to secure the Bank of Kentucky Liabilities. Bank of Kentucky agrees that it will at no time contest, directly or indirectly, the validity or the amount of the Subordinated Lender Liabilities, the existence, validity, enforceability or perfection of the security interest and liens of Subordinated Lender in any collateral securing the Subordinated Lender Liabilities (excluding the Wessco Collateral, the “ISA Collateral”), the priority of the security interests and liens of Subordinated Lender in the ISA Collateral over the security interests and liens of third parties, or the existence or the adequacy of the consideration for the security interests and liens in the ISA Collateral granted to Subordinated Lender to secure the Subordinated Lender. Bank of Kentucky acknowledges that Subordinated Lender has advised Bank of Kentucky that Subordinated Lender has first-priority liens and security interests on the ISA Collateral and on certain other assets of affiliates of Borrower, and Bank of Kentucky agrees not to seek or accept any guaranty from ISA or its subsidiaries (other than Borrower) or any lien or security interest on the assets of ISA or any of its subsidiaries (other than Borrower), nor to interfere with Subordinated Lender’s actions in respect thereof.

 

6.                                      For the limited purpose of perfecting the security interests and liens of Bank of Kentucky and the Subordinated Lender in those types or items of the Wessco Collateral in which a security interest only may be perfected by possession or control, each such party hereby appoints the other as its bailee and representative for the limited purpose of possessing on its behalf any such Wessco Collateral that may come into the possession or control of such other party from time to time, and each party agrees to act as the other’s bailee and representative for such limited purpose of perfecting the other’s security interest by possession or control of such Wessco Collateral through a bailee or representative; provided that, neither party shall incur any liability to the other by virtue of acting as the other’s bailee or representative hereunder. In this regard, to the extent either Bank of Kentucky or the Subordinated Lender is in possession or control of any such item of Wessco Collateral, such party agrees that if it elects to relinquish possession or control of such item of Wessco Collateral it shall deliver possession or control thereof to the other party; provided that, no party shall be required to deliver any such item of Wessco Collateral or take any other action referred to herein to the extent that such action would contravene any law, order or other legal requirements, and in the event of a controversy or dispute, such party may interplead any item of Wessco Collateral in any court of competent jurisdiction. The provisions of this Section 6 are expressly subject to the agreement and understanding of Bank of Kentucky and the Subordinated Lender that, notwithstanding that the Subordinated Lender may have possession or control of any such Wessco Collateral, the security interest and lien of Bank of Kentucky in such Wessco Collateral shall have priority over the security interest and lien of the Subordinated

 

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Lender in the same Wessco Collateral to the fullest extent of, and as complete security for, the Bank of Kentucky Liabilities.

 

7.                                      This Agreement shall in all respects be a continuing agreement and shall remain in full force and effect until the Satisfaction of the BoK Liabilities as confirmed in writing by Bank of Kentucky to the Subordinated Lender, which written notice shall not be unreasonably withheld or delayed by Bank of Kentucky upon the Satisfaction of the BoK Liabilities; provided, however, that the provisions of this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time the payment of any of the Bank of Kentucky Liabilities is rescinded or must otherwise be returned by Bank of Kentucky to the Borrower or the Borrower’s creditors, trustees, or assignees upon the insolvency, bankruptcy, or reorganization of the Borrower or ISA or otherwise, all as though such payment had not been made.

 

8.                                      Bank of Kentucky shall not be prejudiced in its right under this Agreement by any act or failure to act of the Borrower or the Subordinated Lender, or any noncompliance of the Borrower or the Subordinated Lender with any agreement or obligation, regardless of any knowledge thereof which Bank of Kentucky may have or with which Bank of Kentucky may be charged; and no action of Bank of Kentucky permitted hereunder shall in any way affect or impair the rights of Bank of Kentucky and the obligations of the Subordinated Lender under this Agreement, except to the extent that Subordinated Lender may accept payments and collections of proceeds of Wessco Collateral prior to receipt of notice of default from Bank of Kentucky, on and subject to the condition in Section 3.

 

9.                                      No delay on the part of Bank of Kentucky in the exercise of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Agreement be binding upon Bank of Kentucky except as expressly set forth in a writing duly signed and delivered on behalf of Bank of Kentucky. For purposes of this Agreement, Bank of Kentucky Liabilities shall include all obligations of the Borrower to Bank of Kentucky, notwithstanding any right or power of the Borrower or anyone else to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the agreements and obligations of the Subordinated Lender hereunder.

 

10.                                             The Subordinated Lender agrees that Bank of Kentucky shall be entitled to manage and supervise the Bank of Kentucky Liabilities and Wessco Collateral in accordance with applicable law and its usual practices, modified from time to time as it deems appropriate, without regard to the existence of any rights that the Subordinated Lender may now or hereafter have (except as expressly set forth herein).

 

11.                                             Notwithstanding anything to the contrary in this Agreement: (a) Bank of Kentucky acknowledges that it shall not extend any additional loans, other than the loans evidenced by the Notes as such Notes exist on the Effective Date hereof, to the Borrower that would be under the coverage of this Agreement (i.e. any loans to which the Subordinated Lender Liabilities would be subordinate); provided, however, that nothing in this Agreement shall be deemed to prohibit Bank of Kentucky from extending new loans to Borrower that are subordinate to the Subordinated Lender Liabilities (which new subordinate loans are referred to herein as the “Future Wessco Loans”), and provided further, that so long as ISA is indebted to the Subordinated Lender, the Future Wessco Loans shall not be guaranteed by ISA, unless otherwise consented to in writing by the Subordinated Lender; and (b) Bank of Kentucky agrees that it will not increase the amount of the Loans, which agreement does not exclude any increases in the Bank of Kentucky Liabilities that may occur as a result of the terms set forth in the Bank of Kentucky Loan Documents as such documents exist on the Effective Date hereof including, without limitation, revolving line of credit terms in the Revolver Note and New Revolver Note which may permit repayment

 

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and reborrowings under the Revolver Note or New Revolver Note on the terms set forth therein as in existence on the Effective Date hereof.

 

12.                                             The provisions of this Agreement are solely for the purposes of defining the relative rights of the holder of Subordinated Lender Liabilities and the holder of Bank of Kentucky Liabilities. Subject to the restrictions set forth in this Agreement, nothing contained in this Agreement is intended to or shall impair, as between the Borrower and the holder of the Subordinated Lender Liabilities, the obligation of the Borrower to pay the Subordinated Lender Liabilities as and when the same shall become due and payable in accordance with their terms nor shall anything herein prevent the holder of the Subordinated Lender Liabilities from exercising all remedies otherwise permitted by applicable law or under or with respect to the Subordinated Lender Liabilities upon default, subject to the restrictions set forth in this Agreement and the rights, if any, under this Agreement of the holders of the Bank of Kentucky Liabilities in respect of cash, property, or securities of the Borrower received upon the exercise of any such remedy.

 

13.                                             This Agreement shall be binding upon the Subordinated Lender and upon its successors and assigns and shall benefit Bank of Kentucky and its successors and assigns. Neither the obligations nor ISA Collateral held by the Subordinated Lender pursuant to this Agreement or the ISA Loan Documents may be assigned or transferred by the Subordinated Lender unless the Subordinated Lender first shall have supplied to the assignee a copy of this Agreement and shall have received from the assignee and delivered to Bank of Kentucky a written acknowledgement by such assignee of receipt of a copy of this Agreement, accompanied by a consent by such assignee to be bound by the terms of this Agreement.

 

14.                                             This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Kentucky (without regard to its conflicts of laws principles). Wherever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be enjoined by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

15.                               The Subordinated Lender will endeavor to give Bank of Kentucky (at the address listed above) written notice of any default by the Borrower under any ISA Loan Documents contemporaneously with the giving of such notice to Borrower (provided that no liability shall result from the failure of Subordinated Lender to provide any such notice to Bank of Kentucky). Bank of Kentucky will endeavor to give Subordinated Lender (at the address listed above) written notice of any default by the Borrower under any of the Bank of Kentucky Loan Documents contemporaneously with the giving of such notice to the Borrower (provided that no liability shall result from the failure of Bank of Kentucky to provide any such notice to Subordinated Lender). Borrower agrees to provide notice of any default under the ISA Loan Documents to Bank of Kentucky and to give notice of any default under the Bank of Kentucky Loan Documents to Subordinated Lender.

 

16.                                             This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by facsimile or other electronic method of transmission shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by facsimile or other electronic method of transmission to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver

 

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such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.

 

17.                                             IN RECOGNITION OF THE HIGHER COSTS AND DELAY WHICH MAY  RESULT FROM A JURY TRIAL, THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING HEREUNDER OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED;  AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,  ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY,  AND THAT ANY PARTY HERETO MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

18.                                             This Agreement constitutes the entire agreement and the understanding between the parties with respect to the subject matter hereof and this Agreement supersedes all previous and contemporaneous negotiations and agreements between the parties and no parole evidence of any prior or other agreements shall be permitted to contradict or vary the terms hereof.

 

19.                                             The parties hereto acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or supplements thereto.

 

20.                                             All notices required or permitted hereunder shall be in writing and shall be made by overnight air courier or certified mail, return receipt requested, and shall be deemed to have been validly given or delivered one (1) business day after sending, if sent by overnight air courier, and three (3) business days after sending, if sent by certified or registered mail, addressed to the party to be notified as set forth on the first page of this Agreement or such other address as any party may designate for itself by like notice.

 

21.                                             Notwithstanding anything to the contrary in this Agreement or in any of the Bank of Kentucky Loan Documents: (a) any use in the Bank of Kentucky Loan Documents of the term “Loan Documents” shall be deemed to include, without limitation: (i) this Agreement; (ii) that certain Assignment of Promissory Note as Collateral Security, entered into between Borrower and Bank of Kentucky as of October 15, 2013 (the “Collateral Assignment”), assigning to Bank of Kentucky that certain Promissory Note, dated as of October 15, 2013, from ISA to Borrower in the principal amount of $3,000,000.00 (as amended on June 13, 2014, the “Inter-Company Note”) , as said Collateral Assignment was previously amended by Bank of Kentucky and Borrower on or June 13, 2014; and (iii) that certain Guaranty of Payment (“2013 Guaranty”), dated as of October 15, 2013, from ISA to Bank of Kentucky relative to the 2013 Loans; and (iv) that certain Guaranty of Payment (“New Guaranty”), dated as of the Effective Date hereof, from ISA to Bank of Kentucky relative to the New Loan; (b) as used herein, the term “Bank of Kentucky Loan Documents” shall be deemed to include, without limitation, this Agreement, the Collateral Assignment (as amended), the 2013 Guaranty and the New Guaranty; and (c)

 

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as used in this Agreement, the term “Wessco Collateral” shall include, without limitation, the Inter-Company Note.

 

22.                                             Borrower and Bank of Kentucky agree (and Subordinated Lender acknowledges) that either of the following events shall constitute an Event of Default for purposes of the Bank of Kentucky Loan Documents, and Subsections 5(b) and 5(c) of the Term Note and 6(b) and 6(c) of the Revolver Note shall be deemed to be superseded by the following: (i) the occurrence of an “Event of Default” as defined in the ISA Credit Agreement (an “ISA Credit Agreement Default”) that results from the actions or omissions of Borrower and which is not waived by Subordinated Lender in writing in its sole discretion; and (ii) the occurrence of any other ISA Credit Agreement Default that continues (and is not waived by Subordinated Lender in writing in its sole discretion) for a period of at least sixty (60) days; provided, however, that if, within said sixty (60) day period, Subordinated Lender enters into an agreement with ISA and Borrower pursuant to which Subordinated Lender agrees to forebear from exercising default remedies under the ISA Credit Agreement as a result of such ISA Credit Agreement Default, no Event of Default for purposes of the Bank of Kentucky Loan Documents shall be deemed to exist as long as said forbearance remains in effect.

 

23.                                             Each party hereto agrees to pay all of the other party’s reasonable costs and expenses, including reasonable attorneys’ fees, which may be incurred in any successful effort to enforce any term of this Agreement, including all such reasonable costs and expenses which may be incurred by any party in any legal action, reference, mediation or arbitration proceeding.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first set forth above.

 

[Signature Pages Follow]

 

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SIGNATURE PAGE OF BANK OF KENTUCKY TO
 AMENDED AND RESTATED SUBORDINATION AGREEMENT

 

	
THE   BANK OF KENTUCKY, INC.,
   a Kentucky banking corporation
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Brett Blackwell
    	
 
    
	
 
    	
Brett Blackwell, Vice President
    	
 
    

 

[Signatures continue on the following pages.]

 

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SIGNATURE PAGE OF SUBORDINATED LENDER TO
 AMENDED AND RESTATED SUBORDINATION AGREEMENT

 

	
WELLS   FARGO BANK, NATIONAL ASSOCIATION, a national bank
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Joseph L. White
    	
 
    
	
 
    	
Joseph   L. White, Vice President
    	
 
    

 

[Signatures continues on the following page]

 

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SIGNATURE PAGE OF BORROWER TO

AMENDED AND RESTATED SUBORDINATION AGREEMENT

 

WESSCO, LLC, a Delaware limited liability company

 

	
By:
    	
 
    	
INDUSTRIAL   SERVICES OF AMERICA, INC.,
    	
 
    
	
 
    	
 
    	
a   Florida corporation, its Manager
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Sean Garber
    	
 
    
	
 
    	
 
    	
 
    	
Sean   Garber, President
    	
 
    

 

11Exhibit 10.4

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into effective as of January 15, 2015 by WESSCO, LLC, a Delaware limited liability company (“Debtor”), and THE BANK OF KENTUCKY, INC., a Kentucky banking corporation, its successors and assigns, as secured party (“Secured Party”).

 

RECITALS:

 

A.                               Secured Party has agreed to loan the following to Debtor a loan in the principal amount of One Million and 00/100 DOLLARS ($1,000,000.00) (the “Loan”).

 

B.                               As a condition precedent to Secured Party’s extension of the Loan to Debtor and in consideration therefor, Secured Party has required the execution and delivery of, among other things: (i) this Agreement, (ii) that certain Promissory Note of even date herewith from Debtor to the order of Secured Party in the principal amount of up of One Million and 00/100 DOLLARS ($1,000,000.00) (the “Note”), and (iii) various other Loan Documents (as defined in the Note).

 

D.                               Debtor: (i) will or is expected to benefit from the Loan, (ii) understands that Secured Party would not make the Loan to Debtor but for the execution and delivery of this Agreement, (iii) acknowledges that this Agreement is being executed and delivered to Secured Party in exchange for valuable consideration which is legally sufficient to support and justify Debtor’s obligations hereunder, and (iv) has knowingly and voluntarily executed and delivered this Agreement to Secured Party after having had the opportunity to review the same with legal counsel.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, Debtor and Secured Party hereby agree and covenant as follows:

 

1.                                 Debtor does hereby grant to Secured Party a security interest in all personal property owned by Debtor, including, without limitation, each item of Equipment, each Third Party Agreement, all of the other property described in Exhibit A, attached hereto and made a part hereof; all property hereafter acquired by Debtor, and all accessions thereto and the proceeds thereof (collectively referred to herein as the “Collateral”).

 

2.                                 The security interest granted pursuant to this Security Agreement is given by Debtor to Secured Party to secure: (a) the payment of the Loan and all interest, late charges, reimbursement obligations, and other indebtedness evidenced by or owing, now or in the future, under the Note, the Loan Agreement, and any of the other Loan Documents, together with all extensions, modifications, renewals or refinancings of any of the foregoing; (b) all amounts and other obligations owed to Secured Party by Debtor as described in the Loan Documents (defined in the Note); (c) all amounts and other obligations owed to Secured Party by Debtor under or pursuant to any other financing, loan, or credit facility, including, without limitation, the loans previously made by Secured Party to Debtor pursuant to certain Promissory Notes, each dated as of October 15, 2013, in the original principal or face amounts of $1,000,000.00 and $3,000,000.00, respectively, and all documents and agreements evidencing and securing the

 

 

same; and (d) the performance and observance of the covenants, conditions, agreements, representations, warranties and other liabilities and obligations of the Debtor or any other obligor to or benefiting the Secured Party which are evidenced or secured by or otherwise provided in the Note, this Agreement or any of the other Loan Documents.

 

3.                                      Debtor hereby represents, warrants, and covenants to Secured Party that:

 

A.                                    The Collateral is or is to be used by the Debtor primarily for business use.

 

B.                                    The Collateral will be kept in the Commonwealth of Kentucky except such of the Collateral as is subject to any Third Party Agreement approved by Secured Party that requires certain Equipment to be kept in a different location, in which case the Collateral shall be kept in the location(s) described in each approved Third Party Agreement. The Debtor’s principal place of business is located in the Commonwealth of Kentucky. Debtor will promptly notify Secured Party of any change in the location of the Collateral and Debtor will not remove the Collateral from the above described locations without the written consent of the Secured Party. The Debtor shall not change its name, its principal place of business or its state of organization or registration or merge with another entity without first providing written notice to Secured Party.

 

C.                                    Except for the security interest granted herein, Debtor is or will be the owner of the Collateral free from any prior lien, security interest or encumbrance other than the interests described in the Third Party Agreements, and Debtor will defend the Collateral against all claims and demands of any and all persons at any time claiming the same or any other interest therein.

 

D.                                    Except in the ordinary course of business for reasonable consideration, Debtor will not sell, exchange, lease or otherwise dispose of any interest in the Collateral without the written consent of the Secured Party and will not permit any lien, security interest or encumbrance to attach to the Collateral.

 

E.                                     Other than financing statements in favor of Secured Party, no financing statement covering the Collateral is on file in any public office and, at the request of Secured Party, Debtor will join with Secured Party in executing and/or authorizing one or more financing statements, covering the Collateral generally and/or any particular item of Collateral if Secured Party elects, from time to time, to file separate financing statements for each such items, pursuant to the Uniform Commercial Code of Kentucky in form satisfactory to the Secured Party and Debtor will pay the cost of filing in all public offices wherever tiling is deemed necessary by Secured Party. A carbon, photographic or other reproduction of this Agreement or a financing statement will be sufficient as a financing statement.

 

F.                                      Debtor will maintain the Collateral in good condition and repair; will maintain insurance on the Collateral with a coverage amount at least equal to the replacement value of the Collateral against fire, theft, and such other hazards and in such form and amount as Secured Party may require (but in no event less than replacement

 

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value of such Collateral) and for the benefit of Debtor and Secured Party as their interest shall appear and will pay and discharge all taxes imposed on the Collateral. Debtor assigns to Secured Party all right to proceeds of any insurance not exceeding the unpaid balance hereunder, and directs any insurer to pay all proceeds directly to Secured Party and authorizes Secured Party to indorse any draft for the proceeds. Such policy or policies (or certificates thereof) shall be delivered to the Secured Party and shall be with a company or companies satisfactory to Secured Party.

 

G.                                    At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, pay for insurance on the Collateral, and pay for the maintenance and preservation of the Collateral should Debtor fail to do so. Debtor agrees to reimburse Secured Party on demand for any payment so made and until such reimbursement, the amount so paid by Secured Party shall be added to the principal amount of the indebtedness.

 

H.                                   Upon happening of any of the following events or conditions: (a) a default in the payment or performance of any of the obligations or of any covenant or liability contained or referred to in the Note or any of the other Loan Documents; (b) loss, theft, destruction, sale or encumbrance of or to the Collateral; (c) death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceedings under any bankruptcy or insolvency laws by or against Debtor; or (d) any default under the terms hereunder; Secured Party may at its election, declare the entire amount of the indebtedness then outstanding under the Note and other Loan Documents due and payable at once and Secured Party shall have the rights and remedies of a secured party under any applicable Uniform Commercial Code, including the right to enter any premises of the Debtor, without legal process and take possession of and remove the Collateral and the right to act in Debtor’s place under any of the Third Party Agreements. Debtor agrees, upon request of the Secured Party, to assemble the Collateral and to make it available at the place designated by Secured Party. Any requirement of reasonable notice of any disposition of the Collateral shall be satisfied if such notice is mailed to the address of the Debtor shown in this Agreement at least ten (10) days before the time of such disposition.

 

4.                                      No waiver by Secured Party of any default shall be effective unless in writing nor shall operate as a waiver of any other default or of the same default on a subsequent occasion. Secured Party is hereby authorized to fill any blank spaces hereunder. All rights of Secured Party hereunder shall inure to the benefit of the heirs, executors, administrators, successors and assigns of Secured Party; and all obligations of Debtor shall bind the heirs, executors, administrators, successors and assigns of Debtor. If there is more than one Debtor, their obligations hereunder shall be joint and several. This Agreement constitutes the entire agreement between the parties. This Agreement shall be governed by Kentucky law.

 

5.                                      Any notice that Secured Party or Debtor is required or entitled to give to the other party hereunder shall be in writing and shall be deemed given when sent by certified mail, return receipt requested, postage prepaid or upon receipt, if hand delivered or sent by facsimile, at the addresses specified below:

 

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Secured   Party:
    	
The   Bank of Kentucky, Inc.
    
	
 
    	
111   Lookout Farm Drive
    
	
 
    	
Crestview   Hills, Kentucky 41017
    
	
 
    	
Attn:   Brett Blackwell
    
	
 
    	
 
    
	
With   a copy to:
    	
Strauss   Troy Co., LPA
    
	
 
    	
50   E. Rivercenter Blvd., Suite 1400
    
	
 
    	
Covington,   KY 41011
    
	
 
    	
Attn:   William O. Williamson, Esq.
    
	
 
    	
 
    
	
Debtor:
    	
Wessco,   LLC
    
	
 
    	
7100   Grade Lane
    
	
 
    	
Louisville,   KY 40213
    
	
 
    	
Attn:   Sean Garber
    
	
 
    	
 
    
	
With   a copy to:
    	
Frost   Brown Todd LLC
    
	
 
    	
400   West Market Street, 32nd
    
	
 
    	
Floor   Louisville, KY 40202
    
	
 
    	
Attn:   John S. Egan, Esq.
    

 

The addresses set forth above may be changed as to any party by such party delivering to the other parties written notice as to such change of address.

 

6.                                 Upon the payment in full of all amounts secured by this Security Agreement, Secured Party agrees that it will promptly terminate this Agreement and cause, at Debtor’s reasonable expense, all financing statements filed to perfect Secured Party’s security interest in the Collateral to be released.

 

7.                                 DEBTOR AND SECURED PARTY (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITION-ALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO THIS INSTRUMENT, THE NOTE, ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP BETWEEN DEBTOR AND SECURED PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO SECURED PARTY TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER RELATED DOCUMENTS. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY SECURED PARTY’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN THIS INSTRUMENT, ANY NOTE OR ANY OTHER GUARANTY OF PAYMENT, AGREEMENT, INSTRUMENT OR DOCUMENT RELATED THERETO.

 

8.                                 This Agreement may be executed in one or more original or facsimile counterparts, each of which, when taken together, shall constitute a single enforceable instrument.

 

Executed effective as of the date first set forth above.

 

[SIGNATURE PAGES FOLLOW]

 

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SIGNATURE PAGE OF SECURED PARTY FOR SECURITY AGREEMENT

 

	
 
    	
THE   BANK OF KENTUCKY INC., a Kentucky banking corporation
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Brett Blackwell
    
	
 
    	
Printed   Name:
    	
Brett   Blackwell
    
	
 
    	
Title:
    	
Vice   President
    

 

STATE OF OHIO

SS.

COUNTY OF HAMILTON

 

The undersigned, a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Brett Blackwell, the Vice President of The Bank of Kentucky, Inc., a Kentucky banking corporation, who is personally known to me to be the same person whose name is subscribed to the foregoing instrument as such, appeared before me this day in person and acknowledged that he signed and delivered the said instrument as his own free and voluntary act and as the free and voluntary act of said entity, for the uses and purposes therein set forth.

 

	
GIVEN   under my hand and notarial seal this 14th day of January, 2015.
    	
 
    

 

	
 
    	
/s/   Anthony M. Barlow
    
	
 
    	
Notary   Public
    
	
 
    	
 
    
	
My Commission Expires:  
    	
N/A
    
			

 

5

 

SIGNATURE PAGE OF DEBTOR FOR SECURITY AGREEMENT

 

	
 
    	
WESSCO,   LLC, a Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Industrial   Services of America, Inc., a
    
	
 
    	
 
    	
Florida   corporation, its Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Sean Garber
    
	
 
    	
 
    	
Printed   Name:
    	
Sean   Garber
    
	
 
    	
 
    	
Title:
    	
President
    

 

STATE OF KENTUCKY

) SS.

COUNTY OF JEFFERSON

 

The undersigned, a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Sean Garber, the President on behalf of Industrial Services of America, Inc., a Florida corporation, which corporation is the Manger on behalf of Wessco, LLC, a Delaware corporation, who is personally known to me to be the same person whose name is subscribed to the foregoing instrument as such, appeared before me this day in person and acknowledged that he/she signed and delivered the said instrument as his/her own free and voluntary act and as the free and voluntary act of said company, for the uses and purposes therein set forth.

 

GIVEN under my hand and notarial seal this 15th day of January, 2015.

 

	
 
    	
/s/   LeAnders L. Jones
    
	
 
    	
Notary   Public
    
	
 
    	
 
    
	
My Commission Expires:  
    	
9-29-15
    
			

 

 

EXHIBIT A

TO

SECURITY AGREEMENT

 

	
Debtor:
    	
 
    	
Secured   Party:
    
	
 
    	
 
    	
 
    
	
Wessco,   LLC
   7100 Grade Lane
   Louisville, KY 40213
    	
 
    	
The   Bank of Kentucky, Inc.
   111 Lookout Farm Drive
   Crestview Hills, Kentucky 41017
    

 

Collateral Description

 

All of Debtor’s right, title and interest in and to the following:

 

All leases and other agreements (“Third Party Agreements”) between or among Debtor and other persons related to any Equipment (defined below) leased, sold, or serviced by Debtor, including, without limitation, all of the following to the extent produced by or from or otherwise related to said Equipment or Third Party Agreements: (a) all monies, revenues, rent, rent equivalents, receipts, deposits, letters of credit, income and profits due and to become due to Debtor thereunder; (b) all claims, demands, and causes of action that Debtor has now or which may arise in the future; (c) all rights and options, including, without limitation, the full power and authority possessed by Debtor to exercise the same pursuant to their terms; (d) all permits, approvals, and consents, previously granted and those granted in the future; (e) all plans, reports, appraisals, investigations, and examinations; (0 all licenses; and (g) all leases to or from Debtor whether existing now or in the future; and

 

All Accounts, Equipment, General Intangibles, Intellectual Property, Inventory, Deposit Accounts, all products and proceeds thereof, and the items set forth in subparagraphs (g) and (h) below, whether now owned or existing or hereafter acquired or arising. The following definitions apply to the terms used in this Exhibit and any corresponding UCC Financing Statement:

 

(a)                                 Accounts:  All accounts, accounts receivable, other receivables, contract rights, chattel paper, instruments and documents, and notes; any other obligations or indebtedness owed to Debtor from whatever source arising; all rights of Debtor to receive any performance or any payments in money or kind; all guaranties of the foregoing and security therefor; all of the right, title and interest of Debtor in and with respect to the goods, services, or other property that gave rise to or that secure any of the foregoing and insurance policies and proceeds relating thereto, and all rights of Debtor as an unpaid seller of goods and services. including but not limited to, the rights to stoppage in transit, replevin, reclamation, and resale; and all of the foregoing whether now owned or existing or hereafter created or acquired (the “Accounts”).

 

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(b)                       Equipment: All of Debtor’s now owned or hereafter acquired machinery, equipment, furniture, furnishings and fixtures, together with tools and motor vehicles of every kind and description, all parts therefor, and all improvements, accessions or appurtenances thereto (the “Equipment”).

 

(c)                        General Intangibles: All chosen in action and causes of action and all other intangible personal property of Debtor of every kind and nature (other than Accounts) now owned or hereafter acquired by Debtor, including, without limitation, corporate or other business records, trademarks, trade names, brand names, trade secrets, goodwill, copyrights, registrations, licenses, franchises, tax refund claims, insurance proceeds, including without limitation, insurance covering the lives of key employees on which the Debtor is beneficiary, and any letter of credit, guarantee, claim, security interest or other security held by or granted to Debtor to secure payment by an account debtor of any of the Accounts (the “Intangibles”).

 

(d)                            Intellectual Property:  All of Debtor’s present and future: trade secrets and other proprietary information; trademarks, service marks and business names and the goodwill of the business relating thereto; copyrights (including without limitation copyrights for computer programs) and all tangible property embodying the copyrights; unpatented inventions (whether or not patentable); patent applications and patents, license agreements related to any of the foregoing and income therefrom; books, records, computer tapes or disks, flow diagrams, specification sheets, source codes, object codes and other physical manifestations of the foregoing; the right to sue for all past, present and future infringements of’ the foregoing; and proceeds of the foregoing (the “Intellectual Property”).

 

(e)                             Inventory:  Any and all now owned or hereafter acquired goods, merchandise, or other personal property, raw materials, parts, supplies, work-in-process and finished products intended for sale, of every kind and description, in the custody or possession, actual or constructive, of Debtor, including such inventory as is temporarily out of the custody or possession of Debtor, including insurance proceeds from insurance on any of the above, any returns upon any Accounts and other proceeds, resulting from the sale or disposition of any of the foregoing, including without limitation, raw materials, work-in-process, and finished goods (the “Inventory”).

 

Deposit Accounts:                                             All deposit accounts of Debtor maintained with Secured Party or any other bank, savings and loan association, credit union or like organization, including all demand, time, savings, passbook or other accounts.

 

(g)                             All products and proceeds of the collateral described in this Exhibit A and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering said collateral, all property received wholly or partly in trade or exchange for said collateral, and all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of, said collateral or any interest therein.

 

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(h)                                 In addition, all ledger sheets, books, records and documents concerning any of the collateral described in this Exhibit A, including all formulations, manufacturing procedures, quality control procedures, product specifications, computer records, programs, storage media and computer software useful or required in connection therewith.

 

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