Document:

Exhibit 10.2

	
 

	
 

	

	
 

	
PROMISSORY NOTE

	
 

	

	
 

	
$1,320,240.00

	
Promissory Note Date:
October 13, 2010

	
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
Florida 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
Million Three Hundred Twenty Thousand Two Hundred Forty and 00/100 Dollars
($1,320,240.00), with interest at the Interest Rate (as defined below) and all
other Obligations on or before October 15, 2014 (“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 October 13, 2010 (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 20/100 percent (5.20%); 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 15th day of each calendar month,
of $30,510.78 commencing on the 15th day of November, 2010, 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 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.

{Remainder of page intentionally
left blank. Signature page follows.}

          IN WITNESS WHEREOF, the Borrower has executed this Note as of the 13th day of
October, 2010.

	
 

	
 

	
 

	
 

	
BORROWER:

	
 

	
 

	
 

	
INDUSTRIAL SERVICES OF
AMERICA, INC.

	
 

	
 

	
 

	
By:

	
/s/ Harry Kletter 

	
 

	
 

	

	
 

	
Name: 

	
Harry Kletter

	
 

	
 

	

	
 

	
Title: 

	
Chief Executive Officer

	
 

	
 

	

SCHEDULE A

TO
PROMISSORY NOTE DATED OCTOBER 13, 2010

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

	
 

	

	
 

	

	
 

	

	
 

	

	
 

	

	
 

	

	
 

	
Hammermills
090-0380

	
 

	
ISS feed conveyor, s/n: 10084-BC1

	
 

	
1

	
 

	
$

	
38,560.00

	
 

	
$

	
0.00

	
 

	
$

	
38,560.00

	
 

	
Hammermills
090-0380

	
 

	
Hi stroke vibratory feeder, s/n: 10084-VF1

	
 

	
1

	
 

	
$

	
34,600.00

	
 

	
$

	
0.00

	
 

	
$

	
34,600.00

	
 

	
Hammermills
090-0380

	
 

	
Steinert ISS sorter, s/n: 10084-ISS96

	
 

	
1

	
 

	
$

	
380,080.00

	
 

	
$

	
0.00

	
 

	
$

	
380,080.00

	
 

	
Hammermills
090-0380

	
 

	
Palatek 150HP air compressor, s/n: 10084-AC1

	
 

	
1

	
 

	
$

	
77,250.00

	
 

	
$

	
0.00

	
 

	
$

	
77,250.00

	
 

	
Hammermills
090-0380

	
 

	
ISS feed conveyor, s/n: 10084-BC2

	
 

	
1

	
 

	
$

	
32,850.00

	
 

	
$

	
0.00

	
 

	
$

	
32,850.00

	
 

	
Hammermills
090-0380

	
 

	
Hi stroke vibratory feeder, s/n: 10084-SIC

	
 

	
1

	
 

	
$

	
27,300.00

	
 

	
$

	
0.00

	
 

	
$

	
27,300.00

	
 

	
Hammermills
090-0380

	
 

	
Steinert ISS sorter, s/n: 10084-ISS80

	
 

	
1

	
 

	
$

	
301,500.00

	
 

	
$

	
0.00

	
 

	
$

	
301,500.00

	
 

	
Hammermills
090-0380

	
 

	
Palatek 150HP air compressor, s/n: 10084-AC2

	
 

	
1

	
 

	
$

	
77,250.00

	
 

	
$

	
0.00

	
 

	
$

	
77,250.00

	
 

	
Hammermills
090-0380

	
 

	
Conveyor, sn: 10084-BC3

	
 

	
1

	
 

	
$

	
29,900.00

	
 

	
$

	
0.00

	
 

	
$

	
29,900.00

	
 

	
Hammermills
090-0380

	
 

	
Drum re-feeder, s/n: 10084-DF1

	
 

	
1

	
 

	
$

	
39,450.00

	
 

	
$

	
0.00

	
 

	
$

	
39,450.00

	
 

	
Hammermills
090-0380

	
 

	
Re-feed conveyor, s/n: 10084-BC4

	
 

	
1

	
 

	
$

	
29,900.00

	
 

	
$

	
0.00

	
 

	
$

	
29,900.00

	
 

	
Hammermills
090-0380

	
 

	
Mezzanine support structure, s/n: 10084-MS1

	
 

	
2

	
 

	
$

	
39,250.00

	
 

	
$

	
0.00

	
 

	
$

	
78,500.00

	
 

	
Hammermills
090-0380

	
 

	
Motor control center, s/n: 10084-MCC

	
 

	
1

	
 

	
$

	
26,000.00

	
 

	
$

	
0.00

	
 

	
$

	
26,000.00

	
 

	
Hammermills
090-0380

	
 

	
Trommel modification with opening screens, s/n:
10084-TR1

	
 

	
1

	
 

	
$

	
21,600.00

	
 

	
$

	
0.00

	
 

	
$

	
21,600.00

	
 

	
Hammermills
090-0380

	
 

	
AWC welding service

	
 

	
1

	
 

	
$

	
125,500.00

	
 

	
$

	
0.00

	
 

	
$

	
125,500.00

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	

	
 

	
Total:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
1,320,240.00

	
 

	
 

	

	
 

	
LOAN AND
SECURITY AGREEMENT

	
 

	

          This
Loan and Security Agreement (this “Agreement”) dated as of October 13, 2010 is
made by and between 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”), 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, KY 40232
(“Borrower”).

RECITALS

          WHEREAS,
Lender has determined that it may make one or more loans, advances or other
extensions of credit (each an “Advance” and collectively, the “Loan”), in its
sole and absolute discretion, to Borrower; 

          WHEREAS,
Lender and Borrower desire to set forth the general requirements and conditions
for the approval of credit to Borrower applicable to the Loan; and

          WHEREAS,
for each additional extension of credit, Lender may impose additional
requirements as it deems necessary for the approval of the credit, terms, the
documentation of the associated Advance, and the perfection of Lender’s
security interests; 

          NOW,
THEREFORE, the parties agree that it is appropriate to enter into this Loan and
Security Agreement in order to set forth general terms and conditions that
shall be applicable to each Advance and the Loan and to establish the framework
for the making of future Advances and the documentation thereof.

          General Terms Applicable to Loans, Advances and Credit
Commitments. 

                    Each
Advance individually, and the Loan generally, shall be subject to the terms and
conditions of this Agreement and any additional terms or conditions which
Lender may specify to Borrower in the case of any particular Advance to
Borrower.

                    As
of the date of this Agreement, Lender has NOT extended to Borrower any credit
commitment (“Commitment”) or made any representation or warranty to Borrower
that a Commitment will be extended to Borrower. Any Commitment, if made at all,
shall be made in writing by Lender in either a separate commitment letter, in
the written documentation relating to a particular Advance or evidenced by the
promissory note relating to such Advance. The drafting of documents relating to
a requested Advanced, preliminary proposals made to Borrower, or Lender’s
furnishing of drafts of documents to Borrower, however, shall not signify or be
interpreted as the making of a Commitment. No credit Commitment may be extended
without the completion of Lender’s internal credit approval processes and any
such Commitment at the time of an Advance shall only be made upon and evidenced
by the completion and execution of written documentation satisfactory to Lender
in all respects and in its sole discretion.

                    Advances
(if any) shall be made on or before any applicable Commitment termination or
expiration date specified by Lender with regard to such Advances or the Loans
generally.

                    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 any Advance, which notice shall include the contemporaneous delivery
to Lender of the documents described herein. Each such notice shall specify (a)
the requested date for the making of such Advance which shall be a
Business Day and (b) the amount of such

Advance. 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. 

          Principal
and Interest. 

                    The
obligation to repay any Loan hereunder shall be evidenced by one or more
promissory notes payable by Borrower to the order of Lender (as each such
promissory note may be amended, amended and restated, supplemented or modified
from time to time, a “Note”). Each 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
percentage points (6.0%) in excess of the otherwise applicable rate of
interest, not to exceed the maximum rate permitted by applicable law (the
“Default Rate”). 

                    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 Advance 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 percent (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 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 herein or such other address as Lender may
designate from time to time, in writing. 

          Security. 

                    As
security for the payment as and when due of the indebtedness of Borrower to
Lender under this Agreement, each Note, and any other documents relating
thereto (and any renewals, extensions and modifications thereof) and under any
other agreement or instrument (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) or
on any similar schedule attached to a Note (collectively, the “Equipment” and,
individually, an “Item of Equipment”), and the performance as and when due of
all obligations of Borrower under this Agreement, each 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
thereunder and the right to make any election or determination or give any
consent or waiver thereunder), 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”). 

                    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 hereto or to a Note, 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.

          Conditions Precedent. 

                    Concurrently
with the execution hereof, or on or prior to the date on which Lender is to
make the first Advance 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 in any case prior to the first Advance, 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, any Notes 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 0 and as to such other matters as Lender may reasonably request. 

                    The
obligation of Lender to make any Advance hereunder is subject to the
satisfaction (or waiver by Lender) of each of the following conditions prior to
the date specified for such Advance: (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 0) 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 such Advance relates; (C) a schedule
describing the Equipment, in a form approved by Lender and to be attached as
Schedule A, a supplement to Schedule A and/or as a schedule to the Note; and
(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; (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 by the date of the
Advance; (iii) Lender shall have received evidence of insurance policies
covering the Equipment which comply with the requirements of Section 0 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 such Advance both with and without giving effect to the
making of such Advance; (v) no Default or Event of Default shall have occurred
and be continuing or result from the transactions contemplated by the making of
such Advance; (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; (vii) no material adverse change, in the sole judgment of
Lender, 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; (viii) Borrower shall have furnished proof of payment for the Equipment
prior to the date of each applicable Advance and, to the extent that Borrower
has not paid for any Item of Equipment, Lender may remit proceeds of the
Advance directly to the vendor of the Equipment in payment thereof; and (ix)
Borrower shall have executed and delivered to Lender a Payment Proceeds letter
authorizing Lender to remit funds to the appropriate parties.

          Acceptance of Equipment. The execution
of each Note relating to any Equipment shall constitute Borrower’s
representation and warranty to Lender 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 each
such Note 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 any manufacturer or supplier
of such Equipment or any other person (other than Lender). Borrower’s execution
of each Note shall be deemed an affirmation and ratification of the terms and
conditions herein.

          Use and Maintenance; Alterations.

                    Borrower
covenants and agrees that: (i) Borrower 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) Borrower 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 thereunder, 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.

                    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 0) 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.

                    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. 

                    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.

          Insurance. 

                    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.

                    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 Borrower or any other person or by any
fact or information known to Lender; and (v) waive any right of subrogation
against Lender. 

                    If
Borrower does not obtain, maintain or furnish to Lender acceptable proof of the
insurance coverage required by this Agreement, Lender shall be entitled to
procure such insurance, as Lender shall deem appropriate in its discretion, at
Borrower’s sole cost and expense.

          Risk of Loss; Damage to Equipment.

                    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.

                    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 each Note relating to the Equipment) (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 such 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 30 day LIBOR rate as of the date of the Note to be prepaid or the
Prepayment Date, whichever is lower. 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. 

          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
Loan has not been accelerated pursuant to Section 0, 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 each Note, second, to
the payment of all interest (including default interest) then due and payable
on the outstanding principal of the Loan, third, to the payment of all
principal then due and payable on the Loan, fourth, to the payment of
the remaining principal on the Loan in inverse order of maturity, and fifth,
to Borrower or such other person as may have an interest in such proceeds, as
their interests may appear, and (ii) if the Loan has been accelerated pursuant
to Section 0, 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. If the Loan is comprised of more than one Note, Lender shall be entitled
to apply proceeds to one or more of the Notes in such order and manner as the
Lender may, in its discretion, deem appropriate.

          Financial,
Other Information and Notices.

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

	
 

	
 

	
 

	
          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. 

	
 

	
 

	
 

	
          Within
ninety (90) days after the end of each fiscal year, a copy of Borrower’s
consolidated year end 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. So long as Borrower is
a reporting company under the Securities Exchange Act of 1934 and is timely
filing the reports required thereunder to the Securities Exchange Commission,
Borrower will have no obligation to furnish its financial statements as
provided above.

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

                    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. 

          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.

          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 each Advance 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, 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 each Advance 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
or made publicly available 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.

          Events of Default and Remedies. 

                    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 any Note and
such failure continues for a period of ten (10) days; (ii) any representation
or warranty made by Borrower in this Agreement, any Note 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 (A) fails 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, any Note 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 which is not an
individual shall have consolidated with or merged with or into another entity,
or conveyed, sold or otherwise transferred all or substantially all of its
assets or shall have failed to maintain its corporate existence; (v) Borrower
that is an individual dies or becomes permanently and totally disabled; (vi)
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; (vii)
a default shall have occurred and be continuing under any contract, agreement
or document between Borrower and Lender or any affiliate of Lender; (viii) a
default shall have occurred and be continuing under any contract, agreement or
document between Borrower and any of its other creditors, (ix) 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; (x) Lender
shall have determined, in its sole discretion, that a material adverse change
in Borrower’s existing or prospective financial condition, management or
results of operations since the date hereof which may affect the ability of
Borrower to perform its obligations under the Loan Documents has occurred; or
(xi) 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
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.

                    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 all Notes, all of
the unpaid interest accrued therein, and all of the other sums (if any) payable
by Borrower under this Agreement, any Notes, or any of the other Loan
Documents, to be immediately due and payable, plus three percent (3%) of the
unpaid principal of all Notes declared due by Lender (as compensation for
reinvestment costs and not as a penalty), 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:

	
 

	
 

	
 

	
          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; 

	
 

	
 

	
 

	
          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; 

	
 

	
 

	
 

	
          Sell,
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 Notes and the other Loan Documents, with Borrower remaining liable
for any deficiency, or retain any and all of the Equipment; 

	
 

	
 

	
 

	
          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

	
 

	
 

	
 

	
          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, any Notes
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.

                    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.

                    Borrower
shall notify Lender in writing of the occurrence of an Event of Default
pursuant to this Agreement promptly after such Event of Default has occurred,
and in any event within ten (10) days thereafter.

          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.

          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 Borrower thereunder, shall be made,
observed or performed by 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.

          Power of Attorney and Filing Authority.
Borrower hereby authorizes Lender to file financing statements, either before
or after an Advance and, if applicable, amendments and continuation statements,
and execute in the name of Borrower any other documents, including applications
for or transfers of title, that Lender may reasonably deem necessary to perfect
and maintain Lender’s interest in the Equipment, to exercise its rights and
remedies hereunder and to fully consummate all transactions contemplated under
this Agreement. Borrower hereby irrevocably makes, constitutes and appoints,
with an interest, Lender as true and lawful attorney with power to sign the
name of Borrower on any such documents. Borrower agrees promptly to execute and
deliver to Lender such further documents or other assurances, and to take such
further action, 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. 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.

          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 Note, 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. 

          Miscellaneous.

                    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 the Loan Documents,
perfection of security interests, payment of any obligations of Borrower
required to be performed under this Agreement (including without limitation,
taxes and assessments with respect to any Collateral), enforcement of any
terms, conditions or provisions hereof and protection of Lender’s rights
hereunder. If Borrower fails to reimburse Lender for any such costs and
expenses within thirty (30) days of invoice, interest shall accrue at the
Default Rate on the unpaid balance thereof.

                    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. 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.

                    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: (502) _515_-_1700_

	
 

	
 

	
 

	
If to Lender:

	
 

	
 

	
 

	
Fifth Third Commercial Leasing Co.

	
 

	
Mail Drop 10904A

	
 

	
38 Fountain Square Plaza

	
 

	
Cincinnati, Ohio 45263

	
 

	
Telephone: (800) 998-3444

	
 

	
Facsimile: (513) 534-6706

                    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. 

                    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. 

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

                    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.

                    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.

{Remainder of page intentionally
left blank. Signature page follows.}

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

	
 

	
 

	
 

	
 

	
 

	
LENDER:

	
 

	
BORROWER:

	
 

	
 

	
 

	
FIFTH THIRD BANK

	
 

	
INDUSTRIAL SERVICES OF AMERICA,
INC.

	
 

	
 

	
 

	
By:

	
/s/ Henry Kelsey

	
 

	
By:

	
/s/ Harry Kletter

	
 

	

	
 

	
 

	

	
Name: 

	
Henry Kelsey

	
 

	
Name:  

	
Harry Kletter

	
 

	

	
 

	
 

	

	
Title:

	
Vice President

	
 

	
Title:

	
Chief Executive OfficerExhibit 10.3

AMENDED
AND RESTATED REVOLVING LOAN NOTE

	
  

 	
  

 
	
 $45,000,000

 	
 July 30, 2010

 
	
  

 	
 First Amendment and Restatement April 14, 2011

 
	
  

 	
 (“Effective Date”)

 

For value received, the
undersigned, INDUSTRIAL SERVICES OF AMERICA, INC., a Florida corporation (“ISA”),
ISA INDIANA, INC., an Indiana corporation (“ISA Indiana”), and each of
the other Persons that become a Borrower under the Credit Agreement after the
Effective Date (such Persons, together with ISA and ISA Indiana, are each a “Borrower”
and, collectively, “Borrowers”), hereby jointly and severally promise to
pay to the order of FIFTH THIRD BANK, an Ohio banking corporation (“Lender”),
the principal sum of FORTY-FIVE MILLION AND 00/100 DOLLARS ($45,000,000), or
such lesser amount as shall equal the aggregate unpaid and outstanding
principal amount of the Revolving Loans made by Lender to Borrowers under the
Credit Agreement dated as of July 30, 2010, as amended by the First Amendment
to Credit Agreement dated of even date herewith (as the same may be hereafter
amended, supplemented or restated from time to time, the “Credit Agreement”),
by and among Borrowers, the Persons party thereto as “Lenders” (including,
without limitation, Lender), and Fifth Third Bank, as Agent and LC Issuer, in
lawful money of the United States of America and in immediately available
funds, on the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of each such
Revolving Loan, in like money and funds, for the period commencing on the date
of this Amended and Restated Revolving Loan Note (this “Note”) until
such Indebtedness evidenced by this Note shall be paid in full, at the rates
per annum and on the dates and at the offices provided in the Credit Agreement.
The entire unpaid principal balance of this Note, together with all accrued but
unpaid interest, shall, if not sooner paid or required to be paid pursuant to
the Credit Agreement, be due and payable on July 31, 2013. 

This Note is one of the
Revolving Loan Notes referred to in the Credit Agreement and is entitled to the
benefits and security, and is subject to the terms and conditions, of the
Credit Agreement, including, without limitation, acceleration upon the terms
provided therein and in the other Loan Documents. All capitalized terms used
herein which are defined in the Credit Agreement and not otherwise defined
herein shall have the meanings given in the Credit Agreement.

The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for voluntary and mandatory
prepayments of Loans upon the terms and conditions specified therein. This Note
is subject to voluntary prepayment, in full or in part, in accordance with, and
subject to the terms of, the Credit Agreement.

If, at any time, the rate of interest contracted for, and computed in
the manner provided, in the Credit Agreement (“Applicable Rate”),
together with all fees and charges as provided for in the Credit Agreement or
in any other Loan Document (collectively, the “Charges”), which are
treated as interest under applicable law, exceeds the maximum lawful rate (the
“Maximum Rate”) allowed under applicable law, it is agreed that such
contracting for, charging or receiving of such excess amount was an accidental
and bona fide error and the provisions of this paragraph will govern and
control. The rate of interest payable under the Credit Agreement and this Note,
together with all Charges, shall be limited to the Maximum Rate; provided,
however, that any subsequent reduction in the Daily LIBOR-Based Rate
or the LIBOR Tranche-Based Rate (or in the interest rate equal to the Prime
Rate plus the Applicable Prime Rate Margin in the event LIBOR Rate Loans are no
longer permitted or available under the Credit Agreement) shall not reduce the
Applicable Rate below the Maximum Rate until the total amount of interest
earned under the Credit Agreement and this Note, together with all Charges,
equals the total amount of interest which would have accrued at the Applicable
Rate if the Applicable Rate had at all times been in effect. If any payment
hereunder, for any reason, results in Borrowers having paid interest in excess
of that permitted by applicable law, then all excess amounts theretofore
collected by Lender shall be credited on the principal balance of the
Obligations (or, if all sums owing hereunder have been paid in full, refunded
to Borrowers), and the amounts thereafter collectible hereunder shall
immediately be deemed reduced, without the necessity of the execution of any
new

document, so as to comply with applicable law and permit the recovery
of the fullest amount otherwise called for hereunder.

Borrowers hereby agree to
pay all costs of collection, including, without limitation, Attorneys’ Fees, if
this Note is not paid when due, whether or not legal proceedings are commenced.

All of the obligations of Borrowers hereunder
are joint, several and primary. No Borrower shall be, or be deemed to be, an
accommodation party with respect to this Note. 

Presentment or other
demand for payment, notice of dishonor and protest are expressly waived.

This Note is issued, not as a refinancing or refunding of or payment
toward, but as a continuation of, the Obligations of Borrowers to Lender
pursuant to that certain Revolving Loan Note dated as of July 30, 2010 in the
principal amount of $40,000,000 (the “Prior Note”), together with any
and all additional Revolving Loans incurred under this Note. Accordingly, this
Note shall not be construed as a novation or extinguishment of the Obligations
arising under the Prior Note, and its issuance shall not affect the priority of
any Lien granted in connection with the Prior Note. Interest accrued under the
Prior Note prior to the Effective Date remains accrued and unpaid under this Note
and does not constitute any part of the principal amount of the Indebtedness
evidenced hereby. All Revolving Loans created or existing under, pursuant to,
as a result of, or arising out of, the Prior Note shall, together with any and
all additional Revolving Loans incurred under this Note, continue in existence
under this Note, which Obligations Borrowers acknowledge, reaffirm, and confirm
to Lender. The Indebtedness evidenced by this Note will continue to be secured
by all of the collateral and other security granted to Lender under the Prior
Note and the other Loan Documents.

THIS NOTE HAS BEEN DELIVERED AND ACCEPTED AT AND SHALL BE DEEMED TO
HAVE BEEN MADE AT CINCINNATI, OHIO. THIS NOTE SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF OHIO (WITHOUT REFERENCE TO OHIO CONFLICTS OF LAW
PRINCIPLES).

AS A SPECIFICALLY BARGAINED INDUCEMENT FOR AGENT AND LENDERS TO ENTER
INTO THE CREDIT AGREEMENT AND EXTEND CREDIT TO BORROWERS, BORROWERS, AGENT AND
LENDERS AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT
OF THIS NOTE, ITS VALIDITY OR PERFORMANCE, AND WITHOUT LIMITATION ON THE
ABILITY OF AGENT OR ANY LENDER, OR ITS RESPECTIVE SUCCESSORS AND ASSIGNS, TO
EXERCISE ALL RIGHTS AS TO THE LOAN COLLATERAL AND TO INITIATE AND PROSECUTE IN ANY
APPLICABLE JURISDICTION ACTIONS RELATED TO REPAYMENT OF THE OBLIGATIONS, SHALL
BE INITIATED AND PROSECUTED AS TO BORROWERS, AGENT AND LENDERS AND THEIR
SUCCESSORS AND ASSIGNS AT CINCINNATI, OHIO. AGENT, LENDERS AND BORROWERS EACH
CONSENT TO AND SUBMIT TO THE EXERCISE OF JURISDICTION OVER THEIR RESPECTIVE
PERSONS BY ANY COURT SITUATED AT CINCINNATI, OHIO HAVING JURISDICTION OVER THE
SUBJECT MATTER, AND EACH CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY
CERTIFIED MAIL DIRECTED TO BORROWERS, AGENT AND LENDERS AT THEIR RESPECTIVE
ADDRESSES SET FORTH IN SECTION 12.2 OF THE CREDIT AGREEMENT OR AS
OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO. EACH BORROWER WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE
OF ANY ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

AS
A SPECIFICALLY BARGAINED INDUCEMENT FOR AGENT AND LENDERS TO ENTER INTO THE
CREDIT AGREEMENT AND EXTEND CREDIT TO BORROWERS, BORROWERS, AGENT AND LENDERS
EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING
IN RESPECT OF OR ARISING OUT OF THIS NOTE OR THE CONDUCT OF THE RELATIONSHIP
AMONG AGENT, LENDERS AND BORROWERS.

[Signature Page Follows]

          In Witness
Whereof, Borrowers, intending to be legally bound, have caused this Note to be
executed and delivered by its duly authorized officer as of the Effective Date
and at the place set forth above.

	
  

 	
  

 	
  

 
	
  

 	
 INDUSTRIAL
 SERVICES OF AMERICA, INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
     /s/ Alan Schroering

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
     Alan Schroering, Chief
 Financial Officer

 
	
  

 	
  

 	
  

 
	
  

 	
 ISA INDIANA,
 INC.

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
     /s/ Alan Schroering

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
     Alan
 Schroering, Chief Financial Officer

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