SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 31, 1998
INDUSTRIAL SERVICES OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation)
2-31610 59-0712746
(Commission File Number) (IRS Employer Identification No.)
7100 Grade Lane
P.O. Box 32428
Louisville, KY 40232
(Address of principal executive offices) (Zip Code)
(502) 368-1661
(Registrant's telephone number, including area code)
Item 5. Other Events. Effective June 1, 1998 but executed as
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of July 31, 1998, ISA Indiana, Inc. (the "Subsidiary"), an
Indiana corporation and wholly-owned subsidiary of Industrial
Services of America, Inc. (the "Registrant"), a Florida
Corporation; R. J. Fitzpatrick Smelters, Inc. (the "Seller"); and
R. J. Fitzpatrick and Cheryl Fitzpatrick (collectively the
"Guarantors"); have entered into an Asset Purchase Agreement (the
"Purchase Agreement") whereby the Subsidiary has acquired all of
the business, property, rights and assets of the Seller and
assumed certain of the liabilities of the Seller as set forth in
the Purchase Agreement. Under the Purchase Agreement, the
Subsidiary has entered into a real property Lease Agreement (the
"Lease"), effective June 1, 1998, from the Guarantors and the
Seller for ten successive terms of ten years each at a rental of
$13,000 per month during the original term (as adjusted in
accordance with the Consumer Price Index for each renewal term)
with an option to purchase for $1,600,000 the real property
(including an adjoining 20 acre tract less 3 acres to be retained
by the Seller and Guarantors). In addition, the assets purchased
include furniture, fixtures and equipment, contracts, agreements,
commitments, understandings, trademarks, service marks, trade
names, books and records of the Seller and goodwill associated
with the business of the Seller. In addition, the Subsidiary has
entered into a Commission Agreement and Covenant Not To Compete
for a five-year term with the Guarantors recognizing the Seller's
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right to liquidate and sell the inventory of the Seller as of
the date of the Purchase Agreement and agreeing to pay the
Guarantors and the Seller $10,500 per month plus a percentage
commission of gross profit for any new sales generated from their
efforts.
The Subsidiary is an Indiana corporation newly formed for
the purpose of acquiring the assets of the Seller. The location
of the business is on an approximate 14-acre tract at U.S. 50 and
Jennings County Road 900 West, North Vernon, Jennings County,
Indiana, approximately 65 miles north of Louisville, Kentucky.
Louisville, Kentucky is the headquarters for the Registrant. The
business of the Seller is a metal salvage and metal handling
operation and is comprised of five buildings the total square
footage of which is approximately 71,400 feet. The principal
improvement is a one-story concrete warehouse/foundry/office
approximating 25,500 square feet. The remaining buildings are
steel framed buildings constituting warehouses, garages and
office space.
Under the Purchase Agreement the Subsidiary has not assumed
any material liabilities of the Seller, and specifically, the
Subsidiary will not pay, perform, assume or discharge any
liability related to environmental, health or safety matters or
conditions. The Seller and the Guarantors remain specifically
responsible for all conditions with respect to any hazardous
material activity at the site of the business prior to June 1,
1998; however, as between the Guarantors and the Seller on the
one hand and the Subsidiary on the other hand, the Guarantors and
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the Seller shall be responsible to the Subsidiary in an amount
not in excess of $500,000. In that connection, the Guarantors
have entered into an Environmental Indemnity Agreement, dated as
of June 1, 1998, in favor of the Subsidiary and the Registrant
relating to the indemnity for all environmental conditions
affecting the real property (subject to the monetary limitation
referred to above). The aggregate purchase price for the
business is $900,000, $250,000 of which was paid June 1, 1998,
the balance of which was paid on July 31, 1998.
The Lease provides for the right of the Subsidiary to
terminate the Lease at any time after May 31, 2003, for a
termination payment of $156,000. Defaults include (i) failure of
the Subsidiary to pay rent or any other payments due under the
Lease within 20 days after written demand, (ii) failure by the
Subsidiary to observe or perform any other covenants, agreements
or conditions of the Lease after 20 days written notice unless
the Subsidiary has within that 20 day period commenced to cure
the default, and (iii) certain events of bankruptcy of the
Subsidiary. Remedies for a default include termination of the
Lease and a suit for damages. The Subsidiary has the option to
terminate the Lease if it is deprived of the use and benefit of
the real property under certain conditions described in the
Lease.
Funds from the operating line of credit of the Registrant
made available by Mid-America Bank of Louisville and Trust
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Company were used as a source of funds for consummating this
acquisition.
The Purchase Agreement provides for cross-indemnifications.
The Seller and the Guarantors are providing indemnity in favor of
the Subsidiary for any misrepresentation, breach of warranty, or
non-fulfillment of any covenant under the Purchase Agreement in
addition to any damage, deficiency or cost resulting from claims
regarding the business, the assets, or the premises accruing
prior to June 1, 1998, or any claim, action, suit, proceeding,
demand, judgment, assessment, cost and expense incident to either
of the above. The Subsidiary may make a claim for
indemnification for a period ending no later than ten years after
the date of the Purchase Agreement so long as any single claim or
aggregate of claims equals $1,000. In turn, the Seller and the
Guarantors have a similar period within which to make claims
against the Subsidiary for similar violations of the Purchase
Agreement for damages, deficiencies or costs accruing after June
1, 1998 and related claims as set forth above. The threshold for
claims against the Subsidiary is also $1,000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: August 3, 1998 INDUSTRIAL SERVICES OF AMERICA,
INC.
By: /s/ Sean M. Garber
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Sean M. Garber
President and Chief Operating
Officer
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