**Exhibit 10.41**

 

NINETEENTH AMENDMENT TO

GENERAL CREDIT AND SECURITY AGREEMENT

(A Fifteenth Amendment does not exist)

 

THISAGREEMENT, dated and effective as of June 21, 2007, between SPECTRUMCommercial Services Company, a Minnesota Corporation, having its mailingaddress and principal place of business at Two Appletree Square, Suite 415,Bloomington, Minnesota 55425 (herein called “Lender” or “SCS”), and ApplianceRecycling Centers of America, Inc., a Minnesota corporation, having themailing address and principal place of business at 7400 Excelsior Boulevard,Minneapolis, MN 55426, (herein called “Borrower”), amends that certain GeneralCredit and Security Agreement dated August 30, 1996, (“Credit Agreement”)as amended.  Where the provisions of thisAgreement conflict with the Credit Agreement, the intent of this Agreementshall control.

 

1.               The definition of “MaximumPrincipal Amount” under paragraph 2 of the Credit Agreement is hereby deletedand replaced with the following:

 

**Maximum Principal Amount** shall mean, at any date,Twelve Million and No/100ths Dollars ($12,000,000).

 

2.               Paragraph 5 entitled “Interest”is hereby deleted and replaced with the following:

 

**5.****                                     ****Interest****.**  Borrower agrees to pay interest on theoutstanding principal amount of the Note, at the close of each day at afluctuating rate per annum (computed on the basis of actual number of dayselapsed and a year of 360 days) which is at all times equal to Two Percent(2.00%) in excess of the Prime Rate; each change in such fluctuating rate causedby a change in the Prime Rate to occur simultaneously with the change in thePrime Rate (the “Initial Rate”); provided, however, that (i) in no event shall the Initial Rate, theAdjusted Rate or the Re-adjusted rate in effect hereunder at any time be lessthan 7.5% per annum; (ii) interest payable hereunder with respect to eachcalendar month shall not be less than $58,000.00 regardless of the amount ofloans, Advances or other credit extensions that actually may have beenoutstanding during the month, and (iii) interest shall continue to accruehereunder until all Obligations have been paid in full..  Interest accrued through the last day of eachmonth will be due and payable to Lender on the next Monthly Payment Date.  Interest shall also be payable on theMaturity Date or on any earlier Termination Date.  Interest accrued after the Maturity Date orearlier Termination Date shall be payable on Demand.  Interest may be charged to Borrower’s loanaccount as an Advance at Lender’s option, whether or not Borrower then has theright to obtain an Advance pursuant to the terms of this Agreement.

 

Inthe event Borrower earns Net Profit in any fiscal year of at least One MillionDollars ($1,000,000.00) and evidences such profit by delivering to Lender thePeriodic Financial Report for that period that reflects the required NetProfit, and provided no Event of Default exists or has occurred, then uponBorrower’s written request, the Initial Rate shall be reduced to One and50/100ths percent (1.50%) in excess of the Prime Rate (the “Adjusted Rate”)commencing with the next scheduled Monthly Payment Date following Lender’sreceipt of both Borrower’s written request and the Periodic Financial Report.

 

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Notwithstandingthe foregoing, after an Event of Default, the Note shall bear interest untilpaid at 5% per annum in excess of the rate otherwise then in effect, which rateshall continue to vary based on further changes in the Prime Rate; provided,however, that after an Event of Default, (i) in no event shall theinterest rate in effect under the Note at any time be less than 12.5% perannum; (ii) interest payable under the Note with respect to each calendarmonth shall not be less than $86,000.00 regardless of the amount of loans,Advances or other credit extensions that actually may have been outstandingduring the month, and (iii) interest shall continue to accrue hereunderuntil all Obligations have been paid in full.. (The Initial Rate, the Adjusted Rate and the Re-adjusted Rate in effecteither before or after an Event of Default is referred to herein collectivelyas the “Interest Rate”).  The undersignedshall also pay a late fee equal to 10% of any payment under the Note that ismore than 10 days past due.

 

3.               The definition of “BorrowingBase” appearing in Paragraph 2 is amended in its entirety to read as follows:

 

(i) Eighty percent (80%) of the net amount of Eligible Receivablesor such greater or lesser percentage as Lender, in its sole discretion, shalldeem appropriate, plus

 

(ii) The lesser of:  (x) TwentyFive percent (25%) of the net amount of Eligible Inventory (excluding EligibleWhirlpool Inventory and Eligible Scratch and Dent Inventory), plus Fiftypercent (50%) of the net amount of Eligible Scratch and Dent Inventory, plusEighty percent (80%) of the net amount of Eligible Whirlpool Inventory; or (y) TenMillion and No/100ths Dollars ($10,000,000), minus

 

(iii) Twenty percent (20%) of the amount of issued but unpaidfinancing authorizations issued by Lender in favor of Whirlpool Corporation; minus

 

(iv) Fifty percent (50%) of the amount of issued but unpaidfinancing authorizations issued by Lender in favor of General Electric Company,GE Appliances or any other company.

 

(v) Notwithstanding theabove, any of the percentages and/or dollar amounts described in thisdefinition of Borrowing Base may be increased or decreased, in any amount,which Lender, in its sole and absolute discretion, deems appropriate.  In addition, it should be noted that Lender reservesthe right, in its sole discretion, to establish additional availabilityreserves for any reason, including but not limited to providing for liabilitiesfor personal property and other taxes.

 

4.               Paragraph 23 is herebydeleted and replaced with the following:

 

23. Termination.  Subject to the automatic termination ofBorrower’s ability to obtain additional Advances or credit extensions underthis Agreement upon the occurrence of certain Events of Default, and furthersubject to Lender’s right to terminate Borrower’s ability to obtain additionalcredit extensions and Advances under this Agreement upon the occurrence ofother Events of Default or upon demand, the term of this Agreement shall end onthe Termination Date provided, however, that 

 

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Borrower may terminate thisAgreement at any earlier time upon sixty days prior written notice.

 

In the event of thetermination of this Agreement and repayment of all of the Obligations at anytime prior to the then current Maturity Date, for any reason, including but notlimited to (a) termination by Lender after the occurrence of an Event ofDefault, (b) sale of Collateral by Lender, Borrower or any third party, (c) saleof Collateral in any Insolvency Proceeding, (iv) restructure,reorganization, compromise, or repayment of the Obligations by the confirmationof a plan of reorganization or any other plan of compromise, restructure,arrangement, or repayment in any Insolvency Proceeding, (d) the use of newor replacement financing or capital to repay the Obligations, or (e) thecontraction, winddown or cessation of business by Borrower, then, in view ofthe impracticability and extreme difficulty of ascertaining the actual amountof damages to Lender or profits lost by Lender as a result of such earlytermination, and by mutual agreement of the parties as to a reasonableestimation and calculation of the lost profits or damages of Lender, Borrowershall pay a “Prepayment Fee” to Lender equal to one percent of the MaximumPrincipal Amount.  On the TerminationDate, all obligations arising under this Agreement shall become immediately dueand payable without further notice or demand. Lender’s rights with respect to outstanding Obligations owing on orprior to the Termination Date will not be affected by termination and all ofsaid rights including (without limitation) Lender’s Security Interest in theCollateral existing on such Termination Date or acquired by Borrowerthereafter, and the requirements of this Agreement that Borrower furnishschedules and confirmatory assignments of Receivables and Inventory and turnover to Lender all full and partial payments thereof shall continue to beoperative until all such Obligations have been duly satisfied.

 

5.               The definition of “MaturityDate” appearing in Paragraph 2 is amended in its entirety to read as follows:

 

“Maturity Date” shall mean December 31, 2010, provided,however, that the then current Maturity Date shall be extended by succeedingperiods of 12 calendar months without notice to or action by either Borrower orLender, provided further however, that such extension shall not occur if: (i) Lenderhas notified Borrower of an Event of Default that has occurred and iscontinuing, or (ii) this Agreement has previously terminated as providedin the paragraph entitled “Termination”, or (iii) Lender has, in its soleand absolute discretion, demanded payment of amounts owed hereunder, or (iv) Borroweror Lender have notified the other of the intention not to renew at least sixtydays prior to the then current Maturity Date and thereafter no extension shalloccur.

 

6.               Paragraph 17(o) ishereby deleted. [regarding pledge of the $300,000 account]

 

7.               Paragraph 17(p) ishereby deleted. [regarding the requirement of hiring a Chief Financial Officer]

 

8.               Subparagraph 18(a) ishereby deleted and replaced with the following:

 

Without Lender’s consent, expend or contract to expend an aggregate inexcess of $250,000 for fixed assets in any fiscal year, whether by way ofpurchase, lease, or otherwise, and whether payable currently or in thefuture.  For purposes of this 

 

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paragraph, “fixed assets” include property and assets deemed “fixedassets” according to GAAP, whether tangible or intangible (including but notlimited to software development and acquisition costs) but fixed assets shallexpressly not include leasehold improvements.

 

9.               Paragraph 4(b) ishereby deleted and replaced with the following:

 

(b) In order to obtainan Advance, Borrower shall give written notice to Lender, by no later than11:00 a.m. (Minneapolis time) on the business day the requested Advance isto be made.  Lender, shall make suchAdvance by transferring the amount thereof in immediately available funds forcredit to Borrower’s account at Associated Bank Minnesota, NA (other than apayroll account) or other bank approved by Lender, as specified in suchnotice.  Lender’s customary fees formaking such advance will apply.  It isalso noted that “next day wires”/ACH transfers will be posted as a loan Advanceon the day released to the ACH transfer system by Lender with the understandingthat funds may not be received in Borrower’s account until the next businessday or later.  At the request of Lender,Borrower shall confirm in writing any telephonic notice.

 

10.         The Lender will now requirethat all cash receipts are directed to Lender for application to theObligations.  Retail proceeds, depositedinto local banks, will then be directed from the local bank to Lender’saccount.  Credit card proceeds willlikewise be directed to Lender’s account. Toward this end, Paragraph 7(c) is hereby deleted and replaced withthe following:

 

All full and partialcustomer payments and any other cash collections from whatever sourcewhatsoever, whether or not arising from the sale, collection or otherdisposition of Collateral (whether or not in the ordinary course of business),including but not limited to the collection of accounts receivable in theordinary course of business and the sale of inventory or services for cash,shall immediately be delivered by Borrower to Lender in their original form(except for endorsement where necessary) and uncashed (in the case of checks orother documents).  Borrower shall directall customers, credit card processors and other remitters of payments to mailpayments to Lender’s post office box or other lockbox or to direct electronicfunds to Lender’s bank account directly (eg: ACH transfers, wire transfersetc.)  In the case of retail sales, cashproceeds will be deposited in a local bank account and subsequently transferredto Lender.  (All such local bank accountswill be subject to an account control agreement in favor of Lender.)  Within 90 days of the date hereof, at leastninety percent (95%) of the aggregate dollars paid to or on behalf of Borrowershall be received in Lender’s post office box, lockbox, or bank accountdirectly from the payors and the local bank accounts.  Until such payments are so delivered toLender (or Lender’s account or lockbox), such payments which nonetheless comeinto possession of Borrower shall be held in trust by Borrower for and asLender’s property and shall not be commingled with any funds of Borrower orotherwise negotiated.  All cashcollections received by Lender will be credited to Borrower’s loan account(subject to final collection thereof) after three Business Days, or longer asrequired by Lender’s bank to fully and finally collect the funds represented bychecks or other instruments.  Collectionsreceived by Lender after 11:00 am Central Time in Minneapolis will be deemedreceived on the next Business Day.

 

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11.         Paragraph 17(q) ishereby added as follows:

 

Borrower shall use its diligent and best efforts to obtain the writtenagreement of each of its lessors of any leased real property on a landlord’sagreement in form and substances satisfactory to Lender.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of thedate first above written.

 
| SPECTRUM  COMMERCIAL SERVICES COMPANY |   | APPLIANCE  RECYCLING CENTERS OF AMERICA, INC. |
|---------------------------------------|--------|----------------------------------------------------|
|                                  |   |                                               |
| By                                    |   |                                               | By |   |
| Steven  I. Lowenthal, Co-CEO          |   | Edward  R. Cameron, CEO                            |
|                                       |        |                                                    |  |  |

 

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REAFFIRMATION

Of Edward R. Cameron

 

Theundersigned, Edward R. “Jack” Cameron, hereby reaffirms all of the terms of theSupport Agreement issued by him in favor of SPECTRUM Commercial ServicesCompany (including its participants and assigns) and dated as of December 29,2004, and acknowledges that such agreement is in full force and effectaccording to its terms.  The undersignedunderstands and acknowledges that this Reaffirmation is required by SPECTRUMCommercial Services Company as a condition to the execution of the SeventeenthAmendment to the General Credit and Security Agreement between ApplianceRecycling Centers of America, Inc. and SPECTRUM Commercial ServicesCompany.

 

 
| Dated  as of: June                                , 2007 |   |               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|
|                                                                                                                                                                                                      |   | Edward  R. Cameron |

 

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