Exhibit 10.40 Promissory Note and Settlement Agreement with Gregory McWade



                              SETTLEMENT AGREEMENT

THIS  SETTLEMENT  AGREEMENT  ("Agreement")  is made by and among Gregory  McWade
("Mcwade"),  Pacific Printing & Embroidery,  L.L.C.  ("PPE"),  Print Works, Inc.
("Print Works") and American Resources and Development Company ("ARDCO").

WHEREAS,  McWade filed a complaint  eventually  of venue in the Circuit Court of
the State of  Oregon  for the  County  of  Multnomah,  Case  No.9908-08692  (the
"Action")  against PPE,  Print Works,  and ARDCO alleging the failure of PPE and
Print Works to pay certain  amounts to McWade for a loan and wages,  and further
alleging  that the  payment  of such  amounts  were  guaranteed  by  ARDCO  (the
"Action"); and

WHEREAS,  PPE,  Print Works,  and ARDCO  alleged  counterclaims  against  McWade
arising  out of the  performance  of  services  provided  by McWade and  certain
actions taken by McWade;

WHEREAS,  PPE is the maker of a promissory  note dated September 1, 1996 payable
to the Pershing  Group, as Trustee of the Gregory McWade SEP IRA, a true copy of
which is attached as Exhibit "A" (the "Note"); and

WHEREAS,  the  parties  now  desire to fully and  finally  settle all claims and
counterclaims   made  in  the  Action,   and  such  other  actual  or  potential
controversies or disputes which do or might now exist, whether known or unknown,
that McWade may have against PPE, Print Works, and/or ARDCO, and that PPE, Print
Works, and/or ARDCO may have against McWade; and

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WHEREAS,  the  parties  further  desire to  supersede  the terms of the Note and
provide for a payment  schedule,  the bill  performance of which will constitute
hall satisfaction of the Note;

NOW,  THEREFORE,  in  consideration  of  the  premises,  mutual  covenants,  and
agreements  hereinafter set forth, and intending to be legally bound hereby, the
parues agree as follows;

1. PPE, Print Works, and ARDCO agree to pay McWade the sum of One Hundred Ninety
Thousand  Dollars  ($190,000.00),  which  shall be made in  installments  over a
nineteen month period in the following amounts at the following times: a payment
of  Five  Thousand  Dollars  ($5,000.00)  on the  twentieth  of  each of the six
consecutive  months  commencing  August 2000; a payment of Seven  Thousand  Five
Hundred  Dollars  ($7,500.00)  on the  twentieth of each of the six  consecutive
months commencing February 2001; a payment of Ten Thousand Dollars  ($10,000.00)
on the twentieth or each of the six consecutive  months  commencing August 2001;
and a final payment of Fifty-Five  Thousand Dollars on the twentieth of February
2002.  All  payments  shall be made payable to the Gregory J. McWade SEP IRA DLJ
IMS 376 003106,  and each payment shall be sent by certified mail return receipt
requested and addressed as follows,  Jensen Investment Management.  Attn, Robert
Zagunis,  1211 S.W. 5th Avenue,  Suite 2130,  Portland,  OR 97204.  Each payment
shall be deemed made on the date the payment is mailed by first class mail.

2. PPE,  Print  Works,  and ARDCO agree to execute a  confession  of judgment in
favor of McWade in the form attached as Exhibit "B". The  confession of judgment
shall be in the amount of $327,084.39 (the "Confession Amount").  The confession
of judgment shall

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accrue  interest  at the rate of nine  percent  per annum  from the date of this
agreement.

3. The parties  agree that a payment  default shall occur only upon a failure to
make any  payment  within  five  business  days of the due date.  Upon a payment
default, McWade may at his option file the confession of judgment with the court
and act to collect the Confession amount plus accrued interest and less payments
made in accordance with paragraph 1.

4. The parties agree that so long as there has been no payment default,  neither
McWade nor any of his agents shall do any of the  following:  A)  Participate in
any  efforts  to  place  any of PPE,  Print  Works,  or ARDCO  into  involuntary
bankruptcy. B) Undertake any collection activities or seek to collect any amount
under the Note.

5.  McWade,  for himself  and on behalf of his  affiliates,  agents,  subrogees,
representatives,  predecessors,  successors,  assigns,  and other  businesses or
entities  in which he has an  interest,  including  but not  limited  to Graphic
Synergies,  Inc., dots hereby  generally  release and forever  discharge each of
PPE,  Print  Works,  and ARDCO and their  affiliates,  shareholders,  directors,
officers,  members,  managers,  employees,  agents, subrogees,  representatives,
predecessors7  successors,  assigns.  and  affiliated  entities from any and all
claims, demands, damages, actions, causes of action, or suits of any kind, known
or  unknown,  that were or could have been made in the Action or that  otherwise
may now exist.

6. Each of PPE,  Print Works,  and ARDCO,  for themselves and on behalf of their
affiliates,  shareholders,  directors,  officers,  employees, members, managers,
agents,  subrogees,  representatives,  predecessors,  successors,  assigns,  and
affiliated entities do hereby generally

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release and forever  discharge  McWade and his  affiliates,  agents,  subrogees,
representatives,  predecessors,  successors,  assigns,  and other  businesses or
entities in which McWade has an interest,  including  but not limited to Graphic
Synergies,  inc., from any and all claims, demands,  damages, actions, causes of
action,  or suits of any kind  whatsoever,  known or unknown  that were or could
have been made in the Action or that otherwise may now exist.

7.  Notwithstanding  any other  provision to this  Agreement,  the parties agree
that:

A. In the  event  McWade  is  named as a party  to any  litigation,  arbitration
proceeding,  or  administrative  proceeding  upon a claim that he is liable to a
third  party  because of or in any way  related to any act or omission by any of
PPE, Print Works, or ARDCO, or any of their shareholders,  officers,  directors,
managers, members, employees, agents subsidiaries,  or affiliated entities, then
McWade may seek contribution and/or indemnity from such responsible party.

B. In the event any of PPE, Print Works, or ARDCO, or any of their shareholders,
officers,  directors,  managers, members, employees,  agents,  subsidiaries,  or
affiliated  entities  is  named  as  a  party  to  any  litigation,  arbitration
proceeding,  or  administrative  proceeding  upon a claim that it, he, or she is
liable to a third party  because of or in any way related to any act or omission
by McWade,  then such entity or person may seek  contribution  and/or  indemnity
from McWade.

8. McWade  represents that he has disclosed and discussed the  modifications  to
and the new repayment terms for  satisfaction of the Note with the holder of the
Note,  and that the holder  agrees that the  payments  described  in paragraph 1
shall constitute full and total  satisfaction of the Note. McWade also agrees to
obtain the express approval of the holder of

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the Note by obtaining the signature of the Holder to this Agreement,  which will
constitute the agreement of the holder to the modified payment terms.

9. Upon  satisfaction  of all amounts  described  in  paragraph  1, McWade shall
immediately  return the  original  note  attached as Exhibit A and the  original
confession of judgment to PPE.

10. Upon execution of this Agreement by the parties, the parties shall execute a
stipulated notice of dismissal, dismissing the Action with prejudice and without
an award of costs, disbursements, or attorney fees to any party.

11. The parties  agree that until McWade is paid the full amount  identified  in
paragraph  1, no officer or director of PPW,  Print Works  and/or ARDCO shall be
paid any amount by PPW,  Print Works and/or ARDCO for the  repayment of any loan
or for the  redemption  of any stock.  McWade agrees and  understands  that this
paragraph  restricts  payments to directors  and  officers of PPW,  Print Works,
and/or ARDCO only, and no other creditor or equity owner,  and does not restrict
the payment of W-2  compensation to any officer or director.  McWade may, at his
expense, direct that a CPA, mutually agreeable to both parties and pursuant to a
confidentiality  agreement,  audit the books solely to determine compliance with
this section.  McWade may file the  confession of judgment upon a breach of this
section.

12.  The  parties  acknowledge  that this  agreement  involves a  Compromise  of
disputed claims, and that this agreement itself and its execution by the parties
is not to be  construed  as an  admission of liability to the claims made in the
Action by any party. All parties deny all liability to all opposing parties.

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13. In making  this  Agreement,  it is  understood  and agreed  that each of the
undersigned  specifically warrants and represents that in doing so, he or it has
been fully advised and represented by legal counsel of his or its own selection,
and in executing  this Agreement he or it does so relying wholly upon his or its
own judgment and advice of counsel of his or its own independent selection,  and
that he or it has been in no way influenced whatsoever regarding the matters set
forth  herein,  or  any  other  matter  made  by  any  person,   individual,  or
corporation, or any agent, employee, or servant thereof, who is hereby released,
or by any persons representing any of them.

14. If any clause or provision in this  Agreement is  determined  to be illegal,
invalid or  unenforceable  under any present or future law by the final judgment
of a court of competent  jurisdiction,  the remainder of this Agreement will not
be  affected  thereby.  It is the  intention  of the  parties  that if any  such
provision is held to be illegal, invalid, or unenforceable,  there will be added
in lieu thereof a provision as similar in terms to that provision as is possible
and be legal, valid, and enforceable.

15. This Agreement will be interpreted  and construed under the internal laws of
the State of Oregon, regardless of the domicile of any party, and will be deemed
for those  purposes to have been made,  executed,  and  performed  in  Portland,
Oregon.  All claims,  disputes,  and other matters in question arising out of or
relating  to this  Agreement,  or the  breach  thereof,  shall be decided by the
Circuit Court of Multnomah County, Oregon.

16. The parties agree that the prevailing party in any dispute arising out of or
in  any  way  related  to  this  Agreement  will  be  entitled  to  recover  its
investigation  costs,  expert witness fees and costs, and attorneys' fees at the
trial court or arbitration level or any level of appeal.

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17.  Before and at all times  following  the  execution of this  Agreement,  the
parties agree to execute and deliver,  or to cause to be executed and delivered,
those  documents  and to do, or cause to be done,  such other acts and things as
might  reasonably be requested to assure that the benefits of this Agreement are
realized by the parties.

18. This  Agreement  is  personal  to the parties  herein and cannot be assigned
without the express written authorization of the other party.

19. This  constitutes the entire Agreement  between the parties,  supersedes all
prior or  contemporaneous  oral or written  agreements and shall not be modified
except by a document signed by the parties.

DATED:  August 18, 2000
        /s/  GREGORY MCWADE


Dated September 26, 2000.

PACIFIC PRINTING & EMBROIDERY, LLC
/s/ Jeffrey Harden, Manager

DATED: September 26, 2000.
PRINT WORKS, INC.
/s/ Jeffrey Harden, Manager

DATED: September 26, 2000.
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
/s/ B. Willes Papenfuss, President