Exhibit 10.41


 


NINETEENTH AMENDMENT TO


GENERAL CREDIT AND SECURITY AGREEMENT


(A Fifteenth Amendment does not exist)


 


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


 


1.               The definition of “Maximum
Principal Amount” under paragraph 2 of the Credit Agreement is hereby deleted
and 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 the
outstanding principal amount of the Note, at the close of each day at a
fluctuating rate per annum (computed on the basis of actual number of days
elapsed 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 caused
by a change in the Prime Rate to occur simultaneously with the change in the
Prime Rate (the “Initial Rate”); 
provided, however, that (i) in no event shall the Initial Rate, the
Adjusted Rate or the Re-adjusted rate in effect hereunder at any time be less
than 7.5% per annum; (ii) interest payable hereunder with respect to each
calendar month shall not be less than $58,000.00 regardless of the amount of
loans, Advances or other credit extensions that actually may have been
outstanding during the month, and (iii) interest shall continue to accrue
hereunder until all Obligations have been paid in full..  Interest accrued through the last day of each
month will be due and payable to Lender on the next Monthly Payment Date.  Interest shall also be payable on the
Maturity Date or on any earlier Termination Date.  Interest accrued after the Maturity Date or
earlier Termination Date shall be payable on Demand.  Interest may be charged to Borrower’s loan
account as an Advance at Lender’s option, whether or not Borrower then has the
right to obtain an Advance pursuant to the terms of this Agreement.


 


In
the event Borrower earns Net Profit in any fiscal year of at least One Million
Dollars ($1,000,000.00) and evidences such profit by delivering to Lender the
Periodic Financial Report for that period that reflects the required Net
Profit, and provided no Event of Default exists or has occurred, then upon
Borrower’s written request, the Initial Rate shall be reduced to One and
50/100ths percent (1.50%) in excess of the Prime Rate (the “Adjusted Rate”)
commencing with the next scheduled Monthly Payment Date following Lender’s
receipt of both Borrower’s written request and the Periodic Financial Report.


 


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


 


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


 


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


 


(ii) The lesser of:  (x) Twenty
Five percent (25%) of the net amount of Eligible Inventory (excluding Eligible
Whirlpool Inventory and Eligible Scratch and Dent Inventory), plus Fifty
percent (50%) of the net amount of Eligible Scratch and Dent Inventory, plus
Eighty percent (80%) of the net amount of Eligible Whirlpool Inventory; or (y) Ten
Million and No/100ths Dollars ($10,000,000), minus


 


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


 


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


 


(v) Notwithstanding the
above, any of the percentages and/or dollar amounts described in this
definition 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 reserves
the right, in its sole discretion, to establish additional availability
reserves for any reason, including but not limited to providing for liabilities
for personal property and other taxes.


 


4.               Paragraph 23 is hereby
deleted and replaced with the following:


 


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


 


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


 


In the event of the
termination of this Agreement and repayment of all of the Obligations at any
time prior to the then current Maturity Date, for any reason, including but not
limited to (a) termination by Lender after the occurrence of an Event of
Default, (b) sale of Collateral by Lender, Borrower or any third party, (c) sale
of Collateral in any Insolvency Proceeding, (iv) restructure,
reorganization, compromise, or repayment of the Obligations by the confirmation
of a plan of reorganization or any other plan of compromise, restructure,
arrangement, or repayment in any Insolvency Proceeding, (d) the use of new
or replacement financing or capital to repay the Obligations, or (e) the
contraction, winddown or cessation of business by Borrower, then, in view of
the impracticability and extreme difficulty of ascertaining the actual amount
of damages to Lender or profits lost by Lender as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of Lender, Borrower
shall pay a “Prepayment Fee” to Lender equal to one percent of the Maximum
Principal Amount.  On the Termination
Date, all obligations arising under this Agreement shall become immediately due
and payable without further notice or demand. 
Lender’s rights with respect to outstanding Obligations owing on or
prior to the Termination Date will not be affected by termination and all of
said rights including (without limitation) Lender’s Security Interest in the
Collateral existing on such Termination Date or acquired by Borrower
thereafter, and the requirements of this Agreement that Borrower furnish
schedules and confirmatory assignments of Receivables and Inventory and turn
over to Lender all full and partial payments thereof shall continue to be
operative until all such Obligations have been duly satisfied.


 


5.               The definition of “Maturity
Date” 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 succeeding
periods of 12 calendar months without notice to or action by either Borrower or
Lender, provided further however, that such extension shall not occur if: (i) Lender
has notified Borrower of an Event of Default that has occurred and is
continuing, or (ii) this Agreement has previously terminated as provided
in the paragraph entitled “Termination”, or (iii) Lender has, in its sole
and absolute discretion, demanded payment of amounts owed hereunder, or (iv) Borrower
or Lender have notified the other of the intention not to renew at least sixty
days prior to the then current Maturity Date and thereafter no extension shall
occur.


 


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


 


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


 


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


 


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


 


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


 


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


 


(b) In order to obtain
an Advance, Borrower shall give written notice to Lender, by no later than
11:00 a.m. (Minneapolis time) on the business day the requested Advance is
to be made.  Lender, shall make such
Advance by transferring the amount thereof in immediately available funds for
credit to Borrower’s account at Associated Bank Minnesota, NA (other than a
payroll account) or other bank approved by Lender, as specified in such
notice.  Lender’s customary fees for
making such advance will apply.  It is
also noted that “next day wires”/ACH transfers will be posted as a loan Advance
on the day released to the ACH transfer system by Lender with the understanding
that funds may not be received in Borrower’s account until the next business
day or later.  At the request of Lender,
Borrower shall confirm in writing any telephonic notice.


 


10.         The Lender will now require
that all cash receipts are directed to Lender for application to the
Obligations.  Retail proceeds, deposited
into local banks, will then be directed from the local bank to Lender’s
account.  Credit card proceeds will
likewise be directed to Lender’s account. 
Toward this end, Paragraph 7(c) is hereby deleted and replaced with
the following:


 


All full and partial
customer payments and any other cash collections from whatever source
whatsoever, whether or not arising from the sale, collection or other
disposition of Collateral (whether or not in the ordinary course of business),
including but not limited to the collection of accounts receivable in the
ordinary 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 or
other documents).  Borrower shall direct
all customers, credit card processors and other remitters of payments to mail
payments to Lender’s post office box or other lockbox or to direct electronic
funds to Lender’s bank account directly (eg: ACH transfers, wire transfers
etc.)  In the case of retail sales, cash
proceeds will be deposited in a local bank account and subsequently transferred
to Lender.  (All such local bank accounts
will be subject to an account control agreement in favor of Lender.)  Within 90 days of the date hereof, at least
ninety percent (95%) of the aggregate dollars paid to or on behalf of Borrower
shall be received in Lender’s post office box, lockbox, or bank account
directly from the payors and the local bank accounts.  Until such payments are so delivered to
Lender (or Lender’s account or lockbox), such payments which nonetheless come
into possession of Borrower shall be held in trust by Borrower for and as
Lender’s property and shall not be commingled with any funds of Borrower or
otherwise negotiated.  All cash
collections received by Lender will be credited to Borrower’s loan account
(subject to final collection thereof) after three Business Days, or longer as
required by Lender’s bank to fully and finally collect the funds represented by
checks or other instruments.  Collections
received by Lender after 11:00 am Central Time in Minneapolis will be deemed
received on the next Business Day.


 


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11.         Paragraph 17(q) is
hereby added as follows:


 


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


 


IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date 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


 


The
undersigned, Edward R. “Jack” Cameron, hereby reaffirms all of the terms of the
Support Agreement issued by him in favor of SPECTRUM Commercial Services
Company (including its participants and assigns) and dated as of December 29,
2004, and acknowledges that such agreement is in full force and effect
according to its terms.  The undersigned
understands and acknowledges that this Reaffirmation is required by SPECTRUM
Commercial Services Company as a condition to the execution of the Seventeenth
Amendment to the General Credit and Security Agreement between Appliance
Recycling Centers of America, Inc. and SPECTRUM Commercial Services
Company.


 


 


	
  Dated
  as of: June                              
  , 2007

  	
   

  	
   

  
	
   

  	
   

  	
  Edward
  R. Cameron

  



 


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