Exhibit 10.40


 


EIGHTEENTH AMENDMENT TO


GENERAL CREDIT AND SECURITY AGREEMENT


(Note:  A Fifteenth Amendment
does not exist)


 


THIS
AGREEMENT, dated and effective as of March 22, 2005, 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.               Paragraph 17(m) is
hereby deleted and replaced with the following:


 


17(m). Borrower’s Periodic Financial Report shall reflect a Net Profit
of at least (or Net Loss not to exceed, as the case may be):


 


	
  Fiscal quarter ending

  	
   

  	
  Net Profit (Net Loss)

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  (500,000

  	
  )

  
	
  June 30, 2007

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  225,000

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  175,000

  	
   

  
	
  All subsequent quarters

  	
   

  	
  $

  	
  1

  	
   

  



 


At the end of the fiscal year ending on December 31, 2007, and as
of the end of each subsequent fiscal year, Borrower’s Periodic Financial Report
for the fiscal year shall reflect a Net Profit of at least One Dollar.


 


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


 


23. Termination.  Subject to automatic termination of Borrower’s
ability to obtain additional Advances under this Agreement upon the occurrence
of any Event of Default specified in Paragraphs 20(d), (e), (f) or (g) and
to Lender’s right to terminate Borrower’s ability to obtain additional Advances
under this Agreement upon the occurrence of any other Event of Default or upon
demand, this Agreement shall have a term ending on the Termination Date provided,
however, that Borrower may terminate this Agreement at any earlier time upon
sixty days prior written notice and will incur no prepayment fee or charge
thereafter; provided further, however, that if Borrower terminates this
Agreement at any time prior to the then current Maturity Date, then Borrower
shall pay to Lender a prepayment charge equal to the following:


 


·                  If termination occurs on or
prior to December 31, 2005 — 3.0% of the Maximum Principal Amount.


·                  If termination occurs after December 31,
2005 but on or before December 31, 2006 — 2.0% of the Maximum Principal
Amount.


·                  If termination occurs after December 31,
2006 but before the then current Maturity Date — 1.0% 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 


 


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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.


 


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


 


“Maturity Date” shall mean December 31, 2008, 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.


 


4.               The following Paragraph 17(p) shall
be added as follows:


 


17(p) 
Before July 1, 2007, Borrower shall hire a Chief Financial Officer with
the skill and experience customary and appropriate for a business of Borrower’s
size, type and complexity and, further, such Chief Financial Officer shall be 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: January                     
  , 2007

  	
   

  	
   

  
	
   

  	
   

  	
  Edward
  R. Cameron

  



 


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