Exhibit 10.1


 


FOURTEENTH AMENDMENT TO

GENERAL CREDIT AND SECURITY AGREEMENT


 


THIS AGREEMENT, dated and effective as of July 1, 2004, 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 “Maturity Date” appearing in Paragraph 2 is amended in its
entirety to read as follows:


“Maturity Date”
shall mean December 31, 2004, 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.


 


2.               The
Line Maintenance Fee referred to in paragraph 17 (i) shall be pro-rated for
this partial year extension making it one-third of the 1/2% per annum of the Maximum Principal
Amount already in force, effective as of the next anniversary date of the
Credit Agreement.


 


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

  	
  /s/ Steven Lowenthal

  	
   

  	
  By

  	
  /s/ Jack Cameron

  	
   

  
	
  Steven I. Lowenthal, Co-CEO

  	
   

  
	
   

  	
  Its

  	
  President

  	
   

  
						



 

















 


GUARANTOR ACKNOWLEDGMENT


(Fourteenth Amendment)


 


The undersigned (collectively the “Guarantor”) has entered into certain
Guaranties of various dates (collectively the “Guaranty;” capitalized terms not
otherwise defined herein being used herein as therein defined), pursuant to
which each Guarantor has guarantied the payment and performance of certain
Indebtedness of Appliance Recycling Centers of America, Inc., a Minnesota
corporation (“Borrower”) to SPECTRUM Commercial Services Company, a Minnesota
corporation, (“SCS”), which Indebtedness includes, without limitation, all
obligations of Borrower under that certain Revolving Note dated as of August
30, 1996 between the Borrower and SCS as subsequently amended and/or restated
(as so amended the “Original Loan Agreement”).


 


Each Guarantor hereby acknowledges that it has received a copy of: (a)
the Fourteenth Amendment as well as all previous amendments to General Credit
and Security Agreement dated as of the date hereof (the “Loan Agreement”)
between the Borrower and SCS amending and restating the Original Loan Agreement;


 


Each Guarantor hereby:


(a) agrees and acknowledges that the Guaranty
applicable to each Guarantor shall be of an UNLIMITED
AMOUNT, including without limitation all of Lender’s fees, costs,
expenses and attorneys’ fees incurred in enforcing the Guarantee; and


 


(b) confirms that:


(i)                                     by the Guaranty,
the Guarantor continues to guarantee the full payment and performance of all of
the Indebtedness owed to SCS, including, without limitation, all obligations of
Borrower under the Original Loan Agreement as amended and restated by the Loan
Agreement; and


 


(ii)                                  with respect to each
corporate Guarantor, by such Guarantor’s Subsidiary Security Agreement, such
Guarantor continues to grant, and hereby does grant, a security interest in all
of their respective property and assets as well as the “Collateral” described
in such Guarantor’s Subsidiary Security Agreement, to secure the payment and
performance of the “obligations” described therein; and


 


(iii)                               the Guaranty remains in
full force and effect, enforceable against the Guarantor in accordance with its
terms.


 


	
  Dated: July 1, 2004

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARCA-MARYLAND, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Jack Cameron

  	
   

  	
   

  	
   

  
	
     Its

  	
  President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  APPLIANCE RECYCLING CENTERS

  OF AMERICA-CALIFORNIA, INC.

  	
   

  	
  ARCA OF ST. LOUIS, INC.

  
	
  By

  	
  /s/ Jack Cameron

  	
   

  	
   

  	
  By

  	
  /s/ Jack Cameron

  	
   

  
	
    Its

  	
  President

  	
   

  	
   

  	
    Its

  	
  President

  	
   

  
												



 

















 


NINTH AMENDED AND RESTATED REVOLVING NOTE


 


	
  $10,000,000.00

  	
   

  	
  July 1, 2004

  
	
   

  	
   

  	
  Bloomington, Minnesota

  



 


FOR VALUE RECEIVED, the undersigned, Appliance Recycling
Centers of America, Inc. promises to pay to the order of SPECTRUM
COMMERCIAL SERVICES COMPANY, a Minnesota corporation, (the “Lender”) at its
office in Bloomington, Minnesota, or at such other place as any present or
future holder of this Note may designate from time to time, the principal sum
of (i) Ten Million and 00/100 Dollars ($10,000,000.00), or (ii) the aggregate
unpaid principal amount of all advances and/or extensions of credit made by the
Lender to the undersigned pursuant to this Note as shown in the records of any
present or future holder of this Note, whichever is less, plus interest thereon
from the date of each advance in whole or in part included in such amount until
this Note is fully paid. Interest shall be computed on the basis of the actual
number of days elapsed and a 360- day year, at an annual rate equal to One
percent (1 %) per annum in excess of the Prime Rate of Wells Fargo Bank
Minnesota, NA, and that shall change when and as said Prime Rate shall change;
provided, however, that (i) in no event shall the interest rate in effect
hereunder at any time be less than 5.5% per annum; and (ii) interest payable
hereunder with respect to each calendar month shall not be less than $37,500
regardless of the amount of loans, advances or other credit extensions that
actually may have been outstanding during the month.. Interest is due and
payable on the first day of each month and at maturity. The term “Prime Rate”
means the rate established by Wells Fargo Bank Minnesota, NA in its sole
discretion from time to time as its Prime or Base Rate, and the undersigned
acknowledges that Wells Fargo Bank and/or Lender may lend to its customers at
rates that are at, above or below the Prime Rate. Notwithstanding the
foregoing, after an Event of Default, this Note shall bear interest until fully
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 hereunder at any time be less than 10.0% per annum; and (ii)
interest payable hereunder with respect to each calendar month shall not be
less than $62,500 regardless of the amount of loans, advances or other credit
extensions that actually may have been outstanding during the month. The
undersigned also shall pay the holder of this Note a late fee equal to 10% of
any payment under this Note that is more than 10 days past due.


 


All
interest, principal, and any other amounts owing hereunder are due on December
31, 2004 or earlier UPON DEMAND by Lender or any holder hereof, and Lender
specifically reserves the absolute right to demand payment of all such amounts
at any time, with or without advance notice, for any reason or no reason
whatsoever. Lender’s right to make such demand is not exclusive and Lender may
coincidentally or separately from such demand make further demand for payment
pursuant to the terms hereof (including but not limited to upon the occurrence
of an Event of Default), and further, amounts may become due hereunder without
a demand by Lender.


 


All
or any part of the unpaid balance of this Note may be prepaid at any time,
provided however, that if Borrower provide Lender with 60 days advance notice
thereof. At the option of the then holder of this Note, any payment under this
Note may be applied first to the payment of other charges, fees and expenses
under this Note and any other agreement or writing in connection with this
Note, second to the payment of interest accrued through the date of payment, and
third to the payment of principal. Amounts may be advanced and readvanced under
this Note at the Lender’s sole and absolute discretion, provided the principal
balance outstanding shall not exceed the amount first above written. Neither
the Lender nor any other person has any obligation to make any advance or
readvance under this Note.


 

















 


The
occurrence of any of the following events shall constitute an Event of Default
under this Note: (i) any default in the payment of this Note; or (ii) any other
default under the terms of any now existing or hereafter arising debt,
obligation or liability of any maker, endorser, guarantor or surety of this
Note or any other person providing security for this Note or for any guaranty
of this Note, including, but not limited to, that certain General Credit and
Security Agreement dated August 30, 1996 as it may have been subsequently
amended and/or restated; or (iii) the insolvency (other than the insolvency of
the undersigned), death dissolution, liquidation, merger or consolidation of
any such maker, endorser, guarantor, surety or other person; or (iv) any
appointment of a receiver, trustee or similar officer of any property of any
such maker,. endorser, guarantor, surety or other person; or (v) any assignment
for the benefit of creditors of any such maker, endorser, guarantor, surety or
other person; or (vi) any commencement of any proceeding under any bankruptcy,
insolvency, dissolution, liquidation or similar law by or against any such
maker, endorser, guarantor, surety or other person, provided however, that if
such a proceeding is commenced against the maker hereof or any Guarantor on an
involuntary basis, then only if such action is not dismissed within 60 days of
first being filed; or (vii) the sale, lease or other disposition (whether in
one transaction or in a series of transactions) to one or more persons of all
or a substantial part of the assets of any such maker, endorser, guarantor,
surety or other person; or (viii) any such maker, endorser, guarantor, surety or
other person takes any action to revoke or terminate any agreement, liability
or security in favor of the Lender; or (ix) the entry of any judgment or other
order for the payment of money in the amount of $10,000.00 or more against any
such maker, endorser, guarantor, surety or other person which judgment or order
is not discharged or stayed in a manner acceptable to the then holder of this
Note within 10 days after such entry; or (x) the issuance or levy of any writ,
warrant, attachment, garnishment, execution or other process against any
property of any such maker, endorser, guarantor, surety or other person; or
(xi) the attachment of any tax lien to any property of any such maker,
endorser, guarantor, surety or other person which is other than for taxes or
assessments not yet due and payable; or (xii) any statement, representation or
warranty made by any such maker, endorser, guarantor, surety or other person
(or any representative of any such maker, endorser, guarantor, surety or other
person) to any present or future holder of this Note at any time shall be
false, incorrect or misleading in any material respect when made; or (xiii)
there is a material adverse change in the condition (financial or otherwise),
business or property of any such maker, endorser, guarantor, surety or other
person. Upon the occurrence of an Event of Default and at any time thereafter
while an Event of Default is continuing, the then holder of this Note may, at
its option, declare this Note to be immediately due and payable and thereupon
this Note shall become due and payable for the entire unpaid principal balance
of this Note plus accrued interest and other charges on this Note without any
presentment, demand, protest or other notice of any kind.


 


The undersigned: (i) waives
demand, presentment, protest, notice of protest, notice of dishonor and notice
of nonpayment of this Note; (ii) agrees to promptly provide all present and
future holders of this Note from time to time with financial statements of the
undersigned and such other information respecting the financial condition,
business and property of the undersigned as any such holder of this Note may
reasonably request, in form and substance acceptable to such holder of this
Note; (iii) agrees that when or at any time after this Note becomes due the
then holder of this note may offset or charge the full amount owing on this
note against any account then maintained by the undersigned with such holder of
this Note without notice; (iv) agrees to pay on demand all fees, costs and expenses
of all present and future holders of this Note in connection with this Note and
any security and guaranties for this Note, including but not limited to audit
fees and expenses and reasonable attorneys’ fees and legal expenses, plus
interest on such amounts at the rate set forth in this Note; and (v) consents
to the personal jurisdiction of the state and federal courts located in the
State of Minnesota in connection with any controversy related in any way to
this Note or any security


 

















 


of
guaranty for this Note, waives any argument that venue in such forums is not
convenient, and agrees that any litigation initiated by the undersigned against
the Lender or any other present or future holder of this Note relating in any
way to this Note or any security or guaranty for this Note shall be venued (at
the sole option of Lender or the holder hereof) in either the District Court of
Dakota or Hennepin County, Minnesota, or the United States District Court,
District of Minnesota. Interest on any amount under this Note shall continue to
accrue, at the option of any present or future holder of this Note, until such
holder receives final payment of such amount in collected funds in form and
substance acceptable to such holder. The maker agrees that, if it brings any
action or proceeding arising out of or relating to this Agreement, it shall
bring such action or proceeding in the District Court of Hennepin County,
Minnesota.


 


No
waiver of any right or remedy under this Note shall be valid unless in writing
executed by the holder of this Note, and any such waiver shall be effective
only in the specific instance and for the specific purpose given. All rights
and remedies of all present and future holders of this Note shall be cumulative
and may be exercised singly, concurrently or successively. The undersigned, if
more than one, shall be jointly and severally liable under this Note, and the
term “undersigned,” wherever used in this Note, shall mean the undersigned or
anyone or more of them. This Note shall bind the undersigned and the successors
and assigns of the undersigned. This Note shall be governed by and construed in
accordance with the laws of the State of Minnesota.


 


This
Note amends and restates, but does not repay, that certain Eighth Amended and
Restated Revolving Note dated as of August 24, 2001 made by the undersigned
payable to the order of Lender in the original principal amount of
$10,000,000.00.


 


THE
UNDERSIGNED REPRESENTS, CERTIFIES, WARRANTS AND AGREES THAT THE UNDERSIGNED HAS
READ ALL OF THIS NOTE AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS NOTE. THE
UNDERSIGNED ALSO AGREES THAT COMPLIANCE BY ANY PRESENT OR FUTURE HOLDER OF THIS
NOTE WITH THE EXPRESS PROVISIONS OF THIS NOTE SHALL CONSTITUTE GOOD FAITH AND
SHALL BE CONSIDERED REASONABLE FOR ALL PURPOSES.


 


	
   

  	
  APPLIANCE RECYCLING CENTERS

  
	
   

  	
  OF AMERICA, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Edward R. Cameron

  	
   

  
	
   

  	
  Edward
  R. Cameron, Chief Executive Officer

  
					



 


	
  STATE
  OF MINNESOTA

  	
  )

  
	
   

  	
  )
  ss.

  
	
  COUNTY
  OF  Ramsey

  	
  )

  



 


On
this 6th day of July, 2004, before me, a Notary Public within and for said
county, personally appeared Edward R. Cameron who being by me duly sworn did
say that he is the Chief Executive Officer of APPLIANCE RECYCLING CENTERS OF
AMERICA, INC. and that the foregoing instrument was signed on behalf of the
corporation by authority of its Board of Directors and that he acknowledged
said instrument to be the free act and deed of said corporation.


 


	
  Notary
  Seal:

  	
  /s/
  Sara L. Dammann

  	
   

  
	
   

  	
  Notary
  Signature