Document:

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

     This Third Amendment to Amended and Restated Credit Agreement (the
"Amendment") dated as of September 12, 2000 (but effective as of August 14,
2000), by and between Badger Paper Mills, Inc. (individually and as successor by
merger to Badger Paper Mills Flexible Packaging Division, Inc.) (the
"Borrower"), the Lenders, and Harris Trust and Savings Bank, as Agent (the
"Agent"); W I T N E S S E T H:

     WHEREAS, the Borrower, the Lenders and Harris Trust and Savings Bank, as
Agent, have heretofore executed and delivered an Amended and Restated Credit
Agreement dated as of January 29, 1999, as previously amended by that certain
First Amendment to Amended and Restated Credit Agreement dated as of August 31,
1999 and that certain Second Amendment to Amended and Restated Credit Agreement
dated as of March 9, 2000 (said Amended and Restated Credit Agreement as so
amended being referred to herein as the "Credit Agreement"); and

     WHEREAS, the parties hereto desire to amend the Credit Agreement as
provided herein;

     NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that the
Credit Agreement shall be and hereby is amended effective as of August 14, 2000
as follows:

                                    ARTICLE 1
                                   AMENDMENTS

     1.1    Sections 7.6, 7.8 and 7.12 of the Credit Agreement shall each be
amended in its entirety and as so amended shall be restated to read as follows:

                 Section 7.6. Fixed Charge Coverage Ratio. Badger shall
            not, as of the last day of each fiscal month of Badger ending
            during each of the periods specified below, permit the ratio of
            (x) EBITDA for the twelve fiscal months of Badger then ended
            minus Capital Expenditures during such period to (y) Fixed
            Charges for the same twelve fiscal months then ended to be less
            than:

                                                              FIXED CHARGE
                                                             COVERAGE RATIO
                                                              SHALL NOT BE
            FROM AND INCLUDING      TO AND INCLUDING           LESS THAN:

            June 30, 2001         September 29, 2001          1.00 to 1.00

            September 30, 2001    At all times thereafter     1.15 to 1.00

<PAGE>

                 Section 7.8. Leverage Ratio. Badger will not, as of the
            last day of each fiscal month of Badger ending during the
            periods specified below, permit the Leverage Ratio to be more
            than:

                                                             LEVERAGE RATIO
                                                              SHALL NOT BE
            FROM AND INCLUDING      TO AND INCLUDING           MORE THAN:

            June 30, 2001         September 29, 2001          4.00 to 1.00

            September 30, 2001    At all times thereafter     3.75 to 1.00

                 Section 7.12.Capital Expenditures. Badger will not, nor
            will it permit any Subsidiary to, expend or become obligated
            for Capital Expenditures in an aggregate amount for Badger and
            the Subsidiaries in excess of the following:

            Fiscal Year 2000.................................. $2,500,000
            Fiscal Year 2001.................................. $2,700,000
            and each fiscal year thereafter

     1.2    Section 7 of the Credit Agreement shall be amended by adding thereto
a new Section 7.24 which reads as follows:

                 "Section 7.23. Minimum EBITDA. Badger shall not, as of the
            last day of each calendar month specified below, permit EBITDA
            for the period commencing on July 1, 2000 to and including the
            last day of such calendar month to be less than the amount
            specified below:

            CALENDAR MONTH                 EBITDA SHALL NOT BE LESS THAN:

            July, 2000                                ($145,000)

            August, 2000                               $210,000

            September, 2000                            $645,000

            October, 2000                            $1,080,000

            November, 2000                           $1,515,000

            December, 2000                           $1,940,000

<PAGE>

            January, 2001                            $2,290,000

            February, 2001                           $2,640,000

            March, 2001                              $3,000,000

            April, 2001                              $3,350,000

            May, 2001                                $3,700,000

            June, 2001                               $4,050,000

     1.3    The definition of each of "Consolidated Net Income", "EBITDA" and
"Eurodollar Margin" appearing in Section 10 of the Credit Agreement are hereby
amended in their respective entireties and as so amended shall be restated to
read as follows:

            "Consolidated Net Income" means, with reference to any
            period, the net income (or net loss) of Badger and its
            Consolidated Subsidiaries for such period as computed on a
            consolidated basis in accordance with generally accepted
            accounting principles, and, without limiting the foregoing,
            after deduction from gross income of all expenses and
            reserves, including reserves for all taxes on or measured by
            income, but excluding any extraordinary profits and losses,
            also excluding any taxes on such extraordinary profits and
            any gains or losses on the Borrowers' Marketable Securities.

            "EBITDA" means, with reference to any period, Consolidated
            Net Income for such period plus all amounts deducted in
            arriving at such Consolidated Net Income amount in respect
            of (i) Interest Expense for such period, plus (ii) federal,
            state and local income taxes for such period, plus (iii) all
            amounts properly charged for depreciation of fixed assets
            and amortization of intangible assets during such period on
            the books of the Borrowers and their Subsidiaries; provided,
            however, that the foregoing calculation of EBITDA shall
            exclude the amount actually incurred by Badger (but in no
            event to exceed $50,000) during its fiscal year 2000 in
            connection with severance paid by Badger to its former
            employees.

            "Eurodollar Margin" means

                 (i)   1.25% for any Pricing Period the Compliance
            Certificate delivered by Badger for the second fiscal month

<PAGE>

            preceding such Pricing Period shows a Leverage Ratio of less
            than 2.25 to 1.00;

                 (ii)  1.50% for any Pricing Period the Compliance
            Certificate delivered by Badger for the second fiscal month
            preceding such Pricing Period shows a Leverage Ratio of
            greater than or equal to 2.25 to 1.00 and less than 2.75 to
            1.00;

                 (iii) 1.75% for any Pricing Period the Compliance
            Certificate delivered by Badger for the second fiscal month
            preceding such Pricing Period shows a Leverage Ratio greater
            than or equal to 2.75 to 1.00 but less than 3.25 to 1.00;

                 (iv)  2.25% for any Pricing Period the Compliance
            Certificate delivered by Badger for the second fiscal month
            preceding such Pricing Period shows a Leverage Ratio greater
            than or equal to 3.25 to 1.00 but less than 3.75 to 1.00;

                 (v)   2.75% for any Pricing Period the Compliance
            Certificate delivered by Badger for the second fiscal month
            preceding such Pricing Period shows a Leverage Ratio greater
            than or equal to 3.75 to 1.00 but less than 4.75 to 1.00;
            and

                 (vi)  3.25% for any Pricing Period the Compliance
            Certificate delivered by Badger for the second fiscal month
            preceding such Pricing Period shows a Leverage Ratio greater
            than or equal to 4.75 to 1.00 or for which Badger has not
            delivered a Compliance Certificate as required by Section
            7.6 hereof.

     1.4    Section 10 of the Credit Agreement is hereby amended by adding
thereto the following new definition:

             "Change of Control" means any of (a) the acquisition by
            any "person" or "group" (as such terms are used in
            sections 13(d) and 14(d) of the Securities Exchange Act of
            1934, as amended) at any time of beneficial ownership of
            50% or more of the outstanding capital stock of Badger on
            a fully-diluted basis, or (b) the failure of individuals
            who are members of the board of directors of Badger on
            August 14, 2000 (together with any new or replacement
            directors whose initial nomination for election was
            approved by a majority of the directors who were either
            directors on August 14, 2000 or previously so approved) to
            constitute a majority of the board of directors of Badger.

<PAGE>

     1.5    Section 8.1 of the Credit Agreement is hereby amended by (i)
striking the word "or" appearing at the end of Subsection (k) thereof, (ii)
striking the period appearing at the end of Subsection (l) thereof and
substituting therefor the word "or" and (iii) adding thereto a new Subsection
(k) which reads as follows:

            (k)  a Change of Control shall occur.

                                   ARTICLE II
                          RELEASE OF INVESTMENT ACCOUNT

     2.1    The Borrower has requested the Bank to release the lien on the
Borrower's investment account number 15-029661-1-CR13 maintained with Robert W.
Baird & Co. granted to the Bank pursuant to that certain Security Agreement Re:
Investment Account dated as of December 31, 1994 (the "Security Agreement Re:
Investment Account"), from the Borrower to the Bank. Accordingly, upon
satisfaction of the conditions precedent set forth in Article III hereof, the
Bank hereby releases the lien granted pursuant to the Security Agreement Re:
Investment Account.

                                   ARTICLE III
                                     WAIVER

     3.1    The Borrower has informed the Bank that it was not in compliance
with Section 7.6 of the Credit Agreement for each of the fiscal months ending
April 30, 2000, May 31, 2000, June 30, 2000 and July 31, 2000, and was not in
compliance with Section 7.8 of the Credit Agreement for each of the fiscal
months ending on May 31, 2000, June 30, 2000 and July 31, 2000 (collectively,
the "Existing Defaults"). The Borrower has requested that the Bank waive the
Existing Defaults. Accordingly, the Bank hereby waives the Existing Defaults;
provided, however, that the waiver contained in this Article III is limited to
the matters set forth herein, and the Borrower agrees that it remains obligated
to comply with the terms of the Credit Agreement and the other Loan Documents,
including Sections 7.6 and 7.8 of the Credit Agreement and that the Bank shall
not be obligated in the future to waive any provision of the Credit Agreement or
the other Loan Documents.

                                   ARTICLE IV
                              CONDITIONS PRECEDENT

     3.1    This Amendment shall become effective as of August 14, 2000 on the
date that each of the following conditions precedent have been met:

                 (a) the Agent shall have received counterparts hereof
            executed by the Borrower and the Required Lenders;

                 (b) the Agent shall have received (i) a certificate of
            the Secretary of the Borrower dated the date of this
            Amendment certifying that attached thereto is a true and

<PAGE>

            complete copy of resolutions adopted by the Board of
            Directors of the Borrower, authorizing the execution,
            delivery and performance of this Amendment and certifying
            the names and true signatures of the officers of the
            Borrower authorized to sign this Amendment and (ii) such
            supporting documents as the Agent may reasonably request;

                 (c) the Agent shall have received for its own account
            an amendment fee in an amount equal to $80,000; and

                 (d) not later than 21 days following the date of this
            Amendment, Agent shall have received fully executed
            landlord's waivers for each of the Borrower's leased
            collateral locations including without limitation the
            locations known as K&K Warehouse, 3100 Woleske Road,
            Marinette, Wisconsin 54143 and McDermid Warehousing, 160
            Hanks Marks Drive, P.O. Box 121, Oconto Falls, Wisconsin
            54154, each in form and substance satisfactory to the Agent
            and its counsel.

Upon satisfaction of the conditions set forth in Article III hereof, this
Amendment shall become effective as of August 14, 2000.

                                ARTICLE V
                              MISCELLANEOUS

     4.1.   To induce the Agent and the Banks to enter into this Amendment, the
Borrower represents and warrants to the Agent and the Banks that: (a) the
representations and warranties contained in the Loan Documents, as amended by
the Amendment, are true and correct in all material respects as of the date
hereof with the same effect as though made on the date hereof; (b) after giving
effect to this Amendment, no Event of Default or Default exists; (c) this
Amendment has been duly authorized by all necessary corporate proceedings and
duly executed and delivered by the Borrower, and the Credit Agreement, as
amended by the Amendment, and each of the other Credit Documents are the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights or by general principles of
equity; and (d) no consent, approval, authorization, order, registration or
qualification with any governmental authority is required for, and in the
absence of which would adversely effect, the legal and valid execution and
delivery or performance by any Borrower of this Amendment or the performance by
the Borrower of the Credit Agreement, as amended by the Amendment, or any other
Credit Document to which they are a party.

     4.2.   The Borrower acknowledges and agrees that all of the Collateral
Documents to which it is a party remain in full force and effect for the benefit
and security of, among other things, the Obligations as modified hereby. The
Borrower further acknowledges and agrees that

<PAGE>

the Borrower's obligations owing under the Applications and the Letters of
Credit shall constitute Secured Obligations as defined under the Collateral
Documents. Nothing herein contained shall in any manner affect or impair the
priority of the liens and security interests created and provided for by the
Collateral Documents as to the indebtedness which would be secured thereby prior
to giving effect to this Amendment. The Borrower further agrees to execute and
deliver any and all instruments or documents as may be required by the Lenders
to confirm any of the foregoing.

     4.3.   This Amendment may be executed in any number of counterparts and by
the different parties on separate counterparts and each such counterpart shall
be deemed to be an original, but all such counterparts shall together constitute
but one and the same Amendment.

     4.4.   Except as specifically provided above, the Credit Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed in all respects. The execution, delivery, and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power, or remedy of the Agent or any Bank
under the Credit Agreement or any of the other Loan Documents, nor constitute a
waiver or modification of any provision of any of the other Loan Documents.

     4.5.   This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the laws of the
State of Illinois.

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

     Dated as of the date first above written.

                                        BADGER PAPER MILLS, INC.

                                        By:       /s/
                                              ----------------------------------
                                        Title:
                                              ----------------------------------

Accepted and agreed to as of the date and year first above written.

                                        HARRIS TRUST AND SAVINGS BANK,
                                         individually and as Agent

                                        By:      /s/
                                              ----------------------------------
                                        Title:
                                              ----------------------------------APPLIANCE RECYCLING CENTERS OF AMERICA FORM 10-Q

                                                                    EXHIBIT 10.1

                               EIGHTH AMENDMENT TO
                      GENERAL CREDIT AND SECURITY AGREEMENT

         THIS AGREEMENT, dated and effective as of August 30, 2000 between
SPECTRUM Commercial Services, a division of Lyon Financial Services, Inc., 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 AUGUST 30, 2001, 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. Paragraph 23 is amended in its entirety to read as follows:

                  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. 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.

         3. Paragraph 23 is amended in its entirety to read as follows

                  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 One and three-quarters percent (1.75%) 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; provided, however, that (i)
                  in no event shall the interest rate in effect hereunder at any
                  time be less than 10% per annum; and (ii) interest payable
                  hereunder with respect to each calendar month shall not be
                  less than $14,000.00 regardless of the amount of loans,
                  Advances or other credit extensions that actually may have
                  been outstanding during the month. 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.
                  Notwithstanding the foregoing, after an Event of Default, this
                  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 hereunder at any time
                  be less than 15% per annum; and (ii) interest payable
                  hereunder with respect to each calendar month shall not be
                  less than $20,300.00 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.

         4. The definition of "Borrowing Base" appearing in Paragraph 2 is
respectively amended in their entirety to read as follows:

                  "Borrowing Base" shall mean the sum of (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) Two Hundred Fifty Thousand and No/100ths Dollars
                  ($250,000) or (y) Twenty Five percent (25%) of the net amount
                  of Eligible Inventory (excluding Eligible Whirlpool Inventory
                  and Eligible Scratch and Dent Inventory), or such greater or
                  lesser dollars and/or percentage as Lender, in its sole
                  discretion, shall deem appropriate, plus (iii) the lesser of
                  (x) Five Hundred Thousand and No/100ths Dollars ($500,000) or
                  (y) Fifty percent (50%) of the net amount of Eligible Scratch
                  and Dent Inventory, or such greater or lesser dollars and/or
                  percentage as Lender, in its sole discretion, shall deem
                  appropriate, plus (iv) the lesser of (x) Four Million and
                  No/100ths Dollars ($4,000,000) or (y) Eighty percent (80%) of
                  the net amount of Eligible Whirlpool Inventory, or such
                  greater or lesser dollars and/or percentage as Lender, in its
                  sole discretion, shall deem appropriate, provided however,
                  that notwithstanding the dollar limits contained in
                  subsections (ii) - (iv) above, that the total aggregate amount
                  available under subsections (ii) - (iv) shall in no event
                  exceed Four Million and No/100ths Dollars ($4,000,000), or
                  such greater or lesser dollars as Lender, in its sole
                  discretion, shall deem appropriate.

         5. The fixed component of the Loan Administration Fee referred to in
paragraph 17(g) which was originally specified at $1,000 per quarter is amended
to be $3,000 per quarter hereafter.

         6. The final sentence of paragraph 7c shall be deleted and replaced
with the following:
                  The net amount received by Lender as proceeds arising from the
                  sale or other disposition of Collateral and/or the receipt of
                  all other funds will be credited by Lender to Borrower's loan
                  account (subject to final collection thereof) after allowing
                  three Business Days for the collection of checks and other
                  instruments.

         7. The Guaranty hereof provided by Edward R. Cameron is hereby released
completely and his name will be deleted from the definition of Guarantor
contained in Paragraph 2.

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

SPECTRUM COMMERCIAL SERVICES                 APPLIANCE RECYCLING CENTERS
                                              OF AMERICA, INC.

By /s/ Steven I. Lowenthal                 By /s/ Edward R. Cameron
Steven I. Lowenthal, Senior Vice President     Its President

                    FIFTH AMENDED AND RESTATED REVOLVING NOTE

$5,000,000.00                                                    August 30, 2000
                                                          Bloomington, Minnesota

FOR VALUE RECEIVED, the undersigned, APPLIANCE RECYCLING CENTERS OF AMERICA,
INC. promises to pay to the order of SPECTRUM COMMERCIAL SERVICES, a division of
Lyon Financial Services, Inc., 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) Five Million and 00/100 Dollars ($5,000,000.00), 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 and
three-quarters percent (1.75%) per annum in excess of the Prime Rate of Norwest
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 10% per annum; and (ii) interest
payable hereunder with respect to each calendar month shall not be less than
$14,000 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 Norwest Bank in its sole discretion from time to
time as its Prime or Base Rate, and the undersigned acknowledges that Norwest
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 15% per annum; and (ii) interest payable hereunder with respect to
each calendar month shall not be less than $20,300 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 August
30, 2001 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 any one 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 Third Amended
and Restated Revolving Note dated as of July 12, 1999 made by the undersigned
payable to the order of Lender in the original principal amount of
$2,000,000.00.

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
                                          President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00017-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00017-of-00352.parquet"}]]