HAZARDOUS MATERIALS DISPOSAL AGREEMENT

Exhibit 10.1


SOUTHERN CALIFORNIA EDISON COMPANY'S 2001 REFRIGERATOR RECYCLING
AND HAZARDOUS MATERIALS DISPOSAL AGREEMENT


TABLE OF CONTENTS


1 DEFINITIONS


2 GENERAL TERMS


3 CONTRACT DOCUMENTS


4 SCOPE OF WORK


5 CUSTOMER AND APPLIANCE ELGIBILITY


6 OWNERSHIP AND CONFIDENTIALITY


7 COMMERCIAL TERMS


8 BILLING


9 RIGHT TO AUDIT


10 CHANGES


11 PERMITS, CODES AND STATUTES


12 WARRANTY


13 TITLE


14 INSURANCE


15 INDEMNITY


16 TERM AND TERMINATION


17 WRITTEN NOTICES


18 SUBCONTRACTS


19 CALIFORNIA PUBLIC UTILITIES COMMISSION


20 NON-WAIVER


21 ASSIGNMENT


TABLE OF CONTENTS


22 FORCE MAJEURE


23 GOVERNING LAW


24 SECTION HEADINGS


25 SURVIVAL


26 NONRELIANCE


27 ATTORNEYS' FEES


28 COOPERATION


29 ENTIRE AGREEMENT


2001 REFRIGERATOR RECYCLING
AND HAZARDOUS MATERIALS DISPOSAL AGREEMENT


BETWEEN


APPLIANCE RECYCLING CENTERS OF AMERICA, INC.


AND


SOUTHERN CALIFORNIA EDISON COMPANY


- --------------------------------------------------------------------------------


THIS PROGRAM IS FUNDED BY CALIFORNIA UTILITY CUSTOMERS AND ADMINISTERED BY SOUTHERN CALIFORNIA EDISON COMPANY UNDER THE AUSPICES OF THE CALIFORNIA PUBLIC
UTILITIES COMMISSION.


THIS AGREEMENT ("Agreement") is made and entered into as of the 1st day
of January, 2001, by and between SOUTHERN CALIFORNIA EDISON COMPANY, a
California corporation ("SCE") and APPLIANCE RECYCLING CENTERS OF
AMERICA, INC., a Minnesota corporation ("Contractor"). SCE and
Contractor are also each individually referred to herein as "Party" and
collectively as "Parties."


RECITALS


WHEREAS, the Parties have previously entered into an agreement
with respect to the recycling of older inefficient refrigerators and
freezers and the disposal of hazardous materials for the period January
2000 through December 2001 ("the 2000/2001 Refrigerator Recycling
Program Agreement").


WHEREAS the Parties desire to terminate the 2000/2001
Refrigerator Recycling Program Agreement and to allow ARCA to continue
to implement a Refrigerator Recycling Program in 2001 under the terms
and conditions set forth herein for the removal of older, inefficient
refrigerators and freezers ("Refrigerators and Freezers") from SCE
Customer residences thereby reducing the load demand on the electrical
system under the terms set forth below ("the 2001 Refrigerator
Recycling Program").


WHEREAS, SCE desires to continue and increase its efforts to
reduce the load demand on the electrical system through the further
removal of older inefficient primary and secondary Refrigerators and
Freezers.


WHEREAS, SCE desires to ensure the safe, lawful recovery and
recycling or lawful disposal, as necessary, of CFCs, PCBs, and
Hazardous Materials.


WHEREAS, in furtherance thereof, SCE desires to contract with
Contractor for the continued comprehensive management of its 2001
Refrigerator Recycling Program.


WHEREAS, Contractor desires to contract with SCE for the
continued comprehensive management of SCE's 2001 Refrigerator Recycling
Program, said management to include collection and dismantling of
primary and secondary Refrigerators and Freezers; removal of CFCs, PCBs
and other Hazardous Materials from collected Refrigerators and
Freezers; handling storage and legal disposal of compressor oil, PCBs
and other Hazardous Materials; recycling of metal, sulfur dioxide, and
CFCs; providing incentives to participating SCE Customers who
relinquish Refrigerators and Freezers; and performance of a customer
survey.


WHEREAS, Contractor represents (i) that it has knowledge of the
Metallic Discard Act, effective January 1, 1994, which prohibits the
disposal of Refrigerators and Freezers in landfills and requires that
Refrigerators and Freezers be shredded for metal recovery following
removal of CFCs, PCBs, and other Hazardous Materials contained in
discarded Refrigerators and Freezers, (ii) that it has knowledge of the
hazards associated with the removal, handling, storage, recycling, and
legal disposal of Hazardous Materials, (iii) that it has experience and
expertise in such removal, handling, storage, recycling, and legal
disposal, (iv) that it uses only qualified personnel, (including
subcontractor's and agent's personnel) who have been instructed and
certified in the proper safety procedures to be used in such removal,
handling, storage, recycling, or legal disposal, and (v) that it has
purchased property and has established and will continue to operate and
maintain its recycling center on said purchased property in the City of
Compton or other area acceptable to Contractor and SCE.


WHEREAS, the Parties hereto desire to set forth terms and
conditions under which the aforesaid management services shall be
performed and which shall constitute the Parties' agreement.


NOW THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants contained herein, the payments and agreement to be
made and performed by SCE as set forth in the pricing schedule attached
hereto as EXHIBIT A and incorporated by reference herein, the Parties
agree as follows:


1. DEFINITIONS


1.1 Agreement: This document, the terms and conditions contained
in this Agreement as amended from time to time.


1.2 CFCs: Chlorofluorocarbons


1.3 CFC-11: Chlorofluorocarbons contained in refrigerator
and freezer insulating foam.


1.4 Change Order: Document issued by SCE to Contractor to change a
Purchase Order.


1.5 Contract Period: January 1, 2001 to December 30, 2001, or as
extended by mutual agreement of the Parties.


1.6 CPUC: the California Public Utilities Commission.


1.7 Documentation: Specifications, procedures, instructions,
reports, test results, analyses, calculations, manuals, and
other data specified in the Purchase Order, Change Order, this
Agreement, and any amendment to this Agreement, as required by
any legal entity having jurisdiction over the Work.


1.8 Eligible Appliances: see Eligible Refrigerators and Freezers
(section 1.10).


1.9 Eligible Customers: Residential customers in SCE service
territory who meet the customer eligibility criteria in
Section 6.


1.10 Eligible Refrigerators and Freezers: Appliances that meet the
2001 Refrigerator Recycling Program appliance eligibility
criteria as set forth in Section 5.


1.11 Hazardous Materials: Any substance or material which has been
designated as hazardous or toxic by the U.S. Environmental
Protection Agency, the California Department of Toxic
Substances Control and/or any other governmental agency now or
hereinafter authorized to regulate materials in the
environment, including, but not limited to "Materials which
require special handling" as defined in California Public
Resources Code Section 42167, which is contained in or is
derived from the Refrigerators or Freezers.


1.12 2001 Refrigerator Recycling Program: Refrigerator Recycling
Program defined by this Agreement.


1.13 2001 Program Participants: Eligible customers who turn in
qualifying Refrigerators or Freezers.


1.14 PCB: Polychlorinated Biphenyl.


1.15 Pilot Program: A sub-program within the overall 2001
Refrigerator Recycling Program designed to demonstrate the
feasibility of certain program elements prior to full
implementation of a program including such program elements.


1.16 Purchase Order: Document issued by SCE to Contractor and
executed by the Parties, which contains additional terms and
conditions for the Work described herein.


1.17 Recycling Center: The site at which Contractor will process
Refrigerators and Freezers, remove CFCs, PCBs and other
Hazardous Materials, and recycle or legally dispose of
Hazardous materials.


1.18 Recycling Charge: Per-unit price for services performed by
Contractor under scope of work, including CFC-11 recovery
services, and excluding incentive and financing services.


1.19 Primary refrigerator: refrigerator currently in use by
customer as the main refrigeration appliance.


1.20 Secondary refrigerator: Surplus refrigerator utilized by
customer concurrently with primary refrigerator.


1.21 Subcontractor: Either an entity contracting directly with
Contractor to furnish services or materials as part of or
directly related to, the Work; or an entity contracting with
Subcontractor of any tier to furnish services or materials as
a part of, or directly related to, the Work.


1.22 Work: Any and all obligations of Contractor to be performed
pursuant to this Agreement or a subsequent Purchase Order or
Change Order incorporating this Agreement, such as
Refrigerator and Freezer collection, Refrigerator and Freezer
processing, handling, storing, recycling, and legal disposal,
of Hazardous Materials and Documentation preparation.


2. GENERAL TERMS


2.1 Contractor shall perform the work and its associated
obligations described below as an independent contractor.


2.2 This Agreement shall be supplemented by a Purchase Order
containing additional terms and conditions for performing the
work described below.


3. CONTRACT DOCUMENTS


3.1 This Agreement shall consist of the following documents: this
Agreement, any amendments to this Agreement, Purchase Orders,
and Change Orders. Except as provided below in Section 12
(Year 2001 warranty provision), in the event of any conflict
or apparent conflict between any of the provisions of the
documents comprising this Agreement, the following order of
construction of the documents shall apply:


3.1.1 Amendments to the Agreement in chronological order
from the most recent to the earliest;


3.1.2 Change Orders incorporating and reflecting any
Amendments to the Agreement in chronological order
from the most recent to the earliest.


3.1.3 This Agreement.


3.1.4 Purchase Order incorporating this Agreement.


3.2 Each Party shall notify the other immediately upon the
identification of any such conflict or inconsistency.


4. SCOPE OF WORK


4.1 Contractor shall be responsible for customer service
activities, including providing inbound 800 telephone numbers
for Customers, a webpage which allows Customer access for
inquiries and/or qualification and signup 24 hours a day,
seven days a week, (see Section 4.9), all communication
services, scheduling Eligible Refrigerator and Freezer
collection appointments, verification of customer and
appliance eligibility, documentation of customer data, and
other activities.


4.2 Contractor shall (i) collect all Eligible Appliances from
Customers' residences within 10 to 15 business days from the
date of initial customer contact (unless otherwise requested
by the Customer), in remote areas of the service territory, or
as approved by SCE's Program Manager. Collection shall be no
later than 20 business days from the date of the initial
customer contact, unless otherwise requested by Customer. A
twenty-five percent (25%) reduction in the Recycling Fee shall
be made by SCE if Eligible Appliances are collected later than
20 business days after the initial customer contact, except in
creation remote areas of SCE's service territory or unless the
customer requested the later collection date. For purposes of
this section, the remote areas of SCE's service territory
shall include: those districts listed below. See EXHIBIT B for
more information on the zip codes and cities for the remote
areas of SCE's service territory.


DISTRICT NAME/NUMBER
* Antelope Valley (36)
* Arrowhead (40)
* Barstow (72)


* Bishop (85)
* Blythe (87)
* Catalina Island (61)
* Kernville (53)
* Tehachapi (52)
* High Desert (73)
* 29 Palms (84)
* Big Creek (50)
* San Joaquin Valley (51)
* Ridgecrest (86);


(ii) ensure that the Eligible Appliance is an operating unit
before removing it from a residence; (iii) disable the unit
prior to leaving pick-up location; and (iv) process the unit
at its Recycling Center.


4.3 Contractor shall be solely responsible for all methods,
techniques, sequences, and procedures for the dismantling of
Eligible Appliances, processing of metal panels and
components, recycling of recovered scrap metal, removal,
recycling, or lawful disposal of Hazardous Materials.


4.4 Contractor shall be solely responsible for all methods,
techniques, sequences, and procedures for the removal and
management of all capacitors found in Eligible Appliances, and
the removal and disposal of compressor oil, PCBs, and other
Hazardous Materials from the time Contractor collects Eligible
Appliances pursuant to this Agreement.


4.5 Contractor shall document and maintain records for services
under this Agreement, or any Purchase order incorporating this
Agreement, as follows:


4.5.1 A Customer Comment Tracking System for recording
customer inquiries, complaints, and positive
feedback.


4.5.2 Appliance Turn-in Order Form to collect data such as
customer name, address, home and work phone numbers;
utility account number, Appliance manufacturer's
name; Appliance model and style; defrost type; color,
size, and estimated age of unit; location of
Appliance within the residence; amperage, final
disposition code (which indicates operating condition
of Appliance and/or Incentive received)
identification of units containing CFC-11; special
pick-up instructions (if applicable) and signature of
customer in the event refrigerator or freezer is
discovered not to be an Eligible Appliance as
certified, customer acknowledges liability to SCE for
recycling costs.


4.5.3 Compilation of data in subsection 4.5.2 in electronic
mode, employing a software program suitable for
exchange of information with SCE, subject to the
approval of SCE's Program Manager.


4.6 Contractor shall conduct a customer survey, comparable to
EXHIBIT C, which is attached and incorporated by reference
herein, using a stratified purposeful sample of 5% to 20% of
the 2001 Program Participants. The stratification and
frequency of the survey may be modified periodically by SCE,
provided that an Amendment to this Agreement or a separate
agreement shall be entered into if any such modification
necessitates unreasonable labor, as substantiated by
Contractor, requiring the negotiation of a charge separate
from the Recycling Charge. The purpose of the survey shall be
to elicit information such as appliance use, customer
demographics and customer satisfaction. Stratification and
frequency of survey shall be modified periodically as
determined by SCE provided modified survey is comparable to
EXHIBIT C.


4.7 Contractor and SCE shall establish and implement a financial
incentive service as follows:


4.7.1 Each 2001 Program Participant, other than low income
customers serviced pursuant to SCE's 1999/2001
Refrigerator Replacement Pilot Program For Low Income
Customers, will be entitled to receive a check in the
amount of thirty-five Dollars ($35.00) and/or a
promotional item to be provided by SCE (the
"Promotional Item"). The check and the Promotional
Item are each referred to individually as the
"Incentive".


The Promotional Item shall be delivered to Contractor
at a location to be mutually agreed upon by the
Parties. SCE shall require the manufacturer to
deliver the Promotional Items in packages designed to
diminish the possibility of damage to the units
during transit.


4.7.2 Contractor shall deliver Promotional Items to 2001
Program Participants at the time the Eligible
Appliance is picked up. Each Program Participant who
receives a Promotional Item must sign a receipt
acknowledging that he/she received the


Promotional Item. Requests for checks shall be
processed and mailed via the U.S. Postal System
within 15 business days of the date the Eligible
refrigerator or freezer was picked up.


4.7.3. Contractor shall provide SCE with a weekly listing of
Customers qualifying for an Incentive for SCE's
approval. Customers qualifying for an Incentive are
2001 non low income Program Participants who turn in
an Eligible Appliance for which SCE will pay a
per-unit price as set forth in Section 7.2 of this
Agreement.


4.7.4 Upon SCE's reimbursement of Contractor for the
Incentives described in Section 7.4 of this
Agreement, SCE shall be under no further obligation
with respect to reimbursement of such amounts and
such reimbursement shall constitute full payment to
Contractor on behalf of the 2001 Program Participants
entitled to Incentives. Moreover, upon SCE's payment
to Contractor of such reimbursement, Contractor shall
be deemed the holder of such property as far as the
interests of the 2001 Program Participants entitled
thereto are concerned for any and all purposes,
including, but not limited to, complying with the
unclaimed property laws of California and any and all
other applicable states. SCE shall not assume any
responsibility for other disposition of the
reimbursement payments after such reimbursement is
paid to Contractor and shall not be entitled to the
reversion of any amounts so paid.


4.8 Contractor shall provide SCE with reports for the services
performed under this Agreement as follows:


4.8.1 A monthly report, provided no later than the 15th day
of the month which shall contain the following:


(a) the number of Eligible Appliances processed
through the Recycling Center during the previous
month and the size in cubic feet, year of
manufacture, style, and defrost type.


(b) environmental data such as an estimated breakdown
of amount of refrigerants recovered; number of pounds
of capacitors removed; number and size of CFC-11
units and amount of CFC-11 recovered; amount of
sulfur dioxide recovered, amount of compressor oil
...