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EXHIBIT 10.02
 
FIRST AMENDMENT AGREEMENT
 
This FIRST AMENDMENT AGREEMENT (this “Amendment”) is made as of the 17th day of
May, 2012 among:
 
(a)           COLONIAL COMMERCIAL CORP., a New York corporation (“Colonial”);

(b)           UNIVERSAL SUPPLY GROUP, INC., a New York corporation
(“Universal”);

(c)           THE RAL SUPPLY GROUP, INC., a New York corporation (“RAL”);

(d)           S&A SUPPLY, INC., a New York corporation (“S&A” and, together with
Colonial, Universal and RAL, collectively, “Borrowers” and, individually, each a
“Borrower”); and

(e)           KEYBANK NATIONAL ASSOCIATION, a national banking association
(“Lender”).

WHEREAS, Borrowers and Lender are parties to that certain Credit and Security
Agreement, dated as of October 18, 2011, that provides, among other things, for
loans and letters of credit aggregating Fifteen Million Dollars ($15,000,000),
all upon certain terms and conditions (as the same may from time to time be
amended, restated or otherwise modified, the “Credit Agreement”);

WHEREAS, Borrowers and Lender desire to amend the Credit Agreement to modify
certain provisions thereof and add certain provisions thereto;

WHEREAS, each capitalized term used herein and defined in the Credit Agreement,
but not otherwise defined herein, shall have the meaning given such term in the
Credit Agreement; and

WHEREAS, unless otherwise specifically provided herein, the provisions of the
Credit Agreement revised herein are amended effective as of the date of this
Amendment.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrowers and Lender agree as follows:

1.            Amendment to Definitions in the Credit Agreement.  Section 1.1 of
the Credit Agreement is hereby amended to delete the definitions of “Borrowing
Base” and “Goldman Associates Short-Term Subordinated Indebtedness” therefrom
and to insert in place thereof, respectively, the following:

“Borrowing Base” means an amount equal to the total of the following:

(a)           up to eighty-five percent (85%) of the aggregate amount due and
owing on Eligible Accounts Receivable of Borrowers; plus
 
 
 

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(b)           the lesser of (i) up to fifty-five percent (55%) of the aggregate
of the cost or market value (whichever is lower), as determined on a first-in
first-out basis in accordance with GAAP, of the Eligible Inventory of Borrowers,
or (ii) Six Million Five Hundred Thousand Dollars ($6,500,000); plus

(c)           during the Temporary Increase Period, the Temporary Increase
Amount; minus

(d)           Reserves, if any;

provided that, anything herein to the contrary notwithstanding, Lender shall at
all times have the right to modify or reduce such percentages or dollar amount
caps or other components of the Borrowing Base from time to time, in its
reasonable credit judgment.

“Goldman Associates Short-Term Subordinated Indebtedness” means unsecured
Subordinated Indebtedness from time to time owing by one or more Borrowers to
Goldman Associates (other than Indebtedness permitted pursuant to Section
5.8(h)(ii) hereof) and/or Michael Goldman, so long as (a) the aggregate
principal amount of all such Subordinated Indebtedness, for all Borrowers, does
not exceed (i) from the First Amendment Effective Date through the date that is
two days after the last day of the Temporary Increase Period, Five Hundred
Thousand Dollars ($500,000) at any time outstanding, and (ii) at all times
thereafter, Three Hundred Fifty Thousand Dollars ($350,000) at any time
outstanding, (b) each advance made with respect thereto has a maturity date of
no more than eighty-nine (89) days after the date of such advance, (c) such
Subordinated Indebtedness is subject to a Subordination Agreement acceptable to
Lender, (d) Administrative Borrower shall have provided notice to Lender prior
to, or contemporaneously with, the incurrence of all such Goldman Associates
Short-Term Subordinated Indebtedness, and (e) such Subordinated Indebtedness is
created pursuant to documentation in form and substance satisfactory to Lender.

2.            Additions to Definitions in the Credit Agreement.  Section 1.1 of
the Credit Agreement is hereby amended to add the following new definitions
thereto:

“First Amendment Effective Date” means May 17, 2012.

“S&A Lee Bank Account” means that certain Deposit Account numbered 23458
maintained by S&A with Lee Bank.

“Temporary Increase Amount” means Five Hundred Thousand Dollars ($500,000).

“Temporary Increase Period” means the period from the First Amendment Effective
Date through August 12, 2012.

 
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3.            Amendment to Commitment and Other Fees Provisions.  Section 2.8 of
the Credit Agreement is hereby amended to add the following new subsection (h)
at the end thereof:

(h)           Temporary Increase Fee.  Borrowers shall pay to Lender, as
consideration for the Temporary Increase Amount, a temporary increase fee from
the First Amendment Effective Date to and including the last day of the
Temporary Increase Period, payable monthly, at a rate per annum equal to fifty
(50) basis points multiplied by the Temporary Increase Amount.  The temporary
increase fee shall be payable in arrears, on June 1, 2012 and continuing on each
Regularly Scheduled Payment Date thereafter during the Temporary Increase Period
and on the last day of the Temporary Increase Period.

4.            Amendment to Post-Closing Conditions.  Section 4.3 of the Credit
Agreement is hereby retroactively amended, effective as of the Closing Date, to
delete Section 4.3 therefrom.

5.            Retroactive Amendment to Permitted Borrowing Covenant
Provisions.  Section 5.8 of the Credit Agreement is hereby retroactively
amended, effective as of the Closing Date, to delete subsection (h) therefrom
and to insert in place thereof the following:

(h)           (i) unsecured Subordinated Indebtedness owing to the Investor
Subordinated Creditors (other than Goldman Associates), in an aggregate
principal amount not to exceed Two Hundred Seventy Thousand Dollars ($270,000),
(ii) unsecured Subordinated Indebtedness owing to Goldman Associates, in an
aggregate principal amount (excluding any Goldman Associates Short-Term
Subordinated Indebtedness) not to exceed One Hundred Seventy-One Thousand
Thirty-Three Dollars ($171,033), and (iii) secured Subordinated Indebtedness
owing to Goldman Associates (excluding any Goldman Associates Short-Term
Subordinated Indebtedness) not to exceed Seven Hundred Fifty Thousand Dollars
($750,000); so long as, in each case, such Subordinated Indebtedness is subject
to a Subordination Agreement acceptable to Lender; and

6.            Retroactive Amendment to Permitted Lien Covenant
Provisions.  Section 5.9 of the Credit Agreement is hereby retroactively
amended, effective as of the Closing Date, to delete subsection (i) therefrom
and insert in place thereof the following new subsection (i):

(i)           Liens securing the Subordinated Indebtedness owing to Goldman
Associates permitted pursuant to Section 5.8(h)(iii) hereof.

7.            Amendment to Restricted Payments Covenant Provisions.  Section
5.15 of the Credit Agreement is hereby amended to delete subsection (a)
therefrom and insert in place thereof the following:

(a)           so long as no Default or Event of Default shall then exist or,
after giving pro forma effect to such payment, thereafter shall begin to exist,
Borrowers may make regularly scheduled payments of principal and interest with
respect to the Subordinated Indebtedness (including, without limitation, the
Goldman Associates Short-Term Subordinated Indebtedness) owing to the Investor
Subordinated Creditors; provided that no such payments shall be made with
respect to the Goldman Associates Short-Term Subordinated Indebtedness until two
days after the termination of the Temporary Increase Period.
 
 
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8.            Retroactive Amendment to Collateral Covenant Provisions.  Section
5.22 of the Credit Agreement is hereby retroactively amended, as of the Closing
Date, to delete subsections (e) and (g) therefrom and insert in place thereof,
respectively, the following:

(e)           with respect to each Deposit Account that is not maintained with
Lender (other than the Colonial Wells Fargo Account and the S&A Lee Bank
Account), transfer all monies in excess of Twenty-Five Thousand Dollars
($25,000) in such Deposit Account to the Cash Collateral Account no less
frequently than two times per week;

(g)           (i) with respect to the Wells Fargo Account, transfer all monies
in excess of One Hundred Thousand Dollars ($100,000) in the Wells Fargo Account
to the Cash Collateral Account no less frequently than two times per week, (ii)
with respect to the S&A Lee Bank Account, transfer all monies in excess of
Twenty-Five Thousand Dollars ($25,000) in the S&A Lee Bank Account to the Cash
Collateral Account no less frequently than two times per week, and (iii) with
respect to both the Wells Fargo Account and the S&A Lee Bank Account, no later
than thirty (30) days after the receipt of written notice from Lender, deliver
to Lender a Control Agreement for each account, in form and substance
satisfactory to Lender if (A) the Revolving Credit Availability shall be less
than Five Hundred Thousand Dollars ($500,000) for a period of five days in any
period of ten (10) consecutive Business Days, or (B) any Default or Event of
Default shall occur;

9.            Closing Deliveries.  Concurrently with the execution of this
Amendment, Borrowers shall:

(a)           deliver to Lender an officer’s certificate certifying that, as of
the First Amendment Effective Date, the aggregate principal amount of the
Goldman Associates Short-Term Subordinated Indebtedness is equal to the
Temporary Increase Amount;

(b)           if the Goldman Associates Short-Term Subordinated Indebtedness, as
of the First Amendment Effective Date, is owing to Michael Goldman, deliver to
Lender a Subordination Agreement for Michael Goldman, in form and substance
satisfactory to Lender; and

(c)           pay all legal fees and expenses of Lender in connection with this
Amendment.

10.           Representations and Warranties.  Borrowers hereby represent and
warrant to Lender that (a) Borrowers have the legal power and authority to
execute and deliver this Amendment; (b) the officers executing this Amendment
have been duly authorized to execute and deliver the same and bind Borrowers
with respect to the provisions hereof; (c) the execution and delivery hereof by
Borrowers and the performance and observance by Borrowers of the provisions
hereof do not violate or conflict with the Organizational Documents of Borrowers
or any law applicable to Borrowers or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrowers; (d) after giving effect to this
Amendment, no Default or Event of Default exists, nor will any occur immediately
after the execution and delivery of this Amendment or by the performance or
observance of any provision hereof; (e) each of the representations and
warranties contained in the Loan Documents is true and correct in all material
respects as of the First Amendment Effective Date as if made on the First
Amendment Effective Date, except to the extent that any such representation or
warranty expressly states that it relates to an earlier date (in which case such
representation or warranty is true and correct in all material respects as of
such earlier date); (f) Borrowers are not aware of any claim or offset against,
or defense or counterclaim to, Borrowers’ obligations or liabilities under the
Credit Agreement or any other Related Writing; and (g) this Amendment
constitutes a valid and binding obligation of Borrowers in every respect,
enforceable in accordance with its terms.
 
 
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11.           No Course of Dealing.  Borrowers acknowledge and agree that this
Amendment is not intended to, nor shall it, establish any course of dealing with
respect to the various provisions amended herein, or otherwise, among Borrowers
and Lender that is inconsistent with the express terms of the Loan Documents.

12.           Waiver and Release.  Borrowers, by signing below, hereby waive and
release Lender, and its directors, officers, employees, attorneys, affiliates
and subsidiaries, from any and all claims, offsets, defenses and counterclaims,
such waiver and release being with full knowledge and understanding of the
circumstances and effect thereof and after having consulted legal counsel with
respect thereto.

13.           References to Credit Agreement and Ratification.  Each reference
to the Credit Agreement that is made in the Credit Agreement or any other
Related Writing shall hereafter be construed as a reference to the Credit
Agreement as amended hereby. Except as otherwise specifically provided herein,
all terms and provisions of the Credit Agreement are confirmed and ratified and
shall remain in full force and effect and be unaffected hereby. This Amendment
is a Loan Document.

14.           Counterparts.  This Amendment may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile or other electronic signature, each of which, when so executed and
delivered, shall be deemed to be an original and all of which taken together
shall constitute but one and the same agreement.

15.           Headings.  The headings, captions and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.

16.           Severability.  Any provision of this Amendment that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
 
 
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17.           Governing Law.  The rights and obligations of all parties hereto
shall be governed by the laws of the State of New York, without regard to
principles of conflicts of laws.

[Remainder of page intentionally left blank.]
 
 
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JURY TRIAL WAIVER.  BORROWERS AND LENDER, TO THE EXTENT PERMITTED BY LAW, EACH
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWERS AND LENDER, OR
ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AMENDMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of
the date first set forth above.
 

  COLONIAL COMMERCIAL CORP.        
By:
/s/ William Pagano

 
Name:
William Pagano
 
Title:
Chief Executive Officer

 

  UNIVERSAL SUPPLY GROUP, INC.        
By:
/s/ William Pagano

 
Name:
William Pagano
 
Title:
President

 

  THE RAL SUPPLY GROUP, INC.        
By:
/s/ William Pagano

 
Name:
William Pagano
 
Title:
Executive Vice President

 

  S&A SUPPLY, INC.        
By:
/s/ William Pagano

 
Name:
William Pagano
 
Title:
President

 

  KEYBANK NATIONAL ASSOCIATION        
By:
/s/Nadine M. Eames
   
Nadine M. Eames
    Vice President

 
 
Signature Page to
First Amendment Agreement

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