**Exhibit 10.1**

 

**FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT**

 

This First Amendment to Amended and Restated Revolving Credit and TermLoan Agreement (this “First Amendment”) is made and entered into as of the 12thday of August, 2008, by and among Continental Materials Corporation, a Delawarecorporation (“Borrower”), LaSalle Bank National Association, a national bankingassociation, as administrative agent and as a lender (LaSalle in its capacityas administrative agent referred to in this Agreement as “Agent” and in itscapacity as a lender as “LaSalle”) and Fifth Third Bank (Chicago), a Michiganbanking corporation, as a lender (“Fifth Third”) (LaSalle and Fifth Third areeach referred to individually in this First Amendment as a “Lender” andcollectively as the “Lenders”).

 

**W I T N E S S E T H****:**

 

**WHEREAS,** prior hereto, Lenders provided certainloans, extensions of credit and other financial accommodations to Borrowerpursuant to (a) that certain Amended and Restated Revolving Credit andTerm Loan Agreement dated as of March 28, 2008, by and among Lenders,Borrower and Agent (the “Credit Agreement”), and (b) the other documents,agreements and instruments referenced in the Credit Agreement or executed anddelivered pursuant thereto;

 

**WHEREAS,** Borrower desires Lenders to (a) waivecertain Events of Default arising from financial covenant violations; (b) modifycertain financial covenants; (c) modify the principal payments on the Termloan; and (d) increase the Commitment – Revolving Credit (collectively,the “Additional Financial Accommodations”); and

 

**WHEREAS,** Lenders are willing to provide theAdditional Financial Accommodations, but solely on the terms and subject to theprovisions set forth in this First Amendment and the other agreements,documents and instruments referenced herein or executed and delivered pursuanthereto.

 

**NOW, THEREFORE**, in consideration of the foregoing, themutual promises and understandings of the parties hereto set forth herein, andother good and valuable consideration, the receipt and sufficiency of suchconsideration is hereby acknowledged, the parties hereto hereby agree as setforth in this First Amendment.

 

I.              **Definitions****:**

 

A.            **Use of Defined Terms**. Except as expressly set forth in this First Amendment, all terms whichhave an initial capital letter where not required by the rules of grammarare defined in the Credit Agreement, or, if not defined in the CreditAgreement, in the “Collateral Agreement” (as defined below).

 

B.            **Amended Definitions**.  Effectiveas of the date of this First Amendment, Section 1.1 of the CreditAgreement is hereby amended by deleting the definitions of “Applicable LIBORMargin”, “Applicable Prime Rate Margin” and “Commitment – Revolving Credit” andsubstituting therefor the following, respectively:

 

“ApplicableLIBOR Margin” for purposes of determining the interest rate on a RevolvingLIBOR Loan and a Term LIBOR Loan, shall mean (a) from August 12,2008, through the day immediately prior to the first quarterly adjustment pursuantto this definition, 3.00% (the “Initial LIBOR Margin”); and (b) theInitial LIBOR Margin as modified by quarterly adjustments (such adjustedInitial LIBOR Margin, the “Applicable LIBOR Margin”) determined basedupon the ratio of Borrower’s consolidated Funded Debt (measured on the date ofthe calculation) to EBITDA (calculated on a rolling four quarters basis) asfollows:

 

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| **If Funded Debt to EBITDA is:**       | ** ** | **Applicable LIBOR Margin is:** | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------------------|------------|
| Greater than or equal  to 3.0 to 1.0                            |       | 3.00                                           | %          |
| Less than 3.0 to 1.0  and greater than or equal to 2.50 to 1.0  |       | 2.25                                           | %          |
| Less than 2.50 to 1.0  and greater than or equal to 2.00 to 1.0 |       | 2.00                                           | %          |
| Less than 2.00 to 1.0  and greater than or equal to 1.5 to 1.0  |       | 1.75                                           | %          |
| Less than 1.50 to 1.0                                           |       | 1.50                                           | %          |

 

Not later thantwenty (20) days after the Agent’s receipt of the quarterly (for each of thefirst three (3) fiscal quarters of each fiscal year) and year-endfinancial statements required by Sections 6.2(a) and (b) hereof foreach of Borrower’s fiscal quarters beginning with the fiscal quarter ending June 28,2008, accompanied by a certificate of the chief accounting officer or Treasurerof Borrower reflecting the ratio of Borrower’s Funded Debt to EBITDA for theperiod of the four fiscal quarters ending on the same date, Agent will determinewhether such financial information indicates that the change in the ratio wouldjustify a change in the Applicable LIBOR Margin.  Any change in the Applicable LIBOR Margin,and in the rate of interest applicable to LIBOR Loans resulting therefrom, shallbe effective as of the first day of the month after the Agent receives thequarterly (for each of the first three (3) fiscal quarters of each fiscalyear) and year-end financial statements required by Section 6.2(a) and(b) hereof for each of Borrower’s fiscal quarters, accompanied by acertificate of the chief accounting officer or Treasurer of Borrower reflectingthe ratio of Borrower’s Funded Debt to EBITDA for the period of the four fiscalquarters ending on the same date.  Suchnew Applicable LIBOR Margin shall continue in effect until the effectiveness ofthe next re-determination thereof. Any determination by Agent of the ratio ofBorrower’s Funded Debt to EBITDA shall be conclusive and binding upon Borrowerand the Lenders provided that it has been made reasonably and in good faith,absent manifest error. If Borrower fails to timely submit the quarterlyfinancial statements and certificate referred to above, the rate of interestapplicable to LIBOR Loans as of the next determination date of the ApplicableLIBOR Margin shall be determined and based upon the Default Rate.  Agent shall notify Lenders and Borrower ofany changes in the Applicable LIBOR Margin within five business days ofdetermining any such change; provided, however, such notice shall not be apre-condition to the effectiveness of any change in the Applicable LIBOR Marginnor shall Agent’s failure to provide such notice be deemed a default by Agentunder this Agreement or give rise to any rights or remedies in favor ofBorrower.

 

“ApplicablePrime Rate Margin” for purposes of determining the interest rate on aRevolving Prime Rate Loan and a Term Prime Rate Loan, shall mean (a) from August 12,2008, through the day immediately prior to the first quarterly adjustmentpursuant to this definition, 1.00% (the “Initial Prime Rate Margin”);and (b) the Initial Prime Rate Margin as modified by quarterly adjustments(such adjusted Initial Prime Rate Margin, the “Applicable Prime Rate Margin”)determined based upon the ratio of Borrower’s consolidated Funded Debt(measured on the date of the calculation) to EBITDA (calculated on a rollingfour quarters basis) as follows:

 

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| **If Funded Debt to EBITDA is:**       | ** ** | **Applicable Prime Rate Margin is:** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| Greater than or equal  to 3.0 to 1.0                            |       | 1.00                                                     | %          |
| Less than 3.0 to 1.0  and greater than or equal to 2.50 to 1.0  |       | 0.25                                                     | %          |
| Less than 2.50 to 1.0  and greater than or equal to 2.00 to 1.0 |       | 0                                                        | %          |
| Less than 2.00 to 1.0  and greater than or equal to 1.5 to 1.0  |       | 0                                                        | %          |
| Less than 1.50 to 1.0                                           |       | 0                                                        | %          |

 

Not later thantwenty (20) days after the Agent’s receipt of the quarterly (for each of thefirst three (3) fiscal quarters of each fiscal year) and year-endfinancial statements required by Section 6.2(a) and (b) hereoffor each of Borrower’s fiscal quarters beginning with the fiscal quarter endingJune 28, 2008, accompanied by a certificate of the chief accountingofficer or Treasurer of Borrower reflecting the ratio of Borrower’s Funded Debtto EBITDA for the period of the four fiscal quarters ending on the same date,Agent will determine whether such financial information indicates that thechange in the ratio would justify a change in the Applicable Prime Rate Margin.Any change in the Applicable Prime Rate Margin, and in the rate of interestapplicable to Prime Rate Loans resulting therefrom, shall be effective as ofthe first day of the month after the Agent receives the quarterly (for each ofthe first three (3) fiscal quarters of each fiscal year) and year-endfinancial statements required by Sections 6.2(a) and (b) hereof foreach of Borrower’s fiscal quarters, accompanied by a certificate of the chiefaccounting officer or Treasurer of Borrower reflecting the ratio of Borrower’sFunded Debt to EBITDA for the period of the four fiscal quarters ending on thesame date.  Such new Applicable PrimeRate Margin shall continue in effect until the effectiveness of the nextre-determination thereof. Any determination by Agent of the ratio of Borrower’sFunded Debt to EBITDA shall be conclusive and binding upon Borrower and theLenders provided that it has been made reasonably and in good faith, absentmanifest error. If Borrower fails to timely submit the quarterly financialstatements and certificate referred to above, the rate of interest applicableto Prime Rate Loans as of the date such statements and certificate are dueshall be determined and based upon the Default Rate.  Agent shall notify Lenders and Borrower ofany changes in the Applicable Prime Rate Margin within five business days ofdetermining such change; provided, however, such notice shall not be apre-condition to the effectiveness of any change in the Applicable Prime RateMargin nor shall Agent’s failure to provide such notice be deemed a default byAgent under this Agreement or give rise to any rights or remedies in favor ofBorrower.

 

“Commitment –Revolving Credit” shall mean each such amount set forth below across fromthe name of each Lender:

 

a.             From March 28, 2008 through December 31,2008:

 
| **Lender**  | ** ** | **Amount** | ** ** |
|-------------|------------|------------|------------|
| LaSalle     |       | $          | 10,800,000 |   |
| Fifth Third |       | $          | 7,200,000  |   |

 

b.             From January 1, 2009 to the Termination Date:

 
| **Lender**  | ** ** | **Amount** | ** ** |
|-------------|------------|------------|------------|
| LaSalle     |       | $          | 9,000,000  |   |
| Fifth Third |       | $          | 6,000,000  |   |

 

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C.            **New Definition**.  Effective asof the date of this First Amendment, Section 1.1 of the Loan Agreement ishereby amended by adding the following new definition thereto in theappropriate alphabetical order:

 

“CollateralAgreement” shall mean that certain Collateral Agreement of even date herewithby and among Borrower, each Subsidiary and Agent, as amended or restated fromtime to time.

 

II.            **Amendment to Credit Agreement**. Effective as of the date of this First Amendment, the Credit Agreementis hereby amended as follows:

 

A.            Section 2.5 of the Credit Agreement is herebyamended by deleting Section 2.5 of the Credit Agreement in its entiretyand substituting the following therefor:

 

“SECTION 2.5       TERM LOAN PAYMENTS.

 

The Term Loanshall be evidenced by term notes (collectively the “Term Note”), substantiallyin the form of Exhibit B, with appropriate insertions, dated as of March 28,2008, payable to the order of each Lender, in the current principal amount ofeach Lender’s Pro Rata Share of the Term Loan. Borrower shall pay the principal amount of the Term Loan in thirteen(13) quarterly principal payments as follows: (a) two (2) quarterlypayments in the amount of $600,000 each, due on March 31, 2008, and June 30,2008, (b) ten (10) quarterly payments in the amount of $414,286 each,due on the last day of each calendar quarter beginning September 30, 2008and continuing through and including December 31, 2010, and (c) afinal payment of all outstanding Term Loan indebtedness on March 31, 2011.”

 

B.            Section 5.5 of the Credit Agreement is hereby amendedby deleting Section 5.5 of the Credit Agreement in its entirety andsubstituting the following therefor:

 

“SECTION 5.5       LIENS.

 

None of the assetsof Borrower or any Subsidiary are subject to any mortgage, pledge, titleretention lien, or other lien, encumbrance or security interest, except for: (a) currenttaxes not delinquent or taxes being contested in good faith and by appropriateproceedings; (b) liens arising in the ordinary course of business for sumsnot due or sums being contested in good faith and by appropriate proceedings,but not involving any deposits or advances or borrowed money or the deferredpurchase price of property or services; (c) liens existing on the datehereof as listed in Exhibit F hereto; and (d) liens in favor of theAgent for the benefit of the Lenders.”

 

C.*           *Financial Covenants.  Section 6.4of the Credit Agreement is hereby amended by deleting Section 6.4 of theCredit Agreement in its entirety and substituting the following therefor:

 

## ***“SECTION 6.4***       FINANCIAL REQUIREMENTS.

## *** ***

Unless at any timeall Lenders shall otherwise expressly consent in writing, until all of theobligations of Borrower under this Agreement and the Notes are fully paid andperformed, Borrower shall:

 

(a)           Fixed Charge Coverage Ratio. Not permit Borrower’s consolidated Fixed Charge Coverage Ratio to beless than 1.0 to 1.0 for the twelve (12) month Measurement Period ending January 3,2009, or for any twelve (12) month Measurement Period ending as of the end ofeach fiscal quarter thereafter.  Borrower’sFixed Charge Coverage Ratio shall not be tested for the Measurement Periodending September 27, 2008;

 

(b)           Current Ratio.  Not permitthe ratio of Borrower’s consolidated current assets to current liabilitiesdetermined as of the end of each fiscal quarter of Borrower’s fiscal year, tobe less than 1.50:1.0;

 

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(c)           Tangible Net Worth.  Not permitBorrower’s consolidated Tangible Net Worth, determined as of the end of eachfiscal quarter of Borrower’s fiscal year, to be less than $34,641,000 plusfifty percent (50%) of Borrower’s cumulative consolidated net income(disregarding cumulative consolidated net loss) for all periods subsequent to December 29,2007;

 

(d)           Leverage Ratio.  Not permitBorrower’s ratio of (i) consolidated Funded Debt as of the end of eachfiscal quarter of Borrower’s fiscal year, to (ii) consolidated EBITDA forthe Measurement Period ending as of the last day of such quarter calculated ona rolling four (4) quarters basis, to exceed (i) 4.0 to 1.0 as of March [31],2009 or June [30], 2009, or (ii) 2.5 to 1.0 as of September [30],2009, or as of the end of any fiscal quarter thereafter.  Borrower’s leverage ratio shall not be testedfor the fiscal quarters ending September 27, 2008 or January 3, 2009;and

 

(e)           Quarterly EBITDA.  Not permitBorrower’s consolidated EBITDA, calculated for the three (3) month fiscalquarter ending September 27, 2008, to be less than $1,700,000.”

 

D.            Field Examination. Borrower and its Subsidiaries will fully cooperate with Agent and any ofits agents in performing one or more field examinations of Borrower and itsSubsidiaries from time to time.  Allcosts, fees and expenses charged or incurred by Agent in connection therewithshall be paid by Borrower upon demand by Agent.

 

E.             Exhibit “F”. The Loan Agreement is hereby amended by deleting Exhibit “F”attached thereto in its entirety and substituting therefor Exhibit “F”attached to this First Amendment.

 

III.           **Conditions Precedent**. Lenders’ obligation to provide the AdditionalFinancial Accommodations to Borrower is subject to the full and timelyperformance of the following covenants prior to or contemporaneously with theexecution of this First Amendment:

 

A.            Borrower executing and delivering, orcausing to be executed and delivered to Agent and Lenders, the followingdocuments, each of which shall be in form and substance acceptable to Agent andLenders:

 
| (i)    | A fully executed  original of a Company General Certificate executed and delivered by Borrower  to Agent and Lenders;                                                                     |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                      |
| (ii)   | A fully executed  original Reaffirmation of Guaranties executed and delivered to Agent and  Lenders by each of the Borrower’s Subsidiaries that executed the Subsidiary  Guaranties; |
|   |                                                                                                                                                                                      |
| (iii)  | A fully executed  Collateral Agreement executed and delivered by Borrowers and each of  Borrower’s Subsidiaries to Agent; and                                                        |
|   |                                                                                                                                                                                      |
| (iv)   | such other  agreements, documents and instruments as Agent or Lenders may reasonably  request;                                                                                            |

 

B.            No Event of Default or Unmatured Event ofDefault exists under the Credit Agreement, as amended by this First Amendment,or the other Loan Documents;

 

C.            No claims, litigation, arbitrationproceedings or governmental proceedings not disclosed in writing to Agent priorto the date hereof shall be pending or known to be threatened against Borrowerand no known material development not so disclosed shall have occurred in anyclaims, litigation, arbitration proceedings or governmental proceedings sodisclosed which in the opinion of Agent is likely to materially and adverselyaffect the financial position or business of Borrower or the capability ofBorrower to pay its obligations and liabilities to Lenders; and

 

D.            There shall have been no material oradverse change in the business, financial condition or results of operationssince the date of Borrower’s most recently delivered financial statements toAgent and Lenders.

 

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IV.           **Waiverof Defaults**.  Borrower hereby acknowledges and agreesthat Borrower has failed to satisfy the EBITDA covenant set forth in Section 6.4(e) ofthe Loan Agreement as of June 28, 2008, and the leverage ratio covenantset forth in Section 6.4(d) of the Loan Agreement for the periodending June 28, 2008 (collectively the “Existing Defaults”).  Borrower hereby represents and warrants tothe Agent and the Lenders that no Unmatured Event of Default or Event ofDefault exists as of the date of this First Amendment, other than the ExistingDefaults.  The Agent and the Lendershereby waive the Existing Defaults; provided that such waiver shall not be orbe deemed to be a waiver of any other Events of Default, whether now existingor hereafter arising or occurring, including, without limitation, any otherEvents of Default arising under Section 6.4 of the Loan Agreement.

 

V.            **Conflict**.  If, and to the extent, the terms andprovisions of this First Amendment contradict or conflict with the terms andprovisions of the Credit Agreement, the terms and provisions of this FirstAmendment shall govern and control; provided, however, to the extent the termsand provisions of this First Amendment do not contradict or conflict with theterms and provisions of the Credit Agreement, the Credit Agreement, as amendedby this First Amendment, shall remain in and have its intended full force andeffect, and Lenders, Borrower and the Agent hereby affirm, confirm and ratifythe same.

 

VI.           **Severability****.** Whereverpossible, each provision of this First Amendment shall be interpreted in suchmanner as to be valid and enforceable under applicable law, but if anyprovision of this First Amendment is held to be invalid or unenforceable by acourt of competent jurisdiction, such provision shall be severed herefrom andsuch invalidity or unenforceability shall not affect any other provision ofthis First Amendment, the balance of which shall remain in and have itsintended full force and effect. Provided, however, if such provision may be modified so as to be validand enforceable as a matter of law, such provision shall be deemed to bemodified so as to be valid and enforceable to the maximum extent permitted bylaw.

 

VII.          **Reaffirmation**.  As of the date of this FirstAmendment, Borrower hereby reaffirms and remakes all of its representations,warranties, covenants, duties, obligations and liabilities contained in theCredit Agreement, as amended hereby.

 

VIII.        **Fees, Costs and Expenses****.**

 

A.            Contemporaneously herewith, Borrowershall pay to Agent, for the ratable benefit of the Lenders based upon each suchLender’s Pro Rata Share, a fully earned, non-refundable waiver and amendmentfee in the amount of $50,000.

 

B.            Borrower agrees to pay, upon demand, allfees, costs and expenses of Lenders, including, but not limited to, reasonableattorneys’ fees, in connection with the preparation, execution, delivery andadministration of this First Amendment and the other agreements, documents andinstruments executed and delivered in connection herewith or pursuant hereto.

 

IX.           **Choice of Law**.  This First Amendment shall begoverned by and construed in accordance with the laws of the State of Illinois,regardless of the laws that might otherwise govern under applicable principlesof conflicts of law as to all matters, including matters of validity,construction, effect, performance and remedies.

 

X.            **Agent Collateral Matters**. The Lenders irrevocably authorize the Agent, at its option and in itsdiscretion, to (a) release any Lien or guaranty granted to or held by theAgent under any Loan Document (i) upon termination of the Commitment –Revolving Credit and payment in full of all Loans and all other Obligations ofthe Borrower hereunder and the expiration or termination of all Letters ofCredit; (ii) constituting property sold or to be sold or disposed of aspart of or in connection with any disposition permitted hereunder; or (iii) ifapproved, authorized or ratified in writing by the Lenders; or (b) tosubordinate its interest in any Collateral to any holder of a Lien on suchCollateral if approved, authorized or ratified by the Lenders.  Upon request by the Agent at any time, theLenders will confirm in writing the Agent’s authority to release, orsubordinate its interest in, particular types or items ofCollateral pursuant to this X.

 

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XI.           **Waiverand Release**.  IN CONSIDERATION OF AGENT’S AND EACH LENDER’SEXECUTION AND DELIVERY OF THIS FIRST AMENDMENT, BORROWER HEREBY, INDIVIDUALLYAND COLLECTIVELY, WAIVES, RELEASES AND FOREVER DISCHARGES AGENT, EACH LENDERAND THEIR PREDECESSORS, PARENTS, SUBSIDIARIES, AFFILIATES, AGENTS, EMPLOYEES,OFFICERS, DIRECTORS, SHAREHOLDERS, ATTORNEYS, LEGAL REPRESENTATIVES, SUCCESSORSAND ASSIGNS, AND EACH OF THEM, OF AND FROM ANY AND ALL CLAIMS, DEMANDS,COUNTERCLAIMS, SET-OFFS, DEFENSES, DEBTS, OBLIGATIONS, COSTS, EXPENSES,ACTIONS, CAUSES OF ACTION AND DAMAGES OF EVERY KIND, NATURE AND DESCRIPTIONWHATSOEVER, KNOWN OR UNKNOWN, FORESEEABLE OR UNFORESEEABLE, LIQUIDATED ORUNLIQUIDATED, AND INSURED OR UNINSURED, WHICH BORROWER AND/OR ANY SUBSIDIARYHERETOFORE, NOW AND FROM TIME TO TIME HEREAFTER OWNS, HOLDS OR HAS BY REASON OFANY MATTER, CAUSE OR THING WHATSOEVER, ARISING ON OR BEFORE THE DATE OF THISFIRST AMENDMENT FROM, RELATING TO OR IN CONNECTION WITH THE LOAN DOCUMENTS, THELOANS OR ANY OTHER OBLIGATIONS OF BORROWER TO AGENT AND LENDERS.

 

**[Remainder of Page Intentionally Left Blank]**

 

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**INWITNESS WHEREOF,**Lenders, Borrower and Agent have caused this First Amendment to be executed anddelivered by their duly authorized officers as of the date first set forthabove.

 

 
| ** ** | ** ** | ** ** | ** ** | ** ** | **CONTINENTAL MATERIALS  CORPORATION**  |
|------------|------------|------------|------------|------------|-----------------------------------------|
| ** ** | ** ** | ** ** | ** ** | ** ** | ** **                              |
| ** ** | ** ** | ** ** | ** ** | ** ** | ** **                              |
|       |       |       |       |       | By:                                     |   |
|       |       |       |       |       |                                    | Joseph J. Sum, Vice President |
|       |       |       |       |       |                                    |   |
| ** ** | ** ** | ** ** | ** ** | ** ** | **LASALLE BANK NATIONAL  ASSOCIATION**, |
|       |       |       |       |       | as Agent and a Lender                   |
|       |       |       |       |       |                                    |
|       |       |       |       |       |                                    |
|       |       |       |       |       | By:                                     |   |
|       |       |       |       |       | Its:                                    |   |
|       |       |       |       |       |                                    |   |
| ** ** | ** ** | ** ** | ** ** | ** ** | **FIFTH THIRD BANK (CHICAGO),**         |
| ** ** | ** ** | ** ** | ** ** | ** ** | as a Lender                             |
| ** ** | ** ** | ** ** | ** ** | ** ** | ** **                              |
|       |       |       |       |       |                                    |
|       |       |       |       |       | By:                                     |   |
|       |       |       |       |       | Its:                                    |   |

 

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