**Exhibit 10**

 

**REVOLVING CREDIT AND TERM LOAN AGREEMENT**

 

Dated as of September 5, 2003

 

CONTINENTALMATERIALS CORPORATION, a corporation organized under the laws of the state ofDelaware (“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 Agreement as a “Lender” and collectivelyas the “Lenders”), agree as follows:

 

**RECITALS:**

 

A.            Borrower desires Lenders to providecertain extensions of credit, loans or other financial accommodations toBorrower (the “Financial Accommodations”).

 

B.            Lenders are willing to provide theFinancial Accommodations to Borrower, but solely on the terms and subject tothe conditions set forth in this Agreement and the other documents, instrumentsand agreements executed and delivered pursuant to this Agreement or referencedherein.

 

**NOWTHEREFORE,**in consideration of the FinancialAccommodations, the mutual promises and understandings of Lenders and Borrowerset forth herein, and other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, Lenders and Borrower hereby agreeas set forth in this Agreement.

 

SECTION 1.DEFINITIONS

 

SECTION 1.1         GENERAL.

 

The following words, terms or phrases shallhave the following meanings:

 

“Affiliate”means any corporation of which Borrower owns directly or indirectly 20% ormore, but less than 50%, of the outstanding voting stock, or any partnership,joint venture, trust or other legal entity of which Borrower has effectivecontrol, by contract or otherwise.

 

“Agent-RelatedPerson” shall mean the Agent and any successor thereto appointed pursuantto Section 9.9 or otherwise succeeding the Agent, together with theirrespective affiliates, and the officers, directors, employees, agents andattorneys-in-fact of such entities and affiliates.

 

“ApplicableLIBOR Margin” for purposes of determining the interest rate on:

 

(i)            a Revolving LIBOR Loan, shall mean(a) prior to the first quarterly adjustment pursuant to clause (b) of thissubparagraph (i), 1.25% (the “Normal Revolving LIBOR Margin”);

 

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and (b) the Normal Revolving LIBOR Margin asmodified by quarterly adjustments (such adjusted Normal Revolving LIBOR Margin,the “Applicable Revolving LIBOR Margin”) determined based upon the ratioof Borrower’s consolidated Funded Debt (measured on the date of thecalculation) to EBITDA (calculated on a rolling four quarters basis) asfollows:

 
| **If Funded  Debt to EBITDA is:**                               |   | **Applicable  Revolving LIBOR Margin is:** |   |
|-----------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                            |   |                                       |   |
| Greater than or equal to 2.01 to 1.0                            |   | 1.75                                       | %      |
|                                                            |   |                                       |   |
| Less than 2.01 to 1.0 and greater than or  equal to 1.51 to 1.0 |   | 1.50                                       | %      |
|                                                            |   |                                       |   |
| Less than 1.51 to 1.0                                           |   | 1.25                                       | %      |

 

(ii)           a Term LIBOR Loan, shall mean either(a) the Normal Revolving LIBOR Margin plus .25%, or (b) the ApplicableRevolving LIBOR Margin, plus .25%, in each case as determined in accordancewith subparagraph (i) hereof.

 

Not later thantwenty (20) days after the Agent’s receipt of the quarterly financialstatements required by Section 6.2(a) hereof for each of Borrower’s fiscalquarters, accompanied by a certificate of the chief accounting officer orTreasurer of Borrower reflecting the ratio of Borrower’s Funded Debt to EBITDAfor the period 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 and shall then notify Borrowerand the Lenders of such determination and of any change in the Applicable LIBORMargin resulting therefrom. Any change in the Applicable LIBOR Margin, and inthe rate of interest applicable to LIBOR Loans resulting therefrom, shall beeffective as of the first day of the month after the Agent provides notice toBorrower and the Lenders of any change in the Applicable LIBOR Margin, and withsuch new Applicable LIBOR Margin to continue in effect until the effectivenessof the next re-determination thereof. Any determination by Agent of the ratioof Borrower’s Funded Debt to EBITDA shall be conclusive and binding uponBorrower and the Lenders provided that it has been made reasonably and in goodfaith, 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.

 

“Borrowing”shall mean the total of Loans of a single type (i.e. LIBOR Loan or Prime RateLoan) made by the Lenders to Borrower on a single date and for a singleInterest Period, if applicable. Borrowings of Loans are made ratably from eachof the Lenders according to their respective commitments.

 

“BorrowingNotice” shall have the meaning set forth in Section 4.2 below.

 

“BusinessDay” shall mean any day other than a Saturday, Sunday or other day on whichbanks in Chicago, Illinois are authorized to close, and with respect to LIBORLoans, a day on which dealings in United States Dollars may be carried on bythe Agent in the London interbank eurodollar market.

 

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“CommitmentFee” shall mean the commitment fee of three-eighths of one percent (3/8%)per year on the average daily unused amount of each Lender’s Commitment -Revolving Credit which Borrower agrees to pay each Lender hereunder.

 

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

 
| **Lender**  |   | **Amount** |      |
|-------------|--------|------------|-----------|
| LaSalle     |   | $          | 6,000,000 |   |
| Fifth Third |   | $          | 4,000,000 |   |

 

“Commitment- Term Loan” shall mean each such amount set forth below across from thename of each Lender:

 
| **Lender**  |   | **Amount** |      |
|-------------|--------|------------|-----------|
| LaSalle     |   | $          | 6,900,000 |   |
| Fifth Third |   | $          | 4,600,000 |   |

 

“DefaultRate” shall have the meaning set forth in Section 3.5 below.

 

“EBITDA”,with reference to any Measurement Period, shall mean, on a consolidated basis,the sum of Borrower’s:

 

(i)            consolidated net income after allprovisions or credits for any Federal, state or other income taxes, plus

 

(ii)           Federal, state and other income taxesdeducted in the determination of consolidated net income, plus

 

(iii)          Interest Expense deducted in thedetermination of consolidated net income, plus

 

(iv)          depreciation, depletion andamortization expense deducted in the determination of consolidated net income,and minus

 

(v)           any items of gain which areextraordinary items to the extent reflected in the determination ofconsolidated net income.

 

“ExistingLetter of Credit” shall mean that certain letter of credit issued byLaSalle in favor of St. Paul Fire and Marine Insurance Co. in the amount of$995,000 that is referred to as Letter of Credit No.: S500399.

 

“FixedCharges” for any Measurement Period, shall mean, on a consolidated basis,the sum of Interest Expense and all principal payments in satisfaction ofIndebtedness scheduled or otherwise made during such Measurement Period(including capitalized lease obligations) by Borrower, but excluding anypayments on the Revolving Credit Loan.

 

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“FixedCharge Coverage Ratio” shall mean for any Measurement Period consisting ofthe four fiscal quarters of Borrower ending as of the end of each fiscalquarter of Borrower, the ratio of Income Available for Fixed Charges to FixedCharges.

 

“FundedDebt” shall mean, for any Person, (i) all Indebtedness created, assumed orincurred in any manner by such Person representing money borrowed (includingbut not limited to the issuance of debt securities), (ii) all Indebtedness forthe deferred purchase price of property or services (other than trade accountspayable arising in the ordinary course of business which are not more thansixty (60) days past due), (iii) all Indebtedness secured by any lien uponproperty of such Person, whether or not such Person has assumed or becomeliable for the payment of such Indebtedness, (iv) all capitalized leaseobligations of such Person, and (v) all obligations of such Person on or withrespect to letters of credit, bankers’ acceptances and other extensions ofcredit excluding any letters of credit which have not been drawn upon.

 

“GAAP”shall mean generally accepted accounting principles consistently applied fromtime to time.

 

“IncomeAvailable for Fixed Charges” shall mean, for any Measurement Period,EBITDA, minus the sum of capital expenditures not financed by long-term debtand cash dividends paid to Borrower’s shareholders, all as determined forBorrower on a consolidated basis.

 

“Indebtedness”of any entity or consolidated group means, without duplication:

 

(i)            all obligations, contingent orotherwise, of such entity for borrowed money and all obligations of such entityevidenced by bonds, debentures, notes or other similar instruments;

 

(ii)           all obligations of such entity aslessee under leases which have been or should be, in accordance with GAAP,recorded as capitalized lease liabilities;

 

(iii)          all guaranties, whether direct orindirect, secured or unsecured, of Indebtedness of another Person by suchentity or any of its Subsidiaries;

 

(iv)          net liabilities of such entity underall interest rate swap agreements, interest rate cap agreements, interest ratecollar agreements and all other agreements or arrangements designed to protectsuch entity against fluctuations in interest rates or currency exchange rates;

 

(v)           whether or not so included asliabilities in accordance with GAAP, all obligations of such entity to pay thedeferred purchase price of property or services, and indebtedness (excludingprepaid interest thereon) secured by a lien on property owned or being purchasedby such entity (including indebtedness arising under conditional sales or othertitle retention agreements), whether or not such indebtedness shall have beenassumed by such entity or is limited in recourse; and

 

(vi)          all contingent liabilities of suchentity in respect of any of the foregoing or in respect of any letters ofcredit.

 

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For allpurposes of this Agreement, the Indebtedness of any entity shall include itspro rata share of Indebtedness of any partnership or joint venture in whichsuch entity is a general partner or a joint venturer.

 

“InterestExpense” shall mean, for any Measurement Period of Borrower, all interestaccrued (whether or not actually paid) during such period on Indebtedness ofBorrower and its Subsidiaries (determined on a consolidated basis), providedthat the term “Interest Expense” also shall include (without limitation) (i)dividends paid on any preferred or special stock issued by Borrower, (ii)amortized discount in respect of Indebtedness of Borrower and its Subsidiariesissued at a discount, and (iii) imputed interest on capitalized leaseobligations of Borrower and its Subsidiaries.

 

“InterestPeriod” shall mean the period commencing on the date a Borrowing of LIBORLoans is made and ending on the date, as Borrower may select, one month, twomonths, three months, or six months thereafter; provided, however,that, with respect to any LIBOR Loan:

 

(i)            Borrower may not select an InterestPeriod that extends beyond the Termination Date or beyond the maturity date ofall or any portion of such LIBOR Loan; and

 

(ii)           whenever the last day of any InterestPeriod would otherwise be a day that is not a Business Day, the last day ofsuch Interest Period shall be extended to the next succeeding Business Day.

 

“L/C Issuer”shall mean LaSalle Bank National Association, a national banking association.

 

“L/CRefinancing Borrowing” shall mean a Revolving Credit Loan Borrowing torefinance a reimbursement obligation with respect to a Letter of Credit.

 

“Letters of Credit”shall mean any letters of credit which are now or at any time hereafter issuedby either Lender hereunder at the request of and for the account of Borrower.

 

“Letter ofCredit Obligations” shall mean the sum of the aggregate outstanding faceamount available to be drawn under all of the Letters of Credit, plus theaggregate outstanding face amount of any unpaid drafts presented under any ofthe Letters of Credit.

 

“LIBOR Rate”shall mean the per annum rate of interest at which United States dollardeposits in an amount comparable to the principal balance of the applicableLIBOR Loan and for a period equal to the relevant Interest Period are offeredin the London Interbank Eurodollar market at 11:00 a.m. (London time) two BusinessDays prior to the commencement of each Interest Period, as displayed in theBloomberg Financial Markets system, or other authoritative source selected bythe Agent in its sole discretion, divided by a number determined by subtractingfrom 1.00 the maximum reserve percentage for determining reserves to bemaintained by member banks of the Federal Reserve System for Eurocurrencyliabilities, such rate to remain fixed for such Interest Period.  Lender’s determination of LIBOR Rate shallbe conclusive, absent manifest error.

 

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“LIBOR Loan”shall mean either a Revolving LIBOR Loan or a Term LIBOR Loan, as applicable.

 

“LoanDocument” shall mean any instrument, document, note, agreement, or guarantydelivered to Lenders or either Lender in connection with the Loans.

 

“Loans”  shall mean the Revolving Credit Loans andthe Term Loan, collectively.

 

“MeasurementPeriod” shall mean any period of measurement for determining financialcovenants and ratios set forth herein.

 

“Notes”shall mean the Revolving Credit Notes and the Term Notes, collectively.

 

“Person”shall mean any individual, sole proprietorship, partnership, limited liabilitycompany, joint venture, trust, unincorporated organization, association, corporation,institution, entity, party or foreign or United States government, whetherfederal, state, county, city, municipal or otherwise, including, but notlimited to, any instrumentality, division, agency, body or department thereof.

 

“Prime Rate”shall mean the per annum rate of interest announced from time to time by Agentcalled its prime rate, which may or may not at any time be the lowest rate ofinterest charged by Agent. Changes in the rate of interest resulting from achange in the Prime Rate shall take effect on the date set forth in eachannouncement.

 

“Prime RateLoan” shall mean either a Term Prime Rate Loan or a Revolving Prime RateLoan, as applicable.

 

“Pro RataShare” shall mean, with respect to any Lender, the ratio (expressed as apercentage calculated to the ninth digit to the right of the decimal point) of(i) such Lender’s Total Commitment at such time as set forth on Schedule 1attached hereto, to (ii) the Total Commitment of all Lenders’ at such time, asset forth on Schedule 1 attached hereto.

 

“RateHedging Transaction” shall mean any transaction (including an agreementwith respect thereto) now existing or hereafter entered into between Borrowerand any Lender which is a rate swap, basis swap, forward rate transaction,commodity swap, commodity option, equity or equity index swap, equity or equityindex option, bond option, interest rate option, foreign exchange transaction,cap transaction, floor transaction, collar transaction, forward transaction,currency swap transaction, cross-currency rate swap transaction, currencyoption or any other similar transaction (including any option with respect toany of these transactions) or any combination thereof, whether linked to one ormore interest rates, foreign currencies, commodity prices, equity prices orother financial measure.

 

“RefundingBorrowing” shall have the meaning set forth in Section 4.2 below.

 

“RevolvingCredit Loan” shall have the meaning set forth in Section 2.1 below.

 

“RevolvingCredit Note” shall have the meaning set forth in Section 2.2 below.

 

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“RevolvingLIBOR Loan” shall mean a Revolving Credit Loan bearing interest at a ratedetermined by reference to the LIBOR Rate.

 

“RevolvingPrime Rate Loan” shall mean a Revolving Loan bearing interest at a ratedetermined by reference to the Prime Rate.

 

“Subsidiary”shall mean any corporation, partnership, joint venture, trust, or other legalentity of which Borrower owns directly or indirectly 50% or more of theoutstanding voting stock or interest, or of which Borrower has effectivecontrol, by contract or otherwise.

 

“SubsidiaryGuaranty” and “Subsidiary Guaranties” shall have the meanings setforth in Section 2.6 below.

 

“TangibleNet Worth” means, at any date, net stockholders’ equity, minus goodwill,patents, trademarks, service marks, trade names, copyrights, and all otherintangible assets and all items that are treated as intangible assets underGAAP.

 

“TerminationDate” shall mean July 31, 2004.

 

“Term LIBORLoan” shall mean a Term Loan bearing interest at a rate determined byreference to the LIBOR Rate.

 

“Term Loan”shall have the meaning set forth in Section 2.4 below.

 

“Term Note”shall have the meaning set forth in Section 2.5 below.

 

“Term PrimeRate Loan” shall mean a Term Loan bearing interest at a rate determined byreference to the Prime Rate.

 

“TotalCommitment Amount” means Twenty-One Million Five Hundred Thousand andno/100 Dollars ($21,500,000.00).

 

“UnmaturedEvent of Default” means an event or condition which would become an Eventof Default with notice or the passage of time or both.

 

SECTION 1.2         APPLICABILITYOF SUBSIDIARY AND AFFILIATE REFERENCES.

 

Terms hereofpertaining to any Subsidiary or Affiliate shall apply only during such times asBorrower has any Subsidiary or Affiliate.

 

SECTION 1.3         ACCOUNTINGTERMS.

 

Except as andunless otherwise specifically provided herein, all accounting terms in thisAgreement shall have the meanings given to them by GAAP and shall be appliedand all reports required by this Agreement shall be prepared, in a mannerconsistent with GAAP.

 

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SECTION 2.LOANS

 

SECTION 2.1         REVOLVINGCREDIT LOANS.

 

Subject to theterms and conditions of this Agreement, each Lender, severally and not jointly,agrees to make loans to Borrower, from time to time from the date of thisAgreement through the Termination Date, at such times and in such amounts, notto exceed the amount of each such Lender’s Commitment - Revolving Credit, atany one time outstanding, as Borrower may request (the “Revolving CreditLoan(s)”).  During such period,Borrower may borrow, repay and reborrow hereunder. Notwithstanding thegenerality of the foregoing, neither Lender shall make any Revolving CreditLoans under this Agreement or the Revolving Credit Note if at any time the sumof: (a) the aggregate principal amount outstanding under the Revolving CreditNotes and due such Lender, plus (b) such Lender’s Pro Rata Share of theaggregate outstanding Letter of Credit Obligations equals or exceeds suchLender’s Commitment - Revolving Credit.

 

SECTION 2.2         REVOLVINGCREDIT NOTE

 

The RevolvingCredit Loans shall be evidenced by a revolving credit note (the “RevolvingCredit Note”), substantially in the form of Exhibit A, withappropriate insertions, dated the date hereof, payable to the order of eachLender, in the principal amount of the Commitment - Revolving Credit of eachsuch Lender, and with the amounts borrowed and repaid and the balance indorsedon the grid by such Lender. As long as such Lender is the holder of suchRevolving Credit Note it may, at its option, in lieu of endorsing the grid,record the amounts borrowed and repaid under and the balance due on theRevolving Credit Note in each such Lender’s respective books and records, whichbooks and records may treat each Borrowing as a separate Revolving Credit Loan;such endorsement or recording by such Lender shall be rebuttably presumptiveevidence of the principal balance due on each Revolving Credit Note.  The principal of each Revolving Credit Noteshall be payable in full on the Termination Date.

 

SECTION 2.3         LETTERSOF CREDIT.

 

Subject to theterms and conditions of this Agreement and in reliance upon the representationsand warranties of Borrower in this Agreement, and in any master letter ofcredit agreement or other additional document that the L/C Issuer requests thatBorrower execute, L/C Issuer agrees to issue from time to time upon the requestof and for the account of Borrower one or more Letters of Credit in accordancewith this Section 2.3 during the period, commencing on the date hereof andending on the Business Day prior to the Termination Date, with a maturity dateon any Letter of Credit no later than one year after the first to occur of theissuance thereof or the Termination Date. If, and to the extent, the terms and provisions of this Agreementcontradict or conflict with the terms and provisions of any master letter ofcredit agreement executed by Borrower in favor of the L/C Issuer, the terms andprovisions of such master letter of credit agreement shall govern and control.

 

(a)           The obligation of the L/C Issuer toissue any Letter of Credit is subject to the satisfaction in full of thefollowing conditions:

 

(1)           after giving effect to the requestedissuance of any Letter of Credit (i) the total outstanding Letter of CreditObligations will not exceed $5,000,000, and (ii) the sum of the

 

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total outstanding Letter of CreditObligations and the total outstanding Revolving Credit Loans will not exceedthe aggregate Commitment – Revolving Credit for all Lenders (for all purposeshereof, each Existing Letter of Credit shall be deemed to be a Letter of Creditissued hereunder);

 

(2)           Borrower shall have delivered to theL/C Issuer at the time and manner as the L/C Issuer may prescribe the documentsand materials requested by the L/C Issuer and the proposed Letter of Creditmust be satisfactory to the L/C Issuer as to form and content;

 

(3)           as of the date of issuance, no order,judgment, or decree of any court, arbitrator, or governmental agency shallpurport by its terms to enjoin or restrain the L/C Issuer from issuing theLetter of Credit, and no law, rule, or regulation applicable to the L/C Issuerand no request or directive from any governmental agency shall prohibit orrequest that the L/C Issuer refrain from the issuance of letters of creditgenerally or the Letter of Credit; and

 

(4)           Borrower must comply with the L/CIssuer’s normal procedures for the issuance of letters of credit generally.

 

(b)           Promptly after receipt of any Letterof Credit application from Borrower, the L/C Issuer will confirm with the Agent(by telephone or in writing) that the Agent has received a copy of such Letterof Credit application from Borrower and, if not, the L/C Issuer will providethe Agent with a copy thereof.  Uponreceipt by the L/C Issuer of confirmation from the Agent that the requestedissuance or amendment is permitted in accordance with the terms of this Agreement,then, subject to the terms and conditions of this Agreement, the L/C Issuershall, on the requested date, issue a Letter of Credit for the account ofBorrower or enter into the applicable amendment to a Letter of Credit, as thecase may be, in each case in accordance with the L/C Issuer’s usual andcustomary business practices. Immediately upon the issuance of each Letter of Credit or amendmentthereof, each Lender shall be deemed to, and hereby irrevocably andunconditionally agrees to, purchase from the L/C Issuer a participation in suchLetter of Credit or amendment thereof in an amount equal to the product of suchLender’s Pro Rata Share times the face amount of such Letter of Credit.

 

(c)           Promptly after its delivery of anyLetter of Credit or any amendment to a Letter of Credit to an advising bankwith respect thereto or to the beneficiary thereof, the L/C Issuer will alsodeliver to Borrower and the Agent a true and complete copy of such Letter ofCredit or amendment.

 

(d)           Upon any drawing under any Letter ofCredit, the L/C Issuer shall notify Borrower and the Agent of the amount to bepaid by the L/C Issuer as a result of such drawing and the date which paymentis to be made by the L/C Issuer to the beneficiary of such Letter of Credit inrespect of such drawing.  Not later than11:00 a.m., on the date of any payment by the L/C Issuer under a Letter ofCredit (each such date, an “Honor Date”), Borrower shall reimburse the L/CIssuer through the Agent in an amount equal to the amount of such drawing.  If Borrower fails to so reimburse the L/CIssuer by such time, the Agent shall promptly notify each Lender of the HonorDate, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), andsuch Lender’s Pro Rata Share thereof. In such event, Borrower shall be deemed to have requested a RevolvingCredit Loan to be disbursed on the Honor Date in an amount equal to theUnreimbursed Amount, but subject to the amount of the unutilized portion of theCommitment – Revolving Credit.  Anynotice given by the L/C Issuer or the Agent pursuant to

 

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this Section may be given by telephone ifimmediately confirmed in writing; provided, that the lack of such an immediateconfirmation shall not affect the conclusiveness or binding effect of suchnotice.

 

(e)           Each Lender (including the Lenderacting as L/C Issuer) shall upon any notice pursuant to subsection 2.3(d) abovemake funds available to the Agent for the account of the L/C Issuer at theAgent’s office in an amount equal to its Pro Rata Share of the UnreimbursedAmount not later than 1:00 p.m. on the Business Day specified in such notice bythe Agent, whereupon each Lender that so makes funds available shall be deemedto have made a Revolving Credit Loan to Borrower in such amount.  The Agent shall remit the funds so receivedto the L/C Issuer.  If the RevolvingCredit Loans made pursuant to this subsection 2.3(e) are not sufficient tosatisfy the Unreimbursed Amount, each Lender (including the Lender acting asL/C Issuer) shall make additional funds available to the Agent for the accountof the L/C Issuer at the Agent’s office in an amount equal to its Pro RataShare of the outstanding Unreimbursed Amount not later than 1:00 p.m. on theBusiness Day specified in such notice by the Agent.  All amounts paid by each Lender pursuant to the immediatelypreceding sentence shall constitute additional loans made by each Lender toBorrower hereunder, immediately due and payable with interest at the DefaultRate until paid.

 

(f)            Until each Lender funds itsRevolving Credit Loan pursuant to this Section 2.3 or otherwise reimburses theL/C Issuer for any Unreimbursed Amount, interest in respect of such Lender’sPro Rata Share of such amount shall be solely for the account of the L/CIssuer.

 

(g)           Each Lender’s obligation to makeRevolving Credit Loans or otherwise reimburse the L/C Issuer for UnreimbursedAmounts, as contemplated by this Section 2.3, shall be absolute andunconditional and shall not be affected by any circumstance, including (1) anyset-off, counterclaim, recoupment, defense or other right which such Lender mayhave against the L/C Issuer, Borrower or any other Person for any reasonwhatsoever; (2) the occurrence or continuance of an Unmatured Event of Defaultor Event of Default, or (3) any other occurrence, event or condition, whetheror not similar to any of the foregoing. Any such reimbursement shall not relieve or otherwise impair theobligation of Borrower to reimburse the L/C Issuer for the amount of anypayment made by the L/C Issuer under any Letter of Credit, together withinterest as provided herein.

 

(h)           If any Lender fails to make availableto the Agent for the account of the L/C Issuer any amount required to be paidby such Lender pursuant to the foregoing provisions of this Section 2.3 by thetime specified in this Section 2.3, the L/C Issuer shall be entitled to recoverfrom such Lender (acting through the Agent), on demand, such amount withinterest thereon for the period from the date such payment is required to thedate on which such payment is immediately available to the L/C Issuer at a rateper annum equal to the Federal Funds Rate from time to time in effect.  A certificate of the L/C Issuer submitted toany Lender (through the Agent) with respect to any amounts owing under thisSection 2.3 shall be conclusive absent manifest error.

 

SECTION 2.4         TERMLOAN.

 

Subject to theterms and conditions of this Agreement, each Lender, severally and not jointly,agrees to lend to Borrower, and Borrower agrees to borrow from each Lender, onthe

 

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date hereof, the amount of each Lender’sCommitment - Term Loan (the “Term Loan”).  Any amount of Term Loans repaid may not be reborrowed.

 

SECTION 2.5         TERM.

 

The Term Loanshall be evidenced by a term note (the “Term Note”), substantially inthe form of Exhibit B, with appropriate insertions, dated the datehereof, payable to the order of each Lender, in the principal amount of theCommitment - Term Loan of each such Lender. The principal balance of the TermLoan is payable in twenty (20) quarterly principal payments as follows: (a)four (4) quarterly payments in the amount of $375,000 each, due on the last dayof each fiscal quarter beginning September 27, 2003 and continuing through andincluding July 3, 2004, (b) eight (8) quarterly payments in the amount of$500,000 each, due on the last day of each fiscal quarter beginning October 2,2004 and continuing through and including July 1, 2006, and (c) eight (8)quarterly payments in the amount of $750,000 each, due on the last day of eachfiscal quarter beginning September 30, 2006 and continuing through andincluding June 28, 2008.

 

SECTION 2.6         GUARANTY.

 

The Loans andall of Borrower’s other liabilities, obligations and indebtedness to each ofthe Lenders, direct or indirect, absolute or contingent, due or to become due,now or hereafter existing with respect to principal, and interest accruedthereon, whether under this Agreement, as amended, or any other agreement witheither or both of the Lenders or note payable to either or both of the Lenders,shall be guaranteed by all current and future Subsidiaries of Borrower, byexecution and delivery of a Guaranty in the form of Exhibit C hereto,with appropriate insertions (each such Guaranty, and all amendments,restatements, and replacements, if any, thereto or therefor, is a “SubsidiaryGuaranty”, and all such Guaranties, and all amendments, restatements, andreplacements, if any, thereto or therefor, are collectively, the “SubsidiaryGuaranties”).

 

SECTION 3.INTERESTAND FEES

 

SECTION 3.1         INTEREST.

 

Borrower mayelect that each Borrowing of Loans be made by means of a Prime Rate Loan or aLIBOR Loan; provided, however, that there shall not be more than six Borrowingsof LIBOR Loans outstanding at any time.

 

(a)           Prime Rate Loans.  Each Prime Rate Loan made by the Lendersshall bear interest on the unpaid principal amount thereof from the date suchLoan is made until maturity (whether by acceleration or otherwise) at a rateper annum equal to the Prime Rate from time to time in effect.

 

(b)           LIBOR Loans.  Each LIBOR Loan made by the Lenders shallbear interest on the unpaid principal amount thereof from the first day of theapplicable Interest Period until paid in full or converted to a Prime Rate Loanor a new LIBOR Rate Loan at a rate per annum equal to the sum of the ApplicableLIBOR Margin from time to time in effect plus the LIBOR Rate.

 

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(c)           Rate Determinations.  The Agent shall determine each interest rateapplicable to the Loans hereunder, and its determination thereof shall beconclusive and binding except in the case of manifest error.

 

(d)           Letter of Credit Fees.  Borrower agrees to pay to the Agent for theratable benefit of the Lenders a Letter of Credit Fee equal to .75% per annumof the face amount of all stand-by Letters of Credit in accordance with thecustomary practice of the L/C Issuer. Borrower agrees to pay to the Agent for the ratable benefit of theLenders a Letter of Credit Fee equal to the L/C Issuer’s quoted rate at thetime of issuance for all documentary Letters of Credit in accordance with thecustomary practice of the L/C Issuer. The Letter of Credit fee is payable on the last day of each calendarquarter in arrears.  The Letter ofCredit fee shall be calculated based upon a 360 day year.  All other fees paid by Borrower inconnection with the issuance of a Letter of Credit shall be paid to and for thesole benefit of the L/C Issuer.

 

SECTION 3.2         MINIMUMAND MAXIMUM BORROWING AMOUNTS.

 

Each Borrowingof Prime Rate Loans (other than an L/C Refinancing Borrowing) shall be in anamount not less than $25,000 or any larger amount that is an integral multipleof $25,000.  Each Borrowing of LIBOR Loansshall be in an amount not less than $500,000, or any larger amount that is anintegral multiple of $100,000.

 

SECTION 3.3         BASISOF COMPUTATION.

 

Interest onall Loans shall be computed for the actual number of days elapsed on the basisof a year consisting of 360 days, including the date a Loan is made andexcluding the date a Loan or any portion thereof is paid or prepaid.

 

SECTION 3.4         INTERESTPAYMENT DATES.

 

Accruedinterest on Prime Rate Loans shall be paid on the last Business Day of eachMarch, June, September and December of each year, at maturity and upon paymentin full, beginning with the first of such dates to occur after the date of thefirst such Loan hereunder. Accrued interest on LIBOR Loans shall be paid on thelast day of the applicable Interest Period and at maturity and, if theapplicable Interest Period is longer than three months, on each day occurringthree months after the date such LIBOR Loan is made. After maturity, whether byacceleration or otherwise, accrued interest on all Loans shall be paid upondemand.

 

SECTION 3.5         DEFAULTRATE.

 

Upon theoccurrence of an Event of Default and during the continuation thereof, theLoans and other obligations of Borrower to the Agent and the Lenders hereundershall bear interest, after as well as before judgment, until paid in full,payable on demand, at a rate per annum (the “Default Rate”) equal to:

 

(a)           with respect to any Prime Rate Loan,the sum of two percent (2%) plus the interest rate from time to time in effectwith respect to such Prime Rate Loan pursuant to Section 3.1(a); and

 

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(b)           with respect to any LIBOR Loan, thesum of two percent (2%) plus the rate of interest in effect thereon at the timeof such default until the end of the Interest Period applicable thereto and,thereafter, at a rate per annum equal to the sum of two percent (2%) plus thePrime Rate from time to time in effect; and

 

(c)           with respect to other monetaryobligations for which a Default Rate is not otherwise specified, the sum of twopercent (2%) plus the Prime Rate from time to time in effect.

 

SECTION 3.6         CLOSINGFEE.

 

Borroweragrees, on the date of execution hereof, to pay to LaSalle a fully-earnednon-refundable closing fee of $21,000, and to Fifth Third a fully-earnednon-refundable closing fee in the amount of $14,000.

 

SECTION 3.7         COMMITMENTFEE; REDUCTION OF COMMITMENT.

 

Borroweragrees to pay to each Lender the Commitment Fee.  The Commitment Fee shall be calculated on an accrual basis basedupon a 360 day year and shall commence to accrue on the date of this Agreementand shall be paid on the last Business Day of each March, June, September andDecember in each year, beginning with the first of such dates to occur afterthe date of this Agreement, at maturity and upon payment in full.  At any time or from time to time, upon atleast ten (10) days’ prior written notice, which shall be irrevocable, Borrowermay reduce each Lender’s Commitment - Revolving Credit in the amount of atleast $25,000.00 or in full, provided, however, that all suchreductions of Commitment - Revolving Credit shall reduce the Commitment -Revolving Credit of each Lender on a pro rata basis based on the Commitment -Revolving Credit of each Lender immediately prior to such reduction. Upon anysuch reduction of any part of the unused Commitment - Revolving Credit, theCommitment Fee on the part reduced shall be paid in full as of the date of suchreduction.

 

SECTION 3.8         ADMINISTRATIVEAGENT FEE.

 

Borroweragrees to pay the Agent for the sole benefit of the Agent an administrativeagent fee of $5,000.00 per year. Such administrative agent fee shall be payablecontemporaneously with the execution of this Agreement and on each anniversarythereafter.

 

SECTION 4.PAYMENTSAND PREPAYMENTS.

 

SECTION 4.1         PAYMENTS.

 

All paymentsand prepayments of principal, interest, closing fees and Commitment Fees shallbe made in immediately available funds to each respective Lender at its mainbanking office in Chicago, Illinois.  Ifany payment due hereunder is due on a date that is not a Business Day, thensuch payment may be made on the next succeeding Business Day and such extensionof time shall be included in the computation of the amount of interest and feesdue hereunder unless, in the case of a LIBOR Loan, such immediately succeedingBusiness Day is the first Business Day of the next calendar month, in whichcase such due date shall be the immediately preceding Business Day.

 

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SECTION 4.2         MANNEROF BORROWING.

 

Borrower shallgive the Agent irrevocable written or telephonic notice (a “Borrowing Notice”)by 11:00 a.m., Chicago, Illinois time, (a) on the date at least two (2)Business Days prior to the date of each requested Borrowing of LIBOR Loans, and(b) on the date of any requested Borrowing of Prime Rate Loans. Each suchnotice shall specify the proposed date of Borrowing, which must be a BusinessDay, the aggregate amount of the requested Borrowing, the type of Loans tocomprise such Borrowing and, if such Borrowing is to be comprised of LIBORLoans, the Interest Period applicable thereto. The Agent will then promptlynotify the Lenders in writing or by telephone (which such notice in the case ofFifth Third, if it relates to Revolving Credit Loan Borrowings constitutingPrime Rate Loans, may be made before or after LaSalle has funded its Pro RataShare of such requested Loans) and, if such notice requests the Lenders to makeLIBOR Loans, the Agent shall give notice to Borrower and to the Lenders of theinterest rate applicable thereto promptly after the Agent has made suchdetermination. The Lenders, on the date of Borrowing any Revolving Credit Loan,shall each remit their Pro Rata Share of any requested Revolving Credit Loan toBorrower’s account maintained with Agent, except to the extent such Borrowingis either a reborrowing, in whole or in part, of the principal amount of anoutstanding Borrowing of Loans (a “Refunding Borrowing”) or an L/CRefinancing Borrowing, in which case each Lender shall record the Loan made byit as a part of such Refunding Borrowing or L/C Refinancing Borrowing, as thecase may be, on its books or records or on a schedule to the appropriate Note,and shall effect the repayment, in whole or in part, as appropriate, of itsmaturing Loan or reimbursement obligation through the proceeds of such newLoan.  At the time LaSalle has made aRevolving Credit Loan, Fifth Third shall fund its Pro Rata Share of suchRevolving Credit Loan and the obligation to remit to LaSalle on such day itsPro Rata Share of the Revolving Credit Loan shall be absolute and irrevocable.Each Borrowing from the Lenders under this Agreement shall be made inaccordance with each Lender’s Pro Rata Share of the Commitment - RevolvingCredit and Commitment - Term Loan.  Eachpayment and prepayment made by Borrower shall be made to the Lenders inaccordance with each Lender’s Pro Rata Share of the respective amounts of theLoans outstanding immediately prior to such payment or prepayment.  Unless Borrower notifies the Agent to thecontrary, upon the expiration of any Interest Period for a LIBOR Loan, suchLIBOR Loan shall automatically convert to a Prime Rate Loan.  Each LIBOR Loan shall mature and become dueand payable by Borrower on the last day of the Interest Period applicablethereto.

 

SECTION 4.3         CHANGEIN CIRCUMSTANCES, ETC.

 

(a)           Borrower agrees to pay to each Lendersuch amounts as will compensate each Lender for any increase in the cost tosuch Lender of making or maintaining any Loans hereunder or of maintaining itsCommitment - Revolving Credit to make Revolving Credit Loans hereunder, causedby any change in any reserve, tax, capital guidelines, special deposit, orsimilar requirement with respect to assets of, deposits with or for the accountof, or credit extended by, or commitments extended by, such Lender which areimposed on such Lender and which are caused by any change in law, treaty, rule,regulation (including, without limitation, Regulation D of the Board ofGovernors of the Federal Reserve System), any interpretation thereof by anygovernmental, fiscal, monetary or other authority charged with theadministration thereof or having jurisdiction over such Loan or such Lender, orany requirement imposed by any such authority, whether or not having the forceof law.  Such additional amounts shallbe

 

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payable on demand.  Such Lender’s calculation of such additional amounts shall befinal and binding absent manifest error.

 

(b)           Notwithstanding any other provisionsof this Agreement or any Note, if at any time after the date hereof any changein applicable law or in the interpretation thereof makes it unlawful for anyLender to make or continue to maintain LIBOR Loans or to give effect to itsobligations as contemplated hereby, such Lender shall promptly give noticethereof to Borrower, with a copy to the Agent and the other Lender, and suchLender’s obligations to make or maintain LIBOR Loans under this Agreement shallterminate until it is no longer unlawful for such Lender to make or maintainLIBOR Loans. Borrower shall prepay on demand the outstanding principal amountof any such affected LIBOR Loans, together with all interest accrued thereonand all other amounts then due and payable to such Lender under this Agreement;provided, however, subject to all of the terms and conditions ofthis Agreement, Borrower may then elect to borrow the principal amount of theaffected LIBOR Loan from such Lender by means of a Prime Rate Loan from suchLender that shall not be made ratably by the Lenders but only from suchaffected Lender.

 

(c)           If on or prior to the first day ofany Interest Period for any Borrowing of LIBOR Loans: (i)  the Agent advises Borrower that deposits inUnited States Dollars (in the applicable amounts) are not being offered to itin the interbank eurodollar market, for such Interest Period, or (ii)  either Lender advises Borrower that LIBOR asdetermined by the Agent will not adequately and fairly reflect the cost to suchLender of funding its LIBOR Loans for such Interest Period, then, until theAgent notifies Borrower that the circumstances giving rise to such suspensionno longer exist, the obligation of the Lenders to make LIBOR Loans shall besuspended.

 

SECTION 4.4         FUNDINGINDEMNITY.

 

In the eventany Lender shall incur any loss, cost or expense (including, withoutlimitation, any loss of profit, and any loss, cost or expense incurred byreason of the liquidation or re-employment of deposits or other funds acquiredby such Lender to fund or maintain any LIBOR Loan or the relending orreinvesting of such deposits or amounts paid or prepaid to such Lender) as aresult of

 

(a)           any payment (including prepayment) ofa LIBOR Loan on a date other than the last day of its Interest Period for anyreason, whether before or after default, and whether or not such payment isrequired by any provisions of this Agreement, or

 

(b)           any failure (because of a failure tomeet the conditions of Borrowing or otherwise) by Borrower to borrow a LIBORLoan on the date specified in a Borrowing Notice,

 

then, upon the demand of such Lender,Borrower shall pay to such Lender such amount as will reimburse such Lender forsuch loss, cost or expense.  If anyLender makes such a claim for compensation, it shall provide to Borrower, witha copy to the Agent and the other Lender, a certificate executed by an officerof such Lender setting forth the amount of such loss, cost or expense inreasonable detail (including an explanation of the basis for and thecomputation of such loss, cost or expense) and the amounts shown on suchcertificate shall be deemed rebuttably presumptive evidence of the correctnessthereof absent manifest error.

 

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SECTION 4.5         DISCRETIONOF LENDERS AS TO MANNER OF FUNDING.

 

Notwithstandingany other provision of this Agreement, each Lender shall be entitled to fundand maintain its funding of all or any part of its Loans in any manner it seesfit, it being understood, however, that for the purposes of this Agreement alldeterminations hereunder shall be made as if each Lender had actually fundedand maintained each LIBOR Loan through the purchase of deposits in the relevantmarket having a maturity corresponding to such Loan’s Interest Period and bearingan interest rate equal to the LIBOR Rate, for such Interest Period.

 

SECTION 4.6         PREPAYMENTS.

 

Except asotherwise provided with respect to Rate Hedging Transaction prepayment fees andas otherwise provided with respect to LIBOR Loans in Section 4.4 above,Borrower shall have the privilege of prepaying the Loans without premium orpenalty and in whole or in part (but, if in part, then: (i) in an amount notless than $250,000 and in integral multiples of $25,000 in the case of PrimeRate Loans, and in an amount not less than $500,000 and in integral multiplesof $100,000 in the case of LIBOR Loans), and (ii) in an amount such that theminimum amount required for a Borrowing pursuant to Section 3.2 hereofremains outstanding) on any Business Day upon prior notice to the Lenders whichmust be received by the Lenders by no later than 11:00 a.m. (Chicago time) onthe date of such prepayment in the case of Prime Rate Loans and by no laterthan 11:00 a.m. (Chicago time) on the second Business Day prior to the date ofsuch prepayment in the case of LIBOR Loans, such prepayment to be made by thepayment of the principal amount to be prepaid and, in the case of LIBOR Loans,any compensation required by Section 4.4 hereof.  Partial prepayments of any outstanding typeof Loan shall be applied to the various Borrowings thereof in the inverse orderof their maturity.  Partial prepaymentsof the Term Loans shall be applied to installments thereof in the inverse orderof their maturity.  Unless otherwisedesignated by Borrower, prepayments of any outstanding type of Loan shall bedeemed paid with respect to such Loans which are Prime Rate Loans.

 

SECTION 4.7         MANDATORYREPAYMENT.

 

If at anygiven time from and after the date of this Agreement, the amount of RevolvingCredit Loans plus all outstanding Letter of Credit Obligations exceeds the thenaggregate amount of the Commitment-Revolving Credit of all Lenders, thenBorrower shall immediately repay to the Lenders that amount necessary to reducethe unpaid and outstanding principal amount of the Revolving Credit Loans suchthat the amount of Revolving Credit Loans plus all outstanding Letter of CreditObligations is equal to or less than the then aggregate amount of theCommitment-Revolving Credit of all Lenders. All repayments of principal underthis Section 4.7 shall include interest accrued to the date of repaymenton the principal amount repaid and the applicable prepayment penalty providedherein or in any Rate Hedging Transaction agreement, if any.

 

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SECTION 5.REPRESENTATIONSAND WARRANTIES.

 

To induce eachLender to make each of the Loans, Borrower represents and warrants, and at thetime Borrower requests or accepts any Loan, Borrower shall be deemed torepresent and warrant, to each Lender that:

 

SECTION 5.1         ORGANIZATION.

 

Borrower is acorporation existing and in good standing under the laws of the state ofDelaware; each current Subsidiary of Borrower is listed on Exhibit D andeach Subsidiary is a corporation duly existing and in good standing under thelaws of the state of its formation as indicated on Exhibit D; Borrowerand each Subsidiary are duly qualified, in good standing and authorized to dobusiness in each jurisdiction where, because of the nature of their activitiesor properties, such qualification is required and failure to qualify could havea material adverse effect on Borrower and its Subsidiaries taken as a whole;and Borrower and each Subsidiary have the power and authority to own theirproperties and to carry on their businesses as now being conducted.

 

SECTION 5.2         AUTHORIZATION:NO CONFLICT.

 

The Borrowingshereunder, the execution and delivery of the Notes and the performance byBorrower of its obligations under this Agreement and the Notes are withinBorrower’s corporate powers, have been authorized by all necessary corporateaction, have received all necessary governmental approval (if any shall berequired) and do not and will not contravene or conflict with any provision oflaw or of the charter or by-laws of Borrower or any Subsidiary or of anyagreement binding upon Borrower or any Subsidiary.

 

SECTION 5.3         FINANCIALSTATEMENTS.

 

Borrower’saudited consolidated financial statements as of December 28, 2002, and itsunaudited consolidated financial statements as of June 28, 2003, copies ofwhich have been furnished to the Agent, have been prepared in conformity withGAAP, and accurately present the financial condition of Borrower and eachSubsidiary as of such dates and the results of their operations for therespective periods then ended. Since the date of those financial statements, nomaterial, adverse change in the business, properties, assets, operations,conditions or prospects of Borrower or any Subsidiary has occurred of which theAgent has not been advised in writing before this Agreement was signed. Thereis no known contingent liability of Borrower or any Subsidiary which is knownto be in an amount in excess of $100,000.00 which is not reflected in suchfinancial statements or in Exhibit E hereto or of which the Agent hasnot been advised in writing before this Agreement was signed.

 

SECTION 5.4         TAXES.

 

Borrower andeach Subsidiary have filed or caused to be filed all federal, state and localtax returns which, to the knowledge of Borrower and each Subsidiary, arerequired to be filed, and have paid or have caused to be paid all taxes asshown on such returns or on any assessment received by them, to the extent thatsuch taxes have become due (except for current taxes not delinquent and taxesbeing contested in good faith and by appropriate proceedings for which

 

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adequate reserves have been provided on thebooks of Borrower or the appropriate Subsidiary, and as to which noforeclosure, distraint, sale or similar proceedings have been commenced).Borrower and each Subsidiary have set up reserves which are adequate for thepayment of additional taxes for years which have not been audited by therespective tax authorities.

 

SECTION 5.5         LIENS.

 

None of theassets of Borrower or any Subsidiary are subject to any mortgage, pledge, titleretention lien, or other lien, encumbrance or security interest, except for:(a) current taxes not delinquent or taxes being contested in good faith and byappropriate proceedings; (b) liens arising in the ordinary course of businessfor sums not due or sums being contested in good faith and by appropriateproceedings, but not involving any deposits or advances or borrowed money orthe deferred purchase price of property or services; (c) to the extentspecifically shown in the financial statements referred to above; and (d) liensexisting on the date hereof as listed in Exhibit F hereto.

 

SECTION 5.6         ADVERSECONTRACTS.

 

NeitherBorrower nor any Subsidiary is a party to any agreement or instrument orsubject to any charter or other corporate restriction, nor is it subject to anyjudgment, decree or order of any court or governmental body, which may have amaterial and adverse effect on the business, assets, liabilities, financialcondition, operations or business prospects of Borrower and its Subsidiariestaken as a whole or on the ability of Borrower to perform its obligations underthis Agreement or the Notes.  NeitherBorrower nor any Subsidiary has, nor with reasonable diligence should have had,knowledge of or notice that it is in default in the performance, observance orfulfillment of any of the obligations, covenants or conditions contained in anysuch agreement, instrument, restriction, judgment, decree or order.

 

SECTION 5.7         REGULATIONU.

 

Borrower isnot engaged in, nor is one of Borrower’s important activities, the business ofextending credit for the purpose of purchasing or carrying “margin stock”within the meaning of Regulation U of the Board of Governors of the FederalReserve System as now and from time to time hereinafter in effect.

 

SECTION 5.8         LITIGATIONAND CONTINGENT LIABILITIES.

 

No litigation(including derivative actions), arbitration proceedings or governmentalproceedings are pending or threatened against Borrower or any Subsidiary whichwould (singly or in the aggregate), if adversely determined, have a materialand adverse effect on the financial condition, continued operations orprospects of Borrower or any Subsidiary, except as set forth (includingestimates of the dollar amounts involved) in Exhibit E hereto.

 

SECTION 5.9         SUBSIDIARIES.

 

Attachedhereto as Exhibit D is a correct and complete list of all Subsidiariesand Affiliates of Borrower.

 

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SECTION 5.10       PURPOSES.

 

Borrower shalluse the proceeds of the Loans to refinance Borrower’s existing indebtedness,for working capital purposes, and for general corporate purposes, includingcapital expenditures.

 

SECTION 6.COVENANTS.

 

Until allobligations of Borrower hereunder and under the Notes are paid and fulfilled infull, and as a condition precedent to Borrower requesting the Term Loans andany Revolving Credit Loan, Borrower agrees that it shall, and shall cause eachSubsidiary to, comply with the following covenants, unless the Lenders consentotherwise in writing:

 

SECTION 6.1         CORPORATEEXISTENCE. MERGERS. ETC.

 

Borrower andeach Subsidiary shall preserve and maintain its corporate existence, rights,franchises, licenses and privileges, and will not liquidate, dissolve, ormerge, or consolidate with or into any other corporation, or sell, lease,transfer or otherwise dispose of all or a substantial part of its assets,except that:

 

(a)           any Subsidiary may merge orconsolidate with or into any one or more wholly-owned Subsidiaries;

 

(b)           any Subsidiary may sell, lease,transfer or otherwise dispose of any of its assets to Borrower or one or morewholly-owned Subsidiaries; and

 

(c)           Borrower may liquidate, dissolve,sell, lease, transfer, or otherwise dispose of the net assets of any Subsidiarywhose net assets constitute ten percent (10%) or less of Borrower’sconsolidated net assets.. For purposes of this Section 6.1(c),Borrower’s consolidated net assets shall be determined immediately prior to anysuch liquidation, dissolution, sale, lease, transfer, or other disposition, andthe ten percent limitation applies on a cumulative basis to all suchdispositions during the period beginning on the date hereof and ending on theTermination Date.

 

SECTION 6.2         REPORTS.CERTIFICATES AND OTHER INFORMATION.

 

Borrower shallfurnish to Agent, with sufficient copies for each Lender:

 

(a)           Interim Reports.  Within 45 days after the end of each quarterof each fiscal year of Borrower, a copy of an unaudited financial statement ofBorrower and any Subsidiary prepared on a consolidated basis consistent withthe audited consolidated financial statements of Borrower and any Subsidiaryreferred to above, signed by an authorized officer of Borrower and consistingof at least (i) a balance sheet as of the close of such quarter and (ii) astatement of earnings and cash flows for such quarter and for the period fromthe beginning of such fiscal year to the close of such quarter.

 

(b)           Audit Report.  Within 120 days after the end of each fiscalyear of Borrower, a copy of an annual audit report of Borrower and anySubsidiary prepared on a consolidated basis and in conformity with GAAP, dulycertified by independent certified public accountants of

 

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recognized standing satisfactory to theLenders, accompanied by an opinion without significant qualification.

 

(c)           Certificates.  Contemporaneously with the furnishing of acopy of each quarterly and fiscal year-end report provided for in this Section,a certificate dated the date of such report and signed by either the President,the Chief Accounting officer or the Treasurer of Borrower, to the effect thatno Event of Default or Unmatured Event of Default has occurred and is continuing,or, if there is any such event, describing it and the steps, if any, beingtaken to cure it, and containing (except in the case of the certificate datedthe date of the annual report) a computation of, and showing compliance with,any financial covenant, ratio or restriction contained in this Agreement.

 

(d)           Reports to SEC and to Shareholders.  Copies of (i) each 10K, 10Q and 8K filingand report made by Borrower or any Subsidiary with or to any securitiesexchange or the Securities and Exchange Commission, except for 8K’s relating toa quarterly report press release or reports in respect of any singleshareholder, (ii) each communication from Borrower or any Subsidiary toBorrower’s shareholders generally, promptly upon the filing or making thereof,and (iii) any other filings, reports or other documents to or from anysecurities exchange or the Securities and Exchange Commission upon the Agent’srequest.

 

(e)           Notice of Default, Litigation andERISA Matters.   Immediately uponlearning of the occurrence of any of the following, written notice describingthe same and the steps being taken by Borrower or any Subsidiary affected inrespect thereof: (i) the occurrence of an Event of Default or an UnmaturedEvent of Default; or (ii) the institution of, or any adverse determination in,any litigation, arbitration or governmental proceeding which is material toBorrower or any Subsidiary on a consolidated basis; or (iii) the occurrence ofa reportable event under, or the institution of steps by Borrower or any Subsidiaryto withdraw from, or the institution of any steps to terminate, any employeebenefit plans as to which Borrower or any of its Subsidiaries may have anyliability.

 

(f)            Subsidiaries.  Promptly from time to time a written reportof any changes in the list of its Subsidiaries.

 

(g)           Projections.  As soon as available, but in no event laterthan December 31st of each year, Borrower’s internally prepared financialprojections and business plans for the forthcoming year, including, withoutlimitation, (1) a balance sheet, (2) a statement of income andretained earnings, and (3) a statement of cash flows, all for theforthcoming year prepared on a month by month basis.

 

(h)           Other Information.  From time to time such other information,financial or otherwise, concerning Borrower or any Subsidiary as the Agent oreither Lender may reasonably request.

 

SECTION 6.3         INSPECTION.

 

Borrower andeach Subsidiary shall permit the Agent or any Lender and their agents at anytime during normal business hours to inspect Borrower’s and each Subsidiary’sproperties and to inspect and make copies of their books and records.

 

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SECTION 6.4         FINANCIALREQUIREMENTS.

 

Unless at anytime both Lenders shall otherwise expressly consent in writing, until all ofthe obligations of Borrower under this Agreement and the Notes are fully paidand performed, Borrower shall:

 

(a)           Fixed Charge Coverage Ratio.  Not permit the Fixed Charge Coverage Ratio,(i) determined as of June 28, 2003, or as of the end of any fiscal quarterthereafter through and including January 1, 2005, in all instances for theperiod of the four fiscal quarters then ending, to be less than 1.1 to 1.0, or(ii) as of April 2, 2005, or as of the end of any fiscal quarter thereafter, inall instances for the period of the four fiscal quarters then ending, to beless than 1.2 to 1.0;

 

(b)           Current Ratio.  Not permit the ratio of Borrower’sconsolidated current assets to current liabilities (with current liabilitiesnot including the final installment on the Term Loans due on July 31, 2008)determined as of the end of each fiscal quarter of Borrower’s fiscal year, tobe less than 1.50:1.0;

 

(c)           Tangible Net Worth.  Not permit Borrower’s consolidated TangibleNet Worth, determined as of the end of each fiscal quarter of Borrower’s fiscalyear, to be less than $30,000,000, plus fifty percent (50%) of Borrower’scumulative consolidated net income (disregarding cumulative consolidated netloss) for all periods subsequent to June 28, 2003.

 

(d)           Leverage Ratio.  Not permit Borrower’s ratio of (i)consolidated Funded Debt as of the end of each fiscal quarter of Borrower’sfiscal year, to (ii) EBITDA for the Measurement Period ending as of the lastday of such quarter calculated on a rolling four (4) quarters basis, to exceed2.5 to 1.0 as of the end of each fiscal quarter.

 

SECTION 6.5         INDEBTEDNESS.LIENS AND TAXES.

 

NeitherBorrower nor any Subsidiary shall:

 

(a)           Indebtedness.  Incur, permit to remain outstanding, assumeor in any way become committed for Indebtedness in respect of borrowed money,except (i) Indebtedness incurred hereunder or to either Lender; (ii)Indebtedness existing on the date of this Agreement shown on the financialstatements furnished to both Lenders before this Agreement was signed; (iii)other Indebtedness existing on the date hereof as listed in Exhibit Ghereto; (iv) other Indebtedness to which the Lenders give Borrower priorwritten consent; and (v) Indebtedness in the aggregate amount not greater thanfive percent (5%) of the Tangible Net Worth of Borrower at any time or fromtime to time.

 

(b)           Liens.  Create, suffer or permit to exist any lienor encumbrance of any kind or nature upon any of their assets now or hereafterowned or acquired, or acquire or agree to acquire any property or assets of anycharacter under any conditional sale agreement or other title retentionagreement; notwithstanding the foregoing, Borrower shall be permitted to besubject to: (i) liens existing on the date of this Agreement which are listedon Exhibit F hereto or of which the Lenders have been advised in writingbefore this Agreement was signed; (ii) liens of

 

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landlords, contractors, laborers orsupplement, tax liens, or liens securing performance or appeal bonds or othersimilar liens or charges arising out of Borrower’s business, provided that taxliens are removed before related taxes become delinquent and other liens arepromptly removed, in either case unless contested in good faith and byappropriate proceedings, and as to which adequate reserves shall have beenestablished; and (iii) liens securing Borrowings or advances from Borrower towholly-owned Subsidiaries.

 

(c)           Taxes.  Fail to pay and discharge any taxes,assessments or governmental charges or levies imposed upon them, upon theirincome or profits or upon any properties belonging to them, prior to the dateon which penalties attach thereto, or all lawful claims for labor, materialsand supplies when due, except that no such tax, assessment, charge, levy orclaim need be paid which is being contested in good faith, by appropriateproceedings and as to which adequate reserves shall have been established, andas to which no foreclosure, distraint, sale or similar proceedings havecommenced.

 

(d)           Guaranties.  Except as set forth in Exhibit Hhereto, assume, guarantee, indorse or otherwise become or be responsible in anymanner (whether by agreement to purchase any obligations, stock, assets, goodsor services, or to supply or advance any funds, assets, goods or services, orotherwise) with respect to the obligation of any other person or entity, exceptby the endorsement of negotiable instruments for deposit or collection in theordinary course of business and except as permitted by this Agreement.

 

SECTION 6.6         INVESTMENTSAND LOANS.

 

NeitherBorrower nor any Subsidiary shall make any loan, advance, extension of creditor capital contribution to, or purchase or otherwise acquire for aconsideration, evidences of indebtedness, capital stock or other securities of,or all or substantially all of the assets of, any person in an aggregate amountgreater than $1,500,000, except as set forth on Exhibit I hereto andfurther excepting that Borrower and any Subsidiary may:

 

(a)           purchase or otherwise acquire and ownshort-term money market items;

 

(b)           extend credit upon customary terms totheir customers in the ordinary course of their business; and

 

(c)           extend credit to officers andemployees in accordance with policies in effect on the date of this Agreementof which the Lenders have been advised in writing.

 

SECTION 6.7         CAPITALSTRUCTURE AND DIVIDENDS.

 

NeitherBorrower nor any Subsidiary shall purchase or redeem, or obligate itself topurchase or redeem, any shares of Borrower’s capital stock, of any class,issued and outstanding from time to time, provided, however, thatBorrower may purchase an amount of shares of Borrower’s capital stock in atotal amount not to exceed $2,000,000 in the aggregate (as determined for theperiod beginning on the date hereof and ending on the Termination Date); ordeclare or pay any dividend (other than dividends payable in its own commonstock or to Borrower) or make any other distribution in respect of such sharesother than to Borrower. Borrower shall continue to own, directly or indirectly,the same (or greater) percentage of the

 

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stock of each Subsidiary that it held on thedate of this Agreement, and no Subsidiary shall issue any additional securitiesother than to Borrower.

 

SECTION 6.8         MAINTENANCEOF PROPERTIES.

 

Borrower andeach Subsidiary shall maintain, or cause to be maintained, in good repair,working order and condition, all their properties (whether owned or held underlease), and from time to time make or cause to be made all needed andappropriate repairs, renewals, replacements, additions, betterments andimprovements thereto, so that the business carried on in connection therewithmay be properly and advantageously conducted at all times.

 

SECTION 6.9         INSURANCE.

 

Borrower andeach Subsidiary shall maintain insurance in responsible companies in suchamounts and against such risks as are usually carried by owners of similarbusinesses and properties in the same general area in which Borrower or itsSubsidiaries operate. The Lenders agree that Borrower may self-insure certainrisks, provided that the levels of such self-insurance are reasonably andprudently determined by Borrower.

 

SECTION 6.10       USEOF PROCEEDS.

 

(a)           General.  Borrower and any Subsidiary shall not use orpermit any proceeds of the Loans to be used, either directly or indirectly, forthe purpose, whether immediate, incidental or ultimate, of “purchasing orcarrying any margin stock” within the meaning of Regulation U of the Board ofGovernors of the Federal Reserve System, as amended from time to time.Contemporaneously herewith, Borrower and each Subsidiary will furnish to Lendera statement in conformity with the requirements of Federal Reserve Form U-l tothe foregoing effect. No part of the proceeds of the Loans will be used for anypurpose which violates or is inconsistent with the provisions of Regulation Uof the Board of Governors.

 

(b)           Tender Offers and Going Private.  Neither Borrower nor any Subsidiary shalluse (or permit to be used) any proceeds of the Loans to acquire any security inany transaction which is subject to Section 13 or 14 of the Securities ExchangeAct of 1934, as amended, or any regulations or rulings thereunder.

 

SECTION 6.11       PURPOSE.

 

Borrower shalluse the proceeds of the Loans as set forth in Section 5.10 above.

 

SECTION 6.12       ACCOUNTINGPERIODS.

 

Borrower shallnot alter the method by which it establishes the dates on which its fiscal yearand fiscal quarters end without prior written consent of Lenders.

 

SECTION 6.13       NEGATIVEPLEDGE.

 

Borrowerwarrants and represents to and covenants with Lenders that neither Borrower norany Subsidiary has heretofore or shall hereafter, without Lenders’ priorwritten consent thereto:  (a) grant asecurity interest in or assign any of its assets to any person or entity or

 

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permit, grant, or suffer a lien, claim orencumbrance upon any of its assets, unless in favor of Lenders; (b) agree to aprovision the same as or similar to the provision contained in this Section6.13 in favor of any Person other than Lenders; (c) sell or transfer any ofits assets not in the ordinary course of business; or (d) enter into anytransaction not in the ordinary course of business which materially andadversely affects Borrower’s or any Subsidiary’s assets or Borrower’s or anySubsidiary’s ability to repay any Indebtedness.  Borrower shall execute and deliver to Lenders all otheragreements and documents as Lenders may request to fully consummate all of thetransactions contemplated hereunder.

 

SECTION 6.14       BANKACCOUNTS.

 

Borrower andeach Subsidiary shall keep and maintain all of its checking, depository andother bank accounts with LaSalle, provided, however, that eachSubsidiary may maintain a depository account with a local bank in cases whereit is not practicable for such Subsidiary to have LaSalle as its primarydepository bank.  In such instances thefunds from the Subsidiaries accounts will be swept into an account at LaSalle uponterms acceptable to LaSalle.  Borrowerand each Subsidiary shall also be permitted to maintain bank accounts at FifthThird with the prior consent of the Agent. Each statement of account by a Lender delivered to Borrower shall bepresumed correct and accurate and shall constitute an account stated betweenBorrower and such Lender unless, within thirty (30) days after Borrower’sreceipt of said statement, Borrower delivers to the Lender notice specifyingthe error or errors, if any, contained in any such statement.

 

SECTION 7.CONDITIONSOF LENDING

 

The obligationof each Lender to make the Term Loan and each of the Revolving Credit Loans issubject to the following conditions precedent:

 

SECTION 7.1         DOCUMENTATION:FIRST LOAN.

 

In addition tothe conditions precedent set forth in Section 7.2 hereof, the obligationof both Lenders to make the Term Loan and the first Revolving Credit Loan issubject to the conditions precedent that both Lenders shall have received allof the following, each duly executed and dated the date of this Agreement, inform and substance satisfactory to the Lenders and their counsel, at theexpense of Borrower, and in such number of signed counterparts as each Lendermay request (except for the Notes, of which only the original of each shall besigned):

 

(a)           Revolving Credit Note.  Revolving Credit Notes in the form of ExhibitA, with appropriate insertions, each payable to each Lender for the faceamount of such Lender’s Commitment - Revolving Credit;

 

(b)           Term Note.  Term Notes in the form of Exhibit B,with appropriate insertions, each payable to each Lender for the face amount ofsuch Lender’s Commitment - Term Loan;

 

(c)           Resolutions.  A copy of a resolution of the Board ofDirectors of Borrower authorizing or ratifying the execution, delivery andperformance, respectively, of this Agreement, the Notes and the other documentsprovided for in this Agreement, certified by the Secretary of Borrower; andcopies of the resolutions of the Board of Directors of each Subsidiary

 

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authorizing or ratifying the execution,delivery and performance of its guaranty, certified by its Secretary;

 

(d)           Articles of Incorporation andBy-laws; Good Standing Certificates. A copy of the articles of incorporation and by-laws of Borrower and eachSubsidiary, certified by the Secretary of Borrower and each Subsidiary,respectively; and current good standing certificates issued by the Secretary ofState of each state in which Borrower or such Subsidiary is incorporated andqualified to do business;

 

(e)           Certificates of Incumbency.  A certificate of the Secretary of Borrowerand each Subsidiary certifying the names of the officer or officers of Borroweror such Subsidiary authorized to sign this Agreement, the Notes, its guarantyand the other documents provided for in this Agreement to be signed by Borrowerand such Subsidiary, together with a sample of the true signature of each suchofficer (the Lender may conclusively rely on such certificate until formallyadvised by a like certificate of any changes therein);

 

(f)            Guaranties.  A Subsidiary Guaranty duly executed by eachSubsidiary, in the form of Exhibit C with appropriate insertions;

 

(g)           Certificate of No Default.  A certificate signed by the Chairman of theBoard of Directors, the Chief Financial Officer, the Treasurer or the Secretaryof Borrower to the effect that: (i) no Event of Default or Unmatured Event ofDefault has occurred and is continuing or will result from the making of theTerm Loan and the first Revolving Credit Loan; and (ii) the representations andwarranties of Borrower contained herein are true and correct as of the date ofthe Term Loan and the first Revolving Credit Loan as though made on that date;

 

(h)           Opinion of Counsel to Borrower andSubsidiaries.  An opinion of counselto Borrower and its Subsidiaries to such effect as the Lenders may require; and

 

(i)            Miscellaneous.  Such other documents and certificates as theAgent or the Lenders may request.

 

SECTION 7.2         REPRESENTATIONSAND WARRANTIES; NO DEFAULT.

 

(a)           Representations and Warranties.  At the date of the Term Loan and eachRevolving Credit Loan, Borrower’s representations and warranties set forthherein shall be true and correct as of such date with the same effect as thoughthose representations and warranties had been made on and as of such date.

 

(b)           No Default.  At the time of the Term Loan and eachRevolving Credit Loan, and immediately after giving effect to the Term Loan andeach Revolving Credit Loan, Borrower shall be in compliance with all the termsand provisions set forth herein on its part to be observed or performed, and noEvent of Default or Unmatured Event of Default shall have occurred and becontinuing at the time of any Loan, or would result from the making of anyLoan.

 

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SECTION 7.3         SUCCEEDINGLOANS.

 

Theapplication by Borrower for any Revolving Credit Loan other than the firstshall be deemed a representation and warranty by Borrower that the statementsin Section 7.2 are true and correct on and as of the date of each suchLoan.

 

SECTION 8.SECTION8 DEFAULT

 

SECTION 8.1         EVENTSOF DEFAULT.

 

Each of thefollowing occurrences is hereby defined as an “Event of Default”:

 

(a)           Nonpayment or Non-Compliance withFinancial Requirements. Borrower shall fail to make any payment ofprincipal, interest, or other amounts payable hereunder or under any Note whenand as due, or shall fail to be in compliance with any of the financialrequirements set forth at Section 6.4 hereof; or

 

(b)           Default under Related Documents.Any default, event of default, or similar event shall occur or continue beyondany applicable grace or notice period under any Loan Document, or any LoanDocument shall not be, or shall cease to be, enforceable in accordance with itsterms; or

 

(c)           Cross-Default.  There shall occur any default or event ofdefault, or any event which might become such with notice or the passage oftime or both, or any similar event, or any event which requires the prepaymentof borrowed money or the acceleration of the maturity thereof, under the termsof any evidence of Indebtedness or other agreement issued or assumed or enteredinto by Borrower or any Subsidiary or under the terms of any indenture,agreement or instrument under which any such evidence of Indebtedness or otheragreement is issued, assumed, secured or guaranteed, and such event shallcontinue beyond any applicable period of grace; or

 

(d)           Dissolutions, etc.  Borrower shall fail to comply with anyprovision concerning its existence or that of any Subsidiary or Borrower shallviolate any prohibition against dissolution, liquidation, merger, consolidationor sale of assets set forth in any Loan Document; or

 

(e)           Warranties.  Any representation, warranty, schedule, certificate,financial statement, report, notice or other writing furnished by or on behalfof Borrower or any Subsidiary to the Agent or to either Lender is false ormisleading in any material respect on the date as of which the facts thereinset forth are stated or certified; or

 

(f)            Change in Control.  A transfer of or an accumulation of amajority of the outstanding capital stock of Borrower shall be acquired,directly or indirectly, by a person or entity, or group of persons or entitiesacting in concert, who own on the date hereof less than 5% of such votingstock; or

 

(g)           ERISA.  Any reportable event shall occur under theEmployee Retirement Income Security Act of 1974, as amended, in respect of anyemployee benefit plan maintained for employees of Borrower or any Subsidiary;or

 

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(h)           Litigation.  Any suit, action or other proceeding(judicial or administrative) commenced against Borrower or any Subsidiary, orwith respect to any assets of Borrower or any Subsidiary, shall threaten tohave a material and adverse effect on the future operations of Borrower or anySubsidiary; or a final judgment or settlement shall be entered in, or agreed toin respect of, any such suit, action or proceeding and said final judgment orsettlement is for or in an amount which would have a material adverse effect onBorrower and its Subsidiaries taken as a whole; or

 

(i)            Noncompliance with this Agreement.  Borrower shall fail to comply with anymaterial provision hereof, which failure does not otherwise constitute an Eventof Default, and such failure shall continue for thirty (30) days after noticethereof to Borrower by the Agent or either Lender or any other holder of aNote; or

 

(j)            Guaranty.  Any guaranty of the Loans (specificallyincluding any Subsidiary Guaranty) shall be repudiated or become unenforceableor incapable of performance; or

 

(k)           Voluntary Bankruptcy.  Borrower or any Subsidiary shall file apetition or answer or consent seeking relief under Title 11 of the UnitedStates Code, as now constituted or hereafter amended, or any other applicablefederal, state or foreign bankruptcy law or other similar law, or Borrower orany Subsidiary shall consent to the institution of proceedings thereunder orthe filing of any such petition or to the appointment or taking possession of areceiver, liquidator, assignee, trustee, custodian, sequestrator or similarofficial of Borrower or any Subsidiary; or

 

(1)           Involuntary Bankruptcy.  There shall be entered a decree or order bya court constituting an order for relief in respect of Borrower or anySubsidiary under Title 11 of the United States Code, as now constituted orhereafter amended, or any other applicable federal, state or foreign bankruptcylaw or other similar law, or appointing a receiver, liquidator, assignee,trustee, custodian, sequestrator or similar official of Borrower or anySubsidiary or of any substantial part of their respective properties, orordering the winding-up of or liquidation of the affairs of Borrower or anySubsidiary and any such decree or order shall continue unstayed and in effectfor a period of forty-five (45) consecutive calendar days; or

 

(m)          Insolvency.  Borrower or any Subsidiary shall becomeinsolvent or shall fail or be unable to pay its debts as they mature, shalladmit in writing its inability to pay its debts as they mature, shall make ageneral assignment for the benefit of its creditors, shall enter into anycomposition or similar agreement, or shall suspend the transaction of all or asubstantial portion of its usual business.

 

SECTION 8.2         REMEDIES.

 

Upon theoccurrence of any Event of Default set forth in subsections (a)-(j) of Section8.1 and during the continuance thereof, Agent shall, at the request of, ormay, with the consent of the Lenders declare the Notes and any other amountsowed to the Lenders, including without limitation any accrued but unpaidCommitment Fee, to be immediately due and payable, whereupon the Notes and anyother amounts owed to the Lenders shall forthwith become due and payable. Uponthe occurrence of any Event of Default set forth in subsections (k)-(m) of

 

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Section 8.1, all ofthe Notes and any other amounts owed to both Lenders, including without limitationany accrued but unpaid Commitment Fee, shall be immediately and automaticallydue and payable without action of any kind on the part of either Lender or anyother holder of a Note.  Upon theoccurrence of any Unmatured Event of Default or Event of Default, anyobligation of either Lender to make Loans shall immediately and automaticallyterminate without action of any kind on the part of the Agent or either Lenderuntil such Event of Default is waived by the Lenders, if ever, or suchUnmatured Event of Default is cured within the applicable cure period, ifany.  Borrower expressly waivespresentment, demand, notice and protest of any kind in connectionherewith.  The Agent shall promptly giveBorrower written notice of any such declaration, but failure to do so shall notimpair the effect of such declaration. No delay or omission on the part of the Agent, the Lenders or any holderof a Note in exercising any power or right hereunder or under such Note shallimpair such right or power or be construed to be a waiver of any Event ofDefault or any acquiescence therein, nor shall any single or partial exerciseof any power or right hereunder preclude other or further exercise thereof, orthe exercise of any other power or right.

 

SECTION 9.THEAGENT

 

SECTION 9.1         APPOINTMENTAND AUTHORIZATION.

 

Each Lenderhereby irrevocably appoints, designates and authorizes the Agent to take suchaction on its behalf under the provisions of this Agreement and each other LoanDocument and to exercise such powers and perform such duties as are expresslydelegated to it by the terms of this Agreement or any other Loan Document,together with such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrarycontained elsewhere in this Agreement or in any other Loan Document, the Agentshall not have any duties or responsibilities, except those expressly set forthherein, nor shall the Agent be deemed to have any fiduciary relationship withany Lender, and no implied covenants, functions, responsibilities, duties,obligations or liabilities shall be read into this Agreement or any other LoanDocuments or otherwise exist against the Agent.

 

SECTION 9.2         DELEGATIONOF DUTIES.

 

The Agent mayexecute any of its duties under this Agreement or any other Loan Document by orthrough agents, employees or attorneys-in-fact and shall be entitled to adviceof counsel concerning all matters pertaining to such duties. The Agent shallnot be responsible for the negligence or misconduct of any agent orattorney-in-fact that it selects with reasonable care.

 

SECTION 9.3         LIABILITYOF AGENT.

 

None of theAgent-Related Persons shall (i) be liable for any action taken or omitted to betaken by any of them under or in connection with this Agreement or any otherLoan Document or the transactions contemplated hereby (except for its own grossnegligence or willful misconduct) or (ii) be responsible in any manner to anyof the Lenders for any recital, statement, representation or warranty made byBorrower, or any Subsidiary or Affiliate of Borrower, or any officer thereof,contained in this Agreement or in any other Loan Document, or in anycertificate, report, statement or other document referred to or provided forin, or received by the Agent under or in connection with, this Agreement or anyother Loan Document, or the validity,

 

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effectiveness, genuineness, enforceability orsufficiency of this Agreement or any other Loan Document, or for any failure ofBorrower or any other party to any Loan Document to perform its obligationshereunder or thereunder. No Agent-Related Person shall be under any obligationto any Lender to ascertain or to inquire as to the observance or performance ofany of the agreements contained in, or conditions of, this Agreement or anyother Loan Document, or to inspect the properties, books or records of Borroweror any of Borrower’s Subsidiaries or Affiliates.

 

SECTION 9.4         RELIANCEBY AGENT.

 

(a)           The Agent shall be entitled to rely,and shall be fully protected in relying upon any writing, resolution, notice,consent, certificate, affidavit, letter, telegram, facsimile, telex ortelephone message, statement or other document or conversation reasonablybelieved by it to be genuine and correct and to have been signed, sent or madeby the proper person or persons, and upon advice and statements of legalcounsel (including counsel to Borrower), independent accountants and otherexperts selected by the Agent.  TheAgent shall be fully justified in failing or refusing to take any action underthis Agreement or any other Loan Document until it shall have first receivedsuch advice or concurrence of the Lenders as it deems appropriate and, if it sorequests, it shall first be indemnified to its satisfaction by the Lendersagainst any and all liability and expense which may be incurred by it by reasonof taking or continuing to take any such action.  The Agent shall in all cases be fully protected in acting, or inrefraining from acting under this Agreement or any other Loan Document inaccordance with a request or consent of the Lenders and such request and anyaction taken or failure to act pursuant thereto shall be binding upon theLenders.

 

(b)           For purposes of determiningcompliance with the conditions specified in Section 7.1 hereof, eachLender shall be deemed to have consented to, approved or accepted, or to besatisfied with, each document or other matter sent by the Agent to such Lenderfor consent, approval, acceptance or satisfaction, or required thereunder to beconsented to or approved by or acceptable or satisfactory to the Lender.

 

SECTION 9.5         NOTICEOF DEFAULT.

 

The Agentshall not be deemed to have knowledge or notice of the occurrence of any Eventof Default, except with regard to defaults in the payment of principal,interest and fees required to be paid to the Agent for the account of theLenders, unless the Agent shall have received written notice from a Lender orBorrower referring to this Agreement, describing such Event of Default andstating that such notice is a “notice of default.” The Agent shall promptlynotify the Lenders of its receipt of any such notice. The Agent shall take suchaction with respect to such Event of Default as may be requested by the Lendersin accordance with Section 8 hereof; provided, however, that unless anduntil the Agent has received any such request, the Agent may (but shall not beobligated to) take such action, or refrain from taking such action, withrespect to such Event of Default as it shall deem advisable or in the bestinterest of the Lenders.

 

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SECTION 9.6         CREDITDECISION.

 

Each Lenderacknowledges that none of the Agent-Related Persons has made any representationor warranty to it, and that no act by the Agent hereinafter taken, includingany review of the affairs of Borrower and its Subsidiaries, shall be deemed toconstitute any representation or warranty by any Agent-Related Person to anyLender.  Each Lender represents to theAgent that it has, independently and without reliance upon any Agent-RelatedPerson and based on such documents and information as it has deemedappropriate, made its own appraisal of and investigation into the business,prospects, operations, property, financial and other condition andcreditworthiness of Borrower and its Subsidiaries, and all applicable bankregulatory laws relating to the transactions contemplated hereby, and made itsown decision to enter into this Agreement and to extend credit to Borrowerhereunder. Each Lender also represents that it will, independently and withoutreliance upon any Agent-Related Person and based on such documents andinformation as it shall deem appropriate at the time, continue to make its owncredit analysis, appraisals and decisions in taking or not taking action underthis Agreement and the other Loan Documents, and to make such investigations asit deems necessary to inform itself as to the business, prospects, operations,property, financial and other condition and creditworthiness of Borrower.  Except for notices, reports and otherdocuments expressly herein required to be furnished to the Lenders by theAgent, the Agent shall not have any duty or responsibility to provide anyLender with any credit or other information concerning the business prospects,operations, property, financial or other condition or creditworthiness ofBorrower which may come into the possession of any of the Agent-RelatedPersons.

 

SECTION 9.7         INDEMNIFICATIONOF AGENT.

 

Whether or notthe transactions contemplated hereby are consummated, the Lenders shallindemnify upon demand the Agent-Related Persons (to the extent not reimbursedby or on behalf of Borrower and without limiting the obligation of Borrower todo so), pro rata, from and against any and all liabilities, obligations,losses, damages, penalties, actions, judgments, suits, costs, charges, expensesand disbursements (including legal fees) of any kind or nature whatsoever whichmay at any time (including at any time following the repayment of the Loans, thetermination of the Letters of Credit or the resignation or replacement of theAgent) be imposed on, incurred by or asserted against such Agent-RelatedPersons in any way relating to or arising out of this Agreement, or any LoanDocument, or any of the transactions contemplated hereby, or any action takenor omitted by such Agent-Related Person under or in connection with any of theforegoing, including with respect to any investigation, litigation orproceeding relating to or arising out of this Agreement or the Loans or theLetters of Credit or the use of the proceeds thereof, whether or not theAgent-Related Person so indemnified is a party thereto; provided, however,that the Lenders shall have no obligation hereunder to indemnify anyAgent-Related Person under this Section 9.7 with respect to obligationsresulting solely from the gross negligence or willful misconduct of suchAgent-Related Person.  Withoutlimitation of the foregoing, each Lender shall reimburse the Agent upon demandfor its ratable share of any costs or out-of-pocket expenses (including legalfees) incurred by the Agent in connection with the preparation, execution,delivery, administration, modification, amendment or enforcement (whetherthrough negotiations, legal proceedings or otherwise) of, or legal advice inrespect of rights or responsibilities under, this Agreement, any other LoanDocument, or any document contemplated by or referred to herein, to the extentthat the Agent is not reimbursed for such

 

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expenses by or on behalf of Borrower.  The undertaking in this Section shallsurvive the payment of all obligations hereunder and the resignation orreplacement of the Agent.

 

SECTION 9.8         AGENTIN INDIVIDUAL CAPACITY.

 

LaSalle and itsaffiliates may make loans to, issue letters of credit for the account of,accept deposits from, acquire equity interests in and generally engage in anykind of banking, trust, financial advisory, underwriting or other business withBorrower and its Subsidiaries and affiliates as though LaSalle were not theAgent hereunder and without notice to or consent of the Lenders. The Lendersacknowledge that, pursuant to such activities, LaSalle or its affiliates mayreceive information regarding Borrower or its Subsidiaries (includinginformation that may be subject to confidentiality obligations in favor ofBorrower or such Subsidiary) and acknowledge that the Agent shall be under noobligation to provide such information to them.  With respect to its Loans, LaSalle shall have the same rights andpowers under this Agreement as any other Lender and may exercise the same asthough it were not the Agent.

 

SECTION 9.9         SUCCESSORAGENT.

 

The Agent mayresign as Agent upon 30 days’ notice to the Lenders.  If the Agent resigns under this Agreement, the Lenders shallappoint from among the Lenders a successor agent for the Lenders.  If no successor agent is appointed prior tothe effective date of the resignation of the Agent, the Agent may appoint,after consulting with the Lenders and Borrower, a successor agent from amongthe Lenders.  Upon the acceptance of itsappointment as successor agent hereunder, such successor agent shall succeed toall the rights, powers and duties of the retiring Agent and the term “Agent”shall mean such successor agent and the retiring Agent’s appointment, powersand duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, theapplicable provisions of this Section 9 shall inure to its benefit as toany actions taken or omitted to be taken by it while it was Agent under thisAgreement.  If no successor agent hasaccepted appointment as Agent by the date which is 30 days following a retiringAgent’s notice of resignation, the retiring Agent’s resignation shallnevertheless thereupon become effective and the Lenders shall perform all ofthe duties of the Agent hereunder until such time, if any, as the Lendersappoint a successor agent as provided for above.

 

SECTION 10.MISCELLANEOUS

 

SECTION 10.1       WAIVEROF DEFAULT.

 

The Lendersmay, by written notice to Borrower, at any time and from time to time, waiveany default in the performance or observance of any condition, covenant orother term hereof, or any Unmatured Event of Default or Event of Default, whichshall be for such period and subject to such conditions as shall be specifiedin any such notice.  In the case of anysuch waiver, the Lenders and Borrower shall be restored to their formerposition and rights hereunder and under the Notes, respectively, and anyUnmatured Event of Default or Event of Default so waived shall be deemed to becured and not continuing; but no such waiver shall extend to or impair anyright consequent thereon or to any subsequent or other Unmatured Event ofDefault or Event of Default.

 

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SECTION 10.2       NOTICES.

 

Any and allnotices, demands, requests, consents, designations, waivers and othercommunications required or desired hereunder shall be in writing and shall bedeemed effective upon personal delivery, upon confirmed facsimile transmission,upon receipted delivery by reputable overnight carrier, or three (3) daysafter mailing if mailed by registered or certified mail, return receiptrequested, postage prepaid, to Borrower, the Agent or the Lenders at thefollowing addresses or facsimile numbers or such other addresses and facsimilenumbers as Borrower, the Agent or Lenders may specify in like manner; provided,however, that notices of a change of address or facsimile number shall beeffective only upon receipt thereof:

 
| If to Borrower, then to:                 |   | If to LaSalle, in its capacity as Agent or |
|------------------------------------------|--------|--------------------------------------------|
|                                     |   | Lender, then to:                           |
| Continental Materials Corporation        |   |                                       |
| 225 West Wacker Drive                    |   | LaSalle Bank National Association          |
| Chicago, Illinois 60606                  |   | 135 South LaSalle Street                   |
| Attention:   Treasurer              |   | Chicago, Illinois 60603                    |
| Facsimile No.:  (312) 541-8089 |   | Attention: Mr. Henry J. Munez              |
|                                     |   | Facsimile No.:  (312) 904-6242   |
|                                     |   |                                       |
|                                     |   | With a copy to:                            |
|                                     |   |                                       |
|                                     |   | FagelHaber LLC                             |
|                                     |   | 55 East Monroe Street, 40th  Floor         |
|                                     |   | Chicago, Illinois  60603              |
|                                     |   | Attention: Victor A. Des Laurier, Esq.     |
|                                     |   | Facsimile No.:  (312) 580-2201   |
|                                     |   |                                       |
|                                     |   | If to Fifth Third, then to                 |
|                                     |   |                                       |
|                                     |   | Fifth Third Bank                           |
|                                     |   | 233 South Wacker Drive                     |
|                                     |   | Suite 400                                  |
|                                     |   | Chicago, Illinois  60606              |
|                                     |   | Attention: Ms. Susan Kaminski              |
|                                     |   | Facsimile No.: (312) 876-4793              |

 

SECTION 10.3       NONWAIVER;CUMULATIVE REMEDIES.

 

No failure toexercise, and no delay in exercising, on the part of the Agent or either or allof the Lenders of any right, power or privilege hereunder shall preclude anyother or further exercise thereof or the exercise of any other right, power orprivilege.  The rights and remedies ofthe Lenders herein provided are cumulative and not exclusive of any rights orremedies provided by law.

 

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SECTION 10.4       SURVIVALOF AGREEMENTS.

 

Allagreements, representations and warranties made herein shall survive thedelivery of the Notes and the making of any Loan hereunder.

 

SECTION 10.5       SUCCESSORS:PARTICIPATIONS.

 

This Agreementshall, upon execution and delivery by Borrower, and acceptance by the Lendersin Chicago, Illinois, become effective and shall be binding upon and inure tothe benefit of Borrower, the Agent, the Lenders and their respective successorsand assigns, except that Borrower may not transfer or assign any of its rightsor interest hereunder without the prior written consent of all Lenders.  The Lenders may, without notice or consentof any kind, sell, assign, transfer or grant participations in all or any ofthe Loans.  In such event each and everyimmediate and successive assignee, transferee or holder of or participant inall or any of the Loans shall have the right to enforce this Agreement, theNotes, and all of the other document or instrument executed in connectionherewith, by suit or otherwise, for the benefit of such assignee, transferee,holder or participant as fully as if such assignee, transferee, holder orparticipant were herein by name specifically given such rights, powers andbenefits, but the Lenders shall have an unimpaired right, prior and superior tothat of any assignee, transferee or holder to enforce this Agreement, theNotes, and all of the other documents or instrument executed in connectionherewith for the benefit of the Lenders or any such participant, as to so muchof the Loans as it has not sold, assigned or transferred.

 

SECTION 10.6       CAPTIONS.

 

Captions inthis Agreement are for convenience of reference only and shall not define orlimit any of the terms or provisions hereof. References herein to Sections or provisions without reference to thedocument in which they are contained are references to this Agreement.

 

SECTION 10.7       SINGULARAND PLURAL.

 

Unless thecontext requires otherwise, wherever used herein the singular shall include theplural and vice versa, and the use of one gender shall also denote the otherwhere appropriate.

 

SECTION 10.8       COUNTERPARTS.

 

This Agreementmay be executed by the parties on any number of separate counterparts, and byeach party on separate counterparts; each counterpart shall be deemed anoriginal instrument; and all of the counterparts taken together shall be deemedto constitute one and the same instrument.

 

SECTION 10.9       FEES.

 

Borroweragrees, upon demand of the Lenders, to pay or reimburse the Lenders for allreasonable costs, expenses (including attorneys’ fees and legal costs andexpenses, and time charges of attorneys who may be employees of either of theLenders, in each case both in and out of court and in original, appellate andbankruptcy proceedings), and disbursements incurred or paid by the Lenders inconnection with the preparation, negotiation, documentation, administration,amendment, modification, waiver or interpretation of this Agreement, and/or in

 

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enforcing or preserving its rights hereunderor under the Notes or any document or instrument executed in connectionherewith.  Notwithstanding theforegoing, Borrower shall not be obligated to pay expenses of the Lenderspertaining to any lawsuit initiated by the Lenders if the Lender’s complaintshall be dismissed with prejudice or if judgment shall be rendered, in whole,against the Lenders (and shall not be reversed on appeal).

 

SECTION 10.10     CONSTRUCTION:PROVISIONS SEVERABLE.

 

This Agreement,the Notes and any document or instrument executed in connection herewith shallbe governed by, and construed and interpreted in accordance with, the internallaws of the State of Illinois, and shall be deemed to have been executed in theState of Illinois.  If any term orprovision of this Agreement, the Notes, or any other documents or instrumentexecuted in connection herewith shall be unenforceable or invalid, suchunenforceability or invalidity shall not render any other term or provisionhereof unenforceable or invalid, and all other terms and provisions of thisAgreement, the Notes, and any other documents or instrument executed inconnection herewith shall be enforceable and valid.

 

SECTION 10.11     SUBMISSIONTO JURISDICTION: VENUE.

 

TO INDUCE THELENDERS TO MAKE THE LOANS, AS EVIDENCED BY THE NOTES AND THIS AGREEMENT,BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO THE LENDER’S SOLE AND ABSOLUTEELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS IN ANY WAY, MANNER ORRESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE NOTES OR ANYDOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH, SHALL BE SUBJECT TOLITIGATION IN COURTS HAVING SITUS WITHIN CHICAGO, ILLINOIS.  BORROWER HEREBY CONSENTS AND SUBMITS TO THEJURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN CHICAGO,ILLINOIS.  BORROWER HEREBY WAIVES ANYRIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHERPROCEEDING BROUGHT AGAINST BORROWER BY THE LENDERS IN ACCORDANCE WITH THISSECTION.

 

SECTION 10.12     SET-OFF.

 

At any timeafter an Event of Default or at any time after any liabilities owed to eitherLender under any Loan Document becomes past due, and without notice of anykind, any account, deposit or other indebtedness owing by either Lender to Borrower,and any securities or other property of Borrower delivered to or left in thepossession of either Lender or its nominee or bailee, may be set- off againstand applied in payment of any obligation hereunder (whether as Loans or Lettersof Credit), whether due or not.  TheLenders hereby agree that if either shall, through the exercise of any right ofcounterclaim, set-off, banker’s lien, or otherwise, receive payment of aproportion of the aggregate amount of principal and interest due with respect toits participation in the Loans that is greater than the proportion received bythe Lenders in respect of the aggregate amount of principal and interest duewith respect to its Pro Rata Share in the Loans, the party receiving suchproportionately greater payment shall remit to the other Lender an amountnecessary to maintain each Lender’s Pro Rata Share of the Commitment -Revolving Credit or Commitment - Term Loan, so that all such recoveries ofprincipal and interest with respect to all Loans and Letters of Credit shall beon a pro rata basis.

 

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SECTION 10.13     DOCUMENTATION.

 

Both Lendersrepresent, warrant, and covenant to the other Lender that:

 

(a)           in making its decisionto enter into this Agreement and the Notes:

 

(i) itindependently has taken whatever steps it considers necessary to evaluate thefinancial condition and affairs of Borrower;

 

(ii) it hasmade an independent credit judgment;

 

(iii) it hasnot relied upon any representation by the other Lender; and

 

(iv) neitherLender shall be responsible or liable to the other Lender for any statements inor omissions from this Agreement, the Notes, or any other document orinstrument executed by Borrower or by and among Borrower and the Lenders and documentor instrument received by either Lender from Borrower or concerning Borrower,and

 

(b)           with respect to theLoans and Letters of Credit and so long as any portion of the Loans and Lettersof Credit, respectively, remains outstanding, each Lender will continue to makeits own independent evaluation of the financial conditions and affairs ofBorrower.

 

SECTION 10.14     LENDERS.

 

The Lendersagree that neither Lender may amend, waive, alter or agree to any othermodification of this Agreement, the Notes and all other documents orinstruments executed in connection herewith without the prior written consentand agreement of the other Lender.

 

SECTION 10.15     MERGERAND INTEGRATION.

 

Commencing asof the date of this Agreement, this Agreement, the Notes, the Letters ofCredit, the Subsidiary Guaranties and the other documents and instrumentsreferred to herein contain the entire agreement among the parties hereto andthereto with respect to the subject matter hereof and thereof.

 

 

[REMAINDER OF PAGE INTENTIONALLYLEFT BLANK]

 

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**INWITNESS WHEREOF**, the parties hereto have duly executedthis Agreement as of the date first written above.

 
|   | 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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### **SCHEDULE 1**

 

### **LENDERS’TOTAL COMMITMENT AMOUNT**

 
| **Lender**                         |   | **Total  Commitment Amount** |         | **Pro Rata  Share** |   |
|------------------------------------|--------|------------------------------|--------------|---------------------|--------|
|                               |   | $                            | (21,500,000  | )                   |   |   |
| LaSalle Bank  National Association |   | $                            | 12,900,000   |                | 60.00  | % |
| Fifth Third  Bank (Chicago)        |   | $                            | 8,600,000.00 |                | 40.00  | % |

 

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