**Exhibit 10.2**

 

**ExecutionVersion**

 

**WAIVER AND SECONDAMENDMENT TO CREDIT AGREEMENT**

** **

THISWAIVER AND SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”),dated as of April 15, 2010, is entered into by and among CONTINENTAL MATERIALSCORPORATION, a Delaware corporation (the “Company”), the financialinstitutions that are or may from time to time become parties to the CreditAgreement referenced below (together with their respective successors andassigns, the “Lenders” and each, a “Lender”) and THE PRIVATEBANKAND TRUST COMPANY, an Illinois state chartered bank as AdministrativeAgent for each Lender (the “Administrative Agent”).  Capitalized terms used herein and not otherwisedefined shall have the meanings given to such terms in the Credit Agreementreferenced below.

 

WHEREAS,the Lender previously made available to the Company a credit facility pursuantto the terms and conditions of that certain Credit Agreement, dated as of April16, 2009, by and among the Company, the Lender and the Administrative Agent, asamended by that certain First Amendment to Credit Agreement, dated as of November18, 2009, by and among the Company, the Lender and the Administrative Agent(the “First Amendment”) (as further amended, restated or supplementedfrom time to time, the “Credit Agreement”);

 

WHEREAS,pursuant to the Credit Agreement, the Lender previously (i) made available tothe Company a revolving credit facility in the amount of $20,000,000 (reducedto $15,000,000 pursuant to the First Amendment), and (ii) funded a term loan inthe original principal amount of $10,000,000;

 

WHEREAS,the parties to this Amendment desire to amend the Credit Agreement to, amongother things, (i) reduce the Revolving Commitment to $13,500,000 from and afterOctober 1, 2010, (ii) shorten the maturity date of the Revolving Loan and TermLoan to August 1, 2011, (iii) modify certain financial covenants, eliminatecertain financial covenants and eliminate the requirement to test the financialcovenants on April 3, 2010, (iv) modify the definition of Borrowing Base toreduce the inventory cap from $7,500,000 to $6,750,000, (v) modify the pricingapplicable to the Revolving Loan and Term Loan, and (vi) modify the definitionof Eligible Accounts to exclude any Dating Program Accounts that are more thansixty (60) days past due, in each case, all on the terms and conditions setforth herein; and

 

WHEREAS,as of the date of this Amendment, there exist Events of Default under and asdefined in the Credit Agreement as a result of the Company’s failure to complywith the minimum Adjusted EBITDA requirement in Section 11.13.1 of theCredit Agreement and the Fixed Charge Coverage Ratio requirement in Section 11.13.2of the Credit Agreement, in each case, for the period ended January 2, 2010(the “Existing Covenant Defaults”).

 

NOW,THEREFORE, in consideration of the premises, to induce the Lender andAdministrative Agent to enter into this Amendment, and for other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, it is hereby agreed by the parties hereto as follows:

 

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# Section 1.  Incorporation of Recitals.  The foregoing recitals are herebyincorporated into and made a part of this Amendment.

#  

# Section 2.  Amendment of the Credit Agreement.  It is hereby agreed and understood that,subject to the complete fulfillment and performance of the conditions precedentset forth in Section 7 of this Amendment, the Credit Agreement is herebyamended and modified as follows:

#  

## A.                                   Section 1.1.  Section 1.1 of the Credit Agreement ishereby amended as follows:

##  

### (1)                                  The definitionof “Applicable Margin” is hereby deleted in its entirety and replacedwith the following (and Annex C of the Credit Agreement is herebyeliminated):

###  

### “Applicable Marginmeans, for any day, the rate per annum set forth below, it being understoodthat the Applicable Margin for (i) LIBOR Loans shall be the percentage setforth under the column “LIBOR Margin”, (ii) Base Rate Loans shall be thepercentage set forth under the column “Base Rate Margin”, (iii) the Non-Use FeeRate shall be the percentage set forth under the column “Non-Use Fee Rate” and (iv)the L/C Fee shall be the percentage set forth under the column “L/C Fee Rate”:

 
| **Revolving Loan and  Term Loan** | ** ** | ** **            | ** ** | ** **            | ** ** |
|-----------------------------------|------------|-----------------------|------------|-----------------------|------------|
| **LIBOR  Margin**                 | ** ** | **Base Rate  Margin** | ** ** | **Non-Use  Fee Rate** | ** ** | **L/C Fee  Rate** | ** ** |
| 4.0                               | %          | 1.75                  | %          | 0.375                 | %          | 1.50 | %” |

###  

### (2)                                  The inventorycap (currently set at $7,500,000) contained in the definition of “BorrowingBase” is hereby reduced to $6,750,000.

###  

### (3)                                  The definitionof “Computation Period” is hereby deleted in its entirety and replacedwith the following:

###  

### “ComputationPeriod means (a) with respect to each financial covenant contained in Section11.13 (other than the minimum Adjusted EBITDA covenant contained in Section11.13.1), each period of four consecutive Fiscal Quarters ending on thelast day of a Fiscal Quarter, and (b) with respect to the minimum AdjustedEBITDA covenant contained in Section 11.13.1, each period of threeconsecutive months ending on the last day of a Fiscal Quarter, commencing withthe Fiscal Quarter ending July 3, 2010.”

 

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### (4)                                  Clause (k) ofthe definition of “Eligible Account” is hereby deleted in its entiretyand replaced with the following:

###  

#### “(k)                            such Account isevidenced by an invoice delivered to the related Account Debtor and is not morethan (i) sixty (60) days past the due date thereof as reflected in the originalinvoice therefor, or (ii) one-hundred (120) days past the original invoice datetherefor (provided, however, the requirement set forth in item (ii) ofthis clause (k) shall not apply to the Dating Program Accounts to the extentthe applicable Account Debtors are in compliance with the terms and conditionsof the Dating Program with respect to the applicable Dating Program Accountsand a Senior Officer certifies in the applicable Borrowing Base Certificatethat to his or her knowledge such Account Debtors are in compliance with theDating Program and that such Dating Program Accounts (including any portionthereof) are not more than sixty (60) days past due);”

####  

### (5)                                  The definitionof “Revolving Commitment” is hereby deleted in its entirety and replacedwith the following:

###  

“Revolving Commitment means (a) $15,000,000 atall times prior to October 1, 2010, and (b) $13,500,000 at all times from andafter October 1, 2010, as reduced from time to time pursuant to Section 6.1.”

 

### (6)                                  The definitionof “Term Loan Maturity Date” is hereby deleted in its entirety andreplaced with the following:

###  

“Term Loan Maturity Date means the earlier of (a)August 1, 2011 or (b) the Termination Date.”

 

### (7)                                  The definitionof “Termination Date” is hereby deleted in its entirety and replacedwith the following:

###  

“Termination Date means the earlier to occur of(a) August 1, 2011 or (b) such other date on which the Commitments terminatepursuant to Section 6 or Section 13.”

 

## B.                                     Section 11.13.1.  Section 11.13.1 (Minimum AdjustedEBITDA) of the Credit Agreement is hereby deleted in its entirety and replacedwith the following:

##  

### “11.13.1      MinimumAdjusted EBITDA.  Not permitAdjusted EBITDA for any Computation Period to be less than the applicableamount set forth below for such Computation Period:

 

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| **Computation  Period Ending** | ** ** | **Adjusted EBITDA** | ** ** |
|--------------------------------|------------|---------------------|------------|
| ** **                     | ** ** | ** **          | ** ** |
| July 3, 2010                   |       | $                   | 2,100,000  |   |
|                           |       |                |       |   |
| October 2, 2010                |       | $                   | 2,000,000  |   |
|                           |       |                |       |   |
| January 1, 2011                |       | $                   | 500,000    |   |
|                           |       |                |       |   |
| April 2, 2011                  |       | $                   | (600,000   | ) |
|                           |       |                |       |   |
| July 2, 2011                   |       | $                   | 2,100,000  | ” |

##  

## C.                                     Section 11.13.2.  Section 11.13.2 (Minimum Fixed ChargeCoverage Ratio) of the Credit Agreement is hereby deleted in its entirety andreplaced with the following (and such financial covenant is hereby removed fromthe Credit Agreement):

##  

## “11.13.2      [Intentionally Deleted].”

##  

## D.                                    Section 11.13.4.  Section 11.13.4 (Maximum AdjustedTotal Cash Flow Leverage) of the Credit Agreement is hereby deleted in itsentirety and replaced with the following (and such financial covenant is herebyremoved from the Credit Agreement):

##  

## “11.13.4      [Intentionally Deleted].”

##  

## E.                                      Sections11.13.3 and 11.13.5. Notwithstanding the test dates set forth in Section 11.13.3(Minimum Tangible Net Worth) and Section 11.13.5 (Capital Expenditures),such financial covenants shall not be tested for the Computation Period ended April3, 2010, it being agreed that the next test date for both such financialcovenants after April 3, 2010 shall be July 3, 2010.  Other than eliminating the April 3, 2010 testdate for both such financial covenants, the requirements and test dates forsuch financial covenants shall continue in full force and affect.

##  

# Section 3.  BorrowingBase.  The Company acknowledges andagrees that, as provided in the most recent field audit report, effective as ofthe date hereof, the following reserves will be implemented in respect of theEligible Inventory component of the Borrowing Base:  (i) a reserve for slow-moving Inventory inthe amount of $3,115,000, and (ii) a test count reserve equal to seven percent(7.0%) of the Eligible Inventory of Williams Furnace.  As a condition to the effectiveness of thisAmendment, the Company will deliver a pro forma Borrowing Base Certificatesetting forth the Borrowing Base as of April 3, 2010 (giving effect to themodifications and the reserves set forth in this Amendment).  Notwithstanding anything to the contrarycontained herein, the Administrative Agent shall not be restricted fromimplementing additional reserves or increasing any reserves with respect to theBorrowing Base, which the Administrative Agent deems necessary in its reasonablediscretion.

 

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# Section 4.  Waiver.  It is hereby agreed and understood that,subject to the complete fulfillment and performance of the conditions precedentset forth in Section 7 of this Amendment, the Administrative Agent andeach Lender hereby waives the Existing Covenant Defaults and all of theirrespective rights and remedies with respect to the Existing CovenantDefaults.  The waiver hereunder will notin any way operate as (i) an amendment or modification of the Credit Agreementor any related agreement, (ii) a waiver of repayment by the Company of anyportion of the outstanding Obligations under the Credit Agreement, or (iii) awaiver of, or consent with respect to, any existing or future Event of Default,or a waiver or abandonment to any right or remedy available to the Lender withrespect to any such Event of Default, all of which rights are reserved.

#  

# Section 5.  Revolving Loan Note and Term Loan Note.  It is hereby agreed and understood that the RevolvingLoan Note and the Term Loan Note remain in full force and effect and that theObligations evidenced thereby remain due and payable on the terms set forththerein and in the Credit Agreement (as modified by this Amendment).

#  

# Section 6.  Amendmentof the Loan Documents.  It is herebyagreed and understood by the Administrative Agent, each Lender and the Companythat, subject to the complete fulfillment and performance of the conditionsprecedent set forth in Section 7 of this Amendment and effective as ofthe effective date of this Amendment, each reference to the Credit Agreement,the Revolving Loan, the Term Loan, the Revolving Loan Note, the Term Loan Note,and/or any other defined terms or any Loan Documents in any Loan Documentsshall be deemed to be a reference to any such defined terms or such agreementsas such terms or agreements are amended or modified by this Amendment.  Any breach of any representation, warranty,covenant or agreement contained in this Amendment shall be deemed to be an Eventof Default for all purposes of the Credit Agreement.

#  

# Section 7.  ConditionsPrecedent.  The effectiveness of thisAmendment and the obligations of the Administrative Agent and each Lenderhereunder are subject to the satisfaction, or waiver by the AdministrativeAgent, of the following conditions precedent on or before the date hereof(unless otherwise provided or agreed to by the Administrative Agent) inaddition to the conditions precedent specified in Section 12.2 of theCredit Agreement:

#  

## A.                                   The Companyshall have (i) paid to the Administrative Agent, for its benefit and theratable benefit of each Lender, a waiver and amendment fee of $20,000, and (ii)paid and/or reimbursed all reasonable fees, costs and expenses relating to thisAmendment and owed to the Lender pursuant to the Credit Agreement in connectionwith this Amendment.

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## B.                                     The Companyshall have delivered, or caused to be delivered, original fully completed,dated and executed originals of (i) this Amendment, (ii) a pro forma BorrowingBase Certificate setting forth the Borrowing Base as of April 3, 2010 (givingeffect to the modifications and the reserves set forth in this Amendment), and (iii)such other certificates, instruments, agreements or documents as theAdministrative Agent may reasonably request (each of the foregoingcertificates, instruments, agreements and documents described in this Section7(B) (other than this Amendment) which constitute Loan Documents arehereinafter referred to collectively as the “Other Documents”).

 

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## C.                                     The followingstatements shall be true and correct and the Company, by executing anddelivering this Amendment to the Lender and the Administrative Agent, herebycertifies that the following statements are true and correct as of the datehereof:

##  

### (1)                                  Other than asexpressly contemplated by this Amendment, since the date of the most recentfinancial statements furnished by the Company to the Administrative Agent(which financial statements were true and correct in all material respects andotherwise conformed to the requirements set forth in the Credit Agreement forsuch financial statements), there shall have been no change which has had orwill have a material adverse effect on the business, operations, properties orfinancial condition of the Loan Parties taken as a whole;

###  

### (2)                                  Therepresentations and warranties of the Company set forth in the Credit Agreementand the other Loan Documents (as amended by this Amendment) are true andcorrect in all respects on and as of the date of this Amendment with the sameeffect as though made on and as of such date, except to the extent suchrepresentations and warranties expressly relate to an earlier date, and noUnmatured Event of Default or Event of Default (other than the ExistingCovenant Defaults waived in this Amendment) has occurred and is continuing; and

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### (3)                                  No consents,licenses or approvals are required in connection with the execution, deliveryand performance by the Company of this Amendment or the Other Documents or thevalidity or enforceability against the Company of this Amendment or the OtherDocuments which have not been obtained and delivered to the Lender.

###  

# Section 8.  Miscellaneous.

#  

## A.                                   Except asexpressly amended and modified by this Amendment, the Credit Agreement and theother Loan Documents are and shall continue to be in full force and effect inaccordance with the terms thereof.

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## B.                                     This Amendmentmay be executed by the parties hereto in counterparts, and all of suchcounterparts taken together shall be deemed to constitute one and the sameinstrument.

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## C.                                     This Amendmentshall be construed in accordance with and governed by the internal laws, andnot the laws of conflict, of the State of Illinois.

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## D.                                    The headingscontained in this Amendment are for ease of reference only and shall not beconsidered in construing this Amendment.

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## [SIGNATURE PAGES FOLLOW]

 

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INWITNESS WHEREOF, the parties hereto have caused this Waiver and SecondAmendment to Credit Agreement to be duly executed as of the day and year firstabove written.

 
|   | **COMPANY:**                          |
|--------|---------------------------------------|
|   |                                  |
|   | CONTINENTAL MATERIALS CORPORATION     |
|   |                                  |
|   | By:                                   | /s/ Joseph J. Sum |
|   |                                  | Joseph J. Sum |
|   |                                  | Chief  Financial Officer |
|   |                                  |
|   |                                  |
|   | **ADMINISTRATIVE  AGENT AND LENDER:** |
|   |                                  |
|   |                                  |
|   | THE PRIVATEBANK AND TRUST COMPANY     |
|   |                                  |
|   | By:                                   | /s/ Steven M. Cohen |
|   |                                  | Steven M. Cohen |
|   |                                  | Managing Director & Senior Vice President |

 

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**ACKNOWLEDGMENT, AGREEMENT,CONSENT**

**AND REAFFIRMATION OF LOAN PARTIES**

 

Eachof the undersigned Loan Parties, for good and valuable consideration, receiptof which is hereby acknowledged:  (a) herebyacknowledges receipt of a copy of the foregoing Amendment, acknowledges thatsuch Loan Party has read and reviewed the terms thereof, and acknowledges thatsuch Loan Party has been afforded an adequate opportunity to have the foregoingAmendment reviewed by such Loan Party’s counsel; (b) hereby consents to theterms and conditions of the foregoing Amendment; and (c) hereby acknowledgesand agrees that such Loan Party’s duties, obligations and liabilities to theAdministrative Agent and/or the Lender under the Guaranty and CollateralAgreement shall be continuing and shall remain in full force and effect againstsuch Loan Party irrespective of the amendments to the Credit Agreementcontained in the foregoing Amendment or any other amendments or modificationsto any of the other Loan Documents.

 

In addition to the foregoing, each of the undersignedLoan Parties (i) hereby ratifies, reaffirms and confirms its pledge,hypothecation, and grant of a continuing lien and first priority securityinterest in favor of the Administrative Agent in all of the assets of such LoanParty pledged to the Administrative Agent under the Guaranty and CollateralAgreement (subject to the terms and conditions set forth therein), and (ii) herebyacknowledges that such pledge shall continue in full force and effect securingthe Secured Obligations under and as defined in the Guaranty and CollateralAgreement notwithstanding the execution and delivery of the foregoingAmendment.

 

INWITNESS WHEREOF, each of the undersigned Loan Parties has duly executed thisAcknowledgment, Agreement, Consent and Reaffirmation of Loan Parties to theWaiver and Second Amendment to Credit Agreement as of April 15, 2010.

 
|   | MCKINNEY DOOR AND HARDWARE, INC. |
|--------|----------------------------------|
|   |                             |
|   |                             |
|   | By:                              | /s/ Joseph J. Sum |
|   |                             | Joseph J. Sum |
|   |                             | Treasurer |
|   |                             |   |
|   | TRANSIT MIX CONCRETE CO.         |
|   |                             |
|   |                             |
|   | By:                              | /s/ Joseph J. Sum |
|   |                             | Joseph J. Sum |
|   |                             | Treasurer |

 

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|   | TRANSIT MIX OF PUEBLO, INC.  |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | By:                          | /s/ Joseph J. Sum |
|   |                         | Joseph J. Sum |
|   |                         | Chief Financial Officer |
|   |                         |   |
|   | WILLIAMS  FURNACE CO.        |
|   |                         |
|   |                         |
|   | By:                          | /s/  Joseph J. Sum |
|   |                         | Joseph  J. Sum |
|   |                         | Treasurer |
|   |                         |   |
|   | PHOENIX  MANUFACTURING, INC. |
|   |                         |
|   |                         |
|   | By:                          | /s/  Joseph J. Sum |
|   |                         | Joseph  J. Sum |
|   |                         | Treasurer |
|   |                         |   |
|   | CASTLE  CONCRETE COMPANY     |
|   |                         |
|   |                         |
|   | By:                          | /s/  Joseph J. Sum |
|   |                         | Joseph  J. Sum |
|   |                         | Treasurer |
|   |                         |   |
|   | EDENS  INDUSTRIAL PARK INC.  |
|   |                         |
|   |                         |
|   | By:                          | /s/  Joseph J. Sum |
|   |                         | Joseph  J. Sum |
|   |                         | Treasurer |

 

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