Document:

Exhibit 10.3

 

	
   

  	
  Deutsche Bank 

  
	
   

  	
   

  
	
   

  	
  Deutsche
  Bank AG London

  
	
   

  	
  Winchester House

  
	
   

  	
  1 Great Winchester St,

  
	
   

  	
  London EC2N 2DB

  
	
   

  	
  Telephone:
  44 20 7545 8000

  
	
   

  	
   

  
	
   

  	
  c/o
  Deutsche Bank AG New York

  
	
   

  	
  60
  Wall Street

  
	
   

  	
  New
  York, NY 10005

  
	
   

  	
  Telephone:
  212-250-5977

  
	
   

  	
  Facsimile:
  212-797-8826

  

 

June 28, 2005

 

Cephalon, Inc.
(“Counterparty”)

41
Moores Road

Frazer,
PA 19355

Attention:
Kevin Buchi, Senior Vice President & Chief Financial Officer

 

 Dear Sirs / Madam:

 

Reference
is made to the Confirmation (the “Confirmation”)
dated as of June 2, 2005 between Deutsche Bank AG acting through its
London Branch (“Deutsche”) and Cephalon, Inc.
(“Counterparty”), which sets forth
the terms and conditions of a warrant transaction (the “Transaction”)
entered into between Deutsche and Counterparty. 
Terms used herein and not defined herein have the meanings set forth in
the Confirmation.  For purposes of this
Amendment and the Confirmation, unless the context otherwise requires, all
references herein and therein to “the Confirmation”, and “the Transaction”,
shall be deemed references to the Confirmation as amended hereby, and the
Transaction as governed by such amended Confirmation, respectively.

 

DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S.
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 
DEUTSCHE BANK AG, NEW YORK BRANCH HAS ACTED SOLELY AS AGENT IN
CONNECTION WITH THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE,
ENDORSEMENT, GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER
PARTY UNDER THE TRANSACTION. DEUTSCHE BANK AG, LONDON BRANCH IS NOT A MEMBER OF
THE SECURITIES INVESTOR PROTECTION CORPORATION (SIPC).

 

In
connection with the exercise of the option granted by Counterparty to the
Underwriters (as such term is defined in the Underwriting Agreement) to
purchase additional Reference Notes pursuant to the Underwriting Agreement (the
“Option Exercise”), and as provided for
in Section 10(d) of the Confirmation, Deutsche and the Counterparty
intend to enter into this letter agreement (this “Amendment”)
to amend the Confirmation in the manner set forth below.  In consideration of such premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Deutsche and the Counterparty hereby agree that:

 

(a)                                  In Section 2 of the Confirmation, the
number “17,130,621” opposite the caption “Number of Warrants” is deleted and
replaced with the number “19,700,214”.

 

(b)                                 On July 1, 2005, Deutsche, through the Agent, shall pay to
Counterparty $23,024,055, representing payment of additional Premium with
respect to the Transaction and this Amendment.

 

1

 

(c)                                  In Section 10(a) of the
Confirmation, the definition of “Reference Notes” is hereby amended to read “.
.. .of Counterparty, $800,000,000
principal amount of which were issued on June 7, 2005, and
$120,000,000 principal amount of which were issued on July 1, 2005. . .”

 

(d)                                 By executing and delivering this Amendment,
Counterparty shall be deemed to have represented and warranted to Deutsche, on
each day from (and including) the date hereof, to (and including) the date by
which Deutsche is able to initially complete a hedge of its position created by
the Option Exercise and this Amendment, that:

 

(1)                                  it will not, and will not permit any person
or entity subject to its control to, bid for or purchase Shares during such
period; and

 

(2)                                  it has publicly disclosed all material
information necessary for it to be able to purchase or sell Shares in
compliance with applicable federal securities laws and that it has publicly
disclosed all material information with respect to its condition (financial or
otherwise).

 

(e)                                  In addition, by executing and delivering this
Amendment, Counterparty, or Counterparty and Deutsche, as the case may be,
shall be deemed to have made, on the date hereof, the representations and
warranties set forth in Section 10(c) of the Confirmation, in clauses
(i) through (v) under the heading “Mutual Representations” of Section 10
of the Confirmation and in clauses (i) through (iii) under the
heading “Additional Counterparty Representations” of Section 10 of the
Confirmation; provided that (w) each reference
in each such Section or clause to “the Confirmation” shall be deemed to be
a reference to the Confirmation as amended by this Amendment, (x) each
reference in each such Section or clause to “the Transaction” shall be
deemed to be a reference to the Transaction as governed by such amended
Confirmation, (y) each reference in each such Section or clause to “the
Trade Date” shall be deemed to be a reference to the date hereof and (z) each
reference in each such Section or clause to “hereof”, “hereunder”, “herein”,
“hereby” or any other similar reference shall be deemed to be a reference to
the Confirmation as amended by this Amendment.

 

If
the Option Exercise fails to close for any reason, then the entirety of this
Amendment shall terminate automatically and no payments or deliveries shall be
required in connection herewith.

 

This
Amendment may be executed by the parties hereto in counterparts, each of which
shall be deemed to be an original and all of which, taken together, shall
constitute one and the same instrument.

 

This
Amendment shall be governed by and construed in accordance with New York law
without reference to choice of law doctrine and each party hereby submits to
the jurisdiction of the Courts of the State of New York.

 

[Remainder of page intentionally left blank]

 

2

 

Please
confirm that the foregoing correctly sets forth the terms of your agreement by
signing and returning this Amendment.

 

 

	
   

  	
   

  	
  Yours faithfully,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DEUTSCHE
  BANK AG, acting through its New York branch and solely in its capacity as
  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Haas

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Mark Haas

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Dirvin

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  David Dirvin

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
  Confirmed as of the date first written above:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CEPHALON, INC. (“Counterparty”)

  	
   

  	
   

  
	
   

  
	
   

  
	
   By:

  	
  /s/ John E. Osborn

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  John E. Osborn

  	
   

  
	
  Title:

  	
  Senior Vice President, General Counsel and Secretary

  	
   

  
	
   

  	
   entered into on this 30th day
  of June, 2005

  	
   

  
	
   

  	
   

  	
   

  
	
  DEUTSCHE BANK AG, LONDON

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   By:

  	
  /s/ David Dirvin

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  David Dirvin

  	
   

  
	
  Title:

  	
  Attorney-in-Fact

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   By:

  	
  /s/ Noreddine Sebti

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Noreddine Sebti

  	
   

  
	
  Title:

  	
  Attorney-in-FactExhibit 10.1

 

THIRD AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT

 

This Third
Amendment to Revolving Credit and Term Loan Agreement (this “Third Amendment”)
is made and entered into as of the 28th day of June, 2005, by and among
Continental Materials Corporation, a Delaware corporation (“Borrower”), LaSalle
Bank National Association, a national banking association, as administrative
agent and as a lender (LaSalle in its capacity as administrative agent referred
to in this Agreement as “Agent” and in its capacity as a lender as “LaSalle”)
and Fifth Third Bank (Chicago), a Michigan banking corporation, as a lender (“Fifth
Third”) (LaSalle and Fifth Third are each referred to individually in this
Third Amendment as a “Lender” and collectively as the “Lenders”).

 

W I T N E S S E T H:

 

WHEREAS, prior
hereto, Lenders provided certain loans, extensions of credit and other
financial accommodations to Borrower pursuant to (a) that certain
Revolving Credit and Term Loan Agreement dated as of September 5, 2003, as
amended by that certain First Amendment to Revolving Credit and Term Loan
Agreement dated as of May 29, 2004, and that certain Second Amendment to
Revolving Credit and Term Loan Agreement dated as of April 14, 2005, each
by and among Lenders, Borrower and Agent (collectively, the “Credit Agreement”),
and (b) the other documents, agreements and instruments referenced in the
Credit Agreement or executed and delivered pursuant thereto;

 

WHEREAS, Borrower
desires Lenders to, among other things, modify certain financial covenants set
forth in the Credit Agreement (collectively, the “Additional Financial
Accommodations”); and

 

WHEREAS, Lenders are
willing to provide the Additional Financial Accommodations, but solely on the
terms and subject to the provisions set forth in this Third Amendment and the
other agreements, documents and instruments referenced herein or executed and
delivered pursuant hereto.

 

NOW, THEREFORE, in
consideration of the foregoing, the mutual promises and understandings of the
parties hereto set forth herein, and other good and valuable consideration, the
receipt and sufficiency of such consideration is hereby acknowledged, the
parties hereto hereby agree as set forth in this Third Amendment.

 

I.              Definitions:

 

A.            Use of Defined Terms.  Except as expressly set
forth in this Third Amendment, all terms which have an initial capital letter
where not required by the rules of grammar are defined in the Credit
Agreement.

 

 

B.            Amended Definitions.  Effective as of the date of this Third
Amendment, Section 1.1 of the Credit Agreement is hereby amended by
deleting the definitions of “Commitment - Term Loan” and “Total Commitment
Amount” and substituting therefor the following:

 

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

 

	
  Lender

  	
   

  	
  Amount

  	
   

  
	
  LaSalle

  	
   

  	
  $

  	
  8,100,000

  	
   

  
	
  Fifth Third

  	
   

  	
  $

  	
  5,400,000

  	
   

  

 

“Total
Commitment Amount” means Twenty-Three Million Five Hundred Thousand and
no/100 Dollars ($23,500,000.00).

 

II.            Amendment to Credit Agreement.  Effective as of the date of this Third
Amendment, the Credit Agreement is hereby amended as follows:

 

A.            Term Loan Provisions.  Sections 2.4 and 2.5 of the Credit Agreement
are hereby amended by deleting Sections 2.4 and 2.5 in their entirety and
substituting therefor the following:

 

“2.4         TERM LOAN.

 

Prior hereto, each Lender, severally and not jointly, lent to Borrower,
and Borrower borrowed from each Lender, the amount of each Lender’s Commitment
- Term Loan (the “Term Loan”), which Term Loan has an outstanding principal
balance of $13,500,000.00 as of June 28, 2005.

 

2.5           TERM.

 

The Term Loan shall be evidenced by term notes (collectively the “Term
Note”), substantially in the form of Exhibit B, with
appropriate insertions, dated as of June 28, 2005, payable to the order of
each Lender, in the current principal amount of each Lender’s Pro Rata Share of
the Term Loan.  The principal balance of
the Term Loan is payable in twelve (12) quarterly
principal payments in the amount of $500,000 each, due on the last day of each
fiscal quarter beginning June 30, 2005 and continuing through and
including March 31, 2008, and twelve (12) quarterly principal payments in the amount of $625,000 each, due on
the last day of each fiscal quarter beginning June 30, 2008 and continuing
through and including March 31, 2011.”

 

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

 

“6.4         FINANCIAL REQUIREMENTS.

 

Unless at any time both Lenders shall otherwise expressly consent in
writing, until all of the obligations of Borrower under this Agreement and the
Notes are fully paid

 

2

 

and performed, Borrower shall:

 

(a)           Fixed Charge Coverage
Ratio.  Not permit the Fixed Charge
Coverage Ratio, determined as of July 2, 2005 and as of the end of each
fiscal quarter thereafter, in all instances for the period of the four fiscal
quarters then ending, to be less than 1.1 to 1.0; provided, however, for
purposes of calculating the Fixed Charge Coverage Ratio, up to $1,500,000 of
the purchase price paid by Borrower relating to the acquisition of the sand and
gravel property located in Pueblo, Colorado, shall not be subtracted from
EBITDA;

 

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

 

(c)           Tangible Net Worth.  Not permit Borrower’s consolidated Tangible
Net Worth to be less than (i) $32,500,000 as of July 2, 2005, or October 1,
2005, or (ii) $32,500,000 plus fifty percent (50%) of Borrower’s
cumulative consolidated net income (disregarding cumulative consolidated net
loss) for all periods from and after January 1, 2005, in each case
calculated as of December 31, 2005, and as of the last day of each
calendar quarter thereafter; and

 

(d)           Leverage Ratio.  Not permit Borrower’s ratio of (i) consolidated
Funded Debt as of the end of each fiscal quarter of Borrower’s fiscal year, to (ii) EBITDA
for the Measurement Period ending as of the last day of such quarter calculated
on a rolling four (4) quarters basis, to exceed 2.75 to 1.0 as of July 2,
2005, or as of the end of any fiscal quarter thereafter.”

 

C.            Capital Structure and Dividends.  Section 6.7 of the Credit Agreement is
hereby amended by deleting Section 6.7 in its entirety and substituting
therefor the following:

 

“SECTION 6.7       CAPITAL
STRUCTURE AND DIVIDENDS.

 

Neither Borrower nor any Subsidiary shall (a) purchase or redeem,
or obligate itself to purchase or redeem, any shares of Borrower’s capital
stock, of any class, issued and outstanding from time to time, provided,
however, that Borrower may, (i) purchase an amount of Borrower’s
capital stock in a total amount not to exceed $3,500,000 in the aggregate
pursuant to a tender offer financed by the proceeds of the Term Loan, as
determined for the period beginning April 14, 2005 and ending on June 28,
2005, and (ii) purchase an additional amount of Borrower’s capital stock
in a total amount not to exceed $1,438,000 in the aggregate, as determined from
the period beginning June 28, 2005 and ending on the Termination Date, or (b) declare
or pay any dividend (other than dividends payable in its own common stock or to
Borrower) or make any other distribution in respect of such shares other than
to Borrower.  Borrower shall continue to
own, directly or indirectly, the same (or greater) percentage of the stock of
each Subsidiary that it held on the date of this Agreement, and no Subsidiary
shall issue any additional securities other than to Borrower.”

 

3

 

D.            Schedule I.  The Credit Agreement is hereby amended by
deleting Schedule I attached to the Credit Agreement and substituting
therefor Schedule I attached to this Third Amendment.

 

III.           Conditions Precedent. Lenders’
obligation to provide the Additional Financial Accommodations to Borrower is
subject to the full and timely performance of the following covenants prior to
or contemporaneously with the execution of this Third Amendment:

 

A.            Borrower
executing and delivering, or causing to be executed and delivered to Agent and
Lenders, the following documents, each of which shall be in form and substance
acceptable to Agent and Lenders:

 

(i)            A fully executed
original of a Company General Certificate executed and delivered by Borrower to
Agent and Lenders;

 

(ii)           A fully executed
original of a Term Note for each Lender in the principal amount of such Lender’s
Pro-Rata Share of the sum of the current outstanding Term Loan.

 

(iii)          A fully executed
original Reaffirmation of Guaranties executed and delivered to Agent and
Lenders by each of the Borrower’s Subsidiaries that executed the Subsidiary
Guaranties; and

 

(iv)          such
other agreements, documents and instruments as Agent or Lenders may reasonably
request;

 

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

 

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

 

D.            There
shall have been no material or adverse change in the business, financial
condition or results of operations since the date of Borrower’s most recently
delivered financial statements to Agent and Lenders.

 

IV.           Conflict.  If, and to the extent, the terms and
provisions of this Third Amendment contradict or conflict with the terms and
provisions of the Credit Agreement, the terms and provisions of this Third
Amendment shall govern and control; provided, however, to the extent the terms
and provisions of this Third Amendment do not contradict or conflict with the
terms and provisions of the Credit Agreement, the Credit Agreement, as amended
by this Third

 

4

 

Amendment,
shall remain in and have its intended full force and effect, and Lenders,
Borrower and the Agent hereby affirm, confirm and ratify the same.

 

V.            Severability.  Wherever possible, each provision of this
Third Amendment shall be interpreted in such manner as to be valid and
enforceable under applicable law, but if any provision of this Third Amendment
is held to be invalid or unenforceable by a court of competent jurisdiction,
such provision shall be severed herefrom and such invalidity or unenforceability
shall not affect any other provision of this Third Amendment, the balance of
which shall remain in and have its intended full force and effect.  Provided, however, if such provision may be
modified so as to be valid and enforceable as a matter of law, such provision
shall be deemed to be modified so as to be valid and enforceable to the maximum
extent permitted by law.

 

VI.           Reaffirmation.  Borrower hereby reaffirms and remakes all of
its representations, warranties, covenants, duties, obligations and liabilities
contained in the Credit Agreement, as amended hereby.

 

VII.          Fees, Costs and Expenses.  Borrower agrees to pay, upon demand, all
fees, costs and expenses of Lenders, including, but not limited to, reasonable
attorneys’ fees, in connection with the preparation, execution, delivery and
administration of this Third Amendment and the other agreements, documents and
instruments executed and delivered in connection herewith or pursuant hereto.

 

VIII.        Choice of Law.  This Third Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law as to all matters, including matters of validity, construction, effect,
performance and remedies.

 

 

[signature page follows]

 

5

 

IN WITNESS WHEREOF,
Lenders, Borrower and Agent have caused this Third Amendment to be executed and
delivered by their duly authorized officers as of the date first set forth
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:

  	
   

  	
   

  

 

6

 

Schedule I

Lenders’ Total Commitment
Amount

 

	
  Lender

  	
   

  	
  Total Commitment Amount

  	
   

  	
  Pro Rata Share

  	
   

  
	
  Total

  	
   

  	
  $

  	
  (23,500,000

  	
  )

  	
   

  	
   

  
	
  LaSalle Bank National Association

  	
   

  	
  $

  	
  14,100,000

  	
   

  	
  60.00

  	
  %

  
	
  Fifth Third Bank (Chicago)

  	
   

  	
  $

  	
  9,400,000

  	
   

  	
  40.00

  	
  %

  

 

7

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