SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT

Exhibit 10.1

SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT

This Second Amendment to Revolving Credit and Term Loan Agreement (this “Second Amendment”) is made and entered into as of the 14th day of April, 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 Second 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, 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 increase the principal amount of the Term Loan by $12,500,000 to fund Borrower’s repurchase of its stock (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 Second 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 Second Amendment.

I.               Definitions :

A.             Use of Defined Terms .  Except as expressly set forth in this Second 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 Second Amendment, Section 1.1 of the Credit Agreement is hereby amended by deleting the definitions of “Applicable LIBOR Margin” and “Total Commitment Amount” and substituting therefor the following, respectively:

“ Applicable LIBOR 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 this subparagraph (i), 1.25% (the “ Normal Revolving LIBOR Margin ”); and (b) the Normal Revolving LIBOR Margin as modified by quarterly adjustments (such adjusted Normal Revolving LIBOR Margin, the “ Applicable Revolving LIBOR Margin ”) determined based upon the ratio of Borrower’s consolidated Funded Debt (measured on the date of the calculation) to EBITDA (calculated on a rolling four quarters basis) as follows:

(ii)            a Term LIBOR Loan, shall mean (a) prior to the first quarterly adjustment pursuant to clause (b) of this subparagraph (ii), 1.50% (the “ Normal Term LIBOR Margin ”); and (b) the Normal Term LIBOR Margin as modified by quarterly adjustments (such adjusted Normal Term LIBOR Margin, the “ Applicable Term LIBOR Margin ”) determined based upon the ratio of Borrower’s consolidated Funded Debt (measured on the date of the calculation) to EBITDA (calculated on a rolling four quarters basis) as follows:

Not later than twenty (20) days after the Agent’s receipt of the quarterly financial statements required by Section 6.2(a) hereof for each of Borrower’s fiscal quarters,

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accompanied by a certificate of the chief accounting officer or Treasurer of Borrower reflecting the ratio of Borrower’s Funded Debt to EBITDA for the period of the four fiscal quarters ending on the same date, Agent will determine whether such financial information indicates that the change in the ratio would justify a change in the Applicable LIBOR Margin and shall then notify Borrower and the Lenders of such determination and of any change in the Applicable LIBOR Margin resulting therefrom. Any change in the Applicable LIBOR Margin, and in the rate of interest applicable to LIBOR Loans resulting therefrom, shall be effective as of the first day of the month after the Agent provides notice to Borrower and the Lenders of any change in the Applicable LIBOR Margin, and with such new Applicable LIBOR Margin to continue in effect until the effectiveness of the next re-determination thereof. Any determination by Agent of the ratio of Borrower’s Funded Debt to EBITDA shall be conclusive and binding upon Borrower and the Lenders provided that it has been made reasonably and in good faith, absent manifest error. If Borrower fails to timely submit the quarterly financial statements and certificate referred to above, the rate of interest applicable to LIBOR Loans as of the next determination date of the Applicable LIBOR Margin shall be determined and based upon the Default Rate.

“ Total Commitment Amount ” means Thirty-One Million and no/100 Dollars ($31,000,000.00).

C.             New Definitions .  Effective as of the date of this Second Amendment, Section 1.1 is hereby amended by adding the following new definitions thereto in appropriate alphabetical order:

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

“ Additional Commitment – Term Loan Draw Date ” shall mean the date upon which the portion of the Term Loan represented by the Additional Commitment – Term Loan is advanced, in whole or in part, by Lenders to Borrower.

“ Applicable Prime Rate Margin ” for purposes of determining the interest rate on:

(i)             a Revolving Prime Rate Loan, shall mean zero percent (0%); and

(ii)            a Term Prime Rate Loan, shall mean (a) prior to the first quarterly adjustment pursuant to clause (b) of this subparagraph (ii), 0% (the “ Normal Term Prime Rate Margin ”); and (b) the Normal Term Prime Rate Margin as modified by quarterly adjustments (such adjusted Normal Term Prime Rate Margin, the “ Applicable Term Prime Rate Margin ”) determined based upon the ratio of Borrower’s consolidated Funded

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Debt (measured on the date of the calculation) to EBITDA (calculated on a rolling four quarters basis) as follows:

Not later than twenty (20) days after the Agent’s receipt of the quarterly financial statements required by Section 6.2(a) hereof for each of Borrower’s fiscal quarters, accompanied by a certificate of the chief accounting officer or Treasurer of Borrower reflecting the ratio of Borrower’s Funded Debt to EBITDA for the period of the four fiscal quarters ending on the same date, Agent will determine whether such financial information indicates that the change in the ratio would justify a change in the Applicable Prime Rate Margin and shall then notify Borrower and the Lenders of such determination and of any change in the Applicable Prime Rate Margin resulting therefrom. Any change in the Applicable Prime Rate Margin, and in the rate of interest applicable to Prime Rate Loans resulting therefrom, shall be effective as of the first day of the month after the Agent provides notice to Borrower and the Lenders of any change in the Applicable Prime Rate Margin, and with such new Applicable Prime Rate Margin to continue in effect until the effectiveness of the next re-determination thereof. Any determination by Agent of the ratio of Borrower’s Funded Debt to EBITDA shall be conclusive and binding upon Borrower and the Lenders provided that it has been made reasonably and in good faith, absent manifest error. If Borrower fails to timely submit the quarterly financial statements and certificate referred to above, the rate of interest applicable to Prime Rate Loans as of the next determination date of the Applicable Prime Rate Margin shall be determined and based upon the Default Rate.

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

A.             Additional Term Loan Funding .  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:

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“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 “Original Term Loan”), which Original Term Loan has an outstanding principal balance of $8,500,000.00 as of April 14, 2005.  Subject to the terms and conditions of this Agreement, each Lender, severally and not jointly, agrees to lend to Borrower, and Borrower agrees to borrow from each Lender, up to the amount of each Lender’s Pro Rata Share of the Additional Commitment - Term Loan (the Original Term Loan, together with such Additional Commitment - Term Loan is the “ Term Loan ”).  The Additional Commitment - Term Loan shall be funded in a single draw which shall be made after April 14, 2005, but on or before September 30, 2005.  The proceeds of the Additional Commitment - Term Loan may and shall be used solely for the purpose of repurchasing Borrower’s capital stock, which repurchase shall occur not later than September 30, 2005.  Borrower shall provide Lender written notice of its intention to make the draw on the Additional Commitment - Term Loan and the amount of such draw not less than five (5) business days prior to the proposed date of funding the Additional Commitment – Term Loan.  Any amount of the Term Loan repaid may not be reborrowed.

2.5            TERM .

(A)           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 April 14, 2005, payable to the order of each Lender, in the current principal amount of each Lender’s Pro Rata Share of the Term Loan.  Prior to the Additional Commitment – Term Loan Draw Date or if the Additional Commitment – Term Loan is not funded for any reason, the principal balance of the Term Loan is payable in thirteen (13) quarterly principal payments as follows: (a) five (5) quarterly 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 June 30, 2006, and (b) eight (8) quarterly payments in the amount of $750,000 each, due on the last day of each fiscal quarter beginning September 30, 2006 and continuing through and including June 28, 2008.

(B)            Provided the Additional Commitment - Term Loan Draw Date is on or before June 30, 2005, then, on and after the Additional Commitment – Term Loan Draw Date, the principal balance of the Term Loan is payable in twenty - four (24) quarterly principal payments as follows: (a) four (4) quarterly payments in the amount of $750,000 each, due on the last day of each fiscal quarter beginning June 30, 2005 and continuing through and including March 31, 2006, (b) sixteen (16) quarterly p