WAIVER AND SECOND AMENDMENT TO CREDIT AGREEMENT
THIS WAIVER AND SECOND AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of April 15, 2010, is entered into by and among CONTINENTAL MATERIALS CORPORATION, a Delaware corporation (the “ Company ”), the financial institutions that are or may from time to time become parties to the Credit Agreement referenced below (together with their respective successors and assigns, the “ Lenders ” and each, a “ Lender ”) and THE PRIVATEBANK AND TRUST COMPANY, an Illinois state chartered bank as Administrative Agent for each Lender (the “ Administrative Agent ”). Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Credit Agreement referenced below.
WHEREAS, the Lender previously made available to the Company a credit facility pursuant to the terms and conditions of that certain Credit Agreement, dated as of April 16, 2009, by and among the Company, the Lender and the Administrative Agent, as amended by that certain First Amendment to Credit Agreement, dated as of November 18, 2009, by and among the Company, the Lender and the Administrative Agent (the “ First Amendment ”) (as further amended, restated or supplemented from time to time, the “ Credit Agreement ”);
WHEREAS, pursuant to the Credit Agreement, the Lender previously (i) made available to the Company a revolving credit facility in the amount of $20,000,000 (reduced to $15,000,000 pursuant to the First Amendment), and (ii) funded a term loan in the original principal amount of $10,000,000;
WHEREAS, the parties to this Amendment desire to amend the Credit Agreement to, among other things, (i) reduce the Revolving Commitment to $13,500,000 from and after October 1, 2010, (ii) shorten the maturity date of the Revolving Loan and Term Loan to August 1, 2011, (iii) modify certain financial covenants, eliminate certain financial covenants and eliminate the requirement to test the financial covenants on April 3, 2010, (iv) modify the definition of Borrowing Base to reduce the inventory cap from $7,500,000 to $6,750,000, (v) modify the pricing applicable to the Revolving Loan and Term Loan, and (vi) modify the definition of Eligible Accounts to exclude any Dating Program Accounts that are more than sixty (60) days past due, in each case, all on the terms and conditions set forth herein; and
WHEREAS, as of the date of this Amendment, there exist Events of Default under and as defined in the Credit Agreement as a result of the Company’s failure to comply with the minimum Adjusted EBITDA requirement in Section 11.13.1 of the Credit Agreement and the Fixed Charge Coverage Ratio requirement in Section 11.13.2 of 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 and Administrative Agent to enter into this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by the parties hereto as follows:
Section 1. Incorporation of Recitals . The foregoing recitals are hereby incorporated 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 precedent set forth in Section 7 of this Amendment, the Credit Agreement is hereby amended and modified as follows:
A. Section 1.1 . Section 1.1 of the Credit Agreement is hereby amended as follows:
(1) The definition of “ Applicable Margin ” is hereby deleted in its entirety and replaced with the following (and Annex C of the Credit Agreement is hereby eliminated):
“ Applicable Margin means, for any day, the rate per annum set forth below, it being understood that the Applicable Margin for (i) LIBOR Loans shall be the percentage set forth under the column “LIBOR Margin”, (ii) Base Rate Loans shall be the percentage set forth under the column “Base Rate Margin”, (iii) the Non-Use Fee Rate 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”:
(2) The inventory cap (currently set at $7,500,000) contained in the definition of “ Borrowing Base ” is hereby reduced to $6,750,000.
(3) The definition of “ Computation Period ” is hereby deleted in its entirety and replaced with the following:
“ Computation Period means (a) with respect to each financial covenant contained in Section 11.13 (other than the minimum Adjusted EBITDA covenant contained in Section 11.13.1 ), each period of four consecutive Fiscal Quarters ending on the last day of a Fiscal Quarter, and (b) with respect to the minimum Adjusted EBITDA covenant contained in Section 11.13.1 , each period of three consecutive months ending on the last day of a Fiscal Quarter, commencing with the Fiscal Quarter ending July 3, 2010.”
(4) Clause (k) of the definition of “ Eligible Account ” is hereby deleted in its entirety and replaced with the following:
“(k) such Account is evidenced by an invoice delivered to the related Account Debtor and is not more than (i) sixty (60) days past the due date thereof as reflected in the original invoice therefor, or (ii) one-hundred (120) days past the original invoice date therefor ( provided , however, the requirement set forth in item (ii) of this clause (k) shall not apply to the Dating Program Accounts to the extent the applicable Account Debtors are in compliance with the terms and conditions of the Dating Program with respect to the applicable Dating Program Accounts and a Senior Officer certifies in the applicable Borrowing Base Certificate that to his or her knowledge such Account Debtors are in compliance with the Dating Program and that such Dating Program Accounts (including any portion thereof) are not more than sixty (60) days past due);”
(5) The definition of “ Revolving Commitment ” is hereby deleted in its entirety and replaced with the following:
“ Revolving Commitment means (a) $15,000,000 at all times prior to October 1, 2010, and (b) $13,500,000 at all times from and after October 1, 2010, as reduced from time to time pursuant to Section 6.1 .”
(6) The definition of “ Term Loan Maturity Date ” is hereby deleted in its entirety and replaced with the following:
“ Term Loan Maturity Date means the earlier of (a) August 1, 2011 or (b) the Termination Date.”
(7) The definition of “ Termination Date ” is hereby deleted in its entirety and replaced with the following:
“ Termination Date means the earlier to occur of (a) August 1, 2011 or (b) such other date on which the Commitments terminate pursuant to Section 6 or Section 13 .”
B. Section 11.13.1 . Section 11.13.1 (Minimum Adjusted EBITDA) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:
“11.13.1 Minimum Adjusted EBITDA . Not permit Adjusted EBITDA for any Computation Period to be less than the applicable amount set forth below for such Computation Period: