Item 1.01. Entry into a Material Definitive Agreement.
Paycheck Protection Program Loan
On April 14, 2020, Continental Materials
Corporation (together with its subsidiaries, the “Company”) entered into a promissory note, dated as of April 8, 2020
(the “Note”) in favor of CIBC Bank USA (the “Lender”) evidencing a loan in the aggregate principal amount
of $5,487,000 (the “Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under Division
A, Title I of Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted on March
27, 2020.
Interest Rate
The interest rate on the Loan is 1.00%
per year.
Maturity
The term of the Loan is two years. The
Company will be required to pay any unforgiven principle and interest in eighteen equal monthly installments, with the first payment
being due on November 8, 2020 and continuing on the same day of each subsequent month until the date of maturity. The
Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.
Potential Loan Forgiveness
Under the PPP, the Company may apply for
forgiveness of the amount due on the Loan in an amount equal to the sum of the following costs incurred during the 8-week period
beginning on the date of the first disbursement of the Loan: (a) payroll costs, (b) any payment of interest on a covered obligation
(which shall not include any prepayment of or payment of principal on a covered mortgage obligation), (c) any payment on a covered
rent obligation, and (d) any covered utility payment, calculated in accordance with the terms of the CARES Act. No
assurance can be provided that the Company will obtain forgiveness of the Loan in whole or in part.
Events of Default
The Loan provides for customary events of default, including
payment defaults, cross-defaults on any other loan with the lender, and breach of the terms of the Note. The Loan may be accelerated
upon the occurrence of an event of default, among other remedies available to the Lender.
The foregoing description of the Loan is a summary of, and does
not purport to be a complete statement of, the terms of the Note or the rights and obligations of the parties thereunder, and is
qualified in its entirety by reference to the full text of the Note, a copy of which will be filed with the Securities and Exchange
Commission (the “Commission”) as an exhibit to the Company’s next periodic report under the Securities Act of
1934, as amended (the “Exchange Act”).
Property
Sale Agreements
Black
Canyon Quarry
On
April 16, 2020, Castle Concrete Company, a subsidiary of the Company (“Castle Concrete”), entered into a Real Estate
Purchase Agreement (the “Black Canyon Agreement”) with the City of Colorado Springs (the “City”).
Pursuant
to the Black Canyon Agreement, the City will purchase the real property and related fixtures and improvements located in El Paso
County, Colorado commonly known as the Black Canyon Quarry (the “Black Canyon Property”) from the Company for a total
purchase price of $2,140,000 to be paid in cash at the closing of the transaction.
The
Black Canyon Agreement contains certain representations and warranties by the Company as to environmental matters and the physical
condition of the Black Canyon Property. Either party may terminate the Black Canyon Agreement in the event the other party defaults
on the terms of the Black Canyon Agreement.
The
consummation of the sale of the Black Canyon Property is contingent upon, among other things, the completion of due diligence and
related matters to the City’s satisfaction, approval of the transaction by the governing bodies of the Company and the City,
receipt of the approval of the Reclamation Plan Amendment by the DRMS, each as defined below, and certain other regulatory approvals,
and the consummation of the sales of the Pikeview Buffer Property and the Pikeview Quarry Property, each as defined below. The
sale of the Black Canyon Property is expected to be completed in the third quarter of 2020.
Pikeview
Buffer Property
On
April 16, 2020, Castle Concrete entered into a Contract for the Sale of Real Estate (the “Pikeview Buffer Agreement”)
with The Conservation Fund, a non-profit entity (“TCF”).
Pursuant
to the Pikeview Buffer Agreement, TCF will purchase approximately 147.02 acres of real property and related fixtures and improvements
located in El Paso County, Colorado (the “Pikeview Buffer Property”) from the Company for a total purchase price of
$6,660,000 to be paid in cash at the closing of the transaction.
The
Pikeview Buffer Agreement contains customary representations and warranties by the Company as to environmental and other matters
and the physical condition of the Pikeview Buffer Property. Under the Pikeview Buffer Agreement, the Company agrees to indemnify
TCF for a period of two years from the closing of the transaction for damages arising from any hazardous materials present on the
Pikeview Buffer Property. Either party may terminate the Pikeview Buffer Agreement in the event the other party defaults on the
terms of the Pikeview Buffer Agreement.
The
consummation of the sale of the Pikeview Buffer Property is contingent upon, among other things, the completion of due diligence
and related matters to TCF’s satisfaction, approval of the transaction by the governing bodies of the Company and TCF, receipt
of the approval of the Reclamation Plan Amendment by the DRMS and certain other regulatory approvals, and the consummation of the
sales of the Black Canyon Property and the Pikeview Quarry Property. The sale of the Pikeview Buffer Property is expected to be
completed in the third quarter of 2020.
Pikeview
Quarry Property
On
April 16, 2020, Castle Concrete entered into an Agreement for the Donation of Real Estate Property (the “Pikeview Quarry
Agreement” and, collectively with the Black Canyon Agreement and the Pikeview Buffer Agreement, the “Sale Agreements”)
with the City.
Pursuant
to the Pikeview Quarry Agreement, the Company will donate to the City the real property and related fixtures and improvements located
in El Paso County, Colorado commonly known as the Pikeview Quarry (the “Pikeview Quarry Property”), as well as the
mining permit held by the Company with respect to the Pikeview Quarry Property (the “Permit”). As previously disclosed,
the Company determined in 2019 to cease mining operations at the Pikeview Quarry Property and has commenced reclamation activities.
The
Pikeview Quarry Agreement contains certain representations and warranties by the Company as to environmental matters and the physical
condition of the Pikeview Quarry Property. Either party may terminate the Pikeview Quarry Agreement in the event the other party
defaults on the terms of the Pikeview Quarry Agreement.
The
consummation of the donation of the Pikeview Quarry Property is contingent upon, among other things, the approval of an amendment
to the Company’s plan of reclamation for the Pikeview Quarry (the “Reclamation Plan Amendment”) by the Colorado
Division of Reclamation, Mining and Safety (the “DRMS”) by May 31, 2020, the completion of the Company’s reclamation
work as required by the Permit, the completion of due diligence and related matters to the City’s satisfaction, approval
of the transaction by the governing bodies of the Company and the City, receipt of certain other regulatory approvals, and the
consummation of the sales of the Black Canyon Property and the Pikeview Buffer Property. The donation of the Pikeview Quarry Property
is expected to be completed in the third quarter of 2020.
The foregoing description of the Sale Agreements is a summary
of, and does not purport to be a complete statement of, the terms of the Sale Agreements or the rights and obligations of the parties
thereunder, and is qualified in its entirety by reference to the full text of the Sale Agreements, copies of which will be filed
with the Commission as an exhibit to the Company’s next periodic report under the Exchange Act.