Prudential Investment Management, Inc. ("PIM")
The Prudential Insurance Company of America ("Prudential")
Each Prudential Affiliate under the Note Agreement
c/o Prudential Capital Group
Four Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
May 20, 0000
XXXXXXXXX XXXX COMPANY
000 XX Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Re: First Amendment to Note Agreement dated as of February 25, 2004
Ladies and Gentlemen:
Reference is made to the Note Purchase and Private Shelf Agreement, dated
as of February 25, 2004 (as amended, restated, supplemented or otherwise
modified from time to time, the "Note Agreement"), by and between Northwest Pipe
Company, an Oregon corporation (the "Company"), on the one hand, and PIM,
Prudential, and each Prudential Affiliate (as therein defined) that becomes
bound by certain provisions thereof (together with PIM and Prudential and their
respective successors and Transferees, collectively, the "Purchasers"), on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the meanings provided in the Note Agreement (after giving effect to any
amendments of such terms in this letter agreement).
Pursuant to the request of the Company and the provisions of paragraph 11C
of the Note Agreement, and subject to the terms and conditions of this letter
agreement, the Purchasers hereby agree with the Company that the Note Agreement
shall be amended as follows:
1. Paragraph 1B is amended to delete the reference to "$25,000,000" and
substitute the reference to "$45,000,000" therefor.
2. Paragraph 2B(1) is amended to delete the reference to "$25,000,000" and
substitute the reference to "$45,000,000" therefor.
3. Paragraph 2B(2) is amended and restated, as follows:
"Shelf Notes may be issued and sold pursuant to this Agreement
until the earlier of (i) May 20, 2008 (or if such day is not a
Business Day, the Business Day next preceding such day) and (ii) the
thirtieth day after PIM shall have given to the Company, or the
Company shall have given to PIM, written notice stating that it
elects to terminate the issuance and sale of Shelf Notes pursuant to
this Agreement (or if such thirtieth day is not a Business Day, the
Business Day next preceding such thirtieth day). The period during
which Shelf Notes may be issued and sold pursuant to this Agreement
is herein called the "Issuance Period.""
4. Paragraph 3A(3)(i) is amended to delete the paragraph and replace
such paragraph with "INTENTIONALLY OMITTED."
Northwest Pipe Company
May 20, 2005
Page 2
5. Paragraph 3A(3)(ii) is amended to delete the paragraph and replace
such paragraph with "INTENTIONALLY OMITTED."
6. Paragraph 5A is amended to delete the reference to "6A, 6C, 6D, 6F,
6G and 6H" in each of the final two paragraphs thereof and
substitute the reference to "6A, 6C, 6D, 6F, 6G, 6H and 6K"
therefor.
7. Paragraph 5B(iii) is amended to delete the paragraph and replace
such paragraph with "INTENTIONALLY OMITTED."
8. Paragraph 6A(1) is amended and restated, as follows:
"(a) The Company will not, on the dates specified below, permit (a)
the ratio of Consolidated Total Debt on such date to (b)
Consolidated EBITDA for the period of four consecutive fiscal
quarters of the Company ended on such date, to be greater than the
applicable amount set forth below:
====================================================================
Date Ratio
====================================================================
12/31/04 3.45:1.00
--------------------------------------------------------------------
3/31/05 and on the last day of each fiscal quarter
thereafter 3.25:1.00
====================================================================
(b) The Company will not, at any time during any period specified
below, other than the last day of any fiscal quarter, permit (a) the
ratio of Consolidated Total Debt at such time to (b) Consolidated
EBITDA for the period of four consecutive fiscal quarters of the
Company then most recently ended, to be greater than the amount set
forth opposite such period:
====================================================================
Period Ratio
====================================================================
10/1/04-3/30/05 3.70:1.00
--------------------------------------------------------------------
4/1/05 and at all times thereafter 3.55:1.00"
====================================================================
9. Paragraph 6A(3) is amended and restated, as follows:
"The Company will not permit the Consolidated Fixed Charge Coverage
Ratio calculated as of the end of each fiscal quarter set forth
below to be less than the ratio set forth opposite such date:
====================================================================
Period Ratio
====================================================================
9/30/04 and 12/31/04 1.00:1.00
--------------------------------------------------------------------
3/31/05 and 6/30/05 1.20:1.00
--------------------------------------------------------------------
9/30/05 and 12/31/05 1.25:1.00
--------------------------------------------------------------------
3/31/06 and at the end of each fiscal quarter
thereafter 1.35:1.00"
====================================================================
Northwest Pipe Company
May 20, 2005
Page 3
10. Xxxxxxxxx 0X is amended to delete the paragraph and replace such
paragraph with "INTENTIONALLY OMITTED."
11. Paragraph 6D(iii) is amended and restated, as follows:
"(iii) Debt secured by Purchase Money Liens; provided that the
aggregate principal amount of such Debt (A) incurred during any year
shall not exceed $3,000,000, and (B) shall not exceed $15,000,000 in
the aggregate at any time;"
12. Paragraph 6D(v) is amended and restated, as follows:"(v) Debt
incurred under the Bank Credit Agreement and Guarantees of such Debt
pursuant to the requirements thereof; provided that (a) the
aggregate commitment amount thereunder and the aggregate principal
amount of such Debt shall not, at any time, exceed $65,000,000, and
(b) each obligor and lender thereof is party to, and such Debt is
subject to, the terms of the Intercreditor Agreement;"
13. Paragraph 6F is amended to delete existing clause (vii) and to replace
such clause with new clauses (vii) and (viii), as follows:
"(vii) Investments in joint ventures; provided and for so long
as no joint venture is engaged to any substantial extent in any
business other than the businesses in which the Company and its
Subsidiaries are engaged as of May 20, 2005 and businesses
reasonably related thereto or in furtherance thereof; and provided,
further, that the aggregate original amount of such Investments does
not exceed $7,000,000; and
(viii) other capital contributions, loans, advances and
investments not to exceed $5,000,000 in the aggregate."
14. Paragraph 6H is amended to delete the paragraph and replace such
paragraph with "INTENTIONALLY OMITTED."
15. Paragraph 6K is amended and restated, as follows:
"The Company will not permit the Asset Coverage Ratio, measured on
the last day of each fiscal quarter of the Company, to be less than
1.00:1.00. If the Company is out of compliance with this covenant, the
Company may cure the resulting default by repaying Indebtedness of the
Company within two Business Days of learning of such non-compliance in an
amount at least sufficient to bring itself into compliance with this
covenant (assuming that such amount repaid had been in fact repaid on the
applicable date of measurement of this covenant)."
16. Paragraph 6L is amended to delete the words "Consolidated Tangible Net
Worth" and substitute therefor the words "consolidated total assets of the
Company and its Subsidiaries".
Northwest Pipe Company
May 20, 2005
Page 4
17. The definitions for the following terms contained in paragraph 10(B)
are amended and restated, as follows:
""Bank" shall mean Bank of America, N.A. or such other
financial institution(s) from time to time party to the Bank Credit
Agreement acting in the capacity as lender thereunder."
""Bank Credit Agreement" shall mean that certain Credit
Agreement, dated as of May 20, 2005, by and between the Company and
the Bank, or any renewal, refinancing, refunding or replacement
thereof; provided that, following any such renewal, refinancing,
refunding or replacement (i) the aggregate commitment amount and the
aggregate principal amount of Debt of the Company and its
Subsidiaries thereunder does not exceed $65,000,000, and (ii) such
Debt is subject to the terms of the Intercreditor Agreement, as any
of the foregoing may be amended, supplemented or otherwise modified
from time to time."
""Collateral Agent" shall mean Bank of America, N.A., in its
capacity as collateral agent for the holders of the Notes, the
Existing Noteholders and the Bank."
""Consolidated EBITDA" shall mean, for any period of
determination, net income (or loss) of the Company and its
Subsidiaries on a consolidated basis for such period as determined
in accordance with GAAP, plus, to the extent deducted in the
calculation thereof, (i) consolidated interest expense, (ii)
consolidated depreciation and amortization expense, (iii)
consolidated income tax expense of the Company and its Subsidiaries
and (iv) noncash expenses relating to stock options. Consolidated
EBITDA shall not include (a) extraordinary gains; (b) expenses of up
to $1,500,000 arising from the sale of the Company's Riverside,
California facility and the consolidation of those operations with
its Adelanto, California facility and incurred within 12 months of
the sale, so long as the net proceeds received by the Company from
such sale equal or exceed the amount of such expenses; (c) any gains
resulting from the sale or other disposition of capital assets
(other than gains on sales related to the sale-leaseback of
equipment or assets sold in the ordinary course of business); (d)
undistributed earnings of non-Subsidiary investments; (e) gains
arising from changes in accounting principals; (f) gains arising
from the write-up of assets (except in the normal course of business
related to accounting reconciliation); (g) any gains resulting from
the early retirement or extinguishment of Debt; and (h) any earnings
of a Foreign Subsidiary of the Company to the extent that such
Foreign Subsidiary is not at the time permitted, whether by the
terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such
Foreign Subsidiary to convert such earnings into United States
currency or repatriate such earnings to the Company or any other
Domestic Subsidiary which is the parent corporation of such Foreign
Subsidiary. Notwithstanding anything to the contrary herein, if the
Company or a Subsidiary divests itself of a Subsidiary or a business
unit (it being understood and agreed that the sale of real property
no longer used or useful in the ongoing operations shall not be
deemed to constitute the sale of a business unit) or acquires a
Person that becomes a Subsidiary or a group of assets constituting a
business unit, in either case during the relevant period of
Northwest Pipe Company
May 20, 2005
Page 5
computation for Consolidated EBITDA, then, solely for purpose of
determining Consolidated EBITDA, such divestiture or acquisition
will be deemed to have been consummated on the first day of the
relevant period of computation; provided that Consolidated EBITDA
shall include the operating results of such a Person or business
unit prior to the date of its acquisition only if such operating
results are based on audited financial statements, pro forma
financial reporting for acquisitions or divestitures in accordance
with the requirements of the SEC, or financial statements that are
otherwise reasonably satisfactory to the Required Holders. Unless
provided otherwise, Consolidated EBITDA shall be calculated at any
time of determination for the four consecutive fiscal quarters ended
immediately prior to such time."
""Consolidated Fixed Charges" shall mean in respect of the
Company and the Subsidiaries, determined on a consolidated basis in
accordance with GAAP, the sum of (a) consolidated interest expense
for the period of four consecutive fiscal quarters ended on the date
of determination, plus (b) consolidated current maturities of
long-term debt (including Capitalized Lease Obligations) as set
forth on the Company's balance sheet on the date of determination,
plus (c) Lease Rentals for the fiscal quarter of the Company ended
on the date of determination, multiplied by 4."
""Intercreditor Agreement" shall mean the Amended and Restated
Intercreditor and Collateral Agency Agreement, dated as of May 20,
2005, by and among the Collateral Agent, PIM, the holders from time
to time of the Notes, the Existing Noteholders, the Bank, the Credit
Parties and each of the other parties signatory thereto, in the form
of Exhibit G hereto (as amended, supplemented or otherwise modified
from time to time)."
""Security Agreement" shall mean the Second Amended and
Restated Security Agreement, dated as of May 26, 2005, by and
between the Credit Parties, as grantors, and the Collateral Agent,
as secured party for the benefit of the Bank, the Existing
Noteholders, PIM and the holders from time to time of the Notes, in
the form of Exhibit H hereto (as amended, supplemented or otherwise
modified from time to time)."
18. The following defined terms are added to paragraph 10(B) in their
proper alphabetical order:
""Administrative Agent" shall mean Bank of America, N.A., in
its capacity as administrative agent under the Bank Credit Agreement
and the other Loan Documents (as defined in the Bank Credit
Agreement)."
""Asset Coverage Ratio" shall mean the ratio of (i) the sum of
(a) 85% of Eligible Accounts Receivable plus (b) 60% of Eligible
Inventory plus (c) 30% of Eligible Property, Plant and Equipment to
(ii) Consolidated Total Debt."
""Eligible Accounts Receivable" shall mean, as at the date of
determination, trade accounts created in the ordinary course of the
Company's business, upon which the Company's right to receive
payment is absolute and not contingent upon the fulfillment of any
condition whatsoever, other than the obligation to provide future
Northwest Pipe Company
May 20, 2005
Page 6
deliveries under phased purchase contracts, and in which the
Collateral Agent has a perfected security interest of first
priority, and shall not include, unless agreed to by the
Administrative Agent in writing and in advance:
(a) any account which is more than 120 days past due, except
with respect to any account for which the Company has provided
extended payment terms not to exceed 180 days and any such extended
payment account is more than 30 days past due;
(b) that portion of any account for which there exists any
right of setoff, defense or discount (except regular discounts
allowed in the ordinary course of business to promote prompt
payment) or for which any defense or counterclaim has been asserted;
(c) any account which represents an obligation of the United
States government or any agency of the United States (except
accounts which represent obligations of the United States government
for which the assignment provisions of the Federal Assignment of
Claims Act, as amended or recodified from time to time, have been
complied with to the satisfaction of the Administrative Agent);
(d) any account which represents an obligation of an account
debtor located in a foreign country other than an account debtor
located in the Canadian provinces of Alberta, British Columbia,
Manitoba, Ontario, Saskatchewan, the Yukon Territory, or other
jurisdiction approved in advance and in writing by the
Administrative Agent, as long as, in the Administrative Agent's
determination, such Canadian or other jurisdictions recognize the
Collateral Agent's first priority security interest in and right to
collect such account as a consequence of any security agreements and
UCC filings in favor of the Collateral Agent or the Company has
obtained a letter of credit or foreign receivable insurance in form
and substance satisfactory to the Administrative Agent;
(e) any account, which arises from the sale or lease to or
performance of services for, or represents an obligation of, an
employee, affiliate, partner, member, parent or subsidiary of the
Company;
(f) that portion of any account which represents retention
rights on the part of the account debtor;
(g) that portion of any account from an account debtor which
represents the amount by which the Company's total accounts from
said account debtor exceeds twenty-five percent (25%) of the
Company's total accounts; and
(h) any account deemed ineligible by the Administrative Agent
when the Administrative Agent, in its sole discretion, deems the
creditworthiness or financial condition of the account debtor to be
unsatisfactory."
""Eligible Inventory" shall mean, as at the date of
determination, inventory acquired or manufactured in the ordinary
course of the Company's business and in which the Collateral Agent
Northwest Pipe Company
May 20, 2005
Page 7
has a perfected security interest of first priority and shall be
inclusive of costs and estimated earnings in excess of xxxxxxxx on
uncompleted contracts, but shall not include:
(a) work in process and inventory that is obsolete, unsaleable
or damaged;
(b) parts and supplies;
(c) propane tank inventory that is not accounted for at any
specific United States location; or
(d) any inventory not located in the United States."
""Eligible Property, Plant and Equipment" shall mean the
Company's net property, plant and equipment, other than real
property, at book value in accordance with GAAP, in which the
Collateral Agent has a perfected security interest or Lien of first
priority, less any of such property not located in the United States
and less any rolling stock. Eligible Property, Plant and Equipment
shall also include the Company's real property at book value in
accordance with GAAP located in the United States, even if the
Collateral Agent does not have a Lien on it, so long as such real
property is not subject to any Lien other than a Lien described in
clauses (i), (iii), (v) or (ix) of paragraph 6E."
19. The defined terms "Borrowing Certificate" and "Capital Expenditures"
are deleted from paragraph 10B.
20. Exhibit G to the Note Agreement (Form of Intercreditor Agreement) is
hereby amended and restated in the form of Exhibit A attached hereto.
21. Exhibit H to the Note Agreement (Form of Security Agreement) is hereby
amended and restated in the form of Exhibit B attached hereto.
22. The Company and the Purchasers hereby acknowledge that, after giving
effect to the amendments in this letter agreement, the Available Facility Amount
(as defined in paragraph 2B(1) of the Note Agreement) is $20,000,000.
Each of the amendments set forth in this letter agreement shall be limited
precisely as written and shall not be deemed to be (a) an amendment, consent or
waiver of any other terms or conditions of the Note Agreement or any other
document related to the Note Agreement or (b) a consent to any future amendment,
consent or waiver. Except as expressly set forth in this letter, the Note
Agreement and the documents related to the Note Agreement shall continue in full
force and effect.
The Company hereby represents and warrants as follows (both before and
after giving effect to the effectiveness of this letter agreement): (i) no Event
of Default has occurred and is continuing (or would result from the transactions
contemplated by this letter agreement); (ii) the Company's execution, delivery
and performance of each of the Note Agreement, as modified by this letter
agreement, the Intercreditor Agreement and the Security Agreement have been duly
authorized by all necessary corporate and other action and do not and will not
require any registration with, consent or approval of, or notice to or action
Northwest Pipe Company
May 20, 2005
Page 8
by, any Person (including any governmental authority) in order to be effective
and enforceable; (iii) each of the Note Agreement, as modified by this letter
agreement, the Intercreditor Agreement and the Security Agreement constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights or by general
principles of equity; and (iv) each of the representations and warranties set
forth in paragraph 8 of the Note Agreement is true, correct and complete as of
the date hereof (except to the extent such representations and warranties
expressly relate to another date, in which case such representations and
warranties are true, correct and complete as of such other date).
This letter agreement shall become effective on the date on which: (i) the
Purchasers shall have received a fully executed and delivered counterpart of
this letter agreement executed by the Company; (ii) the Purchasers shall have
received a fully executed and delivered copy of each of the Bank Credit
Agreement, the Intercreditor Agreement and the Security Agreement, with each of
the foregoing in form and substance satisfactory to the Purchasers, and each of
the conditions precedent in the Bank Credit Agreement shall have been previously
or concurrently satisfied; (iii) the Purchasers shall have received evidence
satisfactory to them that all actions necessary to perfect (and maintain
perfection of) the Liens of the Collateral Agent in the Collateral shall have
been taken in accordance with the terms of the Collateral Documents; (iv) the
Purchasers shall have received a copy of a certificate of insurance from an
independent insurance broker, dated as of or near the date hereof, identifying
the insurers, types of insurance, insurance limits, policy terms, and otherwise
confirming that insurance has been obtained in accordance with the provisions of
the Transaction documents, together with evidence satisfactory to the Purchasers
that the Collateral Agent has been named loss payee (on Form 438 BFU or a
similar form) with respect to the property insurance and an "additional insured"
with respect to the general liability insurance; (v) the Purchasers shall have
received fully executed and delivered amendments to each of the Existing Note
Agreements, with each of the foregoing in form and substance satisfactory to the
Purchasers, and each of the conditions precedent in such amendments shall have
been previously or concurrently satisfied; (vi) the Company shall have paid to,
or as directed by, PIM in immediately available funds an amendment fee of
$100,000; and (vii) the Company shall have paid Xxxxxxx XxXxxxxxx LLP in
immediately available funds its accrued and unpaid legal fees and expenses.
This document may be executed in multiple counterparts, which together
shall constitute a single document.
If you are in agreement with the foregoing, please sign the enclosed
counterpart of this letter in the space indicated below and return it to the
Purchasers at the above address whereupon, subject to the conditions expressed
herein, it shall become a binding agreement between the Company, on the one
hand, and the Purchasers, on the other hand.
Sincerely,
PURCHASERS
PRUDENTIAL INVESTMENT MANAGEMENT, INC.
By: /s/ Xxxxxxxx X. Xxxx
-------------------------------
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Xxxxxxxx X. Xxxx
-------------------------------
Title: Vice President
PRUDENTIAL RETIREMENT INSURANCE AND
ANNUITY COMPANY
By: PRUDENTIAL INVESTMENT MANAGEMENT,
INC., AS INVESTMENT MANAGER
By: /s/ Xxxxxxxx X. Xxxx
-------------------------------
Title: Vice President
Accepted and agreed to as of the date first appearing above:
NORTHWEST PIPE COMPANY,
an Oregon corporation
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President and Chief Executive Officer
Exhibit A
EXHIBIT G
[FORM OF INTERCREDITOR AGREEMENT]
To be inserted.
Exhibit B
EXHIBIT H
[FORM OF SECURITY AGREEMENT]
To be inserted.
