Exhibit 10.2

 

FIRST AMENDMENT TO FOURTH AMENDED

AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS FIRST AMENDMENT TO FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(“First Amendment”) is made as of the 15th day of March, 2005 by and among PW
Eagle, Inc., a Minnesota corporation (“Borrower”), the lenders who are
signatories hereto (“Lenders”), and Fleet Capital Corporation, a Rhode Island
corporation (“FCC”), as agent for Lenders hereunder (FCC, in such capacity,
being “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, Borrower, Agent and Lenders entered into a certain Fourth Amended and
Restated Loan and Security Agreement dated as of October 25, 2004 (said Fourth
Amended and Restated Loan and Security Agreement is hereinafter referred to as
the “Loan Agreement”); and

 

WHEREAS, Borrower desires to amend and modify certain provisions of the Loan
Agreement and, subject to the terms hereof, Agent and Lenders are willing to
agree to such amendments and modifications;

 

NOW THEREFORE, in consideration of the premises, the mutual covenants and
agreements herein contained, and any extension of credit heretofore, now or
hereafter made by Agent and Lenders to Borrower, the parties hereto hereby agree
as follows:

 

1. Definitions. All capitalized terms used herein without definition shall have
the meaning given to them in the Loan Agreement.

 

2. Applicable Margin. Notwithstanding the provisions of the definition of
Applicable Margin, the adjustment to the Applicable Margin scheduled to have
occurred on May 1, 2005 shall be deemed to have occurred on April 1, 2005 so
long as Borrower shall have delivered to Agent the financial statements required
by subsection 8.1.3(ii) for the fiscal period ended March 31, 2005 on or prior
to April 30, 2005.

 

3. Additional Definitions. The following definitions of “Covenant Election” and
“First Amendment” are hereby inserted into Appendix A to the Loan Agreement:

 

“Covenant Election – an election made by Borrower with respect to any fiscal
quarter and the twelve month fiscal period then ended to reduce the covenant
levels of Minimum EBITDA and Interest Coverage Ratio contained in Exhibit 8.3.
Borrower may only exercise a Covenant Election and such Covenant Election shall
only remain effective if (x) on each day from the date on which the Covenant
Election is exercised until the date on which Borrower delivers to Agent the
financial statements required by subsection 8.1.3(ii) for the last month of the
fiscal quarter immediately succeeding the fiscal quarter for which the Covenant
Election is to apply Availability equalled or exceeded $8,000,000, (y) Borrower
has not exercised a Covenant Election for more than six consecutive fiscal
quarters and (z) Borrower has not exercised a Covenant Election for more than
eight fiscal quarters within the Term. In order to make a Covenant Election,
Borrower must notify Agent in writing as provided in Section 12.8 of such
election no later than thirty days after the end of the fiscal quarter to which
the Covenant Election is to apply. By way of example of the period described in
clause (x) above, if Borrower wishes to make a Covenant Election for the fiscal
quarter ended 12/31/05, then Borrower must notify Agent of such Covenant
Election on or prior to January 30, 2006 and must maintain Availability greater
than $8,000,000 for each day from the date of the Covenant Election until the
date on which the financial statements for the fiscal period ended March 31,
2006 are delivered to Agent.

 

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* * *

 

First Amendment – that certain First Amendment to Fourth Amended and Restated
Loan and Security Agreement dated as of March 15, 2005 by and among Borrower,
Agent and Lenders.”

 

4. Distributions. Section 8.2.7 of the Loan Agreement is hereby deleted and the
following is inserted in its stead:

 

“8.2.7 Distributions. Declare or make, or permit any Subsidiary of Borrower to
declare or make, any Distributions; provided, however, that: (i) Borrower may
make repurchases of Common Stock from its stockholders or may pay dividends on
its Common Stock not in excess of an aggregate amount of $500,000 during any
fiscal year or $125,000 in any fiscal quarter, in each case, provided (v)
Borrower shall have Availability over the 60 days prior to such repurchase, on
average, and immediately after giving effect to any such repurchase or dividend,
of at least $18,000,000, (w) the Fixed Charge Coverage Ratio for the most
recently ended twelve month period equals or exceeds 1.10 to 1; (x) EBITDA for
the most recently ended twelve month period equalled or exceeded $15,000,000,
(y) Borrower’s total Money Borrowed as of the last day of the most recently
ended fiscal month equals or is less than $114,000,000, and (z) no Default or
Event of Default shall have occurred and be continuing; (ii) Borrower may make
repurchases of Common Stock from its stockholders or may pay dividends on its
Common Stock not in excess of an aggregate amount of $1,000,000 during any
fiscal year or $250,000 in any fiscal quarter, in each case, provided (v)
Borrower shall have Availability over the 60 days prior to such repurchase or
dividend, on average, and immediately after giving effect to any such
repurchase, of at least $21,000,000, (w) the Fixed Charge Coverage Ratio for the
most recently ended twelve month period equals or exceeds 1.10 to 1; (x) EBITDA
for the most recently ended twelve month period equalled or exceeded
$20,000,000, (y) Borrower’s total Money Borrowed as of the last day of the most
recently ended fiscal month equals or is less than $102,000,000, and (z) no
Default or Event of Default shall have occurred and be continuing; (iii)
Borrower may make repurchases of Common Stock from its stockholders or may pay
dividends on its Common Stock not in excess of an aggregate amount of $2,000,000
during any fiscal year or $500,000 in any fiscal quarter, in each case, provided
(v) Borrower shall have Availability over the 60 days prior to such repurchase
or dividend, on average, and immediately after giving effect to any such
repurchase, of at least $25,000,000, (w) the Fixed Charge Coverage Ratio for the
most recently ended twelve month period equals or exceeds 1.10 to 1; (x) EBITDA
for the most recently ended twelve month period equalled or exceeded
$22,500,000, (y) Borrower’s total Money Borrowed as of the last day of the most
recently ended fiscal month equals or is less than $89,000,000; (iv) Borrower
may make repurchases of Common Stock from its stockholders or may pay dividends
on its Common Stock not in excess of an aggregate amount of $4,000,000 during
any fiscal year or $1,000,000 in any fiscal quarter, in each case, provided (v)
Borrower shall have Availability over the 60 days prior to such repurchase or
dividend, on average, and immediately after giving effect to any such
repurchase, of at least $28,000,000, (w) the Fixed Charge Coverage Ratio for the
most recently ended twelve month period equals or

 

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exceeds 1.15 to 1; (x) EBITDA for the most recently ended twelve month period
equalled or exceeded $25,000,000, (y) Borrower’s total Money Borrowed as of the
last day of the most recently ended fiscal month equals or is less than
$82,000,000 and (z) no Default or Event of Default shall have occurred and be
continuing and (v) Borrower may make a Distribution to its stockholders and
certain holders of warrants to purchase shares of Borrower’s capital stock of
shares of capital stock of PW Poly or of cash proceeds received from any sale of
the capital stock of PW Poly. The foregoing notwithstanding, Borrower shall make
no Distribution if the making of such Distribution is prohibited by the terms of
the 2004 Subordinated Note Documents.”

 

5. Capital Expenditures. Subsection 8.2.8 of the Loan Agreement is hereby
deleted and the following is inserted in its stead:

 

“8.2.8 Capital Expenditures. (a) Make Capital Expenditures (including, without
limitation, by way of capitalized leases) which, in the aggregate, as to
Borrower and its Subsidiaries during any fiscal year (or other period) of
Borrower exceeds the amount set forth opposite such fiscal year (or other
period) in the following schedule:

 

Fiscal Year Ending

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   Permitted Capital Expenditure

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December 31, 2004 and each December 31 thereafter

   $ 2,000,000

 

(b) The foregoing notwithstanding, if for any fiscal year Borrower incurs less
than the maximum amount of permitted Capital Expenditures permitted hereunder
(such difference is hereinafter referred to as the “Capital Expenditure
Carryover”), then Capital Expenditures incurred within the first six months of
the next fiscal year up to an amount equal to the lesser of $750,000 (or
$1,500,000 as provided below) and the Capital Expenditure Carryover, shall be
treated, for purposes of this Section 8.2.8, as incurred in the prior fiscal
year.

 

(c) The foregoing notwithstanding, if Borrower’s EBITDA for a fiscal year was
$13,000,000 or more but less than $15,000,000 and Availability as of each day
within the applicable fiscal year equalled or exceeded $8,000,000, then for such
fiscal year permitted Capital Expenditures shall be increased to $3,000,0000.

 

(d) The foregoing notwithstanding, if Borrower’s EBITDA for a fiscal year was
$15,000,000 or more but less than $20,000,000 and Availability as of each day
within the applicable fiscal year equalled or exceeded $8,000,000, then for such
fiscal year permitted Capital Expenditures shall be increased to $4,000,000 and
the Capital Expenditure Carryover shall be increased to $1,500,000.

 

(e) The foregoing notwithstanding, if Borrower’s EBITDA for a fiscal year was
$20,000,000 or more and Availability as of each day within the applicable fiscal
year equalled or exceeded $8,000,000, then for such fiscal year permitted
Capital Expenditures

 

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shall be increased to $6,000,000 and the Capital Expenditure Carryover shall be
increased to $1,500,000.”

 

6. Financial Covenants. As of the “First Amendment Effective Date” (as defined
in Section 5 of the First Amendment), Exhibit 8.3 to the Loan Agreement is
hereby deleted and Exhibit 8.3 attached hereto and incorporated herein is
incorporated into the Loan Agreement in its stead.

 

7. Amendment Fee. In order to induce Agent and Lenders to enter into this First
Amendment, Borrower agrees to pay to Agent, for the ratable benefit of Lenders,
an amendment fee equal to $25,000. Said amendment fee shall be deemed fully
earned and non-refundable and shall be due and payable on the First Amendment
Effective Date.

 

8. Conditions Precedent. This First Amendment shall become effective upon
satisfaction of each of the following conditions precedent:

 

(A) Borrower, Agent and Lenders shall have executed and delivered to each other
this First Amendment;

 

(B) Borrower and the lenders under the 2004 Subordinated Note Documents shall
have entered into an amendment to the Subordinated Note Documents in form and
substance acceptable to Agent;

 

(C) Borrower shall have delivered to Agent the PVC Resin Supply Agreement
(together with all amendments thereto) between Borrower and Oxy Vinyls, LP dated
as of January 1, 2005 and the terms and conditions of such PVC Resin Supply
Agreement (and such amendments) shall be acceptable to Agent in its reasonable
discretion; and

 

(D) Borrower shall have paid to Agent for the ratable benefit of Lenders the
amendment fee referred to in Section 7 of this First Amendment.

 

The date on which all of the foregoing conditions precedent are satisfied shall
be called the “First Amendment Effective Date.”

 

9. Miscellaneous.

 

(a) This First Amendment is limited as specified and shall not constitute an
amendment, modification or waiver of any other provision of the Loan Agreement
or any other Loan Document.

 

(b) This First Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.

 

10. Continuing Effect. Except as otherwise specifically set out herein, the
provisions of the Loan Agreement shall remain in full force and effect.

 

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(Signature Page Follows)

 

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(Signature Page to First Amendment to

Fourth Amended and Restated Loan and Security Agreement)

 

IN WITNESS WHEREOF, this First Amendment has been duly executed as of the day
and year specified at the beginning hereof.

 

PW EAGLE, INC., (“Borrower”) By:  

/s/ Scott Long

   

Name: Scott Long

   

Title: Chief Financial Officer

FLEET CAPITAL CORPORATION, as Agent and as a Lender By:  

/s/ Brian Conole

   

Name: Brian Conole

   

Title: Senior Vice President

WELLS FARGO BUSINESS CREDIT, INC.,

as a Lender

By:  

/s/ Mona M. Krueger

   

Name: Mona M. Krueger

   

Title: Vice President

THE CIT GROUP/BUSINESS CREDIT, INC.,

as a Lender

By:  

/s/ Anthony Alexander

   

Name: Anthony Alexander

   

Title: Vice President

 

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EXHIBIT 8.3

 

FINANCIAL COVENANTS

 

Consolidated Net Income means, with respect to Borrower and its Subsidiaries
(other than PW Poly) for any fiscal period, the net income (or loss) of Borrower
and its Subsidiaries for such period taken as a whole (determined in accordance
with GAAP on a consolidated basis), but excluding in any event: (a) any gains or
losses on the sale or other disposition of Investments or fixed or capital
assets or from any transaction classified as extraordinary under GAAP, any taxes
on such excluded gains and any tax deductions or credits on account of any such
excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings
and losses of any business entity, substantially all the assets of which have
been acquired in any manner by Borrower, realized by such business entity prior
to the date of such acquisition; (d) net earnings and losses of any business
entity which shall have merged into Borrower earned or incurred prior to the
date of such merger; (e) net earnings of any business entity (other than a
Consolidated Subsidiary) in which Borrower has an ownership interest unless such
net earnings shall have been received by Borrower in the form of cash
distributions; (f) earnings resulting from a reappraisal, revaluation or
write-up of assets; (g) any charge to net earnings resulting from the
amortization of the value of stock options given to employees to the extent
required by FASB 25; (h) any increase or decrease of net income arising from a
change in Borrower’s accounting methods; (i) any gains resulting from the
forgiveness of Funded Debt or the retirement of Funded Debt at a discount; (j)
any gain arising from the acquisition of any Securities of Borrower; (k) any
reversal of any contingency reserve, unless the provision for such contingency
reserve shall have been made from income arising during the fiscal period in
question; and (l) any charge to earnings resulting from the write-off of
deferred loan costs and/or debt discounts in connection with repayment of the
1999 Subordinated Notes and the Obligations under the Original Loan Agreement
and the ETI Loan Agreement.

 

EBITDA With respect to any fiscal period, the sum of Borrower’s Consolidated Net
Income plus amounts deducted in determining Consolidated Net Income in respect
of: (a) any provision for (or less any benefit from) income taxes whether
current or deferred; (b) amortization and depreciation expense; (c) Interest
Expense for such period; and (d) the amount, if any, deducted from Consolidated
Net Income (and not otherwise added back pursuant to clause (a), (b) or (c) of
this definition) paid to Oxy Vinyls, LP in connection with Section 5.5 of the
new PVC Resin Supply Agreement referred to in Section 8(c) of the First
Amendment. For purposes of this Section 8.3 and Exhibit 8.3, EBITDA, for fiscal
periods ending on or prior to December 31, 2004, shall not include restructuring
charges of up to $1,000,000 which were incurred in fiscal year 2003, but were
expensed in fiscal year 2004 and up to $400,000 of expenses which have been or
will be incurred in connection with the PW Poly spin-off contemplated by Section
8.2.7(v).

 

Fixed Charge Coverage Ratio - With respect to any period of determination, the
ratio of (i) EBITDA of Borrower for such period minus income taxes paid in cash
and non-financed Capital Expenditures during such period to (ii) Fixed Charges.

 

Fixed Charges - For any period of determination, the sum of (a) scheduled
principal payments of Funded Debt (including the principal portion of scheduled
payments of Capital Lease Obligations), (b) Interest Expense paid in cash
included in the determination of Consolidated Net Income, (c) dividends paid on,
or repurchases or redemptions of, Borrower’s capital stock and (d) the amount of
the reduction in the Fixed Asset Maximum Amount occurring within such period of
determination.

 

Interest Coverage Ratio - With respect to any period of determination, the ratio
of (i) EBITDA for such period to (ii) Interest Expense paid in cash for such
period, all as determined in accordance with GAAP.

 

Interest Expense - With respect to any fiscal period, the interest expense
incurred for such period excluding interest income as determined in accordance
with GAAP, including, without limitation (whether or not such amount is included
within interest expense pursuant to GAAP), the amounts payable to Oxy Vinyls, LP
under Section 5.5 of the new PVC Resin Supply Agreement referred to in Section
8(c) of the First Amendment.

 

Interest Coverage Ratio - Borrower shall not permit the Interest Coverage Ratio
as of the last date of the period set forth below to be less than the ratio set
forth opposite such period below:

 

Period

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Ratio

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Three months ended December 31, 2004    0.15 to 1 Six months ended March 31,
2005    0.60 to 1 Nine months ended June 30, 2005    1.60 to 1 Twelve months
ended September 30, 2005 and each December 31, March 31, June 30 and September
30 thereafter    1.80 to 1; provided that if Borrower has properly made a
Covenant Election with respect to the last fiscal quarter of the applicable
twelve month period, then Minimum Interest Coverage Ratio shall be decreased to
1.00 to 1.

 

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Minimum EBITDA – Borrower shall achieve EBITDA of $15,000,000 or more for the
twelve month period ending December 31, 2004 and each twelve month period ending
each March 31, June 30, September 30 and December 31 thereafter; provided that
if Borrower has properly made a Covenant Election with respect to the last
fiscal quarter of the applicable twelve month period, then the Minimum EBITDA
for such twelve month period shall be decreased to $10,000,000.