Exhibit 10.24

 

NORTHWEST PIPE COMPANY

 

AMENDMENT TO

 

NOTE PURCHASE AGREEMENT

dated as of November 15, 1997

 

$35,000,000 Principal Amount

6.87% Senior Notes

due November 15, 2007

 

AND TO

 

NOTE PURCHASE AGREEMENT

dated as of April 1, 1998

 

$10,000,000 Principal Amount

6.63% Series A Senior Notes

due April 1, 2005

 

$30,000,000 Principal Amount

6.91% Series B Senior Notes

due April 1, 2008

 

Dated as of February 25, 2004

 

To the Holders of the Senior Notes

of Northwest Pipe Company Named in

the Attached Schedule I

 

Ladies and Gentlemen:

 

Reference is made to (a) the Note Purchase Agreement dated as of November 15,
1997 (as in effect on the date hereof, the “1997 Note Purchase Agreement”) among
Northwest Pipe Company (the “Company”), and each of the Purchasers named in
Schedule A thereto, pursuant to which the Company issued $35,000,000 aggregate
principal amount of its 6.87% Senior Notes due November 15, 2007 (the “1997
Notes”), and (b) the Note Purchase Agreement dated as of April 1, 1998 (as in
effect on the date hereof, the “1998 Note Purchase Agreement” and, together with
the 1997 Note Purchase Agreement, collectively, the “Note Purchase Agreements”),
pursuant to which the Company issued $10,000,000 aggregate principal amount of
its 6.63%

--------------------------------------------------------------------------------

Series A Senior Notes, due April 1, 2005 (the “1998 Series A Notes”), and
$30,000,000 aggregate principal amount of its 6.91% Series B Senior Notes, due
April 1, 2008 (the “1998 Series B Notes,” together with the 1998 Series A Notes,
collectively, the “1998 Notes” and, the 1998 Notes, together with the 1997
Notes, collectively, the “Notes”). You are referred to herein individually as a
“Holder” and collectively as the “Holders.” Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the Note
Purchase Agreements, as amended hereby.

 

The Company and Wells Fargo Bank, National Association (“Wells Fargo”) entered
into a Credit Agreement, dated as of May 31, 2001, as amended, that is being
amended and restated as of the date hereof (the “Credit Agreement”), pursuant to
which Wells Fargo is extending to the Company a master line of credit in the
aggregate commitment amount of $35,000,000.

 

The Company, on the one hand, and Prudential Investment Management, Inc.
(“PIM”), The Prudential Insurance Company of America (“Prudential”), on the
other hand, are entering into that Note Purchase and Private Shelf Agreement,
dated as of the date hereof (the “Prudential Note Agreement”), pursuant to which
the Company is issuing (a) to Prudential on the date hereof the Company’s 8.75%
senior secured promissory term notes due February 25, 2014 in the aggregate
original principal amount of $15,000,000 (the “Prudential Series A Notes”), and
(b) to PIM and certain Prudential affiliates at a date in the future the
Company’s senior secured promissory term notes in the aggregate principal amount
of up to $25,000,000 (the “Prudential Shelf Notes” and, together with the
Prudential Series A Notes, the “Prudential Notes”).

 

The lenders party to the Credit Agreement (the “Credit Agreement Lenders”), the
Holders, the Company and the holders of the Prudential Notes (the “Prudential
Noteholders”) have agreed that the obligations to the Credit Agreement Lenders
under the Credit Agreement, the obligations to the Holders with respect to the
Notes and the obligations of the Prudential Noteholders with respect to the
Prudential Notes shall be secured pari passu pursuant to certain security
documents. Certain modifications to the Note Purchase Agreements are necessary
to make the obligations of the Company under the Notes pari passu with the
obligations of the Company to the Prudential Noteholders. The Holders are
willing to grant an amendment (hereinafter, this “Amendment”) to effect such
modifications on the terms and conditions set forth herein.

 

In consideration of the premises and for good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the Company and the Holders
agree as follows:

 

1. AMENDMENTS TO NOTE PURCHASE AGREEMENTS

 

1.1. Amendment of Section 9. Section 9 of each of the Note Purchase Agreements
(except as otherwise specifically noted) is hereby amended by the addition of
the following:

 

9.6 Most Favored Lender Status. If at any time any Principal Lending Agreement
shall include any covenant, undertaking, restriction or other provision (or any
thereof shall be amended or otherwise modified) that is not contained in this
Agreement or would be more beneficial to the holders of Notes than any analogous
covenant, undertaking, restriction or provision contained in this Agreement (any
such covenant,

 

2

--------------------------------------------------------------------------------

undertaking, restriction or provision, an “Additional Covenant”), then the
Company shall provide a Most Favored Lender Notice to the holders of the Notes.
Thereupon, unless waived in writing by the Required Holders within five (5) days
of receipt of such notice by the holders of the Notes, such Additional Covenant
shall be deemed automatically incorporated by reference into this Agreement,
mutatis mutandis, as if set forth fully herein, without any further action
required on the part of any Person, effective as of the date when such
Additional Covenant became effective under such Principal Lending Agreement.
Thereafter, upon the request of the Required Holders, the Company shall enter
into any additional agreement or amendment to this Agreement reasonably
requested by such holder evidencing any of the foregoing. Any Additional
Covenant incorporated into this Agreement pursuant to this Section 9.6 shall
remain unchanged herein notwithstanding any subsequent waiver, amendment or
other modification of such Additional Covenant (unless any such waiver,
amendment or modification adds another Additional Covenant) under the applicable
Principal Lending Agreement.

 

9.7 Payments on the Notes.

 

(a) 1997 Notes. Interest and supplemental interest, if any, on the unpaid
balance of each Note shall be payable quarterly on May 15, August 15, November
15 and February 15 in each year, commencing with the May 15 next succeeding the
date hereof, until the principal hereof shall have become due and payable.

 

(b) 1998 Notes. Interest and supplemental interest, if any, on the unpaid
balance of each Note shall be payable quarterly on January 1, April 1, July 1
and October 1 in each year, commencing with the April 1 next succeeding the date
hereof, until the principal hereof shall have become due and payable.

 

(c) Supplemental Interest Rate. Commencing on February 25, 2004 and for each
quarter thereafter, the rate of interest payable on each Note shall be adjusted
(the “Supplemental Interest Rate”) to reflect the ratio of the Company’s
Consolidated Total Debt to Consolidated EBITDA (calculated on a rolling
twelve-month basis) (the “Leverage Ratio”) as set forth in the chart below (such
rate adjustment will be an adjustment to (and not in place of) the Company’s
existing interest rate on each Note):

 

Ratio of Consolidated Total Debt/

Consolidated EBITDA

--------------------------------------------------------------------------------

  

Supplemental

Interest Rate

--------------------------------------------------------------------------------

> 3.50:1

   1.50%

> 2.75:1 and <= 3.50:1

   0.75%

<= 2.75:1

   0.00%

 

The calculation of the supplemental interest for the period from February 25,
2004 to and including March 31, 2004 will be prorated based on the actual number
of days elapsed and on the basis of a 360-day year and will be calculated using
the Supplemental Interest Rate as determined by the Leverage Ratio as of
December 31, 2003. Thereafter, the Supplemental Interest Rate will be adjusted
at the beginning of each fiscal quarter for such fiscal quarter based on the
Leverage Ratio as determined as of

 

3

--------------------------------------------------------------------------------

the last day of the immediately preceding fiscal quarter. Interest and the
supplemental interest calculated at the Supplemental Interest Rate will be paid
on the interest payment dates set forth in Section 9.7(a) for the 1997 Notes and
will be paid on the interest payment dates set forth in Section 9.7(b) for the
1998 Notes until the principal hereof shall have become due and payable.

 

(d) Notices. Commencing on May 15, 2004, and on the 60th calendar day of each
calendar quarter thereafter, the Company will notify each holder of a Note of
the Leverage Ratio for the most recently ended fiscal quarter, together with the
associated Supplemental Interest Rate for the for the respective fiscal quarter;
provided that such date shall automatically be extended to the date the Bank
extends such date under Section 4.3(c) of the Bank Credit Agreement and the
Company shall promptly notify each holder of a Note in writing of such extension
by the Bank but in no event shall such date be extended for purposes of this
Section 9.7(d) to a date later than the 90th day of each calendar quarter.

 

(e) Amendments. Each of the amendments set forth in this Section 9.7 shall be
effective without the reissuance of any of the existing Notes. To the extent
that any new Notes are issued after the date hereof, or should any existing
Notes be reissued for any reason, the amendments set forth in this Section 9.7
shall be reflected in such newly-issued or reissued Notes.

 

9.8 Subsequent Guarantors. Within 10 days after any Credit Party’s acquisition
or formation of a Person that becomes a Major Domestic Subsidiary or within 10
days after any determination that any Domestic Subsidiary has become a Major
Domestic Subsidiary, or (ii) concurrently with any Subsidiary’s becoming a
guarantor or co-obligor of any of the Secured Obligations (as defined in the
Intercreditor Agreement), the Company will cause such Person to (a) become a
party to the Subsidiary Guaranty, the Indemnity and Contribution Agreement, the
Security Agreement (or an additional security agreement substantially similar to
the Security Agreement) and the Intercreditor Agreement and (b) execute and
deliver to each holder of Notes such opinions of counsel, certificates
accompanying authorizing resolutions and corporate or similar documents, and
such other financing statements, landlord/mortgagee waivers and other
agreements, instruments and other documents as the Required Holders may
reasonably request, each of foregoing in form and substance satisfactory to the
Required Holders. Notwithstanding the foregoing, within 10 days after any
determination by the Required Holders that (1) the book value of the assets of
the Company (exclusive of its Subsidiaries), together with the book value of the
assets of any then existing parties to the Subsidiary Guaranty, in each case as
at the end of the most recently ended fiscal quarter, do not collectively
constitute at least 90% of the book value of the assets of the Company and its
Subsidiaries on a consolidated basis as at the end of the most recently ended
fiscal quarter, or (2) the Consolidated EBITDA (determined solely with respect
to the Company (exclusive of its Subsidiaries)), together with the Consolidated
EBITDA determined solely with respect to any then existing parties to the
Subsidiary Guaranty, in each case for the most recently ended four consecutive
fiscal quarters, does not collectively constitute at least 90% of the
Consolidated EBITDA for the most recently ended four consecutive fiscal
quarters, then the Company shall cause such Domestic Subsidiaries to

 

4

--------------------------------------------------------------------------------

execute and deliver to each holder of Notes the documents described in clauses
(a) and (b) of the immediately preceding sentence so that (A) the book value of
the assets of the Company (exclusive of its Subsidiaries) and the parties to the
Subsidiary Guaranty constitute at least 90% of the book value of the assets of
the Company and its Subsidiaries on a consolidated basis and (B) the
Consolidated EBITDA (determined solely with respect to the Company (exclusive of
its Subsidiaries)), together with the Consolidated EBITDA determined solely with
respect to any then existing parties to the Subsidiary Guaranty collectively
constitute at least 90% of the Consolidated EBITDA.

 

1.2. Amendment of Section 10. Section 10 of each of the Note Purchase Agreements
is hereby amended and restated in its entirety as follows:

 

The Company covenants that so long as any of the Notes are outstanding:

 

10.1 Financial Covenants.

 

(a) Consolidated Total Debt to EBITDA Ratio. 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 then most recently ended, to be greater than the applicable amount
set forth below:

 

Date

--------------------------------------------------------------------------------

   Ratio

--------------------------------------------------------------------------------

12/31/03

   5.00:1.00

3/31/04

   4.15:1.00

6/30/04

   3.65:1.00

9/30/04

   3.45:1.00

12/31/04

   3.45:1.00

3/31/05

   3.20:1.00

6/30/05

   3.05:1.00

9/30/05

   2.90:1.00

12/31/05

   2.85:1.00

3/31/06

   2.85:1.00

6/30/06 and on the last day of each fiscal quarter thereafter

   2.80:1.00

 

(b) Consolidated Total Debt to EBITDA Ratio. The Company will not, at any time
during any period specified below, other than the last day of any fiscal
quarter, permit (i) the ratio of Consolidated Total Debt at such time to (ii)
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:

 

Date

--------------------------------------------------------------------------------

   Ratio

--------------------------------------------------------------------------------

2/[    ]04-3/30/04

   5.25:1.00

3/31/04-6/29/04

   4.40:1.00

6/30/04-9/29/04

   3.90:1.00

9/30/04-3/30/05

   3.70:1.00

3/31/05-6/29/05

   3.45:1.00

6/30/05-9/29/05

   3.30:1.00

9/30/05-12/30/05

   3.15:1.00

12/31/05-6/29/06

   3.10:1.00

6/30/06 and at all times thereafter

   3.05:1.0

 

5

--------------------------------------------------------------------------------

(c) Consolidated Tangible Net Worth. The Company will not, at any time, permit
Consolidated Tangible Net Worth to be less than the sum of (i) $101,000,000,
plus (ii) 50% of the consolidated net income of the Company and its Subsidiaries
(but only if a positive number) for each fiscal quarter of the Company ended
after September 30, 2003, through and including the most recently ended fiscal
quarter of the Company at such time, plus (iii) 100% of the net proceeds from
any Equity Offering of the Company consummated after February 25, 2004.

 

(d) Consolidated Fixed Charge Coverage Ratio. 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:

 

Date

--------------------------------------------------------------------------------

   Ratio

--------------------------------------------------------------------------------

12/31/03

   0.75:1.00

3/31/04

   0.85:1.00

6/30/04

   0.95:1.00

9/30/04

   1.00:1.00

3/31/05

   1.20:1.00

9/30/05

   1.25:1.00

3/31/06

   1.35:1.00

6/30/06

   1.35:1.00

at the end of each fiscal quarter thereafter

   1.50:1.00

 

10.2 Restricted Payments. The Company will not declare, make or pay, or commit
to declare, make or pay, any Restricted Payment.

 

10.3 Capital Expenditures. The Company will not, and will not permit any of its
Subsidiaries to, cause or permit the aggregate amount of Capital Expenditures of
the Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP (excluding (i) any Capital Expenditures directly related to
the consolidation of a Company facility into another Company facility; provided
that in no event shall such exclusion of Capital Expenditures exceed $3,000,000
and (ii) internal personnel and related expenses of the Company that relate to
specific Company projects and that are permitted to be and are capitalized
according to GAAP) to exceed (x) $6,500,000 for the fiscal year ended December
31, 2004, (y) $8,500,000 for the fiscal years ended December 31, 2005 and
December 31, 2006 and (z) $15,000,000 for any fiscal year thereafter.

 

6

--------------------------------------------------------------------------------

10.4 Other Indebtedness.

 

Neither the Company nor any of its Subsidiaries shall create, incur, assume or
permit to exist any Debt except:

 

(a) Debt in existence on the date hereof and disclosed on Schedule 10.4 hereto;

 

(b) Debt evidenced by the Notes or under this Agreement or the Subsidiary
Guaranty;

 

(c) Debt secured by Purchase Money Liens; provided that the aggregate principal
amount of such Debt (i) incurred during any year shall not exceed $2,500,000 and
(ii) shall not exceed $10,000,000, in the aggregate, at any time;

 

(d) Debt incurred under the Prudential Note Agreement and evidenced by the
Prudential Notes and Guaranties of such Debt; provided that such Debt is subject
to the terms of the Intercreditor Agreement;

 

(e) Debt incurred under the Bank Credit Agreement and Guaranties of such Debt
pursuant to the requirements thereof; provided that (i) the aggregate commitment
amount thereunder and the aggregate principal amount of such Debt shall not, at
any time, exceed $38,500,000 and (ii) such Debt is subject to the terms of the
Intercreditor Agreement;

 

(f) Debt incurred to finance the exercise of purchase options or to otherwise
purchase assets or property subject to leases under which the Company is a
party; and

 

(g) Debt incurred to renew, refinance, refund or replace any Debt described in
Sections 10.4(a), (c), (d), (e) or (f), provided that (i) the principal amount
of such Debt is not increased or the maturity thereof reduced in connection with
such renewal, refinancing, refunding or replacement, and (ii) the Debt from the
renewal, refinancing, refunding or replacement of the Debt described in Sections
10.4(e) shall be subject to the Intercreditor Agreement.

 

10.5 Liens. Neither the Company nor any of its Subsidiaries shall create, assume
or allow any Lien on property of the Company or any Subsidiary now or hereafter
acquired, except:

 

(a) Liens for taxes, assessments or other governmental levies or charges not yet
due or which are subject to a Good Faith Contest;

 

(b) Purchase Money Liens on equipment and/or real estate acquired after the date
hereof securing Debt permitted under Section 10.4(c);

 

(c) statutory liens of landlords and liens of carriers, warehousemen, mechanics
and materialmen incurred in the ordinary course of business that do not secure
Debt and are for sums not yet due or which are subject to a Good Faith Contest;

 

7

--------------------------------------------------------------------------------

(d) Liens (other than any Lien imposed by ERISA) incurred, or deposits made, in
the ordinary course of business, such as workers’ compensation liens or
statutory liens; provided, however, that such Liens were not incurred or made in
connection with the borrowing of money or the obtaining of advances or credit;

 

(e) minor survey exceptions or minor encumbrances, easements or reservations and
related Liens incurred in the ordinary course of business which do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Company or any Subsidiary;

 

(f) deposits or pledges required in the ordinary course of business under
workers’ compensation statutes or other insurance;

 

(g) Liens in existence on the date hereof and disclosed on Schedule 10.5 hereto;

 

(h) Liens on property or assets of a Subsidiary to secure obligations of such
Subsidiary to the Company;

 

(i) Liens granted in favor of the Collateral Agent under the Collateral
Documents securing the Secured Obligations (as defined in the Intercreditor
Agreement);

 

(j) Liens securing Debt permitted under Section 10.4(f);

 

(k) Liens created after the date hereof in connection with the renewal,
refinancing, refunding or replacement of the Liens listed on Schedule 10.5 or
Liens securing Debt permitted under Section 10.4(c) or (f); provided that (i)
the principal amount of Debt secured by such Lien immediately prior to such
renewal, refinancing, refunding or replacement is not increased or the maturity
thereof reduced, (ii) such Lien is not extended to any other property, (iii)
immediately after such renewal, refinancing, refunding or replacement, no
Default or Event of Default would exist; and

 

(l) Liens to secure Debt incurred to renew, refinance, refund or replace any
Debt described in Sections 10.4(g).

 

10.6 Loans, Advances and Investments. Neither the Company nor any Subsidiary
shall make or permit to remain outstanding any capital contributions, loans,
advances or investments (collectively, “Investments”), except the following:

 

(a) Investments in direct obligations of the United States of America or
obligations fully guarantied by the United States of America; provided that such
obligations mature within one (1) year from the date acquired;

 

(b) Investments in certificates of deposit maturing within one (1) year from the
date acquired and issued by a bank or trust company organized under the laws of
the United States or any of its states, rated at least AA by S&P or Aa2 Moody’s,
and having capital, surplus and undivided profits aggregating at least
$750,000,000;

 

8

--------------------------------------------------------------------------------

(c) Investments in commercial paper rated at least A1 by S&P or P1 by Moody’s
and maturing not more than two hundred and seventy (270) days from the date
acquired;

 

(d) capital contributions, loans, advances and investments: (i) from or by the
Company to or in its Subsidiaries or (ii) between Subsidiaries;

 

(e) travel and other business advances to officers and employees of the Company
or any Subsidiary in the ordinary course of business in an aggregate amount not
exceeding $500,000;

 

(f) capital contributions, loans, advances or investments in connection with
acquisitions permitted under Section 10.12;

 

(g) other capital contributions, loans, advances and investments not to exceed
$5,000,000 in the aggregate.

 

10.7 Merger and Consolidation; Transfer of Assets. The Company will not, and
will not permit any Subsidiary to, consolidate or merge with or into, or
Transfer any of its assets to, any other Person, except that, so long as no
Default or Event of Default has occurred and is continuing or would result from
any such event:

 

(a) any Subsidiary may consolidate or merge with or into the Company; provided
that the Company is the continuing or surviving corporation;

 

(b) any Subsidiary may consolidate or merge with or into any other Domestic
Subsidiary of the Company;

 

(c) the Company may consolidate or merge with any other solvent corporation;
provided that the Company shall be the continuing or surviving corporation;

 

(d) any Subsidiary may Transfer assets to the Company or another Domestic
Subsidiary of the Company;

 

(e) the Company or any Subsidiary may sell inventory in the ordinary course of
business;

 

(f) the Company or any Subsidiary may otherwise Transfer assets; provided that
after giving effect thereto (i) the Annual Percentage of Assets Transferred
pursuant to this clause (f) shall not exceed 10%, and (ii) the Cumulative
Percentage of Assets Transferred pursuant to this clause (f) shall not exceed
20%; and

 

(g) any Subsidiary may consolidate or merge with another Person if otherwise
permitted under Section 10.12; provided that the continuing or surviving Person
following such consolidation or merger is a Subsidiary.

 

9

--------------------------------------------------------------------------------

10.8 Lease Expenditures.

 

The Company will not, and will not permit or cause any Subsidiary to, incur any
new operating lease expense in any fiscal year in excess of an aggregate of
$1,000,000 for the Company and its Subsidiaries on a consolidated basis, other
than that in respect of the lease by the Company of a pipe mill located in
Houston, Texas the aggregate annual lease expense for which is anticipated to be
in the approximate amount of $2,400,000.

 

10.9 Sale of Stock and Indebtedness of Subsidiaries.

 

The Company will not, and will not permit any Subsidiary to, sell or otherwise
dispose of, or part with control of, any shares of stock, partnership interests,
membership interests or other equity interests in, or indebtedness of, any
Subsidiary (in the case of the Company) or any other Subsidiary (in the case of
a Subsidiary), except (a) to the Company or another Subsidiary that is a
Wholly-Owned Subsidiary, and (b) the sale of all equity interests and
indebtedness of any Subsidiary at the time owned by or owed to the Company and
one or more Subsidiaries sold as an entirety; provided that in the case of the
immediately preceding clause (b), (i) such sale or other disposition is treated
as a Transfer of assets of such Subsidiary and is permitted by Section 10.7 and
(b) at the time of such sale, such Subsidiary shall not own, directly or
indirectly, any equity interests or indebtedness of any other Subsidiary (unless
all of the equity interests and indebtedness of such other Subsidiary owned,
directly or indirectly, by the Company and all Subsidiaries are simultaneously
being sold as permitted by this Section 10.9.

 

10.10 Related Party Transactions. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, purchase, acquire or lease any property
from, or sell, transfer or lease any property to, pay or agree to pay any
management, advisory, consulting or other fees to, or otherwise deal with, in
the ordinary course of business or otherwise, any Related Party other than on
fair and reasonable terms and conditions at least as favorable to the Company or
such Subsidiary as those that would be obtained through an arm’s-length
negotiation with an unaffiliated third party.

 

10.11 Compliance with Borrowing Base. The Company will not permit the aggregate
principal amount of the Debt outstanding under the Bank Credit Agreement, at the
end of any month, to exceed the lesser of (a) the aggregate commitment amount in
effect at such time under the Bank Credit Agreement, and (b) the borrowing base
as determined pursuant to Section 1.1(f) of the Bank Credit Agreement as in
effect on the date hereof.

 

10.12 Permitted Acquisition. The Company will not, and will not permit any
Subsidiary to, acquire any Person, all or substantially all of the property of a
Person or a business line or division of a Person (whether by merger,
acquisition of all or substantially all of the assets of any other Person, stock
or other equity purchase, investment or otherwise) if (a) the Total Acquisition
Consideration of such acquisition when aggregated with the Total Acquisition
Consideration of all acquisitions consummated by the Company and its
Subsidiaries during the then current fiscal year exceeds 10% of Consolidated
Tangible Net Worth determined as of the end of the

 

10

--------------------------------------------------------------------------------

immediately prior fiscal year of the Company, (b) a Default or an Event of
Default shall have occurred and is continuing or would result therefrom, or (c)
such acquisition has not been approved by the Board of Directors of such Person
being acquired or is otherwise considered “hostile” by the Required Holders.

 

1.3. Amendment of Section 11.

 

1.3.1. Section 11(c) is amended to read in its entirety as follows:

 

“(c) the Company defaults in the performance of or compliance with any term
contained in Sections 7.1(d), 9.8 or any of 10.1 through 10.12; or”

 

1.3.2 Section 11(f) is amended to read in its entirety as follows:

 

(f) any Credit Party or any Subsidiary of a Credit Party defaults (whether as
primary obligor or as guarantor or other surety) in any payment of principal of
or interest on any other obligation for money borrowed (or any Capitalized Lease
Obligation, any obligation under a conditional sale or other title retention
agreement, any obligation issued or assumed as full or partial payment for
property whether or not secured by a purchase money mortgage or any obligation
under notes payable or drafts accepted representing extensions of credit) beyond
any period of grace provided with respect thereto, or any Credit Party or any
Subsidiary of a Credit Party fails to perform or observe any other agreement,
term or condition contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement shall
occur and be continuing) and the effect of such failure or other event is to
cause, or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due (or to
be repurchased by any Credit Party or any Subsidiary of a Credit Party) prior to
any stated maturity; provided that the aggregate amount of all obligations as to
which such a payment default shall occur and be continuing or such a failure or
other event causing or permitting acceleration (or resale to any Credit Party or
any Subsidiary of a Credit Party) shall occur and be continuing exceeds
$1,000,000; or”

 

1.3.3 Section 11(i) is amended to read in its entirety as follows:

 

(i) except for the judgment entered approving the settlement of the POZ-LOK
class action litigation, the material terms and conditions of which are set
forth on Schedule 11(i), one or more final judgments in an aggregate amount in
excess of $1,000,000 (to the extent not fully insured by an insurance carrier
rated “A” or better by A.M. Best Co. that has expressly acknowledged coverage
thereof) is rendered against any Credit Party or any Subsidiary of any Credit
Party and, within 30 days after entry thereof, any such judgment is not
discharged or execution thereof stayed pending appeal, or within 30 days after
the expiration of any such stay, such judgment is not discharged; or”

 

11

--------------------------------------------------------------------------------

1.3.4 Section 11(j) is amended to read in its entirety as follows:

 

“(A) any Plan shall fail to satisfy the minimum funding standards of ERISA or
the Code for any plan year or part thereof or a waiver of such standards or
extension of any amortization period is sought or granted under Section 412 of
the Code, (B) a notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA Section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified any Credit Party, any
Subsidiary of any Credit Party or any ERISA Affiliate that a Plan may become a
subject of such proceedings, (C) the aggregate “amount of unfunded benefit
liabilities” (within the meaning of Section 4001(a)(18) of ERISA) under all
Plans of any Credit Party or any Subsidiary of any Credit Party, determined in
accordance with Title IV of ERISA, shall exceed $1,000,000, (D) any Credit
Party, any Subsidiary of any Credit Party or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (E) any Credit Party, any Subsidiary of any Credit Party
or any ERISA Affiliate withdraws from any Multiemployer Plan, or (F) any Credit
Party, any Subsidiary of any Credit Party establishes or amends any employee
welfare benefit plan that provides post-employment welfare benefits in a manner
that would materially increase the liability of any Credit Party or any
Subsidiary of any Credit Party thereunder; and any such event or events
described in clauses (A) through (F) above, either individually or together with
any other such event or events, could reasonably be expected to have a Material
Adverse Effect; or”

 

1.3.5 New Sections 11(k), (l) and (m) are added as follows:

 

(k) any of the Transaction Documents shall cease for any reason to be in full
force and effect or any party thereto (other than the Collateral Agent or any
holder from time to time of a Note) shall purport to disavow its obligations
thereunder, shall declare that it does not have any further obligation
thereunder or shall contest the validity or enforceability thereof; or

 

(l) any Collateral Document shall cease for any reason (other than pursuant to
the terms thereof) to create a valid security interest in the Collateral
purported to be covered thereby or such security interest shall for any reason
cease to be a perfected and first priority security interest subject only to
Liens permitted under Section 10.5; or

 

(m) a Change in Control shall occur.

 

1.4. Amendment and Restatement of Schedule A to the 1997 Note Purchase Agreement
and the 1998 Note Purchase Agreement.

 

1.4.1. Schedule A to the 1997 Note Purchase Agreement is amended and restated in
its entirety and replaced with Schedule A as attached hereto as Exhibit A.

 

1.4.2. Schedule A to the 1998 Note Purchase Agreement is amended and restated in
its entirety and replaced with Schedule A as attached hereto as Exhibit B.

 

12

--------------------------------------------------------------------------------

1.5. Amendment of Schedule B.

 

1.5.1. The following defined terms are added to Schedule B of each Note Purchase
Agreement:

 

“Additional Covenant” has the meaning set forth in Section 9.6.

 

“Agreement” shall mean this Note Purchase Agreement, together with all exhibits
and schedules hereto, as any of the foregoing may be amended, supplemented or
otherwise modified from time to time.

 

“Amendment Fee” means, with respect each holder, with respect to each Note held
by such holder, an amount equal to the product of (a) the outstanding principal
balance of such holder’s Note as set forth in Schedule I hereof and (b) 0.20%
(20 basis points).

 

“Annual Percentage of Assets Transferred” shall mean, as of any time of
determination thereof, the sum of the Percentages of Assets Transferred for each
of the assets of the Company and Subsidiaries that has been Transferred during
the then current fiscal quarter and the three fiscal quarters immediately
preceding the then current fiscal quarter.

 

“Bank” shall mean Wells Fargo Bank, National Association 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 Amended and Restated Credit
Agreement, dated as of February 25, 2004, by and between the Company and the
Wells Fargo, 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 $38,500,000 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.

 

“Capital Expenditures” shall mean, with respect to the Company or any of its
Subsidiaries, expenditures made (by the expenditure of cash or the incurrence of
Debt) by such Person for any fixed assets or improvements or for replacements,
substitutions or additions thereto that have a useful life of more than one year
and that are required to be capitalized under GAAP.

 

“Capitalized Lease Obligation” shall mean, with respect to any Person, any
rental obligation which, under GAAP, is or will be required to be capitalized on
the books of such Person, taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such principles.

 

“Change in Control” shall mean, with respect to the Company, the acquisition
(including through a merger or consolidation) by any person or group of persons
(within

 

13

--------------------------------------------------------------------------------

the meaning of Section 13 or 14 of the Exchange Act) of (i) beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Exchange Act), directly or indirectly, of more than 40% of
the outstanding Voting Stock of the Company.

 

“Collateral Agent” shall mean Wells Fargo Bank, National Association, in its
capacity as collateral agent for the holders of the Prudential Notes, the
holders and the Bank.

 

“Collateral” shall mean the personal or real property of the Credit Parties in
which a security interest, deed of trust or mortgage has been created under the
Collateral Documents in favor of the Collateral Agent for the benefit of the
holders from time to time of the Notes to secure the obligations of the Credit
Parties under the Notes and the other Transaction Documents.

 

“Collateral Documents” shall mean the Security Agreement(s) and each of the
other agreements and instruments to be executed pursuant to the terms of any of
the foregoing or which grant Liens in favor of the Collateral Agent or the
holders of the Notes securing the obligations of the Company and the
Subsidiaries under any of the Notes, this Agreement or the Subsidiary Guaranty,
as each may be amended, restated or otherwise modified from time to time,
together with all financing statements or comparable documents filed with
respect thereto under the Uniform Commercial Code (as defined in the Security
Agreement) or comparable law.

 

“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 resulting from a
change in accounting principles relating to stock options. Consolidated EBITDA
shall not include extraordinary gains, 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, 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), undistributed earnings of non-Subsidiary investments, gains
arising from changes in accounting principals, gains arising from the write-up
of assets (except in the normal course of business related to accounting
reconciliation), any earnings of a Person acquired by the Company or a
Subsidiary prior to the date such acquisition occurs, any gains resulting from
the early retirement or extinguishment of Debt and 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

 

14

--------------------------------------------------------------------------------

corporation of such Foreign Subsidiary. Unless provided otherwise, EBITDA shall
be calculated at any time of determination for the four consecutive fiscal
quarters ended immediately prior to such time. To the extent deducted therefrom,
EBITDA for the quarter ended December 31, 2003, shall not include expenses of up
to $500,000 related to a fatal accident in Texas and $400,000 related to
employee severance expense in the aggregate. To the extent deducted therefrom,
EBITDA for the quarter ended March 31, 2004 shall not include expenses of up to
$200,000 related to employee severance expense in the aggregate.

 

“Consolidated EBITDAR” shall mean, (a) Consolidated EBITDA, plus (b) Lease
Rentals for the fiscal quarter of the Company ended on the date of determination
multiplied by 4.

 

“Consolidated Fixed Charge Coverage Ratio” shall mean the ratio of (a)
Consolidated EBITDAR; to (b) Consolidated Fixed Charges.

 

“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, plus the scheduled principal payments
of long-term Debt (including Capitalized Lease Obligations) for the period of
four consecutive fiscal quarters ended on the date of determination, plus (b)
Lease Rentals for the fiscal quarter of the Company ended on the date of
determination, multiplied by 4.

 

“Consolidated Tangible Net Worth” shall mean at any time of determination
consolidated shareholders’ equity of the Company and its Subsidiaries as of such
time, minus the net book amount of all assets of the Company and its
Subsidiaries (after deducting any reserves applicable thereto) which would be
shown as intangible assets on a consolidated balance sheet of the Company and
its Subsidiaries (including, without limitation, goodwill).

 

“Consolidated Total Debt” shall mean, as of any time of determination, the total
of all Debt of the Company and its Subsidiaries exclusive of Debt of
Subsidiaries owed to the Company or other Subsidiaries.

 

“Credit Parties” shall mean the Company and the Subsidiary Guarantors.

 

“Cumulative Percentage of Assets Transferred” shall mean, as at any time of
determination thereof, the sum of the Percentages of Assets Transferred for each
asset of the Company and Subsidiaries that has been Transferred from and after
the date hereof.

 

“Debt” shall mean, with respect to any Person, without duplication: (i) any
indebtedness for borrowed money (including commercial paper and revolving credit
line borrowings), or which is evidenced by bonds, debentures or notes, or
otherwise representing the deferred purchase price of property or extensions of
credit, whether or not representing obligations for borrowed money (other than
trade, payroll and taxes payable), (ii) indebtedness of a third party secured by
Liens on the assets of such Person, (iii) Capitalized Lease Obligations, (iv)
Guarantees, (v) unreimbursed obligations with respect to Swaps, drawn letters of
credit and similar obligations, (vi) mandatorily redeemable preferred stock or
equivalents and (vii) letters of credit in excess of IRB obligations.

 

15

--------------------------------------------------------------------------------

“Domestic Subsidiary” shall mean, as of any time of determination, any
Subsidiary that is incorporated or organized under the laws of any state or
territory of the United States of America, whether now existing or hereafter
formed or acquired.

 

“Equity Offering” shall mean any issuance of any class or series of the capital
stock of the Company.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Foreign Subsidiary” shall mean a Subsidiary other than a Domestic Subsidiary.

 

“Good Faith Contest” shall mean an active contest or challenge initiated in a
timely manner and in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP.

 

“Indemnity and Contribution Agreement” shall mean an Indemnity and Contribution
Agreement in the form of Exhibit C hereto (as amended, supplemented or otherwise
modified from time to time).

 

“Intercreditor Agreement” means that certain Intercreditor and Collateral Agency
Agreement, dated as of the date hereof, by and among the Credit Parties, the
Prudential Noteholders, the holders, the Bank and the Collateral Agent and each
of the other parties signatory thereto, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“Lease Rentals” shall mean, with respect to any period, the sum of rental and
operating lease expense, for the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.

 

“Major Domestic Subsidiary” shall mean any Domestic Subsidiary of the Company
that, together with any other Domestic Subsidiaries owned by such Subsidiary,
(i) has assets with a book value as at the end of the most recently completed
fiscal quarter that total 5% or more of the consolidated total assets of the
Company and its Subsidiaries as at the end of the most recently ended fiscal
quarter, or (ii) has Consolidated EBITDA (determined solely with respect to such
Subsidiary on a consolidated basis) for the most recently ended four consecutive
fiscal quarters that is 5% or more of Consolidated EBITDA during such period.

 

“Most Favored Lender Notice” means a written notice from the Company to each of
the holders of the Notes delivered promptly, and in any event within ten (10)
Business Days after the inclusion of any Additional Covenant in any Principal
Lending Agreement (including by way of amendment or other modification of any
exiting provision thereof), pursuant to Section 9.6, by a Responsible Officer of
the Company in reasonable detail, including reference to Section 9.6, a verbatim
statement of such Additional Covenant (including any defined terms used therein)
and related explanatory calculations, as applicable.

 

16

--------------------------------------------------------------------------------

“Moody’s” shall mean Moody’s Investors Service, Inc.

 

“Percentage of Assets Transferred” shall mean, with respect to each asset
Transferred pursuant to clause (vi) of Section 10.7, the ratio (expressed as a
percentage) of (i) the greater of such asset’s fair market value or net book
value on the date of such Transfer to, (ii) the consolidated total assets of the
Company and Subsidiaries as of the last day of the fiscal quarter immediately
preceding the date of such Transfer.

 

“PIM” shall mean Prudential Investment Management, Inc.

 

“Principal Lending Agreement” means (a) the Bank Credit Agreement and any
renewal, refinancing, refunding or replacement thereof, (b) the Prudential Note
Agreement and any renewal, refinancing, refunding or replacement thereof, and
(c) any other financing agreement with any lender that becomes a party to the
Intercreditor Agreement.

 

“Prudential” shall mean The Prudential Insurance Company of America.

 

“Prudential Note Agreement” means that certain Note Purchase and Private Shelf
Agreement, dated as of the date hereof between Prudential and PIM, as the same
may be amended, restated, supplemented or otherwise modified from time to time.

 

“Prudential Noteholders” means a holder of a Prudential Note.

 

“Prudential Notes” means (a) the Company’s 8.75% senior secured promissory term
notes due February 25, 2014 in the aggregate original principal amount of
$15,000,000 (the “Prudential Series A Notes”), and (b) the Company’s senior
secured promissory term notes in the aggregate principal amount of up to
$25,000,000, in each case to be issued pursuant to the Prudential Note
Agreement.

 

“Purchase Money Lien” shall mean a Lien on tangible property (or any improvement
thereon) securing the purchase price or cost of construction, expansion,
renovation or improvement of such tangible property (or any improvement thereon)
by the Company or any Subsidiary after the date hereof or to secure Debt of the
Company or such Subsidiary incurred after the date hereof solely for the purpose
of financing the acquisition, construction, expansion, renovation or improvement
of such tangible property (or any improvements thereon), provided that no such
Lien shall extend to or cover any property other than the property (or
improvement thereon) being acquired or constructed (except that, in the case of
any expansion, renovation or improvement of an existing facility involving fixed
or capital assets that will become a part of a related property or other assets
comprising such facility, such Lien may extend to such related property or other
assets), the amount of Debt secured by any such Lien shall not exceed an amount
equal to the lesser of (a) the cost to the Company or such Subsidiary of the
property (or improvement thereon) being acquired or constructed or (b) the fair
market value (as determined in good faith by the Company) of such property,
determined at the

 

17

--------------------------------------------------------------------------------

time of such acquisition or at the time of substantial completion of such
construction, expansion, renovation or improvement, and such Lien shall be
created concurrently with or within 180 days after such acquisition or the
substantial completion of such construction, expansion, renovation or
improvement.

 

“Related Party” shall mean: (i) any shareholder of the Company or any
Subsidiary; (ii) all Persons to whom any Person described in clause (i) above is
related by blood, adoption or marriage; and (iii) all Affiliates of the Company
and the foregoing Persons.

 

“Restricted Payments” of a Person shall mean any of the following:

 

(i) any dividend on any class of such Person’s capital stock;

 

(ii) any other distribution on account of the ownership of any class of such
Person’s capital stock; and

 

(iii) any redemption, purchase or other acquisition, direct or indirect, of any
shares of such Person’s capital stock.

 

Notwithstanding the foregoing, Restricted Payments shall not include: (A)
dividends paid, or distributions made, by such Person solely in shares of
capital stock; or (B) exchanges of capital stock of such Person for another
class of capital stock of such Person, except to the extent that cash or other
non-stock value is paid by such Person in such exchange. The term “capital
stock” as used herein shall include equity interests other than capital stock,
including warrants or options to purchase capital stock and other equity
interests.

 

“Security Agreement” means the Amended and Restated Security Agreement, dated as
of the date hereof by and between the Company, as grantor, and the Collateral
Agent, as secured party, for the benefit of the Bank the Prudential Noteholders,
the holders and each of the other parties signatory thereto, as the same may be
amended, restated, supplemented or otherwise modified from time to time.

 

“S&P” shall mean Standard & Poor’s Ratings Group, a division of McGraw Hill,
Inc.

 

“Subsidiary Guaranty” shall mean a Subsidiary Guaranty in favor of the holders
from time to time of the Notes, in the form of Exhibit D hereto (as amended,
supplemented or otherwise modified from time to time).

 

“Subsidiary Guarantors” shall mean each Person that hereafter becomes a party to
the Multiparty Guaranty pursuant to the requirements of Section 9.8.

 

“Total Acquisition Consideration” shall mean, with respect to any acquisition
described in Section 10.12, (a) the amount of any cash and the fair market value
of all other property given or required to be given as consideration, including
the deferred payments of any such amounts, (b) the amount (determined by using
the outstanding

 

18

--------------------------------------------------------------------------------

amount or the amount payable at maturity, whichever is greater) of any
obligations for money borrowed, incurred, assumed or acquired or required to be
assumed or acquired by either the Company or any Subsidiary in connection with
such acquisition, and (c) all amounts paid or required to be paid in respect of
covenants not to compete and consulting agreements that should be recorded on
the consolidated financial statements of the Company and its Subsidiaries
prepared in accordance with GAAP.

 

“Transaction Documents” shall mean this Agreement, the Notes, the Collateral
Documents, the Subsidiary Guaranty, the Indemnity and Contribution Agreement,
the Intercreditor Agreement, and any and all other agreements, documents,
certificates and instruments from time to time executed and delivered by or on
behalf of any Credit Party related thereto.

 

“Transfer” shall mean, with respect to any item, the sale, exchange, conveyance,
lease, transfer or other disposition of such item.

 

“Voting Stock” shall mean, with respect to any Person, any shares of stock (or
similar equity interests) of such Person whose holders are entitled under
ordinary circumstances to vote for the election of directors (or similar body
that has management authority of such Person) of such Person (irrespective of
whether at the time stock (or similar equity interests) of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).

 

“Wholly-Owned Subsidiary” means, at any time, any Subsidiary one hundred percent
(100%) of all of the equity interests (except directors’ qualifying shares) and
voting interests of which are owned by any one or more of the Company and the
Company’s other Wholly-Owned Subsidiaries at such time.

 

1.4.2 The following defined terms as set forth in Schedule B of each of the Note
Purchase Agreement are amended in their entirety as follows:

 

“Material Adverse Effect” shall mean a material adverse change in, or a material
adverse effect upon, any of (i) the business, assets, operations, affairs or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole or (ii) the ability of any Credit Party to perform its respective
obligations under the Transaction Documents to which such Person is a party, or
(iii) the validity or enforceability of this Agreement, any Note, the Subsidiary
Guaranty, the Indemnity and Contribution Agreement, any Collateral Document or
any other Transaction Document.

 

1.6. Addition of Schedule C. Each of the Note Purchase Agreements is amended by
the addition of the attached new Schedule C (Form of Subsidiary Guaranty).

 

1.7. Addition of Schedule D. Each of the Notes Purchase Agreements is amended by
the addition of the attached new Schedule D (Form of Indemnity and Contribution
Agreement).

 

19

--------------------------------------------------------------------------------

2. REAFFIRMATION; REPRESENTATIONS AND WARRANTIES

 

2.1. Reaffirmation of Note Purchase Agreements. The Company reaffirms its
agreement to comply with each of the covenants, agreements and other provisions
of the Note Purchase Agreements and the Notes, including the additions and
amendments of such provisions effected by this Amendment.

 

2.2. Bank Credit Agreement and Prudential Note Agreement. The Company represents
and warrants that the representations and warranties contained in each of the
Bank Credit Agreement and the Prudential Note Agreement were true and correct
when made and are true and correct as of the date hereof, and each of the
Holders may rely on such representations and warranties in the same manner and
with the same effect as though each such Holder were itself a party to the Bank
Credit Agreement and the Prudential Note Agreement.

 

2.3. No Default or Event of Default. Both before and after giving effect to the
transactions contemplated hereby, there will exist no Default or Event of
Default.

 

2.4. Authorization. The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate action and
do not require any registration with, consent or approval of, notice to or
action by, any Person (including any Governmental Authority) in order to be
effective and enforceable. Each Note Purchase Agreement and this Amendment each
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

 

3. EFFECTIVE DATE

 

This Amendment shall become effective as of the date set forth above upon the
satisfaction of the following conditions:

 

3.1. Consent of Holders to Amendment. Execution by the Holders of a 100% of the
aggregate principal amount of the Notes outstanding and receipt by the Holders
of a counterpart of this Amendment duly executed by the Company.

 

3.2. Opinion of Company Counsel. The Holders shall have received an opinion of
counsel for the Company, in form and substance satisfactory to the Holders and
their special counsel, to the effect set forth in Section 2.4.

 

3.3. Intercreditor Agreement. The Intercreditor Agreement shall have been
executed and delivered by the Prudential Noteholders, the Holders, the Banks and
the Collateral Agent and acknowledged by the Company and each Subsidiary
Guarantor.

 

3.4. Bank Credit Agreement. The Holders shall have received a copy of the Bank
Credit Agreement duly executed by the Company and Wells Fargo.

 

20

--------------------------------------------------------------------------------

3.5. Amended and Restated Security Agreement. The Holders shall have received a
copy of the Amended and Restated Security Agreement duly executed by the
Collateral Agent and the Company.

 

3.6. Amendment Fee. Each of the Holders shall have received its Amendment Fee.

 

3.7. Fees of Special Counsel. The Company shall have paid all fees and expenses
of special counsel to the Holders.

 

4. MISCELLANEOUS

 

4.1. Ratification. Except as amended hereby, each Note Purchase Agreement,
including the representations and warranties contained therein, shall remain in
full force and effect and is ratified, approved and confirmed in all respects as
of the date hereof.

 

4.2. Reference to and Effect on the Note Purchase Agreements. Upon the final
effectiveness of this Amendment, each reference in each Note Purchase Agreement
and in other documents describing or referencing such Note Purchase Agreement to
the “Agreement,” “Note Purchase Agreement,” “hereunder,” “hereof,” “herein,” or
words of like import referring to such Note Purchase Agreement, shall mean and
be a reference to such Note Purchase Agreement, as amended hereby.

 

4.3. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.

 

4.4. Governing Law. This Amendment shall be governed by and construed in
accordance with Illinois law.

 

4.5. Counterparts. This Amendment may be executed in any number of counterparts,
each executed counterpart constituting an original, but altogether only one
instrument.

 

[SIGNATURE PAGES FOLLOW]

 

21

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Company and the Holders have caused this Amendment to be
executed and delivered by their respective officer or officers thereunto duly
authorized.

 

NORTHWEST PIPE COMPANY

By:

 

/s/ Brian W. Dunham    

--------------------------------------------------------------------------------

Name:

 

Brian W. Dunham

--------------------------------------------------------------------------------

Title:

 

President and CEO

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

SCHEDULE I

 

1997 Holders

--------------------------------------------------------------------------------

  

Principal
Amount of

each Note

--------------------------------------------------------------------------------

Massachusetts Mutual Life Insurance Company

   $ 8,000,000.00

Massachusetts Mutual Life Insurance Company

   $ 2,285,714.29

Nationwide Life Insurance Company

   $ 5,714,285.71

CM Life Insurance Company

   $ 1,142,857.14

London Life Insurance Company

   $ 2,857,145.00

1998 Series A Holders

--------------------------------------------------------------------------------

  

Principal
Amount of

each Note

--------------------------------------------------------------------------------

Nationwide Life Insurance Company

   $ 2,857,145.00

1998 Series B Holders

--------------------------------------------------------------------------------

   Principal
Amount

--------------------------------------------------------------------------------

Allstate Life Insurance Company

   $ 3,571,428.66

Allstate Life Insurance Company

   $ 3,571,428.66

Allstate Life Insurance Company

   $ 3,571,428.66

United of Omaha Life Insurance Company

   $ 5,714,286.00

Companion Life Insurance Company

   $ 1,428,571.00

Massachusetts Mutual Life Insurance Company

   $ 2,142,857.20

Massachusetts Mutual Life Insurance Company

   $ 714,285.74

Bay State Health Systems Inc.

   $ 357,142.87

CM Life Insurance Company

   $ 357,142.87