Exhibit 10.22

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS AMENDED AND RESTATED CREDIT AGREEMENT (“Restated Credit Agreement”) is made
and entered into effective as of February     , 2004 (“Effective Date”), by and
between NORTHWEST PIPE COMPANY, an Oregon Corporation (“Borrower”), and WELLS
FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

A. Borrower is currently indebted to Bank pursuant to the terms and conditions
of that certain Credit Agreement between Borrower and Bank dated as of May 30,
2001, as amended by:

 

  • First Amendment to Credit Agreement dated April 5, 2002 (“First Amendment”);

 

  • Second Amendment to Credit Agreement dated June 30, 2002 (“Second
Amendment”);

 

  • Third Amendment to Credit Agreement dated September 30, 2002 (“Third
Amendment”);

 

  • Fourth Amendment to Credit Agreement dated May 30, 2003 (“Fourth
Amendment”);

 

  • Fifth Amendment to Credit Agreement dated June 30, 2003 (“Fifth Amendment”);

 

  • Sixth Amendment to Credit Agreement dated July 31, 2003 (“Sixth Amendment”);

 

  • Seventh Amendment to Credit Agreement dated September 15, 2003 (“Seventh
Amendment”); and

 

  • Eighth Amendment to Credit Agreement dated November 19, 2003 (“Eighth
Amendment”).

 

B. Borrower and Bank intend to amend the Credit Agreement and restate it in its
entirety so that this Restated Credit Agreement supersedes and replaces the
original Credit Agreement and the First through Eighth Amendments in their
entirety pursuant to the commitment of Bank to Borrower, which Borrower
accepted, dated November 19, 2003 (“Bank Commitment”). All terms used with an
initial capital letter herein shall have the meanings set forth in this Restated
Credit Agreement.

 

C. Section 3(a) of the Fourth Amendment contemplated Borrower obtaining Take Out
Financing (as defined in the Fourth Amendment) to (1) repay the Term Loan (as
defined in the Fourth Amendment) and (2) reduce the outstanding principal
balance of the Line of Credit (as defined in the original Credit Agreement).

 

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D. Borrower, Prudential Investment Management, Inc. (“PIM”) and The Prudential
Insurance Company of America (“Prudential”) are entering into that Note Purchase
and Private Shelf Agreement dated as of the date hereof (as the same from time
to time may be amended, supplemented or otherwise modified (the “Prudential Note
Agreement”) pursuant to which, subject to the terms and conditions set forth
therein, (1) Borrower has agreed to issue and sell to Prudential, and Prudential
has agreed to buy from Borrower, its 8.75% Series A Senior Secured Notes due
February     , 2014, in the total aggregate principal amount of $15,000,000 (the
“Prudential Series A Notes”) and (2) Prudential and Prudential Affiliates (as
defined in the Intercreditor Agreement) are willing to consider, in their sole
discretion and within limits which may be authorized for purchase by them from
time to time, the purchase of Borrower’s additional senior secured promissory
notes in the total aggregate principal amount not to exceed $25,000,000 (the
“Prudential Shelf Notes”; the Prudential Series A Notes and the Prudential Shelf
Notes are referred to collectively as the “Prudential Notes”). The holders of
the Prudential Notes are sometimes hereinafter collectively referred to as the
“Prudential Note Holders.”

 

E. A total of $15,000,000 of the proceeds of the Prudential Series A Notes shall
be paid to Bank to satisfy the $8,500,000 Term Loan and reduce the outstanding
principal balance of the Line of Credit by $6,500,000. In consideration of the
same, Bank is prepared to extend the maturity date of the Line of Credit and
make other modifications to the original Credit Agreement as hereinafter set
forth.

 

F. Borrower entered into a (1) Note Purchase Agreement dated November 1, 1997,
between Borrower and Massachusetts Mutual Life Insurance Company, CM Life
Insurance Company, Nationwide Life Insurance Company and London Life Insurance
Company, as amended (and as the same may be further amended, supplemented or
otherwise modified from time to time, the “1997 Note Purchase Agreement”),
pursuant to which Borrower has issued its 6.87% Senior Notes due November 15,
2007, in the aggregate original principal amount of $35,000,000 (the “1997
Notes”) and (2) Note Purchase Agreement dated April 1, 1998, between Borrower
and Allstate Life Insurance Company, United of Omaha Life Insurance Company,
Companion Life Insurance Company, Nationwide Life Insurance Company,
Massachusetts Mutual Life Insurance Company, CM Life Insurance Company and MML
Bay State Life Insurance Company, as amended (and as the same may be further
amended, supplemented or otherwise modified from time to time, the “1998 Note
Purchase Agreement”), pursuant to which Borrower has issued its 6.63% Series A
Senior Notes due April 1, 2005, in the aggregate original principal amount of
$10,000,000 (the “1998 Series A Notes”) and its 6.91% Series B Senior Notes due
April 1, 2008, in the aggregate original principal amount of $30,000,000 (the
“1998 Series B Notes” and, together with the 1998 Series A Notes, the “1998
Notes”). The 1997 Note Purchase Agreement and the 1998 Note Purchase Agreement,
are sometimes hereinafter collectively referred to as the “1997-98 Note Purchase
Agreements” and the 1997 Notes and the 1998 Notes are sometimes hereinafter
collectively referred to as the “1997-1998 Notes”. Borrower advised Bank that
the holders of the 1997 Notes and the 1998 Notes (collectively, the “1997-98
Note Holders”) agreed to modify certain covenants in the 1997-98 Note Purchase
Agreements relating to the pledging of collateral in consideration for the
Prudential Notes, the receipt of collateral and in consideration for the
additional commitments to be made by Bank as set forth herein.

 

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G. Bank, PIM, Prudential and the 1997-98 Note Holders will, as a condition to
their respective commitments to Borrower (including those commitments of Bank
set forth herein), negotiate and enter into an intercreditor and collateral
agency agreement (“Intercreditor Agreement”) in form and substance acceptable to
Bank, PIM, Prudential and the 1997-98 Note Holders in their sole discretion.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

 

CREDIT TERMS

 

SECTION 1.1. LINE OF CREDIT.

 

(a) Line of Credit. Subject to the terms and conditions of this Restated Credit
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including December 31, 2006, not to exceed at any time the aggregate
principal amount of Thirty Five Million Dollars ($35,000,000) (“Line of
Credit”), the proceeds of which shall be used for working capital and general
corporate purposes. Borrower’s obligation to repay advances under the Line of
Credit shall be evidenced by a restated promissory note, substantially in the
form of Exhibit “A” attached hereto (“Restated Line of Credit Note”), all terms
of which are incorporated herein by this reference. The Restated Line of Credit
Note now matures on January 2, 2007 (“Maturity Date”), and bears interest as
follows: Bank’s Prime Rate, fully floating, or LIBOR (as detailed in the
Restated Line of Credit Note), interest payable monthly, with applicable margin
determined according to the following schedule:

 

Ratio of Consolidated Total Debt/

Consolidated EBITDA (as hereinafter

defined)

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Prime

Margin

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Libor

Margin

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    Unused
Fee

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> 3.50:1 and greater

   1.00 %   3.50 %   50 bp

> 3.00:1 and <= 3.50:1

   0.75 %   3.25 %   37.5 bp

> 2.50:1 and <= 3.00:1

   0.50 %   3.00 %   25 bp

> 2.00:1 and <= 2.50:1

   0.25 %   2.75 %   25 bp

> 1.50:1 and <= 2.00:1

   0.00 %   2.50 %   25 bp

<= 1.50:1

   -0.25 %   2.25 %   25 bp

 

The “Prime Rate” is a base rate that Bank from time to time establishes and that
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto; this Prime Rate is not necessarily the
lowest rate that Bank changes to its most creditworthy customers. Each change in
the rate of interest shall become effective on the date each Prime Rate change
is announced within Bank. Interest shall be computed on the basis of a 360 day
year, actual days elapsed, and shall be payable at the times and place set forth
in the Restated Line of Credit Note or other instrument or document executed by
Borrower to evidence any extension of credit by Bank.

 

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(b) Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank
agrees from time to time during the term thereof to issue or cause an affiliate
to issue standby letters of credit for the account of Borrower to finance
Borrower’s self insurance for worker’s compensation and for letter of credit
deposits for other insurance (each, a “Letter of Credit” and collectively,
“Letters of Credit”); provided, however, that the aggregate undrawn amount of
all outstanding Letters of Credit shall not at any time exceed Nine Million
Dollars ($9,000,000). No Letter of Credit shall have an expiration date
subsequent to the Maturity Date. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. Each Letter of Credit shall be subject to the additional
terms and conditions of the Letter of Credit agreements, applications and any
related documents required by Bank in connection with the issuance thereof. Each
draft paid under a Letter of Credit shall be deemed an advance under the Line of
Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Restated Credit Agreement applicable to such advances;
provided however, that if advances under the Line of Credit are not available,
for any reason, at the time any draft is paid, then Borrower shall immediately
pay to Bank the full amount of such draft, together with interest thereon from
the date such draft is paid to the date such amount is fully repaid by Borrower,
at the Prime Rate-based rate of interest applicable to advances under the Line
of Credit. In such event Borrower agrees that Bank, in its sole discretion, may
debit any account maintained by Borrower with Bank for the amount of any such
draft. The letter of credit issued by Bank in connection with the Bonds (as
defined below) is not subject to this Restated Credit Agreement and is not
included in the calculation of the $9,000,00 subfeature limit described above.

 

(c) Borrowing and Repayment. Borrower may from time to time during the term of
the Line of Credit, borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein, in the Restated Line of Credit Note or in the
Intercreditor Agreement; provided, however, that the total outstanding
borrowings under the Line of Credit shall not at any time exceed the maximum
principal amount available thereunder, as set forth above.

 

(d) Security Interest. As security for all indebtedness of Borrower to Bank
under the Line of Credit, Borrower shall grant to Bank, as collateral agent
(“Collateral Agent”) under the Intercreditor Agreement, security interests,
according to the Amended and Restated Security Agreement identified therein
(“Security Agreement”), as follows:

 

(i) First priority in all of Borrower’s assets, including a first lien on all
existing and subsequently acquired accounts receivable, inventory, equipment,
and intangibles, plus to the extent all consents that are required are obtained
from the holder(s) of the first lien and any other third parties that must
consent thereto, a second lien (as long as the existing first lien remains in
place) on the collateral (the “IDB Collateral”) for an existing Letter of Credit
to support a master letter of credit which secures those certain industrial
revenue bonds described as California Statewide Communities Development
Authority Weekly Adjustable/Fixed Rate Industrial Development Bonds Series 1990
(Northwest Pipe & Casing Company Project) (the “Bonds”). Subject to Section
1.1(d)(ii), the security interest shall not include (A) mortgage liens upon
Borrower’s real property, fixtures or improvements or (B) any assets listed in
Schedule 1.1(d)(i).

 

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(ii) Bank may require, at any time after the Effective Date, that Borrower grant
to Bank, as Collateral Agent, first liens on all real property, fixtures and/or
improvements owned by Borrower (other than any real property that is part of the
IDB Collateral which may be a second lien as long as the existing first lien
remains in place), in accordance with documents acceptable to Bank and all at
Borrower’s sole cost and expense. Prior to granting such liens, Bank may require
Borrower to provide, at Borrower’s sole cost and expense, such reports and
studies as Bank deems prudent in relationship to the land, including, but not
limited to, appraisals, environmental assessments, title searches, surveys,
engineering reports and other studies. Borrower shall also supply appropriate
extended coverage ALTA Lenders’ Policies of Title Insurance (based on the fair
market value of such properties and subject to such exceptions to title as Bank
may reasonable approve), along with such title endorsements as Bank may deem
prudent and along with such tax service contracts as Bank shall require, to
remain in effect as long as such real property secures any obligations of
Borrower to Bank as required hereby. Legal opinions of Borrower’s counsel shall
also be supplied to Bank in a form similar to those required under Section
3.1(b)(ix).

 

(iii) Borrower shall reimburse Bank immediately upon demand for all costs and
expenses incurred by Bank in connection with any of the foregoing security,
including, without limitation, filing and recording fees and costs of appraisals
and audits.

 

(e) Intercreditor Agreement. Pursuant to the Prudential Note Agreement and the
1997-98 Note Purchase Agreements, the security interests referenced above shall
also secure the obligations of Borrower under the Prudential Note Agreement, the
Prudential Notes, and the obligations of Borrower under the 1997-98 Note
Purchase Agreements and the 1997-98 Notes. The Intercreditor Agreement appoints
Bank as Collateral Agent for itself, the Prudential Note Holders and the 1997-98
Note Holders and sets forth provisions acceptable to Bank, PIM, Prudential and
the 1997-98 Note Holders regarding (i) subsequent advances and prepayments by
each creditor, (ii) voting percentages and supermajority voting percentages for
taking certain actions following an event of default, (iii) formulas for sharing
proceeds from an enforcement action, (iv) formulas for sharing foreclosure
expenses including a reasonable fee to Bank for serving as Collateral Agent, (v)
assigning to each creditor any risks allocated to bankruptcy preferences that
result from each creditor’s circumstances and (vi) such other matters as each of
the creditors believes important to protect its interests.

 

(f) Limitation on Borrowings. Outstanding borrowings under the Line of Credit
(including outstanding Letters of Credit), to a maximum of the principal amount
set forth above, shall not exceed an aggregate of (i) eighty percent (80%) of
Borrower’s eligible accounts receivable, (ii) fifty percent (50%) of the value
of Borrower’s eligible inventory and (iii) thirty percent (30%) of
Borrower-owned net property, plant and equipment at book value determined in
accordance with generally accepted accounting principles, consistently applied
(“GAAP”) (collectively, “PPE”) in which Bank has a perfected security interest
of first priority less (A) PPE not located in the United States and (B) all
rolling stock, furniture and fixtures. All of the

 

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foregoing shall be determined by Bank upon receipt and review of all collateral
reports required hereunder and such other documents and collateral information
as Bank may from time to time require. Borrower acknowledges that said borrowing
base was established by Bank with the understanding that, among other items, the
aggregate of all returns, rebates, discounts, credits and allowances for the
immediately preceding three (3) months at all times shall be less than five
percent (5%) of Borrower’s gross sales for said period. If such dilution of
Borrower’s accounts for the immediately preceding three (3) months at any time
exceeds five percent (5%) of Borrower’s gross sales for said period or if there
at any time exists any other matters, events, conditions or contingencies which
Bank reasonably believes may affect payment of any portion of Borrower’s
accounts, Bank, in its sole discretion, may reduce the foregoing advance rate
against eligible accounts receivable to a percentage appropriate to reflect such
additional dilution and/or establish additional reserves against Borrower’s
eligible accounts receivable.

 

As used herein, “eligible accounts receivable” shall consist solely of trade
accounts (exclusive of amounts to be collected by Borrower and paid to third
parties, including, but not limited to, amounts to pay sales, use and other
similar taxes, costs of shipping and handling, governmental duties and fees and
similar items) created in the ordinary course of Borrower’s business, upon which
Borrower’s right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, other than the obligation to provide
future deliveries under phased purchase contracts, and in which Bank has a
perfected security interest of first priority, and shall not include, unless
agreed to by Bank in writing and in advance:

 

(i) any account which is more than sixty (60) days past due, except with respect
to any account for which Borrower has provided extended payment terms not to
exceed one hundred eighty (180) days and any such extended payment account is
more than thirty (30) days past due;

 

(ii) 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;

 

(iii) any account which represents an obligation of the United States government
or any political subdivision thereof (except accounts which represent
obligations of the United States government and 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 Bank’s satisfaction);

 

(iv) 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 Bank, as
long as, in Bank’s determination, such Canadian or other jurisdictions recognize
Bank’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 Bank;

 

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(v) 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 Borrower;

 

(vi) that portion of any account, which represents retention rights on the part
of the account debtor;

 

(vii) any account which represents an obligation of any account debtor when
twenty percent (20%) or more of Borrower’s accounts from such account debtor are
not eligible pursuant to clause (i) above and for the purposes of this test, 120
days shall be substituted for 60 in clause (i);

 

(viii) that portion of any account from an account debtor which represents the
amount by which Borrower’s total accounts from said account debtor exceeds
twenty-five percent (25%) of Borrower’s total accounts; and

 

(ix) any account deemed ineligible by Bank when Bank, in its sole discretion,
deems the creditworthiness or financial condition of the account debtor to be
unsatisfactory.

 

As used herein, “eligible inventory” shall consist solely of inventory acquired
or manufactured in the ordinary course of Borrower’s business and in which Bank
has a perfected security interest of first priority and shall be inclusive of
costs and estimated earnings in excess of billings 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.

 

SECTION 1.2. INTEREST/FEES.

 

(a) Interest. The outstanding principal balance of the Line of Credit shall bear
interest at the rate(s) of interest set forth in the Restated Line of Credit
Note.

 

(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Restated Line of Credit Note.

 

(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to the amount
set forth in the fourth column in the table in Section 1.1(a) above (per annum
[computed on the basis of a 360-day year, actual days elapsed]) on the average
daily unused amount of the Line of Credit, which fee shall be calculated on a
quarterly basis by Bank and shall be due and payable by Borrower in arrears
within five (5) days after each billing is sent by Bank.

 

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(d) Letter of Credit Fees. Borrower shall pay to Bank fees (i) upon the issuance
of each Letter of Credit equal to one and three quarters percent (1.75%) per
annum (computed on the basis of a 360-day year, actual days elapsed) of the face
amount thereof and (ii) upon the payment or negotiation of each draft under any
Letter of Credit and upon the occurrence of any other activity with respect to
any Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any Letter of Credit) determined in accordance with Bank’s
standard fees and charges then in effect for such activity.

 

(e) Arrangement Fee. A nonrefundable arrangement fee for advice and assistance
in arranging for the Prudential Note Agreement in an amount equal to $402,500,
one-half of which was earned upon acceptance by Borrower of the commitment dated
November 18, 2003, from PIM, which Borrower accepted (“Pru-Commitment”), and is
now due and payable and the other one-half which is due on the Effective Date.

 

(f) Collateral Agent Fee. Borrower shall pay to Bank a Collateral Agent fee in
an amount equal to (i) $2,500 per calendar month plus (ii) Bank’s actual out of
pocket expenses in serving as Collateral Agent under the Intercreditor Agreement
(although the amounts under clause [ii] shall not be due until ten (10) days
after Bank bills Borrower for the same).

 

(g) Other Fees. Borrower shall pay such other fees as currently provided for in
this Restated Credit Agreement or in the Intercreditor Loan Documents

 

SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
interest and fees due hereunder by charging Borrower’s deposit account number
4496887373 with Bank, or any other deposit account maintained by Borrower with
Bank, for the full amount thereof. Should there be insufficient funds in any
such deposit account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower.

 

SECTION 1.4. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed jointly and severally by any Subsidiary (as hereinafter defined)
organized under the laws of any state or territory of the United States of
America, now existing or hereafter formed or acquired, which is required under
GAAP to be included in Borrower’s consolidated financial statements, (referred
to hereinafter as, individually, a “Domestic Subsidiary,” and collectively as
the “Domestic Subsidiaries”) in the principal amount of Thirty Five Million
Dollars ($35,000,000) each, as evidenced by and subject to the terms of
guaranties in form and substance satisfactory to Bank; provided, however, that
Bank will not require that the Subsidiaries listed in Schedule 2.1 execute
guaranties on the Effective Date or join in the Security Agreement, but Bank
reserves the right to require such guaranties and joinder within ten (10) days
after any determination by the Bank that (a) the book value of the assets of
Borrower (exclusive of its Subsidiaries), as at the end of the most recently
ended fiscal quarter, does not constitute at least ninety percent (90%) of the
book value of the assets of Borrower and its Subsidiaries on a consolidated
basis, as at the end of the most recently ended fiscal quarter, or (b) the
Consolidated

 

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EBITDA (determined solely with respect to Borrower [exclusive of its
Subsidiaries]) for the most recently ended four consecutive fiscal quarters does
not constitute at least ninety percent (90%) of the Consolidated EBITDA for the
most recently ended four consecutive fiscal quarters. If guaranties are required
as above provided, then Borrower shall cause such Subsidiaries, as Bank may
select, to execute guaranties and joinder agreements, along with appropriate
authorizing resolutions, to the extent necessary so that (i) the book value of
the assets of Borrower (inclusive of those Subsidiaries that execute garnaties
and exclusive of those Subsidiaries that do not) constitute at least 90% of the
book value of the assets of Borrower and all of its Subsidiaries on a
consolidated basis and (ii) the Consolidated EBITDA (determined solely with
respect to Borrower [inclusive of those Subsidiaries that execute guaranties and
exclusive of those Subsidiaries that do not]), constitutes at least 90% of the
Consolidated EBITDA.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES

 

Except as set forth in Schedule 2 attached to this Restated Credit Agreement,
Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Restated
Credit Agreement and shall continue in full force and effect until the full and
final payment, and satisfaction and discharge, of all obligations of Borrower to
Bank subject to this Restated Credit Agreement.

 

SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and validly
existing under the laws of the state of Oregon, and is qualified or licensed to
do business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on the operations, business or condition (including financial
condition) of Borrower and Subsidiaries, taken as a whole, with “Subsidiaries”
(as defined in Section 4.9(b). Except as set forth in Schedule 2.1, as of the
date hereof, Borrower has no Subsidiaries that would be required under GAAP to
be consolidated with Borrower.

 

SECTION 2.2. AUTHORIZATION AND VALIDITY. This Restated Credit Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
“Loan Documents”) and the Intercreditor Loan Documents (as hereinafter defined)
to which Borrower is a party have been duly authorized, and upon their execution
and delivery in accordance with the provisions hereof, will constitute legal,
valid and binding agreements and obligations of Borrower or the Subsidiary which
executes the same, enforceable in accordance with their respective terms against
Borrower and the Subsidiary.

 

SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower
of each of the Loan Documents and Intercreditor Loan Documents and by Domestic
Subsidiaries of the guaranties do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
Bylaws of Borrower or any Domestic Subsidiary, or result in any breach of or
default under any contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower or any Domestic Subsidiary may be
bound.

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SECTION 2.4. LITIGATION. There are no pending or, to the best of Borrower’s
knowledge, threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material effect on Borrower or its Subsidiaries, other than
those disclosed in Schedule 2.4 attached to this Restated Credit Agreement.

 

SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated December 31, 2002, and the unaudited nine-month interim financial
statements of Borrower dated September 30, 2003 (“Interim Statements”), true
copies of which have been delivered by Borrower to Bank prior to the date
hereof, (a) are complete and correct and present fairly the financial condition
of Borrower, (b) discloses all liabilities of Borrower and Subsidiaries that are
required to be reflected or reserved against under GAAP, whether liquidated or
unliquidated, fixed or contingent, and (c) have been prepared in accordance with
GAAP; provided, however, that the Interim Statements are subject to year end
notes and adjustments. Borrower also provided to Bank copies of calendar year
2003—2006 (quarterly through 2004 and annually thereafter) projections dated
August 29, 2003 (collectively, the “Projections”); although Bank understands
that (i) Borrower has not met those Projections as of the Effective Date and
further revisions to them will be made and (ii) a failure to meet the
Projections alone shall neither constitute an Event of Default nor a material
adverse change. Since the date of the Interim Statements, there has been no
material adverse change in the financial condition of Borrower on any
Subsidiary, nor has Borrower or any Subsidiary mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties,
except (A) the security interests in favor of the Prudential Note Holders, the
1997-98 Note Holders and Bank as provided for in the Intercreditor Loan
Documents and (B) as otherwise listed in Schedule 1.1(d).

 

SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its or any Subsidiary’s income tax payable with
respect to any year.

 

SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower or a Domestic Subsidiary is a party or by which
Borrower or a Domestic Subsidiary may be bound that requires the subordination
in right of payment of any of Borrower’s or a Domestic Subsidiary’s obligations
to Bank to any other obligation of Borrower except as set forth in the
Intercreditor Agreement.

 

SECTION 2.8. PERMITS, FRANCHISES. Borrower and each Subsidiary possesses, and
will hereafter possess, all permits, consents, approvals, franchises and
licenses required and rights to all trademarks, trade names, patents, and
fictitious names, if any, necessary to enable it to conduct the business in
which it is now engaged in compliance with applicable law.

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SECTION 2.9. ERISA. To the best of Borrower’s knowledge, Borrower and each
Domestic Subsidiary is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time (“ERISA”); neither Borrower nor any
Domestic Subsidiary has violated any provision of any defined employee pension
benefit plan (as defined in ERISA) maintained or contributed to by Borrower
(each, a “Plan”); no Reportable Event as defined in ERISA has occurred and is
continuing with respect to any Plan initiated by Borrower or a Domestic
Subsidiary; Borrower and each Domestic Subsidiary has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under GAAP.

 

SECTION 2.10. OTHER OBLIGATIONS. Neither Borrower nor any Subsidiary is in
default on any obligation for borrowed money, any purchase money obligation or
any other material lease, commitment, contract, instrument or obligation and
there are no California Board of Equalization filings against Borrower or any
present Subsidiary.

 

SECTION 2.11. ENVIRONMENTAL MATTERS. Borrower and each Subsidiary is in
compliance in all material respects with all applicable federal and state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower’s
operations and/or properties, including without limitation, with respect to
Borrower and Domestic Subsidiaries, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower or any Subsidiary is the subject of any federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment. Neither Borrower nor any Subsidiary has any material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.

 

ARTICLE III

CONDITIONS

 

SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank
to extend any credit to Borrower under this Restated Credit Agreement (as
opposed to under the original Credit Agreement as amended by the First through
Eighth Amendments) is subject to the fulfillment to Bank’s satisfaction of all
of the following conditions:

 

(a) Approval of Bank Counsel. All legal matters incidental to the extension of
credit by Bank under the terms of this Restated Credit Agreement shall be
satisfactory to Bank’s counsel.

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(b) Documentation. Bank shall have received, in form and substance satisfactory
to Bank, each of the following, duly executed by all parties:

 

(i) This Restated Credit Agreement and each promissory note or other instrument
required hereby.

 

(ii) Restated Line of Credit Promissory Note.

 

(iii) Guaranties (to the extent required by Bank).

 

(iv) Certificates of Incumbency.

 

(v) Borrowing and Guaranty Resolutions (with Guaranty Resolutions only being
required if Guaranties of Subsidiaries are required).

 

(vi) Certificate of Existence for Borrower in the state of Oregon and good
standing certificates for Borrower for each state in which Borrower is
authorized to transact business (all such certificates to be issued no earlier
than ten (10) business days prior to the Effective Date) and similar
certificates for each Domestic Subsidiary.

 

(vii) Intercreditor Agreement and each security agreement and other instrument,
document or certification required thereunder (sometimes hereinafter
collectively, the “Intercreditor Loan Documents”).

 

(viii) Receipt of a Certificate of the Chief Executive Officer and Chief
Financial Officer of Borrower, which shall be current as of the Effective Date
and include (A) a schedule of all capital and operating leases (“Lease
Schedule”), including the Master Lease Agreement dated as of May 30, 2001,
between GECC as lessor and Borrower as lessee, to which Borrower is a party and
which schedule shall be attached to the Officer’s Certificate and shall contain
(1) a description of the lease agreement and all amendments and waivers thereto,
(2) the name of the lessor, (3) the total commitment under the lease, (4) the
monthly rental payment required by the lease, (5) the net monthly rental expense
recorded by Borrower for GAAP purposes, (6) an explanation of any difference
between the actual cash rental payment and the amount expensed for GAAP
purposes, (7) a schedule of all equipment leased under each such lease, (8) a
listing of any known defaults under the Master Lease Agreement, and (9) the
lease termination date and (B) a schedule of all indebtedness owed by Borrower
listing the name of lender, principal balance, interest rate, maturity date and
annual payments of debt other than to Bank.

 

(ix) Opinions from Borrower’s outside legal counsel to Bank and its outside
legal counsel on the Effective Date regarding (A) the due organization and valid
existence of Borrower and its Domestic Subsidiaries (if they are parties to any
of the Loan Documents or any of the Intercreditor Loan Documents) and the
authorization of Borrower and its Domestic Subsidiaries (if they are parties to
any of the Loan Documents or the Intercreditor Loan Documents) to execute this
Restated Credit Agreement and all other related Loan Documents and Intercreditor
Loan Documents, (B) the enforceability of such documents, including a perfection
opinion, (C) the absence of known defaults under other agreements binding upon
Borrower and its Domestic Subsidiaries (if they are parties to any of the Loan
Documents or the Intercreditor Loan Documents), both as of the Effective Date
and as a result of entering into the

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

Loan Documents and the Intercreditor Loan Documents, (D) usury, (E) the absence
of litigation or threatened litigation to the knowledge of such counsel and (F)
such other items as Bank may reasonably require in such opinion. The opinion may
contain customary assumption, qualifications and limitations.

 

(x) A collateral examination to be conducted at Borrower’s expense (not to
exceed $10,000).

 

(xi) Such other documents as Bank may require under any other Section of this
Restated Credit Agreement or under the Bank Commitment.

 

(c) Financial Condition. There shall have been no material adverse change in the
operations, business or condition (including financial condition) of Borrower
and Subsidiaries taken as a whole since the date of the Interim Statements.

 

(d) Uniform Commercial Code Search. Bank, PIM, Prudential and the 1997-98 Note
Holders must have reviewed and approved the results of a Uniform Commercial Code
Search conducted in each state in which Borrower transacts business and the
state in which Borrower was organized (if Borrower does not transact business in
that state).

 

(e) GECC Financing Statements. Borrower will provide Bank with evidence of the
filing of appropriate UCC filings executed or authorized by General Electric
Credit Corporation, or its assignee, that are approved by Bank and implement the
amendments outlined in the undated correspondence from Anthony Lange, Risk
Analysis at GE Capital, responding to Borrower’s correspondence of December 13,
2002 (i.e, an amendment to reflect that the lien filings in favor of GECC only
cover collateral at the Houston, Denver and Portland locations of Borrower as of
the date of such filings [and the same collateral as it may be moved from those
locations to other locations after the date of those lien filings]). Borrower
shall also provide evidence to Bank that the Cross Collateral/Cross Default
Agreement was amended in accordance with the third paragraph of that
correspondence.

 

(f) Legal Fees. Borrower will reimburse Bank for all of Bank’s reasonable legal
fees and expenses, including, without limitation, those of its outside counsel,
along with any and all filing fees and other fees and expenses, incurred in
connection with (i) the transaction contemplated under this Restated Credit
Agreement and under the Intercreditor Agreement, (ii) all prior amendments to
the original Credit Agreement (to the extent not previously paid), and (iii) the
Bank Commitment, the Prudential Note Agreement and the 1997-98 Note Purchase
Agreements.

 

(g) Prudential Credit Facility. Borrower shall have closed the Prudential Series
A Notes with Prudential in accordance with the terms of the Pru-Commitment.

 

(h) Term Loan Payoff. The Term Loan shall be been paid in full from the proceeds
of the Prudential Series A Notes.

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(i) 1997-98 Note Holders. The 1997-98 Note Holders must have entered in to the
Intercreditor Loan Documents to which they are parties and waived certain
negative covenants in the 1997-98 Note Purchase Agreements, relating to the
pledging of collateral in consideration for the Prudential Note Agreement, the
receipt of collateral and in consideration for the additional commitments to be
made by Bank as set forth herein, all as evidenced by documentation delivered by
Borrower to, and otherwise acceptable to, Bank, PIM and Prudential.

 

(j) Credit Checks. Bank shall have conducted and shall be satisfied with the
results of an updated credit check on Borrower and all other persons and
entities that directly or indirectly own or control Borrower.

 

(k) Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage on all of Borrower’s property, in form, substance, amounts, covering
risks and issued by companies satisfactory to Bank, and where required by Bank,
with loss payable endorsements in favor of Bank as Collateral Agent, including,
without limitation, policies of fire and extended coverage insurance covering
all real property even though such real property will not initially be part of
the collateral required hereby, with replacement cost endorsements, and such
policies of insurance against specific hazards affecting any such real property
as may be required by governmental regulation or Bank. The current insurance
provided by Borrower is acceptable to Bank (although such insurance shall now
identify Bank as Collateral Agent) but Bank reserves the right to require an
expansion in the form, scope and amount of coverage based on the results of the
collateral examinations and appraisals described in Sections 1.1(d)(ii) and
3.1(b)(x) and, in all events, shall be entitled to coverage no less favorable
than that required by PIM, Prudential and the 1997-98 Note Holders.

 

(l) Bank Commitment. Borrower shall have satisfied and fulfilled all other terms
and conditions set forth in the Bank Commitment.

 

SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank’s satisfaction of each of the following conditions:

 

(a) Compliance. The representations and warranties contained herein and in each
of the other Loan Documents and Intercreditor Loan Documents shall be true on
the Effective Date and on the date of each extension of credit by Bank pursuant
hereto, with the same effect as though such representations and warranties had
been made on and as of each such date, and on each such date, no Event of
Default as defined herein, and no condition, event or act which with the giving
of notice or the passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.

 

(b) Borrowing Base. Borrower, at all times, must have been in full compliance
with the borrowing base standards set forth in Section 1.1(f).

 

(c) Documentation. Bank shall have received all additional documents that may be
required in connection with the restatement of the credit facility and the
entering into of the Intercreditor Agreement with PIM, Prudential and the
1997-98 Note Holders.

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

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower covenants that as long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
or Intercreditor Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, Borrower shall, and shall cause each
Subsidiary to, unless Bank otherwise consents in writing:

 

SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents and Intercreditor Loan
Documents at the times and place and in the manner specified therein.

 

SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with GAAP, and permit any representative of Bank, at any reasonable
time, to inspect, audit and examine such books, and records, to make copies of
the same, and to inspect the real and personal property of Borrower and/or any
Subsidiary.

 

SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form
and detail satisfactory to Bank:

 

(a) As soon as available, and in any event within one hundred and five (105)
days after the end of each fiscal year of Borrower, the Annual Report and 10-K
report of Borrower. Unless already included within the annual report and 10-K
report, Borrower will deliver to Bank, as soon as available, and in any event
within one hundred and five (105) days after the end of each fiscal year of
Borrower, the consolidated balance sheet of Borrower and its Subsidiaries as of
the end of such fiscal year and the related consolidated statements of income
and retained earnings and statement of changes in financial position of Borrower
and its Subsidiaries for such fiscal year, accompanied by the audit report
thereon by independent certified public accountants selected by Borrower and
reasonably acceptable to Bank (which reports shall be prepared in accordance
with GAAP and shall not be qualified by reason of qualified or restricted
examination of any material portion of the records of Borrower or any Subsidiary
and shall contain no disclaimer of opinion or adverse opinion except such as
Bank, in its sole discretion, determines to be immaterial);

 

(b) As soon as available and, in any event, within one hundred and five (105)
days after the end of each fiscal year of Borrower, a copy of the unaudited
division and product line consolidating income statements of Borrower and
Subsidiaries as of the end of such fiscal year;

 

(c) As soon as available and, in any event, within sixty (60) days after the end
of each fiscal quarter of Borrower, except for fiscal year end, the 10-Q report
of Borrower. Unless already included within the 10-Q report, Borrower

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

will deliver to Bank, as soon as available and, in any event, within sixty (60)
days after the end of each such fiscal quarter, the unaudited consolidated
balance sheet of Borrower and its Subsidiaries as of the end of such fiscal
quarter. At the same time, Borrower shall deliver to Bank the division and
product line consolidating income statements of Borrower and Subsidiaries, as of
the end of such fiscal quarter, along with a certification that Borrower is in
compliance with each of the financial covenants set forth in Section 4.9, which
certification shall be accompanied by calculations to support such conclusions;

 

(d) Contemporaneously with each annual and quarterly financial statement of
Borrower required hereby, a certificate of Chief Financial Officer of Borrower
that said financial statements are accurate and that there exists no Event of
Default nor any condition, act or event which with the giving of notice or the
passage of time or both would constitute an Event of Default, together with
calculations demonstrating compliance with financial covenants;

 

(e) From time to time such other information as Bank may reasonably request; and

 

(f) To the extent not covered by items (a) through (e) above, contemporaneously
with delivery to PIM, Prudential and/or the 1997-98 Note Holders, copies of all
financial and other reports delivered to PIM, Prudential and/or the 1997-98 Note
Holders under the terms of their respective credit and/or loan agreements.

 

SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower and each Subsidiary is organized and/or which govern
Borrower’s or such Subsidiary’s continued existence and with the requirements of
all laws, rules, regulations and orders of any governmental authority applicable
to Borrower, Subsidiaries and their business.

 

SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower and
its Subsidiaries, including, but not limited to, fire, extended coverage, public
liability, flood, property damage and workers’ compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank’s request schedules setting forth all
insurance then in effect. Additionally, Borrower shall maintain such additional
insurance as may required under the Intercreditor Loan Documents.

 

WARNING: UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS
REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR
EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT
YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY
NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL
THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPERTY COVERAGE
ELSEWHERE.

 

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

YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE COST OF
THIS INSURANCE MAY BE ADDED TO YOUR CONTRACT OR LOAN BALANCE. IF THE COST IS
ADDED TO YOUR CONTRACT OR LOAN BALANCE, THE INTEREST RATE ON THE UNDERLYING
CONTRACT OR LOAN WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE
MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO PROVIDE
PROOF OF COVERAGE.

 

THE COVERAGE WE PURCHASE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU
CAN OBTAIN ON YOUR OWN AND MAY NOT SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE
OR ANY MANDATORY LIABILITY INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW.
(Each reference to “you” and “your” shall refer to Borrower and each reference
to “us” and “we” shall refer to Bank.)

 

SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower’s
and each Subsidiary’s business in good repair and condition, and from time to
time make necessary repairs, renewals and replacements thereto so that such
properties shall be fully and efficiently preserved and maintained.

 

SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower or any Subsidiary
may in good faith contest or as to which a bona fide dispute may arise and (b)
for which Borrower or such Subsidiary has made provision, to Bank’s
satisfaction, for eventual payment thereof if Borrower is obligated to make such
payment.

 

SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower or any Subsidiary with a
single claim in excess of $250,000 or a series of related claims that aggregate
to $1,000,000 or more.

 

SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower’s consolidated financial
condition as follows in accordance with GAAP (except to the extent modified by
the definitions herein):

 

(a) Consolidated Tangible Net Worth. Borrower will not permit Consolidated
Tangible Net Worth to fall below the sum of (a) $101,000,000 plus (b) 50% of
positive net income for each quarter ended subsequent to 9/30/03 plus (c) 100%
of net proceeds of any equity offerings. “Consolidated Tangible Net Worth” shall
mean consolidated shareholders’ equity, less goodwill and other intangible
assets.

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(b) Consolidated Total Debt to Consolidated EBITDA. (i) Borrower will not, on
the dates specified below, permit (A) the ratio of Consolidated Total Debt
onsuch dateto (B) Consolidated EBITDA for the period of four consecutive fiscal
quarters of Borrower then most recently ended, to be greater than the applicable
amount set forth below:

 

Ratio

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

    

Date

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5.00:1.00      12/31/20031 4.15:1.00      3/31/2004 3.65:1.00      6/30/2004
3.45:1.00      9/30/2004 3.20:1.00      3/31/2005 3.05:1.00      6/30/2005
2.90:1.00      9/30/2005 2.85:1.00      12/31/2005 2.80:1.00      6/30/2006 and
on the last day of each fiscal quarter thereafter through Maturity Date

 

(ii) Borrower 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 Borrower then most recently ended, to be greater
than the amount set forth opposite such period:

 

Ratio

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

    

Period

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

5.25:1.00      from the Effective Date through 3/30/2004 4.40:1.00      from
3/31/2004 through 6/29/2004 3.90:1.00      from 6/30/2004 through 9/29/2004
3.70:1.00      from 9/30/2004 through 3/30/2005 3.45:1.00      from 3/31/2005
through 6/29/2005 3.30:1.00      from 6/30/2005 through 9/29/2005 3.15:1.00     
from 9/30/2005 through 12/30/2005 3.10:1.00      from 12/31/2005 through
6/29/2006 3.05:1.00      from 6/30/2006 through Maturity Date

 

“Consolidated EBITDA” shall mean on a rolling four quarter basis: consolidated
net income, plus to the extent deducted in the calculation thereof, (i)
consolidated interest expense, (ii) depreciation and amortization, (iii) income
taxes and (iv) noncash expenses resulting from a change in accounting principles
relating to stock options. Consolidated net income shall not include
extraordinary gains (and there shall be excluded extraordinary scheduled
expenses

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

1 Borrower agrees to provide certification of compliance in accordance with
subsection 2.5, notwithstanding that this Restated Credit Agreement is executed
after that date.

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

not to exceed $1,500,000 arising from the sale of its Riverside, California
facility and the consolidation of those operations with its Adelanto,
California, facility and incurred within twelve (12) months of the date of the
sale of the Riverside, California, facility ), gains resulting from the sale or
other disposition of capital assets (other than gains on sales related to
sale-leaseback of equipment or sales of assets in the ordinary course of
business), undistributed earnings of non-Subsidiary investments or undistributed
earnings of non U.S.-Subsidiaries, gains arising from changes in accounting
principles, 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 Borrower or any Subsidiary prior to the date such acquisition
occurs and any gains resulting from the retirement or extinguishment of Debt.
“Subsidiary” shall mean any entity consolidated with Borrower in accordance with
GAAP in which Borrower and/or another subsidiary holds at least eighty percent
(80%) of the voting and economic interests. To the extent deducted therefrom,
EBITDA for the quarter ended 12/31/03 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 3/31/04 shall not include up to $200,000 of employee severance
expense in the aggregate.

 

“Consolidated Total Debt” shall mean all Debt of Borrower and Subsidiaries as of
the date of determination exclusive of Debt of Subsidiaries owed to Borrower or
other Subsidiaries. “Debt” shall mean: (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) debt of a third party secured by liens on the assets of Borrower or a
Subsidiary, (iii) capitalized lease obligations, (iv) guaranties, (v)
obligations with respect to swaps, letters of credit if drawn and similar
obligations, (vi) mandatorily redeemable preferred stock or its equivalents, and
(vii) letters of credit in excess of IRB obligations..

 

(c) Consolidated Fixed Charge Coverage Test: Borrower shall not, at any time,
permit the Consolidated Fixed Charge Coverage Ratio of Adjusted EBITDAR
(Consolidated EBITDA as defined above plus rental expense for the most recently
completed quarter preceding the date of determination multiplied by 4) divided
by “A”+”B”, where “A” equals [interest expense plus current maturities of long
term debt plus current maturities of capital leases calculated for the four
fiscal quarters immediately preceding the date of determination], and “B” equals
[operating lease and other rent payments

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

calculated for the most recently completed quarter preceding the date of
determination, multiplied by 4]. Such ratio may not be less than:

 

Ratio

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

    

Date

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

0.75:1.00      12/31/20032 0.85:1.00      3/31/2004 0.95:1.00      6/30/2004
1.00:1.00      9/30/2004 1.20:1.00      3/31/2005 1.25:1.00      9/30/2005
1.35:1.00      3/31/2006 1.35:1.00      6/30/2006 1.50:1.00      9/30/2006 and
at the end of each fiscal quarter through Maturity Date

 

SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Bank
in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower or any Subsidiary; (c) the occurrence and
nature of any Reportable Event or Prohibited Transaction, each as defined in
ERISA, or any funding deficiency with respect to any Plan; or (d) any
termination or cancellation of any insurance policy which Borrower or any
Subsidiary is required to maintain, or any uninsured or partially uninsured loss
through liability or property damage, or through fire, theft or any other cause
affecting Borrower’s property.

 

SECTION 4.11 BORROWING BASE CERTIFICATES. Not later than twenty (20) days after
the end of each calendar month, Borrower shall supply to Bank a borrowing base
certificate (“Borrowing Certificate”) covering the prior calendar month in form
and substance acceptable to Bank (and other documentation as Bank may require),
reflecting, as at the end of the applicable month, eligible collateral,
ineligibles, monthly account receivable and account payable agings that tie to
Borrower’s general ledger, which shall include, but not be limited to, (a), an
inventory collateral report, (b) an aged listing of accounts receivable and
accounts payable, and a reconciliation of accounts, (c) an updated balance sheet
prepared in accordance with GAAP reflecting current PPE and identifying changes
to PPE from the prior month, (e) a certification that Borrower has been, at all
times, in full compliance with the borrowing base standards set forth in Section
1.1(f), and (f) immediately upon each request from Bank, a list of the names and
addresses of all Borrower’s account debtors.

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2 Borrower agrees to provide certification of compliance in accordance with
subsection 2.5, notwithstanding that this Restated Credit Agreement is executed
after that date.

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ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenants that as long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents or Intercreditor Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto, Borrower will
not, and will not cause or permit any Subsidiary to, without Bank’s prior
written consent:

 

SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

 

SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, capital leases, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
(b) any other liabilities of Borrower set forth in the Certificate to be
delivered pursuant to Section 3.1(b)(viii), (c) liabilities to the Prudential
Note Holders and the 1997-98 Note Holders, (d) additional purchase money
indebtedness of Borrower and its Subsidiaries, not to exceed $2,500,000 per
calendar year in the aggregate principal amount for purchase money financing and
$7,500,000 in the aggregate principal amount for all such additional purchase
money indebtedness of Borrower and its Subsidiaries, provided that such
additional purchase money indebtedness of Borrower and its Subsidiaries shall be
secured solely by equipment and/or real estate so purchased, (e) additional
loans to effect purchases of equipment under options to purchase contained in
current operating leases or future operating leases provided that the terms and
conditions of such additional loans are approved in advance by Bank in its
reasonable discretion; and (f) any renewal, refinancing, refunding or
replacement (collectively, “Refinancing”) of the indebtedness or liabilities in
items (b) through (e) provided that the Refinancing does not increase the
principal balance of the refinanced indebtedness or liability or contain
different terms that are materially adverse to Borrower or Borrower’s financial
condition or to Bank’s rights in the collateral under the Security Agreement.

 

SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Borrower and its
Subsidiaries will not, at any time, merge or consolidate with another person or
entity or sell, lease to other than a Subsidiary, transfer or otherwise dispose
of (collectively, “Transfer”) assets (other than sales of inventory in the
ordinary course of business), except that:

 

(a) any Subsidiary may consolidate or merge with Borrower (with Borrower
surviving), another Domestic Subsidiary, or any third party to effect a
permitted acquisition under Section 5.6 provided that the continuing or
surviving person following such consolidation or merger is a Subsidiary,

 

(b) any Subsidiary may Transfer its assets to Borrower or any other Domestic
Subsidiary of Borrower,

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

(c) Borrower may merge or consolidate if (i) it will be the continuing or
surviving corporation and (ii) no default or Event of Default has occurred and
is continuing or would result from such event, and

 

(d) Borrower or any Subsidiary may sell assets (valued at higher of book or fair
market value) of up to ten percent (10%) total assets per fiscal year and twenty
percent (20%) total assets over the life of this financing.

 

Prior to engaging in any of the Transfers that are authorized in this Section
5.3, Borrower shall supply Bank with copies of all relevant Transfer documents
at least five (5) business days prior to the proposed Transfer. Additionally,
after the Transfer, Borrower shall supply to Bank certified copies of all
executed documents of Transfer.

 

SECTION 5.4. GUARANTIES. Except as permitted above, Borrower agrees not to
guarantee or become liable in any way as surety, endorser (other than as
endorser of negotiable instruments for deposit or collection in the ordinary
course of business), accommodation endorser or otherwise for, nor to pledge or
hypothecate any assets of Borrower as security for, any liabilities or
obligations of any other person or entity, except (a) any of the foregoing on
behalf of a Domestic Subsidiary, if Borrower would have otherwise been permitted
hereunder to be directly obligated for such obligation, (b) any of the foregoing
in favor of Bank, the Prudential Note Holders and/or the 1997-98 Note Holders,
as contemplated hereunder, or (c) any of the foregoing in connection with the
obligations permitted under Section 5.2.

 

SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Borrower and its Subsidiaries will
not at any time make or permit to remain outstanding any capital contributions,
loans, advances or investments except the following (“Permitted Investments”):

 

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

 

(b) 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 AA/Aa2 or better by Standard and Poor’s or
Moody’s, and having capital, surplus and undivided profits aggregating at least
$750,000,000;

 

(c) commercial paper rated A1/P1 by Standard and Poor’s or Moody’s and maturing
not more than two hundred and seventy (270) days from the date acquired;

 

(d) loans and advances: (i) from Borrower to its Subsidiaries or (ii) between
Subsidiaries;

 

(e) travel and other business advances to officers and employees of Borrower or
any Subsidiary in the ordinary course of business in aggregate amount of
$500,000;

 

(f) other loans, advances and investments not to exceed $5,000,000 in aggregate;
or

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(g) capital contributions, loans, advances or investments to effect permitted
loans and Refinancings under Section 5.2 and/or permitted acquisitions under
Section 5.6.

 

SECTION 5.6. PERMITTED ACQUISITIONS. Borrower agrees not to acquire any business
(whether by merger, acquisition of all or substantially all of the assets of any
other entity, investment, or otherwise) without Bank’s prior review and consent
if the total of all such acquisitions in any fiscal year exceeds ten percent
(10%) of Consolidated Tangible Net Worth as of the end of the prior fiscal year.
For purposes of the ten percent (10%) limitation above, acquisitions shall be
valued at the fair market value of all consideration given, including without
limitation, cash, notes, assumption of debt and stock. All acquisitions
otherwise permitted hereunder shall be approved by the board of directors of the
entity owning the business to be acquired or otherwise not considered “hostile”
by Bank.

 

SECTION 5.7. PLEDGE OF ASSETS. Borrower and its Subsidiaries will not at any
time incur, create or suffer to exist any lien on any of its properties or
assets, except the following (“Permitted Liens”):

 

(a) liens for taxes, assessments or other governmental levies or charges not yet
due or which are subject to a good faith contest;

 

(b) 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 subject to a good faith contest;

 

(c) liens on property or assets of a Subsidiary to secure obligations of such
Subsidiary to Borrower;

 

(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 that are necessary for the conduct of the operations of Borrower
and its Subsidiaries;

 

(f) liens in connection with capitalized lease obligations (limited to the
property subject to such leases) as scheduled and not to exceed $5,000,000 on
the Effective Date;

 

(g) liens in favor of Bank as Collateral Agent under the Intercreditor Loan
Documents;

 

(h) deposits or pledges under worker’s compensation or other insurance; and

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(i) liens created pursuant to (i) Section 5.2(b), to the extent the liens are
specifically detailed (with copies of lien filings attached) in the Certificate
to be delivered pursuant to Section 3.1(b)(viii); (ii) Section 5.2(d); (iii)
Section 5.2(e) or (iv) 5.2(f).

 

SECTION 5.8 CAPITAL EXPENDITURES. Borrower shall not and will not permit any of
its Subsidiaries to, cause or permit the aggregate amount of capital
expenditures of the Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, (excluding (i) any capital expenditures directly
related to the consolidation of a Borrower facility into another Borrower
facility; provided that in no event, shall such exclusion of capital
expenditures exceed $3,000,000 and (ii) internal personnel and related expenses
of Borrower that relate to specific Borrower projects and that are permitted to
be and are capitalized in accordance with GAAP) to exceed (x) $6,500,000 for the
fiscal year ended December 31, 2004, and (y) $8,500,000 for each fiscal year
thereafter.

 

SECTION 5.9 LEASE EXPENDITURES. Borrower shall not, and shall not cause or
permit any Subsidiary to, without Bank’s prior written consent, incur any new
operating lease expense in any fiscal year in excess of an aggregate of
$1,000,000, except for a lease in the approximate amount of $2,400,000 for a
pipe mill in Houston, Texas.

 

SECTION 5.10 AFFILIATES. Borrower and its Subsidiaries will not at any time
enter into or consummate any transactions with affiliates or shareholders on
terms less favorable to Borrower or such Subsidiary than could be obtained on an
arm’s-length basis.

 

SECTION 5.11 SALE. Borrower and its Subsidiaries will not sell or otherwise
dispose of, or part with control of, any debt or shares of stock of any
Subsidiary, except to Borrower or a wholly-owned Subsidiary.

 

SECTION 5.12 DIVIDENDS, DISTRIBUTIONS. Except as permitted above, Borrower
agrees not to declare or pay any dividend or distribution either in cash, stock
or any other property on Borrower’s stock now or hereafter outstanding; nor to
redeem, retire, repurchase or otherwise acquire any shares of any class of
Borrower’s stock now or hereafter outstanding without the prior approval of
Bank, which Bank may withhold in its sole discretion.

 

SECTION 5.13. AMENDMENTS.

 

(a) Borrower shall not, without the prior written consent of Bank, amend or
otherwise modify the payment terms or other terms of any operating or capital
lease, including, without limitation, the Master Lease Agreement and the Cross
Collateral and Cross Default Agreement from Borrower in favor of General
Electric Credit Corporation (“GECC”); (collectively, the “Leases”), without the
prior written consent of Bank. For purposes of this Section 5.13, adding or
replacing equipment on an existing Lease shall be considered an amendment or
modification prohibited by this Section 5.13. Borrower shall not exercise any
renewal or purchase option under any Lease without Bank’s written consent, which
shall not be unreasonably withheld. Borrower agrees that it will not perform any
repairs or make any improvements on any leased equipment that are not required
by the applicable Lease without Bank’s written consent. To the extent Borrower
has not previously done so, Borrower shall send a proper notice to each lessor

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

of each Lease indicating a change of address for notices to be delivered to
Borrower under such Lease such that Bank receives a copy of such notices at
Wells Fargo Bank, National Association, Portland RCBO, 1300 SW Fifth Avenue,
P.O. Box 3131, MAC P6101-133, Portland, OR 97208-3131, Attn: James R. Bednark
(although if the Lessor rejects the request or fails to comply, Borrower shall
not be in default solely by virtue thereof).

 

(b) Any provision hereof or of any of the other Loan Documents may be amended,
modified, waived or released and any Event of Default and its consequences may
be rescinded and annulled upon the written consent of the Bank; any provision of
1997-98 Note Purchase Agreements may be amended, modified, waived or released
and any event of default thereunder and its consequences may be rescinded and
annulled upon the written consent of that percentage of the 1997-98 Note Holders
that are required to provide such consent; and any provision of the Prudential
Note Purchase Agreement may be amended, modified, waived or released and any
event of default and its consequences may be rescinded and annulled upon the
written consent of that percentage of the Prudential Note Holders that are
required to provide such consent; provided, however, that except as permitted in
the Intercreditor Agreement and the Intercreditor Loan Documents, without the
consent of Bank, the 1997-98 Note Holders and the Prudential Note Holders (each
a “Lender” and collectively, the “Lenders”) no such amendment, modification or
waiver shall, without the Bank’s prior written consent, (i) increase the
principal amount by more than ten percent (10%) of any Lender’s lending
commitment as set forth in the Bank Commitment, the Prudential Commitment and in
the 1997-98 Note Purchase Agreements, (ii) increase the interest rates or fees
applicable to or shorten or extend the maturity of, any obligation owed to such
Lender, (iii) release any substantial (in value) part of the collateral security
afforded by the Intercreditor Loan Documents (except in connection with a sale
or other disposition required to be effected by the provisions of the
Intercreditor Loan Documents) or (iv) change the number of Lenders required to
take any action under the Intercreditor Loan Documents.

 

(c) 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 Restated Credit Agreement or
would be more beneficial to Bank than any analogous covenant, undertaking,
restriction or provision contained in this Restated Credit Agreement (any such
covenant, undertaking, restriction or provision, an “Additional Covenant”), then
Borrower shall provide a Most Favored Lender Notice to Bank. Thereupon, unless
waived in writing by Bank within five (5) days of receipt of such notice by
Bank, such Additional Covenant shall be deemed automatically incorporated by
reference into this Restated Credit 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 Bank, Borrower
shall enter into any additional agreement or amendment to this Restated Credit
Agreement reasonably requested by Bank evidencing any of the foregoing. Any
Additional Covenant incorporated into this Agreement pursuant to this Section
5.13(c) 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. For the purpose of this Section, (i)
“Principal Lending Agreement” means (A) the Prudential Note Agreement and/or the
1997-98 Note Purchase Agreements and any renewal, refinancing, refunding or
replacement

 

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

thereof, and (B) any other financing agreement with any lender that becomes a
party to the Intercreditor Agreement; and (ii) “Most Favored Lender Notice”
means a written notice from Borrower to Bank 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 the terms of
this Section, by an authorized officer of Borrower in reasonable detail,
including reference to this Section, a verbatim statement of such Additional
Covenant (including any defined terms used therein) and related explanatory
calculations, as applicable.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1. The occurrence of any of the following shall constitute an “Event
of Default” under this Restated Credit Agreement:

 

(a) Borrower shall fail to pay any principal when due, or any interest, fees or
other amounts payable under any of the Loan Documents or Intercreditor Loan
Documents within five (5) calendar days from the applicable due date.

 

(b) Any financial statement or certificate furnished to Bank in connection with,
or any representation or warranty made by Borrower or any other party under this
Restated Credit Agreement or any other Loan Document or Intercreditor Loan
Document shall prove to be incorrect, false or misleading when furnished or made
and which could reasonably be anticipated to have a material adverse effect on
the operations, business or condition (including financial condition) of
Borrower and Subsidiaries, taken as a whole.

 

(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above) or in any
Intercreditor Loan Document, and with respect to any such default other than a
breach of Sections 4.9 or 4.11 or of any Section of Article V, such default
shall continue for a period of thirty (30) days after the date Borrower first
knew (or using reasonable due diligence, should have known) of its occurrence.

 

(d) (i) any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents or the Intercreditor Loan Documents) pursuant to
which Borrower or any Subsidiary has incurred any debt to Bank, PIM, Prudential,
the 1997-98 Note Holders or their successors and assigns and if such debt or
liability in the aggregate amount exceeds $1,000,000 and such default continues
beyond any applicable grace period; or

 

(ii) any default in the payment or performance of any obligation, or any defined
event of default, under the terms of any contract or instrument (other than any
of the Loan Documents or the Intercreditor Loan Documents) pursuant to which
Borrower or any Subsidiary has incurred any debt to any person or entity, other
than Bank, PIM, Prudential and/or the 1997-98 Note Holders or their successors
and assigns, and if such debt in the aggregate amount exceeds $1,000,000 and
such default continues beyond any applicable grace

 

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

period and if (A) the holder of such debt has the right to accelerate the same
by reason of such default, or (B) such debt is or has been declared to be due
and payable or required to be prepaid (other than by regularly scheduled
required prepayment) prior to the stated maturity date.

 

(e) Except for a judgment entered approving the settlement of the Poz-Lok class
action litigation, the material terms of which are set forth in the attached
Schedule 6.1(e), the filing of a notice of judgment lien against Borrower or any
Subsidiary; or the recording of any abstract of judgment against Borrower or any
Subsidiary in any county in which Borrower or such Subsidiary has an interest in
real property; or the service of a notice of levy and/or of a writ of attachment
or execution, or other like process, against the assets of Borrower or any
Subsidiary or the entry of a judgment against Borrower or any Subsidiary; and
with respect to any of the foregoing, the amount thereof exceeds $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) and the proceeding is
not dismissed or vacated within thirty (30) days after its occurrence.

 

(f) Borrower or any Subsidiary shall become insolvent, or shall suffer or
consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any or a material portion of its property, or shall
generally fail to pay its debts as they become due, or shall make a general
assignment for the benefit of creditors; Borrower or any Subsidiary shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time (“Bankruptcy Code”), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any Subsidiary
(and, if filed against Borrower or a Subsidiary, the proceeding is not dismissed
within ninety (90) days after such filing), or Borrower or any such Subsidiary
shall file an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Borrower or any such Subsidiary
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower or any such Subsidiary by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors.

 

(g) The dissolution or liquidation of Borrower or any Subsidiary; or Borrower or
any such Subsidiary, or any of their directors, stockholders or members, shall
take action seeking to effect the dissolution or liquidation of Borrower or such
Subsidiary, except as otherwise permitted in this Restated Credit Agreement.

 

(h) Any event of default by Borrower under the Intercreditor Loan Documents.

 

(i) Any failure of the representations and warranties contained in the original
Credit Agreement and/or in the First through Eighth Amendments to have been true
when made in any material respect.

 

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SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without further notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Bank to extend any further credit under any of the
Loan Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under each of the Loan Documents and
the Intercreditor Loan Documents, or accorded by law, including without
limitation, the right to resort to any or all security for any credit subject
hereto and to exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable law. All rights, powers and remedies of Bank may be
exercised at any time by Bank and from time to time after the occurrence of an
Event of Default, are cumulative and not exclusive, and shall be in addition to
any other rights, powers or remedies provided by law or equity. Subject to the
terms of the Intercreditor Agreement, any payments received from Borrower
following an Event of Default shall be applied in the following order of
priority: (i) first to payment of Bank’s costs and expenses (including attorney
fees) incurred in connection with the collection of such payments, (ii) then to
payment of interest on so much of the Line of Credit as is not secured by the
Collateral (as defined in the Intercreditor Loan Documents), (iii) then to
payment of principal on so much of the Line of Credit as is not secured by the
Collateral, (iv) then to payment of interest on so much of the Line of Credit as
is secured by the Collateral, and (v) then to payment of principal on so much of
the Line of Credit as is secured by the Collateral; provided, however, in the
event of liquidation of all or any portion of the Collateral upon an Event of
Default, any payments received by Bank from such liquidation shall be applied
(A) first to payment of Bank’s costs and expenses (including attorney fees)
incurred in connection with the collection of such payments and (B) then to
payment of indebtedness under the Line of Credit.

 

ARTICLE VII

 

MISCELLANEOUS

 

SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents or
Intercreditor Loan Documents shall affect or operate as a waiver of such right,
power or remedy; nor shall any single or partial exercise of any such right,
power or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, permit, consent or approval of any kind by Bank of any breach of or
default under any of the Loan Documents or Intercreditor Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

 

SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Restated Credit

 

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Agreement must be in writing delivered to each party at the following address:

 

BORROWER:

 

NORTHWEST PIPE COMPANY

   

200 S.W. Market Street, Suite 1800

   

Portland, OR 97201

   

Attention: Chief Executive Officer

   

Facsimile No. (503) 240-6615

   

With a copy by regular mail to:

   

Ater Wynne LLP

   

222 SW Columbia, Suite 1800

   

Portland, OR 97201

   

Attention: Greg Struxness, Esq.

   

Facsimile No. (503) 226-0079

BANK:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

   

Portland RCBO

   

1300 S.W. Fifth Avenue T-13

   

Portland OR 97201

   

Facsimile No. (503) 886-3210

   

With a copy by regular mail to:

   

Preston Gates & Ellis LLP

   

222 SW Columbia Street, Suite 1400

   

Portland, Oregon 97201

   

Attention: Randall B. Bateman, Esq.

   

Facsimile No. (503) 553-6206

 

or to such other address within the United States as any party may designate by
written notice to all other parties. Each such notice, request and demand shall
be deemed given or made as follows: (a) if sent by hand delivery, upon delivery;
(b) if sent by mail, upon the earlier of the date of receipt or three (3) days
after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent
by telecopy, upon receipt.

 

SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees (to include outside
counsel fees and all allocated costs of Bank’s in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of the
Bank Commitment, this Restated Credit Agreement, the other Loan Documents and
the Intercreditor Loan Documents, Bank’s continued administration hereof and
thereof, and the preparation of any amendments and waivers hereto and thereto,
(b) the enforcement of Bank’s rights and/or the collection of any amounts which
become due to Bank under any of the Bank Commitment, the Loan Documents or the
Intercreditor Loan Documents, and (c) the prosecution or defense of any action
in any way

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related to any of the Loan Documents or Intercreditor Loan Documents, including
without limitation, any action for declaratory relief, whether incurred at the
trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to any Borrower
or any pother person or entity.

 

SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Restated Credit Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties; provided, however,
that Borrower may not assign or transfer its interest hereunder without Bank’s
prior written consent. Bank reserves the right, subject to Borrower’s prior
written consent, not to be unreasonably withheld, to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Bank’s rights and benefits under each of the Loan Documents and/or Intercreditor
Loan Documents. Notwithstanding the foregoing, Bank may sell participations,
without Borrower’s consent, in all or any portion of the Line of Credit and the
Loan Documents and/or Intercreditor Loan Documents, but such sales shall not
entitle the participant(s) to any direct rights against Borrower under the terms
of this Restated Credit Agreement or any of the other Loan Documents or
Intercreditor Loan Documents. Any outright sale or assignment of Bank’s rights
hereunder must be to a commercial bank organized under the laws of the United
States or any state thereof, having a combined capital and surplus of at least
$100,000,000. In connection with any assignment or participation hereunder, Bank
may disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or it business, any
guarantor hereunder or the business of such guarantor, or any collateral
required hereunder, subject to the terms of a confidentiality agreement
customarily used by Bank in connection therewith.

 

SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Restated Credit Agreement, the
other Loan Documents and the Intercreditor Loan Documents constitute the entire
agreement between Borrower and Bank with respect to each credit subject hereto
and supersede all prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This Restated Credit
Agreement may be amended or modified only in writing signed by each party
hereto.

 

SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Restated Credit Agreement is
made and entered into for the sole protection and benefit of the parties hereto
and their respective permitted successors and assigns, and no other person or
entity shall be a third party beneficiary of, or have any direct or indirect
cause of action or claim in connection with, this Restated Credit Agreement or
any other of the Loan Documents or Intercreditor Loan Documents to which it is
not a party.

 

SECTION 7.7. TIME. Time is of the essence of each and every provision of this
Restated Credit Agreement and each other of the Loan Documents and Intercreditor
Loan Documents.

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SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Restated
Credit Agreement shall be found to be invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any remaining
provisions of this Restated Credit Agreement.

 

SECTION 7.9. COUNTERPARTS. This Restated Credit Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which when taken together shall constitute
one and the same Restated Credit Agreement.

 

SECTION 7.10. GOVERNING LAW. This Restated Credit Agreement shall be governed by
and construed in accordance with the laws of the state of Oregon.

 

SECTION 7.11. WAIVER OF JURY TRIAL. BORROWER AND BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON THE LOAN EVIDENCED BY THIS AGREEMENT OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF
BORROWER OR BANK. THIS WAIVER PROVISION IS A MATERIAL INDUCEMENT FOR BANK’S
MAKING OF THE LOAN SECURED BY THE LOAN DOCUMENTS.

 

SECTION 7.12: RESIGNATION AS COLLATERAL AGENT. At any time that Bank has been
fully and indefeasibly repaid in full and has no further commitments to make
credit extensions to Borrower hereunder, then if requested by Borrower, Bank
agrees that it will resign as Collateral Agent under the Intercreditor Agreement
to the extent (a) not otherwise prohibited thereunder and (b) there are no
unresolved claims among the parties to the Intercreditor Agreement that the Bank
believes can be best resolved by Bank remaining as Collateral Agent until final
resolution. This provision will survive termination of this Restated Credit
Agreement.

 

UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)

 

[SIGNATURE PAGE FOLLOWS]

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[SIGNATURE PAGE OF THE AMENDED AND RESTATED CREDIT AGREEMENT]

 

IN WITNESS WHEREOF, the parties hereto have caused this Restated Credit
Agreement to be executed as of the day and year first written above.

 

NORTHWEST PIPE COMPANY,
an Oregon corporation   WELLS FARGO BANK, NATIONAL
ASSOCIATION

By:

 

/s/ Brian W. Dunham

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

 

By:

 

/s/ James R. Bednark

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

   

Brian W. Dunham

     

James R. Bednark, Senior Vice President

   

President and Chief Executive Officer