Document:

Seventh Amendment to Third Amended and Restated Loan and Security Agreement

 EXHIBIT 10.3 
 Execution Copy 
  
 SEVENTH AMENDMENT TO THIRD AMENDED 
 AND RESTATED LOAN AND SECURITY AGREEMENT 
  
 THIS SEVENTH AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(“Seventh Amendment”) is made as of the 30th day of March, 2004 by and among PW Eagle, Inc., a Minnesota
corporation (“Borrower”), the lenders who are signatories hereto (“Lenders”), and Fleet Capital Corporation, a Rhode Island corporation (“FCC”), as agent for Lenders hereunder (FCC, in such capacity, being
“Agent”). 
  
 WITNESSETH: 
  
 WHEREAS, Borrower, Agent and Lenders entered into a certain Third Amended and Restated Loan
and Security Agreement dated as of September 30, 2002 as amended by a certain First Amendment to Third Amended and Restated Loan and Security Agreement (“First Amendment”) dated as of February 4, 2003 by and among Borrower, Lenders and
Agent, by a certain Second Amendment to Third Amended and Restated Loan and Security Agreement (“Second Amendment”) dated as of May 30, 2003 by and among Borrower, Lenders and Agent, by a certain Third Amendment to Third Amended and
Restated Loan and Security Agreement (“Third Amendment”) dated as of August 7, 2003 by and among Borrower, Lenders and Agent, by a certain Fourth Amendment to Third Amended and Restated Loan and Security Agreement (“Fourth
Amendment”) dated as of September 15, 2003 by and among Borrower, Lenders and Agent, by a certain Fifth Amendment to Third Amended and Restated Loan and Security Agreement (“Fifth Amendment”) dated as of September 30, 2003 among
Borrower, Lenders and Agent and by a certain Sixth Amendment to Third Amended and Restated Loan and Security Agreement (“Sixth Amendment”) dated as of November 6, 2003 (said Third Amended and Restated Loan and Security Agreement, as so
amended, is hereinafter referred to as the “Loan Agreement”); and 
  
 WHEREAS, Borrower desires to amend and modify certain provisions of the Loan Agreement and, subject to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications; 
  
 NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein
contained, and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrower, the parties hereto hereby agree as follows: 
  
 1. Definitions. All capitalized terms used herein without definition shall have the meaning given to them in the Loan Agreement. 

 
 2. Additional Definition. The following definition of
“Excess Cash Flow” is hereby inserted into Appendix A to the Loan Agreement. 
  
 “Excess Cash Flow – with respect to any fiscal year of Borrower, commencing with the fiscal year ending December 31,
2004, 50% of the amount equal to the sum of net income plus depreciation, amortization and other non-cash charges deducted in determining net income and minus the sum of Interest Expense (as defined in Exhibit 8.3) paid in cash, income
taxes paid in cash, regularly scheduled payments of principal on Indebtedness for Money Borrowed, non-cash income included in determining net income and Capital Expenditures which are not financed, all for such fiscal year and all determined for
Borrower and its Subsidiaries on a Consolidated basis in accordance with GAAP.” 
  
 3. Waiver. Upon the “Seventh Amendment Effective Date” (as defined below), Agent and Lenders shall be deemed to have waived any Event of Default resulting from the failure of Borrower to comply
with the provisions of Section 8.3 regarding (w) minimum Interest Coverage Ratio for the fiscal period of twelve months ending December 31, 2003, (x) Fixed Charge Coverage Ratio for the fiscal 

  

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period of twelve months ending December 31, 2003, (y) minimum Net Worth for the fiscal period ending December 31, 2003 and (z) maximum Funded Debt to EBITDA
Ratio for the twelve month period ending December 31, 2003. The waiver contained in this Section 3 of this Seventh Amendment does not apply to any Section of the Loan Agreement other than Section 8.3 (minimum Interest Coverage Ratio, Fixed Charge
Coverage Ratio, Net Worth and maximum Funded Debt to EBITDA Ratio) or to any other fiscal period other than the fiscal period ending December 31, 2003. 
  
 4. Term Loan. The aggregate amount of scheduled quarterly installments of principal due with respect to the Term Loan on each March 31, June
30, September 30 and December 31 within the Term hereof shall be reduced from $650,000 to $400,000, commencing with the quarterly principal installments due March 31, 2004. On the Seventh Amendment Effective Date, Borrower shall execute and deliver
to Agent for the benefit of Lenders, amended and restated Term Notes in the form attached hereto as Exhibits 1.3A-1 and 1.3A-2. 
  
 5. Excess Cash Flow. The following is inserted into the Loan Agreement as subsection 3.3.5: 
  
 “3.3.5 Excess Cash Flow Recapture. Borrower
shall repay the Term Loan in amounts equal to the lesser of (x) Borrower’s Excess Cash Flow with respect to each fiscal year of Borrower during the Term hereof and (y) $1,000,000, commencing with the fiscal year ending December 31, 2004, such
prepayments to be based upon, and made within 5 Business Days following the due date for delivery by Borrower to Agent of the annual financial statements required by subsection 8.1.3(i) hereof and each such prepayment shall be applied to the Term
Loan in the manner specified in the second sentence of subsection 3.3.1 until payment thereof in full.” 
  
 6. Hastings and Baker Sale and Leaseback. Agent, Lenders and Borrower agree that the proceeds from the “Hastings Sale and Leaseback
Transaction” and the “Baker City Sale and Leaseback Transaction” (as defined in the Fifth Amendment) shall be applied to the outstanding principal balance of the Revolving Credit Loans (without a permanent reduction in the Maximum
Revolving Loan Amount). The provisions of Sections 2 and 3 of the Fifth Amendment are hereby amended so that clauses (ii) and (vi) of such Section 2 and Section 3 read as follows: 
  
 “2. Consent to Hastings, Nebraska Real Property Sale and Leaseback. In reliance upon and subject
to the accuracy of the representations set forth in this Fifth Amendment, upon the Fifth Amendment Effective Date, Majority Lenders hereby consent to the sale by Borrower of the real Property, facility, and fixtures located at Hastings, Nebraska and
the leaseback of same by PW Poly (as defined below) (the “Hastings Sale and Leaseback”); provided, that (i) the aggregate net cash proceeds to Borrower received in respect of the Hastings Sale and Leaseback shall be at least
$1,128,000, (ii) Borrower shall pay the entire net cash proceeds to Agent, with such proceeds to be applied for payment of the Revolving Credit Loans as provided in Section 6 of the Seventh Amendment, (iii) the maximum annual gross lease payment
(including, without limitation, obligations to reimburse landlord’s expenses) in respect of the Hastings Sale and Leaseback shall not exceed $183,300, which lease payments shall be the obligation of PW Poly and Borrower shall have no liability
therefor, (iv) the Hastings Sale and Leaseback shall be a bona fide arm’s length transaction, (v) the documentation in respect of the Hastings Sale and Leaseback shall be reasonably satisfactory in all material respects to Agent (it being
agreed that such documentation shall be deemed to be satisfactory if, taken as a whole, such documentation is no less favorable to Agent from a risk allocation perspective than the Sale and Leaseback Documents) and (vi) if the Hastings Sale and
Leaseback is not consummated by May 31, 2004, then this Section 2 shall be null and void ab initio. 
  

 2 

 3. Consent to Baker City, Oregon Real Property Sale and Leaseback. In reliance
upon and subject to the accuracy of the representations set forth in this Fifth Amendment, upon the Fifth Amendment Effective Date, Majority Lenders hereby consent to the sale by Borrower of the real Property, facility, and fixtures located at Baker
City, Oregon and the leaseback of same by PW Poly (as defined below) the “Baker City Sale and Leaseback”); provided, that (i) the aggregate net cash proceeds to Borrower received in respect of the Baker City Sale and
Leaseback shall be at least $584,000, (ii) Borrower shall pay the entire net cash proceeds to Agent, with such proceeds to be applied to the Revolving Credit Loans as provided in Section 6 of the Seventh Amendment, (iii) the maximum annual gross
lease payment (including, without limitation, obligations to reimburse landlord’s expenses) in respect of the Baker City Sale and Leaseback shall not exceed $94,900, which lease payments shall be the obligations of PW Poly and Borrower shall
have no liability therefor, (iv) the Baker City Sale and Leaseback shall be a bona fide arm’s length transaction, (v) the documentation in respect of the Baker City Sale and Leaseback shall be reasonably satisfactory in all material respects to
Agent (it being agreed that such documentation shall be deemed to be satisfactory if, taken as a whole, such documentation is no less favorable to agent from a risk allocation perspective than the Sale and Leaseback Documents) and (vi) if the Baker
City Sale and Leaseback is not consummated by May 31, 2004, then this Section 3 shall be null and void ab initio.” 
  
 7. Amendment Fee. In order to induce Agent and Lenders to enter into this Seventh Amendment, Borrower agrees to pay to Agent, for the
ratable benefit of Lenders, an amendment fee equal to $219,660.81. Said amendment fee shall be deemed fully earned and non-refundable and shall be due and payable on the Seventh Amendment Effective Date. 
  
 8. Conditions Precedent. This Seventh Amendment shall become
effective upon satisfaction of each of the following conditions precedent: 
  
 (A) Borrower, Agent and Lenders shall have executed and delivered to each other this Seventh Amendment; 
  
 (B) Borrower and the lenders under the Subordinated Note Documents shall have entered into an amendment to the Subordinated Note Documents
in form and substance acceptable to Agent; 
  
 (C) Borrower and Lessor shall have entered in an amendment to the Sale and Leaseback Documents in form and substance acceptable to Agent; 
  
 (D) Borrower shall have paid to Agent for the ratable benefit of Lenders the amendment fee referred to in Section 7 of this Seventh
Amendment; and 
  
 (E) Borrower shall have
executed and delivered to Agent for the benefit of Lenders the amended and restated Term Notes in the forms attached hereto and incorporated herein as Exhibits 1.3A-1 and 1.3A-2. 
  

 3 

 The date on which all of the foregoing conditions precedent are satisfied shall be called the
“Seventh Amendment Effective Date.” After the Seventh Amendment Effective Date, Lenders shall return to Borrower the Term Notes delivered to them on the Closing Date marked “Amended and Superceded.” 
  
 9. Miscellaneous. 
  
 a. This Seventh Amendment is limited as specified and shall not constitute an
amendment, modification or waiver of any other provision of the Loan Agreement or any other Loan Document. 
  
 b. This Seventh Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 
  
 10. Payment of Interest on the Subordinated Note. Upon the Seventh Amendment Effective Date, Agent and Lenders shall be deemed to have
consented to the payment of interest due on the Subordinated Note in the amount of up to $2,360,000. 
  
 11. Financial Covenants. Upon the Seventh Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be deleted and Exhibit 8.3
attached hereto and incorporated herein shall be inserted in its stead. 
  
 12. Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain in full force and effect. 
  
 (Signature Page Follows) 
  

 4 

 (Signature Page to Seventh Amendment to 
 Third Amended and Restated Loan and Security Agreement) 
  
 IN WITNESS WHEREOF, this Seventh Amendment has been duly executed as of the day and year specified at the beginning hereof. 
  

			
	PW EAGLE, INC., (“Borrower”)
		
	By:	 	 /s/ Scott Long

	 	 	

	 	 	 Name: Scott Long
 Title: CFO 

  

			
	FLEET CAPITAL CORPORATION, as Agent and as a Lender
		
	By:	 	 /s/ Brian Conole

	 	 	

	 	 	 Name: Brian Conole
 Title: Senior vice President 

  

			
	THE CIT GROUP/BUSINESS CREDIT, INC., as Lender
		
	By:	 	 /s/ Anthony Alexander

	 	 	

	 	 	 Name: Anthony Alexander
 Title: Vice President

  

 5 

 EXHIBIT 8.3 
  
 FINANCIAL COVENANTS 
  
 Consolidated Net Income means, with respect to Borrower and its Subsidiaries for any fiscal period, the net income (or loss) of Borrower and its
Subsidiaries for such period taken as a whole (determined in accordance with GAAP on a consolidated basis), but excluding in any event: (a) any gains or losses on the sale or other disposition of Investments or fixed or capital assets or from any
transaction classified as extraordinary under GAAP, any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any business
entity, substantially all the assets of which have been acquired in any manner by Borrower, realized by such business entity prior to the date of such acquisition; (d) net earnings and losses of any business entity which shall have merged into
Borrower earned or incurred prior to the date of such merger; (e) net earnings of any business entity (other than a Consolidated Subsidiary) in which Borrower has an ownership interest unless such net earnings shall have been received by Borrower in
the form of cash distributions; (f) earnings resulting from a reappraisal, revaluation or write-up of assets; (g) any charge to net earnings resulting from the amortization of the value of stock options given to employees to the extent required by
FASB 25; (h) any increase or decrease of net income arising from a change in Borrower’s accounting methods; (i) any gains resulting from the forgiveness of Funded Debt or the retirement of Funded Debt at a discount; (j) any gain arising from
the acquisition of any Securities of Borrower; and (k) any reversal of any contingency reserve, except that provision for such contingency reserve shall have been made from income arising during such period. 
  
 EBITDA With respect to any fiscal period, the sum of Borrower’s
Consolidated Net Income plus amounts deducted in determining Consolidated Net Income in respect of: (a) any provision for (or less any benefit from) income taxes whether current or deferred; (b) amortization and depreciation expense; and (c)
Interest Expense for such period. 
  
 Fixed Charge Coverage Ratio -
With respect to any period of determination, the ratio of (i) EBITDA of Borrower for such period minus income taxes paid in cash and non-financed Capital Expenditures during such period to (ii) Fixed Charges. 
  
 Fixed Charges - For any period of determination, the sum of (a) scheduled
principal payments of Funded Debt (including the principal portion of scheduled payments of Capital Lease Obligations), (b) Interest Expense paid in cash included in the determination of Consolidated Net Income, and (c) dividends paid on
Borrower’s capital stock. 
  

 Exhibit 8.3 – Page 1 

 Funded Debt - means: (i) Indebtedness arising from the lending of money by any Person to Borrower,
including, without limitation, the Obligations; (ii) Indebtedness, whether or not in any such case arising from the lending by any Person of money to Borrower (A) which is represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes or similar instruments, or (C) upon which interest charges are customarily paid (other than accounts payable) or that was issued or assumed as full or partial payment
for Property; (iii) Indebtedness that constitutes a Capitalized Lease Obligation; (iv) reimbursement obligations with respect to letters of credit or guaranties of letters of credit and (v) Indebtedness of Borrower for purposes of the Funded Debt to
EBITDA Ratio for the nine months ending September 30, 2002, EBITDA for such period shall be actual EBITDA for such period multiplied by four-thirds (4/3s) for one most recently ended twelve month period; provided, that, under any guaranty of
obligations that would constitute Funded Debt under clauses (i) through (iv) hereof if owed directly by Borrower or any guaranty having the economic effect of guaranteeing any of the obligations of any other Person. In computing the amount of Funded
Debt, the Subordinated Notes will be valued at full face value (less any payments thereon) without giving effect to any original issue discount. 
  
 Funded Debt to EBITDA Ratio - With respect to any date, the ratio of (i) total Funded Debt as of such date to (ii) EBITDA for the most recently ended twelve
month period. 
  
 Interest Coverage Ratio - With respect to any
period of determination, the ratio of (i) EBITDA for such period to (ii) Interest Expense paid in cash for such period, all as determined in accordance with GAAP. 
  
 Interest Expense - With respect to any fiscal period, the interest expense incurred for such period excluding interest income
as determined in accordance with GAAP. 
  
 Investment - All
investments in the property or assets of any person, in cash or property, whether by way of advance, loan, extension of credit by Borrower or any of its Subsidiaries (by way of guaranty or otherwise) or capital contribution, or purchase of stock,
bonds, notes, debentures or other securities or any assets constituting the purchase of a business or line of business. 
  
 Net Worth - Book net worth of Borrower as determined in accordance with GAAP. For purposes of this Exhibit 8.3, Net Worth shall include any unamortized
value assigned to the Warrants issued in connection with the Subordinated Notes which value was calculated in accordance with GAAP and is contained in Borrower’s Consolidated Financial Statements. 
  

 Exhibit 8.3 – Page 2 

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

			
	 Period

	  	Ratio

	 For 6 months ending 6/30/04
	  	1.30 to 1
		
	 For 9 months ending 9/30/04
	  	1.45 to 1
		
	 Trailing 12 month period ending 12/31/04
	  	1.35 to 1
		
	 Trailing 12 month period ending 3/31/05
	  	1.35 to 1
		
	 Trailing 12 month period ending 6/30/05 and each 9/30, 12/31, 3/31 and 9/30 thereafter
	  	1.70 to 1

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

			
	 Period

	  	Ratio

	 For 6 months ending 6/30/04
	  	1.00 to 1
		
	 Trailing 9 month period ending 9/30/04
	  	1.00 to 1
		
	 Trailing 12 month period ending 12/31/04
	  	1.00 to 1
		
	 Trailing 12 month period ending 3/31/05
	  	1.00 to 1
		
	 Trailing 12 month period ending 6/30/05 and each 9/30, 12/31, 3/31 and 6/30 thereafter
	  	1.10 to 1

  

 Exhibit 8.3 – Page 3 

 Funded Debt to EBITDA Ratio - Borrower shall not permit the Funded Debt to EBITDA Ratio for any period set
forth below to be greater than the ratio set forth opposite such period below: 
  

			
	 Period

	  	Ratio

	 6 months ending 6/30/04
	  	9.50 to 1
		
	 9 months ending 9/30/04
	  	7.50 to 1
		
	 Trailing 12 month period ending 12/31/04
	  	8.50 to 1
		
	 Trailing 12 month period ending 3/31/05
	  	8.50 to 1
		
	 Trailing 12 month period ending 6/30/05 and each 9/30, 12/31, 3/31 and 6/30 thereafter
	  	5.00 to 1

  
 provided that for purposes of
this Funded Debt to EBITDA Ratio with respect to (x) the six month period ending 6/30/04, Borrower’s EBITDA for said six month period shall be multiplied by two (2) and (y) for the nine month period ending 9/30/04, Borrower’s EBITDA for
said nine month period shall be multiplied by four-thirds (4/3). 
  
 For purposes
of this Section 8.3, EBITDA, for fiscal periods ending on or prior to December 31, 2004, shall not include restructuring charges of up to $1,000,000 which were incurred in fiscal year 2003, but were expensed in fiscal year 2004 and up to $400,000 of
expenses incurred in connection with the PW Poly Transaction (as defined in the Fifth Amendment). 
  

 Exhibit 8.3 – Page 4 

 EXHIBIT 1.3A-1 
  
 (Term Note) 
  

			
	 $5,175,729.65
	 	 Amended and Restated
 As of March 30, 2004
 Chicago, Illinois

  
 FOR VALUE RECEIVED, the
undersigned (hereinafter “Borrower”), hereby promises to pay to the order of Fleet Capital Corporation, a Rhode Island corporation (hereinafter “Lender”), or its registered assigns at the office of Fleet Capital Corporation, as
agent for such Lender, or at such other place in the United States of America as the holder of this Note may designate from time to time in writing, in lawful money of the United States, in immediately available funds, at the time of payment, the
principal sum of Five Million One Hundred Seventy-Five Thousand Seven Hundred Twenty-Nine and 65/100 Dollars ($5,175,729.65), together with interest from and after the date hereof on the unpaid principal balance outstanding from time to time.

  
 This Secured Promissory Note (the “Note”) is one of the Term Notes
referred to in, and is issued pursuant to, that certain Third Amended and Restated Loan and Security Agreement dated as of September 30, 2002, by and among Borrower, the lender signatories thereto (including Lender) and Fleet Capital Corporation
(“FCC”) as Agent for said lenders (FCC in such capacity “Agent”) (hereinafter, as amended from time to time, the “Loan Agreement”), and is entitled to all of the benefits and security of the Loan Agreement. All of the
terms, covenants and conditions of the Loan Agreement and the Security Documents are hereby made a part of this Note and are deemed incorporated herein in full. All capitalized terms used herein, unless otherwise specifically defined in this Note,
shall have the meanings ascribed to them in the Loan Agreement. 
  
 For so long as
no Event of Default shall have occurred and be continuing the principal amount and accrued interest of this Note shall be due and payable on the dates and in the manner hereinafter set forth: 
  
 (a) Interest on the unpaid principal balance outstanding
from time to time shall be paid at such interest rates and at such times as are specified in the Loan Agreement; 
  
 (b) Principal shall be due and payable quarterly commencing on March 31, 2004 and continuing on each June 30, September 30, December 31
and March 31 thereafter to and including June 30, 2005, in installments equal to $240,000. 
  
 (c) The entire remaining principal amount then outstanding, together with any and all other amounts due hereunder, shall be due and
payable on August 20, 2005. 
  
 Notwithstanding the foregoing, the entire unpaid
principal balance and accrued interest on this Note shall be due and payable immediately upon any termination of the Loan Agreement pursuant to Section 4 thereof. 
  
 This Note shall be subject to mandatory prepayment in accordance with the provisions of Section 3.3 of the Loan Agreement. Borrower may also
prepay this Note in the manner provided in Section 4 of the Loan Agreement. 
  
 Upon the occurrence, and during the continuation, of an Event of Default, this Note shall or may, as provided in the Loan Agreement, become or be declared immediately due and payable. 
  
 The right to receive principal of, and stated interest on, this Note may only be transferred
in accordance with the provisions of the Loan Agreement. 
  
 Demand, presentment,
protest and notice of nonpayment and protest are hereby waived by Borrower. 
  

 Exhibit 1.3A-1 – Page 5 

 This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Illinois.

  

			
	PW EAGLE, INC.
		
	By:	 	 /s/ Scott Long

	 	 	

	 Name:
 Title:
	 	 Scott Long
 CFO

  

 Exhibit 1.3A-1 – Page 6 

 [EXECUTION COPY] 
  
 EXHIBIT 1.3A-2 
  
 (Term Note) 
  

			
	 $3,450,486.43
	 	 Amended and Restated
 As of March 30, 2004
 Chicago, Illinois

  
 FOR VALUE RECEIVED, the
undersigned (hereinafter “Borrower”), hereby promises to pay to the order of The CIT Group, Business Credit, Inc., a Delaware corporation (hereinafter “Lender”), or its registered assigns at the office of Fleet Capital
Corporation, as agent for such Lender, or at such other place in the United States of America as the holder of this Note may designate from time to time in writing, in lawful money of the United States, in immediately available funds, at the time of
payment, the principal sum of Three Million Four Hundred Fifty Thousand Four Hundred Eighty-Six and 43/100 Dollars ($3,450,486.43), together with interest from and after the date hereof on the unpaid principal balance outstanding from time to time.

  
 This Secured Promissory Note (the “Note”) is one of the Term Notes
referred to in, and is issued pursuant to, that certain Third Amended and Restated Loan and Security Agreement dated as of September 30, 2002, by and among Borrower, the lender signatories thereto (including Lender) and Fleet Capital Corporation
(“FCC”) as Agent for said lenders (FCC in such capacity “Agent”) (hereinafter, as amended from time to time, the “Loan Agreement”), and is entitled to all of the benefits and security of the Loan Agreement. All of the
terms, covenants and conditions of the Loan Agreement and the Security Documents are hereby made a part of this Note and are deemed incorporated herein in full. All capitalized terms used herein, unless otherwise specifically defined in this Note,
shall have the meanings ascribed to them in the Loan Agreement. 
  
 For so long as
no Event of Default shall have occurred and be continuing the principal amount and accrued interest of this Note shall be due and payable on the dates and in the manner hereinafter set forth: 
  
 (a) Interest on the unpaid principal balance outstanding
from time to time shall be paid at such interest rates and at such times as are specified in the Loan Agreement; 
  
 (b) Principal shall be due and payable quarterly commencing on March 31, 2004 and continuing on each June 30, September 30, December 31
and March 31 thereafter to and including June 30, 2005, in installments equal to $160,000. 
  
 (c) The entire remaining principal amount then outstanding, together with any and all other amounts due hereunder, shall be due and
payable on August 20, 2005. 
  
 Notwithstanding the foregoing, the entire unpaid
principal balance and accrued interest on this Note shall be due and payable immediately upon any termination of the Loan Agreement pursuant to Section 4 thereof. 
  
 This Note shall be subject to mandatory prepayment in accordance with the provisions of Section 3.3 of the Loan Agreement. Borrower may also
prepay this Note in the manner provided in Section 4 of the Loan Agreement. 
  
 Upon the occurrence, and during the continuation, of an Event of Default, this Note shall or may, as provided in the Loan Agreement, become or be declared immediately due and payable. 
  
 The right to receive principal of, and stated interest on, this Note may only be transferred
in accordance with the provisions of the Loan Agreement. 
  
 Demand, presentment,
protest and notice of nonpayment and protest are hereby waived by Borrower. 
  

 1 

 This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Illinois.

  

			
	PW EAGLE, INC.
		
	By:	 	 /s/ Scott Long

	 	 	

	 Name:
 Title:
	 	 Scott Long
 CFO

  

 2Management Service Agreement between Spell Capital Partners and PW Eagle

 EXHIBIT 10.4 
  
 MANAGEMENT SERVICES AGREEMENT 
  

					
	PARTIES:	  	PW Eagle, Inc.	  	(the “Company”)
	 	  	1550 Valley River Drive	  	 
	 	  	P.O. Box 10049	  	 
	 	  	Eugene, OR 97440	  	 
			
	 	  	 	  	 
	 	  	Spell Capital Partners, LLC	  	(the “Manager”)
	 	  	222 South 9th Street, Suite 2880	  	 
	 	  	Minneapolis, MN 55402	  	 
			
	DATE:	  	January 1, 2004	  	 

  
 RECITALS: 
  
 A. The Company is a Minnesota corporation with headquarters in Eugene,
Oregon engaged in the business of manufacturing, distributing and selling poly vinyl chloride (PVC) pipe. 
  
 B. The Manager is a Minnesota limited liability company engaged, in among other things, the business of providing management and advisory services.

  
 C. The Company has determined that it is in its best interests
that the Manager provide management, advisory and investment analysis services for the Company, and the Manager has decided to provide such services to the Company. 
  
 AGREEMENT: 
  
 The hereto, each intending to be legally bound, agree as follows: 
  
 1. Appointment of Manager; Management Services. The Company appoints the Manager to act as manager of the Company pursuant to the terms of this
Agreement. The Manager shall engage and maintain personnel for the purpose of identifying and structuring transactions and assisting with other services as set forth in this Agreement. Subject to the terms of this Agreement and any guidelines
established by the Company’s Board of Directors, the Manager, on behalf of the Company, shall perform and render management, investment, consulting and other services to the Company as may be required by the Company, including, without
limitation, the following: 
  

	 	(a)	providing general business advice, including recommendations as to, and identification of, potential investments and financing activities; 

  

	 	(b)	conducting due diligence in connection with potential investments; 

  

	 	(c)	structuring and negotiating acquisition, divestiture and financing transactions; 

  

	 	(d)	identifying, structuring, negotiating, obtaining bank, institutional and other sources of financing necessary or appropriate in connection with any proposed investment or the
general capital needs of the Company, including arranging appropriate introductions; and 

  

 1 

	 	(e)	monitoring the performance of the Company and, where appropriate, providing advice to the Board of Directors of the Company (“Monitoring Activities”).

  
 The Manager shall perform its obligations under
this Agreement in good faith and in a diligent and timely manner. In addition to the services of its own personnel, the Manager shall, to the extent that it determines that it would be necessary or advisable in order to perform the services for the
Company which are required hereunder, arrange for and coordinate the services of other professionals, experts and consultants (collectively, “Third Parties”) at the expense of the Company. 
  
 2. Management Fees. As compensation for providing the Company with the
foregoing services, the Company will pay to the Manager a monthly management fee equal to $51,000.00 (the “Monthly Management Fee”) for each month of the Initial Term, and a pro-rata portion for each Additional Term. The Monthly Management
Fee shall be payable monthly in advance. It is anticipated that the Board of Directors of the Company may from time to time declare discretionary bonuses for the Manager if warranted by the Manager’s performance and the performance of the
Company. In addition, the Company’s Board of Directors may pay Manager transaction fees in connection with transactions entered into by the Company with the assistance of Manager. 
  
 3. Personnel and Office Space. The Manager shall be responsible for providing all personnel and office space required
by it in order to perform its obligations under this Agreement. 
  
 4. Out-of-Pocket Expenses. The Company shall reimburse the Manager for substantiated and unreimbursed out-of-pocket expenses incurred by the Manager in satisfying its obligations under this Agreement; provided, however, that the
Company shall not reimburse the Manager for expenses of salaries or employee benefits of employees of the Manager. The Company shall pay all costs and expenses of its professional advisors, including its attorneys and accountants. 
  
 5. Termination. The initial term of this Agreement shall be through
December 31, 2005 (the “Initial Term”) and shall thereafter automatically be extended on a quarter-by-quarter basis (each, and “Additional Term”). In the event that the Company elects not to renew the Agreement for any Additional
Term, the Company shall pay to the Manager, in addition to the Monthly Management Fee owing during the Initial Term or any Additional Term, an amount equal to twenty-four times the current Monthly Management Fee payable in full on the last day of
the term. Either party may terminate this Agreement thirty days after a non-defaulting party notifies a defaulting party of its intention to terminate this Agreement pursuant to this provision as a result of a material breach hereof which remains
uncured during such thirty day period. 
  
 6. Indemnification
of Manager. The Company shall, to the maximum extent permitted by applicable law, indemnify and hold harmless the Manager, its members, managers, employees, agents, assigns or any of their respective affiliates or any person who was, at the time
in question, such a person (collectively, the “Related Persons”) and the Company shall release each Related Person, to the fullest extent permitted by law, from and against any and all Damages (as defined below), including, without
limitation, Damages incurred in preparing or defending any action, claim, proceeding, investigation or appeal from any of the foregoing by or before any court or governmental authority, whether pending or threatened, whether or not a Related Person
is or may be a party thereto, which, in the judgment of the Manager, arise out of, relate to or are in connection with this Agreement or the management or conduct of the business or affairs of the 

  

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Company provided that (a) the act or failure to act giving rise to such Damages was taken in good faith and except for any such Damages that are found
by a court of competent jurisdiction to have resulted primarily from any act or omission which constituted gross negligence, intentional misconduct, an intentional or material breach of this Agreement or a knowing violation of law, and (b) if such
Related Person is entitled to indemnification from any source other than the Company, then the Manager shall use its reasonable best efforts to cause such Related Person to seek indemnification from such other source simultaneously with seeking
indemnification from the Company, and the amount recovered by such Related Person from such other source shall reduce the amount of the Company’s indemnification obligation hereunder. Attorneys’ fees and expenses shall be paid by the
Company as they are incurred upon receipt of an undertaking, in each case, by or on behalf of the Related Person on whose behalf such expenses are incurred to repay such amounts if it is ultimately determined that such Related Person is not entitled
to indemnification with respect thereto. 
  
 The indemnification
provisions of this Section may be asserted and enforced by, and shall be for the benefit of, each Related Person, and each Related Person is hereby specifically empowered to assert and enforce such right; provided that any Related Person who enters
into a settlement of any proceeding without the prior approval of the Manager (which approval shall not be unreasonably withheld) shall not be entitled to the indemnification provided in this section. The right of any Related Person to the
indemnification provided herein shall be in addition to any and all rights to which such Related Person may otherwise be entitled by contract or as a matter of law or equity. 
  
 7. Liability of Manager. Neither the Manager nor any other Related Person shall be liable to the Company for any
damages, losses, costs, and expenses (collectively, “Damages”) asserted against, suffered or incurred by the Company, arising out of, relating to or in connection with any act or failure to act pursuant to this Agreement or otherwise with
respect to the management or conduct of the business and affairs of the Company, provided that such act or failure to act was taken in good faith and except, in each case, for Damages that are finally found by a court of competent jurisdiction to
have resulted primarily from any act or omission of such Related Person which constituted gross negligence, intentional misconduct, an intentional or material breach of this Agreement or a knowing violation of law. For purposes of this Agreement, no
Related Person shall be deemed per se not to have acted in good faith or to have acted with gross negligence, to have engaged in intentional misconduct, to have intentionally or materially breached this Agreement or to have knowingly violated the
law in connection with the management or conduct of the business and affairs or other activities of such Related Person which involve a conflict of interest with the Company. 
  
 8. Relationship. The Manager shall be deemed to be an independent contractor and, unless expressly authorized, shall
not be authorized to bind the Company. The Company shall not be obligated to follow or accept any recommendation made by the Manager. The management, policies and operations of the Company (including the ultimate approval of the making or
disposition of any investment by the Company) shall be the responsibility of the Company and its board of directors. 
  
 9. Non-exclusivity; Other Activities. This Agreement and the duties of the Manager hereunder shall not preclude the Manager from providing services
of a like nature to any other person or entity. The Company agrees that the Manager and any other Related Person may engage independently or with others, for its, his or her own account and for the accounts of others, in other business ventures and
activities of every nature and description whether such ventures are competitive with the business of the Company or otherwise, including, without 

  

 3 

 
limitation, purchasing, selling or holding securities for the account of any other person or enterprise or for its, his or her own account. The Company
expressly agrees that the Manager and any other Related Person may earn directors’, management, advisory, consulting, finders’, transaction or similar fees from other persons and that any such fees shall be for the sole account of the
Manager or such Related Person. 
  
 10. Notices. All
notices and other communications hereunder shall be in writing and shall be deemed to have been given only if and when (a) personally delivered, or (b) three (3) business days after mailing, postage prepaid, by first class certified or registered
airmail, or (c) sent by prepaid cable, telegram, telex or telecopy, addressed in each case as set forth above. The parties may each change the address for giving of notices and communications to it by written notice to the other parties in
conformity with the foregoing. 
  
 11. Governing Law. The
interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the law of the State of Minnesota. Any controversy or dispute arising under this Agreement shall be settled by arbitration conducted under the
Commercial Arbitration Rules of the American Arbitration Association (without submitting such arbitration to their jurisdiction) by one or more arbitrators appointed in accordance with such rules then prevailing. The arbitration shall be held in
Minneapolis, Minnesota. 
  
 12. Assignment. This Agreement
shall not be assignable by either party without the prior consent of the other party. Notwithstanding the foregoing, each of the Company and the Manager may assign its duties and rights under this Agreement to an affiliate or a successor to
substantially al of its business, respectively, without the other’s consent. 
  
 13. Complete Agreement. This Agreements represents the sole agreement relating to the subject matter hereof between the parties, and supercedes and replaces any other agreement between the parties, whether
written or oral, relating to the subject matter hereof, including the Amended and Restated Office Sharing Agreement dated August 20, 2001. 
  
 IN WITNESS WHEREOF, the parties hereto have executed this Management Services Agreement as of the date and year first above written. 
  

			
	 PW EAGLE, INC.

		
	By:	 	 /s/ Scott Long

	 	 	

	 	 	 Scott Long

  

			
	 SPELL CAPITAL PARTNERS, LLC

		
	By:	 	 /s/ William H. Spell

	 	 	

	 	 	 William H. Spell

  

 4

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