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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER: 0-27140
NORTHWEST PIPE COMPANY
(Exact name of registrant as specified in its charter)
OREGON 93-0557988
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12005 N. BURGARD
PORTLAND, OREGON 97203
(Address of principal executive offices and zip code)
503-285-1400
(Registrant's telephone number including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $109,631,988 as of March 17, 1998 based upon the last sales
price as reported by Nasdaq.
The number of shares outstanding of the Registrant's Common Stock as of
March 17, 1998 was 6,413,278 shares.
The Index to Exhibits appears on page 16 of this document.
--------------
--------------
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant has incorporated into Part III of Form 10-K by reference
portions of its Proxy Statement for its Annual Meeting of Shareholders to be
held on May 19, 1998
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NORTHWEST PIPE COMPANY
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
Page
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Item 1 - Business 1
Item 2 - Properties 5
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a Vote of Security Holders 6
PART II
Item 5 - Market for the Registrant's Common
Equity and Related Stockholder Matters 6
Item 6 - Selected Financial Data 7
Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Item 7A - Quantitative and Qualitative Disclosures About
Market Risk 14
Item 8 - Financial Statements and Supplementary Financial Data 14
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 14
PART III
Item 10 - Directors and Executive Officers of the Registrant 14
Item 11 - Executive Compensation 14
Item 12 - Security Ownership of Certain Beneficial
Owners and Management 14
Item 13 - Certain Relationships and Related Transactions 14
PART IV
Item 14 - Exhibits, Financial Statement Schedule
and Reports on Form 8-K 15
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
Northwest Pipe Company ("the Company") manufactures welded steel pipe in
two business groups. In its water transmission business group, the
Company is a leading supplier in the United States and Canada of large
diameter, high pressure steel pipe used primarily for water transmission
(the "Water Transmission" business). In its tubular products business
group, the Company manufactures smaller diameter, electric resistance
welded ("ERW") steel pipe for use in a wide range of construction,
agricultural and industrial applications (the "Tubular Products"
business). In 1997, Water Transmission and Tubular Products revenues
represented approximately 66% and 34% of the Company's net sales,
respectively. Headquartered in Portland, Oregon, the Company operates
five manufacturing facilities. Water Transmission products are
manufactured in Portland, Oregon; Denver, Colorado; Adelanto,
California, and Riverside, California (both are near Los Angeles).
Tubular Products are manufactured in Portland, Oregon, and Atchison,
Kansas.
In May 1996, the Company acquired Thompson Pipe and Steel Company, a
manufacturer of steel water transmission pipe headquartered in Denver,
Colorado. The principal assets acquired were steel pipe manufacturing
facilities located in Denver, Colorado and Princeton, Kentucky. The
Kentucky manufacturing facility was closed by Thompson Pipe and Steel
Company in 1995, and the Company intends to sell the Kentucky facility.
In December 1996, the Company acquired, from California Steel Pressure
Pipe Company, certain assets of its Riverside, California plant, which
included two spiral mills. The Riverside, California plant was closed in
December 1996 by California Steel Pressure Pipe Company. In January
1997, the Company began producing water transmission pipe at the
Riverside plant and managing this facility from its Adelanto, California
facility.
PRODUCTS
WATER TRANSMISSION PRODUCTS. Water transmission pipe is used for (i)
high pressure applications, typically requiring pipe able to withstand
pressures in excess of 150 pounds per square inch, (ii) low pressure
applications such as gravity-flow wastewater and sewers and (iii) other
industrial and structural applications. All of the Company's Water
Transmission products are made to custom specifications. Most of these
products are for fully engineered, large diameter, high pressure water
transmission lines. Other uses include pipe for piling and hydroelectric
projects, waste water transmission and treatment plant piping. The
Company has the capability to manufacture Water Transmission pipe in
diameters ranging from 4" to 156" with wall thicknesses of 0.135" to
3.00". The Company has the capability to coat and line these products
with cement mortar, polyethylene tapes, paints and coal tar enamel
according to the customers' specifications. The Company maintains
complete fabrication facilities and provides installation contractors
with custom fabricated sections as well as straight pipe sections.
TUBULAR PRODUCTS. The Company's Tubular Products range in size from
2 3/8" to 16" in diameter with wall thicknesses from 0.075" to 0.315".
These products are typically sold to pipe distributors or original
equipment manufacturers and are used for a wide variety of applications.
The Company has historically focused on niche markets that typically
generate strong margins. The tubular products industry, however, serves
very large markets with products that generally have wall thicknesses
greater than those that the Company has traditionally manufactured.
The Company has added new product lines in its Tubular Products business
as management identified opportunities for sustainable growth. In 1989,
the Company entered the fire protection sprinkler system market with its
branded product FLAME-OUT. In 1993, the Company began marketing
WELL-LIFE, a water well casing product. These new products represented
an expansion of the Company's focus from the light-wall, large diameter
niche markets to include higher volume, more competitive markets. The
Company acquired and has
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installed a new tubular products mill in its Portland, Oregon facility, which
was operational late in the first quarter of 1998. This new mill gives the
Company the ability to manufacture products with smaller diameters and
heavier wall thicknesses for uses in industrial piping, oil and gas
transmission, fire protection systems and other applications. The Company
intends to continue to pursue future opportunities to broaden its product
lines by adding products that will take advantage of the Company's available
manufacturing capacity, existing marketing channels and manufacturing
expertise.
MARKETING
WATER TRANSMISSION. The primary customers for Water Transmission
products are installation contractors for projects funded by public
water agencies, including states, municipalities and water districts.
Water Transmission products are manufactured at the Company's Oregon,
California and Colorado facilities and are marketed primarily in the
United States, Canada and Mexico. High freight costs reduce the
Company's competitiveness as the distances from its manufacturing
facilities increase.
The Company's Water Transmission marketing strategy emphasizes early
identification of potential water projects, promotion of specifications
consistent with the Company's capabilities and close contact with the
project designers and owners throughout the design phase. The Company's
in-house sales force is composed of sales representatives, engineers and
support personnel. These representatives and engineers work with public
water agencies, contractors and engineering firms, often more than a
year in advance of the project being bid, in order to identify and
evaluate planned projects. As the public water agency continues the
process of developing a pipeline project, the Company's professional
engineers provide information to the agency or its design engineers
promoting the advantages of coated and lined steel pipe. In certain
cases, the Company's professional engineers may be successful in
influencing the specifications to favor the Company's products. After
the agencies complete the design, they publicize the upcoming bidding
for a water transmission project. The Company then obtains detailed
plans and develops its estimate for the pipe portion of the project. The
Company typically bids to installation contractors who include the
Company's bid in their proposal to the public water agency. The public
water agency generally awards the entire project to the contractor with
the lowest bid.
Because a substantial portion of the Company's Water Transmission
revenue is derived from sales to installation contractors for public
water transmission projects, the Company's sales could be adversely
impacted by a change in the number of projects planned by public water
agencies, adjustments in governmental spending, general budgetary
constraints or the inability of governmental entities to issue debt. A
decline in the number of such projects or in the funding available for
such projects could have a material adverse effect on the Company's
business, financial condition and results of operations.
TUBULAR PRODUCTS. The Company's Tubular Products are marketed through a
network of direct sales force personnel and independent distributors in
the United States and Canada. The Company's marketing strategy focuses
on customer service and customer relationships. For example, the
Company is willing to sell in small lot sizes and is able to provide
mixed truckloads of finished products to its customers. Approximately
90% of the Company's Tubular Products sales have been to pipe
distributors, and approximately 10% of sales have been to original
equipment manufacturers (primarily irrigation system manufacturers). The
Company's sales effort emphasizes regular personal contact with current
and potential customers. The Company supplements this effort with
targeted advertising, participation in trade shows and brochures. The
Company's plant locations in Kansas and Oregon allow the Company to
efficiently serve customers throughout the United States and in Canada.
MANUFACTURING
WATER TRANSMISSION. The Company manufactures Water Transmission
products at its Oregon, California and Colorado facilities. The process
begins with the preparation of engineered drawings of each unique piece
of pipe in the project. These drawings are prepared on the Company's
proprietary computer-aided design system and are used as blueprints for
the manufacture of the pipe. After the drawings are completed and
approved, manufacturing begins by feeding steel coil continuously at a
specified angle into a spiral weld mill which cold
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forms the band into a tubular configuration with a spiral seam.
Automated arc welders, positioned on both the inside and the outside of
the tube, are used to weld the seam. The welded tube is then cut at the
specified length. After completion of the forming and welding phases,
the finished cylinder is tested and inspected in accordance with project
specifications, which may include 100% radiographic analysis of the weld
seam. The cylinders are then coated and lined as specified. Possible
coatings include coal tar enamel, polyethylene tape, paint, epoxies and
cement mortar. Linings may be coal tar enamel, cement mortar or epoxies.
Following coating and lining, certain pieces may be custom fabricated as
required for the project. This process is performed in the Company's
fabrication facilities. The pipe is final inspected and prepared for
shipment. The Company ships its products to project sites by truck and
rail.
TUBULAR PRODUCTS. Tubular Products are manufactured by the ERW process at the
Company's Oregon and Kansas facilities in diameters ranging from 2 3/8" to 16".
This process begins by unrolling and slitting steel coils into narrower bands
sized to the circumference of the finished product. Each band is re-coiled and
fed into the material handling equipment at the front end of the ERW mill and
fed through a series of rolls that cold-form it into a tubular configuration.
The resultant tube is welded by high-frequency electric resistance welders and
cut into the appropriate lengths. After exiting the mill, the products are
straightened, inspected, tested and end-finished, and certain products are
coated with lacquer.
The Company acquired and has installed a new tubular products mill in its
Portland, Oregon facility, which was operational late in the first quarter of
1998. This new mill gives the Company the ability to manufacture products with
smaller diameters and heavier wall thicknesses for uses in industrial piping,
oil and gas transmission, fire protection systems and other applications.
TECHNOLOGY. Advances in technology help the Company produce high
quality products at competitive prices. Recent investments in
technological improvements include laser seam tracking systems, steel
coil slitters, an ultraviolet light coating system and an in-line
ultrasonic testing system. To stay abreast of technological developments
in the United States and abroad, the Company participates in trade
shows, industry associations, research projects and vendor trials of new
products.
QUALITY ASSURANCE. The Company has adopted quality assurance techniques
and policies which govern every aspect of its operations to ensure high
quality. During and after the manufacturing process, the Company
performs many tests, including tensile, impact, hydrostatic, ultrasonic
and radiographic tests. The Quality Assurance department reports
directly to the chief executive officer. As a reflection of its
commitment to quality, the Company has been certified for certain
products or operations by Factory Mutual, Underwriters Laboratory, Steel
Plate Fabricators Association, American Society for Mechanical
Engineers, National Sanitary Foundation and the American Petroleum
Institute.
PRODUCT LIABILITY. The manufacturing and use of steel pipe involves a
variety of risks. Certain losses may result or be alleged to result from
defects in the Company's products, thereby subjecting the Company to
claims for damages, including consequential damages. The Company
warrants its products to be free of certain defects. The Company
maintains insurance coverage against potential product liability claims
in the amount of $27 million which it believes to be adequate. However,
there can be no assurance that product liability claims exceeding the
Company's insurance coverage will not be experienced in the future or
that the Company will be able to maintain such insurance with adequate
coverage.
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BACKLOG
The Company's backlog includes confirmed orders, including the balance
of projects in process. The backlog also includes projects for which
the Company has been notified it is the successful bidder even though a
binding agreement has not been executed. Projects for which a binding
contract has not been executed could be canceled. Binding orders
received by the Company may also be subject to cancellation or
postponement, however, cancellation would generally obligate the
customer to pay the costs incurred by the Company. As of December 31,
1997 and 1996, the Company's backlog of orders was approximately $54.5
million and $51.4 million, respectively. Backlog as of December 31, 1997
includes projects having a value of approximately $5.9 million for which
binding contracts had not yet been executed. Backlog orders as of any
particular date may not be indicative of actual operating results for
any fiscal period. There can be no assurance that any amount of backlog
ultimately will be realized.
COMPETITION
WATER TRANSMISSION. The Company has several competitors in the Water
Transmission segment of its business. High freight costs may limit the
ability of manufacturers located in other market areas to compete with
the Company. Most of the projects in this segment are competitively bid
and price competition is vigorous. Price competition may reduce the
gross margin on sales, which may adversely affect overall profitability.
Other competitive factors include timely delivery and ability to meet
customized specifications. The Company and Ameron International, Inc.
are the principal competitors in the water transmission business in the
western United States and southwestern Canada. Another competitor in
this region is Continental Pipe. East of the Rocky Mountains, the
Company's primary competition includes American Cast Iron Pipe Company,
McWane Cast Iron Company and US Pipe & Foundry Company, all of which
manufacture ductile iron pipe; Price Bros. and Gifford-Hill-American,
Inc., which manufacture concrete cylinder pipe.
The Company is not aware of any competitors that are currently planning
to enter into the water transmission business within the Company's
markets. The Company believes the cost of constructing a facility, the
long lead time before a manufacturing plant could compete effectively,
product acceptance and the high standards for product quality and
manufacturing experience required by project specifications all serve as
barriers to entry. However, no assurance can be given that a new or
existing competitor will not establish new facilities or expand its
capacity within the Company's market areas. New or expanded facilities
or competitors could have a material adverse effect on the Company's
business, financial condition and results of operations.
TUBULAR PRODUCTS. The market for tubular products is highly fragmented
and diversified with over 100 manufacturers in the United States and a
number of foreign-based manufacturers that export such pipe into the
United States. Manufacturers compete with one another primarily on the
basis of price, established business relationships, customer service and
delivery. In a number of sectors within the tubular products industry,
competition may be less vigorous due to the existence of a relatively
small number of companies with the capabilities to manufacture certain
products. In particular, the Company operates in a variety of different
markets that require pipe with lighter wall thicknesses in relation to
diameters than many of the Company's competitors can manufacture.
However, the Company is increasingly introducing products into higher
volume markets with more competition than it experiences with its niche
products.
SUPPLIERS
The Company purchases hot rolled steel coil produced by a number of
primary steel producers including Geneva Steel Company, California Steel
Industries, Inc., Lonestar Steel, Thyssen Trading and Nucor.
Additionally, Oregon Steel Mills is in the process of adding steel coil
manufacturing capabilities to its facility located approximately one
mile from the Company's Portland manufacturing facility. The Company
orders steel according to its business forecasts for its Tubular
Products business group. Steel for the Water Transmission business is
normally purchased only after a project has been awarded to the Company,
however, the steel price is generally negotiated in advance of the
bidding process. Purchased steel represents a substantial portion of the
Company's cost of sales. The steel industry is highly cyclical in nature
and steel prices are influenced by
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numerous factors beyond the control of the Company, including general
economic conditions, import duties, other trade restrictions and
currency exchange rates. Historically, the Company has sought to recover
increases in steel prices through price increases of its products. There
can be no assurance that steel prices will not increase or that the
Company will be successful in implementing related price increases on
its products.
The Company also relies on certain suppliers of coating materials,
lining materials and certain custom fabricated items. The Company has at
least two suppliers for most of its raw materials. The Company believes
its relationships with its suppliers are positive and has no indication
that it will experience shortages of raw materials or components
essential to its production processes or that it will be forced to seek
alternative sources of supply. Any shortages of raw materials may result
in production delays and costs which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
ENVIRONMENTAL MATTERS
The Company operates under numerous governmental permits and licenses
relating to air emissions and water discharges, stormwater run-off,
workplace safety and other matters. The Company is not aware of any
current violations or citations relating to any of these permits or
licenses. The Company has a policy of reducing use and consumption of
hazardous materials in its operations by substituting non-hazardous
materials when possible.
The Company has completed discussions with the Oregon Department of
Environmental Quality ("DEQ") with respect to the reporting requirements
for calculating emissions of volatile organic compounds ("VOCs") from
pipe coating and lining operations at its Portland, Oregon facility. The
Company and DEQ have resolved the emissions calculation issues pursuant
to a Mutual Agreement and Order ("MAO") dated October 4, 1995 and
amended June 20, 1997. Pursuant to the MAO, the Company was required to
periodically report its progress in finding alternative coatings that
comply with the VOC content levels allowed by Condition 4 of the
Company's air permit. The MAO as amended also required the Company to be
in full compliance with this Condition 4 by January 1, 1998, or to have
submitted an application for an alternative emission limit. In December
1997, the Company submitted a report to DEQ confirming its compliance
with Condition 4. The DEQ has indicated informally that it is satisfied
with the Company's compliance progress. DEQ will initiate formal
acknowledgment that the terms of the MAO have been fully satisfied.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources - Environmental
Matters" for a discussion of certain litigation with the U.S.
Environmental Protection Agency.
EMPLOYEES
As of December 31, 1997, the Company had 687 full-time employees.
Approximately 25% were salaried and approximately 75% were employed on
an hourly basis. All of the hourly employees at Thompson Pipe and Steel
Company are represented by a union. The Company considers its relations
with its employees to be satisfactory.
ITEM 2. PROPERTIES
The Oregon facility consists of 300,000 square feet of covered
manufacturing space, located on approximately 25 acres. The Company
operates five pipe mills at its Oregon facility. The Kansas facility
consists of 60,000 square feet of covered manufacturing space located on
40 acres. The Adelanto, California facility, which was built in 1990,
consists of 85,000 square feet of covered manufacturing space located on
70 acres. The Company has two pipe mills located at each of the Kansas
and Adelanto, California facilities. Thompson Pipe and Steel Company has
a steel pipe manufacturing facility, including approximately 157,000
square feet of covered manufacturing space, located in Denver, Colorado
on approximately 40 acres, and a facility, including approximately
336,120 square feet of covered manufacturing space, located in
Princeton, Kentucky, on
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approximately 64 acres. The Kentucky manufacturing facility was closed
by Thompson Pipe and Steel Company in 1995, and the Company intends to
sell this facility. The principal assets acquired by the Company from
California Steel Pressure Pipe Company were two spiral mills and one ERW
mill located in Riverside, California. The Company owns all of its
facilities, except for the Riverside, California facility, which is
leased to the Company with an option to purchase. The Company exercised
its option to purchase the Oregon facility in December 1997, and intends
to exercise its option to purchase the Riverside, California facility in
1998.
The Company has available manufacturing capacity at each of its
facilities and believes its facilities are adequate for its immediate
and near-term requirements, and it does not anticipate the need for
significant expansion in the next twelve months.
ITEM 3. LEGAL PROCEEDINGS
In addition to the matters described above in "ENVIRONMENTAL MATTERS",
from time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of its
business. The Company maintains insurance coverage against potential
claims in amounts which it believes to be adequate. Management believes
that it is not presently a party to any litigation, the outcome of which
would have a material adverse effect on the Company's business,
financial condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the quarter ended December 31, 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is quoted on the Nasdaq National Market
System under the symbol "NWPX." The Company's common stock commenced
trading on November 30, 1995. The high and low sales prices as reported
on the Nasdaq National Market System for each quarter in the years ended
December 31, 1996 and 1997 were as follows.
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LOW HIGH
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1996
First Quarter $ 9 7/8 $ 13 1/2
Second Quarter 12 3/4 18 1/8
Third Quarter 15 3/4 20 1/2
Fourth Quarter 15 20
1997
First Quarter $ 15 7/8 $ 20 1/4
Second Quarter 14 3/4 18 1/2
Third Quarter 17 27
Fourth Quarter 21 27
</TABLE>
There were 94 shareholders of record and approximately 1700 beneficial
shareholders at March 23, 1998. There were no cash dividends declared or
paid in fiscal years 1997 or 1996. The Company does not anticipate
paying cash dividends in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
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In thousands, except per share amounts YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
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Net sales $150,833 $135,182 $97,715 $73,641 $54,437
Gross profit 31,117 30,942 19,576 11,980 6,529
Income (loss) before cumulative effect of accounting change (1) 1,100 10,404 5,107 2,161 (574)
Net income 11,100 10,404 5,107 2,161 263
Loss per share before cumulative effect of accounting change (1) - - - - (0.27)
Basic earnings per share (2) 1.73 1.92 6.11 3.10 0.38
Diluted earnings per share (2) 1.68 1.85 1.44 0.65 0.16
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 51,051 $ 35,737 $22,438 $ 9,944 $ 3,234
Total assets 132,051 101,424 64,454 56,808 44,825
Long-term debt, less current maturities 39,944 14,356 12,040 20,998 16,251
Stockholders' equity 70,779 59,694 33,729 11,519 9,358
</TABLE>
(1) Includes the effect of a benefit reflecting the cumulative effect of a
change in method of accounting for income taxes, which was adopted on a
prospective basis effective January 1, 1993. The cumulative effect of the
change in accounting method was $837, which was recognized in the statement
of operations for the year ended December 31, 1993.
(2) Reflects, for all years, the presentation of basic and diluted earnings per
share as required under Statement of Financial Accounting Standards No.
128, "Earnings Per Share", which was adopted by the Company in the year
ended December 31, 1997.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Report contain
forward-looking statements within the meaning of the Securities
Litigation Reform Act of 1995 that are based on current expectations,
estimates and projections about the Company's business, management's
beliefs and assumptions made by management. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates" and
variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is
expressed or forecasted in such forward-looking statements due to
numerous factors, including, but not limited to those discussed in this
discussion and analysis of financial condition and results of
operations, as well as those discussed elsewhere in this Report and
from time to time in the Company's other Securities and Exchange
Commission filings and reports. In addition, such statements could be
affected by general industry and market conditions and growth rates,
and general domestic and international economic conditions.
OVERVIEW
The Company manufactures Water Transmission products in facilities
located in Portland, Oregon; Denver, Colorado; Adelanto, California and
Riverside, California. The Adelanto facility was constructed by the
Company in 1990. The Denver, Colorado facility was obtained through
the acquisition of Thompson Pipe and Steel Company in May 1996. The
Riverside, California facility was purchased from California Steel
Pressure Pipe Company in December 1996. Tubular Products are
manufactured in the Company's Portland, Oregon and Atchison, Kansas
facilities. The Company believes that the Tubular Products business, in
conjunction with the Water Transmission business, provides a
significant degree of market diversification, because the principal
factors affecting demand for Water Transmission products are different
from those affecting demand for Tubular Products. Demand for Water
Transmission products is generally based on population growth and
movement, changing water sources and replacement of aging
infrastructure. Demand can vary dramatically within the Company's
market area since each population center determines its own waterworks
requirements. Demand for Tubular Products is influenced by
non-residential construction, the agricultural economy and general
economic conditions.
The Company's net sales and net income may fluctuate significantly from
quarter to quarter due to the size of certain Water Transmission
orders, the schedule for deliveries of those orders and the inventory
management policies of certain of the Company's Tubular Products
customers. The Company has experienced such fluctuations in the past
and may experience such fluctuations in the future. Results of
operations in any period should not be considered indicative of the
results to be expected for any future period, and fluctuations in
operating results may also result in fluctuations in the price of the
Common Stock. No assurance can be given that the Company will remain
profitable in any future period. The Company's business is subject to
cyclical fluctuations based on general economic conditions and the
economic conditions of the specific industries served. Future economic
downturns could have a material adverse effect on the Company's
business, financial condition and results of operations.
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The following table sets forth, for the periods indicated, certain
financial information regarding costs and expenses expressed as a
percentage of total net sales and net sales of the Company's business
segments.
<TABLE>
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Year Ended December 31,
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1997 1996 1995
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Net sales
Water transmission 65.8% 66.5% 62.6%
Tubular products 34.2 33.5 37.4
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Total net sales 100.0 100.0 100.0
Cost of sales 79.4 77.1 80.0
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Gross profit 20.6 22.9 20.0
Selling, general and administrative
expenses 7.5 8.5 8.0
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Income from operations 13.1 14.4 12.0
Interest expense 1.2 1.7 3.5
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Income before income taxes 11.9 12.7 8.5
Provision for income taxes 4.5 5.0 3.3
------ ------ -------
Net income 7.4% 7.7% 5.2%
------ ------ -------
------ ------ -------
Gross profit as a percentage
of segment net sales:
Water transmission 22.9% 26.0% 21.9%
Tubular products 16.3 16.8 17.0
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales increased 11.6% from $135.2 million in 1996 to $150.8 million
in 1997. Sales increased in both business segments. Water Transmission
net sales increased 10.4% from $89.9 million in 1996 to $99.3 million
in 1997. The increase was primarily due to acquisitions made in 1996.
Tubular Products net sales increased 13.9% from $45.2 million in 1996
to $51.5 million in 1997. The increase was primarily the result of
increased demand in certain product lines. No single customer accounted
for 10% or more of total net sales in 1997 or 1996.
Gross profit increased slightly from $30.9 million (22.9% of total net
sales) in 1996 to $31.1 million (20.6% of total net sales) in 1997.
Water Transmission gross profit decreased 2.7% from $23.4 million
(26.0% of segment net sales) in 1996 to $22.7 million (22.9% of segment
net sales) in 1997. Water Transmission gross profit was impacted by
lower bidding activity which resulted in unfavorable pricing pressures.
In addition to lower bidding activity, weather related delays and
delays in receipt of steel shipments in the latter half of 1997 may
impact margins adversely in the first quarter of 1998. Gross profit
from tubular products increased 10.5 % to $8.4 million (16.3% of
segment net sales) in 1997 from $7.6 million (16.8% of segment net
sales) in 1996.
Selling, general and administrative expenses decreased slightly from
$11.5 million (8.5% of total net sales) in 1996 to $11.4 million (7.5%
of total net sales) in 1997.
Interest expense decreased 17.0% to $1.8 million in 1997 from $2.2
million in 1996, due to lower interest rates and a reduction of average
borrowings in 1997.
The Company's effective tax rate was approximately 38.1% in 1997
compared to approximately 39.6% in 1996. The decrease in the effective
tax rate was due primarily to a state tax credit in 1997. In connection
with the acquisition of Thompson Pipe and Steel Company in May 1996,
the Company acquired net operating loss carryforwards which, due to an
"ownership change" as defined under Section 382 of the Internal Revenue
Code
9
<PAGE>
of 1986, as amended, are subject to an annual limitation of
approximately $338,000 during the 15 year carryforward period. The
Company had approximately $4.5 million of net carryforwards remaining
at December 31, 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales increased 38.3% from $97.7 million in 1995 to $135.2 million
in 1996. Sales increased in both business segments. Water Transmission
net sales increased 46.9% from $61.2 million in 1995 to $89.9 million
in 1996, primarily as a result of an increase in the number of projects
bid in the Company's geographical market areas and the number of
successful bids in prior periods which resulted in increased production
during 1996, and the acquisition of Thompson Pipe and Steel Company in
May 1996. Tubular Products net sales increased 23.9% from $36.5 million
in 1995 to $45.2 million in 1996. The increase was primarily the result
of increased sales of well casing products. In 1996, no customer
accounted for 10% or more of total net sales. In 1995, sales to a
single customer represented 12% of total net sales.
Gross profit increased 58.1% from $19.6 million (20.0% of total net
sales) in 1995 to $30.9 million (22.9% of total net sales) in 1996.
Water Transmission gross profit increased 74.6% from $13.4 million
(21.9% of segment net sales) in 1995 to $23.4 million (26.0% of segment
net sales) in 1996. This increase was primarily attributable to
increased Water Transmission project bidding activity in 1996, which
allowed the Company to obtain projects which were well suited to its
manufacturing strengths, and resulted in comparatively higher margins.
Additionally, improved margins resulted from increased plant
utilization. Gross profit from Tubular Products increased 22.4% from
$6.2 million (17.0% of segment net sales) in 1995 to $7.6 million
(16.8% of segment net sales) in 1996, primarily as a result of
increased sales volume.
Selling, general and administrative expenses increased 47.9% from $7.8
million (8.0% of total net sales) in 1995 to $11.5 million (8.5% of
total net sales) in 1996. The increase is largely attributable to the
one-time costs associated with the acquisition of Thompson Pipe and
Steel Company in May 1996, and to its operating costs since that time,
as well as the costs of litigating an environmental issue with the EPA.
During the third quarter of 1996 the parties to this dispute reached an
agreement in principle to settle the litigation. SEE
"BUSINESS--ENVIRONMENTAL MATTERS." The Company recorded an expense of
$1.0 million, in the third quarter of 1996, in connection with this
agreement.
Interest expense decreased 36.5% from $3.4 million in 1995 to $2.2
million in 1996. This resulted from a decrease in average borrowings
outstanding due to the application of the proceeds of the Company's
initial public offering in November 1995 and the public offering in
November 1996.
The Company's effective tax rate was approximately 38.7% in 1995
compared to approximately 39.6% in 1996. The provision for income taxes
in 1995 reflected the use of net operating loss carryforwards and tax
credits which reduced the Company's tax provision. In connection with
the acquisition of Thompson Pipe and Steel Company, the Company
acquired net operating loss carryforwards of approximately $5.1 million
which, due to an "ownership change" as defined under Section 382 of the
Internal Revenue Code of 1986, as amended, are subject to an annual
limitation of approximately $338,000 during the 15 year carryforward
period.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In November 1995, the Company completed an initial public offering of
1.9 million shares of its common stock, which resulted in net proceeds
to the Company of approximately $14.6 million. In November 1996, the
Company completed a public offering of 2.3 million shares of its common
stock, 1.1 million shares by the Company and 1.2 million shares by
certain shareholders of the Company, which resulted in net proceeds to
the Company of approximately $15.3 million. The Company finances
operations with internally generated funds and available borrowings. At
December 31, 1997, the Company had cash and cash equivalents of
$904,000.
Net cash used in operating activities in 1997 was $4.3 million. This
was primarily a net result of $11.1 million of net income and non-cash
adjustments for depreciation and amortization of $2.2 million; offset
by increases in trade receivables of $2.1 million, refundable income
taxes of $3.3 million and costs and estimated earnings in excess of
billings on uncompleted contracts of $9.2 million, and decreases in
accounts payable of $1.8 million and accrued and other liabilities of
$4.3 million. The decreases in accounts payable and accrued and other
liabilities were primarily attributable to timing of purchases and
payments. The increases in accounts receivable and costs and estimated
earnings in excess of billings on uncompleted contracts resulted from
delayed shipments in the latter half of 1997 primarily due to project
delays, inclement weather, and other contractor related issues.
Net cash used in investing activities in 1997 was $22.4 million, which
primarily resulted from expenditures related to a new tubular products
mill installed in its Portland, Oregon facility, which was operational
late in the first quarter of 1998, and the installation of a rolled and
welded manufacturing line in the Adelanto, California plant, which was
operational in the fourth quarter of 1997. The remaining expenditures
were for projects related to existing operations.
Net cash provided by financing activities in 1997 was $23.4 million,
which included the net effect of an additional $35.0 million in
borrowings under Senior Notes and the repayment of long-term debt and
capital lease obligations.
The Company has four significant components of debt: $35.0 million of
Senior Notes, without collateral, which bear interest at 6.87%; a $25.0
million credit agreement under which $7.0 million was outstanding at
December 31, 1997; Industrial Development Bonds in the aggregate amount
of $3.7 million with variable interest rates ranging from 3.85% to
4.55% at December 31, 1997; and capital leases aggregating $3.6 million
bearing interest at rates ranging from 4.55% to 11.25% at December 31,
1997.
In November 1997, the Company issued $35.0 million of 6.87% Senior
Notes, without collateral (the "Notes"). Proceeds received under the
Notes were used to reduce amounts outstanding under the Company's line
of credit. The Notes mature November 15, 2007, and require semi-annual
interest payments in November and May, and equal annual principal
payments commencing on November 15, 2001 and continuing every year
thereafter until final maturity.
The $25.0 million line of credit agreement expires on October 20, 2000
and is without collateral. It bears interest at rates related to IBOR
or LIBOR plus 0.65% (6.275% at December 31, 1997), or at prime less
0.5% (8.5% at December 31, 1997). At December 31, 1997, the Company had
$7.0 million outstanding under the line of credit at a weighted average
IBOR interest rate of 6.534%, and available additional borrowing
capacity under the line of credit of $15.5 million. SEE NOTE 6 OF NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
The Company's working capital requirements have increased due to the
increase in the Company's Water Transmission business which is
characterized by lengthy production periods and extended payment
cycles. The Company anticipates that its existing cash and cash
equivalents, cash flows expected to be generated by operations, amounts
available under its credit agreement or Notes and amounts available
under additional senior
11
<PAGE>
notes anticipated to be issued in the second quarter of 1998, will be
adequate to fund its working capital and capital requirements for at
least the next twelve months.
To the extent necessary, the Company may also satisfy capital
requirements through additional bank borrowings, senior notes, and
capital leases if such resources are available on satisfactory terms.
The Company has from time to time evaluated and continues to evaluate
opportunities for acquisitions and expansion and, consistent with this
practice, is currently engaged in discussions with other parties
regarding possible acquisitions. Any such transactions, if consummated,
may use a portion of the Company's working capital or necessitate
additional borrowings.
YEAR 2000 ISSUE. The Company has made an assessment of the effect of
the Year 2000 issue on its hardware, operating and applications
software. The Company has or is obtaining certification that its
primary operating systems and application software packages will
properly recognize calendar dates beginning in the year 2000. In
addition, the Company is discussing with its major vendors and
customers the possibility of interface or service difficulties relating
to the Year 2000 issue. The Company plans to complete its examination
of the effect of the Year 2000 issue on all of its application and
operating systems by the end of 1998.
To date, no significant concerns have been identified and accordingly
the Company does not currently expect to incur material costs in
connection with the Year 2000 issue. There can be no assurance,
however, that there will not be any Year 2000 related operating
problems or material expenses that will arise with the Company's
computer application and operating systems.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which establishes requirements for disclosure of comprehensive
income. The objective of SFAS 130 is to report a measure of all changes
in equity that result from transactions and economic events other than
transactions with owners. Comprehensive income is the total of net
income and all other non-owner changes in equity. SFAS 130 is effective
for fiscal years beginning after December 15, 1997. Reclassification of
earlier financial statements for comparative purposes is required.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). This
statement will change the way public companies report information about
segments of their business in their annual financial statements and
requires them to report selected segment information in their quarterly
reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the
material countries in which it holds assets and reports revenues and
its major customers. This statement is effective for fiscal years
beginning after December 15, 1997.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" ("SFAS 132"). This
statement revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or
recognition of those plans. The statement suggests combined formats for
presentation of pension and other postretirement benefit disclosures.
The statement also permits reduced disclosures for nonpublic entities.
This statement is effective for fiscal years beginning after December
15, 1997.
The Company's management has studied the implications of SFAS 130,
SFAS 131 and SFAS 132, and based on the initial evaluation, expects the
adoption to have no impact on the Company's financial condition or
results of operations, but will require revised disclosures when the
respective statements become effective.
ENVIRONMENTAL MATTERS. As described in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, the Company has been
identified as one of four potentially responsible parties with
potential liability for a Superfund site in Clackamas, Oregon (the
"Site"). In October 1995, the Company filed a complaint seeking a
declaratory judgment from the Bankruptcy Court that any claims with
respect to liability for
12
<PAGE>
the costs of the Response Activities at the Site were discharged by the
Bankruptcy Court's confirmation of the Company's Plan of Reorganization
(the "Plan"). In September 1996, the Company entered into mediation
with the EPA and the Oregon Department of Environmental Quality (the
"ODEQ") (collectively, the "Agencies") in an attempt to resolve the
matter without incurring the substantial additional expense of
continuing the litigation. As a result of the mediation process, the
Company and the Agencies entered into an agreement in principle with
respect to a proposed settlement of the litigation (the "Settlement
Agreement"). Pursuant to the Settlement Agreement, the Company and the
Agencies prepared a consent decree which embodies the terms of the
Settlement Agreement (the "Consent Decree"). The Consent Decree was
entered by the Bankruptcy Court on July 22, 1997. The Consent Decree
relating to the portion of the Site that is vacant (the "Hall
Property") which provides for the transfer of title to the Hall
Property to the Agencies, and upon which the effectiveness of the
Consent Decree was conditioned, was entered by the United States
District Court on August 19, 1997.
Under the terms of the Consent Decree, the Company on August 22, 1997
paid the Agencies $1.0 million and deposited an additional $2.3 million
in an escrow account or cash escrow (the "Cash Escrow"), with the
interest income on the Cash Escrow to be distributed to the EPA. The
Consent Decree provides that the EPA will complete construction of the
remedial action at the Site in accordance with its standards and will
have the right to sell the Hall Property at any time during the
clean-up process and for one year thereafter. If the Hall Property is
sold by the Agencies, the $2.3 million held in the Cash Escrow will be
returned to the Company. Once construction of the remedial action has
been completed as evidenced by issuance of Remedial Action Reports (or
their equivalents) and a Preliminary Close Out Report, and the Hall
Property is usable for a "reasonable commercial or industrial use," the
Agencies will have the option to continue to market the Hall Property
for one year. If the Hall Property is not sold during this period, the
Company believes the Agencies will elect to have the Hall Property
conveyed to the Company in exchange for the $2.3 million held in the
Cash Escrow. The Company would then be required to market the Hall
Property for another year. If the Hall Property sells within one year
thereafter, fifty percent of any net proceeds in excess of $2.3 million
would be paid to the EPA.
If the Company takes title to the Hall Property, the Agencies will
provide a "Prospective Purchaser Agreement" for use by the Company at
its option and for use by the Company's eligible successors in
interest. The EPA would specify that any eligible prospective purchaser
of the Hall Property would not be liable for any past environmental
contamination or any ongoing remediation resulting from past operations
at the Site. If the Company elects not to take ownership of the Hall
Property, the Agencies would retain the $2.3 million held in Cash
Escrow. If the Agencies are unable to complete construction of the
remedial action and clean up soils so that the Hall Property can be
used for a reasonable commercial or industrial use within ten years,
they would be required to return the $2.3 million held in the Cash
Escrow to the Company. The Consent Decree also contains covenants not
to sue, reservations of rights, and protection for the Company from
third party claims for contribution for environmental clean-up costs at
the Site.
The Company believes that once the Hall Property is available for a
"reasonable commercial or industrial use," it would have a current
value in excess of $2.3 million. Consequently, the Company does not
believe that the $2.3 million to be held in the Cash Escrow is
"impaired" under generally accepted accounting principles. Accordingly,
the Company segregated the $2.3 million as a restricted asset on its
consolidated balance sheet. The Company recorded the $1.0 million
payment as an expense in the third quarter of 1996.
SUBSEQUENT EVENTS. On March 6, 1998, the Company acquired all of the
outstanding capital stock of Southwestern Pipe, Inc. ("Southwestern")
and P&H Tube Corporation ("P&H"), both Texas corporations. The Company
paid a purchase price of $40.1 million in cash, which is subject to a
post-closing adjustment based upon changes in the working capital from
February 28, 1998 to the closing date and the amount of outstanding
indebtedness of the purchased companies at the closing date.
The principal business of both Southwestern and P&H is the manufacture
and sale of structural and mechanical tubing products. Southwestern
owns and operates a manufacturing facility in Houston, Texas. P&H Tube
owns and operates a manufacturing facility in Bossier City, Louisiana.
The Company will continue to operate the acquired plant, equipment and
other property for the same purpose, and will operate each of the
companies as separate wholly owned subsidiaries of the Company.
13
<PAGE>
On March 6, 1998, the Company amended its line of credit agreement to
temporarily increase the line to $55.0 million. Additionally, the
restriction associated with the ratio of maximum funded debt to
earnings before interest, taxes, depreciation and amortization
("EBITDA") was adjusted for one year from 3.0:1.0 to 3.25:1.0. The
total commitment under the line of credit will be reduced to $30.0
million on the earliest of April 15, 1998 or the date that the Company
receives the net proceeds from the issuance of senior notes in the
amount of at least $20.0 million. The Company expects to issue
additional senior notes totaling $40.0 million during the second
quarter of 1998 to reduce the amounts borrowed under its line of credit
and to reduce the available line of credit. Interest under the amended
line of credit agreement is payable at IBOR plus 0.65% to 1.05% (0.65%
at March 6, 1998) based on the Company's ratio, as defined, of funded
debt to EBITDA.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Substantially all of the Company's liquid investments are at fixed
interest rates, and therefore the fair value of these investments is
affected by changes in market interest rates. However, substantially
all of the Company's liquid investments mature within one year. As a
result, the Company believes that the market risk arising from its
holdings of financial instruments is minimal.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
The information required by this item is included under the caption
QUARTERLY DATA, in Note 17 of Notes to Consolidated Financial
Statements as listed in Item 14 of Part IV of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is included under the captions
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS, EXECUTIVE OFFICERS
and SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE in the
Company's Proxy Statement for its 1998 Annual Meeting of Shareholders
and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included under the caption
EXECUTIVE COMPENSATION in the Company's Proxy Statement for its 1998
Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included under the caption
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS in the Company's
Proxy Statement for its 1998 Annual Meeting of Shareholders and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included under the caption
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS in the Company's Proxy
Statement for its 1998 Annual Meeting of Shareholders and is
incorporated herein by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The Financial Statements, together with the report thereon of Coopers &
Lybrand L.L.P., are included on the pages indicated below.
<TABLE>
<CAPTION>
Page
------
<S> <C>
Report of Independent Accountants F-1
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995 F-2
Consolidated Balance Sheets as of
December 31, 1997 and 1996 F-3
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996, and 1995 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
(a) (2) FINANCIAL STATEMENT SCHEDULE
The following schedule and report of independent public accountants are filed
herewith:
<TABLE>
<CAPTION>
Page
------
<S> <C>
Schedule II Valuation and Qualifying Accounts S-1
Report of Independent Accountants on Financial Statement
Schedule S-2
</TABLE>
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is included in the Consolidated
Financial Statements or notes thereto.
15
<PAGE>
(a) (3) EXHIBITS INCLUDED HEREIN:
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C> <C>
(1) 3.1 Second Restated Articles of Incorporation
(1) 3.2 Second Amended and Restated Bylaws
(1) 10.2 1986 Incentive Stock Option Plan*
(1) 10.3 1995 Stock Incentive Plan*
(1) 10.4 1995 Stock Option Plan for Nonemployee Directors*
(1) 10.5 Registration Rights Agreement
(1) 10.6 Loan Agreement dated May 1, 1990 between the Company and
California Statewide Communities Development Authority
(2) 10.7 Stock Purchase Agreement dated as of May 8, 1996 among
Northwest Pipe Company, Thompson Pipe and Steel Company, CHL
Holdings, Inc. and Inter-City Products Corporation
(3) 10.8 Amended 1995 Stock Incentive Plan*
(4) 10.9 Loan Agreement dated October 20, 1997 by and among Bank of
America National Trust and Savings Association, Northwest
Pipe Company, Thompson Pipe and Steel Company and Thompson
Steel Pipe Company
(4) 10.10 First Amendment to Loan Agreement dated October 20, 1997
(4) 10.11 Second Amendment to Loan Agreement dated November 26, 1997
(4) 10.12 Third Amendment to Loan Agreement dated March 6, 1998
(4) 10.13 Note Purchase Agreement dated November 1, 1997
(5) 10.14 Stock Purchase Agreement dated March 6, 1998 by and among
Southwestern Pipe, Inc., P&H Tube Corporation, and the
shareholders of Southwestern Pipe, Inc. and P&H Tube
Corporation
(4) 21 Subsidiaries of the Registrant
(4) 23 Consent of Coopers & Lybrand L.L.P.
(4) 27 Financial Data Schedule
</TABLE>
*This exhibit constitutes a management contract or compensatory plan or
arrangement.
(1) Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form S-1, as amended, effective November 30, 1995, Commission
Registration No. 33-97308.
(2) Incorporated by reference to Exhibits to the Company's Report on Form 8-K
(as filed with the Securities and Exchange Commission on June 14, 1996).
(3) Incorporated by reference to Exhibits to the Company's Proxy Statement for
the 1997 Annual Meeting of Shareholders.
(4) Filed herewith.
(5) Incorporated by reference to the Company's Report on Form 8-K (as filed
with the Securities and Exchange Commission on March 20, 1998).
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1997.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 23rd day of
March 1998.
NORTHWEST PIPE COMPANY
By /s/ WILLIAM R. TAGMYER
---------------------------
William R. Tagmyer
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated, on the 23rd day of March 1998.
Signature Title
- --------- -----
/s/ WILLIAM R. TAGMYER Chairman of the Board
- ---------------------- and Chief Executive Officer
William R. Tagmyer (Principal Executive Officer)
/s/ BRIAN W. DUNHAM Director, President, Chief Operating Officer,
- ---------------------- Treasurer and Secretary
Brian W. Dunham
/s/ JOHN D. MURAKAMI Vice President, Chief Financial Officer
- ---------------------- (Principal Financial Officer)
John D. Murakami
/s/ WAYNE B. KINGSLEY Director
- ----------------------
Wayne B. Kingsley
/s/ NEIL R. THORNTON Director
- ----------------------
Neil R. Thornton
/s/ VERN B. RYLES, JR. Director
- ----------------------
Vern B. Ryles, Jr.
/s/ WARREN K KEARNS Director
- ----------------------
Warren K. Kearns
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Northwest Pipe Company
We have audited the accompanying consolidated balance sheets of Northwest
Pipe Company and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Northwest Pipe
Company and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Portland, Oregon
February 7, 1998, except for Note 18,
for which the date is March 6, 1998
F-1
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1997 1996 1995
------------- -------------- ------------
<S> <C> <C> <C>
Net sales $ 150,833 $ 135,182 $ 97,715
Cost of sales 119,716 104,240 78,139
------------- -------------- ------------
Gross profit 31,117 30,942 19,576
Selling, general and administrative
expenses 11,382 11,530 7,798
------------- -------------- ------------
Operating income 19,735 19,412 11,778
Interest expense 1,616 1,961 2,839
Interest expense to related parties 201 228 609
------------- -------------- ------------
Income before income taxes 17,918 17,223 8,330
Provision for income taxes 6,818 6,819 3,223
------------- -------------- ------------
Net income $ 11,100 $ 10,404 $ 5,107
------------- -------------- ------------
------------- -------------- ------------
Basic earnings per share $ 1.73 $ 1.92 $ 6.11
------------- -------------- ------------
------------- -------------- ------------
Diluted earnings per share $ 1.68 $ 1.85 $ 1.44
------------- -------------- ------------
------------- -------------- ------------
Shares used in per share
calculations:
Basic 6,405 5,408 836
------------- -------------- ------------
------------- -------------- ------------
Diluted 6,622 5,631 3,675
------------- -------------- ------------
------------- -------------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
--------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 904 $ 4,302
Trade receivables, less allowance for doubtful
accounts of $1,825 and $1,680 25,162 23,222
Costs and estimated earnings in excess of billings
on uncompleted contracts 19,914 10,750
Inventories 20,530 20,484
Refundable income taxes 3,307 -
Deferred income taxes 447 3,051
Prepaid expenses and other 1,402 1,289
--------------- -------------
Total current assets 71,666 63,098
Property and equipment, net 57,447 37,469
Restricted assets 2,300 -
Other assets 638 857
--------------- -------------
$ 132,051 $ 101,424
--------------- -------------
--------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to financial institution $ 7,000 $ 7,302
Current portion of long-term debt 250 2,100
Current portion of capital lease obligations 2,175 424
Accounts payable 8,116 9,930
Accrued liabilities 3,074 7,605
--------------- -------------
Total current liabilities 20,615 27,361
Long-term debt, less current portion 38,490 10,050
Capital lease obligations, less current portion 1,454 1,760
Capital lease obligations due to related party, less
current portion - 2,546
Minimum pension liability 294 -
Deferred income taxes 419 13
--------------- -------------
Total liabilities 61,272 41,730
Commitments and contingencies (Notes 8 and 13)
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, none issued or outstanding - -
Common stock, $.01 par value, 15,000,000 shares
authorized, 6,411,402 and 6,388,986
shares issued and outstanding 64 64
Additional paid-in-capital 38,725 38,546
Retained earnings 32,277 21,177
Minimum pension liability (287) (93)
--------------- -------------
Total stockholders' equity 70,779 59,694
--------------- -------------
$ 132,051 $ 101,424
--------------- -------------
--------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------
Class A Class B Additional Minimum Total
-------------- --------------- Paid in Retained Pension Stockholders'
Shares Amount Shares Amount Shares Amount Capital Earnings Liability Equity
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 448,394 $ 5 248,609 $ 3 $ 5,845 $ 5,666 $ 11,519
Net income
Conversion of Class A 5,107 5,107
to common stock (448,394) (5) 448,394 $ 5
Conversion of Class B
to common stock (248,609) (3) 248,609 3
Conversion of Series B
and Series C Subor-
dinated debt to
common stock 2,629,296 26 2,464 2,490
Proceeds from sale of
common stock, net of
issuance costs of
$1,558 1,932,000 19 14,594 14,613
----------------------------------------------------------------------------------------------------------
Balances at
December 31, 1995 - - - - 5,258,299 53 22,903 10,773 33,729
Net income 10,404 10,404
Issuance of common
stock under stock
option plans 59,069 1 65 66
Repurchase of common
stock (174) (2) (2)
Tax benefit of stock
options exercised 238 238
Proceeds from sale of
common stock, net of
issuance costs of
$400 1,071,792 10 15,249 15,259
Reclassification 93 (93)
----------------------------------------------------------------------------------------------------------
Balances at
December 31, 1996 - - - - 6,388,986 64 38,546 21,177 (93) 59,694
Net income 11,100 11,100
Issuance of common
stock under stock
option plans 22,416 - 49 49
Minimum pension
liability (194) (194)
adjustment
Tax benefit of stock
options exercised 130 130
----------------------------------------------------------------------------------------------------------
Balances at
December 31, 1997 - - - - 6,411,402 $64 $38,725 $32,277 $(287) $70,779
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
F-4
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,100 $ 10,404 $ 5,107
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,242 2,022 1,362
Provision for doubtful accounts 145 813 296
Deferred income tax provision 3,010 3 1,070
Changes in current assets and liabilities:
Trade receivables (2,085) 1,106 (2,629)
Costs and estimated earnings in excess of billings
on uncompleted contracts (9,164) 1,031 (7,079)
Inventories (46) (6,358) 2,336
Refundable income taxes (3,307) - -
Prepaid expenses and other (113) 405 280
Accounts payable (1,814) (2,860) 2,048
Accrued and other liabilities (4,301) 389 962
-------- -------- --------
Net cash (used in) provided by operating activities (4,333) 6,955 3,753
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (20,351) (6,680) (2,556)
Acquisition, net of cash acquired - (10,587) -
Other assets (2,081) 96 148
-------- -------- --------
Net cash used in investing activities (22,432) (17,171) (2,408)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 49 15,323 14,613
Proceeds from long-term debt 35,000 - -
Payments on long-term debt (8,410) (3,286) (7,174)
Net proceeds (payments) under notes payable (302) 1,845 (8,128)
Payments on capital lease obligations (299) (106) (88)
Payments on capital lease obligations
to related party (2,671) (115) (106)
-------- -------- --------
Net cash provided by (used in) financing activities 23,367 13,661 (883)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (3,398) 3,445 462
Cash and cash equivalents, beginning of period 4,302 857 395
-------- -------- --------
Cash and cash equivalents, end of period $ 904 $ 4,302 $ 857
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for: Interest $ 2,157 $ 1,969 $ 4,009
Income taxes 6,741 7,901 1,274
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:
Tax benefit of nonqualified stock options exercised $ 130 $ 238 $ -
Long-term debt converted to common stock - - 2,490
Capital lease obligations incurred 1,869 - 62
Acquisition:
Fair value of assets acquired $ - $ 27,403 $ -
Fair value of liabilities assumed - 16,816 -
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
NORTHWEST PIPE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements include the accounts of Northwest
Pipe Company and its wholly owned subsidiaries (the "Company"). All
significant intercompany balances have been eliminated. The Company
manufactures steel pipe in two business groups at plants located in
Portland, Oregon; Denver, Colorado; Adelanto, California; Atchison,
Kansas and Riverside, California.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and short term highly liquid
investments with remaining maturities of three months or less when
purchased.
INVENTORIES
Inventories are stated at the lower of cost or market. Finished goods
are stated at standard cost which approximates the first-in, first-out
method of accounting. Raw material inventories of steel coil are stated
at cost on a specific identification basis. Raw material inventories of
coating and lining materials, as well as materials and supplies, are
stated on an average cost basis.
PROPERTY AND EQUIPMENT
Property and equipment, including land, buildings and equipment under
capital leases, are stated at cost. Maintenance and repairs are expensed
as incurred and costs of improvements and renewals, including
capitalized interest, are capitalized. Depreciation and amortization are
determined by the straight-line method based on the estimated useful
lives of the related assets. Upon disposal, costs and related
accumulated depreciation of the assets are removed from the accounts and
resulting gains or losses are reflected in operations. The Company
leases land, buildings and equipment under long-term capital leases,
which are being amortized on a straight-line basis over estimated useful
lives.
Estimated useful lives by major classes of property and equipment are as
follows:
<TABLE>
<S> <C>
Land improvements 20 years
Buildings 30 years
Equipment 5-18 years
</TABLE>
REVENUE RECOGNITION
Revenue from construction contracts in the Company's Water Transmission
business group is recognized on the percentage-of-completion method,
measured by the percentage of total costs incurred to date to the
estimated total costs of each contract. Contract costs include all
direct material and labor costs and those indirect costs related to
contract performance, such as indirect labor, supplies, tools, repairs
and depreciation. Selling, general and administrative costs are charged
to expense as incurred. Provisions for losses on uncompleted contracts
are made in the period such losses are known. Changes in job
performance, job conditions and estimated profitability, including
those arising from contract penalty provisions, and final contract
settlements may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.
Revenue from the Company's Tubular Products business group is recognized
when products are shipped.
F-6
<PAGE>
INCOME TAXES
The Company records deferred income tax assets and liabilities based
upon the difference between the financial statement and income tax bases
of assets and liabilities using enacted income tax rates. Valuation
allowances are established when necessary to reduce deferred income tax
assets to the amount expected to be realized. Income tax expense is the
tax payable for the period and the change during the period in net
deferred income tax assets and liabilities.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share" ("SFAS 128"), which supersedes APB Opinion No. 15
and specifies the computation, presentation and disclosure requirements
for earnings per share. The Company adopted the provisions of SFAS 128
for the year ended December 31, 1997, which required the restatement of
all previously reported per share amounts. As it relates to the Company,
the principal differences between the provisions of SFAS 128 and
previous authoritative pronouncements are exclusion of common stock
equivalents in the determination of Basic Earnings Per Share and the
market price at which common stock equivalents are calculated in the
determination of Diluted Earnings Per Share.
Basic earnings per common share is computed using the weighted average
number of shares of common stock outstanding for the period. Diluted
earnings per common share is computed using the weighted average number
of shares of common stock and dilutive common equivalent shares
outstanding during the year, and using the assumption that conversion of
the Series B and Series C Convertible Subordinated Debentures and the
Company's November 1995 initial public offering occurred as of the
beginning of 1995.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Trade receivables are with a large number of customers, including
municipalities, manufacturers, distributors and contractors, dispersed
across a wide geographic base.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments are the amounts at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The carrying
amounts reflected in the consolidated balance sheets for cash and cash
equivalents, trade receivables, other current assets and current
liabilities approximate fair value because of the short maturity for
these instruments. The fair value approximates the carrying value of the
Company's borrowings under its long-term arrangements based upon
interest rates available for the same or similar loans.
IMPAIRMENT OF LONG-LIVED ASSETS
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", establishes criteria for and
requires recognition of impairment losses on long-lived assets. SFAS
121 also prescribes the accounting for long-lived assets that are
expected to be disposed of in future periods. The Company adopted SFAS
121 in 1996. The adoption of this standard did not have any effect on
the consolidated financial statements of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-7
<PAGE>
SEGMENTS
Water Transmission products are custom manufactured in accordance with
project specifications. These products are used primarily for high
pressure water transmission pipelines in the United States and Canada.
Water Transmission products are manufactured in Portland, Oregon;
Denver, Colorado; Adelanto, California, and Riverside, California and
are sold primarily to public water agencies either directly or through
an installation contractor. A substantial portion of the Company's Water
Transmission revenue is derived from sales to installation contractors
for public water transmission projects. As such, the Company's sales
could be adversely impacted by a decline in the projects planned by
public water agencies, governmental spending cuts, general budgetary
constraints or the inability of governmental entities to issue debt.
Tubular Products are manufactured in the Company's Portland, Oregon and
Atchison, Kansas facilities. Tubular Products are marketed through a
network of direct sales force personnel and independent distributors
throughout the United States and Canada. These products are used for a
variety of construction, agricultural and industrial purposes.
RECLASSIFICATIONS
Certain 1996 balances have been reclassified to conform with the 1997
presentation. The reclassifications had no impact on previously reported
net income.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which establishes requirements for disclosure of
comprehensive income. The objective of SFAS 130 is to report a measure
of all changes in equity that result from transactions and economic
events other than transactions with owners. Comprehensive income is the
total of net income and all other non-owner changes in equity. SFAS 130
is effective for fiscal years beginning after December 15, 1997.
Reclassification of earlier financial statements for comparative
purposes is required.
Also in June 1997, the FASB issued SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information", which will change
the way public companies report information about segments of their
business in their annual financial statements and requires them to
report selected segment information in their quarterly reports issued to
shareholders. It also requires entity-wide disclosures about the
products and services an entity provides, the material countries in
which it holds assets and reports revenues and its major customers. This
Statement is effective for fiscal years beginning after December 15,
1997.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", which revises
employers' disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans.
The statement suggests combined formats for presentation of pension and
other postretirement benefit disclosures and is effective for fiscal
years beginning after December 15, 1997.
The Company's management has studied the implications of SFAS 130, SFAS
131 and SFAS 132, and based on the initial evaluation, expects the
adoption to have no impact on the Company's financial condition or
results of operations, but will require revised disclosures in 1998.
F-8
<PAGE>
2. ACQUISITION:
In May 1996, the Company acquired Thompson Pipe and Steel Company
("Thompson Pipe and Steel"), a manufacturer of water transmission pipe
headquartered in Denver, Colorado (the "Acquisition"). The Company
purchased of all of the issued and outstanding capital stock of Thompson
Pipe and Steel from Inter-City Products Corporation, a corporation based
in Toronto, Canada, and its affiliates ("ICP") for approximately $6.1
million in cash. The principal assets acquired by the Company in the
Acquisition were steel pipe manufacturing facilities located in Denver,
Colorado and Princeton, Kentucky. The Kentucky manufacturing facility
was closed by Thompson Pipe and Steel in 1995. The Company intends to
continue operating the manufacturing facility in Denver, Colorado, and
intends to dispose of the manufacturing facility located in Princeton,
Kentucky.
In December 1996, the Company acquired, from California Steel Pressure
Pipe Company, certain assets of its Riverside, California plant for
approximately $6.4 million in cash. The Riverside, California plant was
closed in December 1996 by California Steel Pressure Pipe Company. In
January 1997, the Company began producing smaller diameter water
transmission pipe at the Riverside plant, and managing this facility
from its Adelanto, California facility. The principal assets acquired
by the Company in the acquisition were trade receivables, inventory, and
machinery and equipment.
The acquisitions were accounted for using the purchase method of
accounting, which requires that the purchase price be allocated to the
net assets acquired based upon the relative fair value of assets
acquired. The accompanying consolidated financial statements include the
results of operations from the dates of acquisition.
3. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS:
<TABLE>
<CAPTION>
December 31,
1997 1996
------- --------
<S> <C> <C>
Costs incurred on uncompleted contracts $54,572 $ 41,944
Estimated earnings 11,804 9,588
------- --------
66,376 51,532
Less billings to date (46,462) (40,782)
------- --------
$19,914 $ 10,750
------- --------
------- --------
</TABLE>
Costs and estimated earnings in excess of billings on uncompleted
contracts represents revenue earned under the percentage of completion
method but not billable based on the terms of the contracts. These
amounts are billed based on the terms of the contracts which include
achievement of milestones, partial shipments or completion of the
contracts.
F-9
<PAGE>
4. INVENTORIES:
<TABLE>
<CAPTION>
December 31,
1997 1996
-------- -------
<S> <C> <C>
Finished goods $ 5,854 $ 6,564
Raw materials 12,809 12,449
Materials and supplies 1,867 1,471
-------- -------
$20,530 $20,484
-------- -------
-------- -------
</TABLE>
5. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
December 31,
1997 1996
-------- --------
<S> <C> <C>
Land and improvements $ 6,461 $ 4,534
Buildings 12,762 11,424
Equipment 34,063 33,418
Property and equipment under capital leases 3,232 3,452
Construction in progress 24,608 6,078
-------- --------
81,126 58,906
Less accumulated depreciation and amortization (23,679) (21,437)
-------- --------
$ 57,447 $ 37,469
-------- --------
-------- --------
</TABLE>
Accumulated amortization associated with property and equipment under
capital leases was $106 and $577 at December 31, 1997, and 1996,
respectively.
6. NOTE PAYABLE TO FINANCIAL INSTITUTION:
The Company had, at December 31, 1997, a $25.0 million line of credit.
The Company had available borrowing capacity of $15.5 million at
December 31, 1997 under this line of credit. The line of credit
agreement expires in October 2000 and is without collateral. The line
of credit bears interest at rates related to IBOR or LIBOR plus 0.65%
(6.275% at December 31, 1997), or at prime less 0.5% (8.5% at December
31, 1997). At December 31, 1997, the Company had $7.0 million
outstanding under the line of credit at a weighted average IBOR interest
rate of 6.534%. (See Note 18) The Company had $7.3 million outstanding
at December 31, 1996 under a line of credit with interest at prime plus
1.0% (9.25% at December 31, 1996).
F-10
<PAGE>
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31,
1997 1996
-------- --------
<S> <C> <C>
Industrial Development Bonds, issued in accordance with
Internal Revenue Code Section 144(a), variable interest
(3.85% and 4.55% at December 31, 1997 and 4.05% and 3.99%
at December 31, 1996) payable monthly; annual principal
payments of $250, collateralized by property and
equipment and guaranteed by an irrevocable letter of
credit from a bank $ 3,740 $ 3,990
Notes payable to Senior Lender - 8,100
Senior Notes, due in annual payments of $5.0 million
beginning November 15, 2001, plus interest at 6.87% paid
semi-annually, on May 15 and November 15, without
collateral 35,000 -
Other - 60
-------- --------
Total long-term debt $ 38,740 $ 12,150
-------- --------
-------- --------
Amounts are displayed on the consolidated balance sheet
as follows:
Current portion of long-term debt $ 250 $ 2,100
Long-term debt, less current portion 38,490 10,050
-------- --------
$ 38,740 $ 12,150
-------- --------
-------- --------
</TABLE>
In November 1997, the Company issued $35.0 million of 6.87% Senior Notes (the
"Notes"). Proceeds received under the Notes were used to reduce amounts
outstanding under the Company's line of credit. The Notes require semi-annual
interest payments in November and May, and equal annual principal payments
commencing on November 15, 2001 and continuing every year thereafter until
final maturity on November 15, 2007.
The Company is required to maintain certain financial ratios under its loan
agreements. As of December 31, 1997, the most restrictive of these are a
requirement to maintain maximum funded debt, as defined, to earnings before
interest, taxes, depreciation and amortization of 3.0 to 1.0 and a
requirement to maintain a debt service coverage ratio of 2.0 to 1.0. (See
Note 18)
F-11
<PAGE>
Future principal payments are as follows:
<TABLE>
<S> <C>
1998 $ 250
1999 250
2000 250
2001 5,740
2002 5,250
Thereafter 27,000
--------
$38,740
--------
--------
</TABLE>
Interest expense of $1,817 is net of amounts capitalized of $707 in 1997. All
interest costs incurred in 1996 and 1995 have been expensed.
8. LEASES:
CAPITAL LEASES
The Company leases land, buildings and improvements at its Kentucky and
Riverside, California facilities. In addition, the Company has other capital
leases for office and manufacturing equipment.
The future minimum lease payments under these capital leases, and the present
value of the minimum lease payments as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $2,385
1999 306
2000 249
2001 240
2002 231
Thereafter 639
------
Total minimum lease payments 4,050
Less amount representing interest 421
------
Present value of minimum lease payments including current
maturities of $2,175, with interest rates ranging from
4.55% to 11.25% $3,629
------
------
</TABLE>
OPERATING LEASES
The Company has entered into various equipment leases with terms of five
years or less. Total rental expense for 1997, 1996 and 1995 was $1,323,
$1,060 and $789, respectively. Future minimum payments for operating leases
with initial or remaining terms in excess of one year are:
<TABLE>
<S> <C>
1998 $ 454
1999 295
2000 160
2001 140
2002 61
------
$1,110
------
------
</TABLE>
F-12
<PAGE>
9. RELATED PARTY TRANSACTIONS:
Multnomah Land & Equipment ("Multnomah") is a partnership in which a director
of the Company is a general partner. In a previous year, the Company entered
into two separate agreements to lease a pipe manufacturing facility and
equipment from Multnomah. The amounts paid under these lease agreements were
$315, $344, and $344 for 1997, 1996 and 1995, respectively. The Company
exercised its option to acquire the pipe manufacturing facility in December
1997 for $2,557, in accordance with the terms of the agreement.
10. RETIREMENT PLANS:
The Company has a defined contribution retirement plan covering substantially
all of its employees. Total expense in 1997, 1996 and 1995 amounted to $412,
$422 and $230, respectively. The Company matches up to 50% of employee
contributions to the plan, subject to certain limitations.
Thompson Pipe and Steel has two noncontributory defined benefit plans which
cover substantially all employees. Benefits under the union pension plan are
based upon a flat benefit formula, while benefits under the salaried benefit
plan are based upon a final pay formula. The funding policy for each plan is
based on current plan costs plus amortization of the unfunded plan liability.
11. CAPITAL STOCK:
On July 28, 1995, the Board of Directors amended and restated the Company's
Articles of Incorporation subject to approval by the stockholders of the
Company. The revised articles, among other things, redesignated the Class A
and Class B common stock of the Company as Common Stock, authorized a
0.858-for-1 reverse stock split of each outstanding share of Common Stock,
increased the authorized capital stock of the Company to 15,000,000 shares of
Common Stock and 10,000,000 shares of Preferred Stock, authorized the Board
of Directors to issue blank check Preferred Stock, and provided for the
classification of the Board of Directors into three classes with staggered
terms. The Board of Directors, with stockholder approval, also authorized and
approved the 1995 Stock Incentive Plan and the reservation of 429,000 shares
of Common Stock after the stock split noted above for issuance thereunder,
and the 1995 Stock Option Plan for Nonemployee Directors and the reservation
of 100,000 shares of Common Stock (after the stock split) for issuance
thereunder. On April 10, 1997, the stockholders authorized the reservation of
an additional 200,000 shares of Common Stock for issuance under the 1995
Stock Incentive Plan. All share and per share amounts have been restated to
retroactively reflect the aforementioned reverse stock split.
On November 30, 1995, the Company completed an initial public offering (IPO)
of 1,932,000 shares of common stock, including over allotments. In
conjunction with the IPO, all of the Company's outstanding Series B and
Series C Convertible Subordinated Debentures were converted into a total of
2,629,296 shares of the Company's Common Stock.
On November 14, 1996, the Company completed a public offering of 2,300,000
shares of common stock, including over allotments; 1,071,792 shares were sold
by the Company and 1,228,208 were sold by certain of the selling shareholders
of the Company.
12. STOCK-BASED COMPENSATION PLANS
The Company has two stock compensation plans for employees and directors.
The 1995 Stock Incentive Plan provides for the grant of incentive options at
an exercise price which is 100 percent of the fair value of the Company's
stock on the date of grant. The 1995 Stock Option Plan for Nonemployee
Directors provides for the grant of nonqualified options at an exercise price
which is not less than 100 percent of the fair value on the grant date. The
plans provide that options become exercisable according to vesting schedules
which range from immediate to five years. Options terminate 10 years from
the date of grant.
F-13
<PAGE>
There were 407,034, 362,534 and 382,001 shares of common stock reserved under
the Company's stock compensation plans at December 31, 1997, 1996 and 1995,
respectively.
A summary of status of the Company's stock options as of December 31, 1997,
1996 and 1995 and changes during the year ended on those dates is presented
below:
<TABLE>
<CAPTION>
Exercise Price
----------------------------
Options Range
-------- ---------------
<S> <C> <C>
Balance, December 31, 1994 173,414 $0.87 - 1.00
Options granted 146,999 4.78
-------- ---------------
Balance, December 31, 1995 320,413 0.87 - 4.78
Options granted 20,000 11.50 - 17.125
Options exercised (59,069) 0.90 - 4.78
Options canceled (534) 4.78
-------- ---------------
Balance, December 31, 1996 280,810 0.87 - 17.125
Options granted 155,500 15.75 - 18.875
Options exercised (22,416) 0.90 - 4.78
Options canceled - -
-------- ---------------
Balance, December 31, 1997 413,894 $0.87 - $18.875
-------- ---------------
-------- ---------------
</TABLE>
The weighted average grant date fair value of options granted during the
years ended December 31, 1997, 1996 and 1995 was $18.60, $14.19 and $4.78,
respectively.
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Exercise Exercise
Exercise Prices Number of Contractual Price Number of Price
Per Share Options Life (years) Per Share Options Per Share
- ----------------- ----------- ------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
$0.87 - $1.00 102,195 4.04 $ 0.95 102,195 $ 0.95
$4.78 136,199 7.47 4.78 74,894 4.78
$11.50 - $15.75 20,000 8.68 13.64 12,165 14.53
$17.13 - $18.88 155,500 8.95 18.67 32,645 18.35
----------- ----------
Totals 413,894 221,899
----------- ----------
----------- ----------
</TABLE>
The following are the options exercisable at the corresponding weighted
average exercise price at December 31, 1997, 1996 and 1995, respectively:
221,899 at $5.55; 183,978 at $2.95; and 207,199 at $1.57.
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued by the
FASB in 1995 and, if fully adopted, changes the methods for the recognition
of cost related to stock option plans. Adoption of SFAS 123 is optional. As
a result, the Company continues to apply APB opinion No. 25 and related
interpretations in accounting for its plans. However, in accordance with
SFAS 123, pro forma disclosures as if the Company adopted the cost
recognition requirements under SFAS 123 are presented below.
F-14
<PAGE>
The fair value of each option granted in 1997, 1996 and 1995 was estimated on
the date of grant using the Black-Scholes option-pricing model with the
following assumptions:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Risk-free interest rate 6.12% -6.61% 5.23%-6.46% 5.92%-6.17%
Expected dividend yield 0% 0% 0%
Expected volatility 24.70% 19.48% 19.48%
Expected lives five years five years five years
</TABLE>
Had the Company used the fair value methodology for determining compensation
expense, the Company's net income and earnings per share would approximate
the pro forma amounts below (in thousands except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Net income - as reported $11,100 $10,404 $5,107
Net income - pro forma 10,507 10,350 4,975
Diluted earnings per share - as reported 1.68 1.85 1.44
Diluted earnings per share - pro forma 1.59 1.84 1.35
</TABLE>
The effect of applying SFAS 123 in this pro forma disclosure is not
indicative of future amounts.
13. COMMITMENTS AND CONTINGENCIES:
ENVIRONMENTAL MATTERS
GENERAL. The Company operates under numerous governmental permits and
licenses relating to air emissions and water discharges, storm water run-off,
workplace safety and other matters. The Company is not aware of any current
violations or citations relating to any of these permits or licenses. The
Company has a policy of reducing use and consumption of hazardous materials
in its operations by substituting non-hazardous materials when possible.
The Company has completed discussions with the Oregon Department of
Environmental Quality ("DEQ") with respect to the reporting requirements for
calculating emissions of volatile organic compounds ("VOCs") from pipe
coating and lining operations at its Portland, Oregon facility. The Company
and DEQ have resolved the emissions calculation issues pursuant to a Mutual
Agreement and Order ("MAO") dated October 4, 1995 and amended June 20, 1997.
Pursuant to the MAO, the Company was required to periodically report its
progress in finding alternative coatings that comply with the VOC content
levels allowed by Condition 4 of the Company's air permit. The MAO as amended
also required the Company to be in full compliance with this Condition 4 by
January 1, 1998, or to have submitted an application for an alternative
emission limit. In December, 1997, the Company submitted a report to DEQ
confirming its compliance with Condition 4. The DEQ has indicated informally
that it is satisfied with the Company's compliance progress. DEQ will
initiate formal acknowledgment that the terms of the MAO have been fully
satisfied.
SUPERFUND SITE. The Company has been identified as one of four potentially
responsible parties with potential liability for a Superfund site in
Clackamas, Oregon (the "Site"). In October 1995, the Company filed a
complaint
F-15
<PAGE>
seeking a declaratory judgment from the Bankruptcy Court that any claims with
respect to liability for the costs of the Response Activities at the Site
were discharged by the Bankruptcy Court's confirmation of the Company's Plan
of Reorganization (the "Plan"). In September 1996, the Company entered into
mediation with the U.S. Environmental Protection Agency (the "EPA") and the
Oregon Department of Environmental Quality (the "ODEQ") (collectively, the
"Agencies"). As a result of the mediation process, the Company and the
Agencies entered into an agreement in principle with respect to a proposed
settlement of the litigation (the "Settlement Agreement"). Pursuant to the
Settlement Agreement, the Company and the Agencies prepared a consent decree
which embodies the terms of the Settlement Agreement (the "Consent Decree").
The Consent Decree was entered by the Bankruptcy Court on July 22, 1997. The
Consent Decree relating to the portion of the Site that is vacant (the "Hall
Property"), which provides for the transfer of title to the Hall Property to
the Agencies, and upon which the effectiveness of the Consent Decree was
conditioned, was entered by the United States District Court on August 19,
1997.
Under the terms of the Consent Decree, the Company on August 22, 1997 paid
the Agencies $1.0 million and deposited an additional $2.3 million in an
escrow account or cash escrow (the "Cash Escrow"), with the interest income
on the Cash Escrow to be distributed to the EPA. The Consent Decree provides
that the EPA will complete construction of the remedial action at the Site in
accordance with its standards and will have the right to sell the Hall
Property at any time during the clean-up process and for one year thereafter.
If the Hall Property is sold by the Agencies, the $2.3 million held in the
Cash Escrow will be returned to the Company. Once construction of the
remedial action has been completed as evidenced by issuance of Remedial
Action Reports (or their equivalents) and a Preliminary Close Out Report, and
the Hall Property is usable for a "reasonable commercial or industrial use,"
the Agencies will have the option to continue to market the Hall Property for
one year. If the Hall Property is not sold during this period, the Company
believes the Agencies will elect to have the Hall Property conveyed to the
Company in exchange for the $2.3 million held in the Cash Escrow. The Company
would then be required to market the Hall Property for another year. If the
Hall Property sells within one year thereafter, fifty percent of any net
proceeds in excess of $2.3 million would be paid to the EPA.
If the Company takes title to the Hall Property, the Agencies will provide a
"Prospective Purchaser Agreement" for use by the Company at its option and
for use by the Company's eligible successors in interest. The EPA would
specify that any eligible prospective purchaser of the Hall Property would
not be liable for any past environmental contamination or any ongoing
remediation resulting from past operations at the Site. If the Company elects
not to take ownership of the Hall Property, the Agencies would retain the
$2.3 million held in Cash Escrow. If the Agencies are unable to complete
construction of the remedial action and clean up soils so that the Hall
Property can be used for a reasonable commercial or industrial use within ten
years, they would be required to return the $2.3 million held in the Cash
Escrow to the Company. The Consent Decree also contains covenants not to sue,
reservations of rights, and protection for the Company from third party
claims for contribution for environmental clean-up costs at the Site.
The Company believes that once the Hall Property is available for a
"reasonable commercial or industrial use," it would have a current value in
excess of $2.3 million. Consequently, the Company does not believe that the
$2.3 million to be held in the Cash Escrow is "impaired" under generally
accepted accounting principles. Accordingly, the Company segregated the $2.3
million as a restricted asset on its consolidated balance sheet at December
31, 1997. The Company recorded the $1.0 million payment as an expense in the
third quarter of 1996.
F-16
<PAGE>
LITIGATION
In addition to the matters described above, from time to time, the Company is
involved in litigation relating to claims arising out of its operations in
the normal course of business. The Company maintains insurance coverage
against potential claims in amounts which it believes to be adequate.
Management believes that it is not presently a party to any litigation, the
outcome of which would have a material adverse effect on the Company's
business, financial condition, results of operations or cash flows.
COMMITMENTS
As of December 31, 1997, the Company had outstanding raw material purchase
commitments of approximately $16.8 million.
14. INCOME TAXES:
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current:
Federal $3,189 $5,394 $1,728
State 619 1,267 425
Deferred:
Federal 2,624 136 940
State 386 22 130
------ ------ ------
$6,818 $6,819 $3,223
------ ------ ------
------ ------ ------
</TABLE>
The difference between the effective income tax rate and the statutory U.S.
Federal income tax rate is explained as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Provision at statutory rate $6,092 $5,856 $2,832
State provision, net of federal benefit 896 836 280
Other (170) 127 111
------ ------ ------
$6,818 $6,819 $3,223
------ ------ ------
------ ------ ------
</TABLE>
F-17
<PAGE>
The tax effect of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Trade receivables, net $665
Property and equipment $ 730 752
Accrued warranty - 851
Accrued employee benefits 537 425
Inventories 316 453
Accrued environmental settlement - 396
Net operating loss carryforwards 1,763 2,010
Other 57 366
------- -------
Total deferred tax assets $ 3,403 $ 5,918
------- -------
------- -------
Deferred tax liabilities:
Trade receivables, net $ (542) $ -
Property and equipment, principally due to differences in
depreciation and amortization (2,815) (2,862)
Other (18) (18)
------- -------
Total deferred tax liabilities (3,375) (2,880)
------- -------
Net deferred tax assets $ 28 $ 3,038
------- -------
------- -------
Deferred tax assets and liabilities are included in the
consolidated balance sheets as follows:
Deferred tax assets - current $ 447 $3,051
Deferred tax liabilities - noncurrent (419) (13)
------- -------
Net deferred tax assets $ 28 $ 3,038
------- -------
------- -------
</TABLE>
As of December 31, 1997, the Company had approximately $4.5 million of net
operating loss carryforwards as a result of the acquisition of Thompson Pipe
and Steel which are limited in their use to approximately $338 per year
during the 15 year carryforward period which expires in 2011.
F-18
<PAGE>
15. SEGMENT INFORMATION AND MAJOR CUSTOMERS:
Information with respect to the segments of the business is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Net sales
Water Transmission $ 99,317 $ 89,943 $61,215
Tubular Products 51,516 45,239 36,500
-------- -------- -------
$150,883 $135,182 $97,715
-------- -------- -------
-------- -------- -------
Identifiable assets
Water Transmission $ 86,219 $ 69,576 $46,401
Tubular Products 37,813 24,267 14,755
Corporate 8,019 7,581 3,298
-------- -------- -------
$132,051 $101,424 $64,454
-------- -------- -------
-------- -------- -------
Operating income (loss)
Water Transmission $ 17,543 $ 18,815 $10,994
Tubular Products 7,942 6,336 5,078
Corporate (5,750) (5,739) (4,294)
-------- -------- -------
$ 19,735 $ 19,412 $11,778
-------- -------- -------
-------- -------- -------
Capital expenditures
Water Transmission $ 8,235 $ 1,898 $ 1,256
Tubular Products 12,898 4,619 1,242
Corporate 1,087 163 120
-------- -------- -------
$ 22,220 $ 6,680 $ 2,618
-------- -------- -------
-------- -------- -------
Depreciation and amortization expense
Water Transmission $1,781 $1,606 $ 1,020
Tubular Products 387 351 242
Corporate 74 65 100
-------- -------- -------
$2,242 $2,022 $ 1,362
-------- -------- -------
-------- -------- -------
</TABLE>
No one customer represented over 10% of total sales in 1997 or 1996. During
1995 sales to one customer represented 12% of total sales.
F-19
<PAGE>
16. EARNINGS PER SHARE:
The following is a reconciliation of the numerators and denominators of the
basic and diluted computations of earnings per share.
<TABLE>
<CAPTION>
Per Share
Income Shares Amount
-------- -------- ---------
<S> <C> <C> <C>
Year Ended December 31, 1997
- -----------------------------
Basic Earnings per Share:
Income available to common
shareholders $11,100 6,405 $1.73
---------
---------
Effect of dilutive securities
Stock options issuable 217
Diluted Earnings per Share:
Income available to common -------- --------
shareholders $11,100 6,622 $1.68
-------- -------- ---------
-------- -------- ---------
Year Ended December 31, 1996
- -----------------------------
Basic Earnings per Share:
Income available to common $10,404 5,408 $1.92
shareholders ---------
---------
Effect of dilutive securities
Stock options issuable - 223
Diluted Earnings per Share:
Income available to common -------- --------
shareholders $10,404 5,631 $1.85
-------- -------- ---------
-------- -------- ---------
Year Ended December 31, 1995
- -----------------------------
Basic Earnings per Share:
Income available to common $ 5,107 836 $6.11
shareholders ---------
---------
Effect of dilutive securities
Stock options issuable 210
Conversion of Series B and C
Subordinated Debentures 2,629
Diluted Earnings per Share:
Net income
Plus reduction in interest, net
related to Series B and C
Debentures 178
-------- --------
Income available to common
Shareholders $ 5,285 3,675 $1.44
-------- -------- ---------
-------- -------- ---------
</TABLE>
F-20
<PAGE>
17. QUARTERLY DATA (UNAUDITED):
Summarized quarterly financial data for 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1997
Net sales:
Water transmission $25,744 $22,482 $26,208 $24,883
Tubular products 12,013 14,959 13,531 11,013
------- ------- ------- -------
Total net sales $37,757 $37,441 $39,739 $35,896
Gross profit:
Water transmission $ 5,434 $ 5,639 $ 6,342 $ 5,318
Tubular products 2,076 2,498 2,161 1,649
------- ------- ------- -------
Total gross profit $ 7,510 $ 8,137 $ 8,503 $ 6,967
Net income $ 2,415 $ 2,962 $ 3,299 $ 2,424
Earnings per share:
Basic $0.38 $ 0.46 $ 0.51 $ 0.38
Diluted $0.37 $ 0.45 $ 0.50 $ 0.36
1996
Net sales:
Water transmission $20,807 $20,877 $25,518 $22,741
Tubular products 10,164 12,241 12,842 9,992
------- ------- ------- -------
Total net sales $30,971 $33,118 $38,360 $32,733
Gross profit:
Water transmission $ 5,375 $ 5,339 $ 6,462 $ 6,182
Tubular products 2,006 2,145 1,908 1,525
------- ------- ------- -------
Total gross profit $ 7,381 $ 7,484 $ 8,370 $ 7,707
Net income $ 2,769 $ 2,600 $ 2,677 $ 2,358
Earnings per share:
Basic $ 0.53 $ 0.49 $ 0.51 $ 0.41
Diluted $ 0.50 $ 0.47 $ 0.49 $ 0.39
</TABLE>
18. SUBSEQUENT EVENTS:
On March 6, 1998, the Company acquired all of the outstanding capital
stock of Southwestern Pipe, Inc. ("Southwestern") and P&H Tube
Corporation ("P&H"), both Texas corporations. The Company paid a
purchase price of $40.1 million in cash, which is subject to a
post-closing adjustment based upon changes in the working capital from
February 28, 1998 to the closing date and the amount of outstanding
indebtedness of the purchased companies at the closing date.
The principal business of both Southwestern and P&H is the manufacture
and sale of structural and mechanical tubing products. Southwestern owns
and operates a manufacturing facility in Houston, Texas. P&H Tube owns
and operates a manufacturing facility in Bossier City, Louisiana. The
Company will
F-21
<PAGE>
continue to operate the acquired plant, equipment and other property for
the same purpose, and will operate each of the companies as separate
wholly owned subsidiaries of the Company.
On March 6, 1998, the Company amended its line of credit agreement to
temporarily increase the line to $55.0 million. Additionally, the restriction
associated with the ratio of maximum funded debt to earnings before interest,
taxes, depreciation and amortization ("EBITDA") was adjusted for one year
from 3.0:1.0 to 3.25:1.0. The total commitment under the line of credit will
be reduced to $30.0 million on the earliest of April 15, 1998 or the date
that the Company receives the net proceeds from the issuance of senior notes
in the amount of at least $20.0 million. The Company expects to issue
additional senior notes totaling $40.0 million during the second quarter of
1998 to reduce the amounts borrowed under its line of credit and to reduce
the available line of credit. Interest under the amended line of credit
agreement is payable at IBOR plus 0.65% to 1.05% (0.65% at March 6, 1998)
based on the Company's ratio, as defined, of funded debt to EBITDA.
F-22
<PAGE>
SCHEDULE II
NORTHWEST PIPE COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
BALANCE AT CHARGED DEDUCTION BALANCE AT
BEGINNING TO PROFIT FROM CLOSE OF
OF PERIOD AND LOSS RESERVES PERIOD
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful trade
receivables $1,680 $266 $121 $1,825
Year ended December 31, 1996:
Allowance for doubtful trade
receivables $ 867 $921 $108 $1,680
Year ended December 31, 1995:
Allowance for doubtful trade
receivables $ 571 $427 $131 $ 867
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Northwest Pipe
Company and Subsidiaries is included on page F-1 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 15 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Portland, Oregon
February 7, 1998, except for Note 18,
for which the date is March 6, 1998
S-2
<PAGE>
BANK OF AMERICA /
NORTHWEST PIPE COMPANY
THOMPSON PIPE AND STEEL COMPANY
THOMPSON STEEL PIPE COMPANY
LOAN AGREEMENT
Dated: October 20, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S><C>
ARTICLE 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . 1
Section 1.2 General Principles Applicable to Definitions.. . . . . . 10
Section 1.3 Accounting Terms.. . . . . . . . . . . . . . . . . . . . 10
ARTICLE 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . 11
Section 2.2 Manner of Borrowing. . . . . . . . . . . . . . . . . . . 11
Section 2.3 Agent's Right to Fund. . . . . . . . . . . . . . . . . . 11
Section 2.4 Repayment of Principal.. . . . . . . . . . . . . . . . . 12
Section 2.5 Optional Conversion of up to $10,000,000 of
Revolving Loans .. . . . . . . . . . . . . . . . . . . . 12
Section 2.6 Interest on Loans. . . . . . . . . . . . . . . . . . . . 12
(a) General Provisions. . . . . . . . . . . . . . . . . . . . . . 12
(b) Selection of Alternative Rates. . . . . . . . . . . . . . . . 13
(c) Applicable Days For Computation of Interest.. . . . . . . . . 14
(d) Unavailable Offshore Related Rate or Long Term Rate . . . . . 14
(e) Compensation for Increased Costs. . . . . . . . . . . . . . . 14
Section 2.7 Prepayments. . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.8 Manner of Payments.. . . . . . . . . . . . . . . . . . . 16
Section 2.9 Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.10 Sharing of Payments, Etc.. . . . . . . . . . . . . . . . 17
Section 2.11 Application of Payments. . . . . . . . . . . . . . . . . 17
ARTICLE 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.1 Conditions to Initial Loans. . . . . . . . . . . . . . . 18
(a) Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Borrower Authority. . . . . . . . . . . . . . . . . . . . . . 18
(c) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Officer's Certificate.. . . . . . . . . . . . . . . . . . . . 18
(e) Other Information . . . . . . . . . . . . . . . . . . . . . . 18
(f) Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) EQDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Material Adverse Change. . . . . . . . . . . . . . . . . . . 19
Section 3.2 Conditions to Loans. . . . . . . . . . . . . . . . . . . 19
(a) Prior Conditions. . . . . . . . . . . . . . . . . . . . . . . 19
(b) Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . 19
(c) No Default. . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Other Information.. . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.1 Corporate Existence and Power. . . . . . . . . . . . . . 19
Section 4.2 Corporate Authorization. . . . . . . . . . . . . . . . . 20
Section 4.3 Government Approvals, Etc. . . . . . . . . . . . . . . . 20
Section 4.4 Binding Obligations, Etc.. . . . . . . . . . . . . . . . 20
Section 4.5 Litigation.. . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.6 Financial Condition. . . . . . . . . . . . . . . . . . . 20
Section 4.7 Title, Liens and Environmental Matters . . . . . . . . . 21
<PAGE>
Section 4.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.9 Laws, Orders, Other Agreements.. . . . . . . . . . . . . 21
Section 4.10 Federal Reserve Regulations. . . . . . . . . . . . . . . 22
Section 4.11 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.12 Investment Company; Public Utility Holding Company . . . 22
Section 4.13 Solvency . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.14 Representations as a Whole . . . . . . . . . . . . . . . 23
ARTICLE 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.1 Use of Proceeds from Loans/Use of Letters of Credit. . . 23
Section 5.2 Preservation of Corporate Existence, Etc . . . . . . . . 23
Section 5.3 Visitation and Examination Rights. . . . . . . . . . . . 23
Section 5.4 Keeping of Books and Records.. . . . . . . . . . . . . . 24
Section 5.5 Maintenance of Property, Etc.. . . . . . . . . . . . . . 24
Section 5.6 Compliance with Laws, Etc. . . . . . . . . . . . . . . . 24
Section 5.7 Other Obligations. . . . . . . . . . . . . . . . . . . . 24
Section 5.8 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.9 Financial Information: . . . . . . . . . . . . . . . . . 24
(a) Annual 10-K and Annual Report and Audited Financial
Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Annual Consolidating Statements . . . . . . . . . . . . . . . 25
(c) Quarterly 10-Q Report, Unaudited Financial Statements and
Consolidating Statements.. . . . . . . . . . . . . . . . . . . 25
(d) Quarterly Compliance Reports. . . . . . . . . . . . . . . . . 25
(e) Financial Forecast and Budget . . . . . . . . . . . . . . . . 25
(f) Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.10 Notification. . . . . . . . . . . . . . . . . . . . . . 26
Section 5.11 Additional Payments; Additional Acts:. . . . . . . . . . 26
Section 5.12 Minimum Debt Service Coverage Ratio:. . . . . . . . . . 27
Section 5.13 Maximum Funded Debt to EBITDA . . . . . . . . . . . . . 27
Section 5.14 Minimum Tangible Net Worth . . . . . . . . . . . . . . . 27
ARTICLE 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.1 Restriction on Borrowings, Capital Leases and Contract
Purchases . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.2 Liquidation, Merger, Sale of Assets. . . . . . . . . . . 28
Section 6.3 Restrictions on Liens - Negative Pledge. . . . . . . . . 28
Section 6.4 Guaranties, Etc. . . . . . . . . . . . . . . . . . . . . 28
Section 6.5 Restrictions on Loans and Advances.. . . . . . . . . . . 29
Section 6.6 Restriction on Acquisitions. . . . . . . . . . . . . . . 29
Section 6.7 Change in Business.. . . . . . . . . . . . . . . . . . . 29
Section 6.8 ERISA Compliance:. . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.1 Events of Default: . . . . . . . . . . . . . . . . . . . 29
(a) Payment Default.. . . . . . . . . . . . . . . . . . . . . . . 30
(b) Breach of Warranty. . . . . . . . . . . . . . . . . . . . . . 30
(c) Breach of Certain Covenants.. . . . . . . . . . . . . . . . . 30
(d) Breach of Other Covenant. . . . . . . . . . . . . . . . . . . 30
<PAGE>
(e) Cross-default.. . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Cross-Default - Secured Letter of Credit Facility . . . . . . 30
(g) Voluntary Bankruptcy, Etc . . . . . . . . . . . . . . . . . . 30
(h) Involuntary Bankruptcy, Etc.. . . . . . . . . . . . . . . . . 30
(i) Insolvency, Etc.. . . . . . . . . . . . . . . . . . . . . . . 31
(j) Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) Government Approvals. . . . . . . . . . . . . . . . . . . . . 31
(l) Other Government Action.. . . . . . . . . . . . . . . . . . . 31
(m) Material Adverse Change . . . . . . . . . . . . . . . . . . . 31
Section 7.2 Consequences of Default. . . . . . . . . . . . . . . . . 32
ARTICLE 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.1 Authorization and Action:. . . . . . . . . . . . . . . . 32
Section 8.2 Duties and Obligations.. . . . . . . . . . . . . . . . . 33
Section 8.3 Dealings Between Agent and Borrowers.. . . . . . . . . . 34
Section 8.4 Lender Credit Decision . . . . . . . . . . . . . . . . . 34
Section 8.5 Indemnification. . . . . . . . . . . . . . . . . . . . . 34
Section 8.6 Successor Agent. . . . . . . . . . . . . . . . . . . . . 35
Section 8.7 Independent Determination for Funding and Closing. . . . 35
ARTICLE 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 9.1 Letters of Credit. . . . . . . . . . . . . . . . . . . . 35
Section 9.2 Manner of Requesting Letters of Credit.. . . . . . . . . 35
Section 9.3 Indemnification; Increased Costs.. . . . . . . . . . . . 36
Section 9.4 Payment by Borrowers . . . . . . . . . . . . . . . . . . 37
Section 9.5 Sale of Risk Participations. . . . . . . . . . . . . . . 37
Section 9.6 Procedure for Participations . . . . . . . . . . . . . . 38
Section 9.7 Payment Obligations. . . . . . . . . . . . . . . . . . . 38
(a) Reimbursements to Agent.. . . . . . . . . . . . . . . . . . . 38
(b) Payments to Lenders.. . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.1 Bank of America Secured Letter of Credit Facility. . . . 39
Section 10.2 Northwest Pipe Company Security. . . . . . . . . . . . . 39
Section 10.3 Cross-Default. . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.1 No Waiver; Remedies Cumulative . . . . . . . . . . . . . 39
Section 11.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . 39
Section 11.3 Mandatory Arbitration. . . . . . . . . . . . . . . . . . 39
Section 11.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 11.5 Successors and Assigns . . . . . . . . . . . . . . . . . 40
Section 11.6 Severability.. . . . . . . . . . . . . . . . . . . . . . 40
Section 11.7 Additional Lenders . . . . . . . . . . . . . . . . . . . 40
Section 11.8 Joint and Several Liability; Reason for Execution. . . . 41
Section 11.9 Survival.. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.10 Executed in Counterparts . . . . . . . . . . . . . . . . 41
Section 11.11 Entire Agreement; Amendment, Waiver. . . . . . . . . . . 41
<PAGE>
Section 11.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.13 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . 41
Section 11.14 CERTAIN AGREEMENTS NOT ENFORCEABLE . . . . . . . . . . . 42
</TABLE>
<PAGE>
LOAN AGREEMENT
This Loan Agreement ("Agreement") is made as of October 20, 1997, by and
among the following parties:
Bank of America National Trust and Savings Association ("Bank of America"
and "Lender")
Each of the several financial institutions which subsequently become a
party to this Agreement pursuant to Section 11.7 (each individually a "Lender")
Bank of America National Trust and Savings Association, in its capacity as
Agent ("Agent")
Northwest Pipe Company, an Oregon corporation (a "Borrower")
Thompson Pipe and Steel Company, a Colorado corporation (a "Borrower")
Thompson Steel Pipe Company, a Delaware corporation (a "Borrower")
RECITALS
A. Borrowers have requested that Lenders make revolving loans to
Borrowers and issue letters of credit for the account of Borrowers.
B. Lenders are willing to make revolving loans and to issue letters of
credit upon the terms and conditions set forth below. Agent is willing to act
as Agent for Lenders upon the terms and conditions set forth below.
C. At the time this Agreement is executed, Bank of America is the only
Lender. However, Bank of America may select one or more financial institutions
to become Lenders in the future pursuant to Section 11.7.
Therefore, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
Section 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings:
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"AFFILIATE" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of a management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract or
otherwise.
"AGENT" means Bank of America National Trust and Savings Association
and any successor agent selected pursuant to Section 8.6.
"APPLICABLE INTEREST PERIOD" means with respect to any Loan or portion
thereof accruing interest at an Offshore Related Rate or Long Term Rate, the
period commencing on the first date Borrowers select to have such Offshore
Related Rate or Long Term Rate applied to such Loan or portion thereof pursuant
to Section 2.6(b) and ending on the date specified in the Interest Rate Notice
given in respect of such Loan or portion thereof, provided that the Applicable
Interest Period for Offshore Related Rate Loans based on LIBOR shall be in
increments of one month, two months, three months, four months, five months or
six months and for Offshore Related Rate Loans based on IBOR shall be in
increments of one month, two months, three months, four months, five months and
six months. The Applicable Interest Period for Long Term Rate Loans shall be
one year or more. Applicable Interest Period means with respect to any Loan or
portion thereof accruing interest at the Reference Related Rate, the period
commencing on the date of this Agreement or the date Borrowers select to have
such rate applied to such Loan or portion thereof and ending on the date
Borrowers select to have another rate applied to such Loan or portion thereof.
No Applicable Interest Period extending beyond Revolving Loan Maturity Date may
be selected for a Revolving Loan.
"APPLICABLE INTEREST RATE" means for each Loan the Reference Related
Rate, Long Term Rate or an Offshore Related Rate, as designated by Borrowers in
an Interest Rate Notice given with respect to such Loan or portion of such Loan
or as otherwise determined pursuant to Section 2.6.
"APPLICABLE MARGIN" means, with respect to Offshore Related Rate
Loans, a margin determined as set forth below depending on the ratio of Funded
Debt to EBITDA. Adjustments, with respect to borrowings or selections of
Applicable Interest Rates, will be effective the first day of the month after
Agent has received financial information needed to determine the relevant ratio
with respect to future selections or borrowings. However, if such information
is not given to Agent within the time required by Section 5.9, Agent may, at its
option, adjust the Applicable Margin for Offshore Related Rate upwards, if
applicable, as of the first day of the month following the date by which such
information should have been received. The Applicable Margin in effect on the
date of this Agreement is .65 percent.
RATIO AT END OF PRIOR APPLICABLE MARGIN FOR
FISCAL QUARTER OFFSHORE RELATED RATE LOANS
- --------------------------------------------------------------------------------
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<PAGE>
Less than 1.5:1 .65%
Equal to or greater than 1.5:1 .75%
Up to and including 2.25:1
Greater than 2.25:1 .875%
"BORROWERS" means Northwest Pipe Company, Thompson Pipe and Steel
Company and Thompson Steel Pipe Company.
"BUSINESS DAY" means any day other than Saturday, Sunday or another
day on which banks are authorized or obligated to close in Seattle, Washington,
except in the context of the selection of an Offshore Related Rate Loan or the
calculation of the IBOR Rate or the LIBOR Rate for any Applicable Interest
Period, in which event "Business Day" means any day other than Saturday or
Sunday on which dealings in foreign currencies and exchange between banks may be
carried on in London, England and Seattle, Washington.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMERCIAL LETTER OF CREDIT" means any commercial letter of credit
issued by Agent pursuant to the terms of Article 9.
"COMMERCIAL LETTER OF CREDIT USAGE" means, as of any date of
determination, the sum of (i) the aggregate face amount of all outstanding
unmatured Commercial Letters of Credit issued pursuant to Article 9 PLUS (ii)
the aggregate amount of all payments made by Agent under Commercial Letters of
Credit and not yet reimbursed by Borrowers pursuant to Section 9.4.
"COMMITMENT" means, with respect to each Lender, its obligation to
extend Revolving Loans under this Agreement, and its obligation to purchase
Letter of Credit Risk Participations pursuant to Article 9.5. In the case of
Agent, "Commitment" also means its obligation to issue Letters of Credit under
this Agreement.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrowers, are treated as a single employer
under Section 414(b) or 414(c) of the Code. The term "Controlled Group" shall
also include all members of a group of corporations or trades or businesses
(whether or not incorporated) that together with Borrowers constitute an
"affiliated service group," as defined in Code Section 414(m).
"DEFAULT" means any event which but for the passage of time or the
giving of notice or both would be an Event of Default.
"EBITDA" means, for any period, net income (or net loss), plus the sum
of (a) interest expense, (b) income tax expense, (c) depreciation expense, and
(d) amortization
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expense, in each case determined in accordance with GAAP.
"EMPLOYEE PLAN" means any and all plans, programs and arrangement that
constitute a Pension Plan or a Welfare Plan.
"ENVIRONMENTAL LAWS" means all federal, state and local statutes,
regulations, ordinances, and requirements, now or hereafter in effect,
pertaining to environmental protection, contamination or cleanup, including
without limitation (i) the Federal Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901, ET SEQ.), (ii) the Federal Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601
ET SEQ.), (iii) the Federal Hazardous Materials Transportation Control Act (49
U.S.C. Section 1801, ET SEQ.), (iv) the Federal Clean Air Act (42 U.S.C.
Section 7401, ET SEQ.), (v) the Federal Water Pollution Control Act, Federal
Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), (vi) the Federal Insecticide,
Fungicide, and Rodenticide Act, Federal Pesticide Act (7 U.S.C. Section 136, ET
SEQ.), (vii) the Federal Toxic Substances Control Act (15 U.S.C. Section 2601
ET SEQ.), (viii) the Federal Safe Drinking Water Act (42 U.S.C. Section fm ET
SEQ.), (ix) Hazardous Substances, Radiation Sources, ORS Sections 453.01 ET
SEQ., (x) Solid Waste Control, ORS Sections 459.005 ET SEQ., (xi) Hazardous
Waste and Hazardous Materials I, ORS Sections 465.003 ET SEQ., (xii) Hazardous
Waste and Hazardous Materials II, ORS Sections 466.005 ET SEQ., (xiii) Air
Quality, ORS Sections 468A.005 ET SEQ., (xiv) Water Quality, ORS Sections
468B.005 ET SEQ., (xv) Oregon Drinking Water Quality Act, ORS 448.115
ET SEQ., (xvi) Ground Water Act of 1955, ORS Sections 537.505 ET SEQ.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EVENT OF DEFAULT" has the meaning given in Section 7.1.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal, for each day during such period, to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on
transactions received by Agent from three federal funds brokers of recognized
standing selected by Agent.
"FRB" means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
"FUNDED DEBT" means the aggregate amount for Borrowers and all
Subsidiaries of:
(a) any interest bearing indebtedness other than such indebtedness,
the payment of which is secured by any Standby Letter of Credit
described in Article 9 or Article 10, plus
4
<PAGE>
(b) any other obligations of Borrowers or any Subsidiary under leases
which have been or should have been recorded as capital leases,
plus
(c) all outstanding letters of credit whether commercial or standby,
including Letters of Credit described in Article 9 or Article 10,
and all other letters of credit, plus
(d) all obligations guaranteed by any Borrower or Subsidiary.
"FUNDED PRO RATA SHARE" shall mean, with respect to each Lender, a
fraction. The numerator of the fraction will equal the sum of:
(a) the aggregate outstanding principal amount of all such Lender's
Loans, plus
(b) the aggregate outstanding principal amount of all payments made
by such Lender pursuant to Section 9.7(a) (including payments
deemed made by Bank of America in its capacity as Lender to
Agent), plus
(c) in the case of Bank of America, the aggregate of the amounts paid
by Agent under Letters of Credit to the extent Agent has not
received payment with respect to Letters of Credit from Borrowers
hereunder or from Lenders pursuant to Section 9.7(a).
The denominator of the fraction will equal the sum of:
(a) the aggregate outstanding principal amount of the Loans of all
Lenders (including the Lender whose Funded Pro Rata Share is
being calculated), plus
(b) the aggregate face amount of all amounts paid by Agent under the
Letters of Credit (to the extent not already paid or reimbursed
by Borrowers).
"GAAP" shall have the meaning given in Section 1.3.
"GOVERNMENT APPROVAL" means an approval, permit, license,
authorization, certificate, or consent of any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means the government of the United States or
any State or any foreign country or any political subdivision of any thereof or
any branch, department, agency, instrumentality, court, tribunal or regulatory
authority which constitutes a part or exercises any sovereign power of any of
the foregoing.
5
<PAGE>
"HAZARDOUS SUBSTANCES" means any substance or material defined or
designated as hazardous or toxic waste, hazardous or toxic material, a
hazardous, toxic or radioactive substance, or other similar terms, by any
federal, state or local environmental statute, regulation or ordinance presently
in effect, including but not limited to the Environmental Laws.
"INTEREST RATE NOTICE" shall hae the meaning given in Section 2.6(b).
"LENDERS" has the meaning set forth in the introductory paragraph
hereof.
"LETTERS OF CREDIT" means Commercial Letters of Credit and Standby
Letters of Credit.
"LETTER OF CREDIT RISK PARTICIPATION" with respect to each Lender,
means a risk participation purchased by such Lender pursuant to Article 9 with
respect to a Letter of Credit (including risk participations deemed purchased
from Agent by Bank of America in its capacity as Lender).
"LETTER OF CREDIT USAGE" means Commercial Letter of Credit Usage PLUS
Standby Letter of Credit Usage.
"LIEN" means, for any of Borrowers or Subsidiaries any security
interest, pledge, mortgage, charge, assignment, hypothecation, encumbrance,
attachment, garnishment, execution or other voluntary or involuntary lien upon
or affecting the revenues of such person or any real or personal property in
which such person has or hereafter acquires any interest, EXCEPT (a) liens for
Taxes which are not delinquent or which remain payable without penalty or the
validity or amount of which is being contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof; (b) liens imposed
by law (such as mechanics' liens) incurred in good faith in the ordinary course
of business which are not delinquent or which remain payable without penalty or
the validity or amount of which is being contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof with, in the case
of liens on property of either Borrowers or any Subsidiary, provision having
been made to the satisfaction of Agent for the payment thereof in the event the
contest is determined adversely to either Borrowers or any Subsidiary; and (c)
deposits or pledges under worker's compensation, unemployment insurance, social
security or other similar laws or made to secure the performance of bids,
tenders, contracts (except for repayment of borrowed money), or leases, or to
secure statutory obligations or surety or appeal bonds or to secure indemnity,
performance, customs or other similar bonds given in the ordinary course of
business.
"LOAN DOCUMENTS" means this Agreement and all other certificates,
instruments and other documents executed by or on behalf of Borrowers and/or
their Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
6
<PAGE>
"LOANS" means the Revolving Loans and the Term Loans.
"LONG TERM RATE" means the fixed interest rate the Agent and the
Borrowers agree will apply to the Long Term Rate Loan in question during the
Applicable Interest Period.
"LONG TERM RATE LOANS" means a borrowing that bears interest at the
Long Term Rate.
"MAJORITY LENDERS" means at any time Lenders having an aggregate
Funded Pro Rata Share of at least sixty-six and two thirds percent (66 2/3%).
"MONEY MARKET" means one or more wholesale funding markets available
to Agent, including domestic negotiable certificates of deposit, eurodollar
deposits, bank deposit notes or other appropriate money market instruments
selected by Agent.
"NET INCOME" means, for any period, the consolidated net income of
Borrowers and Subsidiaries for such period, determined in accordance with GAAP.
"NOTICE OF BORROWING" means a written or oral request for a Loan from
Borrowers delivered to Agent in the manner, at the time, and containing the
information required under Section 2.2.
"OFFICER'S CERTIFICATE" means a certificate executed and delivered on
behalf of Borrowers by their chief executive officer, chief operating officer or
chief financial officer.
"OFFSHORE RATE" means for any Applicable Interest Period, with respect
to Offshore Related Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded to five decimal places) determined by the Agent
as follows:
Offshore Rate = [LIBOR OR IBOR]
----------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"EURODOLLAR RESERVE PERCENTAGE" means for any day for any Applicable
Interest Period the maximum reserve percentage, expressed as a decimal, in
effect on such day (whether or not applicable to any Lender) under
regulations issued from time to time by the FRB for determining the maximum
reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
7
<PAGE>
"LIBOR" means the rate of interest per annum (rounded to five decimal
places) at which Bank of America's London branch would offer dollar
deposits in the approximate amount of the relevant Offshore Related Rate
Loan having a maturity comparable to the Applicable Interest Period in the
London interbank market at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Applicable Interest Period.
"IBOR" means the rate of interest per annum (rounded to five decimal
places) at which dollar deposits in the approximate amount of the relevant
Offshore Related Rate Loan for the Applicable Interest Period would be
offered by Bank of America's Grand Cayman Branch, Grand Cayman B.W.I to
major banks in the offshore dollar interbank market at approximately 11:00
a.m. (New York City time) on the commencement of such Applicable Interest
Period.
"OFFSHORE RELATED RATE" means, for any Interest Period, with respect
to Offshore Related Rate Loans comprising part of the same Borrowing, the rate
of interest equal to the sum of (a) the Applicable Margin and (b) the Offshore
Rate.
"OFFSHORE RELATED RATE LOAN" means a Borrowing that bears interest
based on the Offshore Related Rate.
"PENSION PLAN" means an "employee pension benefit plan" (as such term
is defined in ERISA) from time to time maintained by Borrowers or a member of
the Controlled Group.
"PERSON" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"PLAN" shall mean, at any time, an employee pension benefit plan which
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either (a) maintained by Borrowers or any
member of the Controlled Group for employees of Borrowers or any member of the
Controlled Group or (b) maintained pursuant to a collective bargaining agreement
or any other arrangement under which more than one employer makes contributions
and to which Borrowers or any member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
(5) plan years made contributions.
"REFERENCE RATE" means the rate of interest publicly announced from
time to time by Bank of America, as its Reference Rate. Reference Rate is set
based on various factors, including Bank of America's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. Bank of America may price loans to its customers at,
above, or below the Reference Rate. Any change in the Reference Rate shall take
effect at the opening of business on the day specified in the public
8
<PAGE>
announcement of a change in the Reference Rate.
"REFERENCE RELATED RATE" means for any interest period with respect to
Reference Related Rate Loans comprising part of the same Borrowing, the rate of
interest equal to the Reference Rate less .50%.
"REFERENCE RELATED RATE LOAN" means a Borrowing that bears interest
based at the Reference Related Rate.
"REIMBURSEMENT AGREEMENTS" shall have the meaning given in Section
9.2.
"REVOLVING LOAN MATURITY DATE" means September 30, 2000. Agent and
Lenders will consider a one year extension to the Revolving Loan Maturity Date
on each anniversary of this Agreement. However, any extension will require the
consent of Agent and all Lenders in their sole discretion.
"REVOLVING LOAN PRO RATA SHARE" means for: Bank of America, 100
percent, subject to adjustment as provided in Section 11.7.
"REVOLVING LOANS" has the meaning given in Section 2.1.
"SOLVENT" means with respect to any Borrower, that on a particular
date, (a) the fair saleable value of the property of such Borrower (including
all tangible and intangible property) is greater than the total amount of
liabilities (including unmatured and contingent liabilities) of such Borrower,
(b) such Borrower is able to pay its debts, commitments and other liabilities
(including unmatured and contingent liabilities) as they mature in the normal
course of business, (c) such Borrower does not have an unreasonably small
capital, and (d) such Borrower is generally paying its debts as and when such
debts become due.
"STANDBY LETTER OF CREDIT" means any standby letter of credit issued
by Agent pursuant to the terms of Article 9.
"STANDBY LETTER OF CREDIT USAGE" means, as of any date of
determination, the sum of (i) the aggregate face amount of all outstanding
unmatured Standby Letters of Credit issued pursuant to Article 9 PLUS (ii) the
aggregate amount of all payments made by Agent under Standby Letters of Credit
and not yet reimbursed by Borrowers pursuant to Section 9.4.
"SUBSIDIARY" shall mean any corporation directly or indirectly
controlled by Borrowers. For the purposes of this definition, "controlled by"
shall mean the possession, directly or indirectly of the power to direct or
cause the direction of the management and policies of such Subsidiary, whether
through the ownership of voting securities, by contract or otherwise.
9
<PAGE>
"SUCCESSOR" means, for any corporation or banking association, any
successor by merger or consolidation, or by acquisition of substantially all of
the assets of the predecessor.
"TAX" means, for any person, any tax, assessment, duty, levy, impost
or other charge imposed by any Governmental Authority on such person or on any
property, revenue, income, or franchise of such person and any interest or
penalty with respect to any of the foregoing.
"TANGIBLE NET WORTH" means, for Borrowers and Subsidiaries on a
consolidated basis, the excess of total assets over total liabilities, but
excluding intangible assets. Tangible Net Worth will be determined pursuant to
GAAP.
"TERM LOAN" means any Term Loan resulting from a conversion of a
portion of the revolving loans as described in Section 2.5.
"TOTAL COMMITMENT" means $45,000,000. However, Total Commitment will
be reduced to $25,000,000 on the earlier of December 31, 1997 or the date that
any Borrower receives the net proceeds from the private placement of notes in
the amount of at least $20,000,000.
"TOTAL REVOLVING LOAN COMMITMENT" means the amount of the Total
Commitment less, at any time, the then total Letter of Credit Usage, and less
the original amount of any Term Loans. The Total Revolving Loan Commitment will
not increase as Term Loans are paid down.
"TOTAL UTILIZATION" shall mean, as of any date of determination, the
sum of the aggregate amount of all outstanding Revolving Loans, plus the Letter
of Credit Usage, and plus the Term Loans, if any.
"UNUSED COMMITMENT FEE" shall have the meaning given in Section
2.9(b).
"UNUSED COMMITMENT FEE RATE" means an annual rate determined as set
forth below depending upon the ratio of Funded Debt to EBITDA. The adjustment
will be effective the first day of the month after Agent has received
information needed to determine the relevant ratio. However, if such
information is not given to Agent within the time required by Section 5.9, Agent
may, at its option, adjust the Annual Unused Commitment Fee Rate upwards, if
applicable, as of the first day of the month following the date by which such
information should have been received. The Unused Commitment Fee Rate in effect
upon the date of this Agreement is .175 percent.
RATIO AT END OF PRIOR ANNUAL UNUSED
FISCAL QUARTER COMMITMENT FEE RATE
- --------------------------------------------------------------------------------
10
<PAGE>
Less than 1.5:1 .175%
Equal to or greater than 1.5:1 .200%
Up to and including 2.25:1
Greater than 2.25:1 .225%
"WELFARE PLAN" means an "employee welfare benefit plan" (as such term
is defined in ERISA) from time to time maintained by Borrowers or a member of
the Controlled Group.
Section 1.2 GENERAL PRINCIPLES APPLICABLE TO DEFINITIONS. Definitions
given herein shall be equally applicable to both singular and plural forms of
the terms therein defined and references herein to "he" or "it" shall be
applicable to persons whether masculine, feminine or neuter. References herein
to any document including, but without limitation, this Agreement shall be
deemed a reference to such document as it now exists, and as, from time to time
hereafter, the same may be amended. References herein to a "person" or
"persons" shall be deemed to be references to an individual, corporation,
partnership, trust, unincorporated association, joint venture, joint-stock
company, government (including political subdivisions), Governmental Authority
or agency or any other entity. References herein to any article, section,
subsection, schedule or exhibit shall, unless otherwise indicated, be deemed a
reference to sections and subsections within and schedules and exhibits to this
Agreement.
Section 1.3 ACCOUNTING TERMS. Except as otherwise provided herein,
accounting terms not specifically defined shall be construed, and all accounting
procedures shall be performed, in accordance with generally accepted United
States accounting principles consistently applied ("GAAP") and as in effect on
the date of application.
ARTICLE 2
THE LOANS
Section 2.1 REVOLVING LOANS. Subject to the terms and conditions of
this Agreement, each Lender hereby severally agrees during the period beginning
on the date hereof and ending on the Revolving Loan Maturity Date to make
revolving loans duly requested hereunder (the "Revolving Loans") to Borrowers in
amounts equal to such Lender's Revolving Loan Pro Rata Share of each requested
loan PROVIDED that, after giving effect to any requested loan, absent such
Lender's consent, the aggregate of all Revolving Loans outstanding from such
Lender will not exceed at any one time its Revolving Loan Pro Rata Share of the
Total Revolving Loan Commitment. The Revolving Loans described in this Section
constitute a revolving credit and within the amount and time specified,
Borrowers may pay, prepay and reborrow.
11
<PAGE>
Section 2.2 MANNER OF BORROWING. For each requested Loan, Borrowers
shall deliver to Agent a Notice of Borrowing specifying the date of a requested
Borrowing and the amount thereof. Borrowers may give a Notice of Borrowing on
the same day it wishes a Loan to be made, provided said Notice of Borrowing is
received by Agent no later than 11:00 a.m. (Seattle time) on the date of the
requested borrowing. Each Notice of Borrowing shall be given in writing or
orally and promptly confirmed in writing, provided, however, that Agent may rely
on any oral Notice of Borrowing even if Agent does not receive a written
confirmation. If Borrowers simultaneously elect to have interest accrue on a
Revolving Loan at an Offshore Related Rate calculated by reference to LIBOR by
giving an Interest Rate Notice described in Section 2.6(b) in respect of such
borrowing, the Notice of Borrowing shall be given no later than 11:00 a.m. three
Business Days prior to the date of the requested borrowing. Requests for
borrowing, or confirmations thereof, received after the designated hour will be
deemed received on the next succeeding Business Day. Each such Notice of
Borrowing shall be irrevocable and shall be deemed to constitute a
representation and warranty by Borrowers that as of the date of such notice the
statements set forth in Article 4 are true and correct and that no Default or
Event of Default has occurred and is continuing. Agent is authorized to make
Loans upon the request of any person authorized in writing by the President or
the CEO of the Northwest Pipe Company to make such requests. Each Loan
requested by Borrowers under this Section shall be in an amount of not less than
$100,000 and an integral multiple of $100,000. On receipt of a Notice of
Borrowing, Agent shall promptly notify each Lender by telephone, telex or
telefax of the date of the requested borrowing and the amount thereof. Each
Lender shall before 1:00 p.m. (Seattle time) on the date of the requested
borrowing, pay such Lender's Revolving Loan Pro Rata Share of the aggregate
principal amount of the requested borrowing in immediately available funds to
Agent at its Commercial Loan Processing Center in Seattle, Washington. Upon
fulfillment to Agent's satisfaction of the applicable conditions set forth in
Article 3, and after receipt by Agent of such funds, Agent will promptly make
such funds available to Borrowers by depositing them to the ordinary checking
account maintained by Borrowers with Agent.
Section 2.3 AGENT'S RIGHT TO FUND. Unless Agent shall have received
notice from a Lender prior to 12:00 Noon (Seattle time) on the date of any
requested borrowing that such Lender will not make available to Agent its share
of the requested borrowing, Agent may assume that such Lender has made such
funds available to Agent on the date such Loan is to be made in accordance with
Section 2.2 and Agent may, in reliance upon such assumption, make available to
Borrowers on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such portion available to Agent, such Lender and
Borrowers jointly and severally agree to pay to Agent forthwith on demand such
corresponding amount, together with interest thereon for each day from the date
such amount is made available to Borrowers until the date such amount is repaid
to Agent, at (a) in the case of Borrowers, the Reference Related Rate and (b) in
the case of such Lender, the Federal Funds Rate. Any such repayment by
Borrowers shall be without prejudice to any rights it may have against the
Lender that has failed to make available its funds for any requested borrowing.
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Section 2.4 REPAYMENT OF PRINCIPAL.
(a) On each day that the Total Utilization exceeds the Total
Commitment, Borrowers shall repay Revolving Loans in such an amount as is
necessary to reduce such Total Utilization to an amount equal to or less than
the Total Commitment. If Borrowers shall pay any Offshore Related Rate Loan
pursuant to this Section prior to the end of the Applicable Interest Period,
Borrowers shall include with such payment any amount payable pursuant to
Section 2.7 and applicable to the payment of such Offshore Related Rate Loan
prior to the termination of the Applicable Interest Period.
(b) Borrowers shall repay the principal amount of the Revolving
Loans on or before the Revolving Loan Maturity Date.
Section 2.5 OPTIONAL CONVERSION OF UP TO $10,000,000 OF REVOLVING LOANS.
On the first day of any month, within 24 months of the date of this Agreement,
if at that time, the conditions set forth in Section 3.2 are satisfied,
Borrowers may convert a portion of not less than $500,000 of the Revolving Loans
in increments of $100,000 to a Term Loan, but Borrowers shall not convert more
than a total of $10,000,000 of Revolving Loans to Term Loans. Each such
conversion will be accomplished by Borrowers giving written notice to Agent at
least 5 business days prior to the date selected by Borrowers for conversion.
Such notice will specify what portions of the Term Loan will bear interest at
the available alternative rates described in Section 2.6(b). Principal payments
on each Term Loan will be paid in 16 equal consecutive quarterly installments
with the first principal payment being due at the end of the calendar quarter
following conversion. Interest on each Term Loan will be payable monthly in
arrears. All then unpaid principal and interest on each Term Loan will be due
and payable no later than 48 months following such conversion .
Section 2.6 INTEREST ON LOANS.
(a) GENERAL PROVISIONS. Borrowers agree to pay to Lenders interest
on the unpaid principal amount of each Loan from the date of such Loan until
such Loan shall be due and payable at a per annum rate equal to the
Applicable Interest Rate in effect from time to time with respect to such
Loan (or respective portions thereof). In addition, at Lenders' option,
during any period of time while an Event of Default has occurred and is
continuing, interest shall accrue and be paid on the unpaid principal amount
of each Loan or portion thereof at a per annum rate equal to 3% above the
Applicable Interest Rate for such Loan or portion thereof. Accrued but
unpaid interest on each Loan or portion thereof shall be paid in arrears on
the first business day of each calendar month, and at the applicable maturity
date.
(b) SELECTION OF ALTERNATIVE RATES.
(1) Borrowers may, subject to the requirements of this
Section, elect on any Business Day to have interest accrue on any Loan or any
portion thereof at an Offshore Related Rate for an Applicable Interest
Period. Borrowers may also, subject to the
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requirements of this Section, elect on any Business Day to have interest accrue
on any Term Loan or portion thereof at a Long Term Rate for an Applicable
Interest Period. Such notice (herein, an "Interest Rate Notice") shall be
deemed delivered when communicated to Agent (in the case of an oral notice) or
when received by Agent (in the case of written notice) except that an Interest
Rate Notice communicated to or received by Agent after the specified time on any
Business Day, shall be deemed to have been delivered or received on the
immediately succeeding Business Day. Any oral Interest Rate Notice shall be
promptly confirmed in writing, provided, however, that Agent may rely on any
oral Interest Rate Notice even if Agent does not receive a written confirmation.
Such Interest Rate Notice shall identify, subject to the conditions of this
Section, the Loan or portions thereof to accrue interest at the Offshore Related
Rate or the Long Term Rate and the Applicable Interest Period which Borrowers
select. Any such Interest Rate Notice shall be irrevocable and shall constitute
a representation and warranty by Borrower that as of the date of such Interest
Rate Notice, the statements set forth in Article 4 are true and correct and that
no Default or Event of Default has occurred and is continuing. An Interest Rate
Notice specifying a LIBOR rate shall be given before 11:00 a.m. (Seattle time)
three Business Days prior to the commencement of the Applicable Interest Period.
An Interest Rate Notice specifying an IBOR rate shall be given before 9:00 a.m.
(Seattle time) on the date of commencement of the Applicable Interest Period.
An Interest Rate Notice specifying a Long Term Rate given at the time of a
conversion described in Section 2.5 shall be given concurrently with the notice
of conversion after agreement on the rate has been reached, and the rate so
agreed upon and specified in the Interest Rate Notice will be effective for the
Applicable Interest Period. An Interest Rate Notice specifying a Long Term Rate
which is given other than in connection with a conversion described in Section
2.5 shall be given before 9:00 a.m. (Seattle time) on the date of commencement
of the Applicable Interest Period. Any Interest Rate Notice which specifies an
Offshore Related Rate but fails to identify an Applicable Interest Period shall
be deemed to request an Applicable Interest Period of one month. Any Interest
Rate Notice which specifies a Long Term Rate but fails to identify an Applicable
Interest Period shall be deemed to request an Applicable Interest Period of one
year.
(2) Borrowers' right to select the Offshore Related Rate
or Long Term Rate to apply to a Loan or any portion thereof shall be subject
to the following conditions: (i) the aggregate of all Loans, or portions
thereof, to accrue interest at a particular Offshore Related Rate or Long
Term Rate for the same Applicable Interest Period shall be an integral
multiple of $100,000 and not less than $500,000; (ii) no such rate may be
selected for any Revolving Loan, or Term Loan, or portion thereof, which is
already accruing interest at an Offshore Related Rate or Long Term Rate
unless such selection is only to become effective at the maturity of the
Applicable Interest Period then in effect; (iii) no Lender shall have given
notice pursuant to Section 2.6(d) that the selected Offshore Rate or Long
Term Rate is not available; and (iv) no Default or Event of Default shall
have occurred and be continuing.
(3) In the absence of an effective request for the
application of an Offshore Related Rate or Long Term Rate, the Revolving
Loans, Term Loans or remaining portions thereof shall accrue interest at the
Reference Related Rate.
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(4) The Interest Rate Notice may be given with and
contained in any Notice of Borrowing.
(5) If Borrowers deliver an Interest Rate Notice with any
Notice of Borrowing for a Loan and Borrowers thereafter declines to take such
Loan or a condition precedent to the making of such Loan is not satisfied or
waived, Borrowers shall indemnify Agent and each Lender for all losses and
any costs which Agent or any Lender may sustain as a consequence thereof
including, without limitation, the costs of re-employment of funds at rates
lower than the cost to Lenders of such funds. Payment of the amount owed
shall be due within fifteen (15) days after Borrowers' receipt of Agent's
statement calculating the sum due.
(c) APPLICABLE DAYS FOR COMPUTATION OF INTEREST. Computations of
interest shall be made on the basis of a year of 360 days, for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such interest is payable.
(d) UNAVAILABLE OFFSHORE RELATED RATE OR LONG TERM RATE. If any
Lender reasonably determines that for any reason, fair and adequate means do
not exist for establishing a particular Offshore Related Rate or Long Term
Rate, or that an Offshore Related Rate or Long Term Rate will not adequately
and fairly reflect the cost to it of making or maintaining the principal
amount of a particular Offshore Related Rate Loan or Long Term Rate Loan or
that accruing interest on any Offshore Related Rate Loan or Long Term Rate
Loan has become unlawful or is contrary to any internal policies (of general
application), such Lender may give notice of that fact to Agent and
Borrowers. After such notice has been given and until such Lender notifies
Borrowers and Agent that the circumstances giving rise to such notice no
longer exist, the interest rate or rates so identified in such notice shall
no longer be available. Any subsequent request by Borrowers to have interest
accrue at such an Offshore Related Rate or Long Term Rate, as the case may
be, shall be deemed to be a request for interest to accrue at the Reference
Related Rate. If the circumstances giving rise to the notice described
herein no longer exist, the Lender who had previously given notice of the
unavailability of rate(s) shall notify Agent and Borrowers in writing of that
fact, and Borrowers shall then once again become entitled to request that
such Offshore Related Rate or Long Term Rate apply to the Loans in accordance
with Section 2.6(b).
(e) COMPENSATION FOR INCREASED COSTS. In the event that after the
date hereof any change occurs in any applicable law, regulation, treaty or
directive or interpretation thereof by any Governmental Authority charged
with the administration or interpretation thereof, or any condition is
imposed by any Governmental Authority after the date hereof or any change
occurs in any condition imposed by any Governmental Authority on or prior to
the date hereof which:
(1) subjects any Lender to any Tax (other than any Tax
measured by such Lender's net or gross income), or changes the basis of
taxation of any payments to any
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Lender on account of principal of or interest on any Offshore Related Rate Loan
or Long Term Rate Loan or fees in respect of such Lender's obligation to make
Long Term Rate Loans or Offshore Related Rate Loans or other amounts payable
with respect to such Loans; or
(2) imposes, modifies or determines applicable any reserve, deposit
or similar requirements against any assets held by, deposits with or for the
account of, or loans or commitments by, the relevant office of any Lender in
connection with its Long Term Rate Loans or Offshore Related Rate Loans to the
extent the amount of which is in excess of, or was not applicable at the time of
computation of, the amounts provided for in the definition of such Long Term
Rate or Offshore Related Rate; or
(3) affects the amount of capital required or expected to be
maintained by banks generally or corporations controlling banks and any Lender
determines that the amount by which it or any corporation controlling it is
required or expected to maintain or increase its capital is increased by, or
based upon, the existence of this Agreement or of any Lender's Loans or
Commitments hereunder;
(4) imposes upon any Lender any other condition with respect to its
Offshore Loans or its obligation to make Long Term Rate or Offshore Related Rate
Loans; which, as a result thereof, (i) increases the cost to any Lender of
making or maintaining its Loans or its Commitments hereunder, or (ii) reduces
the net amount of any payment received by any Lender in respect of its Long Term
Rate Loans or Offshore Related Rate Loans (whether of principal, interest,
commitment fees or otherwise), or (iii) requires any Lender to make any payment
on or calculated by reference to the gross amount of any sum received by it in
respect of its Long Term Rate or Offshore Related Rate Loans, in each case by an
amount which any such Lender in its reasonable judgment deems material, then and
in any such case Borrowers shall pay to Agent for the account of such Lender on
demand such amount or amounts as will compensate such Lender for any increased
cost, deduction or payment actually incurred or made by such Lender, PROVIDED,
HOWEVER, Borrowers shall not be obligated for amounts hereunder unless, within
60 days after learning thereof any such Lender shall have advised Borrowers of
the subjection, change, requirement or other condition forming the basis for
such Lender's request for additional payment hereunder. If Borrowers are
advised of any such subjection, change, requirement or other condition prior to
the expiration of an Applicable Interest Period for any Long Term Rate Loan or
Offshore Related Rate Loan, Borrowers may elect to prepay the Long Term Rate
Loan or Offshore Related Rate Loan, as applicable, without penalty or premium if
such prepayment would reduce or eliminate the amounts which Borrowers would
otherwise be obligated to pay any Lender under the terms of this Section. The
demand for payment by any Lender shall be delivered to both Agent and Borrowers
and shall state the subjection or change which occurred or the reserve or
deposit requirements or other conditions which have been imposed upon such
Lender or the request, direction or requirement with which it has complied,
together with the date thereof, the amount of such cost, reduction or payment
and the manner in which such amount has been calculated.
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The protection of this Section shall be available to each Lender regardless
of any possible contention of invalidity or inapplicability of the relevant law,
regulation, treaty, directive, condition or interpretation thereof. In the
event that Borrowers pay any Lender the amount necessary to compensate such
Lender for any charge, deduction or payment incurred or made by such Lender as
provided in this Section, and such charge, deduction or payment or any part
thereof is subsequently returned to such Lender as a result of the final
determination of the invalidity or inapplicability of the relevant law,
regulation, treaty, directive or condition, then such Lender shall remit to
Borrowers the amount paid by Borrowers which has actually been returned to such
Lender (together with any interest actually paid to such Lender on such returned
amount), less such Lender's costs and expenses incurred in connection with such
governmental regulation or any challenge made by such Lender with respect to its
validity or applicability.
Section 2.7 PREPAYMENTS. Reference Related Rate Loans may be repaid at
any time without penalty or premium. Except as provided in Section 2.6(e), if
an Offshore Related Rate Loan or Long Term Rate Loan is paid prior to the end of
the Applicable Interest Period, a fee computed in the manner set out in Schedule
1 shall be assessed and paid at the time of such payment. Such fee shall be
calculated by Agent. Except as provided in Section 2.6(e), such fee shall apply
in all circumstances where an Offshore Related Rate Loan or Long Term Rate Loan
is paid prior to the end of the Applicable Interest Period, regardless of
whether such payment is voluntary, mandatory (including, without limitation,
payments required pursuant to Section 2.4) or the result of Agent's or any
Lender's collection efforts.
Section 2.8 MANNER OF PAYMENTS.
(a) Agent is authorized to deduct all interest and all other fees and
expenses due from any of Borrowers' checking accounts maintained with Agent. If
such payments are not taken from Borrowers' checking accounts, all payments and
prepayments of principal and interest on any Loan and all other amounts payable
hereunder by Borrowers to Agent or any Lender shall be made by paying the same
in United State Dollars and in immediately available funds to Agent at its
Commercial Loan Processing Center, Seattle, Washington not later than 12:00 Noon
(Seattle time) on the date on which such payment or prepayment shall become due.
(b) Borrowers hereby authorizes Agent and each Lender, if and to the
extent any payment is not promptly made pursuant to this Agreement or any other
Loan Document, to charge from time to time against any or all of the accounts of
Borrowers with Agent or any Lender or any Affiliate of any Lender any amount due
hereunder or under such other Loan Document.
(c) Whenever any payment hereunder or under any other Loan Document
shall be stated to be due would otherwise occur on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day. In the
case of an Offshore Loan or Long Term Base Loan, whenever the last day of any
Applicable Interest Period would otherwise
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occur on a day other than a Business Day, the last day of such Applicable
Interest Period shall occur, on the next succeeding Business Day and such
extension of time shall in such case be included in the computation and payment
of interest, UNLESS, such extension would cause the last day of such Applicable
Interest Period to occur in the next following calendar month, in which case the
last day of such Applicable Interest Period shall occur, on the preceding
Business Day and the calculation of interest will be adjusted accordingly.
Section 2.9 FEES.
(a) Borrowers agree to pay Bank of America, the sole Lender on the
date hereof a loan initiation fee of $28,750.
(b) Borrowers agree to pay Agent for the account of Lenders in
proportion to their respective Revolving Loan Pro Rata Shares an Unused
Commitment Fee. This fee will be payable quarterly in arrears commencing
December 31, 1997, and will be computed by multiplying the Unused Commitment Fee
Rate, based upon a 360-day year by the daily amount by which the Total Revolving
Loan Commitment exceeds the aggregate of the Revolving Loans.
Section 2.10 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment in respect of Borrowers' obligations under the Loan Documents (whether
voluntary or involuntary, through the exercise of any right of set off or
otherwise) in excess of the amount it would have received if all payments had
been made directly to Agent and apportioned in accordance with the terms hereof,
such Lender shall hold such excess payment in trust for Agent and Lenders and
shall forthwith remit the same to Agent for Agent's Lenders' accounts as herein
provided.
Section 2.11 APPLICATION OF PAYMENTS. Any payment made by Borrowers in
respect of amounts owing by them under any of the Loan Documents, in the absence
of a continuing Event of Default shall be applied in the manner directed by
Borrowers, and in the absence of such direction shall be applied as follows:
(a) FIRST, to fees, expenses and indemnities due under any Loan
Document;
(b) SECOND, to interest due under provision of any Loan Document;
(c) THIRD, to any principal payment then due under any Loan;
(d) FOURTH, to prepay the principal amount of any Reference Rate
Related Loan then outstanding but not yet due; and
(e) FIFTH, to prepay the principal amount of any Offshore Related
Rate Loan or Long Term Base Rate Related Loan then outstanding but not yet due.
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Any payments made by Borrowers on the Loans or received for Borrowers' account
and from any source after the occurrence and during the continuation of an Event
of Default shall be applied as follows:
(a) FIRST, to fees, expenses and indemnities due under any Loan
Document;
(b) SECOND, to interest due under provision of any Loan Document;
(c) THIRD, to any principal payment then due under any Loan;
(d) FOURTH, to any liability of Borrowers under any Reimbursement
Agreement or pursuant to Section 9.4.
(e) FIFTH, to prepay the principal amount of any Reference Rate
Related Loan then outstanding, whether or not due;
(f) SIXTH, to prepay the principal amount of any Offshore Related
Rate Loan or Base Rate Related Loan then outstanding, whether or not due; and
(g) SEVENTH, as cash collateral security for Borrowers' obligations
in respect of unmatured and unreimbursed Letters of Credit.
ARTICLE 3
CONDITIONS TO LOANS
Section 3.1 CONDITIONS TO INITIAL LOANS. In addition to the conditions
set forth in Section 3.2, the obligation of each Lender to make its initial Loan
and the obligation of Agent to issue any Letter of Credit is subject to
fulfillment of the following conditions:
(a) LOAN DOCUMENTS. Agent shall have received the Loan Documents, each
been duly executed and delivered by Borrowers and the other parties thereto, and
shall be satisfactory to Agent and each Lender in form and substance.
(b) BORROWER AUTHORITY. Agent shall have received in form and substance
satisfactory to it (i) a copy of a resolution adopted by the Board of Directors
of Borrowers authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents certified by the Secretary of Borrowers;
(ii) evidence of the authority and specimen signatures of the persons who have
signed this Agreement and the other Loan Documents; (iii) Certificate of
Existence or Certificate of Good Standing dated as of a recent date issued by
the Secretary of State of each of the states where a Borrower is incorporated;
and (iv) such other evidence of corporate authority as Agent shall reasonably
require.
(c) LEGAL OPINION. Agent on behalf of each Lender shall have received the
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legal opinion of the law firm of Ater Wynne Hewitt Dodson & Skerritt, L.L.P., as
counsel to Borrowers, substantially in the form attached as Exhibit 3.1 and
dated as of the date hereof.
(d) OFFICER'S CERTIFICATE. Agent shall have received a certificate of
Borrowers' chief financial officer or president as to the accuracy of Borrowers'
representations and warranties set forth in Article 4 and as to the absence of
any Default or Event of Default.
(e) OTHER INFORMATION. Agent shall have received such other statements,
opinions, certificates, documents, undertakings and information with respect to
the matters contemplated by this Agreement and the other Loan Documents as any
Lender may reasonably request.
(f) FEES. Agent shall have received payment from Borrowers of the fees
described in Section 2.9(a).
(g) EQDS. Agent shall have received from Borrowers a completed
Environmental Questionnaire and Disclosure Statement and is satisfied with it.
(h) MATERIAL ADVERSE CHANGE. There has been no material adverse change in
the operations, business, or condition, including financial condition of the
Borrowers and their Subsidiaries, taken as a whole since June 30, 1997.
Section 3.2 CONDITIONS TO LOANS. The obligation of Lender to make
any Loan hereunder, and the obligation of Agent to issue any Letters of Credit
are subject to the fulfillment of the following conditions:
(a) PRIOR CONDITIONS. All of the conditions set forth in Section 3.1
shall have been satisfied.
(b) NOTICE OF BORROWING. Agent shall have received the Notice of
Borrowing in respect of such Loan.
(c) NO DEFAULT. At the date of the Loan, no Default or Event of Default
shall have occurred and be continuing or will have occurred as the result of the
making of the Loan; and the representations and warranties of Borrowers in
Article 4 shall be true on and as of such date with the same force and effect as
if made on and as of such date.
(d) OTHER INFORMATION. Agent and each Lender shall have received such
other statements, opinions, certificates, documents and information as it may
reasonably request in order to satisfy itself that the foregoing conditions have
been fulfilled.
ARTICLE 4
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REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant as follows:
Section 4.1 CORPORATE EXISTENCE AND POWER. Northwest Pipe Company
is a corporation duly incorporated and validly existing under the laws of the
State of Oregon. Thompson Pipe and Steel Company is a corporation duly
incorporated and validly existing under the laws of the State of Colorado and is
a wholly owned subsidiary of Northwest Pipe Company. Thompson Steel Pipe
Company is a corporation duly incorporated and validly existing under the laws
of the State of Delaware and is a wholly owned subsidiary of Thompson Pipe and
Steel Company. Borrowers are duly qualified to do business in each other
jurisdiction where the nature of their activities or the ownership of their
properties requires such qualification, except to the extent that failure to be
so qualified does not have a material adverse effect on its business, operations
or financial condition. Borrowers have full corporate power and authority to
carry on their business as presently conducted, to own and operate their
properties and assets, and to execute, deliver and perform the Loan Documents.
Except as described in this section, no Borrower has any Subsidiary.
Section 4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Borrowers and their Subsidiaries of the Loan Documents and any
borrowing thereunder, has been duly authorized by all necessary corporate
action, and does not require any shareholder approval or the approval or consent
of any trustee or the holders of any Funded Indebtedness of Borrowers except
such as have been obtained (certified copies thereof having been delivered to
Agent), does not contravene any law, regulation, rule or order binding on them
or their Articles of Incorporation or Bylaws and does not contravene the
provisions of or constitute a default under any indenture or any material
mortgage, contract or other agreement or instrument to which Borrowers or any of
their Subsidiaries are a party or by which Borrowers or any of their
Subsidiaries, or any of their properties, may be bound or affected.
Section 4.3 GOVERNMENT APPROVALS, ETC. No Government Approval or
filing or registration with any Governmental Authority is required for the
making and performance by Borrowers of the Loan Documents or in connection with
any of the transactions contemplated hereby or thereby, except such as have been
heretofore obtained and are in full force and effect (certified copies thereof
having been delivered to Agent), or except such approvals, filings or
registrations, the absence of which would not have a material adverse effect on
the business of Borrowers.
Section 4.4 BINDING OBLIGATIONS, ETC. This Agreement has been duly
executed and delivered by Borrowers and constitutes, and the other Loan
Documents when duly executed and delivered by Borrowers will constitute, the
legal, valid and binding obligations of Borrowers enforceable against Borrowers
in accordance with their respective terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by the exercise of judicial
discretion in accordance with general principles of equity.
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Section 4.5 LITIGATION. Except as described on Schedule 4.5, there
are no actions, proceedings, investigations, or claims against or affecting
Borrowers or their Subsidiaries now pending before any court, arbitrator or
Governmental Authority, which, if determined adversely to Borrowers or any
Subsidiary, would be likely to have a material adverse effect on the Borrowers
or any Subsidiary, or which seeks a judgment in excess of $500,000 which is not
fully insured. Also, Borrowers do not have knowledge that any of the foregoing
have been threatened or that a basis for any of the foregoing exists.
Section 4.6 FINANCIAL CONDITION. The consolidated balance sheet of
Borrowers and their Subsidiaries as at June 30, 1997, and the related statements
of income and retained earnings of Borrowers and their Subsidiaries for the
fiscal year then ended, copies of which have been furnished to Agent and
Lenders, fairly present the consolidated financial condition of Borrowers and
their Subsidiaries as at such date and the consolidated results of operations of
Borrowers for the period then ended, all in accordance with GAAP. Neither
Borrowers nor their Subsidiaries had on such date any material contingent
liabilities, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in that balance sheet and in the notes to those
financial statements and since that date there has been no material adverse
change in the financial condition or operations of Borrowers or their
Subsidiaries.
Section 4.7 TITLE, LIENS AND ENVIRONMENTAL MATTERS. Borrowers or their
Subsidiaries have good and marketable title to each of the properties and assets
reflected on the financial statements described in Section 4.6 (except such as
have been since sold or otherwise disposed of in the ordinary course of
business). No assets or revenues of Borrowers or their Subsidiaries are subject
to any material Lien except as required or permitted by this Agreement,
disclosed in the financial statements described in Section 4.6 or otherwise
disclosed to the Agent in writing prior to the date of this Agreement. Except
as set forth in Schedule 4.7, to the best of Borrowers' knowledge, all
properties of Borrowers and their Subsidiaries, and their use thereof comply in
all material respects with applicable zoning and use restrictions and with
applicable laws and regulations relating to the environment. Except as
disclosed in Schedule 4.7, to the best of Borrowers' knowledge, there are no
past or present events, conditions, circumstances, activities, practices,
incidents or actions at or in connection with any of the realty or other
premises owned, leased, operated, used or held at any time by Borrowers or their
subsidiaries which could reasonably be expected to interfere with or prevent the
continued material compliance with any laws or regulations relating to
underground storage tanks or any other Environmental Laws or give rise to any
material legal liability or otherwise form the basis of any claim, action, suit,
proceedings, hearings or investigation against or affecting Borrowers in a
material way under the Environmental Laws. Neither Borrowers nor their
Subsidiaries have commissioned or otherwise come to possess any environmental
audit or report concerning such premises or any portion thereof except such as
have been disclosed to Lenders prior to the date hereof.
Section 4.8 TAXES. Borrowers and their subsidiaries have filed all tax
returns and reports required of them, have paid all Taxes which are shown to be
due and payable on such
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returns and reports, or have provided adequate reserves for payment all
contested Tax payments. The charges, accruals and reserves on the books of
Borrowers in respect of Taxes for all fiscal periods to date are accurate in all
material respects and there are no material questions or disputes between
Borrowers and any Governmental Authority with respect to any Taxes except as
disclosed in the balance sheet referred to in Section 4.6 or otherwise disclosed
to Agent in writing prior to the date of this Agreement.
Section 4.9 LAWS, ORDERS, OTHER AGREEMENTS. Neither Borrowers nor any
of their Subsidiaries is in violation of or subject to any contingent liability
on account of any laws, statutes, rules, regulations and orders of any
Governmental Authority, except for violations which in the aggregate do not have
a material adverse effect on the business, operations or financial condition of
Borrowers or such Subsidiary. Neither Borrowers nor any of their Subsidiaries
is in material breach of or default under any material agreement to which it is
a party or which is binding on it or any of its assets.
Section 4.10 FEDERAL RESERVE REGULATIONS. Borrowers are not engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying any margin stock (within the
meaning of Federal Reserve Regulation U), and no part of the proceeds of any
Loan will be used to purchase or carry any such margin stock or to extend credit
to others for the purpose of purchasing or carrying any such margin stock or for
any other purpose that violates the applicable provisions of any Federal Reserve
Regulation. Borrowers will furnish to any Lender on request a statement
conforming with the requirements of Regulation U.
Section 4.11 ERISA.
(a) No Employee Plan or trust created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) which could
subject such Employee Plan or any other Employee Plan, any trust created
thereunder, or any trustee or administrator thereof, or any party dealing with
any Employee Plan or any such trust to any material tax or penalty on prohibited
transactions imposed by Section 502 of ERISA or Section 4975 of the Code.
(b) Each Employee Plan has been operated in material compliance with
its terms and applicable provisions of ERISA and the Code. Each Pension Plan
intended to qualify under Section 401(a) of the Code has obtained (or is in the
process of obtaining) a favorable determination letter from the IRS.
(c) Except for underfunding revealed on Schedule B of 1996 IRS Form
5500, for both the Thompson Pipe & Steel Company Union Pension Plan and the
Thompson Pipe & Steel Company Retirement Plan, (i) there is no "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code) with respect to any Employee Plan; (ii) no event has occurred, or is
threatened or about to occur, that would constitute a
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"reportable event" within the meaning of Section 4043(b) of ERISA; (iii)
neither Borrowers nor any Affiliate have incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC"), except for the payment of premiums, which
have been paid on a timely basis; (iv) with respect to any Employee Plan subject
to Title IV of ERISA, such plan could be terminated as of the date of this
Agreement without Borrowers incurring any liability under Title IV of ERISA, and
all benefits accrued up to the date of this Agreement (whether or not vested)
would be fully funded in accordance with the actuarial assumptions and methods
utilized by such Employee Plan for valuation purposes; and (v) with respect to
any Employee Plans that are "multiemployer plans" under Section 3(37) of ERISA,
(1) neither Borrowers nor any Affiliate have incurred any withdrawal liability
within the meaning of Section 4201 of ERISA, or had such liability asserted, (2)
no such Employee Plan is in reorganization (under Section 4241(a) of ERISA), and
(3) the vested and accrued liabilities of the Employee Plans are fully funded
and if Borrowers or Affiliates were to withdraw from such plans, there would be
no withdrawal liability, as defined in Title IV, subtitle E of ERISA.
Section 4.12 INVESTMENT COMPANY; PUBLIC UTILITY HOLDING COMPANY.
Borrowers are not (a) an "investment company" or a company "controlled" by an
investment company within the meaning of the Investment Company Act of 1940, as
amended; or (b) a "holding company" or a "subsidiary company" of a "holding
company" or an "Affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 4.13 SOLVENCY. Each Borrower is Solvent and shall be Solvent
immediately after the consummation of the transactions contemplated by this
Agreement. Borrowers are not incurring the obligations contemplated by this
Agreement for the purposes of hindering or delaying or defrauding their
respective present or future creditors.
SECTION 4.14 REPRESENTATIONS AS A WHOLE. This Agreement, the other Loan
Documents, the financial statements referred to in Section 4.6, and all other
instruments, documents, certificates and statements furnished to Agent and
Lenders by Borrowers, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained herein or therein not misleading. Without limiting the
foregoing, each of the representations and warranties made by Borrowers in the
other Loan Documents is true and correct on and as of the date when made, on and
as of the date hereof, and on and as of each date this representation is deemed
made hereunder with the same force and effect as if made on and as of such
dates.
ARTICLE 5
AFFIRMATIVE COVENANTS
So long as Agent or any Lender shall have any Commitment hereunder or
there shall be any outstanding Letters of Credit and until payment in full of
each Loan and performance of all other obligations of Borrowers under this
Agreement and the other Loan
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Documents, Borrowers agree to do all of the following unless the Majority
Lenders shall otherwise consent in writing.
Section 5.1 USE OF PROCEEDS FROM LOANS/USE OF LETTERS OF CREDIT. The
proceeds of the Loans will be used to repay existing secured debt, to finance
accounts receivable and inventory of Borrowers and their Subsidiaries and in
connection with the general corporate requirements incurred in the ordinary
course of Borrowers' business. The Letters of Credit will be used to replace
existing letters of credit supporting Caldwell County, Kentucky and "KREDA"
industrial revenue bonds, or general corporate purposes.
Section 5.2 PRESERVATION OF CORPORATE EXISTENCE, ETC. Borrowers
will, and will cause their Subsidiaries to, preserve and maintain their
corporate existence, rights, franchises and privileges in the jurisdictions of
their incorporation and will, and will cause their Subsidiaries to, qualify and
remain qualified as foreign corporations in each jurisdiction where
qualification is necessary in view of their business and operations or the
ownership of their properties.
Section 5.3 VISITATION AND EXAMINATION RIGHTS. At any reasonable time,
and from time to time, Borrowers will, and will cause each Subsidiary, to permit
Agent and Lenders to examine and make copies of and abstracts from the records
and books of account of and to visit the properties of Borrowers and each
Subsidiary and to discuss the affairs, finances and accounts of Borrowers and
each Subsidiary with any of its officers or directors.
Section 5.4 KEEPING OF BOOKS AND RECORDS. Borrowers will keep adequate
records and books of account in which complete entries will be made, in
accordance with GAAP, reflecting all financial transactions of Borrowers and
their Subsidiaries.
Section 5.5 MAINTENANCE OF PROPERTY, ETC. Borrowers will maintain and
preserve and will cause each Subsidiary to maintain and preserve all of their
respective properties in reasonably good working order and condition, ordinary
wear and tear excepted, and will from time to time make all needed repairs,
renewals and replacements so that the efficiency of such properties shall be
fully maintained and preserved.
Section 5.6 COMPLIANCE WITH LAWS, ETC. Borrowers will comply and will
cause each Subsidiary to comply in all material respects with all laws,
regulations, rules, and orders of Governmental Authorities, including without
limitation, Environmental Laws applicable to Borrowers or any Subsidiary or to
their respective operations or property, except any thereof whose validity is
being contested in good faith by appropriate proceedings upon stay of execution
of the enforcement thereof.
Section 5.7 OTHER OBLIGATIONS. Borrowers will pay and discharge and
cause each Subsidiary to pay and discharge before the same shall become
delinquent all material Funded Debt, Taxes and other material obligations for
which either Borrowers or any Subsidiary is liable or to which their income or
property is subject and all material claims for labor and
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<PAGE>
materials or supplies which claims if unpaid might become by law a Lien upon
assets of either Borrowers or any Subsidiary. However, Borrowers and
Subsidiaries may refuse to pay any item described above whose validity or amount
is being contested in good faith by a Borrowers or Subsidiary in appropriate
proceedings with provision having been made to the satisfaction of Agent for the
payment thereof in the event the contest is determined adversely to such
Borrowers or such Subsidiary.
Section 5.8 INSURANCE. Borrowers will keep in force and will cause each
Subsidiary to keep in force upon all of their respective properties and
operations policies of insurance carried with responsible companies in such
amounts and covering all such risks as shall be customary in the industry and
reasonably satisfactory to Agent.
Section 5.9 FINANCIAL INFORMATION. Borrowers will deliver to Agent in
sufficient copies for distribution to Agent and each Lender:
(a) ANNUAL 10-K AND ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS.
As soon as available, and in any event within 105 days after the end of each
fiscal year of Northwest Pipe Company the Annual Report and 10-K report of
Northwest Pipe Company. Unless already included within the annual report and
10-K report, Borrowers will deliver to Agent, as soon as available, in any event
within 105 days after the end of each fiscal year of Borrowers, the consolidated
balance sheet of Borrowers and their 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 Borrowers and their Subsidiaries
for such fiscal year, accompanied by the audit report thereon by independent
certified public accountants selected by Borrowers and reasonably satisfactory
to Agent (which reports shall be prepared in accordance with GAAP and shall not
be qualified by reason of restricted or limited examination of any material
portion of the records of Borrowers or any Subsidiary and shall contain no
disclaimer of opinion or adverse opinion except such as Agent in its sole
discretion determines to be immaterial).
(b) ANNUAL CONSOLIDATING STATEMENTS. As soon as available, and in
any event within 105 days after the end of each fiscal year of Northwest Pipe
Company, a copy of the unaudited division and product line consolidating income
statements of the Borrowers and Subsidiaries as of the end of such year.
(c) QUARTERLY 10-Q REPORT, UNAUDITED FINANCIAL STATEMENTS AND
CONSOLIDATING STATEMENTS. As soon as available and in any event within 60 days
after the end of each fiscal quarter, except for fiscal year end, the 10-Q
report of Northwest Pipe Company. Unless already included within the 10-Q
report, Borrowers will deliver to Agent, as soon as available, and in any event
within 60 days after the end of each such fiscal quarter, the unaudited
consolidated balance sheet and statement of income of Borrowers and their
Subsidiaries as of the end of such quarter. At the same time, Borrowers shall
deliver to Agent the division and product line consolidating income statements
of Borrowers and their Subsidiaries as of the end of such fiscal quarter. The
statements required in this subsection
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shall be accompanied by a certificate of the chief financial officer of
Borrowers certifying that the balance sheets and statements required in this
subsection have been prepared in accordance with GAAP and present fairly the
financial position and results of Borrowers and each Subsidiary, and that there
has been no material adverse change in the financial condition or operations of
Borrowers and their Subsidiaries as shown on the balance sheet as of such date.
(d) QUARTERLY COMPLIANCE REPORTS. Within 60 days after the end
of each of the first three fiscal quarters and within 105 days of Borrowers'
fiscal year end, a certificate of the chief financial officer of Borrowers, that
as of the close of such fiscal quarter or fiscal year no Event of Default had
occurred, and was continuing, and that as of such date, Borrowers were in
compliance with the provisions of Sections 5.12, 5.13 and 5.14. Such
certificate shall show Borrowers' calculations with respect to Sections 5.12,
5.13 and 5.14.
(e) FINANCIAL FORECAST AND BUDGET. As soon as available, and in
any event within 90 days after the end of each fiscal year of Borrowers, a
budget and a financial forecast forecasting the results of operations for the
ensuing fiscal year in form satisfactory to Agent. Such budget and financial
forecast will be in quarterly format and include both income and balance sheet
forecasts.
(f) OTHER. All other statements, reports and other information
as Agent or any Lender may reasonably request concerning the financial condition
and business affairs of Borrowers and their Subsidiaries.
Section 5.10 NOTIFICATION. Promptly after learning thereof, Borrowers
shall notify Agent of:
(a) any action, proceeding, investigation or claim against or
affecting Borrowers or any of their Subsidiaries instituted
before any court, arbitrator or Governmental Authority or,
to Borrowers' knowledge, threatened to be instituted, which
might reasonably be determined adversely to Borrowers or any
Subsidiary and which, if determined adversely, would be
likely to have a material adverse effect on Borrowers or any
Subsidiary, or which seeks a judgment exceeding $500,000,
which is not fully insured;
(b) any substantial dispute between either Borrowers or any
Subsidiary and any Governmental Authority;
(c) any labor controversy which has resulted in or, to
Borrowers' knowledge, threatens to result in a strike which
would materially affect the business operations of Borrowers
or any Subsidiary; and
(d) the occurrence of any Event of Default or Default. In the
case of the occurrence of an Event of Default or Default,
Borrowers will deliver to
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Agent an Officer's Certificate specifying the nature
thereof, the period of existence thereof, and what action
Borrowers propose to take with respect thereto.
Section 5.11 ADDITIONAL PAYMENTS; ADDITIONAL ACTS. From time to time,
Borrowers will:
(a) pay or reimburse Agent and Lenders on request for all Taxes
(other than Taxes imposed on the net or gross income of
Agent or Lenders) imposed on any Loan Document or payment
and for all reasonable expenses, including legal fees,
incurred by Agent in connection with the preparation of the
Loan Documents or the making or administrating of the Loans
or the issuance of any letter of credit;
(b) pay or reimburse Agent and any Lender for all reasonable
expenses, including legal fees, incurred by Agent or any
Lender in connection with the enforcement by judicial
proceedings of any of the rights of Agent or any Lender
under the Loan Document, in which Lender or Agent prevails;
(c) obtain and promptly furnish to Agent evidence of all such
Government Approvals as may be required to enable Borrowers
to comply with its obligations under the Loan Documents and
to continue in business as conducted on the date hereof
without material interruption or interference; and
(d) execute and deliver all such instruments and perform all
such other acts as Agent or any Lender may reasonably
request to carry out the transactions contemplated by the
Loan Documents.
Section 5.12 MINIMUM DEBT SERVICE COVERAGE RATIO. Borrowers, and their
Subsidiaries, on a consolidated basis, shall maintain a minimum debt service
coverage ratio of not less than 2.0:1. The minimum debt service coverage
ratio will be computed by dividing:
(a) EBITDA, less
(b) income taxes paid in cash,
(c) less dividends paid in cash
by the sum of:
(a) current portion of long term debt, plus
(b) interest expense, plus
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(c) current portion of capital leases
The minimum debt service coverage ratio will be based upon the then ended fiscal
quarter plus the preceding three fiscal quarters. The current portion of long
term debt, including the current portion of capital leases, will be measured as
of the last day of the preceding fiscal year.
Section 5.13 MAXIMUM FUNDED DEBT TO EBITDA. Borrowers and their
Subsidiaries, on a consolidated basis, shall maintain for each period of four
consecutive fiscal quarters a ratio of Funded Debt to EBITDA of no greater than:
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
From the date of this Agreement through, 3.0:1
and including the four fiscal quarters
ending June 30, 1999
For the four consecutive fiscal quarters 2.75:1
ending September 30, 1999 and thereafter
</TABLE>
Section 5.14 MINIMUM TANGIBLE NET WORTH. Borrowers, and their
Subsidiaries, on a consolidated basis shall have a minimum Tangible Net Worth
equal to or greater than the sum of:
(a) $58,000,000, plus
(b) 70% of the cumulative Net Income of Borrowers and their
Subsidiaries for all fiscal quarters ending after June 30, 1997 in which such
Net Income was greater than zero, plus
(c) 90% of the amount by which the shareholders' equity of Borrowers
and their Subsidiaries has increased after June 30, 1997 solely as a result of
the issuance of common or preferred stock or the conversion of debt securities
into such stock.
ARTICLE 6
NEGATIVE COVENANTS
So long as Agent or any Lender shall have any Commitment hereunder or there
shall be any outstanding Letter of Credit and until payment in full of each Loan
and performance of all other obligations of Borrowers under this Agreement and
the other Loan Documents, Borrowers agree that it will not do any of the
following unless the Majority Lenders shall
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otherwise consent in writing.
Section 6.1 RESTRICTION ON BORROWINGS, CAPITAL LEASES AND CONTRACT
PURCHASES. Borrowers shall not and shall not permit any Subsidiary to borrow
money, enter into capital leases or enter into contracts to purchase any item on
deferred payments in any fiscal year if the total of such borrowings, leases and
contracts exceeds 3.5% of Borrowers' Tangible Net Worth in existence at the end
of Borrowers' prior fiscal year. This restriction shall not apply to the
issuance by Northwest Pipe Company of up to $35,000,000 in private placement
notes or to the Loans, or the Letters of Credit described in Articles 9 and 10.
Section 6.2 LIQUIDATION, MERGER, SALE OF ASSETS. Borrowers shall
not, and shall not permit any Subsidiary to liquidate, dissolve or enter into
any merger, consolidation, partnership or other combination, except that
Thompson Pipe and Steel Company and/or Thompson Steel Pipe Company may be merged
into Northwest Pipe Company and, except that Borrowers may make acquisitions by
merger, as provided in Section 6.6 when Northwest Pipe Company is the survivor.
Borrowers shall not sell, lease, or dispose of assets other than in the ordinary
course of business, except that Borrowers in any one fiscal year may sell assets
not in the ordinary course of business so long as the total of such sales does
not exceed 20% of Tangible Net Worth as of the end of the prior fiscal year. In
addition, Borrowers' existing facilities in the State of Kentucky may be sold
and such sale will not be considered in applying the 20% of Tangible Net Worth
restriction set forth in this Section.
Section 6.3 RESTRICTIONS ON LIENS - NEGATIVE PLEDGE. Borrowers
shall not, and shall not permit any Subsidiary to create or suffer any Liens
upon their property except for liens securing the letter of credit facility
described in Article 10. New Liens securing amounts not exceeding $500,000 in
any one fiscal year are permitted. In addition, new liens secured by newly
purchased tangible property are permitted subject, however, to the limits
described in Section 6.1.
Section 6.4 GUARANTIES, ETC. Borrowers shall not, and shall not
permit any Subsidiary to assume, guaranty, endorse or otherwise become directly
or contingently liable for, nor obligated to purchase, pay or provide funds for
payment of, any obligation of any other Person, other than (a) by endorsement of
negotiable instruments for deposit or collection or by similar transactions in
the ordinary course of business. Notwithstanding the foregoing restriction, any
Borrower may guaranty the obligation of any other Borrower.
Section 6.5 RESTRICTIONS ON LOANS AND ADVANCES. Borrowers shall
not, and shall not permit any Subsidiary to make any loan or advance to any
officer, director, employee or Affiliate, except for advances for travel or
other expenses in the ordinary course of business so long as the total of all
advances and loans outstanding at any one time do not exceed $500,000.
Section 6.6 RESTRICTION ON ACQUISITIONS. Borrowers shall not and
shall not permit any Subsidiary to acquire any business without Agent's prior
review and consent if the total
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of all business acquisitions in any one fiscal year exceeds 20% of Tangible Net
Worth as of the end of the prior fiscal year. For purposes of 20% limitation
above, acquisitions accomplished by merger shall be valued at the fair value of
all consideration given, including, without limitation, cash, notes, assumption
of debt and stock. In addition, Borrowers shall not and shall not permit any
Subsidiary to acquire any business if such acquisition is not approved by the
board of directors of the company owning such business or is deemed by Agent to
involve a hostile takeover.
Section 6.7 CHANGE IN BUSINESS. Borrowers shall not, and shall not
permit any Subsidiary to enter into a new business of substantial size which is
unrelated to Borrowers' present business.
Section 6.8 ERISA COMPLIANCE. Borrowers will not, and will not
permit any member of the Controlled Group nor any Employee Plan to:
(a) engage in any "prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the Code) which could result in a
material liability to Borrowers;
(b) violate state or federal securities laws applicable to any
Employee Plan in any material respect; or
(c) take any action that renders the representations of Section 4.11
of this Agreement inaccurate.
ARTICLE 7
EVENTS OF DEFAULT
Section 7.1 EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an "Event of Default" hereunder:
(a) PAYMENT DEFAULT. Borrowers shall fail to pay when due any
amount of principal of or interest on any Loan or any other amount payable by it
under this Agreement or under any Reimbursement Agreement with Agent; or
(b) BREACH OF WARRANTY. Any representation or warranty made or
deemed made by Borrowers under or in connection with this Agreement or any Loan
Document shall prove to have been incorrect in any material respect when made;
or
(c) BREACH OF CERTAIN COVENANTS. Borrowers shall have failed to
comply with Sections 5.12, 5.13 or 5.14 or any provision of Article 6 of this
Agreement; or
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(d) BREACH OF OTHER COVENANT. Borrowers shall fail to perform or
observe any other material covenant, obligation or term of any Loan Document
executed by it and such failure shall remain unremedied for thirty (30) days
after written notice thereof shall have been given to Borrowers by Agent; or
(e) CROSS-DEFAULT. Borrowers or any Subsidiary shall fail (i) to
pay when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) any indebtedness, other than an indebtedness arising under
this Agreement, which in the aggregate exceeds $250,000 and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such indebtedness, or (ii) to perform any term or
covenant on its part to be performed under any agreement or instrument relating
to any such indebtedness and required to be performed and such failure shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such failure to perform is to accelerate or to
permit the acceleration of the maturity of such indebtedness, or (iii) any such
indebtedness shall be declared to be due and payable or required to be prepaid
(other than by regularly scheduled required prepayment) prior to the stated
maturity thereof; or
(f) CROSS-DEFAULT - SECURED LETTER OF CREDIT FACILITY. An event
of default shall occur under any agreement with Bank of America with respect to
the Secured Letter of Credit Facility described in Article 10; or
(g) VOLUNTARY BANKRUPTCY, ETC. Borrowers or any Subsidiary
shall: (i) file a petition seeking relief for itself under Title 11 of the
United States Code, as now constituted or hereafter amended, or file an answer
consenting to, admitting the material allegations of or otherwise not
controverting, or fail timely to controvert a petition filed against it seeking
relief under Title 11 of the United State Code, as now constituted or hereafter
amended; or (ii) file such petition or answer with respect to relief under the
provisions of any other now existing or future applicable bankruptcy,
insolvency, or other similar law of the United States of America or any state
thereof or of any other country or jurisdiction providing for the
reorganization, winding-up or liquidation of corporations or an arrangement,
composition, extension or adjustment with creditors; or
(h) INVOLUNTARY BANKRUPTCY, ETC. Either an order for relief
shall be entered against Borrowers or any Subsidiary under Title 11 of the
United States Code, as now constituted or hereafter amended, which order is not
stayed; or upon the entry of an order, judgment or decree by operation of law or
by a court having jurisdiction in the premises which is not stayed adjudging it
a bankrupt or insolvent under, or ordering relief against it under, or approving
as properly filed a petition seeking relief against it under the provisions of
any other now existing or future applicable bankruptcy, insolvency or other
similar law of the United States of America or any state thereof or of any other
country or jurisdiction providing for the reorganization, winding-up or
liquidation of corporations or any arrangement, composition, extension or
adjustment with creditors; or appointing a receiver, liquidator, assignee,
sequestrator, trustee or custodian of Borrowers, or any Subsidiary or of
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<PAGE>
any substantial part of its or their property, or ordering the reorganization,
winding-up or liquidation of its or their affairs; or upon the expiration of
ninety (90) days after the filing of any involuntary petition against it seeking
any of the relief specified in Section 7.1(g) or this Section without the
petition being dismissed prior to that time; or
(i) INSOLVENCY, ETC. Borrowers or any Subsidiary shall (i) make
a general assignment for the benefit of its creditors or (ii) consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, or custodian of all or a substantial part of the property of Borrowers
or any Subsidiary, as the case may be, or (iii) admit its insolvency or
inability to pay its debts generally as they become due, or (iv) fail generally
to pay its debts as they become due, or (v) take any action (or suffer any
action to be taken by its directors or shareholders) looking to the dissolution
or liquidation of Borrowers or any Subsidiary, as the case may be; or
(j) JUDGMENT. A final judgment or order for the payment of money
in excess of $500,000 (to the extent not fully insured) shall be rendered
against Borrowers or any Subsidiary and such judgment or order shall continue
unsatisfied and in effect for a period of thirty (30) consecutive days; or
(k) GOVERNMENT APPROVALS. Any Government Approval or
registration or filing with any Governmental Authority now or hereafter required
in connection with the performance by Borrower of its obligations set forth in
the Loan Documents shall be revoked, withdrawn or withheld or shall fail to
remain in full force and effect unless in the reasonable opinion of Agent such
revocation, withdrawal or withholding would not be likely to have a material
adverse effect on the ability of Borrowers to perform their obligations under
the Loan Documents; or
(l) OTHER GOVERNMENT ACTION. Any act of any Governmental
Authority shall, in the reasonable opinion of Agent, deprive Borrowers or any
Subsidiary of any substantial right, privilege, or franchise or substantially
restrict the exercise thereof and such act is not revoked or rescinded within
sixty (60) days after it becomes effective or within thirty (30) days after
notice from Agent, whichever first occurs; or
(m) MATERIAL ADVERSE CHANGE. There occurs a material adverse
change in the operations, business or condition, including financial condition,
of the Borrowers and their Subsidiaries, taken as a whole after the date of this
Agreement.
Section 7.2 CONSEQUENCES OF DEFAULT. If an Event of Default
described in Section 7.1(g), 7.1(h) or 7.1(i) shall occur and be continuing,
then in any such case, the Commitment shall be immediately terminated and, if
any Loans shall have been made or issued, the principal of and interest on the
Loans, and all other sums payable by Borrowers under the Loan Documents and the
face amount of the Letters of Credit shall become immediately due and payable
all without notice or demand of any kind.
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If any other Event of Default shall occur and be continuing, then in any
such case and at any time thereafter so long as any such Event of Default shall
be continuing, Agent shall at the request, or may with the consent of the
Majority Lenders, immediately terminate the Commitments, and, if any Loans or
Letters of Credit shall have been made or issued, Agent shall at the request, or
may with the consent of the Majority Lenders, declare the principal of and the
interest on the Loans, the face amount of the Letters of Credit and all other
sums payable by Borrowers under the Loan Documents immediately due, whereupon
the same shall become immediately due and payable all without protest,
presentment, notice or demand, all of which Borrowers expressly waives.
ARTICLE 8
THE AGENT
Section 8.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints
and authorizes Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. Agent shall
have no duties or responsibilities except those expressly set forth in this
Agreement. The duties of Agent shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or the
other Loan Documents, expressed or implied, is intended to or shall be so
construed as to impose upon Agent any obligations in respect of this Agreement
or the other Loan Documents except as expressly set forth herein. In any
instance where Agent is required or permitted to consent to or approve any
action of Borrowers under this Agreement, such consent or approval shall be
deemed to be administrative in nature and may be given or withheld in Agent's
sole discretion unless the Loan Document states otherwise. As to any matters
not expressly provided for by this Agreement, including enforcement or
collection of the Loans, Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining) upon the instructions of
the Majority Lenders, and such instructions shall be binding on all Lenders,
PROVIDED that Agent shall not be required to take any action which exposes Agent
to personal liability or which is contrary to the Loan Documents or applicable
law. Without the consent of all Lenders, the Agent shall not:
- Change any Lender's Commitment or the total of all Lenders'
Commitments.
- Change the definition of Majority Lenders.
- Change the timing or rates of interest payments.
- Change the timing or amounts of principal payment due in respect
of Loans.
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- Amend this Section 8.1.
The terms of this Article shall not be amended without the prior written consent
of Agent (acting for its own account). In the absence of instructions from the
Majority Lenders, Agent shall have authority (but not the obligation), in its
sole discretion, to take or not to take any action, unless this Agreement
specifically requires the consent of Lenders, and any such action or failure to
act shall be binding on all Lenders. Each Lender shall execute and deliver such
additional instruments, including powers of attorney in favor of Agent, as may
be necessary or desirable to enable Agent to exercise its powers hereunder.
Section 8.2 DUTIES AND OBLIGATIONS.
(a) Neither Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
any of them under or in connection with this Agreement or any other Loan
Document except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent (i) may treat each
Lender which is a party hereto as the party entitled to receive payments
hereunder until Agent receives written notice of the assignment of such Lender's
interest herein signed by such Lender and made in accordance with the terms
hereof and a written agreement of the assignee that it is bound hereby to the
same extent as it would have been had it been an original party hereto, in each
case in form satisfactory to Agent; (ii) may consult with legal counsel
(including counsel for Borrowers), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such experts;
(iii) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
in or in connection with this Agreement, any other Loan Document, or in any
instrument or document furnished pursuant hereto or thereto; (iv) shall not have
any duty to ascertain or to inquire as to the performance of any of the terms,
covenants, or conditions of the Loan Documents, or of any instrument or document
furnished pursuant thereto on the part of Borrowers or as to the use of the
proceeds of any Loan or the proceeds received in respect of any Letter of
Credit; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, effectiveness, or value of this
Agreement, of any other Loan Document, or of any instrument or document
furnished pursuant hereto or thereto; and (vi) shall incur no liability under or
in respect to this Agreement or any other Loan Document by acting upon any oral
or written notice, consent, certificate or other instrument or writing (which
may be by cable, telex or telefax) believed by it to be genuine and signed, sent
or made by the proper party or parties or by acting upon any representation or
warranty of Borrowers made or deemed to be made in this Agreement or any other
Loan Document. Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care.
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(b) Agent will promptly transmit to each Lender copies of all
documents received from Borrowers pursuant to the requirements of this Agreement
other than documents which by the terms of this Agreement, Borrowers are
obligated to deliver directly to Lenders.
(c) Each Lender or its assignee shall furnish to Agent in a timely
fashion such documentation (including, but not limited to, IRS Forms Nos. W-8,
1001 and 4224) as may be reasonably requested by Agent to establish such
Lender's status for tax withholding purposes.
(d) Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default under any of the Loan Documents
unless Agent has received written notice from a Lender or Borrowers referring to
one or more of the Loan Documents, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that Agent
receives such a notice, Agent shall promptly notify each Lender.
Section 8.3 DEALINGS BETWEEN AGENT AND BORROWERS. With respect to
its Commitment and the Loans made by it, Agent shall have the same rights,
powers and responsibilities under this Agreement and the other Loan Documents as
any other Lender and may exercise the same as though it were not Agent, and the
term "Lender" as used herein and in the other Loan Documents shall unless
otherwise expressly indicated include Agent in its Lender capacity. The
limitations, disclaimers, waivers and the like set forth in Article 8 shall
apply to the Agent solely in its capacity as Agent for Lenders, and not in its
capacity as a Lender. Agent may accept deposits from, lend money to, act and
generally engage in any kind of business with Borrowers and any person which may
do business with Borrowers, all as if Agent were not Agent hereunder and without
any duty to account therefor to Lenders.
Section 8.4 LENDER CREDIT DECISION. Each Lender acknowledges that
it has, independently and without reliance upon Agent or the other Lenders and
based upon such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or the other Lenders and based upon such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
Section 8.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to
the extent not reimbursed by Borrowers) ratably according to their respective
Funded Pro Rata Shares from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted by Agent
under this Agreement or any other Loan Document, except any such as result from
Agent's gross
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negligence or willful misconduct. Without limiting the foregoing, each Lender
agrees to reimburse Agent promptly on demand in proportion to its Funded Pro
Rata Share for any out-of-pocket expenses, including legal fees, incurred by
Agent in connection with the administration or enforcement or preservation of
any rights under any Loan Document (to the extent that Agent is not reimbursed
for such expenses by Borrowers) including without limitation, expenses incurred
in connection with any Letter of Credit.
Section 8.6 SUCCESSOR AGENT. Agent may give written notice of
resignation at any time to Lenders. The Majority Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may on behalf of Lenders, appoint a
successor Agent, which shall be a bank organized under the laws of the United
States or of any state thereof, or any Affiliate of such bank, and having a
consolidated capital and surplus of at least $500,000,000. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. Until the
acceptance by such a successor Agent, the retiring Agent shall continue as
"Agent" hereunder. After any retiring Agent's resignation hereunder as Agent
shall become effective, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
Any company into which Agent may be merged or converted or with which it
may be consolidated or any company resulting from any merger, conversion or
consolidation to which it shall be a party or any company to which Agent may
sell or transfer all or substantially all of its agency relationships shall be
the successor to Agent without the execution or filing of any paper or further
act, anything herein to the contrary notwithstanding.
Section 8.7 INDEPENDENT DETERMINATION FOR FUNDING AND CLOSING. For
purposes of determining compliance with the conditions specified in Section 3.1
each Lender that has executed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with each document or other matter
sent by the Agent to such Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by or
acceptable or satisfactory to the Lender. This Section is solely for the benefit
of the Agent and not for the benefit of Borrowers or any other person.
ARTICLE 9
LETTERS OF CREDIT
Section 9.1 LETTERS OF CREDIT. Borrowers may request that Agent
issue letters of credit for Borrowers' account in accordance with the terms and
conditions of this Article.
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Section 9.2 MANNER OF REQUESTING LETTERS OF CREDIT.
(a) From time to time, Borrowers may request that Agent issue Standby
or Commercial Letters of Credit for Borrowers' account or extend or renew any
existing Letters of Credit. Such request will be made by delivering a written
request for the issuance, extension or renewal of such a Letter of Credit to
Agent. Each such request shall be deemed to constitute a representation and
warranty by Borrowers that as of the date of such request, statements set forth
in Article 4 are true and correct and that no Default or Event of Default has
occurred and is continuing. Each such request shall specify the face amount of
the requested Letter of Credit, the proposed date of expiration, the name of the
intended beneficiary thereof, and whether such Letter of Credit is a Standby
Letter of Credit or a Commercial Letter of Credit or an extension or renewal
thereof.
(b) Borrowers shall pay Agent for the account of Lenders such letter
of credit fees calculated and payable in accordance with Agent's normal and
customary practices for commercial letters of credit and shall pay 9/10ths of 1%
per annum of the face amount of any Standby Letter of Credit. The letter of
credit fees shall be paid on issuance and annually thereafter. Each letter of
credit requested hereunder shall be in a face amount such that after issuance of
such letter of credit, the Total Utilization will not exceed the Total Revolving
Loan Commitment. In addition, after such issuance, the Total Letter of Credit
Usage must not exceed $5,000,000. Each Letter of Credit requested shall be
issued with a maximum maturity of one year and shall have an expiration date not
later than one year after the Revolving Loan Maturity Date. The maturity date
for each Standby Letter of Credit may be automatically extended each year for an
additional year unless the Agent gives Borrowers 45 days written notice to the
contrary.
(c) Borrowers shall execute a letter of credit application. Either
as part of the application or as a separate document, Borrowers shall, at
Agent's request, execute a reimbursement agreement, in the standard form then
used by Agent, in respect of each Letter of Credit requested hereunder. Such
reimbursement agreements may be amended from time to time, and are collectively
referred to herein as the "Reimbursement Agreements".
(d) Subject to the satisfaction of the conditions precedent set forth
in Article 3 and Borrowers' compliance with the terms of this Section, Agent
shall issue and deliver its letter of credit to Borrowers or to the designated
beneficiary at such address as Borrowers may specify. New Letters of Credit and
extensions or renewals of any existing Letters of Credit shall contain terms and
conditions customarily included in Agent's letters of credit and shall otherwise
be in a form acceptable to Agent.
(e) In the event of any conflict between the terms of any
Reimbursement Agreement or Letter of Credit and the terms of this Agreement, the
terms of this Agreement shall control, unless Agent has otherwise agreed in a
writing.
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Section 9.3 INDEMNIFICATION; INCREASED COSTS. Borrowers agree to
indemnify Agent, and any Lender on demand for any and all additional costs,
expenses, or damages reasonably incurred by such Agent or Lender, directly or
indirectly, arising out of the issuance of any Letter of Credit or the purchase
of any Letter of Credit Risk Participation, including, without limitation, any
costs of maintaining reserves in respect thereof and any premium rates imposed
by the Federal Deposit Insurance Corporation.
If at any time after the date of this agreement, the introduction of or any
change in applicable law, rule or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation of administration thereof, or compliance by agent or lender with
any requests directed by such governmental authority (whether or not having the
force of law) shall, with respect to any letter of credit or letter of credit
risk participation, subject agent or such lender to any tax or impose, modify or
deem applicable any reserve, special deposit or similar requirements against the
assets of, deposits with or for the account of agent, or such lender or shall
impose on agent or such lender any other conditions affecting the letters of
credit or letter of credit risk participations and the result of any of the
foregoing is to increase the cost to agent, or such lender of issuing a letter
of credit or holding a letter of credit risk participation or to reduce the
amount of any sum received or receivable by agent, or such lender with respect
to the letters of credit or letter of credit risk participations, then, upon
demand by agent, or such lender, borrowers shall pay to agent or such lender
such additional amount or amounts as will compensate agent, or such lender for
such increased cost or reduction.
Borrowers agree to indemnify and hold agent and lenders (each, an
"indemnitee") harmless from and against any and all (a) taxes payable in
connection with letters of credit, letter of credit risk participations or the
provisions of this agreement relating thereto, and (b) actions, claims, damages,
losses, liabilities, fines, penalties, costs, and expenses of every nature,
including reasonable attorney's fees, suffered or incurred by the indemnitee
otherwise arising out of or relating to this article, any letter of credit, or
any letter of credit risk participations; PROVIDED, HOWEVER, said
indemnification shall not apply to the extent that any such action, claim,
damage, loss, liability, fine, penalty, cost or expense arises out of or is
based solely upon the indemnitee's willful misconduct or gross negligence.
SECTION 9.4 PAYMENT BY BORROWERS. Borrowers agree to fully
reimburse Agent for all amounts paid by Agent under, or in respect of, any
Letter of Credit and to pay interest thereon at the Reference Related Rate then
applicable to Revolving Loans from the date Agent makes such payment until the
date of reimbursement pursuant to any demand for reimbursement by Agent. Such
reimbursement shall be made in immediately available funds at Agent's Commercial
Loan Processing Center not later than 11:00 a.m. (Seattle time) one day after
Borrowers are first notified by Agent that Agent has made payment under the
Letter of Credit. In addition, if Agent so elects pursuant to the terms of
Section 7.2, following the occurrence of an Event of Default, the face amount of
each Letter of Credit shall become immediately due and payable. If Borrowers
shall default in its obligations to reimburse Agent or make any other payment
required hereunder, interest shall accrue on the unpaid amount
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thereof at a per annum rate equal to 3% above the Reference Related Rate
changing as such Reference Related Rate changes from the date such amount
becomes due and payable until payment in full by Borrower. Interest on such
unpaid amounts shall be calculated on the basis of a year of 360 days and shall
be payable on demand.
Section 9.5 SALE OF RISK PARTICIPATIONS. Agent agrees to sell to
each Lender (including itself), and each Lender severally agrees to
unconditionally and irrevocably purchase from Agent, Letter of Credit Risk
Participations. Each Letter of Credit Risk Participation sold hereunder shall
be sold to Lenders in fractional amounts in proportion to their Revolving Loan
Pro Rata Shares.
Section 9.6 PROCEDURE FOR PARTICIPATIONS. Via telephone, telex, or
facsimile, Agent will advise each Lender of its respective Loan Advance Pro Rata
Share of each Letter of Credit on the same day Agent issues such Letter of
Credit as requested by Borrowers pursuant to this Article. The notice shall
contain the following information: (i) the face amount of the Letter of Credit
issued, (ii) the number of Letter of Credit, (iii) the date of acceptance or
issuance, (iv) the maturity or expiration date, and (v) the amount of such
Lender's Revolving Pro Rata Share of any letter of credit fees received by Agent
in respect of the Letter of Credit issued. Agent shall not have any duty to
ascertain or to inquire as to the accuracy of the information furnished by
Borrowers.
Section 9.7 PAYMENT OBLIGATIONS.
(a) REIMBURSEMENTS TO AGENT. In the event Borrowers fails to
fully reimburse Agent for amounts disbursed under a Letter of Credit ("Letter of
Credit Payment") by 12:00 Noon (Seattle time) on the date reimbursement is
demanded, each Lender shall, upon receipt of notice from Agent of such failure,
pay to Agent the amount of such Lender's Revolving Loan Pro Rata Share of the
face amount of such Letter of Credit Payment, PROVIDED, HOWEVER, if Borrowers
pay a portion but less than all of the face amount of any such Letter of Credit
Payment, Lenders shall pay Agent only their respective Revolving Loan Pro Rata
Shares of the difference between the face amount of the Letter of Credit
Payment, as the case may be, and the amount paid by Borrowers on account of such
Letter of Credit Payment. Each and every payment to be made by Lenders to Agent
under this Section shall be made by federal wire transfer in immediately
available funds. If any Lender receives notice from Agent by 1:00 p.m. (Seattle
time) on any Business Day of its obligation to make payments under this
subsection, then such Lender shall make such payment no later than 2:00 p.m.
(Seattle time) on the day such notice is received. If any Lender receives such
notice after 1:00 p.m. (Seattle time) on any Business Day, then such Lender
shall make such payment by no later than 1:00 p.m. (Seattle time) on the next
succeeding Business Day. If any Lender fails to make such payment by the date
and time required, its obligation shall bear interest from and including the
date when such payment was due until paid at the per annum rate equal to the
Federal Funds Rate.
(b) PAYMENTS TO LENDERS. Agent shall immediately remit to each
Lender,
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via federal wire transfer of funds, such Lender's Revolving Loan Pro Rata Share
of any principal, interest, letter of credit fees or other amounts received from
or for the account of Borrowers in respect of any Letter of Credit, PROVIDED,
HOWEVER, Agent shall not remit to any Lender any amounts received from or for
the account of Borrowers in payment of the face amount. In the event Agent is
required to refund any amount which is paid to it or received by it from or for
the account of Borrowers, then Lenders, to the extent they shall have previously
received their Revolving Loan Pro Rata Share of such amount, agree to repay to
Agent their respective Revolving Loan Pro Rata Shares of such amount.
ARTICLE 10
SECURED LETTER OF CREDIT FACILITY
Section 10.1 BANK OF AMERICA SECURED LETTER OF CREDIT FACILITY. By
separate agreement, Bank of America has agreed to provide a Secured Letter of
Credit Facility to Northwest Pipe Company of up to $3,500,000.
Section 10.2 NORTHWEST PIPE COMPANY SECURITY. All obligations of
Borrowers with respect to the Secured Letter of Credit Facility described above,
will be secured by security interests in Adelanto, California machinery,
equipment and fixtures.
SECTION 10.3 CROSS-DEFAULT. Any Event of Default under this Agreement
shall be an event of default under any agreement with respect to the Secured
Letter of Credit Facility.
ARTICLE 11
MISCELLANEOUS
Section 11.1 NO WAIVER; REMEDIES CUMULATIVE. No failure by Agent or any
Lender to exercise, and no delay in exercising, any right, power or remedy under
this Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy under this
Agreement or any other Loan Document preclude any other or further exercise
thereof or the exercise of any other right, power, or remedy. The exercise of
any right, power, or remedy shall in no event constitute a cure or waiver of any
Event of Default this Agreement or any other Loan Document or prejudice the
rights of Agent or Lenders in the exercise of any right hereunder or thereunder.
The rights and remedies provided herein and therein are cumulative and not
exclusive of any right or remedy provided by law.
Section 11.2 GOVERNING LAW. This Agreement and the other Loan Documents
shall be governed by and construed in accordance with the laws of the State of
Oregon.
Section 11.3 MANDATORY ARBITRATION. Any controversy or claim between or
among the parties, including those arising out of or relating to this Agreement
or the other Loan
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Documents and any claim based on or arising from an alleged tort, shall at the
request of any party be determined by arbitration in Portland, Oregon. The
arbitration shall be conducted in accordance with the United States Arbitration
Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this
Agreement, and under the Commercial Rules of the AAA. The arbitrator(s) shall
give effect to statutes of limitation in determining any claim. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrator(s). Judgment upon the arbitration award may be entered in any court
having jurisdiction. No provision of this Section shall limit the right of any
party to this Agreement to exercise self-help remedies such as set off,
foreclosure against or sale of any collateral or security, or to obtain
provisional or ancillary remedies from a court of competent jurisdiction before,
after, or during the pendency of any arbitration or other proceeding. The
exercise of any such remedy does not waive the right of either party to resort
to arbitration.
Section 11.4 NOTICES. All notices and other communications provided for
in any Loan Document shall be in writing or (unless otherwise specified) by
facsimile and shall be mailed (with first class postage prepaid) or sent or
delivered to each party at the address or facsimile number set forth under its
name on the signature page hereof, or at such other address as shall be
designated by such party in a written notice to each other party. Except as
otherwise specified all notices sent by mail, if duly given, shall be effective
three (3) Business Days after deposit into the mails, all notices sent by a
nationally recognized overnight courier service, if duly given, shall be
effective one (1) Business Day after delivery to such courier service, and all
other notices and communications if duly given or made shall be effective upon
receipt. Neither Agent nor any Lender shall incur any liability to Borrowers
for actions taken in reliance on any telephonic notice referred to in this
Agreement which Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow or give such telephonic
notice hereunder on behalf of Borrowers.
Section 11.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective Successors and
assigns, PROVIDED that Borrowers may not assign or otherwise transfer all or any
part of its rights or obligations hereunder or under any other Loan Document
without the prior written consent of Agent and all Lenders. Except as provided
in this Section or Section 11.7, no Lender shall have the right to sell or
assign all or any portion of its Loans or of its right, title and interest
therein or thereto or in or to any Loan Document to any other Person without
Agent's and Borrowers' prior written consent and without providing Agent with a
written agreement executed by such purchaser or assignee as provided in Section
8.2(a)(i). Borrowers' consent shall not be unreasonably withheld.
Notwithstanding the foregoing, each Lender may grant participation, without
consent, in all or any portion of its Loans and Commitment but such grant shall
not entitle the participant to any direct rights against Borrowers under the
terms of this Agreement or any other Loan Document. Any outright sale or
assignment of a Lender's interest hereunder to another Lender 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. Such
sale made in conformance with the terms of this Section shall result in a
corresponding adjustment to the selling and purchasing Lenders' Funded Pro Rata
Share.
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Section 11.6 SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall as
to such jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.
Section 11.7 ADDITIONAL LENDERS. With Borrowers' prior written consent,
which will not be unreasonably withheld, Bank of America may select one or more
financial institutions to purchase a portion of the Loans and Commitment and
become a Lender or Lenders under this Agreement, but such financial institution
must be 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.
Upon such financial institution(s) executing a counterpart of this Agreement,
and delivery of a copy thereof to Borrowers, any such institution shall become a
Lender with full rights as such and there shall be a corresponding adjustment to
the Funded Pro Rata Share of Bank of America and such other Lender.
Section 11.8 JOINT AND SEVERAL LIABILITY; REASON FOR EXECUTION. All
liability of Borrowers hereunder is joint and several. Each Borrower is
executing this Loan Agreement because each will receive working capital from the
proceeds of the Loans. Loan proceeds will be allocated among Borrowers as they
collectively agree.
SECTION 11.9 SURVIVAL. The representations, warranties and indemnities
of Borrowers in favor of Agent and Lenders shall survive indefinitely and,
without limiting the foregoing, shall survive the execution and delivery of this
Agreement, the Loan Documents and the other Loan Documents, the making of any
Loans, the expiration of the Commitments and the repayment of all amounts due
under the Loan Documents.
Section 11.10 EXECUTED IN COUNTERPARTS. The Loan Documents may be
executed in any number of counterparts and by different parties in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 11.11 ENTIRE AGREEMENT; AMENDMENT, WAIVER. This Agreement
together with its schedules and exhibits comprise the entire agreement of the
parties and may not be amended or modified except by written agreement of
Borrowers and Agent executed in conformance with the terms hereof. No provision
of this Agreement may be waived except in writing and then only in the specific
instance and for the specific purpose for which given.
Section 11.12 HEADINGS. The headings of the various provisions of this
Agreement are for convenience of reference only, do not constitute a part
hereof, and shall not affect the meaning or construction of any provision
hereof.
Section 11.13 WAIVER OF JURY TRIAL. BORROWERS, LENDERS, AND
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AGENT WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OUR RISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY AS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
NOTHING CONTAINED IN THIS SECTION SHALL BE DEEMED TO IMPAIR OR REDUCE THE
EFFECTIVENESS OF ANY OTHER SECTION OF THIS AGREEMENT REQUIRING ARBITRATION.
Section 11.14 CERTAIN AGREEMENTS NOT ENFORCEABLE. UNDER OREGON LAW, MOST
AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE LENDERS 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 LENDERS TO BE ENFORCEABLE.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE
EXECUTED BY THEIR RESPECTIVE OFFICERS OR AGENTS THEREUNTO DULY AUTHORIZED AS OF
THE DATE FIRST ABOVE WRITTEN.
BORROWERS: NORTHWEST PIPE COMPANY
By:
------------------------------------
Its:
------------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
THOMPSON PIPE AND STEEL COMPANY
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By:
------------------------------------
Its:
------------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
THOMPSON STEEL PIPE COMPANY
By:
------------------------------------
Its:
------------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
LENDER: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
------------------------------------
Its:
------------------------------------
Address: Commercial Banking
121 S.W. Morrison Street
Suite 1700
Portland, OR 97204
Fax No. (503) 275-1391
Attn: Robert L. Countryman
AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
------------------------------------
Its:
------------------------------------
Address: Agency Services
701 Fifth Avenue, Floor 16
Seattle, WA 98104
Fax No. (206) 358-0971
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Attn: Dora A. Brown
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SCHEDULE 1
PREPAYMENT FEES FOR OFFSHORE RELATED RATE LOANS
THE AMOUNT OF THE FEE TO BE PAID PURSUANT TO SECTION 2.7 SHALL DEPEND ON
THE FOLLOWING:
(1) The amount by which interest rates have changed between the Reference
Date and the Prepayment Date. As used herein, "Reference Date" shall
mean the first day of an Applicable Interest Period. As used herein,
"Prepayment Date" shall mean the date Borrower either voluntarily or
involuntarily prepays an Offshore Related Rate Loan. Certain U.S.
Treasury rates are used as a benchmark to measure changes in interest
rate levels.
(a) A "Reference Rate" equal to the average interest rate yield at
the Reference Date for U.S. Government Securities having
maturities equivalent to that of the applicable Offshore Related
Rate Loan will be determined in the manner described below for
determining applicable rates but will be established as of the
Reference Date for the Applicable Interest Period. This rate
represents interest rate levels at the time a Loan is made or its
interest rate fixed.
(b) An "applicable rate," as determined as described below,
represents interest rate levels as of the Prepayment Date.
(2) The amount of principal prepaid.
(3) A payment fee factor (see "payment fee factor schedule" below). This
factor represents the economic loss to the Agent and Lenders resulting
from a one dollar payment if rates were to drop by one percent from
the time the rate was fixed.
47
<PAGE>
CALCULATION OF PREPAYMENT FEES FOR OFFSHORE
RELATED RATE LOANS
If the reference rate is lower than or equal to the applicable rate, there
is no payment fee.
If the applicable rate is lower than the reference rate, the payment fee
shall be equal to the difference between the reference rate and the applicable
rate (expressed as a decimal), multiplied by the appropriate factor from the
payment fee factor schedule, multiplied by the principal amount of the Offshore
Related Rate Loan which is prepaid.
EXAMPLE:
An Offshore Related Rate Loan with principal of $850,000 is fully
prepaid with 3 months remaining prior to the end of the Applicable
Interest Period. A reference rate of 10% was assigned to the Offshore
Related Rate Loan when the rate was fixed. The applicable rate (as
determined by current 4-month U.S. Treasury rates) is 8.5%. Rates
are therefore judged to have dropped by 1.5% since the rate was fixed,
and a payment fee applies.
A payment fee factor of .31 is determined from the tables below, and
the payment fee is computed as follows:
Payment Fee = (.10 - .085) x (.31) x ($850,000) = $3952.50
APPLICABLE RATES
The applicable rate is equal to the average interest rate yield at the time
of prepayment for U.S. Government Securities having maturities equivalent to the
remaining portion of the Applicable Interest Period.
The applicable rate shall be determined from the Federal Reserve
Statistical Release (Publication H.15(519)) in the "This Week" (most recent
week) column under the heading U.S. Government Securities - Treasury Bills -
Secondary Market, interpolated to the nearest month.
Rates listed in the Federal Reserve Statistical Release for maturities of
less than one year are on a discount rate basis, and these rates shall be
converted to a coupon equivalent basis, based upon a 360-day year. The
Statistical Release published on Monday shall be used for calculation of payment
fees payable on the following Tuesday through the following Monday, with
appropriate adjustment if the day of publication changes.
48
<PAGE>
PREPAYMENT FEE FACTOR SCHEDULES
FOR OFFSHORE RELATED RATE LOANS(1)
Months Remaining in the
Applicable Interest Period for Offshore Related Rate Loans
----------------------------------------------------------
0 1 2 3 4 5 6
- - - - - - -
Factors 0 .10 .20 .31 .41 .51 .61
49
<PAGE>
PREPAYMENT FEES FOR LONG TERM RATE LOANS
The prepayment fee for Long Term Rate Loans will be the sum of fees
calculated separately for each Prepaid Installment, as follows:
(i) Agent will first determine the amount of interest which would
have accrued each month for the Prepaid Installment had it
remained outstanding until the applicable Original Payment Date,
using the Long Term Rate;
(ii) Agent will then subtract from each monthly interest amount
determined in (i) above, the amount of interest which would
accrue for that Prepaid Installment if it were reinvested from
the date of prepayment through the Original Payment Date, using
the Money Market Rate.
(iii) If (i) minus (ii) for the Prepaid Installment is greater than
zero, Agent will discount the monthly differences to the date of
prepayment by the rate used in (ii) above. The sum of the
discounted monthly differences is the prepayment fee for that
Prepaid Installment.
The following definitions will apply to the calculation of the prepayment
fee for Long Term Rate Loans:
"Money Market Rate" means the fixed interest rate per annum which Agent
determines could be obtained by reinvesting a specified Prepaid Installment in
the Money Market from the date of prepayment through the Original Payment Date.
"Original Payment Dates" mean the date on which principal of the Long Term
Rate Loan would have been paid if there had been no prepayment. If a portion of
the principal would have been paid later than the end of the interest period in
effect at the time of prepayment, then the Original Payment Date for that
portion will be the last day of the interest period.
"Prepaid Installment" means the amount of the prepaid principal of the Long
Term Rate Loan which would have been paid on a single Original Payment Date.
"Agent" may adjust the Money Market Rate to reflect the compounding,
accrual basis, or other costs of the Long Term Rate Loan. Each of the rates is
the Agent's estimate only and the Agent is under no obligation to actually
reinvest any prepayment. The rates will be based on information from either the
Telerate or Reuters information services, THE WALL STREET JOURNAL, or other
information sources Agent deems appropriate.
50
<PAGE>
Schedule 4.5
LITIGATION
51
<PAGE>
Schedule 4.7
TITLE AND LIENS
52
<PAGE>
Exhibit 3.1
LEGAL OPINION
[TO BE PROVIDED]
(1) If the remaining Applicable Interest Period or time prior to scheduled
maturity is between any two time periods in the above schedules, interpolate
between the corresponding factors.
The Agent and the Lenders are not required to actually reinvest the paid
principal in any U.S. Government Treasury obligations as a condition to
receiving a payment fee as calculated above.
53
<PAGE>
FIRST AMENDMENT TO LOAN AGREEMENT AND
AGREEMENT WITH RESPECT TO LETTERS OF CREDIT
UNDER REIMBURSEMENT AGREEMENT
This amendment to Loan Agreement ("Amendment") is made as of October
20, 1997 by and among the following parties:
Bank of America National Trust and Savings Association ("Bank of
America") and "Lender")
Bank of America National Trust and Savings Association, in its
capacity as Agent ("Agent")
Northwest Pipe Company, an Oregon corporation (a "Borrower")
Thompson Pipe and Steel Company, a Colorado corporation (a "Borrower")
Thompson Steel Pipe Company, a Delaware corporation (a "Borrower")
RECITALS
A. Borrowers, Lenders and Agent have executed a Loan Agreement dated the
same date as this Amendment (the "Loan Agreement"). Article 9 of the Loan
Agreement describes Lender's duty to issue certain letters of credit. Among the
letters of credit contemplated by Article 9 of the Loan Agreement are two
letters of credit to be substituted for letters of credit issued by Dai-Ichi
Kangyo Bank, Ltd. which are numbers SDC-023600 and SDC-023595.
B. In addition, Lender and Borrowers intend to execute a separate
reimbursement agreement describing Lender's duty to issue a standby letter of
credit to replace letter of credit number SDC-012926 issued by the Dai-Ichi
Kangyo Bank, Ltd. (the "Reimbursement Agreement").
C. Because of the time involved in obtaining consent of the
beneficiaries, Bank of America presently is unable to provide the letters of
credit to substitute for the Dai-Ichi Kangyo Bank, Ltd. as contemplated by
Article 9 to the Loan Agreement. The Dai-Ichi Kangyo Bank, Ltd. letters of
credit referred to in this section are guaranteed by CIT Group/Business Credit,
Inc. ("CIT").
D. Bank of America is not presently able to provide the letter of credit
which will be described in the Reimbursement Agreement because of the time
involved in obtaining approval of California Teachers Retirement System to a
substitution of Bank of America letter of credit for the Dai-Ichi Kangyo Bank,
Ltd. letter of credit, which was guaranteed by CIT.
E. Notwithstanding the delays in issuing the letters of credit referred
to above, the parties desire to execute the Loan Agreement at this time and to
have Bank of America fund the loan described therein.
1
<PAGE>
Therefore, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1. FUNDING OF LOAN AGREEMENT. Bank of America shall fund the loans
described in the Loan Agreement as soon as conditions stated therein are met.
2. ISSUANCE OF LETTERS OF CREDIT UNDER LOAN AGREEMENT AND REIMBURSEMENT
AGREEMENT. Bank of America will not now issue the standby letters of credit to
replace any of the Dai-Ichi Kangyo Bank, Ltd. letters of credit described above,
but will use its good faith best efforts to do so. The letter of credit to
replace Dai-Ichi Kangyo Bank, Ltd. letter of credit will be issued pursuant to
the Reimbursement Agreement substantially in the form of the most recent draft
of the Reimbursement Agreement between the parties with modifications to make it
consistent with the Loan Agreement. If Bank of America is not able to issue its
letters of credit to replace the Dai-Ichi Kangyo Bank, Ltd. letters of credit by
November 30, 1997, it will use its good faith best efforts to issue by November
30, 1997 back-up standby letters of credit in form and substance reasonably
satisfactory to CIT in an aggregate amount of not less than 105 percent of the
then outstanding Dai-Ichi Kangyo Bank, Ltd. letters of credit. Bank of
America's obligation to issue substitute letters of credit or back-up letters of
credit under this section, shall be conditioned upon the conditions of Article 3
of the Loan Agreement and similar conditions in the Reimbursement Agreement then
being satisfied.
3. CONTINUING SECURITY INTEREST OF CIT. Until Bank of America has issued
substitute letters of credit or back-up letters of credit as described herein,
it acknowledges that CIT will retain security interests in Borrowers' property.
Such continued security interest of CIT, so long as Bank of America has not
issued the substitute or back-up letters of credit referred to herein, shall not
constitute a default or misrepresentation by Borrowers under the Loan Agreement,
and Borrowers' obligations to indemnify CIT in the event CIT should be called
upon its guaranty of the Dai-Ichi Kangyo Bank, Ltd. letters of credit shall not
constitute a default or misrepresentation under the Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers or agents thereunto duly authorized as
of the date first above written.
BORROWERS: NORTHWEST PIPE COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
2
<PAGE>
THOMPSON PIPE AND STEEL COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
THOMPSON STEEL PIPE COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
LENDER: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-----------------------------------
Its:
-----------------------------------
Address: Commercial Banking
121 S.W. Morrison Street
Suite 1700
Portland, OR 97204
Fax No. (503) 275-1391
Attn: Robert L. Countryman
AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-----------------------------------
Its:
-----------------------------------
Address: Agency Services
701 Fifth Avenue, Floor 16
Seattle, WA 98104
Fax No. (206) 358-0971
Attn: Dora A. Brown
3
<PAGE>
SECOND AMENDMENT TO LOAN AGREEMENT
This amendment to Loan Agreement ("Second Amendment") is made as
November 26, 1997 by and among the following parties:
Bank of America National Trust and Savings Association ("Bank of
America") and "Lender")
Bank of America National Trust and Savings Association, in its
capacity as Agent ("Agent")
Northwest Pipe Company, an Oregon corporation (a "Borrower")
Thompson Pipe and Steel Company, a Colorado corporation (a "Borrower")
Thompson Steel Pipe Company, a Delaware corporation (a "Borrower")
RECITALS
A. Borrowers, Lender and Agent have executed a Loan Agreement dated as of
October 20, 1997 (the "Loan Agreement"). Article 9 of the Loan Agreement
describes Lender's duty to issue certain letters of credit. Among the letters
of credit contemplated by Article 9 of the Loan Agreement are two letters of
credit to be substituted for letters of credit issued by Dai-Ichi Kangyo Bank,
Ltd. which are numbers SDC-023600 and SDC-023595 (the "Dai-Ichi Letter of
Credit").
B. Because of the time involved in obtaining consent of the
beneficiaries, Bank of America presently is unable to provide the letters of
credit to substitute for the Dai-Ichi Kangyo Bank, Ltd. as contemplated by
Article 9 to the Loan Agreement. The Dai-Ichi Kangyo Bank, Ltd. letters of
credit referred to in this section are guaranteed by CIT Group/Business Credit,
Inc. ("CIT").
C. The parties executed a First Amendment to Loan Agreement and Agreement
with respect to Letters of Credit under Reimbursement Agreement as of October
20, 1997 (the "First Amendment").
Therefore, in consideration of the promises and mutual covenants
contained herein, the parties agree as follows:
Bank of America will issue back-up standby letters of credit equaling
105% of the outstanding amount of the Dai-Ichi Letters of Credit. Such back-up
standby letter of credit (the "Back-Up Letter of Credit") will be issued in
favor of CIT as contemplated by Section 2 of the First Amendment.
1
<PAGE>
Borrowers agree to fully reimburse Agent for all amounts paid by Agent
under, or in respect of, any Back-Up Letter of Credit issued in favor of CIT and
agree to pay interest thereon at the Reference Related Rate then applicable to
Revolving Loans as defined in the Loan Agreement from the date Agent makes such
payment until the date of reimbursement pursuant to any demand for reimbursement
by Agent. Such reimbursement shall be made in immediately available funds at
Agent's commercial loan processing center not later than 11:00 a.m. Seattle time
one day after Borrowers are first notified by Agent that Agent has made payment
under a Back-Up Letter of Credit. In addition, if Agent so elects pursuant to
the terms of Section 7.2 of the Loan Agreement following the occurrence of an
Event of Default, the face amount of such Back-Up Letter of Credit shall become
immediately due and payable. If Borrowers shall default in their obligations to
reimburse Agent or make any other payment required hereunder, interest shall
accrue on the unpaid amount thereof at a per annum rate equal to three percent
(3%) above the Reference Related Rate changing as such Reference Related Rate
changes from the date such amount becomes due and payable until payment in full
by Borrowers. Interest on such unpaid amounts shall be calculated on the basis
of 360 days and shall be payable on demand.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers or agents thereunto duly authorized as
of the date first above written.
BORROWERS: NORTHWEST PIPE COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
THOMPSON PIPE AND STEEL COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
THOMPSON STEEL PIPE COMPANY
By:
-----------------------------------
Its:
-----------------------------------
2
<PAGE>
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
LENDER: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-----------------------------------
Its:
-----------------------------------
Address: Commercial Banking
121 S.W. Morrison Street
Suite 1700
Portland, OR 97204
Fax No. (503) 275-1391
Attn: Robert L. Countryman
AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-----------------------------------
Its:
-----------------------------------
Address: Agency Services
701 Fifth Avenue, Floor 16
Seattle, WA 98104
Fax No. (206) 358-0971
Attn: Dora A. Brown
3
<PAGE>
THIRD AMENDMENT TO LOAN AGREEMENT
This amendment to Loan Agreement ("Third Amendment") is made as of March
6, 1998 by and among the following parties:
Bank of America National Trust and Savings Association ("Bank of America"
and "Lender")
Bank of America National Trust and Savings Association, in its capacity as
Agent ("Agent")
Northwest Pipe Company, an Oregon corporation (a "Borrower")
Thompson Pipe and Steel Company, a Colorado corporation (a "Borrower")
Thompson Steel Pipe Company, a Delaware corporation (a "Borrower")
R E C I T A L S
The Borrowers, the Lender and the Agent are parties to that certain Loan
Agreement dated as of October 20, 1997, as amended by that certain First
Amendment to Loan Agreement dated as of October 20, 1997, and a Second Amendment
to Loan Agreement dated as of November 26, 1997 as the same may be amended,
modified or extended from time to time (the "Loan Agreement") and the related
Loan Documents described therein.
The Borrowers have requested that the Lender and Agent increase the Total
Commitment, as defined in the Loan Agreement, provide their consent to certain
acquisitions described in SECTION 6.6 as amended herein, and make certain other
modifications to the Loan Documents.
The Parties now wish to amend the Loan Documents to increase the Total
Commitment, as defined therein, subject to the terms and conditions set forth
herein.
NOW, THEREFORE, the parties agree as follows:
A G R E E M E N T
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
shall have the meaning given in the Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is amended as
follows:
(a) AMENDMENT TO DEFINITIONS. In SECTION 1.1, amendments are made to
the definitions, as follows:
(1) APPLICABLE MARGIN. The definition of "Applicable Margin" is
amended and restated to read as follows:
Page 1 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
"Applicable Margin" means, with respect to Offshore Related Rate Loans, a
margin determined as set forth below depending on the ratio of Funded Debt
to EBITDA. Adjustments, with respect to borrowings or selections of
Applicable Interest Rates, will be effective the first day of the month
after Agent has received financial information needed to determine the
relevant ratio with respect to future selections or borrowings. However,
if such information is not given to Agent within the time required by
Section 5.9, Agent may, at its option, adjust the Applicable Margin for
Offshore Related Rate upwards, if applicable, as of the first day of the
month following the date by which such information should have been
received. The Applicable Margin in effect on the date of this Third
Amendment to Loan Agreement is .65 percent.
<TABLE>
<CAPTION>
RATIO AT END OF PRIOR APPLICABLE MARGIN FOR
FISCAL QUARTER OFFSHORE RELATED RATE LOANS
<S> <C>
Less than 1.5:1 .65%
Equal to or greater than 1.5:1 .75%
Up to and including 2.25:1
Greater than 2.25:1 .875%
Up to and including 3.00:1
Greater than 3.00:1 1.050%
Up to and including 3.25:1
</TABLE>
For purposes of calculating this ratio, the EBITDA for the prior
fiscal year for the "Acquisitions," as defined in SECTION 6.6 as amended
herein, shall be included in the calculation. The Acquistions' EBITDA shall
be incorporated on a decreasing pro-rata basis, with 100% of the
Acquisitions' EBITDA included in the calculation for the first calendar
quarter-end following closing of the Acquisitions, 75% included in the
second quarter-end, 50% included in the third quarter-end, and 25% included
in the fourth quarter-end. Beginning with the fifth quarter following the
closing of the Acquisitions, the EBITDA for the Acquisitions' prior fiscal
year shall no longer be incorporated in this calculation.
(2) TOTAL COMMITMENT. The definition of "Total Commitment" is
amended and restated to read as follows:
"Total Commitment" means $55,000,000. However, Total Commitment will
be reduced to $40,000,000 on the earliest of April 15, 1998, or the
date that any Borrower receives the net proceeds from the currently
anticipated private placement of notes in the amount of at least
$20,000,000. Borrowers hereby consent to Bank of America's sale of at
least $10,000,000 of the Loans and Commitment, consistent with SECTION
11.7 of the Loan Agreement, within sixty (60) days of execution of
this Third Amendment to Loan Agreement.
Page 2 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
(3) UNUSED COMMITMENT FEE RATE. The definition of "Unused
Commitment Fee Rate" is amended and restated to read as follows:
"UNUSED COMMITMENT FEE RATE" means an annual rate determined as set
forth below depending upon the ratio of Funded Debt to EBITDA. The
adjustment will be effective the first day of the month after Agent
has received information needed to determine the relevant ratio.
However, if such information is not given to Agent within the time
required by Section 5.9, Agent may, at its option, adjust the Annual
Unused Commitment Fee Rate upwards, if applicable, as of the first day
of the month following the date by which such information should have
been received. The Unused Commitment Fee Rate in effect upon the date
of this Third Amendment to Loan Agreement is .175 percent.
<TABLE>
<CAPTION>
RATIO AT END OF PRIOR ANNUAL UNUSED
FISCAL QUARTER COMMITMENT FEE RATE
<S> <C>
Less than 1.5:1 .175%
Equal to or greater than 1.5:1 .200%
Up to and including 2.25:1
Greater than 2.25:1 .225%
Up to and including 3.00:1
Greater than 3.00:1 .250%
Up to and including 3.25:1
</TABLE>
For purposes of calculating this ratio, the EBITDA for the prior
fiscal year for the "Acquisitions," as defined in SECTION 6.6 as
amended herein, shall be included in the calculation. The Acquistions'
EBITDA shall be incorporated on a decreasing pro-rata basis, with 100%
of the Acquisitions' EBITDA included in the calculation for the first
calendar quarter-end following closing of the Acquisitions, 75%
included in the second quarter-end, 50% included in the third
quarter-end, and 25% included in the fourth quarter-end. Beginning
with the fifth quarter following the closing of the Acquisitions, the
EBITDA for the Acquisitions' prior fiscal year shall no longer be
incorporated in this calculation.
(b) AMENDMENTS TO SECTION 2.9 FEES. SECTION 2.9 is hereby amended to
add subsection (c) as follows:
(c) Borrowers agree to pay Bank of America, the sole Lender on
the date of this Third Amendment to Loan Agreement, a fee of $21,250,
representing 0.075% of the permanent $15,000,000 increase in the Total
Commitment amount and a $10,000 fee for the bridge commitment of
$15,000.000.
(c) AMENDMENTS TO SECTION 5.12 MINIMUM DEBT SERVICE COVERAGE RATIO.
SECTION 5.12 is hereby amended and restated as follows:
Page 3 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
Borrowers, and their Subsidiaries, on a consolidated basis, shall
maintain a minimum debt service coverage ratio of not less than 2.0:1.
The minimum debt service coverage ratio will be computed by dividing:
(a) EBITDA, less
(b) income taxes paid in cash,
(c) less dividends paid in cash
by the sum of:
(a) current portion of long term debt, plus
(b) interest expense, plus
(c) current portion of capital leases
The minimum debt service coverage ratio will be based upon the
then ended fiscal quarter plus the preceding three fiscal quarters.
The current portion of long term debt, including the current portion
of capital leases, will be measured as of the last day of the
preceding fiscal year.
For purposes of calculating this covenant, the EBITDA for the
prior fiscal year for the "Acquisitions," as defined in SECTION 6.6 as
amended herein, shall be included in the calculation. The Acquistions'
EBITDA shall be incorporated on a decreasing pro-rata basis, with 100%
of the Acquisitions' EBITDA included in the calculation for the first
calendar quarter-end following closing of the Acquisitions, 75%
included in the second quarter-end, 50% included in the third
quarter-end, and 25% included in the fourth quarter-end. Beginning
with the fifth quarter following the closing of the Acquisitions, the
EBITDA for the Acquisitions' prior fiscal year shall no longer be
incorporated in this calculation.
(d) AMENDMENTS TO SECTION 5.13 MINIMUM FUNDED DEBT TO EBITDA. SECTION
5.13 is hereby amended and restated as follows:
Borrowers and their Subsidiaries, on a consolidated basis, shall
maintain for each period of four consecutive fiscal quarters a ratio
of Funded Debt to EBITDA of no greater than:
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
From the date of this Agreement through, and 3.25:1
including the four fiscal quarters ending
March 31, 1999
For the four consecutive fiscal quarters 3.00:1
ending June 30, 1999, and continuing
through March 21, 2000
For the four consecutive fiscal quarters 2.75:1
ending June 30, 2000 and thereafter
</TABLE>
For purposes of calculating this covenant, the EBITDA for the prior fiscal
year for the "Acquisitions," as defined in SECTION 6.6 as amended herein, shall
be
Page 4 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
included in the calculation. The Acquistions' EBITDA shall be incorporated
on a decreasing pro-rata basis, with 100% of the Acquisitions' EBITDA
included in the calculation for the first calendar quarter-end following
closing of the Acquisitions, 75% included in the second quarter-end, 50%
included in the third quarter-end, and 25% included in the fourth
quarter-end. Beginning with the fifth quarter following the closing of the
Acquisitions, the EBITDA for the Acquisitions' prior fiscal year shall no
longer be incorporated in this calculation.
(e) AMENDMENTS TO SECTION 5.14 MINIMUM TANGIBLE NET WORTH. SECTION
5.14 is hereby amended and restated as follows:
Borrowers, and their Subsidiaries, on a consolidated basis shall
have a minimum Tangible Net Worth equal to or greater than the sum
of:
(a) $41,000,000, plus
(b) 70% of the cumulative Net Income of Borrowers and their
Subsidiaries for all fiscal quarters ending after December 31, 1997 in
which such Net Income was greater than zero, plus
(c) 90% of the amount by which the shareholders' equity of
Borrowers and their Subsidiaries has increased after December 31, 1997
solely as a result of the issuance of common or preferred stock or the
conversion of debt securities into such stock
(f) AMENDMENTS TO SECTION 6.1 RESTRICTION ON BORROWINGS, CAPITAL
LEASES AND CONTRACT PURCHASES. SECTION 6.1 is hereby amended and restated as
follows:
Borrowers shall not and shall not permit any Subsidiary to borrow
money, enter into capital leases or enter into contracts to purchase
any item on deferred payments in any fiscal year if the total of such
borrowings, leases and contracts exceeds 3.5% of Borrowers' Tangible
Net Worth in existence at the end of Borrowers' prior fiscal year.
This restriction shall not apply to the issuance by Northwest Pipe
Company of up to $65,000,000 in private placement notes or to the
Loans, or the Letters of Credit described in Articles 9 and 10. (The
limitation on the issuance of private placement notes shall apply to
the aggregate of all such notes issued since October 20, 1997.)
(g) AMENDMENTS TO SECTION 6.6 RESTRICTION ON ACQUISITIONS. SECTION
6.6 is hereby amended and restated as follows:
Borrowers shall not and shall not permit any Subsidiary to acquire any
business without Agent's prior review and consent if the total of all
business acquisitions in any one fiscal year exceeds 10% of Tangible
Net Worth as of the end of the prior fiscal year. For purposes of the
10% limitation above, acquisitions
Page 5 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
accomplished by merger shall be valued at the fair value of all
consideration given, including, without limitation, cash, notes, assumption
of debt and stock. In addition, Borrowers shall not and shall not permit
any Subsidiary to acquire any business if such acquisition is not approved
by the board of directors of the company owning such business or is deemed
by Agent to involve a hostile takeover. Agent hereby consents to the
acquisition of (i) Southwestern Pipe, Inc. and P&H Tube Corporation, and
(ii) certain assets comprising the Parkersburg Plant from L.B. Foster
Company (together, the "Acquisitions").
(h) AMENDMENTS TO SECTION 9.2 MANNER OF REQUESTING LETTERS OF
CREDIT. SECTION 9.2(b) is hereby amended and restated as follows:
(b) Borrowers shall pay Agent for the account of Lenders such
letter of credit fees calculated and payable in accordance with
Agent's normal and customary practices for commercial letters of
credit and shall pay 9/10ths of 1% per annum of the face amount of any
Standby Letter of Credit. The letter of credit fees shall be paid on
issuance and annually thereafter. Each letter of credit requested
hereunder shall be in a face amount such that after issuance of such
letter of credit, the Total Utilization will not exceed the Total
Revolving Loan Commitment. In addition, after such issuance, the
Total Letter of Credit Usage must not exceed $6,000,000. Each Letter
of Credit requested shall be issued with a maximum maturity of one
year and shall have an expiration date not later than one year after
the Revolving Loan Maturity Date. The maturity date for each Standby
Letter of Credit may be automatically extended each year for an
additional year unless the Agent gives Borrowers 45 days written
notice to the contrary.
3. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained
herein to the contrary, this Amendment shall not become effective until each of
the following conditions is fully and simultaneously satisfied:
(a) DELIVERY OF AMENDMENT. The Borrowers, the Agent and the Lender
shall have executed and delivered counterparts of this Amendment to the Agent;
(b) REIMBURSEMENT FOR EXPENSES. The Borrowers shall have reimbursed
the Agent for all expenses actually incurred by the Agent in connection with the
preparation of the Loan Agreement and the other Loan Documents and shall have
paid all other amounts due and owing under the Loan Documents.
(c) CORPORATE AUTHORITY. The Agent shall have received in form and
substance reasonably satisfactory to it (1) a copy of resolutions adopted by the
Boards of Directors of the Borrowers authorizing the execution, delivery and
performance of this Amendment, certified by the Secretaries of the Borrowers;
(2) evidence of the authority and specimen signatures of the persons who have
signed the Amendment Documents on behalf of the Borrowers; and (3) such
Page 6 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
other evidence of corporate authority as the Agent or any Lender shall request;
(d) LEGAL OPINION. The Agent shall have received the written legal
opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP, counsel for the Borrowers,
addressed to the Agent and the Lender, dated as of the date hereof opining that
(1) the Borrowers are duly incorporated, validly existing, and in good standing
under the state law of their respective states of organization, (2) the
execution and delivery of the Amendment has been duly authorized by the
Borrowers, (3) the Amendment when duly executed and delivered by the Borrowers
will constitute a legal, valid and binding obligation of the Borrowers
enforceable in accordance with its terms, and the Loan Agreement as amended
hereby will constitute a legal, valid, binding obligation of the Borrowers
enforceable in accordance with its terms, and (4) the execution and delivery of
the Amendment by the Borrowers will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under the Articles of Incorporation or Bylaws of the
borrowers or any indenture, loan agreement, mortgage, deed of trust, or other
agreement or instrument to which the Borrowers or any of their properties may be
bound or affected, or violate any law or any order, rule, or regulation binding
on the Borrowers;
(e) REPRESENTATIONS TRUE; NO DEFAULT. The representations of the
Borrowers as set forth in ARTICLE 4 of the Loan Agreement shall be true on and
as of the date of this Amendment with the same force and effect as if made on
and as of this date. No Event of Default and no event which, with notice or
lapse of time or both, would constitute an Event of Default, shall have occurred
and be continuing or will occur as a result of the execution of the Amendment.
(f) OTHER DOCUMENTS. The Agent and the Lender shall have received
such other documents, instruments, and undertakings as the Agent and the Lender
may reasonably request.
4. NO FURTHER AMENDMENT. Except as expressly modified by this Amendment,
the Loan Agreement and the other Loan Documents shall remain unmodified and in
full force and effect and the parties hereby ratify their respective obligations
thereunder. Without limiting the foregoing, the Borrower expressly reaffirms
and ratifies its obligation to pay or reimburse the Agent and the Lender on
request for all reasonable expenses, including legal fees, actually incurred by
the Agent or such Lender in connection with the preparation of this Amendment,
the other Amendment Documents, and the closing of the transactions contemplated
hereby and thereby.
5. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Amendment comprises the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements, representations or commitments.
Page 7 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
(b) COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same Amendment.
(c) GOVERNING LAW. This Amendment and the other agreements provided
for herein and the rights and obligations of the parties hereto and thereto
shall be construed and interpreted in accordance with the laws of the State of
Oregon.
(d) CERTAIN AGREEMENTS NOT ENFORCEABLE.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
THE LENDERS 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 THE LENDERS TO BE ENFORCEABLE.
EXECUTED AND DELIVERED by the duly authorized officers of the parties as of
the date first above written.
BORROWERS: NORTHWEST PIPE COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
THOMPSON PIPE AND STEEL COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
THOMPSON STEEL PIPE COMPANY
Page 8 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
By:
-----------------------------------
Its:
-----------------------------------
Address: 12005 N. Burgard
Portland, OR 97203
Fax No. (503) 240-6615
LENDER: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-----------------------------------
Its:
-----------------------------------
Address: Commercial Banking
121 S.W. Morrison Street
Suite 1700
Portland, OR 97204
Fax No. (503) 275-1391
Attn: Robert L. Countryman
AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-----------------------------------
Its:
-----------------------------------
Address: Agency Services
701 Fifth Avenue, Floor 16
Seattle, WA 98104
Fax No. (206) 358-0971
Attn: Dora A. Brown
Page 9 - THIRD AMENDMENT TO LOAN AGREEMENT
<PAGE>
NORTHWEST PIPE COMPANY
$35,000,000 Principal Amount
6.87% Senior Notes
Due November 15, 2007
________
NOTE PURCHASE AGREEMENT
_________
Dated as of November 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. AUTHORIZATION OF NOTES 1
2. SALE AND PURCHASE OF NOTES 1
3. CLOSING 1
4. CONDITIONS TO CLOSING 2
4.1. Representations and Warranties 2
4.2. Performance; No Default 2
4.3. Compliance Certificates 2
4.4. Opinions of Counsel 3
4.5. Purchase Permitted By Applicable Law, etc 3
4.6. Sale of Other Notes 3
4.7. Payment of Special Counsel Fees 3
4.8. Private Placement Number 3
4.9. Changes in Corporate Structure 4
4.10. Proceedings and Documents 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
5.1. Organization; Power and Authority 4
5.2. Authorization, etc 4
5.3. Disclosure 4
5.4. Organization and Ownership of Shares of
Subsidiaries; Affiliates 5
5.5. Financial Statements 6
5.6. Compliance with Laws, Other Instruments, etc 6
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5.7. Governmental Authorizations, etc. 6
5.8. Litigation; Observance of Agreements, Statutes
and Orders 6
5.9. Taxes 7
5.10. Title to Property; Leases 7
5.11. Licenses, Permits, etc 7
5.12. Compliance with ERISA 8
5.13. Private Offering by the Company 9
5.14. Use of Proceeds; Margin Regulations 9
5.15. Existing Indebtedness; Future Liens 9
5.16. Foreign Assets Control Regulations, etc 10
5.17. Status under Certain Statutes 10
5.18. Environmental Matters 10
6. REPRESENTATIONS OF THE PURCHASER 11
6.1. Purchase for Investment 11
6.2. Source of Funds 11
7. INFORMATION AS TO COMPANY 12
7.1. Financial and Business Information 12
7.2. Officers Certificate 15
7.3. Inspection 15
8. PREPAYMENT OF THE NOTES 16
8.1. Required Prepayments 16
8.2. Optional Prepayments with Make-Whole Amount 16
8.3. Allocation of Partial Prepayments 17
8.4. Maturity; Surrender, etc 17
8.5. Purchase of Notes 17
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8.6. Make-Whole Amount 17
9. AFFIRMATIVE COVENANTS 19
9.1. Compliance with Law 19
9.2. Insurance 19
9.3. Maintenance of Properties 19
9.4. Payment of Taxes and Claims 19
9.5. Corporate Existence, etc 20
10. NEGATIVE COVENANTS 20
10.1. Consolidated Indebtedness; Indebtedness of
Restricted Subsidiaries 20
10.2. Consolidated Net Worth 21
10.3. Liens 21
10.4. Sale of Assets 22
10.5. Merger, Consolidation, etc 23
10.6. Disposition of Stock of Restricted Subsidiaries. 24
10.7. Transactions with Affiliates 24
10.8. Designation of Unrestricted Subsidiaries 25
10.9. Nature of Business 25
11. EVENTS OF DEFAULT 25
12. REMEDIES ON DEFAULT, ETC 27
12.1. Acceleration 27
12.2. Other Remedies 28
12.3. Rescission 28
12.4. No Waivers or Election of Remedies, Expenses, etc 28
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 29
13.1. Registration of Notes 29
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13.2. Transfer and Exchange of Notes 29
13.3. Replacement of Notes 29
14. PAYMENTS ON NOTES 30
14.1. Place of Payment 30
14.2. Home Office Payment 30
15. EXPENSES, ETC 31
15.1. Transaction Expenses 31
15.2. Survival 31
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT 31
17. AMENDMENT AND WAIVER 31
17.1. Requirements 31
17.2. Solicitation of Holders of Notes 32
17.3. Binding Effect, etc 32
17.4. Notes held by Company, etc 33
18. NOTICES 33
19. REPRODUCTION OF DOCUMENTS 33
20. CONFIDENTIAL INFORMATION 34
21. SUBSTITUTION OF PURCHASER 35
22. MISCELLANEOUS 35
22.1. Successors and Assigns 35
22.2. Payments Due on Non-Business Days 35
22.3. Severability 35
4
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22.4. Construction 35
22.5. Counterparts 36
22.6. Governing Law 36
</TABLE>
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE B-1 -- Existing Investments
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Organization and Ownership of Shares of
Subsidiaries; Affiliates
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Litigation
SCHEDULE 5.11 -- Licenses, Permits, etc.
SCHEDULE 5.12 -- Compliance with ERISA
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness; Future Liens
SCHEDULE 10.3 -- Liens
EXHIBIT 1 -- Form of 6.87% Senior Note due November 15, 2007
EXHIBIT 4.4(a) -- Form of Opinion of Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
5
<PAGE>
NORTHWEST PIPE COMPANY
12005 N. Burgard
Portland, Oregon 97203-0149
(503) 285-1400
6.87% Senior Notes due November 15, 2007
As of November 1, 1997
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
Northwest Pipe Company, an Oregon corporation (the "Company"), agrees with
you as follows:
1. AUTHORIZATION OF NOTES.
The Company has authorized the issue and sale of $35,000,000 aggregate
principal amount of its 6.87% Senior Notes due November 15, 2007 (the "Notes",
such term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement). The Notes shall be substantially in the form set
out in Exhibit 1, with such changes therefrom, if any, as may be approved by you
and the Company. Certain capitalized terms used in this Agreement are defined
in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement. You and the
other purchasers are sometimes referred to herein individually as a "Purchaser"
and collectively as the "Purchasers."
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified opposite your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Your obligation hereunder and the obligations of the other Purchasers
hereunder are several and not joint obligations and you shall have no obligation
and no liability to any Person for the performance or non-performance by any
other Purchaser hereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the other
Purchasers shall occur at the offices of Gardner, Carton & Douglas, Quaker
Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois 60610 at 9:00 a.m.,
Chicago time, at a closing (the "Closing") on November 15, 1997 or on such other
Business Day thereafter on or prior to November 20, 1997 as may be agreed upon
by the Company and the Purchasers. At the Closing the Company will deliver to
you the Notes to be purchased by you in the form of a single Note (or such
greater number of Notes in denominations of at least $500,000 as you may
request) dated the date of the Closing and registered in your name (or in the
name of your nominee), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 2801200849 at Bank of America, 1001 SW Fifth Avenue, P.O. Box
3066, Unit 2092, Portland, Oregon 97208, ABA Number 323070380. If at the
Closing the Company shall fail to tender such Notes to you as provided above in
this Section 3, or any of the conditions specified in Section 4 shall not have
been fulfilled to your satisfaction, you shall, at your election, be relieved of
all further obligations under this Agreement, without thereby waiving any
1
<PAGE>
rights you may have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
this Agreement had it applied since such date.
4.3. COMPLIANCE CERTIFICATES.
OFFICER'S CERTIFICATE. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
SECRETARY'S CERTIFICATE. The Company shall have delivered to you a
certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes and the Agreements.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Ater Wynne Hewitt Dodson & Skerritt,
LLP, counsel for the Company, covering the matters set forth in Exhibit 4.4(a)
and covering such other matters incident to the transactions contemplated hereby
as you or your counsel may reasonably request (and the Company hereby instructs
its counsel to deliver such opinion to you) and (b) from Gardner, Carton &
Douglas, your special counsel in connection with such transactions,
substantially in the form set forth in Exhibit 4.4(b) and covering such other
matters incident to such transactions as you may reasonably request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6. SALE OF OTHER NOTES.
2
<PAGE>
Contemporaneously with the Closing the Company shall sell to the other
Purchasers and the other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes
by Gardner, Carton & Douglas.
4.9. CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.
4.10. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.
5.2. AUTHORIZATION, ETC.
This Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of
3
<PAGE>
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. DISCLOSURE.
The Company, through its agent, BancAmerica Robertson Stephens, has
delivered to you and each other Purchaser a copy of a Private Placement
Memorandum, dated September 1997 (the "Memorandum"), relating to the
transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
December 31, 1996, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
Schedule 5.4 contains (except as noted therein) complete and correct
lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary and
whether such Subsidiary is a Restricted Subsidiary, (ii) of the Company's
Affiliates, other than Subsidiaries, and (iii) of the Company's directors
and senior officers.
All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and
clear of any Lien (except as otherwise disclosed in Schedule 5.4).
Each Subsidiary identified in Schedule 5.4 is a corporation or other
legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a
foreign corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends out
of profits or make any other similar distributions of profits to the
Company or any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary.
4
<PAGE>
5.5. FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the financial
statements of the Company and its Subsidiaries listed on Schedule 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to the
Company or any Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any property of the
Company or any Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it
is bound, or any order, judgment, decree or ruling of any court, arbitrator
or Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation (including without limitation Environmental
Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith
5
<PAGE>
by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the Company and its Subsidiaries have been
determined by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended December 31, 1996.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;
to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any of
its Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and
no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability by
the Company or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of the Company or any ERISA Affiliate,
in either case pursuant to Title I or IV of ERISA or to such penalty or
excise tax provisions or to Section 401(a)(29) or 412 of the Code, other
than such liabilities or Liens as would not be individually or in the
aggregate Material.
Except as described in Schedule 5.12, the present value of the
aggregate benefit liabilities under each of the Plans (other than
Multiemployer Plans), determined as of the end of such Plan's most recently
ended plan year on the basis of the actuarial assumptions specified
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for funding purposes in such Plan's most recent actuarial valuation report,
did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has
the meaning specified in section 4001 of ERISA and the terms "current
value" and "present value" have the meaning specified in section 3 of
ERISA.
The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities)
under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
The expected postretirement benefit obligation (determined as of
the last day of the Company s most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by section
4980B of the Code) of the Company and its Subsidiaries is not Material.
The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is
subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the
Code. The representation by the Company in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of
your representation in Section 6.2 as to the sources of the funds used to
pay the purchase price of the Notes to be purchased by you.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you, the other Purchasers and not more than 29 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes to repay
existing Indebtedness and for general corporate purposes as more fully set forth
in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 5.0% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 5.0% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of
buying or carrying" shall have the meanings assigned to them in said Regulation
G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of October 31, 1997, since which date there has been no
Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal
or interest on any Indebtedness of the Company or such
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Subsidiary and no event or condition exists with respect to any
Indebtedness of the Company or any Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.3.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
neither the Company nor any Subsidiary has knowledge of any facts
that would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring
on or in any way related to real properties now or formerly owned, leased
or operated by any of them or to other assets or their use, except, in each
case, such as could not reasonably be expected to result in a Material
Adverse Effect;
neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them and has not disposed of any Hazardous Materials in
violation of any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
to the knowledge of the Company after diligent inquiry, all
buildings on all real properties now owned, leased or operated by the
Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account or for
one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a
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view to the distribution thereof, provided that the disposition of your or their
property shall at all times be within your or their control. You understand
that the Notes have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act or if
an exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
if you are an insurance company, the Source does not include assets
allocated to any separate account maintained by you in which any employee
benefit plan (or its related trust) has any interest, other than a separate
account that is maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to such plan and
to any participant or beneficiary of such plan (including any annuitant)
are not affected in any manner by the investment performance of the
separate account; or
the Source is either (i) an insurance company pooled separate account,
within the meaning of Prohibited Transaction Exemption ("PTE") 90-1 (issued
January 29, 1990), or (ii) a bank collective investment fund, within the
meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have
disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment fund; or
the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this paragraph (c); or
the Source is a governmental plan; or
the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (e); or
the Source does not include assets of any employee benefit plan, other
than a plan exempt from the coverage of ERISA; or
the Source is an "insurance company general account" as such term is
defined in the Department of Labor Prohibited Transaction Class Exemption
95-60 (issued July 12, 1995) ("PTE 95-60") and as of the date of this
Agreement there is no "employee benefit plan" with
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respect to which the aggregate amount of such general account's reserves
and liabilities for the contracts held by or on behalf of such employee
benefit plan and all other employee benefit plans maintained by the same
employer (and affiliates thereof as defined in Section V(a)(1) of PTE
95-60) or by the same employee organization (in each case determined in
accordance with the provisions of PTE 95-60) exceeds 10% of the total
reserves and liabilities of such general account (as determined under PTE
95-60) (exclusive of separate account liabilities) plus surplus as set
forth in the National Association of Insurance Commissioners Annual
Statement filed with the state of domicile of such Purchaser.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
QUARTERLY STATEMENTS -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of,
a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Company's
Quarterly Report on Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 7.1(a);
ANNUAL STATEMENTS -- within 105 days after the end of each fiscal
year of the Company, duplicate copies of,
a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP,
and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
such financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their results
of operations and
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cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for such opinion
in the circumstances; provided that the delivery within the time period
specified above of the Company's Annual Report on Form 10-K for such fiscal
year (together with the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
Section (b);
SEC AND OTHER REPORTS -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement
sent by the Company or any Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company or
any Subsidiary to the public concerning developments that are Material;
NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to
a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
ERISA MATTERS -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
with respect to any Plan, any reportable event, as defined in
section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
any event, transaction or condition that could result in the
incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
could reasonably be expected to have a Material Adverse Effect;
NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to
any order, ruling, statute or other law or regulation that could reasonably
be expected to have a Material Adverse Effect; and
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REQUESTED INFORMATION -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section (a) or Section (b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.6
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
EVENT OF DEFAULT -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or
her supervision, a review of the transactions and conditions of the Company
and its Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
NO DEFAULT -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent
will not be unreasonably withheld) its independent public accountants, and
(with the consent of the Company, which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and each
Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and
DEFAULT -- if a Default or Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent public
accountants (and by this provision the Company authorizes said accountants
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries), all at such times and as often as may be requested.
8. PREPAYMENT OF THE NOTES
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8.1. REQUIRED PREPAYMENTS.
On November 15, 2001 and on each November 15 thereafter to and
including November 15, 2006 the Company will prepay $5,000,000 principal amount
(or such lesser principal amount as shall then be outstanding) of the Notes at
par and without payment of the Make-Whole Amount or any premium, provided that
upon any partial prepayment of the Notes pursuant to Section 8.2 or purchase of
the Notes permitted by Section 8.5 the principal amount of each required
prepayment of the Notes becoming due under this Section 8.1 on and after the
date of such prepayment or purchase shall be reduced in the same proportion as
the aggregate unpaid principal amount of the Notes is reduced as a result of
such prepayment or purchase.
8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay
at any time all, or from time to time any part of, the Notes, in an amount not
less than $1,000,000 of the aggregate principal amount of the Notes then
outstanding in the case of a partial prepayment, at 100% of the principal amount
so prepaid, plus accrued interest to the date of redemption and the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall
specify such date, the aggregate principal amount of the Notes to be prepaid on
such date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.3), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment,
the Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
8.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment. Each
partial prepayment pursuant to Section 8.2 shall be applied first to the payment
due on such Notes at final maturity and thereafter to any required prepayments
on such Notes, in inverse order of maturity.
8.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and canceled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly
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cancel all Notes acquired by it or any Affiliate pursuant to any payment,
prepayment or purchase of Notes pursuant to any provision of this Agreement and
no Notes may be issued in substitution or exchange for any such Notes.
8.6. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, 0.50% plus the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Access Service (or such
other display as may replace Page 678 on Telerate Access Service) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date,
or (ii) if such yields are not reported as of such time or the yields
reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields
have been so reported as of the second Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between (1) the actively traded U.S. Treasury security with the duration
closest to and greater than the Remaining Average Life and (2) the actively
traded U.S. Treasury security with the duration closest to and less than
the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on
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which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
The Company will and will cause each of its Restricted Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Restricted Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or
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assessment or claims if (i) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.4 and 10.5, the Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Restricted Subsidiaries (unless merged into the Company
or a Wholly-Owned Restricted Subsidiary) and all rights and franchises of the
Company and its Restricted Subsidiaries unless, in the good faith judgment of
the Company, the termination of or failure to preserve and keep in full force
and effect such corporate existence, right or franchise could not, individually
or in the aggregate, have a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. CONSOLIDATED INDEBTEDNESS; INDEBTEDNESS OF RESTRICTED SUBSIDIARIES.
The Company will not permit:
Consolidated Indebtedness to exceed 58% of Consolidated Total
Capitalization at any time; and
Any Restricted Subsidiary to create, assume, guaranty or
otherwise incur any Indebtedness other than:
Indebtedness owed to the Company or another Restricted
Subsidiary;
Indebtedness of a Restricted Subsidiary outstanding at the
date of the acquisition of such Restricted Subsidiary; provided that
such Indebtedness was not incurred in contemplation of such Subsidiary
becoming a Restricted Subsidiary and immediately after giving effect
thereto, no Default or Event of Default would exist; and
other Indebtedness; provided that after giving effect
thereto and to the application of the proceeds therefrom, Priority
Debt outstanding would not exceed 20% of Consolidated Net Worth.
For purposes of this Section 10.1, any Person becoming a Restricted
Subsidiary shall be deemed at the time of becoming a Restricted Subsidiary to
have incurred all of its then outstanding Indebtedness and any Person extending,
renewing or refunding any Indebtedness shall be deemed to have incurred such
Indebtedness at the time of such extension, renewal or refunding.
So long as CIT Group/Business Credit, Inc. holds any Liens on any of
the assets or property of the Company or any Restricted Subsidiary, the Company
will not, and will not permit any Restricted Subsidiary to, incur or assume any
Indebtedness owing to CIT Group/Business Credit, Inc. (other than Indebtedness
not exceeding $6.2 million in the aggregate arising under outstanding letters of
credit).
10.2. CONSOLIDATED NET WORTH.
The Company will not permit Consolidated Net Worth at any time to be
less than $50,000,000 plus
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the cumulative sum of 40% of Consolidated Net Income (but only if a positive
number) for each completed fiscal quarter subsequent to June 30, 1997.
10.3. LIENS.
The Company will not, and will not permit any Restricted Subsidiary
to, permit to exist, create, assume or incur, directly or indirectly, any Lien
on its properties or assets, whether now owned or hereafter acquired, except:
Liens for taxes, assessments or other governmental charges not
then due and delinquent or the validity of which is being contested in good
faith by appropriate proceedings and as to which the Company has
established adequate reserves on its books in accordance with GAAP;
Liens incidental to the conduct of business or the ownership of
properties and assets and not incurred in connection with the borrowing of
money (including landlords', carriers', warehousemen's, lessor's,
mechanics' and materialmen's liens) that in the aggregate do not materially
interfere with the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole or materially impair the use or
value of the property or assets subject thereto;
Liens resulting from judgments not exceeding $2,000,000 in the
aggregate as to which the Company has established adequate reserves on its
books in accordance with GAAP, provided that any such judgment so secured
has not, within 60 days after the entry thereof, been discharged or
execution thereof stayed pending appeal, or has not been discharged within
60 days after the expiration of any such stay;
encumbrances in the nature of leases, subleases, zoning
restrictions, easements, rights-of-way and other rights and restrictions of
record on the use of real property and defects in title arising or incurred
in the ordinary course of business, which, individually or in the
aggregate, do not materially impair the use or value of the property or
assets subject thereto;
Liens securing Indebtedness of the Company or a Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary;
Liens existing on property or assets of the Company or any
Restricted Subsidiary as of the date of this Agreement that are described
in Schedule 10.3;
Liens on property acquired, constructed or improved by the
Company or a Restricted Subsidiary after the date of Closing that are
created, incurred or assumed contemporaneously with, or within 180 days
after, the acquisition or, in the case of property constructed or improved,
after completion of construction or improvement thereof, to secure all or
any portion of the purchase price thereof (or for which legally binding
contracts to provide such financing have been obtained), provided that (i)
such Liens do not extend to any other property of the Company or any
Restricted Subsidiary, (ii) the Indebtedness secured thereby does not
exceed the lesser of the cost or the fair market value (as determined in
good faith by the board of directors of the Company) of the property
subject to such Liens and (iii) the Indebtedness secured by such Liens is
permitted under Section 10.1;
Liens (i) existing on property of a Person immediately prior to
such Person's consolidation with, merger into or acquisitions by the
Company or a Restricted Subsidiary and (ii) existing on property at the
time of its acquisition by the Company or a Restricted Subsidiary, provided
that such Liens were not created in contemplation thereof and do not extend
to any other property of the Company or any Restricted Subsidiary;
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Liens created under Capital Leases permitted by Section 10.9;
Liens resulting from extensions, renewals or refundings of any
Lien permitted by paragraphs (a) through (i) above, provided that (i) there
is no increase in the principal amount or decrease in maturity of the
Indebtedness secured thereby at the time of such extension, renewal or
refunding, (ii) such Liens do not extend to any property not subject
thereto at the time of such extension, renewal or refunding and (iii)
immediately after such extension, renewal or refunding, no Default or Event
of Default does or would exist; and
Liens not otherwise permitted by paragraphs (a) through (j) above
to secure Indebtedness, provided that Priority Debt does not at any time
exceed 20% of Consolidated Net Worth.
10.4. SALE OF ASSETS.
Except as permitted by Section 10.5, the Company will not, and will
not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise
dispose of, including by way of merger (collectively a "DISPOSITION"), any
assets, including capital stock of Subsidiaries, in one or a series of
transactions, to any Person, other than Dispositions in the ordinary course of
business and Dispositions by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to the Company or another Restricted Subsidiary, unless
such Disposition is for fair market value and the aggregate net book value of
all assets so disposed of in any period of four fiscal quarters of the Company
then next ending pursuant to this Section 10.4 does not exceed 10% of the book
value of total assets of the Company and its Restricted Subsidiaries determined
as of the end of the immediately preceding fiscal quarter. Notwithstanding the
foregoing, the Company may, or may permit any Restricted Subsidiary to, make a
Disposition and the assets subject to such Disposition shall not be subject to
or included in the foregoing limitation and computation contained in the
preceding sentence to the extent that (x) such assets are leased back by the
Company or any Restricted Subsidiary, as lessee, within 180 days of the
Disposition thereof, or (y) the net proceeds from such Disposition are, within
180 days of such Disposition, (A) reinvested in productive fixed assets by the
Company or a Restricted Subsidiary or (B) applied to the pro rata payment or
prepayment of the Notes and other outstanding Consolidated Indebtedness that is
not subordinated to the Notes. Any prepayment of Notes pursuant to this
Section 10.4 shall be in accordance with Sections 8.2 and 8.3, without regard to
the minimum prepayment requirements of Section 8.2. Furthermore, this Section
10.3 shall not apply to the disposition of the Company's plant located in
Kentucky if the outstanding industrial revenue bond secured by such plant is
paid in full in connection with said Disposition.
10.5. MERGER, CONSOLIDATION, ETC.
The Company will not, and will not permit any Restricted Subsidiary
to, consolidate with or merge with any other Person or convey, transfer or lease
all or substantially all of its assets in a single transaction or series of
transactions to any Person except that:
the Company may consolidate or merge with any other Person or
convey, transfer, sell or lease all or substantially all of its assets in a
single transaction or series of transactions to any Person, provided that:
the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer,
sale or lease all or substantially all of the assets of the Company as
an entirety, as the case may be, shall be a solvent corporation
organized and existing under the laws of the United States or any
State thereof (including the District of Columbia), and, if the
Company is not such corporation, (x) shall have executed and delivered
to each holder of any Notes its
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assumption of the due and punctual performance and observance of each
covenant and condition of this Agreement and the Notes and (y) shall
have caused to be delivered to each holder of any Notes an opinion of
independent counsel reasonably satisfactory to the Required Holders,
to the effect that all agreements or instruments effecting such
assumption are enforceable in accordance with their terms and comply
with the terms hereof;
the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer,
sale or lease all or substantially all of the assets of the Company as
an entirety, as the case may be, could incur immediately thereafter
$1.00 of additional Indebtedness without violating Section 10.1;
immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and
Any Restricted Subsidiary may (x) merge into the Company
(provided that the Company is the surviving corporation) or another
Restricted Subsidiary or (y) sell, transfer or lease all or any part of its
assets to the Company or another Restricted Subsidiary, or (z) merge or
consolidate with, or sell, transfer or lease all or substantially all of
its assets to, any Person in a transaction that is permitted by Section
10.4 or, as a result of which, such Person becomes an Restricted
Subsidiary; provided in each instance set forth in clauses (x) through (z)
that, immediately before and after giving effect thereto, there shall exist
no Default or Event of Default;
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.5 from its liability under this Agreement or the Notes.
10.6. DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES.
The Company (i) will not permit any Restricted Subsidiary to issue its
capital stock, or any warrants, rights or options to purchase, or securities
convertible into or exchangeable for, such capital stock, to any Person other
than the Company or another Restricted Subsidiary, and (ii) will not, and will
not permit any Restricted Subsidiary to, sell, transfer or otherwise dispose of
any shares of capital stock of a Restricted Subsidiary if such sale would be
prohibited by Section 10.4. If a Restricted Subsidiary at any time ceases to be
such as a result of a sale or issuance of its capital stock, any Liens on
property of the Company or any other Restricted Subsidiary securing Indebtedness
owed to such Restricted Subsidiary, which is not contemporaneously repaid,
together with such Indebtedness, shall be deemed to have been incurred by the
Company or such other Restricted Subsidiary, as the case may be, at the time
such Restricted Subsidiary ceases to be a Restricted Subsidiary.
10.7. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Restricted Subsidiary to
enter into directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Restricted Subsidiary), except in the
ordinary course and pursuant to the reasonable requirements of the Company's or
such Restricted Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than would be obtainable
in a comparable arm's-length transaction with a Person not an Affiliate.
Notwithstanding the foregoing, this Section 10.7 shall not apply to the exercise
by the Company of its option to purchase the land and manufacturing facility
described in Note 9 of the Notes to Consolidated Financial Statements of the
Company for the fiscal year ended December 31, 1996.
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10.8. DESIGNATION OF UNRESTRICTED SUBSIDIARIES.
The Company may designate any Restricted Subsidiary as an Unrestricted
Subsidiary unless such Subsidiary has been designated an Unrestricted Subsidiary
more than once previously or has previously been designated a Restricted
Subsidiary and only if immediately before and after such designation there
exists no Default or Event of Default.
10.9. NATURE OF BUSINESS.
The Company will not, and will not permit any Restricted Subsidiary
to, engage in any business if, as a result, the general nature of the business
in which the Company and its Restricted Subsidiaries, taken as a whole, would
then be engaged would be substantially changed from the general nature of the
business in which the Company and its Restricted Subsidiaries, taken as a whole,
are engaged on the date of this Agreement as described in the Memorandum.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing:
the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
the Company defaults in the performance of or compliance with any
term contained in or Sections 10.1 through 10.9 or fails to obtain by
December 15, 1997 a release from CIT Group/Business Credit, Inc. of all
Liens on property or assets of the Company or any Restricted Subsidiary in
its favor; or
the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b)
and (c) of this Section 11) and such default is not remedied within 30 days
after the earlier of (i) a Responsible Officer obtaining actual knowledge
of such default and (ii) the Company receiving written notice of such
default from any holder of a Note; or
any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement or in any
writing furnished in connection with the transactions contemplated hereby
proves to have been false or incorrect in any Material respect on the date
as of which made; or
(i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $5,000,000 beyond
any period of grace provided with respect thereto, or (ii) the Company or
any Restricted Subsidiary is in default in the performance of or compliance
with any term of any evidence of any Indebtedness in an aggregate
outstanding principal amount of at least $5,000,000 or of any mortgage,
indenture or other agreement relating thereto beyond any period of grace
provided with respect thereto, or (iii) as a consequence of the occurrence
or continuation of any event or condition (other than the passage of time
or the right of the holder of Indebtedness to convert such Indebtedness
into equity interests), (x) the Company or any
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Restricted Subsidiary has become obligated to purchase or repay
Indebtedness before its regular maturity or before its regularly scheduled
dates of payment in an aggregate outstanding principal amount of at least
$5,000,000, or (y) one or more Persons have the right to require the
Company or any Restricted Subsidiary so to purchase or repay such
Indebtedness; or
the Company or any Restricted Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any
Restricted Subsidiary, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any of its Restricted Subsidiaries, or any such petition
shall be filed against the Company or any of its Restricted Subsidiaries
and such petition shall not be dismissed within 60 days; or
a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against one or more of the
Company and its Restricted Subsidiaries and which judgments are not, within
60 days after entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within 60 days after the expiration of such stay; or
if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings, (iii) the aggregate "amount
of unfunded benefit liabilities" (within the meaning of section 4001(a)(18)
of ERISA) under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $2,000,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (v) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (vi) the Company or any
Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase
the liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
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If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause (i)
of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
If any other Event of Default has occurred and is continuing, any
holder or holders of more than 33% in principal amount of the Notes at the
time outstanding may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 67%
in principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
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12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $500,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $500,000. You agree to
transfer your Notes only to one or more Institutional Investors. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Section 6.2.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is,
or is a nominee for, an original Purchaser or
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another holder of a Note that is an Institutional Investor, such Person's
own unsecured agreement of indemnity shall be deemed to be satisfactory),
or
in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in
Chicago, Illinois at the principal office of Bank of America National Trust &
Savings Association in such jurisdiction. The Company may at any time, by
notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company in such jurisdiction or the principal office of a bank or trust company
in such jurisdiction.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorney's
fees of a special counsel and, if reasonably required, local or other counsel)
incurred by you and each other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or
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bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Notes. The
Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
17.2. Solicitation of Holders of Notes.
SOLICITATION. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision
with respect to any proposed amendment, waiver or consent in respect of any
of the provisions hereof or of the Notes. The Company will deliver
executed or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of this Section 17 to each holder of
outstanding Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the requisite holders
of Notes.
PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any holder
of Notes as consideration for or as an inducement to the entering into by
any holder of Notes or any waiver or amendment of any of the terms and
provisions hereof
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unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or
amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of Brian W. Dunham, or at
such other address as the Company shall have specified to the holder
of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by
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<PAGE>
applicable law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
This Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this
Section 20), (v) any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 20 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate s agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
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<PAGE>
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this
Section 21), such word shall no longer be deemed to refer to such Affiliate, but
shall refer to you, and you shall have all the rights of an original holder of
the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of Illinois
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
* * * * *
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
NORTHWEST PIPE COMPANY
By: /s/ Brian W. Dunham
Name: Brian W. Dunham
Title: Executive Vice President
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The foregoing is agreed to as of the date thereof.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Mary Ann McCarthy
----------------------------
Name: Mary Ann McCarthy
Title: Managing Director
CM LIFE INSURANCE COMPANY
By: /s/ Mary Ann McCarthy
----------------------------
Name: Mary Ann McCarthy
Title: Managing Director
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ James W. Pruden
----------------------------
Name: James W. Pruden
Title: Vice President
Municipal Securities
LONDON LIFE INSURANCE COMPANY
By: /s/ R J Ritchie By: /s/ Ruth Ann McConkey
------------------------------ ---------------------------
Name: R J Ritchie Name: Ruth Ann McConkey
Title: VP Credit Group Title: Manager, U.S. Fixed Income
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SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- --------------------
MASSACHUSETTS MUTUAL LIFE $14,000,000
INSURANCE COMPANY
(1) All payments by Federal Funds wire transfer of immediately available funds
to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA No. 021000089
For MassMutual Long Term Pool
Account No. 4067-3488
Re: Description of security, principal and interest split
Identifying each payment as Northwest Pipe Company 6.87% Senior Note,
interest and principal
(2) Notices related to payments:
Telephone advice of payment to the Securities Custody and
Collection Department of Massachusetts Mutual Life Insurance
Company at (413) 744-3878
and
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department - F 381
(3) All other communications:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Tax ID # 04-1590850
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SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ----------------------
MASSACHUSETTS MUTUAL LIFE $4,000,000
INSURANCE COMPANY
(1) All payments by Federal Funds wire transfer of immediately available funds
to:
Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
New York, NY 10081
ABA No. 021000021
For MassMutual IFM Non-Traditional
Account No. 910-2509073
Re: Description of security, principal and interest split
Identifying each payment as Northwest Pipe Company 6.87% Senior Note,
interest and principal
(2) Notices related to payments:
Telephone advice of payment to the Securities Custody and
Collection Department of Massachusetts Mutual Life Insurance
Company at (413) 744-3878
and
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department - F 381
(3) All other communications:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Tax ID # 04-1590850
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<PAGE>
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ----------------------
CM LIFE INSURANCE COMPANY $2,000,000
(1) All payments by Federal Funds wire transfer of immediately available funds
to:
Citibank, N.A.
111 Wall Street
New York, NY 10043
ABA No. 021000089
For Segment 43 - Universal Life
Account No. 4068-6561
Re: Description of security, principal and interest split
Identifying each payment as Northwest Pipe Company 6.87% Senior Note,
interest and principal
(2) Notices related to payments:
Telephone advice of payment to the Securities Custody and
Collection Department of Massachusetts Mutual Life Insurance
Company at (413) 744-3878
and
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department - F 381
(3) All other communications:
CM Life Insurance Company
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Tax ID # 06-1041383
33
<PAGE>
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ----------------------
NATIONWIDE LIFE INSURANCE COMPANY $10,000,000
(1) All payments by Federal Funds wire transfer of immediately available funds
to:
The Bank of New York
ABA #021-000-018
BNF: IOC566
F/A/O Nationwide Life Insurance Company
Attn: P&I Department
PPN# ________
Security Description:
with sufficient information to identify the
source and application of such funds
(2) Notices related to payments:
Nationwide Life Insurance Company
c/o The Bank of New York
P.O. Box 19266
Attn: P&I Department
Newark, NJ 07195
with a copy to:
Nationwide Life Insurance Company
Attn: Investment Accounting
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
(3) All other communications:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attn: Corporate Fixed-Income Securities
(4) Deliver original Note to:
The Bank of New York
One Wall Street
3rd Floor - Window A
New York, NY 10286
F/A/O Nationwide Life Insurance Co. Acct# 267829
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Tax ID # 31-4156830
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SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ----------------------
LONDON LIFE INSURANCE COMPANY $5,000,000
(1) All payments by Federal Funds wire transfer of immediately available funds
to:
Bank of New York
1 Wall Street
New York, NY 10286
Re: Account Name: Royal Trust Corporation of Canada
Account # 298310
ABA# 021000018
with sufficient information to identify the
source and application of such funds
(2) Notices related to payments:
London Life Insurance Company
255 Dufferin Avenue
London, Ontario N6A 4K1
Attention: Manager U.S. Fixed Income (Private Placements)
Securities Department
(3) All other communications:
London Life Insurance Company
255 Dufferin Avenue
London, Ontario N6A 4K1
Attention: Manager U.S. Fixed Income (Private Placements)
Securities Department
(4) Deliver original Note to:
Bank of New York
1 Wall Street
Window A
Third Floor
New York, NY 10286
Re: Account Name: Royal Trust Corporation of Canada
Account# 298310
Tax ID # 52-1548741
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SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person, (a)
any other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, (b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests and (c) any officer or
director of such Person. As used in this definition, "CONTROL" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company.
"BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Chicago, Illinois or Portland, Oregon are
required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" means Northwest Pipe Company, an Oregon corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
deficit) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP, but excluding in any
event (a) net losses or undistributed net income of any Person (other than a
Restricted Subsidiary) in which the Company has an ownership interest; (b) net
losses or undistributed net income of any Restricted Subsidiary accrued prior to
the date it became a Restricted Subsidiary; (c) gains or net losses (net of any
tax effect) resulting from the sale of any capital assets other than in the
ordinary course of business; (d) extraordinary, unusual, or nonrecurring gains
or losses; (e) gains resulting from the write-up of assets; (f) earnings of any
Subsidiary unavailable for payment to the Company; and (g) proceeds of any life
insurance policy.
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"CONSOLIDATED NET WORTH" means consolidated stockholders' equity of
the Company and its Restricted Subsidiaries determined in accordance with GAAP
less the amount by which Restricted Investments made after the Closing exceed
10% of Consolidated Net Worth.
"CONSOLIDATED TOTAL CAPITALIZATION" means the sum of Consolidated
Indebtedness and Consolidated Net Worth.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater of
(i) 2.0% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 2.0% over the rate of interest publicly announced
by Bank America National Trust & Savings Association in Chicago, Illinois as its
"base" or "prime" rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
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<PAGE>
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such property);
(c) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities); and
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
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Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note
and (b) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
"INVESTMENT" means any investment made, in cash or by delivery of
property, directly or indirectly, by any Person, in (i) any other Person,
whether by acquisition of capital stock, Indebtedness, or other obligations or
securities or by loan, advance, capital contribution or otherwise or (ii) any
property.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Restricted Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount
40
<PAGE>
upon liquidation or dissolution of such corporation.
"PRIORITY DEBT" means, at any time, the sum, without duplication, of
(i) Indebtedness of Restricted Subsidiaries, (ii) outstanding Indebtedness of
the Company guaranteed by a Restricted Subsidiary and (iii) the aggregate amount
of Consolidated Indebtedness secured by Liens, other than Liens permitted under
Section 10.3 (a) through (j).
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"PURCHASER" is defined in Section 1.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"RESTRICTED INVESTMENTS" means all Investments except:
(a) Investments in Restricted Subsidiaries;
(b) Investments in a Person that, as a result thereof, becomes a
Restricted Subsidiary;
(c) Investments in current assets (as determined in accordance with
GAAP) arising from the sale of goods and services in the ordinary course of
business;
(d) Investments in property to be used in the ordinary course of
business;
(d) Investments in:
(i) obligations of or fully guaranteed by the United States of
America or an agency thereof maturing within three years from the date
of acquisition;
(ii) municipal securities maturing within three years, which are
rated in one of the top two rating classifications by at least one
rating agency of recognized national standing;
(iii) certificates of deposit, EuroDollar deposits or
banker s acceptances maturing within one year from the date of
acquisition issued by commercial banks, which are rated in one of the
top two rating classifications by at least one rating agency of
recognized national standing;
(iv) commercial paper maturing within 270 days, which is rated in
one of the top two rating classifications by at least one rating
agency of recognized national standing; and
(v) money market instrument programs that are classified as
current assets in accordance with GAAP; and
41
<PAGE>
(e) Investments existing as of the date of Closing that are listed in
the attached Schedule B-1.
"RESTRICTED SUBSIDIARY" means any Subsidiary (a) of which more than
50% of the voting securities are owned by the Company and/or one or more
Wholly-Owned Restricted Subsidiaries; (b) that is organized under the laws of
the United States; (c) that maintains substantially all of its assets and
conducts substantially all of its business within the United States, Canada or
Mexico; (d) that the Company has designated a Restricted Subsidiary by notice in
writing given to the holders of the Notes and (e) that the Company has not
designated as a Restricted Subsidiary more than once previously or as an
Unrestricted Subsidiary more than once previously.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary not designated a
Restricted Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company s other Wholly-Owned Subsidiaries at such time.
42
<PAGE>
EXHIBIT 1
[FORM OF NOTE]
NORTHWEST PIPE COMPANY
6.87% SENIOR NOTE DUE NOVEMBER 15, 2007
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, NORTHWEST PIPE COMPANY (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Oregon, hereby promises to pay to [ ], or
registered assigns, the principal sum of [ ]
DOLLARS on November 15, 2007, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
6.87% per annum from the date hereof, payable semiannually, on May 15 and
November 15 in each year, commencing with the May 15 or November 15 next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable semiannually as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the greater of (i) 8.87% or (ii) 2.0% over the rate
of interest publicly announced by Bank of America National Trust & Savings
Association from time to time in Chicago, Illinois as its "base" or "prime"
rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of
November 1, 1997 (as from time to time amended, the "Note Purchase Agreements"),
between the Company and the respective Purchasers named therein and is entitled
to the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
43
<PAGE>
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note also is
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note and the Note Purchase Agreement are governed and construed
in accordance with the substantive laws of the State of Illinois.
NORTHWEST PIPE COMPANY
By:
Name:
Title:
44
<PAGE>
Exhibit 4.4(a)
FORM OF OPINION OF COUNSEL
TO THE COMPANY
The opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP, of the Company,
shall be to the effect that:
1. Each of the Company and each Subsidiary incorporated under the laws of
the United States or any state thereof, including the District of Columbia, is a
corporation duly incorporated, validly existing in good standing under the laws
of the state of its incorporation, and each has all requisite corporate power
and authority to own and operate its properties, to carry on its business as now
conducted, and, in the case of the Company, to enter into and perform the Note
Purchase Agreement and to issue and sell the Notes.
2. Each of the Company and each Subsidiary is duly qualified or licensed
and in good standing as a foreign corporation authorized to do business in each
jurisdiction where the nature of its or their businesses or the character of its
or their properties makes such qualification or licensing necessary, except
where such failure to be so qualified or licensed would not have a Material
Adverse Effect.
3. The Note Purchase Agreement and the Notes have been duly authorized by
proper corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, constitute the legal, valid
and binding agreements of the Company, and are enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.
4. The offering, sale and delivery of the Notes do not require the
registration of the Notes under the Securities Act of 1933, as amended, or the
qualification of an indenture under the Trust Indenture Act of 1939, as amended.
5. No authorization, approval or consent of, and no designation, filing,
declaration, registration and/or qualification with, any Governmental Authority
is necessary or required in connection with the execution, delivery and
performance by the Company of the Note Purchase Agreement or the offering,
issuance and sale by the Company of the Notes.
6. The issuance and sale of the Notes by the Company, the performance of
the terms and conditions of the Notes and the Note Purchase Agreement and the
execution and delivery of the Note Purchase Agreement do not conflict with, or
result in any breach or violation of any of the provisions of, or constitute a
default under, or result in the creation or imposition of any Lien on, the
property of the Company or any Subsidiary pursuant to the provisions of (i) the
charter or by-laws, each as amended, of the Company or any Subsidiary, (ii) any
loan agreement or evidence of Indebtedness known to such counsel to which the
Company or any Subsidiary is a party or by which any of them or their property
is bound or may be affected, (iii) any other agreement or instrument known to
such counsel to which the Company or any Subsidiary is a party or by which any
of them or their property is bound or may be affected, (iv) any law (including
usury laws) or regulation applicable to the Company, or (v) any order, writ,
injunction or decree known to such counsel of any court or Governmental
Authority applicable to the Company or any Subsidiary.
7. All of the issued and outstanding shares of capital stock of each
Subsidiary incorporated in the United States or any state thereof, including the
District of Columbia, have been duly and validly
45
<PAGE>
issued, are fully paid and nonassessable and are owned of record by the Company
free and clear of any perfected pledge or, to the knowledge of such counsel, any
other perfected Lien.
8. There are no actions, suits or proceedings pending, or, to such
counsel's knowledge, threatened against, or affecting the Company or any
Subsidiary, at law or in equity or before or by any Governmental Authority, that
are likely to result, individually or in the aggregate, in a Material Adverse
Effect.
9. Neither the Company nor any Subsidiary is (i) a "public utility
company" or a "holding company," or an "affiliate" or a "subsidiary company" of
a "holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"), (ii) a "public utility" as defined in the Federal Power Act,
as amended, or (iii) an "investment company" or an "affiliated person" thereof,
as such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
10. The issuance of the Notes and the intended use of the proceeds of the
sale of the Notes do not violate or conflict with Regulation G, T or X of the
Board of Governors of the Federal Reserve System.
The opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP shall cover such other
matters relating to the sale of the Notes as the Purchasers may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and officers of the Company and with respect to matters governed by
the laws of any jurisdiction other than the United States of America, the
Delaware General Corporation Law and the laws of the State of Oregon, such
counsel may rely upon the opinions of counsel deemed (and stated in their
opinion to be deemed) by him or her to be competent and reliable.
46
<PAGE>
EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The opinion of Gardner, Carton & Douglas, special counsel to the
Purchasers, shall be to the effect that:
1. The Company is a corporation organized and validly existing in good
standing under the laws of the State of its incorporation, with all requisite
corporate power and authority to enter into the Agreement and to issue and sell
the Notes.
2. The Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.
3. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of the
Notes under the Securities Act of 1933, as amended, nor the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
4. The issuance and sale of the Notes and compliance with the terms and
provisions of the Notes and the Agreement will not conflict with or result in
any breach of any of the provisions of the Certificate or Articles of
Incorporation or By-Laws of the Company.
5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the Note
Purchase Agreement or the Notes.
The opinion of Gardner, Carton & Douglas also shall state that the opinion of
Ater Wynne Hewitt Dodson & Skerritt, LLP, counsel to the Company, delivered to
you pursuant to the Agreement, is satisfactory in form and scope to Gardner,
Carton & Douglas, and, in its opinion, the Purchasers and it are justified in
relying thereon and shall cover such other matters relating to the sale of the
Notes as the Purchasers may reasonably request.
47
<PAGE>
EXHIBIT 21
NORTHWEST PIPE COMPANY
SUBSIDIARIES OF THE REGISTRANT
Thompson Pipe and Steel Company (a Colorado Corporation)
Thompson Steel Pipe Company (a Delaware Corporation)
Southwestern Pipe, Inc. (a Texas Corporation)
P&H Tube Corporation (a Texas Corporation)
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Northwest Pipe Company on Form S-8 (File Nos. 333-20165 and 333-20167)
of our report dated February 7, 1998, except for Note 18 for which the
date is March 6, 1998, on our audits of the consolidated financial
statements and financial statement schedule of Northwest Pipe Company and
Subsidiaries as of December 31, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997, which report is included in
this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Portland, Oregon
March 25, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOUND IN THE COMPANY'S REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 904
<SECURITIES> 0
<RECEIVABLES> 26,987
<ALLOWANCES> 1,825
<INVENTORY> 20,530
<CURRENT-ASSETS> 71,666
<PP&E> 81,126
<DEPRECIATION> 23,679
<TOTAL-ASSETS> 132,051
<CURRENT-LIABILITIES> 20,615
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 70,715
<TOTAL-LIABILITY-AND-EQUITY> 132,051
<SALES> 150,833
<TOTAL-REVENUES> 150,833
<CGS> 119,716
<TOTAL-COSTS> 119,716
<OTHER-EXPENSES> 11,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,817
<INCOME-PRETAX> 17,918
<INCOME-TAX> 6,818
<INCOME-CONTINUING> 11,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,100
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.68
</TABLE>
