SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number 1-12149
CONSOLIDATED FREIGHTWAYS CORPORATION
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 77-0425334
175 Linfield Drive, Menlo Park, CA 94025
Telephone Number (415) 326-1700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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_______
Number of shares of Common Stock, $.01 par value,
outstanding as of April 30, 1997: 22,025,323
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-Q
Quarter Ended March 31, 1997
_____________________________________________________________________
_____________________________________________________________________
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 3
Statements of Consolidated Operations -
Three Months Ended March 31, 1997 and 1996 5
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 41,205 $ 48,679
Trade accounts receivable, net of allowances 304,144 285,410
Other receivables 8,230 3,339
Operating supplies, at lower of average
cost or market 11,314 11,511
Prepaid expenses 46,408 35,848
Deferred income taxes 34,678 35,470
Total Current Assets 445,979 420,257
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 78,953 78,989
Buildings and improvements 343,043 343,023
Revenue equipment 561,435 559,823
Other equipment and leasehold improvements 119,380 115,317
1,102,811 1,097,152
Accumulated depreciation and amortization (691,061) (680,464)
411,750 416,688
OTHER ASSETS
Deposits and other assets 10,889 10,808
Deferred income taxes 8,643 9,334
19,532 20,142
TOTAL ASSETS $ 877,261 $ 857,087
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 78,783 $ 87,511
Accrued liabilities 215,981 187,267
Accrued claims costs 82,161 95,780
Federal and other income taxes 5,961 4,083
Total Current Liabilities 382,886 374,641
LONG-TERM LIABILITIES
Long-term debt 15,100 15,100
Accrued claims costs 118,065 110,200
Employee benefits 114,522 113,312
Other liabilities and deferred credits 32,757 33,136
Total Liabilities 663,330 646,389
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized
5,000,000 shares, issued none -- --
Common stock, $.01 par value; authorized
50,000,000 shares; issued and outstanding
22,025,323 shares 220 220
Additional paid-in capital 57,174 57,174
Cumulative translation adjustment (4,931) (4,910)
Retained earnings 161,468 158,214
Total Shareholders' Equity 213,931 210,698
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 877,261 $ 857,087
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in thousands except per share amounts)
Three Months Ended
March 31,
1997 1996
REVENUES $ 545,633 $ 502,544
COSTS AND EXPENSES
Salaries, wages and benefits 357,997 356,351
Operating expenses 90,742 82,825
Purchased transportation 43,337 37,588
Operating taxes and licenses 18,041 19,000
Claims and insurance 13,799 14,245
Depreciation 13,180 17,092
537,096 527,101
OPERATING INCOME (LOSS) 8,537 (24,557)
OTHER INCOME (EXPENSE)
Investment income 194 78
Interest expense (299) (240)
Miscellaneous, net (433) (1,623)
(538) (1,785)
Income (loss) before income taxes (benefits) 7,999 (26,342)
Income taxes (benefits) 4,745 (6,206)
NET INCOME (LOSS) $ 3,254 $ (20,136)
Average shares outstanding 22,025,323 22,025,323
NET INCOME (LOSS) PER SHARE $ 0.15 $ (0.91)
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended
March 31,
1997 1996
(Dollars in thousands)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 48,679 $ 26,558
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 3,254 (20,136)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 13,628 17,213
Increase in deferred income taxes 1,483 3,333
Gains from property disposals, net (298) (636)
Changes in assets and liabilities:
Receivables (23,625) (16,549)
Prepaid expenses (10,560) (9,605)
Accounts payable (8,728) (2,239)
Accrued liabilities 28,714 11,049
Accrued claims costs (5,754) 3,728
Income taxes 1,878 (1,373)
Employee benefits 1,210 989
Other (1,125) 4,362
Net Cash Provided (Used) by Operating Activities 77 (9,864)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (8,058) (18,551)
Proceeds from sales of property 507 1,468
Net Cash Used by Investing Activities (7,551) (17,083)
CASH FLOWS FROM FINANCING ACTIVITIES
Former parent investments and advances -- 36,161
Net Cash Provided by Financing Activities -- 36,161
Increase (Decrease) in Cash and Cash Equivalents (7,474) 9,214
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 41,205 $ 35,772
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements of
Consolidated Freightways Corporation and subsidiaries (the Company)
have been prepared by the Company, without audit by independent
public accountants, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management,
the consolidated financial statements include all normal recurring
adjustments necessary to present fairly the information required to
be set forth therein. Certain information and note disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted from these statements pursuant to such rules and regulations
and, accordingly, should be read in conjunction with the consolidated
financial statements included in the Company's 1996 Annual Report to
Shareholders.
There have been no significant changes in the accounting
policies of the Company. There were no significant changes in the
Company's commitments and contingencies as previously described in
the 1996 Annual Report to Shareholders and related annual report to
the Securities and Exchange Commission on Form 10-K.
2. Stock Compensation
As previously disclosed in the Company's 1996 Annual Report to
Shareholders and related annual report to the Securities and Exchange
Commission on Form 10-K, the Company granted 2,146,450 shares of
restricted stock to non-employee directors and certain designated
employees in December 1996. As of March 31, 1997, these granted but
unissued shares had an aggregate market value of $25,490,000. The
shares vest over three years and are contingent upon the Company's
stock price achieving pre-determined increases over the grant price
for 10 consecutive trading days following each anniversary of the
grant. If performance conditions are met in December 1997,
approximately 715,500 shares of stock, or one-third of the initial
grant, will be issued and compensation expense will be recognized
based on the then market price of the stock. Based on the market
price of the stock as of March 31, 1997, the Company would recognize
a $5.1 million non-cash charge, net of related tax benefits.
3. Contingencies
The Company and its subsidiaries are defendants in various
lawsuits incidental to their businesses. It is the opinion of
management that the ultimate outcome of these actions will not have a
material adverse effect on the Company's consolidated financial
position or results of operations.
CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company earned net income of $3.3 million or $0.15 per share
for the quarter ended March 31, 1997 on revenues of $545.6 million.
This compares with a net loss of $20.1 million or ($0.91) per share on
revenues of $502.5 million for the same period last year. The
revenue increase of $43.1 million or 8.6% was primarily due to
increased tonnage levels coupled with a sustained, general rate
increase of 5.65% on January 1, 1997. Total and less-than-truckload
(LTL) tonnage increased 6.5% and 6.3%, respectively, over the same
period last year, due primarily to valued-added service offerings.
The prior year was impacted by the implementation of the Business
Accelerator System (BAS), a re-engineering of the Company's freight
flow system, in October 1995.
Operating income was $8.5 million, a $33.1 million improvement
over the same period in 1996 with the operating ratio improving to
98.4 percent from 104.9 percent. The improvement in operating results
reflects the cost savings derived from more efficient operations
under BAS and the fact that prior year results were adversely
affected by the costs of completing operational refinements and
improving service levels in the new freight flow system.
Salaries, wages and benefits for the quarter ended March 31,
1997, at 65.6% of revenues, compares favorably with 70.9% for the
same period in 1996, as the prior year was adversely impacted by the
implementation of BAS. The improvement also reflects increased
productivity and freight handling efficiencies in the linehaul, dock
and city pick-up operations and the reduction of workers compensation
expense following implementation of aggressive cost containment
programs. Purchased transportation increased $5.7 million as the
Company increased its use of rail services from 22% to 26% of
intercity miles. Decreases in operating expense realized by greater
utilization of rail services were offset by increased fuel and
maintenance expenses, and resulted in a net increase in operating
expenses of $7.9 million. Depreciation expense decreased approximately
22.9% from the same period last year as the Company transferred real
properties, with an aggregate net book value of $57.6 million, to its
former parent in connection with its consolidation of terminal
properties at the spin-off in December 1996.
Other expense, net decreased $1.2 million from the same period
last year primarily due to the absence in 1997 of interest expense on
borrowings from the former parent, which was included in
Miscellaneous, net. The Company periodically borrowed funds under its
secured credit facility during the quarter ended March 31, 1997, but
ended the quarter with no borrowings outstanding.
The effective income tax (benefit) rates of 59.3% and (23.6%)
for the quarters ended March 31, 1997 and 1996, respectively, differ
from the statutory Federal rate due to foreign taxes and non-
deductible items.
On April 1, 1997, a 3.65% Teamsters wage and benefit increase
became effective which is expected to cost the Company approximately
$30 million in 1997. However, with continued focus on improving
linehaul efficiency and freight handling in its linehaul, dock and
city pickup operations, and an emphasis on business with higher
profit contributions, management expects to partially offset the
increased costs. As discussed in Footnote 2 in Part 1
of this Form 10-Q, the Company has a restricted stock program. If
performance conditions are met in December 1997, approximately
715,500 shares of stock will be issued and compensation expense will
be recognized based on the then market price of the stock. Based on
the market price of the stock as of March 31, 1997, the Company would
recognize a $5.1 million non-cash charge, net of related tax
benefits.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company had $41.2 million in cash and
cash equivalents. Net cash flow from operations was slightly above
breakeven, as net income and depreciation and amortization were
offset by changes in working capital. The increase in accounts
receivable of $23.6 million reflects the increased revenue levels.
Management expects cash flow from operations for the remainder of
1997 will be sufficient for working capital and capital expenditure
requirements. Capital expenditures for the period were $8.1 million
compared with $18.6 million in the comparable quarter of the previous
year, reflecting fewer fleet replacements and facility expenditures.
The Company expects capital expenditures to be approximately $21
million for the remainder of 1997 and will fund these with cash from
operations supplemented by financing arrangements, if necessary.
The Company has a $225.0 million secured credit facility with
several banks to provide for working capital and letter of credit
needs. Borrowings under the agreement, which expires in 2000, bear
interest based upon either prime or LIBOR, plus a margin dependent on
the Company's financial performance. Borrowings and letters of
credit are secured by substantially all of the assets (excluding real
property and certain rolling stock) of Consolidated Freightways
Corporation of Delaware (CFCD), a wholly owned subsidiary of the Company,
all of the outstanding stock of CFCD and 65% of the outstanding
capital stock of Canadian Freightways Limited (CFL), a wholly owned
subsidiary of CFCD. As of March 31, 1997, the Company had no
short-term borrowings and $68.3 million of letters of credit
outstanding under this facility. The continued availability of
funds under this credit facility will require that CFCD remain
in compliance with certain financial covenants. The most
restrictive covenants require the Company to maintain a minimum
level of earnings before interest, taxes, depreciation and
amortization, minimum amounts of tangible net worth and fixed charge
coverage, and limit capital expenditures. The Company is in
compliance as of March 31, 1997 and expects to be in compliance with
these covenants for the remainder of the year.
INFLATION
Significant increases in fuel prices, to the extent not offset
by increases in transportation rates, would have a material adverse
effect on the profitability of the Company. Historically, the
Company has responded to periods of sharply higher fuel prices by
implementing fuel surcharge programs or base rate increases, or both,
to recover additional costs, but there can be no assurance that the
Company will be able to successfully implement such surcharges or
increases in response to increased fuel costs in the future. The
Company currently has in place a fuel surcharge program in response
to the increased fuel prices that began in 1996 and continue in 1997.
OTHER
The Company's operations necessitate the storage of fuel in
underground tanks as well as the disposal of substances regulated by
various Federal and state laws. The Company adheres to a stringent
site-by-site tank testing and maintenance program performed by
qualified independent parties to protect the environment and comply
with regulations. Where clean-up is necessary, the Company takes
appropriate action.
The Company has received notices from the Environmental
Protection Agency and others that it has been identified as a
potentially responsible party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) or
other Federal and state environmental statutes at various Superfund
sites. Based upon cost studies performed by independent third
parties, the Company believes its obligations with respect to such
sites would not have a material adverse effect on its financial
condition or results of operations.
CFCD and the International Brotherhood of
Teamsters (IBT) are parties to the National Master Freight Agreement
which expires on March 31, 1998. Although CFCD believes that it
will be able to successfully negotiate a new contract with the IBT,
there can be no assurances that it will be able to do so or that
work stoppages will not occur, or that the terms of any such
contract will not be substantially less favorable than those of the
existing contract, any of which could have a material adverse
effect on CFCD's business, financial condition or results of operations.
Certain statements included herein constitute forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to a number of
risks and uncertainties. In that regard, the following factors,
among others, could cause actual results and other matters to differ
materially from those in such statements: changes in general business
and economic conditions; increasing domestic and international
competition and pricing pressure; changes in fuel prices; uncertainty
regarding the Company's ability to improve results of operations;
labor matters, including changes in labor costs, renegotiation of
labor contracts and the risk of work stoppages or strikes; changes in
governmental regulation, and environmental and tax matters. As a
result of the foregoing, no assurance can be given as to future
results of operations or financial condition.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
As previously disclosed, the Company has received notices from the
Environmental Protection Agency and others that it has been
identified as a potentially responsible party (PRP) under the
Comprehensive Environmental Response Compensation and Liability Act
(CERCLA) or other Federal and state environmental statutes at various
Superfund sites. Based upon cost studies performed by independent
third parties, the Company believes its obligations with respect to
such sites would not have a material adverse effect on its
financial condition or results of operations. Certain legal matters
are discussed in Note 3 in the Notes to Consolidated Financial
Statements in Part I of this form.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Participation Agreement dated as of December 22, 1995
between Consolidated Freightways Corporation of Delaware,
as lessee, and ABN AMRO Bank N.V., as lessor, as amended.
(10.2) Participation Agreement dated as of September 30, 1994
between Consolidated Freightways Corporation of Delaware,
as lessee, and BA Leasing & Capital Corporation and various
other financial institutions, as lessors, as amended.
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended
March 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company (Registrant) has duly
caused this Form 10-Q Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Consolidated Freightways Corporation
(Registrant)
May 9, 1997 /s/David F. Morrison
David F. Morrison
Executive Vice President and
Chief Financial Officer
May 9, 1997 /s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and
Controller
Exhibit 10.1
PARTICIPATION AGREEMENT
Dated as of December 22, 1995
Entered Into By and Among
CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE
as Lessee,
ABN AMRO BANK N.V.,
not individually, except as expressly
set forth herein, but as Agent
and
The Lessors Listed on
Schedule I Hereto
TABLE OF CONTENTS
Page
ARTICLE I Definitions 1
ARTICLE II Purchase and Lease of Vehicles 1
Section 2.1 Fundings; Payment of Purchase Price 1
Section 2.2 Application of Funds; Sale and Lease of Vehicles 3
Section 2.3 Time and Place of Delivery Dates 4
Section 2.4 Postponement of Delivery Date 4
Section 2.5 Commitment Fee 4
ARTICLE III Conditions to Delivery Date Closings 5
Section 3.1 Delivery Date Notice; Invoices 5
Section 3.2 Appraisal 5
Section 3.3 Participation Agreement 6
Section 3.4 Lease 6
Section 3.5 Lease Supplements 6
Section 3.6 Financial Reports 7
Section 3.7 Financing Statements 7
Section 3.8 Certificates of Title 7
Section 3.9 Transaction Costs; Fees 7
Section 3.10 Opinions of Counsel 8
Section 3.11 Corporate Status and Proceedings 8
Section 3.12 Consents and Approvals 8
Section 3.13 Payment of Impositions 8
Section 3.14 Search Reports 9
Section 3.15 [Intentionally Omitted] 9
Section 3.16 Insurance 9
Section 3.17 Proceedings Satisfactory, Etc. 9
Section 3.18 Absence of Material Adverse Effect 9
Section 3.19 Representations and Warranties True; Absence of
Defaults 9
ARTICLE IV General Provisions 9
Section 4.1 Nature of Transaction 9
Section 4.2 [Intentionally Omitted] 10
Section 4.3 Replacements 10
ARTICLE V Representations and Warranties 10
Section 5.1 Representations and Warranties of Lessee 10
Section 5.2 Representations and Warranties of Lessors 16
Section 5.3 Representations and Warranties of Agent 16
ARTICLE VI Covenants 18
Section 6.1 Covenants of Lessee 18
Section 6.2 [Intentionally Omitted] 24
Section 6.3 Covenants of Agent and Lessors 24
ARTICLE VII General Indemnities 25
Section 7.1 Indemnity 25
Section 7.2 Excessive Use Indemnity 26
Section 7.3 Increased Capital Costs 26
Section 7.4 LIBO Rate Unlawful 27
Section 7.5 Funding Losses 27
Section 7.6 Actions of Affected Lessors 28
ARTICLE VIII General Tax Indemnity 28
Section 8.1 General Tax Indemnity 28
Section 8.2 Contest 29
Section 8.3 Gross Up 30
Section 8.4 Tax Returns 31
Section 8.5 Withholding Tax Exemption 32
ARTICLE IX Agent 33
Section 9.1 Appointment of Agent; Powers and Authorization
to Take Certain Actions 33
Section 9.2 Reliance 34
Section 9.3 Action Upon Instructions Generally 34
Section 9.4 Indemnification 35
Section 9.5 Independent Credit Investigation 36
Section 9.6 Refusal to Act 36
Section 9.7 Resignation or Removal of Agent; Appointment of
Successor 37
Section 9.8 Separate Agent 37
Section 9.9 Termination of Agency 38
Section 9.10 Compensation of Agency 38
Section 9.11 Limitations 38
ARTICLE X Amendments to Operative Agreements 39
Section 10.1 Amendments to Operative Agreements With
Consent of Lessors 39
Section 10.2 Amendments to Operative Agreements
Affecting Agent 40
ARTICLE XI Miscellaneous 40
Section 11.1 Survival of Covenants 40
Section 11.2 APPLICABLE LAW 40
Section 11.3 Distribution and Application of Rents and Other
Payments 40
Section 11.4 Notices 41
Section 11.5 Transaction Costs; Other Expenses 42
Section 11.6 Counterparts 42
Section 11.7 Severability 43
Section 11.8 Successors and Assigns; Transfers 43
SECTION 11.9 JURY TRIAL 45
Section 11.10 Captions; Table of Contents 45
Section 11.11 FINAL AGREEMENT 45
Section 11.12 No Third-Party Beneficiaries 45
Section 11.13 Further Assurances 45
Section 11.14 Reproduction of Documents 46
Section 11.15 Consideration for Consents to Waivers and
Amendments 46
Section 11.16 Submission to Jurisdiction 46
LIST OF SCHEDULES AND EXHIBITS
Schedule I - Commitments of Lessors; Payment Instructions
Schedule II - Description of Vehicles
Schedule X - Definitions
Exhibit A - Form of Lease
Schedule I - Description of Vehicles
Exhibit A - Form of Lease Supplement
Exhibit B - Form of Delivery Date Notice
Schedule I - Vehicle List and Purchase Price
Exhibit C - Form of Lessee's Opinion of Counsel
Exhibit D - Form of Officer's Certificate
Exhibit E - Form of Investor's Letter
Exhibit F - Form of Assumption Agreement
Exhibit G - Form of Schedule I to Lease Agreement
Exhibit H - Form of Schedule II to Lease Agreement
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of December 22, 1995
(this "Participation Agreement"), is entered into among
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, a Delaware
corporation, as Lessee ("Lessee"), ABN AMRO BANK N.V., a bank
organized under the laws of the Netherlands, not in its
individual capacity, except as otherwise expressly provided
herein, but solely as Agent for the Lessors (the "Agent"), and
the several Lessors listed on Schedule 1 hereto (together with
their respective permitted successors, assigns and transferees,
each a "Lessor" and collectively the "Lessors").
WHEREAS, on each Delivery Date, Lessee will transfer to
Agent, for the benefit of Lessors, and Agent, on behalf of
Lessors, will purchase and receive from Lessee, an interest in
certain of the Vehicles described on Schedule II hereto; and
WHEREAS, upon the transfer of the Vehicles on each Delivery
Date, Agent, on behalf of Lessors, will lease such Vehicles to
Lessee and Lessee will lease such Vehicles from Agent, for the
benefit of Lessors, pursuant to the terms of the Lease substan
tially in the form of Exhibit A hereto and one or more Lease
Supplements, each substantially in the form of Exhibit A to the
Lease;
NOW, THEREFORE, in consideration of the mutual terms and
conditions herein contained, the parties hereto agree as
follows:
ARTICLE I
Definitions
Capitalized terms used but not defined herein (including
those used in the foregoing recitals) shall have the meanings
specified in Schedule X hereto unless the context otherwise
requires, which Schedule X shall for all purposes constitute a
part of this Participation Agreement.
ARTICLE II
Purchase and Lease of Vehicles
Section II.1 Fundings; Payment of Purchase Price.
(a) Subject to the terms and conditions hereinafter set
forth, and in reliance on the representations and warranties
contained herein or made pursuant hereto, upon receipt of each
Delivery Date Notice, each Lessor shall transfer to Agent on the
specified Delivery Date an amount equal to the product of the
aggregate Purchase Price of the Vehicles specified in such
Delivery Date Notice, multiplied by such Lessor's Commitment
Percentage (each such transfer being referred to herein as a
"Funding"). In no event shall any Lessor be required to provide
funds under this Participation Agreement in an aggregate amount
exceeding such Lessor's Commitment.
(b) Remittances pursuant to this Section 2.1 shall be made
in immediately available federal funds by wire transfer to the
account of Agent set forth below (or as otherwise specified by
Agent to each Lessor from time to time not less than three
Business Days prior to the date of the requested Funding) and
must be received by Agent by 2:00 p.m., New York time on the
applicable Delivery Date:
(c) If the Agent determines that any Lessor (a "Defaulting
Lessor") will not make available the amount (the "Defaulted
Amount") which would constitute its Commitment Percentage of the
total Purchase Price of the Vehicles specified in a Delivery
Date Notice, Agent shall promptly notify each other Lessor
(each, a "Non-Defaulting Lessor") and specify the additional
amounts required to be funded by each Non-Defaulting Lessor.
Each Non-Defaulting Lessor, as soon as practical after receipt
of notice but not before the Delivery Date, shall transfer to
the Agent, in immediately available funds, its pro rata share of
the Defaulted Amount, determined in the same proportion that
such Non-Defaulting Lessor's Commitment bears to the aggregate
Commitments of all Non-Defaulting Lessors; provided that such
amount, together with all amounts previously funded by each
Non-Defaulting Lessor, shall not exceed the Non-Defaulting
Lessor's Commitment. If the Defaulted Amount cannot be fully
funded by the Non-Defaulting Lessors, Agent shall so notify the
Non-Defaulting Lessors and give to all Non-Defaulting Lessors
the opportunity to increase their respective Commitments by
notice in writing to the Agent; provided that should the aggre
gate proposed increased Commitments by one or more Non-Default
ing Lessors exceed the Defaulted Amount, Agent shall increase
the Commitments of the participating Non-Defaulting Lessors on a
pro-rata basis in accordance with the respective amounts by
which such Non-Defaulting Lessors have offered to participate,
it being understood that in no event shall the aggregate amount
funded by any Lessor exceed the amount of such Lessor's Commit
ment, after giving effect to any increase in such Commitment
pursuant to this sentence.
In the event of any funding of all or a portion of the
Defaulted Amount by the Non-Defaulting Lessors, the following
rules shall apply notwithstanding any other provision in any
Operative Agreement:
(i) The Commitment of the Defaulting Lessor
shall be decreased in an amount equal to the total
aggregate increase in the Commitments of the
Non-Defaulting Lessors pursuant to this Section
2.1(c);
(ii) A Defaulting Lessor shall be obligated to
fund any deliveries occurring after its default based
upon its revised Commitment Percentage;
(iii) A Defaulting Lessor shall not have the
right to fund its Defaulted Amount without the written
consent of the Agent and Lessee and then only to the
extent such Defaulted Amount has not been funded by
the Non-Defaulting Lessors;
(iv) If and to the extent that the Defaulted
Amount is not funded by the Non-Defaulting Lessors,
Agent may delete Vehicles from the Delivery Date
Notice so that the total Purchase Price of the
Vehicles specified in the Delivery Date Notice equals
the aggregate revised Fundings for the Delivery Date;
and
(v) The Defaulting Lessor shall not be responsi
ble for any consequential damages suffered by Lessee
or any of Lessee's Affiliates as a result of its
failure to so fund.
Section II.2 Application of Funds; Sale and Lease of
Vehicles. On each Delivery Date, upon (a) receipt by Agent of
all amounts to be paid by the Lessors pursuant to Section 2.1,
and (b) satisfaction or waiver of each of the conditions set
forth in Article III, (i) Agent shall purchase, for the benefit
of the Lessors, an interest in the Vehicles to be acquired on
such Delivery Date, as specified in the relevant Delivery Date
Notice delivered pursuant to Section 3.1, (ii) in consideration
therefor, Agent, on behalf of the Lessors, shall pay, from the
funds made available by the Lessors pursuant to Section 2.1, an
amount equal to the aggregate Purchase Price of the interest in
the Vehicles being so sold and purchased in immediately availa
ble federal funds remitted by wire transfer to the account
specified by Lessee in the relevant Delivery Date Notice, and
(iii) Agent, on behalf of the Lessors, shall lease to Lessee the
Vehicles so purchased by Agent and Lessee shall accept delivery
of and lease from Agent such Vehicles pursuant to the Lease.
Each Lessor shall hold an undivided interest in the Vehicles
equal to such Lessor's Investment Percentage.
Section II.3 Time and Place of Delivery Dates. Each
Delivery Date Closing shall take place on the Delivery Date set
forth in the relevant Delivery Date Notice, commencing at
10:00 a.m. San Francisco time, at Pillsbury Madison & Sutro LLP,
subject to the following:
(i) no more than one Funding and one Delivery
Date may occur;
(ii) each Delivery Date shall occur on a
Business Day on or after the date hereof and not later
than December 29, 1995, it being understood that there
may be a Funding without a Delivery Date Closing if
Lessee has postponed the Delivery Date pursuant to
Section 2.4, so long as such Delivery Date occurs not
later than December 29, 1995; and
(iii) in no event shall the aggregate amount
advanced by the Lessors exceed the Total Commitment.
Section II.4 Postponement of Delivery Date. In the event
that the Lessors shall make the Funding requested pursuant to
any Delivery Date Notice and the relevant Delivery Date Closing
shall not have occurred on the date specified in such Delivery
Date Notice, Lessee shall pay to Agent, for the benefit of
Lessors, interest on the amount funded by each Lessor at the
Assumed Interest Rate, less any interest earned by investing
such funded amounts, which interest shall be for the ratable
benefit of the Lessors; provided that this provision shall not
be construed to require Agent to invest such funds in interest-
bearing accounts. Such interest shall be due and payable by
Lessee upon the occurrence of such Delivery Date and such
payment shall be an additional condition precedent to such
Delivery Date Closing; provided, however, that no additional
Delivery Date Notice shall be required to be given if a Delivery
Date Closing is postponed and thereafter consummated; and
provided, further, that if such Delivery Date Closing shall not
have occurred by the first to occur of (a) the fifth (5th)
Business Day following the Funding in respect thereof and
(b) December 29, 1995; then all such interest shall be due and
payable on such date, and Agent shall refund to each Lessor all
amounts funded by such Lessor, plus any other amounts due under
Section 7.5.
Section II.5 Commitment Fee. On the Lease Commencement
Date, in the event that the outstanding Lease Balance is less
than 95% of the Total Commitment (after giving effect to any
Delivery Date Closing that may have occurred on such date),
Lessee shall pay to Agent, for the benefit of the Lessors, a
commitment fee (the "Commitment Fee") equal to the amount
accrued on the unfunded portion of the Total Commitment from the
Initial Delivery Date through the Lease Commencement Date at the
rate of .20% per annum; provided, however, if the Initial
Delivery Date and the Lease Commencement Date occur on the same
date, no Commitment Fee shall be payable by Lessee.
ARTICLE III
Conditions to Delivery Date Closings
The obligation of each Lessor and Agent to perform its obli
gations on any Delivery Date, and of each Lessor to make its
Funding, shall be subject to the fulfillment to the satisfaction
of (including, with respect to writings, such writings being in
form and substance reasonably satisfactory to the addressee or
beneficiary thereof), or the waiver in writing by, each Lessor
and Agent of the conditions precedent set forth in this Article
III on or prior to such Delivery Date (except that the
obligation of any party hereto shall not be subject to the
performance or compliance of such party or of any of such
party's Affiliates).
Section III.1 Delivery Date Notice; Invoices. Lessee
shall have delivered to Agent and each Lessor, not later than
1:00 p.m. San Francisco time not earlier than the tenth (10th)
and not later than the first (1st) Business Day prior to the
proposed Delivery Date, an irrevocable notice (a "Delivery Date
Notice") substantially in the form of Exhibit B, specifying (i)
the proposed Delivery Date, (ii) a description (including model,
make, serial number and registration) of each Vehicle to be
purchased on such Delivery Date and a representation and
warranty that as of the date Lessee takes possession of each
such Vehicle and at all times thereafter, such Vehicle will
either be (a) used in interstate commerce, titled in a State
with respect to which Agent and Lessors have received an opinion
in the form of Exhibit C-1 and registered in a State which is a
party to the International Registration Plan or (b) used in
intrastate commerce, registered in the State in which it is so
used and titled in a State with respect to which Agent and
Lessors have received an opinion in the form of Exhibit C-1,
(iii) the respective Purchase Prices of such Vehicles, and
(iv) wire transfer instructions for the disbursement of funds.
Concurrently with each Delivery Date Notice, Lessee shall
deliver to Agent true and correct copies of the manufacturer's
or dealer's invoice for each Vehicle to be delivered on such
Delivery Date, which invoices shall set forth the Invoice Cost
of each such Vehicle.
Section III.2 Appraisal. At least one (1) Business Day
prior to the Initial Delivery Date, Agent and each Lessor shall
have received an Appraisal to their reasonable satisfaction
opining:
(a) that the Appraised Value of the Vehicles is reasonably
expected to be as follows:
Date Value
Sum of Fair Market Value
Vehicles on the Initial Delivery Date $64,725,527.48
End of Base Period $47,896,890.34
End of First Renewal Term $39,482,571.76
End of Second Renewal Term $31,068,253.19
End of Third Renewal Term $22,653,934.62
(b) that the remaining economic useful life of each
Vehicle is not less than eight (8) years;
(c) that the values set forth in clause (a) above assume
an increase for inflation of 2% per annum, and that such infla
tion assumption is reasonable.
Section III.3 Participation Agreement. On or prior to the
Initial Delivery Date, each of the Participants shall have
received a fully executed counterpart of this Participation
Agreement.
Section III.4 Lease. On or prior to the Initial Delivery
Date, each Participant shall have received a fully executed
counterpart of the Lease.
Section III.5 Lease Supplements. On each Delivery Date,
Lessee by accepting Vehicles for lease on such Delivery Date
shall execute and deliver to Agent and each Lessor one or more
Lease Supplements in form and substance reasonably satisfactory
to Lessors and substantially in the form of Exhibit A to the
Lease (each a "Lease Supplement"); provided, however, only Agent
shall receive the Lease Supplement marked "Counterpart No. 1 -
Agent's Original Copy". Each Lease Supplement to be executed
and delivered by Lessee on each Delivery Date shall set forth:
(a) in Schedule I thereto, a description of and the
Purchase Price for the Vehicles; and
(b) in Schedule II thereto, (i) the Interim Rent (if any),
(ii) a schedule of the installments of Fixed Rent, the Payment
Dates therefor payable during the Base Period and during each
Renewal Term, the Supplement Balance of such Lease Supplement as
of the Delivery Date therefor and as of each Payment Date in the
Base Term and each Renewal Term, assuming in each case that all
installments of Fixed Rent due and payable thereunder to and
including such Payment Date have been paid, (iii) the Lease
Supplement Termination Percentages, (iv) the Lease Supplement
Lessee Risk Percentages and (v) the Lease Supplement Lessor Risk
Percentages.
An amortization schedule, providing for equal quarterly install
ments of Fixed Rent and Variable Rent over the full five years
of the Lease Term (that is, the Base Term and the three Renewal
Terms), will be prepared for each Lease Supplement using the
Interest Rate as determined on the date of the Delivery Date
Notice, such that at the end of the Lease Term the Supplement
Balance of such Lease Supplement shall be equal to the Appraised
Value at such date of the Vehicles subject to such Lease
Supplement. The installments of Fixed Rent so determined shall
be set forth in Schedule II to such Lease Supplement and shall
be payable by Lessee on the dates and in the amounts set forth
in said Schedule II. The installment of Variable Rent shall
vary over the Lease Term, based upon changes in the applicable
Interest Rate. Schedules I and II to each Lease Supplement
shall be prepared by Agent, and the items set forth by Agent in
such Schedules shall be conclusive and binding upon Lessee for
all purposes hereunder. To assist the Agent in preparing
Schedules I and II to each Lease Supplement, attached hereto as
Exhibits G and H are hypothetical Schedules I and II which have
been prepared using certain assumed information.
Section III.6 Financial Reports. At least three (3)
Business Days prior to the Initial Delivery Date, Lessee shall
have delivered to Agent and Lessors copies of its most recent
financial statements prepared in accordance with GAAP, applied
on a consistent basis throughout the periods covered thereby and
on a basis consistent with prior periods.
Section III.7 Financing Statements. On or prior to each
Delivery Date, Agent shall have received from Lessee duly
executed UCC financing statements identifying Lessee as debtor
and Agent as secured party for the benefit of the Lessors, and
describing the Lease as a secured transaction, and such financ
ing statements shall have been filed in (a) the jurisdiction in
which Lessee has its principal office and (b) each jurisdiction
in which any Vehicle being delivered on such Delivery Date is to
be titled.
Section III.8 Certificates of Title. On or prior to each
Delivery Date, Agent and each Lessor shall have received a duly
executed Officer's Certificate from Lessee, certifying that
(a) Lessee has submitted to each applicable motor vehicle
Authority the Certificate of Title or Certificate of Origin for
each Vehicle to be delivered on such Delivery Date, together
with (i) applications duly completed by Lessee requesting that
such Authority record the interests of Agent, on behalf of the
Lessors, as lienholder on each such Certificate of Title and
(ii) payment of all applicable fees and charges and (b) as so
submitted, such Certificates of Title do not evidence title, or
any interest in or Lien against title, in any such Vehicle in
any Person other than the Lessee and the Agent.
Section III.9 Transaction Costs; Fees. On or prior to
each Delivery Date, Lessee shall have paid to Agent, for the
benefit of Agent and the Lessors, any Transaction Costs invoiced
and not previously paid. Such payment shall be made by wire
transfer of immediately available funds to the account specified
for Agent at Schedule I.
Section III.10 Opinions of Counsel. On or prior to the
Initial Delivery Date, each Lessor and Agent shall have received
the opinions of (a) Morrison & Foerster, as counsel to Lessee
substantially to the effect of the matters set forth in
Exhibit C-1, and (b) general counsel to Consolidated
Freightways, Inc., the parent corporation of Lessee,
substantially to the effect of the matters set forth in Exhibit
C-2. By their execution hereof, Lessee expressly instructs
Morrison & Foerster and such general counsel to execute and
deliver such opinions to Agent and the Lessors. To the extent
that any Vehicle to be delivered on any Delivery Date is titled
in a jurisdiction with respect to which Agent and the Lessors
have not previously received a satisfactory opinion or
memorandum of counsel establishing to their satisfaction that
title to such Vehicle may be held in the name of the Lessee
thereof, with the interest of Agent, as lienholder on behalf of
the Lessors, noted on the Certificate of Title (and that the
Lien of Agent is thereby perfected), then Lessee shall cause
such an opinion or memorandum satisfactory to the Lessors to be
delivered to Agent and each Lessor on or prior to such Delivery
Date.
Section III.11 Corporate Status and Proceedings. On or
prior to the Initial Delivery Date, Agent shall have received:
(a) certificates of existence and good standing with
respect to Lessee from the Secretary of State of the State of
its incorporation, dated no earlier than the 15th day prior to
the Initial Delivery Date; and
(b) with respect to Lessee, an Officer's Certificate
substantially in the form of Exhibit D, dated the Initial
Delivery Date, with respect to such Person's governing docu
ments, resolutions and incumbent officers, representations and
warranties and absence of defaults.
Section III.12 Consents and Approvals. On or prior to the
Initial Delivery Date, all necessary consents, approvals and
authorizations of, and declarations, registrations and filings
with, Authorities and nongovernmental Persons required to consum
mate the transactions contemplated by this Agreement and the
other Operative Agreements shall have been obtained or made by
Lessee and shall be in full force and effect.
Section III.13 Payment of Impositions. All Impositions
other than Charges payable on or prior to each Delivery Date in
connection with the execution, delivery, recording or filing of
any of the Operative Agreements, in connection with the filing
of any of the financing statements, any applications regarding
certificates of title and any other documents, in connection
with the consummation of any other transactions contemplated
hereby or by any of the other Operative Agreements, shall have
been paid in full by Lessee.
Section III.14 Search Reports. Prior to each Delivery
Date, Agent shall have received reports acceptable to Agent and
counsel to the Lessors as to Lessee by the office of the
Secretaries of State and the appropriate county filing or
recording offices (if applicable) of each jurisdiction
contemplated by Section 3.7, each dated as close to the relevant
Delivery Date as practicable, in respect of a search of the
applicable UCC files and any indices of Liens maintained by such
offices (including, if applicable, indices of judgment, revenue
and tax liens).
Section III.15 [Intentionally Omitted].
Section III.16 Insurance. On or prior to the Initial
Delivery Date, Agent shall have received (and each Lessor shall
have received a copy of) a current certificate to the effect
that insurance complying with Section 7.1 of the Lease is in
full force and effect, and there shall be no past due premiums
in respect of any such insurance.
Section III.17 Proceedings Satisfactory, Etc. All proceed
ings taken in connection with such Delivery Date and all docu
ments relating thereto shall be reasonably satisfactory to each
Participant and its counsel, and each Participant and its coun
sel shall have received copies of such documents as such Partici
pant or its counsel may reasonably request in connection
therewith, all in form and substance reasonably satisfactory to
such Participant and its counsel.
Section III.18 Absence of Material Adverse Effect. Except
as disclosed in writing to Agent, since September 30, 1995, no
Material Adverse Effect shall have occurred and be continuing.
Section III.19 Representations and Warranties True;
Absence of Defaults. Each of the representations and warranties
made by or on behalf of Lessee under the Operative Agreements
shall be true on and as of each Delivery Date, and no Incipient
Default or Event of Default shall have occurred and be
continuing on and as of each Delivery Date.
ARTICLE IV
General Provisions
Section IV.1 Nature of Transaction. It is the intent of
the Participants that: (a) the transaction contemplated hereby
constitutes an operating lease from Agent and Lessors to Lessee
for purposes of each Lessee's financial reporting, (b) the trans
action contemplated hereby preserves ownership in the Vehicles
to Lessee for purposes of Federal and state income tax,
bankruptcy and UCC purposes, (c) the Lease grants a security
interest in the Vehicles and the other Collateral to Agent for
the benefit of Agent and the Lessors, and (d) the obligations of
Lessee to pay Fixed Rent and Variable Rent shall be treated as
payments of principal and interest, respectively. Nevertheless,
Lessee acknowledges and agrees that Agent has not made any
representations or warranties concerning the tax, accounting or
legal characteristics of the Operative Agreements and that
Lessee has obtained and relied upon such tax, accounting and
legal advice concerning the Operative Agreements as it deems
appropriate. Except as specifically provided for herein or in
the Lease, Agent, for the benefit of the Lessors, shall retain
an interest in the Vehicles, free and clear of all Liens other
than Permitted Liens, as security for the obligations of Lessee
under the Operative Agreements. Lessee shall not have any
right, title or interest in the Vehicles except as expressly set
forth in this Agreement or in the Lease. Without limiting the
foregoing, Lessee shall be permitted to be named as the record
owner of each Vehicle leased by such Lessee on the Certificate
of Title and the registration issued for such Vehicle by each
applicable Authority so long as Agent is listed on the same
Certificate of Title as having a security interest in the
Vehicle or Lessee has taken such other steps as may be necessary
to perfect Agent's security interest, on behalf of the Lessors,
in such Vehicle. Other than Agent, who will hold a security
interest on behalf of the Lessors, and the Lessors, no Person
shall be named on the Certificate of Title of any Vehicle as
having a security interest in such Vehicle.
Section IV.2 [Intentionally Omitted].
Section IV.3 Replacements. Lessors hereby agree that they
shall instruct Agent to release a Part or Vehicle from the Lease
and evidence such release by the execution and delivery of a
termination statement release, a release of Lien from the
applicable Certificate of Title and such other documents as may
be required to release the replaced Part or Vehicle from the
Lease and which are in form and substance satisfactory to the
Required Lessors subject to the satisfaction of the conditions
set forth in the Lease with respect to the release of such Part
or Vehicle.
ARTICLE V
Representations and Warranties
Section V.1 Representations and Warranties of Lessee. As
of each Delivery Date, Lessee makes the representations and
warranties set forth in this Section 5.1 to Agent and each
Lessor:
(a) Title. Lessee has record title to each of the
Vehicles listed opposite such Lessee's name on Schedule I to the
applicable Delivery Date Notice or has beneficial title to such
Vehicle with record title being subject only to the issuance in
the ordinary course of the original Certificate of Title, for
which an application has already been submitted to the appropri
ate titling Authority, and each of the Vehicles and all of the
other Collateral is free from all Liens except for Permitted
Liens.
(b) Perfection of Security Interests. No filing, recorda
tion or registration is necessary or advisable in order to
perfect the security interest of Agent, for the benefit of the
Lessors, in the Vehicles and other Collateral referred to in the
foregoing subsection (a) other than (i) the filing or recording
of financing statements under Article 9 of the applicable UCC in
the jurisdictions contemplated by Section 3.7, and the recorda
tion on the Certificate of Title for each Vehicle with the
applicable Authority of the security interest of Agent on behalf
of the Lessors or (ii) in the case of any Sublease, the delivery
to Agent of the chattel paper original of such Sublease, and
upon the actions described in the foregoing clauses (i) and (ii)
the security interests in the Vehicles and the other Collateral
are enforceable, properly perfected, first-priority Liens,
subject only to Permitted Liens; provided, however, that such
actions may not be effective to perfect such security interest
in certain Intellectual Property Collateral that can only be
perfected by filing with the United States Patent and Trademark
Office and certain items described in clause (e) of the defini
tion of "Collateral" to the extent such items are stored in (but
not made a part of) a Vehicle and located from time to time in
jurisdictions where no such filing has been made or to the
extent that any such item consists of a type of collateral in
which a security interest cannot be perfected by taking such
actions.
(c) Appraisal Data. The information provided by Lessee to
the Appraiser and forming the basis for the conclusions set
forth in the Appraisal, taken as a whole, was true and correct
in all material respects and did not omit any information neces
sary to make the information provided not materially misleading
as of the time provided.
(d) Corporate Existence. Lessee is a corporation duly
incorporated validly existing and in good standing under the
laws of the State of Delaware, and Lessee is duly qualified or
licensed and in good standing as a foreign corporation
authorized to do business in each state where, because of the
nature of its activities or properties, such qualification or
licensing is required, except for such jurisdictions where the
failure to be so qualified or licensed would not have a Material
Adverse Effect.
(e) Corporate Authority. Lessee has all requisite
corporate power and authority to execute, deliver, and perform
its respective obligations under each Operative Agreement to
which it is a party.
(f) Authorization; Non-Contravention. The execution and
delivery by Lessee of the Operative Agreements to which it is a
party, and the performance by Lessee of its obligations under
such Operative Agreements, have been duly authorized by all
necessary corporate action (including any necessary stockholder
action) on its part, and do not and will not: (i) violate any
provision of any law, rule or regulation presently in effect
having applicability to Lessee or of any order, writ, judgment,
decree, determination or award presently in effect having appli
cability to Lessee, which violation or violations would have,
individually or in the aggregate, a Material Adverse Effect;
(ii) violate any provision of the charter or bylaws of Lessee;
(iii) result in a breach of or constitute a default under any
indenture, loan or credit agreement, or any other agreement or
instrument to which Lessee is a party or by which Lessee or its
properties may be bound or affected, which breaches or default
would have, individually or in the aggregate, a Material Adverse
Effect; or (iv) result in, or require, the creation or imposi
tion of any Lien of any nature upon or with respect to any of
the properties now owned or hereafter acquired by Lessee (other
than the security interest contemplated by the Lease); and
Lessee is not in default under or in violation of its charter or
by-laws.
(g) Binding Effect. Each of the Operative Agreements to
which Lessee is a party constitutes the legal, valid and binding
obligation of Lessee, enforceable against Lessee, in accordance
with its terms, except as enforcement may be limited by bank
ruptcy, insolvency, arrangement, reorganization, moratorium or
other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
(h) Absence of Litigation, etc. There is no litigation
(including, without limitation, derivative actions), arbitration
or governmental proceedings pending or, to the knowledge of
Lessee, threatened against Lessee in which there is a reasonable
possibility of an adverse decision which, if adversely deter
mined, would have a Material Adverse Effect.
(i) Consents, etc. No authorization, consent, approval,
license or formal exemption from, nor any filing, declaration or
registration with, any Authority, including, without limitation,
the Securities and Exchange Commission, or with any securities
exchange, is or will be required in connection with the execu
tion and delivery by Lessee of the Operative Agreements to which
it is a party, the performance by Lessee of its obligations
under such Operative Agreements or the ownership, operation and
maintenance of the Vehicles as contemplated by the Operative
Agreements, except as described in Section 5.1(b).
(j) Location of Offices. The principal place of business
and chief executive office (as such term is used in Article 9 of
the UCC) of Lessee is located at 2882 Sand Hill Road, Suite 210,
Menlo Park, California 94025.
(k) ERISA. Relying upon the accuracy of the representa
tions in Section 5.2(a) hereof, the execution and delivery of
the Operative Agreements by Lessee will not involve any prohi
bited transaction within the meaning of ERISA or Section 4975 of
the Internal Revenue Code of 1986, as amended.
(l) Taxes. Lessee has filed or caused to be filed all
United States Federal and all other material tax returns that
are required to be filed by Lessee, and has paid or caused to be
paid all taxes shown to be due and payable on such returns or on
any assessment received by Lessee to the extent that such taxes
have become due and payable except to the extent that taxes due,
but unpaid, are being contested in good faith by Lessee by
appropriate action or proceeding and, to the extent (if any)
that such taxes are not due and payable, has established or
caused to be established reserves that are adequate for the
payment thereof in accordance with GAAP.
(m) Compliance with Laws. The Vehicles, the properties
from which they are operated and serviced and the current opera
tion thereof and thereon do not violate any laws, rules, regula
tions, or orders of any Authorities that are applicable thereto,
including, without limitation, any thereof relating to matters
of occupational safety and health or Environmental Laws, or
motor vehicles or the titling or registration thereof, except
for such violations as would not have, individually or in the
aggregate, a Material Adverse Effect.
(n) Disclosure. Taken as a whole, neither this Participa
tion Agreement, nor any offering materials, nor the other Opera
tive Agreements to which Lessee is or will be a party nor the
other documents and certificates furnished pursuant to this
Participation Agreement to Agent, or the Lessors, in connection
with the transactions contemplated by this Participation Agree
ment, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the state
ments contained herein and therein, in the light of the circum
stances under which they were made, not misleading as of the
time furnished.
(o) Impositions. No sales, use, excise, transfer or other
tax, fee or imposition shall result from the titling, regis
tration or delivery of a Vehicle on or before any Delivery Date,
except such taxes, fees or impositions that have been paid in
full on or prior to the applicable Delivery Date, except with
respect to sales and use taxes owing in connection with a trans
fer which shall be paid monthly or quarterly as due and payable.
(p) Certain Vehicle Matters.
(i) Each Vehicle accepted by the Lessors on a
Delivery Date which is to be used in interstate
commerce will be properly registered pursuant to the
International Registration Plan as in effect in the
state in which such Vehicle is titled on such Delivery
Date.
(ii) Each Vehicle has a gross weight rating of
more than 16,000 pounds, and none of the Vehicles has
been specially constructed, rebuilt, reconstituted or
assembled.
(iii) Lessee is not in the business of selling
vehicles and the Vehicles do not constitute "inven
tory" under any applicable UCC.
(iv) Each Vehicle is manufactured within the
United States of America.
(v) In connection with the submission of each
application to have the Lien of Agent, for the benefit
of the Lessors, listed on each Certificate of Title,
Lessee has submitted sufficient evidence of ownership
of the applicable Vehicle to the relevant motor
vehicle titling Authority.
(q) Registration of Vehicles Used in Intrastate or
Interstate Commerce. Each Vehicle accepted by the Lessors on a
Delivery Date will be, when Lessee takes possession thereof and
at all times thereafter, either (i) used in interstate commerce,
titled in a State with respect to which Agent has received an
opinion in the form of Exhibit C-1 and registered in a State
which is a party to the International Registration Plan or
(ii) used in intrastate commerce, registered in the State in
which it is so used and titled in a State with respect to which
Agent and Lessors have received an opinion in the form of
Exhibit C-1.
(r) Holding Company. Lessee is not subject to regulation
as a "holding company," an "affiliate" of a "holding company",
or a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
(s) Investment Company Act. Lessee is not an "investment
company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
(t) Intellectual Property. To Lessee's knowledge or as
represented in writing by a vendor of the Vehicles which writing
has been provided to Agent, there are no patents, patent rights,
trademarks, service marks, trade names, copyrights, licenses or
other intellectual property rights with respect to the Vehicles,
or proprietary, patented or patentable modifications or Parts
used in connection with the Vehicles, the unavailability of
which would have a material adverse effect on the current Fair
Market Value of the Vehicles.
(u) Subjection to Regulation. Neither Agent nor any
Lessor will, solely by reason of entering into the Operative
Agreements or the consummation and performance of the transac
tions contemplated thereby (other than upon the exercise of
remedies under the Lease) (i) be required to qualify to do
business in any jurisdiction, (ii) become subject to ongoing
regulation by any Authority as a company engaged in the business
of Lessee in any jurisdiction or (iii) to the best knowledge of
Lessee, become subject to any other ongoing regulation of its
operations by any Authority (other than any taxing Authority).
(v) Use of Proceeds. The use of the proceeds from the
transaction contemplated by the Operative Agreements will not
violate or result in any violation of Section 7 of the Securi
ties Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G,
T, U and X of the Board of Governors of the Federal Reserve
System.
(w) Absence of Defaults. No Incipient Default or Event of
Default has occurred and is continuing, and since June 30, 1995
there has occurred no Material Adverse Effect.
(x) Absence of Casualty. No Casualty has occurred with
respect to the Vehicles being delivered on such Delivery Date.
(y) Insurance. All insurance coverages required by
Section 7.1 of the Lease are in full force and effect and there
are no past due premiums in respect of any such insurance.
(z) Financial Reports. The financial statements delivered
by Lessee to Agent pursuant to Section 0 will fairly present the
financial condition of Lessee and its consolidated Subsidiaries
at the dates thereof and the consolidated results of their
operations for the periods covered thereby.
(aa) Private Offering. Neither Lessee, nor anyone acting
on behalf of it, has taken or will take any action which will
subject the issue and sale of any interest being acquired by the
Lessors under the Operative Agreements to the requirements of
Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), and, assuming the truth and accuracy of the
representations set forth in Section 5.2(b), the issuance, sale
and delivery of such interests under the circumstances contem
plated by this Agreement do not require the registration of such
interests under the Securities Act or the qualification of any
of the Operative Agreements under the Trust Indenture Act of
1939, as amended.
(bb) Brokers, etc. Lessee has not engaged or authorized
any broker, finder, investment banker or other third party to
act on its behalf, directly or indirectly, as a broker, finder,
investment banker, agent or in any other like capacity in connec
tion with any of the Operative Agreements or the transactions
contemplated thereby. Lessee shall be responsible for, and
shall indemnify, defend and hold each Lessor harmless from and
against any and all claims, liabilities or demands by any Person
for broker's, finder's, investment banker's or agent's fees,
commissions or other entitlements with respect the Operative
Agreements and the transactions contemplated thereby (except to
the extent arising from a breach of Sections 5.2(c) or 5.3(f)).
Section V.2 Representations and Warranties of Lessors.
Each of Lessors hereby represents and warrants severally but not
jointly to the other Participants as set forth in this
Section 5.2.
(a) ERISA. Such Lessor is not and will not be funding any
of its Commitment or performing any of its obligations under the
Operative Agreements with the assets of an "employee benefit
plan" (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA, or a "plan" (as defined in Section 4975(e)(1)
of the Code.
(b) Investment. The interest being acquired by such
Lessor under the Operative Agreements is being acquired for its
own account, without any view to the distribution thereof or any
interest therein, provided that such Lessor shall be entitled to
assign, transfer or convey its interest in accordance with
Section 11.8.
(c) Brokers, etc. Such Lessor has not engaged or
authorized any broker, finder, investment banker or other third
party to act on its behalf, directly or indirectly, as a broker,
finder, investment banker, agent or in any other like capacity
in connection with any of the Operative Agreements or the
transactions contemplated thereby.
Section V.3 Representations and Warranties of Agent. ABN
AMRO Bank N.V., in its individual capacity, hereby represents
and warrants to the other Participants as set forth in this
Section 5.2.
(a) Organization and Authority. Agent is a corporation
duly organized and validly existing in good standing under the
laws of the Netherlands and has the corporate power and
authority to enter into and perform its obligations under the
Operative Agreements.
(b) Authorization; Binding Effect. The Operative Agree
ments to which Agent is or will be a party have been or will be,
on the date required to be delivered hereby, duly authorized,
executed and delivered by Agent, and this Participation Agree
ment is, and such other Operative Agreements are, or, when so
executed and delivered by Agent will be, valid, legal and
binding agreements of Agent, enforceable against Agent in
accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity.
(c) Non-Contravention. Neither the execution and delivery
by Agent of the Operative Agreements to which it is or will be a
party, either in its individual capacity, as Agent, or both, nor
compliance with the terms and provisions thereof, conflicts
with, results in a breach of, constitutes a default under (with
or without the giving of notice or lapse of time or both), or
violates any of the terms, conditions or provisions of: (i) the
articles of incorporation or by-laws of Agent; (ii) any bond,
debenture, note, mortgage, indenture, agreement, lease or other
instrument to which Agent, either in its individual capacity, as
Agent or both, is now a party or by which it or its property,
either in its individual capacity, as Agent or both, is bound or
affected, where such conflict, breach, default or violation
would be reasonably likely to materially and adversely affect
the ability of Agent, either in its individual capacity, as
Agent or both, to perform its obligations under any Operative
Agreement to which it is or will be a party, either in its indi
vidual capacity, as Agent or both; or (iii) any of the terms,
conditions or provisions of any law, rule, regulation, order,
injunction or decree of any Authority applicable to it in its
individual capacity, as Agent or both, where such conflict,
breach, default or violation would be reasonably likely to
materially and adversely affect the ability of Agent, either in
its individual capacity, as Agent or both, to perform its obliga
tions under any Operative Agreement to which it is or will be a
party.
(d) Absence of Litigation, etc. There is no litigation
(including, without limitation, derivative actions), arbitration
or governmental proceedings pending or, to the best knowledge of
Agent, threatened against it which would be reasonably likely to
adversely affect Agent's ability to perform its obligations
under the Operative Agreements to which it is party.
(e) Consents, etc. No authorization, consent, approval,
license or formal exemption from, nor any filing, declaration or
registration with, any Authority, is or will be required in
connection with the execution and delivery by Agent of the
Operative Agreements to which it is party or the performance by
Agent of its obligations under such Operative Agreements.
(f) Brokers, etc. Agent has not engaged or authorized any
broker, finder, investment banker or other third party (other
than ABN AMRO North America, Inc.) to act on its behalf,
directly or indirectly, as a broker, finder, investment banker,
agent or in any other like capacity in connection with any of
the Operative Agreements or the transactions contemplated
thereby.
ARTICLE VI
Covenants
Section VI.1 Covenants of Lessee. Lessee, covenants and
agrees with the Lessors and Agent that during the Lease Term,
and, if Lessee has not purchased the Vehicles pursuant to the
Lease, for 90 days thereafter, Lessee shall comply with each of
the following provisions of this Section 6.1.
(a) Corporate Existence, etc. Subject to Section 6.1(c)
and any merger permitted thereby pursuant to which Lessee ceases
to exist (in which case this subsection (a) shall apply to the
surviving corporation of such merger), Lessee shall do or cause
to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and powers and
franchises and its power and authority to perform its obliga
tions under the Operative Agreements, including, without limita
tion, any necessary qualification or licensing in any foreign
jurisdiction, except where the failure to be so qualified would
not have a Material Adverse Effect.
(b) Compliance With Laws. Lessee shall comply with all
applicable statutes, regulations, franchises, and orders of, and
all applicable restrictions imposed by, any Authority, in
respect of the conduct of its business and the ownership of its
properties (including, without limitation, applicable statutes,
rules, ordinances, regulations and orders relating to Environ
mental Laws), except for such instances of non-compliance which
would not have, individually or in the aggregate, a Material
Adverse Effect. Without limiting the foregoing, Lessee shall at
all times be responsible for, and shall comply with, all provi
sions of any Authority with respect to the titling and
registration of Vehicles.
(c) Mergers, Consolidations, Dispositions. Lessee shall
not consolidate with or merge into any other Person, or convey,
transfer or lease all or substantially all of its assets to any
other Person, unless:
(i) the Person resulting from such consolidation
or merger, or the Person which acquires all or substan
tially all of Lessee's assets (the "Surviving
Corporation"), is a corporation organized under the
laws of the United States of America or any State
thereof, and executes and delivers to Agent and each
Lessor an Assumption Agreement substantially in the
form of Exhibit G hereto (the "Assumption Agreement"),
pursuant to which the Surviving Corporation shall
succeed to and assume all of the obligations of Lessee
with which it is so merged or whose assets it so
acquires under the Operative Agreements and for all
purposes thereafter be deemed to be such Lessee
thereunder;
(ii) at the time of, and immediately after
giving effect to, such transaction, there shall exist
no Incipient Default, Event of Default or any
violation of any covenant or agreement under any of
the Operative Agreements;
(iii) promptly upon the consummation of such
transaction, such Surviving Corporation shall cause
the Certificate of Title for each Vehicle acquired by
it pursuant to such transaction to be reissued with
such Surviving Corporation listed as the holder of
title to each such Vehicle (unless it has provided to
Agent and each Lessor, prior to the consummation of
such transaction, an opinion of counsel acceptable to
Agent to the effect that such re-titling is not
required under applicable law), with the interests of
Agent and Lessors as lienholders duly noted thereon,
and such Surviving Person shall comply with the
provisions of Sections 6.1(f) and (g) in connection
therewith, for such purposes treating the date of
consummation of such transaction as a "Delivery Date";
and
(iv) promptly upon the consummation of such
transaction, each Lessor and Agent shall have received
an opinion of counsel to such Surviving Corporation
with respect to the validity of such transaction and
as to the enforceability of the Assumption Agreement
and the other Operative Agreements against such
Surviving Corporation.
(d) Liens. Lessee shall not incur or suffer to exist any
Lien on any of the Collateral other than Permitted Liens. With
out limiting the foregoing, Lessee shall not assign or pledge
any of its rights under any Sublease to any Person other than
Agent.
(e) Change of Name or Location. Lessee shall furnish to
Agent notice on or before the 30th day prior to any relocation
of its chief executive office or principal place of business, or
change of its name.
(f) Perfection and Maintenance of Security Interest.
(i) Lessee, at its expense, shall cause, as soon
as possible, but in any event no later than the 10th
day after any request, financing statements (and
continuation statements with respect thereto) and all
other documents necessary or reasonably requested by
Agent in connection with the establishment and perfec
tion of the interest of Agent in the Collateral, to be
recorded or filed at the locations contemplated by
Section 3.7, and in such manner, and, at its expense,
shall take, or shall cause to be taken, all such other
action as may be necessary or reasonably requested by
Agent or the Required Lessors in order to establish,
preserve, protect and perfect the rights, titles and
interests of Agent, on behalf of the Lessors, to the
Collateral.
(ii) All Certificates of Title relating to
Vehicles delivered on any Delivery Date shall indicate
the address of Agent set forth in Section 11.4 as the
address of the lienholder thereon, for the benefit of
the Lessors.
(iii) Lessee shall, no later than seventy-five
(75) days following each Delivery Date, have delivered
to Agent and each Lessor an Officer's Certificate
certifying that each such Certificate of Title is in
the possession of Lessee, shows Lessee as owner of
record, and names Agent, on behalf of the Lessors (and
Lessors to the extent permitted under applicable law
and procedure to be so named), on the face of such
Certificates of Title as having a perfected first
security interest in such Vehicles, and reflecting no
other Liens other than Permitted Liens. All Certifi
cates of Title so held by Lessee shall be available
for inspection by Agent during normal business hours,
and Lessee shall deliver possession of such Certifi
cates of Title to Agent immediately upon Agent's
request therefor.
(iv) Notwithstanding the foregoing, if naming
Agent (and, if permitted as aforesaid, Lessors) as a
secured party on such Certificate or Certificates of
Title as hereinabove contemplated is not adequate to
perfect the first priority security interest of Agent,
for the benefit of the Lessors, then Lessee shall,
upon receipt of Agent's request therefor, within the
applicable time period specified above, deliver to
Agent, in addition to the original Certificates of
Title, all such other documents or filings as reasona
bly required by Agent or the Required Lessors to
ensure that Agent, on behalf of the Lessors, has a
perfected first priority security interest in such
Vehicles.
Without limiting the foregoing, in the event that any
application for registration of such Lien on the Certificate of
Title to any Vehicle shall be rejected by the applicable
Authority, Lessee shall make such corrections as may be
necessary in order that such registration shall be re-submitted
to the applicable Authority not more than fifteen (15) days
following the initial rejection thereof, and duly completed not
more than sixty (60) days following such re-submission. Follow
ing receipt by Lessee of any Certificate of Title as contem
plated by clause (iv) hereof, Lessee shall not, without the
prior written approval of Agent, change the State of title or
the Certificate of Title of any Vehicle, apply for an additional
Certificate of Title for any Vehicle, or otherwise modify such
Certificate of Title. Agent shall grant such written approval
upon Lessee's satisfaction of the provisions of this Section
6.1(f) with respect to the perfection of Agent's security
interest, on behalf of the Lessors, in such Vehicle (or any
Replacement Vehicle) and upon receipt by Agent and each Lessor
of an opinion of counsel substantially to the effect of the
matters set forth in Exhibit C-1 with respect to the jurisdic
tion in which such Vehicle is to be titled or registered (to the
extent that Agent and Lessors have not previously received such
an opinion of counsel with respect to such jurisdiction). The
security interest of Agent, on behalf of the Lessors, on any
Certificate of Title shall not be removed therefrom, nor shall
any other security interest be noted thereon, unless and until
such Vehicle is to be released from the Lien created by the
Lease in accordance with the applicable provisions of the
Operative Agreements. Lessee shall not, without the prior
written approval of Agent, register any Vehicle in any manner
that would render Section 5.1(q) untrue with respect to such
Vehicle as of any date of determination.
It is expressly understood that to the extent that any
Certificate of Title is in the possession of Lessee, such
possession shall be strictly for the benefit of Agent and solely
in accordance with the provisions of the Operative Agreements.
(g) Mandatory Purchase Following a Delivery Date. If
Lessee shall upon the expiration of the applicable time period
set forth in Section 6.1(f) fail to deliver the Officer's
Certificate described in Section 6.1(f)(iii) with respect to any
Vehicle evidencing no other Liens other than that of Agent, for
the benefit of the Lessors, then Lessee shall, on the Payment
Date immediately following the expiration of such time period,
purchase each of the Vehicles for which Lessee has failed to
satisfy any such requirement and pay to Agent, for the benefit
of the Lessors, on such Payment Date a portion of the Lease
Balance equal to the Casualty Amount for each such Vehicle.
Upon Lessors' receipt of the payments described in the preceding
sentence and all Rent then due and payable under the Lease and
each of the Lease Supplements, Agent shall transfer its interest
in such Vehicle or Vehicles to Lessee in accordance with the
last two sentences of Section 12.1 of the Lease.
Notwithstanding the foregoing, if the amount of the Lease
Balance repaid from the Initial Delivery Date to any date of
determination pursuant to this Section 6.1(g) and the last
sentence of Article X of the Lease exceeds $4,000,000 in the
aggregate, Lessee shall be required to repay the entire outstand
ing Lease Balance, together with the applicable Administrative
Charge and all accrued but unpaid Variable Rent to the date of
such repayment.
(h) Periodic Reporting. Lessee shall deliver to Agent:
(i) promptly following but in no event more than
60 days following the end of each fiscal quarter
Lessee's quarterly unaudited consolidated financial
statements and no more than 90 days following the end
of each fiscal year Lessee's annual audited consoli
dated financial statements; provided that if annual
audited consolidated financial statements are not
prepared by Lessee in the ordinary course of its
business, Lessee shall deliver unaudited annual
consolidated financial statements certified as to
accuracy and adherence to GAAP by the Chief Financial
Officer or Chief Accounting Officer of Lessee;
(ii) concurrently with each delivery pursuant to
the foregoing paragraph (i), but in any event not
later than the 60th day after the end of each fiscal
quarter in each fiscal year of Lessee, an Officer's
Certificate of Lessee stating that such officer has
reviewed the activities of Lessee during such period
and that, to the best of such officer's knowledge,
during such period Lessee has performed and fulfilled
each and every covenant, obligation and condition
contained in the Operative Agreements, no Incipient
Default, Event of Default exists under any of the
Operative Agreements, or if such condition shall
exist, specifying the nature and status thereof.
(i) Financial Tests. Lessee shall:
(i) maintain a minimum Consolidated Tangible Net
Worth equal to the greater of (a) one hundred seventy-
five million dollars ($175,000,000) or (b) sixty-five
percent (65%) of Consolidated Tangible Net Worth as of
December 31, 1995 plus fifty percent (50%) of
Consolidated Net Income from January 1, 1996, with no
reduction for losses, provided that if Lessee shall
cease to be at least fifty-one percent (51%) owned by
Consolidated Freightways, Inc. then the minimum
Consolidated Tangible Net Worth shall be reduced by
fifty percent (50%) of dividends to Consolidated
Freightways, Inc. after September 30, 1995, provided,
further, that under no circumstances shall such
minimum Consolidated Tangible Net worth fall below one
hundred fifty million dollars ($150,000,000), all of
which shall be tested at the end of each fiscal
quarter;
(ii) maintain a Consolidated Debt to
Consolidated Tangible Net Worth of not more than 2 to
1 at the end of each fiscal quarter; and
(iii) maintain a ratio of Consolidated EBITDAR
divided by Consolidated Interest Expense plus
Consolidated Rental Expense of at least (i) 1.25 to 1
at the end of each fiscal quarter up to and including
September 30, 1996 and (ii) 1.5 to 1 at the end of
each fiscal quarter thereafter on a four quarter
rolling average.
(j) Default and Acceleration of Material Debt. Lessee
agrees that if an Incipient Default or an Event of Default shall
occur, or if an event or condition shall occur that results in
the acceleration of the maturity of Debt of Lessee in amounts
exceeding twenty million dollars ($20,000,000), or in the event
that such acceleration should occur with respect to Debt of any
Affiliates of Lessee, Lessee shall promptly notify Agent thereof
and upon Agent's request, Lessee shall immediately deliver to
Agent, Certificates of Title for all of the Vehicles, duly
endorsed by Lessee in blank.
(k) Sale of Assets. Lessee will not sell, lease or other
wise transfer any of its assets to any other Person, except for
the sale, lease or other transfer of any asset of the Lessee
(i) in the ordinary course of business; (ii) for fair value,
provided the aggregate fair value of assets sold or otherwise
transferred does not exceed the fair value of assets acquired
during any fiscal year by $50,000,000; (iii) in accordance with
the provisions of Section 6.1(c); or (iv) assets transferred to
a wholly owned subsidiary of Consolidated Freightways, Inc. or
one of its subsidiaries, so long as (a) such transferred assets
are still available for use by Lessee in the conduct of its
business or (b) the fair value of the transferred assets does
not exceed $50,000,000 in the aggregate in any fiscal year, if
such assets are no longer available for use by Lessee in the
conduct of its business.
(l) ERISA Events. Promptly upon Lessee's becoming aware
of the occurrence of any matter or matters referred to in the
following clauses (i), (ii) and (iii) involving liability that
may reasonably be expected to exceed, individually or in the
aggregate, $20,000,000, Lessee shall notify Agent and each of
the Lessors in writing specifying the nature thereof, what
action Lessee is taking or proposes to take with respect
thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto: (i) a "Reportable Event"
as such term is defined in Section 4043 of ERISA, (ii) an
"Accumulated Funding Deficiency" as such term is defined in
Section 302 of ERISA, or (iii) a "Prohibited Transaction", as
such term is defined in Section 4975 of the Code or described in
Section 406 of ERISA, in connection with any Pension Plan (or
any trust created thereunder).
(m) Notice of Defaults. Promptly upon, but in no event
later than five (5) days after Lessee shall have obtained Actual
Knowledge thereof, Lessee shall notify Agent and each Lessor in
writing of the existence of an Incipient Default, Event of
Default, or any other matter which has resulted in or could
reasonably be expected to have a Material Adverse Effect, which
notice shall describe the nature of such Incipient Default,
Event of Default or other matter and the action Lessee is taking
with respect thereto.
(n) Notice of Proceedings. Promptly upon Lessee's
becoming aware of (i) any proposed or pending investigation of
Lessee, or any of its Subsidiaries by any Authority, (ii) any
court or administrative proceeding involving any Person
described in the foregoing clause (i), or (iii) any notice,
claim or demand from any Authority which alleges that any such
Person is in violation of any law or has failed to comply with
any order issued pursuant to any Federal, state or local statute
regulating its operation and business, which in any such case
involves (A) one or more claims involving an aggregate amount of
$25,000,000 or more with respect to Lessee, or (B) individually
or in the aggregate, the reasonable expectation of a Material
Adverse Effect, Lessee shall notify Agent and each of the
Lessors specifying its nature and the action Lessee is taking
with respect thereto.
(o) Additional Information. Promptly upon receipt of a
written request from Agent or any Lessor, Lessee shall deliver
to such requesting party such other data and information as from
time to time may be reasonably requested.
(p) Reports to Lessors. Lessee shall, concurrently with
any notice, delivery or other communication required to be
delivered to Agent pursuant to any Operative Agreement, deliver
a copy of such notice, delivery or other communication to each
Lessor at such Lessor's current address.
Section VI.2 [Intentionally Omitted].
Section VI.3 Covenants of Agent and Lessors. Agent, in
its individual capacity, and each of the Lessors, covenants and
agrees with each of the other parties that: (a) it will not
directly or indirectly create, incur, assume or suffer to exist
any Lessor Liens arising by, through or under it on the
Collateral, other than Permitted Lessor Liens; (b) it will, at
its own cost and expense, promptly take such action in its
individual capacity as may be necessary to discharge fully such
Lessor Liens created by it on the Collateral, other than
Permitted Lessor Liens; (c) it will not, except in compliance
with the Operative Agreements, sell, transfer or otherwise
dispose of all or any part of the Vehicles or the other
Collateral; and (d) it will not claim any depreciation with
respect to the Vehicles during the term of the Lease.
ARTICLE VII
General Indemnities
Section VII.1 Indemnity. Whether or not the transactions
contemplated hereby are consummated, to the fullest extent
permitted by applicable law, Lessee waives and releases any
claims now or hereafter existing against Indemnitees on account
of, and shall indemnify, reimburse and hold the Indemnitees
harmless (subject to Section 8.3) from, any and all claims by
third parties (including, but not limited to, claims relating to
trademark or patent infringement and claims based upon negli
gence, strict liability in tort, violation of laws, including,
without limitation, Environmental Laws, statutes, rules, codes
or orders or claims arising out of any loss or damage to any
property or death or injury to any Person), any losses, damages
or obligations owing to third parties, any penalties, liabili
ties, demands, suits, judgments or causes of action, and all
legal proceedings (either administrative or judicial), in each
case whether or not the Indemnitee is a party thereto, and any
costs or expenses in connection therewith (including costs
incurred in connection with discovery) or in connection with the
enforcement of this indemnity (including reasonable attorneys'
fees and expenses, and fees and expenses of internal counsel,
incurred by the Indemnitees), including, in each case, matters
based on or arising from the negligence of Indemnitees (subject
to the proviso below), which may be imposed on, incurred by or
asserted against the Indemnitees by Persons other than Lessee
(except to the extent arising by or through a claim of a third
party) in any way relating to or arising in any manner out of:
(a) the registration, purchase, taking or foreclosure of a
security interest in, ownership, delivery, condition, lease,
sublease, assignment, storage, transportation, possession, use,
operation, return or other disposition of any of the Vehicles,
or any defect in any such Vehicle, arising from the material or
any article used therein or from the design, testing or use
thereof, or from any maintenance, service, repair, overhaul or
testing of any such Vehicle regardless of when such defect shall
be discovered, whether or not such Vehicle is in the possession
of Lessee and no matter where it is located; or
(b) this Participation Agreement, any other Operative
Agreement or any document or certificate delivered in connection
therewith, the enforcement hereof or thereof or the consummation
of the transactions contemplated hereby or thereby;
provided that Lessee shall not be obligated to indemnify an
Indemnitee for any such claim, loss, damage, liability, obliga
tion, penalty, demand or suit to the extent the same results
directly from
(c) the willful misconduct or gross negligence of such
Indemnitee;
(d) the incorrectness in any material respect of any repre
sentation or warranty made by such Indemnitee in the Operative
Agreements;
(e) the creation or existence of a Lessor Lien attributa
ble to such Indemnitee;
(f) a disposition by such Indemnitee of any Vehicle
following the purchase of such Vehicle by such Indemnitee from
Agent in a foreclosure sale or any use or operation of such
Vehicle following such disposition (other than use or operation
by Lessee or Sublessee or an Affiliate, agent or representative
of Lessee); or
(g) any Impositions described in Section 8.1 except any
amount necessary under this Section 7.1 to hold the Indemnitee
harmless (subject to Section 8.3) from all Impositions required
to be paid by such Indemnitee with respect to the receipt or
accrual of such indemnity under the laws of any Authority in the
United States;
provided, however, that nothing in the preceding proviso shall
be deemed to exclude or limit any claim that any Indemnitee may
have under any Operative Agreement or applicable laws from
Lessee for breach of its representations, warranties or
covenants.
Section VII.2 Excessive Use Indemnity. In the event that
at the end of the Lease Term: (a) Lessee elects the Sale
Option; and (b) after paying to Agent any amounts due under
Section 11.3 of the Lease, Agent does not have sufficient funds
to reduce the Lease Balance to zero, then Lessee shall promptly
pay over to Agent the shortfall unless Lessee delivers a report
from the Appraiser in form and substance satisfactory to the
Required Lessors which establishes that the decline in value in
each Vehicle which was sold pursuant to the Sale Option from
that amount anticipated for such date in the Appraiser's report
delivered with respect to such Vehicle on the applicable
Delivery Date was not due to extraordinary use, failure to
maintain or replace, failure to use, workmanship or method of
installation or removal or any other cause or condition within
the power of Lessee to control or effect (each an "Excessive
Use").
Section VII.3 Increased Capital Costs. If any change in,
or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, direc
tive, guideline, decision or request (whether or not having the
force of law) of any court, central bank regulator or other
Authority ("Change in Law") affects or would affect the amount
of capital required or expected to be maintained by any Lessor
directly or by its parent company (including, without limita
tion, any reserve requirements specified under regulations
issued from time to time by the Board of Governors of the
Federal Reserve System and then applicable to assets or liabili
ties consisting of and including "Eurocurrency Liabilities" as
defined in Regulation D of such Board of Governors) and such
Lessor determines (in its sole and absolute discretion) that the
rate of return on it or its parent's capital as a consequence of
the Funding made by such Lessor hereunder to pay its share of
the Purchase Price is reduced to a level below that which such
Lessor or its parent could have achieved but for the occurrence
of any such circumstances, then, in any such case, upon written
notification from time to time by Lessor to Lessee, Lessee
shall, within five (5) Business Days following receipt of the
statement referred to in the next sentence, pay directly to such
Lessor additional amounts sufficient to compensate Lessor or its
parent for such reduction in rate of return (subject to Section
8.3). A statement of a Lessor as to any such additional amount
or amounts (including calculations thereof in reasonable detail)
shall, in the absence of manifest error, be conclusive and
binding on Lessee. In determining such amount, each Lessor
shall use any method of averaging or attribution that it (in its
reasonable discretion) shall deem applicable. Notwithstanding
the foregoing, any demand by a Lessor pursuant to this
Section 7.3 shall be made in writing within 120 days after such
Lessor receives actual notice or obtains actual knowledge of the
matter giving rise to such demand. In the event such Lessor
fails to make such demand within such 120 day period, Lessee
shall have no obligation to pay any portion of the demanded
payment accruing prior to the 120th day preceding such demand.
Section VII.4 LIBO Rate Unlawful. If any Lessor shall
determine in good faith (which determination shall, upon notice
thereof to Lessee, be conclusive and binding on Lessee) that a
Change in Law makes it unlawful, or the central bank or other
Authority asserts that it is unlawful, for such Lessor to make,
continue or maintain any amount of such Lessor's Funding on a
LIBO Rate basis, the obligations of such Lessor to make,
continue or maintain any such Funding shall, upon such determina
tion, forthwith be suspended until such Lessor shall notify
Lessee that the circumstances causing such suspension no longer
exist, and all Variable Rent allocable to such Lessor, commenc
ing with the Rent Period in which such notice is given, shall
automatically be determined on a CD Rate basis beginning on the
next immediately succeeding Payment Date with respect thereto or
sooner, if required by such law or assertion.
Section VII.5 Funding Losses. Lessee agrees to reimburse
Lessor for any loss or expense incurred (including any loss or
expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lessor to make,
continue or maintain any portion of its Outstanding Investment
as a LIBO Rate financing) as a result of (i) the failure of the
transaction contemplated by Article l of the Lease to occur on
or before the Delivery Date specified in the Delivery Date
Notice or (ii) any payment of all or any portion of the Lease
Balance for any reason on a date other than a Payment Date.
Lessor shall promptly notify Lessee in writing of the amount of
any claim under this Section 7.5, the reason or reasons therefor
and the additional amount required fully to compensate such
Lessor for such loss or expense. Such written notice (which
shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on Lessee.
Section VII.6 Actions of Affected Lessors. Each Lessor
shall use reasonable efforts (including reasonable efforts to
change the booking office for this transaction) to avoid or
minimize any amounts which might otherwise be payable pursuant
to Section 7.3; provided, however, that such efforts shall not
be deemed by such Lessor, in its sole discretion, to be disadvan
tageous to it. In the event that such reasonable efforts are
insufficient to avoid or minimize such amounts that might be
payable pursuant to Section 7.3, then such Lessor (the "Affected
Lessor") shall use its reasonable efforts to transfer to any
other Lessor approved by Lessee (which itself is not then an
Affected Lessor) its rights and obligations hereunder; provided,
however, that such transfer shall not be deemed by such Affected
Lessor, in its sole discretion, to be disadvantageous to it
(other than the economic disadvantage of ceasing to be a
Lessor). In the event that the Affected Lessor is unable, or
otherwise is unwilling, so to transfer its rights and obliga
tions, Lessee may designate an alternate financial institution
to purchase the Affected Lessor's rights and obligations here
under, at the amount of such Lessor's Outstanding Investment
plus accrued Variable Rent, indemnities, and other amounts owing
to such Lessor and, subject to the provisions of Sections 7.5
and 11.8, the Affected Lessor shall transfer its rights and obli
gations to such alternate financial institution and such
alternate financial institution shall become a Lessor hereunder.
ARTICLE VIII
General Tax Indemnity
Section VIII.1 General Tax Indemnity. Lessee agrees to
pay or reimburse Indemnitees for, and to indemnify and hold
Indemnitees harmless from, all Impositions arising at, or
relating to, any time prior to or during the Base Period or
Renewal Terms, or upon any termination of the Lease or prior to,
or upon the return of, the Vehicles to Agent, and levied or
imposed upon Indemnitees directly or otherwise, by any Federal,
state or local government or taxing authority in the United
States or by any foreign country or foreign or international
taxing authority upon or with respect to: (a) the Vehicles or
any other Collateral; (b) the exportation, importation,
registration, purchase, ownership, delivery, condition, lease,
sublease, assignment, storage, transportation, possession, use,
operation, maintenance, repair, return, sale (including to Agent
or any Lessee pursuant to the Operative Agreements), transfer of
title or other disposition thereof; (c) the rentals, receipts,
or earnings arising from any of the Vehicles; or (d) the Lease
or any payment made thereunder; provided that this Section 8.1
shall not apply to: (i) Impositions which are based upon or
measured by the Indemnitee's net income, or which are expressly
in substitution for, or relieve Indemnitee from, any actual
Imposition based upon or measured by Indemnitee's net income;
(ii) Impositions characterized under local law as franchise, net
worth, or shareholder's capital (excluding, however, any value
added, license, property or similar Impositions); and
(iii) Impositions based upon the voluntary transfer, assignment
or disposition by Agent or any Lessor of any interest in any of
the Vehicles (other than a transfer pursuant to the exercise of
remedies under the Operative Agreements, transfers pursuant to
the exercise of the Lessee Purchase Option or Sale Option, a
transfer to Lessee or otherwise pursuant to the Lease).
Notwithstanding the foregoing provisions of this Section 8.1,
Lessee shall pay or reimburse, and indemnify and hold harmless,
any Lessor which is not incorporated under the laws of the
United States, or a state thereof, and which has complied with
Section 8.5, from any deduction or withholding of any United
States Federal income tax.
Section VIII.2 Contest. Lessee shall pay on or before the
time or times prescribed by law any Impositions (except any
Impositions excluded by Section 8.1); provided, however, that
Lessee shall be under no obligation to pay any such Imposition
so long as the payment of such Imposition is not delinquent or
is being contested by a Permitted Contest. If any claim or
claims is or are made against any Indemnitee solely for any
Imposition which is subject to indemnification as provided in
Section 8.1, Indemnitee shall as soon as practicable, but in no
event more than 20 days after receipt of formal written notice
of the Imposition or proposed Imposition, notify Lessee and if,
in the reasonable opinion of Lessee and (in the case of any
Imposition which may reasonably be expected to exceed $100,000
in the aggregate) tax counsel acceptable to the Indemnitee,
there exists a reasonable basis to contest such Imposition (and
if the provisos of the definition of "Permitted Contest"
continues to be satisfied and so long as no Event of Default
exists), Lessee at its expense may, to the extent permitted by
applicable law, contest such imposition, and subsequently may
appeal any adverse determination, in the appropriate administra
tive and legal forums; provided that in all other circumstances,
upon notice from Lessee to such Indemnitee that there exists a
reasonable basis to contest any such Imposition (as supported by
an opinion of tax counsel to Lessee reasonably acceptable to the
Indemnitee), the Indemnitee, at Lessee's expense, shall contest
any such Imposition. Lessee shall pay all expenses incurred by
the Indemnitee in contesting any such Imposition (including,
without limitation, all reasonable attorneys' and accountants'
fees, including the allocated costs of internal counsel), upon
demand by the Indemnitee. Lessee shall have the right to
participate in the conduct of any proceedings controlled by the
Indemnitee to the extent that such participation does not
interfere with the Indemnitee's control of such contest and
Lessee shall in all events be kept informed, to the extent
practicable, of material developments relative to such proceed
ings. The Indemnitee shall have the right to participate in the
conduct of any proceedings controlled by Lessee and the Indemni
tee shall in all events be kept informed, to the extent practica
ble, of material developments relative to such proceedings. The
Indemnitees agree that a contested claim for which Lessee would
be required to make a reimbursement payment hereunder will not
be settled or compromised without Lessee's prior written consent
(which consent shall neither be unreasonably delayed nor
withheld other than in good faith), unless the provisos of the
definition of "Permitted Contest" would not continue to be
satisfied. Indemnitee shall endeavor to settle or compromise
any such contested claim in accordance with written instructions
received from Lessee provided that: (x) Lessee on or before the
date the Indemnitee executes a settlement or compromise pays the
contested Imposition to the extent agreed upon or makes an
indemnification payment to the Indemnitee in an amount accepta
ble to the Indemnitee; and (y) the settlement or compromise does
not, in the reasonable opinion of the Indemnitee materially
adversely affect the right of such Lessor to receive Rent or the
Lease Balance or any other payment pursuant to the Operative
Agreements, or involve a material risk of sale, forfeiture or
loss of any of the Vehicles or any interest therein or any
matter described in the provisos to the definition of "Permitted
Contest". The failure of an Indemnitee to timely contest a
claim against it for any Imposition which is subject to indemni
fication under Section 8.1 and for which it has an obligation to
Lessee to contest under this Section 8.2 in the manner required
by applicable law or regulations where Lessee has timely
requested that such Indemnitee contest such claim shall relieve
Lessee of their obligations to such Indemnitee under Section 8.1
with respect to such claim to the extent such failure results in
the loss of an effective contest. If applicable law requires
the payment of a contested Imposition as a condition to, or
regardless of, its being contested, and Lessee chooses to
contest such Imposition or to direct the Indemnitee to contest
such Imposition in accordance with this Section, then Lessee
shall provide the Indemnitee with the funds to pay such Imposi
tion, such provision of funds to be deemed a non-interest
bearing loan by Lessee to the Indemnitee to be repaid by any
recovery of such Imposition from such contest and any remaining
unpaid amount not recovered to offset Lessee's obligation to
indemnify the Indemnitee for such Imposition. In the event that
the Indemnitee receives a refund (or like adjustment) in respect
of any Imposition for which the Indemnitee has been reimbursed
by Lessee, the Indemnitee shall immediately remit the amount of
such refund (or like adjustment) to Lessee, net of all costs and
expenses incurred by such Indemnitee.
Section VIII.3 Gross Up. If an Indemnitee shall not be
entitled to a corresponding and equal deduction with respect to
any payment or Imposition which Lessee is required to pay or
reimburse under Article VII, Section 8.1 or Section 8.2 (each
such payment or reimbursement under Article VII, Section 8.1 or
Section 8.2, an "original payment") and which original payment
constitutes income to such Indemnitee, then Lessee shall pay to
such Indemnitee on demand the amount of such original payment on
a gross-up basis such that, after subtracting all Impositions
imposed on such Indemnitee with respect to such original payment
by Lessee (including any Impositions otherwise excluded by
Section 8.1 and assuming for this purpose that such Indemnitee
was subject to taxation at the applicable Federal, state or
local marginal rates used to compute such Indemnitee's tax
return for the year in which such income is taxable), such
payments shall be equal to the original payment to be received
(net of any credits, deductions or other tax benefits then
actually recognized that arise from the payment by such Indemni
tee of any amount, including taxes, for which the payment to be
received is made).
Section VIII.4 Tax Returns. Except as otherwise provided
in the third sentence below, Lessee shall prepare and file
(whether or not it is a legal obligation of an Indemnitee) all
tax returns or reports that may be required with respect to any
Impositions assessed, charged or imposed on the Vehicles or the
Lease, including, but not limited to sales and use taxes, prop
erty taxes (ad valorem and real property) and any other tax or
charge based upon the ownership, leasing, subleasing, rental,
sale, purchase, possession, use, operation, delivery, return or
other disposition of any of the Vehicles or upon the rentals or
the receipts therefrom (excluding, however, any tax based upon
the net income of an Indemnitee or any tax which is in substi
tution for or relief of a tax imposed upon or measured by the
net income of an Indemnitee). Lessee may notify in writing all
applicable Authorities having jurisdiction with respect to
personal property taxes that Lessee is the appropriate party for
receiving notices of (or copies of, if such Authority is
required by law to notify Agent) assessment, appeal and payment
with respect to the Vehicles. If an Indemnitee is obligated by
law to file any such reports or returns, then Lessee shall at
least 10 days before the same are due, prepare the same and
forward them to the Indemnitee, as appropriate, with detailed
instructions as to how to comply with all applicable filing
requirements, together with funds in the amount of any payment
required pursuant thereto. Indemnitee shall forward to Lessee
at its address listed in Section 11.4 copies of all assessment
and valuation notices it receives within 10 days of receipt;
provided that Indemnitee's failure to deliver such notices on a
timely basis shall not relieve Lessee of any obligations
hereunder. The Participants agree that neither they nor any
corporation controlled by them, or under common control with
them, directly or indirectly will at any time take any action or
fail to take any action with respect to the filing of any income
tax return, including an amended income tax return, inconsistent
with the intention of the parties expressed in Section 4.1.
Section VIII.5 Withholding Tax Exemption.
(a) At least five (5) Business Days prior to the first
date on which any Rent is payable hereunder or under any other
Operative Agreement for the account of any Lessor not incorpo
rated under the laws of the United States or a state thereof,
such Lessor agrees that it will have delivered to Lessee and
Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case
that such Lessor is entitled to receive payments under this
Agreement and the other Operative Agreements without deduction
or withholding of any United States Federal income taxes. Each
Lessor which so delivers a Form 1001 or 4224 further undertakes
to deliver to Lessee and Agent two additional copies of such
form (or a successor form) on or before the date that such form
expires (currently, three successive calendar years for Form
1001 and one calendar year for Form 4224) or becomes obsolete or
after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by
Lessee or Agent, in each case certifying that such Lessor is
entitled to receive payments under this Agreement and the other
Operative Agreements without deduction or withholding of any
United States Federal income taxes, unless prior to the date on
which any such delivery would otherwise be required any change
in treaty, law or regulation or in the interpretation thereof by
the applicable taxing Authority occurring after such Lessor
became a Lessor hereunder has rendered all such forms inapplica
ble or has prevented such Lessor from duly completing and
delivering any such form with respect to it and such Lessor
advises Lessee and Agent that, as a result of such change in
treaty, law, regulation or interpretation, it is not capable of
receiving payments without any withholding of United States
Federal income tax.
(b) At least five (5) Business Days prior to the first
date on which any Rent is payable hereunder or under any other
Operative Agreement for the account of any Lessor who does not
have a street address in the State of California, such Lessor
agrees that it will have delivered to Lessee and Agent two duly
completed copies of California Form 587 or 590, certifying in
either case that such Lessor is entitled to receive payments
under this Agreement and the other Operative Agreements without
deduction or withholding of any California income taxes. Each
Lessor which so delivers a Form 587 or 590 further undertakes to
deliver to Lessee and Agent two additional copies of such form
(or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it
(including, without limitation, any change in residency or
address), and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by Lessee or Agent, in
each case certifying that such Lessor is entitled to receive
payments under this Agreement and the other Operative Agreements
without deduction or withholding of any California income taxes,
unless prior to the date on which any such delivery would other
wise be required any change in treaty, law or regulation or in
the interpretation thereof by the applicable taxing Authority
occurring after such Lessor became a Lessor hereunder has
rendered all such forms inapplicable or has prevented such
Lessor from duly completing and delivering any such form with
respect to it and such Lessor advises Lessee and Agent that, as
a result of such change in treaty, law, regulation or interpreta
tion, it is not capable of receiving payments without any
withholding of California income tax.
ARTICLE IX
Agent
Section IX.1 Appointment of Agent; Powers and
Authorization to Take Certain Actions.
(a) Each Lessor irrevocably appoints and authorizes ABN
AMRO Bank N.V. to act as its agent hereunder, with such powers
as are specifically delegated to Agent by the terms hereof,
together with such other powers as are reasonably incidental
thereto. Each Lessor authorizes and directs Agent to, and Agent
agrees for the benefit of the Lessors, that, on the Initial
Delivery Date it will accept the documents described in Article
III of this Participation Agreement. Agent accepts the agency
hereby created applicable to it and agrees to receive all
payments and proceeds pursuant to the Operative Agreements and
disburse such payments or proceeds in accordance with the
Operative Agreements. Agent shall have no duties or responsi
bilities except those expressly set forth in the Lease and this
Participation Agreement. Agent shall not be responsible to any
Lessor (or to any other Person) (i) for any recitals, state
ments, representations or warranties of any party contained in
the Lease, this Participation Agreement, or in any certificate
or other document referred to or provided for in, or received by
any of them under, the Operative Agreements, other than the
representations and warranties made by Agent in Section 5.3, or
(ii) for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of the Collateral or the title
thereto (subject to Agent's obligations under Section 6.3) or of
the Lease or any other document referred to or provided for
therein or (iii) for any failure by Lessee, any Lessor or any
other third party (other than Agent) to perform any of its
obligations under any Operative Agreement. Agent may employ
agents, trustees or attorneys-in-fact, may vest any of them with
any property, title, right or power deemed necessary for the
purposes of such appointment and shall not be responsible for
the negligence or misconduct of any of them selected by it with
reasonable care. Neither Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for
any action taken or omitted to be taken by it or them hereunder,
or in connection herewith, except for its or their own gross
negligence or willful misconduct.
(b) Agent shall not have any duty or obligation to manage,
control, use, operate, store, lease, sell, dispose of or other
wise deal with any Vehicle, any other Collateral or the Lease,
or to otherwise take or refrain from taking any action under, or
in connection with, this Agreement, the Lease or any related
document to which Agent is a party, except as expressly provided
by the terms hereof, and no implied duties of any kind shall be
read into any Operative Agreement against Agent. The permissive
right of Agent to take actions enumerated in this Agreement and
the Lease shall never be construed as a duty, unless Agent is
instructed or directed to exercise, perform or enforce one or
more rights by the Required Lessors (provided that Agent has
received indemnification reasonably satisfactory to it).
Subject to Section 9.1(c) below, no provision of the Operative
Agreements shall require Agent to expend or risk its own funds
or otherwise incur any financial liability in the performance of
any of its obligations under the Operative Agreements, or in the
exercise of any of its rights or powers thereunder. It is
understood and agreed that the duties of Agent are ministerial
in nature.
(c) Except as specifically provided herein, Agent is
acting hereunder solely as agent and, except as specifically
provided herein, is not responsible to any party hereto in its
individual capacity, except with respect to any claim arising
from Agent's gross negligence or willful misconduct or any
breach of a representation or covenant made in its individual
capacity.
(d) Agent may accept deposits from, lend money to and
otherwise deal with Lessee or any of its Affiliates with the
same rights as it would have if it were not the named Agent
hereunder.
Section IX.2 Reliance. Agent may rely upon, and shall not
be bound or obligated to make any investigation into the facts
or matters stated in, any certificate, notice or other communica
tion (including any communication by telephone, telecopy, telex,
telegram or cable) reasonably believed by it to be genuine and
correct and to have been made, signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts
selected by Agent with due care (including any expert selected
by Agent to aid Agent in any calculations required in connection
with its duties under the Operative Agreements).
Section IX.3 Action Upon Instructions Generally. Subject
to Sections 9.4 and 9.6, upon written instructions of the
Required Lessors, Agent shall, on behalf of the Lessors, give
such notice or direction, exercise such right, remedy or power
hereunder or in respect of any Vehicle, and give such consent or
enter into such amendment to any document to which it is a party
as Agent as may be specified in such instructions. Agent shall
deliver to each Lessor a copy of each notice, report and certifi
cate received by Agent pursuant to the Operative Agreements.
Agent shall have no obligation to investigate or determine
whether there has been an Event of Default or an Incipient
Default. Agent shall not be deemed to have notice or knowledge
of an Event of Default or Incipient Default unless a Responsible
Officer of Agent is notified in writing of such Event of Default
or Incipient Default, provided that Agent shall be deemed to
have been notified in writing of any failure of Lessee to pay
Rent in the amounts and at the times set forth in Article III of
the Lease. If Agent receives notice of an Event of Default,
Agent shall give prompt notice thereof, at Lessee' expense, to
each Lessor. Subject to Sections 9.4 and 9.6 and Article X,
Agent shall take action or refrain from taking action with
respect to such Event of Default as directed by the Required
Lessors or, in the case of a Payment Default, as directed by any
Lessor; provided that, unless and until Agent receives such
directions, Agent may refrain from taking any action, or may act
in its discretion, with respect to such Event of Default or
Payment Default. Prior to the date the Lease Balance shall have
become due and payable by acceleration pursuant to Section 8.2
of the Lease, Required Lessors may deliver written instructions
to Agent to waive, and Agent shall waive pursuant thereto, any
Event of Default and its consequences; provided that in the
absence of written instructions from all Lessors, Agent shall
not waive any (i) Payment Default or (ii) covenant or provision
which, under Section 10.1, cannot be modified or amended without
the consent of all Lessors. As to any matters not expressly
provided for by this Agreement, Agent shall in all cases be
fully protected in acting, or in refraining from acting, here
under in accordance with instructions signed by the Required
Lessors and such instructions of the Required Lessors and any
action taken or failure to act pursuant thereto shall be binding
on each Lessor.
Section IX.4 Indemnification. Each Lessor shall reimburse
and hold Agent harmless, ratably in accordance with its Outstand
ing Investment at the time the indemnification is required to be
given, (but only to the extent that any such indemnified amounts
have not in fact been paid to Agent by, or on behalf of, Lessee
in accordance with Section 7.1) from any and all claims, losses,
damages, obligations, penalties, liabilities, demands, suits,
judgments, or causes of action, and all legal proceedings, and
any reasonable costs or expenses in connection therewith,
including allocated charges, costs and expenses of internal
counsel of Agent and all other reasonable attorneys' fees and
expenses incurred by Agent, in any way relating to or arising in
any manner out of (i) any Operative Agreement, the enforcement
hereof or thereof or the consummation of the transactions
contemplated thereby, or (ii) instructions from the Required
Lessors (including, without limitation, the costs and expenses
that Lessee is obligated to and does not pay hereunder, but
excluding normal administrative costs and expenses incident to
the performance by Agent of its agency duties hereunder other
than materially increased administrative costs and expenses
incurred as a result of an Event of Default), provided that no
Lessor shall be liable for any of the foregoing to the extent
they arise from (a) the gross negligence or willful misconduct
of Agent, (b) the inaccuracy of any representation or warranty
or breach of any covenant given by Agent in Section 5.3 or
Section 6.3 hereof or in the Lease, (c) in the case of Agent's
handling of funds, the failure to act with the same care as
Agent uses in handling its own funds or (d) any taxes, fees or
other charges payable by Agent based on or measured by any fees,
commissions or compensation received by it for acting as Agent
in connection with the transactions contemplated by the
Operative Agreements.
Section IX.5 Independent Credit Investigation. Each
Lessor by entering into this Agreement agrees that it has, inde
pendently and without reliance on Agent or any other Lessor and
based on such documents and information as it has deemed appro
priate, made its own credit analysis of Lessee and its own
decision to enter into this Agreement and each of the other
Operative Agreements to which it is a party and that it will,
independently and without reliance upon Agent or any other
Lessor, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis
and decisions in taking action under this Agreement and any
related documents to which it is a party. Agent shall not be
required to keep itself informed as to the performance or
observance by Lessee of any other document referred to (directly
or indirectly) or provided for herein or to inspect the proper
ties or books of Lessee. Except for notices or statements which
Agent is expressly required to give under this Agreement and for
notices, reports and other documents and information expressly
required to be furnished to Agent alone (and not also to each
Lessor, it being understood that Agent shall forward copies of
same to each Lessor) hereunder or under any other Operative
Agreement, Agent shall not have any duty or responsibility to
provide any Lessor with copies of notices or with any credit or
other information concerning the affairs, financial condition or
business of Lessee (or any of its affiliates) that may come into
the possession of Agent or any of its Affiliates.
Section IX.6 Refusal to Act. Except for notices and
actions expressly required of Agent hereunder and except for the
performance of its covenants in Section 6.3, Agent shall in all
cases be fully justified in failing or refusing to act unless
(a) it is indemnified to its reasonable satisfaction by the
Lessors against any and all liability and reasonable expense
which may be incurred by it by reason of taking or continuing to
take any such action (provided that such indemnity shall not be
required to extend to liability or expense arising from any
matter described in clauses (a) through (d) of Section 9.4, it
being understood that no action taken by Agent in accordance
with the instructions of the Required Lessors shall be deemed to
constitute any such matter) and (b) it is reasonably satisfied
that such action is not contrary to any Operative Agreement or
to any applicable law.
Section IX.7 Resignation or Removal of Agent; Appointment
of Successor. Subject to the appointment and acceptance of a
successor Agent as provided below, Agent may resign at any time
by giving notice thereof to each Lessor and Lessee or may be
removed at any time by written notice from the Required Lessors.
Upon any such resignation or removal, the Required Lessors at
the time of the resignation or removal shall have the right
(with the reasonable, prompt approval of Lessee unless an Event
of Default shall be continuing) to appoint a successor Agent
which shall be a financial institution having a combined capital
and surplus of not less than $100,000,000. If, within 30 calen
dar days after the retiring Agent's giving of notice of resigna
tion or receipt of a written notice of removal, a successor
Agent is not so appointed and does not accept such appointment,
then the retiring or removed Agent may appoint a successor Agent
and transfer to such successor Agent all rights and obligations
of the retiring Agent. Such successor Agent shall be a finan
cial institution having combined capital and surplus of not less
than $100,000,000. 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 or removed Agent
and the retiring or removed Agent shall be discharged from
duties and obligations as Agent thereafter arising hereunder and
under any related document. If the retiring Agent does not
appoint a successor, any Lessor shall be entitled to apply to a
court of competent jurisdiction for such appointment, and such
court may thereupon appoint a successor to act until such time,
if any, as a successor shall have been appointed as above
provided.
Section IX.8 Separate Agent. The Required Lessors may,
and if they fail to do so at any time when they are so required,
Agent may, for the purpose of meeting any legal requirements of
any jurisdiction in which any Vehicle or Collateral may be
located, appoint one or more individuals or corporations either
to act as co-agent jointly with Agent or to act as separate
agent of all or any part of the Vehicles or Collateral or the
Lease, and vest in such individuals or corporations, in such
capacity, such title to the Vehicles or Collateral or the Lease
or any part thereof, and such rights or duties as Agent may
consider necessary or desirable. Agent shall not be required to
qualify to do business in any jurisdiction where it is not now
so qualified. Agent shall execute, acknowledge and deliver all
such instruments as may be required by any such co-agent or
separate agent more fully confirming such title, rights or
duties to such co-agent or separate agent. Upon the acceptance
in writing of such appointment by any such co-agent or separate
agent, it, she or he shall be vested with such interest in the
Vehicles or Collateral and the Lease or any part thereof, and
with such rights and duties, not inconsistent with the provi
sions of the Operative Agreements, as shall be specified in the
instrument of appointment, jointly with Agent (except insofar as
local law makes it necessary for any such co-agent or separate
agent to act alone), subject to all terms of the Operative Agree
ments. Any co-agent or separate agent, to the fullest extent
permitted by legal requirements of the relevant jurisdiction, at
any time, by an instrument in writing, shall constitute Agent
its attorney-in-fact and agent, with full power and authority to
do all acts and things and to exercise all discretion on its
behalf and in its name. If any co-agent or separate agent shall
die, become incapable of acting, resign or be removed, the
interest in the Vehicles or Collateral and the Lease and all
rights and duties of such co-agent or separate agent shall, so
far as permitted by law, vest in and be exercised by Agent,
without the appointment of a successor to such co-agent or
separate agent.
Section IX.9 Termination of Agency. The agency created
hereby shall terminate upon the final disposition by Agent of
all Collateral at any time subject hereto and the final distribu
tion by Agent of all moneys or other property or proceeds
received pursuant to the Lease in accordance with its terms,
provided that at such time Lessee shall have complied fully with
all the terms hereof.
Section IX.10 Compensation of Agency. As compensation for
the performance of Agent's obligations hereunder, Lessee shall
pay to Agent, on the Initial Delivery Date and on each anniver
sary of the Initial Delivery Date occurring during the Lease
Term, a fee (the "Agency Fee") in the amount of $15,000.
Section IX.11 Limitations. It is expressly understood and
agreed by and among the parties hereto that, except as otherwise
provided herein or in the other Operative Agreements: (a) this
Participation Agreement and the other Operative Agreements to
which Agent is a party are executed by Agent, not in its indivi
dual capacity (except with respect to the representations and
covenants of Agent in Sections 5.3 and 6.3o), but solely as
Agent under the Operative Agreements in the exercise of the
power and authority conferred and vested in it as such Agent;
(b) each and all of the undertakings and agreements herein made
on the part of Agent are each and every one of them made and
intended not as personal undertakings and agreements by Agent,
or for the purpose or with the intention of binding Agent
personally, but are made and intended for the purpose of binding
only the Collateral unless expressly provided otherwise;
(c) actions to be taken by Agent pursuant to its obligations
under the Operative Agreements may, in certain circumstances, be
taken by Agent only upon specific authority of the Lessors;
(d) nothing contained in the Operative Agreements shall be
construed as creating any liability on Agent, individually or
personally, or any incorporator or any past, present or future
subscriber to the capital stock of, or stockholder, officer or
director, employee or agent of, Agent to perform any covenants
either express or implied contained herein, all such liability,
if any, being expressly waived by the other parties hereto and
by any Person claiming by, through or under them; and (e) so far
as Agent, individually or personally, is concerned, the other
parties hereto and any Person claiming by, through or under them
shall look solely to the Collateral and Lessee for the perfor
mance of any obligation under any of the instruments referred to
herein; provided, however, that nothing in this Section 9.11
shall be construed to limit in scope or substance the general
corporate liability of Agent in respect of its gross negligence
or willful misconduct or those representations, warranties and
covenants of Agent in its individual capacity set forth herein
or in any of the other agreements contemplated hereby.
ARTICLE X
Amendments to Operative Agreements
Section X.1 Amendments to Operative Agreements With
Consent of Lessors. This Participation Agreement and each of
the other Operative Agreements shall be changed, waived,
discharged or terminated with respect to Lessee and each Lessor
upon the ratification in writing of such change, waiver,
discharge or termination by Lessee and the Required Lessors, in
which case such change, waiver, discharge or termination shall
be effective as to each Lessor and Lessee; provided no such
change, waiver, discharge or termination shall, without the
written ratification of each Lessor:
(i) modify any of the provisions of this Section
10.1 or Article III, change the definitions of "Commit
ment", "Commitment Percentage", "Total Commitment" or
"Required Lessors" or modify or waive any provision of
an Operative Agreement requiring action by the
foregoing, or release any Collateral (except as
otherwise specifically provided in any Operative
Agreement);
(ii) modify, amend, waive or supplement any of
the provisions of Articles III, VII, VIII (except as
otherwise expressly provided in Section 9.3 hereof), X
or XI, Sections 13.9 or 13.10 of the Lease or Section
11.3 hereof, provided that the Required Lessors may
waive an Event of Default other than a Payment
Default;
(iii) reduce, modify, amend or waive any indemni
ties in favor of any Participant, whether pursuant to
Articles VII or VIII or otherwise (except that any
Person may consent to any reduction, modification,
amendment or waiver of any indemnity payable to it);
(iv) modify, postpone, reduce or forgive, in
whole or in part, any Rent payment (other than
pursuant to the terms of any Operative Agreement),
Lease Balance, Termination Value, Lessor Risk Amount,
Lessee Risk Amount, interest or, subject to clause
(iii) above, any other amount payable under the Lease
or Participation Agreement, or modify the definition
or method of calculation of any Rent payment (other
than pursuant to the terms of any Operative
Agreement), Lease Balance, Termination Value, Lessor
Risk Amount, Lessee Risk Amount or other amount
payable hereunder;
(v) consent to any assignment of the Lease
releasing any Lessee from its obligations in respect
of the payments due pursuant to the Operative Agree
ments or changing the absolute and unconditional
character of such obligations; or
(vi) permit the creation of any Lien on the
Collateral or any part thereof except as contemplated
in the Operative Agreements, or deprive any Lessor of
the benefit of the security interest in the Collateral
granted by Lessee.
Section X.2 Amendments to Operative Agreements Affecting
Agent. Without the prior written consent of Agent, no amendment
of, supplement to, or waiver or modification of, any Operative
Agreement shall adversely affect Agent's rights or immunities or
modify or increase the duties or obligations of Agent with
respect to any Operative Agreement.
ARTICLE XI
Miscellaneous
Section XI.1 Survival of Covenants. All claims pertaining
to the representations, warranties, covenants or indemnities of
the Participants shall survive the termination of the Lease to
the extent such claims arose out of events occurring or condi
tions existing prior to any such termination. Without limiting
the foregoing, the provisions of Article VII and Article VIII
hereof shall survive the termination of the Lease.
Section XI.2 APPLICABLE LAW. THIS PARTICIPATION AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF CALIFORNIA
WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF.
Section XI.3 Distribution and Application of Rents and
Other Payments. Except as otherwise specifically provided for
in the Lease or in Articles VII and VIII hereof, all amounts of
money received or realized by Agent pursuant to the Lease which
are to be distributed to the Lessors (after payment of accrued
but unpaid fees and expenses and indemnification payments
payable to Agent in its capacity as Agent that remain unpaid for
30 days or more) shall be distributed to each Lessor pro rata,
in accordance with each Lessor's Outstanding Investment and
without preference or priority of any Lessor over another;
provided, however, that in the case such moneys are insufficient
to pay in full the whole amount due, owing and unpaid, then
application shall be made in the manner set forth in Section 8.4
of the Lease. All payments to the Lessors shall be made in
accordance with Section 3.2 of the Lease.
Section XI.4 Notices. All notices, demands, declarations,
consents, directions, approvals, instructions, requests and
other communications required or permitted by the terms hereof
shall be in writing and shall be deemed to have been duly given
when delivered personally, by facsimile (and confirmed, which
confirmation may be mechanical), nationally recognized overnight
courier or otherwise actually received or 5 Business Days after
being deposited in the United States mail certified, postage
prepaid, addressed as follows:
If to Lessee:
Consolidated Freightways Corporation
of Delaware
175 Linfield Drive
Menlo Park, California 94025-3799
Attn: Treasurer
Fax: 415-617-6702
With a copy to:
c/o Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, California 94304
Attn: Treasurer
Fax: 415-856-1685
If to Agent:
ABN AMRO Bank N.V.
Syndications
335 Madison Avenue
New York, NY 10017
Attn: Andrew P. Helene
Fax: 212-682-0364
With a copy to:
ABN AMRO Bank N.V.
c/o ABN AMRO North America, Inc.
101 California Street, Suite 4550
San Francisco, CA 94111
Attn: Jeff French
Fax: 415-362-3524
and
ABN AMRO North America, Inc.
Surface Transportation Group
135 So. La Salle St., Suite 760
Chicago, IL 60603
Attn: David Thomas
Fax: 312-904-2849
If to the Lessors, to their respective addresses set forth
on Schedule I hereto or at such other place as any such party
may designate by notice given in accordance with this Section
11.4.
Section XI.5 Transaction Costs; Other Expenses. Lessee
shall pay all Transaction Costs whether or not the transactions
contemplated hereby close. In addition, Lessee shall pay or
reimburse Agent and the Lessors for all other out-of-pocket
costs and expenses (including allocated fees of internal coun
sel) reasonably incurred in connection with: (a) entering into,
or the giving or (in the case of any amendments, supplements,
waivers or consents proposed by Lessee) withholding of, any
future amendments, supplements, waivers or consents with respect
to the Operative Agreements (including without limitation any
legal services rendered in connection with or arising under
Section 6.1 hereof), it being understood that Lessee shall only
be required to pay for one firm of legal counsel to Agent and
Lessors in respect of any transaction under this clause (a); (b)
any Casualty or termination of the Lease or any other Operative
Agreement; (c) the negotiation and documentation of any restruc
turing or "workout," whether or not consummated, of any Opera
tive Agreement; (d) the enforcement of the rights or remedies
under the Operative Agreements; (e) further assurances requested
pursuant to Section 11.13 hereof or any similar provision in
other Operative Agreements; (f) any and all out-of-pocket
expenses of Agent in connection with the Sale Option described
in Section 11.3 of the Lease; (g) any transfer by Agent or a
Lessor of any interest in the Operative Agreements during the
continuance of an Event of Default; and (h) the Agency Fee.
Section XI.6 Counterparts. This Participation Agreement
may be executed in any number of counterparts and by different
parties hereto on separate counterparts, each executed
counterpart constituting an original but all together one
agreement.
Section XI.7 Severability. Whenever possible, each
provision of this Participation Agreement shall be interpreted
in such manner as to be effective and valid under applicable
law; but if any provision of this Participation Agreement shall
be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Participation Agreement.
Section XI.8 Successors and Assigns; Transfers. This
Participation Agreement shall be binding upon the parties hereto
and their respective successors and assigns, and shall inure to
the benefit of the parties hereto and their respective succes
sors and permitted assigns. Lessee may not assign any of its
rights and obligations under any Operative Agreement except as
expressly provided in the Operative Agreements.
No Lessor shall assign, convey or otherwise transfer
(including pursuant to a participation) all or any portion of
its right, title or interest in, to or under any of the Opera
tive Agreements, any Collateral and its interest in the
Vehicles, except that without the prior written consent of Agent
or Lessee (x) any bank or similar financial or commercial
lending institution may pledge its interest in the ordinary
course of its business without the consent of Lessee or Agent,
provided, that no transfer upon a foreclosure pursuant to such a
pledge may occur unless the other provisions of this Section are
complied with, (y) any Lessor may transfer all or any portion of
its interest to any other existing Lessor and (z) any Lessor may
transfer any or all of such right, title and interest upon the
satisfaction of each of the following conditions:
(a) Required Notice and Effective Date. Any Lessor
desiring to effect a transfer of its interest hereunder shall
give written notice of each such proposed transfer to Lessee and
Agent at least ten (10) days prior to such proposed transfer,
setting forth the name of such proposed transferee, the
percentage or interest to be retained by such Lessor, if any,
and the date on which such transfer is proposed to become
effective. All reasonable out-of-pocket costs incurred by Agent
in connection with any such disposition by a Lessor under this
Section 11.8 shall be borne by such Lessor, unless such transfer
is being made pursuant to Section 7.6, in which case such costs
shall be borne by Lessee. In the event of a transfer under this
Section 11.8, any expenses incurred by the transferee in
connection with its review of the Operative Agreements and its
investigation of the transactions contemplated thereby shall be
borne by such transferee or the relevant Lessor, as they may
determine, but shall not be considered costs and expenses which
Lessee are obligated to pay or reimburse under Section 11.5,
unless such transfer is being made pursuant to Section 7.6.
(b) Assumption of Obligations. Any transferee pursuant to
this Section 11.8 shall have executed and delivered to Agent a
letter substantially in the form of the Investor's Letter
attached hereto as Exhibit F, and thereupon the obligations of
the transferring Lessor under the Operative Agreements shall be
proportionately released and reduced to the extent of such
transfer. Upon any such transfer as above provided, the trans
feree shall be deemed to be bound by all obligations (whether or
not yet accrued) under, and to have become a party to, all
Operative Agreements to which its transferor was a party, shall
be deemed the pertinent "Lessor" for all purposes of the Opera
tive Agreements and shall be deemed to have made that portion of
the payments pursuant to the Participation Agreement previously
made or deemed to have been made by the transferor represented
by the interest being conveyed; and each reference herein and in
the other Operative Agreements to the pertinent "Lessor" shall
thereafter be deemed a reference to the transferee, to the
extent of such transfer, for all purposes. Upon any such trans
fer, Agent shall deliver to each Lessor and Lessee a new
Schedule I to this Participation Agreement, revised to reflect
the relevant information for such new Lessor and the Commitment
of such new Lessor (and the revised Commitment of the transferor
Lessor if it shall not have transferred its entire interest).
(c) Employee Benefit Plans. No Lessor may make any such
assignment, conveyance or transfer to or in connection with any
arrangement or understanding in any way involving any employee
benefit plan (or its related trust), as defined in Section 3(3)
of ERISA, or with the assets of any such plan (or its related
trust), as defined in Section 4975(e)(1) of the Code (other than
a governmental plan, as defined in Section 3(32) of ERISA), with
respect to which Lessee or such Lessor or any of their Affili
ates is a party in interest within the meaning of ERISA or a
"disqualified person" within the meaning of the Code.
(d) Amount of Commitment. Unless Lessee shall consent to
otherwise, no Lessor may make any such assignment, conveyance or
transfer if, as a consequence thereof, the transferor (if such
Lessor retains any part of its Commitment) or transferee Lessor
would have an Outstanding Investment of less than $5,000,000.
(e) Representations and Warranties. Notwithstanding
anything to the contrary set forth above, no Lessor may assign,
convey or transfer its interest to any Person, unless such
Person shall have delivered to Agent and Lessee a certificate
confirming the accuracy of the representations and warranties
set forth in Section 5.2 with respect to such Person (other than
as such representation or warranty relates to the execution and
delivery of Operative Agreements).
(f) Financial Condition. Any transferee pursuant to this
Section 11.8 shall be a financial institution having combined
capital and surplus of at least $100,000,000.
Each transferee of a Lessor pursuant to this Section 11.8
shall be entitled to the benefits of Sections 7.3, 7.4 and 7.5;
provided that no such transferee shall be entitled to receive
any greater amount pursuant to such Sections than the transferor
Lessor would have been entitled to receive in respect of the
amount of the Commitment transferred by such transferor Lessor
to such transferee if such transfer had not occurred.
SECTION XI.9 JURY TRIAL. LESSEE WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS PARTICIPATION AGREEMENT OR ANY OTHER
OPERATIVE AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED
IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELA
TIONSHIP EXISTING IN CONNECTION WITH THIS PARTICIPATION AGREE
MENT OR ANY OPERATIVE AGREEMENT AND AGREE THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
Section XI.10 Captions; Table of Contents. Section
captions and the table of contents used in this Participation
Agreement (including the exhibits and schedules) are for
convenience of reference only and shall not affect the
construction of this Participation Agreement.
Section XI.11 FINAL AGREEMENT. THIS PARTICIPATION AGREE
MENT, TOGETHER WITH THE OTHER OPERATIVE AGREEMENTS, REPRESENT
THE ENTIRE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO
THE TRANSACTIONS CONTEMPLATED HEREBY AND IN THE OTHER OPERATIVE
AGREEMENTS. THIS PARTICIPATION AGREEMENT CANNOT BE MODIFIED,
SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE
PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
Section XI.12 No Third-Party Beneficiaries. Nothing in
this Participation Agreement or the other Operative Agreements
shall be deemed to create any right in any Person not a party
hereto or thereto (other than the permitted successors and
assigns of Lessors, Agent and Lessee), and such agreements shall
not be construed in any respect to be a contract in whole or in
part for the benefit of any third party except as aforesaid.
Section XI.13 Further Assurances. Lessee, at its expense,
will promptly and duly execute and deliver all such documents
and take such further action as may be necessary or appropriate
in order to effect the intent or purpose of this Participation
Agreement and the other Operative Agreements and to establish
and protect the rights and remedies created or intended to be
created in favor of the Lessors and Agent for the benefit of the
Lessors, including, without limitation, if requested by Required
Lessors at the expense of Lessee, the recording or filing of any
Operative Agreement or any other document in accordance with the
laws of the appropriate jurisdictions.
Section XI.14 Reproduction of Documents. This Participa
tion Agreement, all documents constituting Schedules or Exhibits
hereto, and all documents relating hereto received by a party
hereto, including, without limitation: (a) consents, waivers
and modifications that may hereafter be executed; (b) the
Certificates of Title and all other documents received by the
Lessors or Agent in connection with the receipt and/or acquisi
tion of the Vehicles; and (c) financial statements, certifi
cates, and other information previously or hereafter furnished
to Agent or any Lessor may be reproduced by the party receiving
the same by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process.
Each of the Participants agrees and stipulates that, to the
extent permitted by 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 such
party in the regular course of business) and that, to the extent
permitted by law, any enlargement, facsimile, or further
reproduction of such reproduction shall likewise be admissible
in evidence.
Section XI.15 Consideration for Consents to Waivers and
Amendments. Lessee hereby agrees that it will not, and that it
will not permit any of its Affiliates to, offer or give any
consideration or benefit of any kind whatsoever to any Lessor in
connection with, in exchange for, or as an inducement to, such
Lessor's consent to any waiver in respect of, any modification
or amendment of, any supplement to, or any other consent or
approval under, any Operative Agreement unless such considera
tion or benefit is offered ratably to all Lessors.
Section XI.16 Submission to Jurisdiction. Any suit by
Agent or any Lessor to enforce any claim arising out of the
Operative Agreements may be brought in any state or Federal
court located in San Francisco, California having subject matter
jurisdiction, and with respect to any such claim, each Partici
pant hereby irrevocably: (a) submits to the jurisdiction of
such courts; and (b) consents to the service of process out of
said courts by mailing a copy thereof, by registered mail,
postage prepaid, to such Participant at its address specified in
this Participation Agreement, and agrees that such service, to
the fullest extent permitted by law: (i) shall be deemed in
every respect effective service of process upon it in any such
suit, action or proceeding; and (ii) shall be taken and held to
be valid personal service upon and personal delivery to it.
Lessee irrevocably waives, to the fullest extent permitted by
law: (A) any claim, or any objection, that it now or hereafter
may have, that venue is not proper with respect to any such
suit, action or proceeding brought in such a court located in
San Francisco, California including, without limitation, any
claim that any such suit, action or proceeding brought in such
court has been brought in an inconvenient forum; and (B) any
claim that Lessee is not subject to personal jurisdiction or
service of process in such forum. Lessee agrees that any suit
to enforce any claim arising out of the Operative Agreements or
any course of conduct or dealing of Agent or any Lessor shall be
brought and maintained exclusively in any state or Federal court
located in San Francisco, California. Nothing in this Section
11.16 shall affect the right of Agent or any Lessor to bring any
action or proceeding against Lessee or any Vehicle or other
Collateral in the courts of any other jurisdiction. Lessee
agrees that a final judgment in any action or proceeding in a
state or Federal court within the United States may be enforced
in any other jurisdiction by suit on the judgment or in any
other manner provided by law.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered as of the
date first above written.
CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE, as Lessee
By /s/D.F. Morrison
Name Printed: D.F. Morrison
Title: Vice President and
Treasurer
ABN AMRO
BANK N.V., not individually, but
solely as Agent for the Lessors
By /s/Jeffery A. French
Name Printed: Jeffery A. French
Title: Vice President
By /s/L.T. Osborne
Name Printed: L.T. Osborne
Title: Group Vice President
LESSORS:
ABN AMRO BANK N.V.
By /s/Jeffery A. French
/s/Jeffery A. French
Name Printed: Jeffery A. French
Title: Vice President
By /s/L.T. Osborne
Name Printed: L.T. Osborne
Title: Group Vice President
SCHEDULE I
TO
PARTICIPATION AGREEMENT
AGENT AND LESSOR ADDRESSES; LESSOR COMMITMENTS
AGENT: ABN AMRO BANK N.V. (address set forth in Section 11.4)
LESSORS:
1. ABN AMRO BANK N.V.
SCHEDULE X
TO
PARTICIPATION AGREEMENT
DEFINITIONS
The following terms (or other terms used or defined in any
Operative Agreement which have meanings substantially similar or
equivalent to the meanings assigned to such terms) shall have
the following meanings for all purposes, and such meanings shall
be equally applicable both to the singular and plural forms of
the terms defined. Any agreement, document or instrument
defined or referred to in this Schedule X shall include each
amendment, modification or supplement thereto including each
waiver and consent that may (pursuant to the Operative
Agreements) be effective from time to time, except as otherwise
expressly indicated. The definition of any person herein shall
include its successors and permitted assigns. Reference to
schedules and exhibits in this Schedule X shall mean Schedules
and Exhibits attached to the Participation Agreement, except as
otherwise indicated. All references to "the Vehicles" or "all
of the Vehicles" or words of similar import shall be deemed to
refer to all Vehicles covered by all Lease Supplements then in
effect.
"Actual Knowledge" shall mean, as to any matter with
respect to any Person, the actual knowledge of such matter by a
Responsible Officer of such Person and shall include, without
limitation, receipt of a notice of such matter by any such
Responsible Officer.
"Affected Lessor" shall have the meaning provided in
Section 7.6 of the Participation Agreement.
"Affiliate(s)" of any Person shall mean any other Person
that directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with,
such Person. No Person shall be considered an Affiliate of
Agent unless such Person directly or indirectly through one or
more intermediaries controls, is controlled by, or is under
common control with, Agent solely in its capacity as agent under
the Lease.
"Agent" shall have the meaning provided in the preamble of
the Lease.
"Agent's Corporate Office" shall mean the principal
corporate office of Agent, which office is, on the date the
Participation Agreement is executed by all parties thereto,
located at the address for Agent set forth in Section 11.4 of
the Participation Agreement.
"Agency Fee" shall have the meaning specified in
Section 9.10 of the Participation Agreement.
"Allocation Fraction" of any Vehicle shall mean, (a) with
respect to any Lease Supplement, a fraction, the numerator of
which is the Purchase Price of such Vehicle and the denominator
of which is the aggregate Purchase Price of all of the Vehicles
then subject to such Lease Supplement, including such Vehicle,
and (b) with respect to the Lease, a fraction, the numerator of
which is the Purchase Price of such Vehicle and the denominator
of which is the aggregate Purchase Price of all of the Vehicles
then subject to the Lease, including such Vehicle.
"alter" shall have the meaning provided in Section 5.5(a)
of the Lease.
"Appraisal" shall mean the appraisal of the Vehicles from
an Appraiser received pursuant to the terms of the Lease.
"Appraised Value" shall mean, with respect to any Vehicle
as of any date of determination, the fair market value of such
Vehicle as set forth on the Appraisal therefor.
"Appraiser" shall mean Valuation Research Corporation or
such other Person as is selected by the Lessee and Agent.
"Assumed Interest Rate" shall mean, as of the date of any
Funding, the Interest Rate that would have been applicable for
purposes of calculating Variable Rent under the Lease in the
event that the Delivery Date to which such Funding relates had
occurred on such date.
"Assumption Agreement" shall have the meaning provided in
Section 6.1(c) of the Participation Agreement.
"Authority" shall mean any: (a) Federal, state, local or
(if any Vehicle or any component thereof has been moved outside
of the United States) foreign, tribunal, legislative body,
governmental subdivision, administrative agency or other
governmental authority; or (b) arbitrator or panel of
arbitrators, in the case of each of clause (a) and (b) having or
exercising jurisdiction over Lessee, Agent, or any Vehicle (or
any component thereof).
"Base Period" shall have the meaning provided in
Section 2.1 of the Lease.
"Basic Rent" shall mean, with respect to the Lease or any
Lease Supplement (as the context may require) all installments
of Fixed Rent and Variable Rent due and payable by Lessee on
each Payment Date during the Base Period.
"Business Day" shall mean any day on which
(a) Federal and state chartered banks in San
Francisco, California are open for commercial banking
business; and
(b) solely with respect to determinations of
Variable Rent and Rent Periods, dealings in Dollars are
carried on in the London Interbank market.
"Casualty" shall mean any of the following events in
respect of any Vehicle: (a) the loss of such Vehicle or the use
thereof due to theft, disappearance, destruction, damage beyond
repair or rendition of such Vehicle permanently unfit for normal
use for any reason whatsoever; (b) any damage to such Vehicle
which results in an insurance settlement with respect to such
Vehicle on the basis of a total loss; (c) the permanent
condemnation, confiscation or seizure of, or requisition of
title to or use of, such Vehicle; (d) as a result of any rule,
regulation, order or other action by any Authority, the use of
such Vehicle in the normal course of business shall have been
prohibited, directly or indirectly, for a period of six
consecutive months, unless Lessee, prior to the expiration of
such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or
desirable to permit the normal use of such Vehicle by the Lessee
thereof or, in any event, if use of such Vehicle shall have been
prohibited, directly or indirectly, for a period of twelve
consecutive months; or (e) the operation or location of such
Vehicle, while under requisition for use by any Authority, in
any area excluded from coverage by any insurance policy then in
effect with respect to such Vehicle required by the terms of
Section 7.1 of the Lease, if Lessee shall be unable to obtain
indemnity in lieu thereof from such Authority; provided that for
the purpose of the foregoing clause (e), if such Vehicle shall
be returned to Lessee prior to the Casualty Settlement Date in
such condition that a Casualty would not otherwise be deemed to
exist with respect thereto, then such event shall, at the option
of Lessee, not constitute a Casualty.
"Casualty Amount" of any Vehicle shall mean, with respect
to any Casualty (and for purposes of Section 6.1(g) of the
Participation Agreement), an amount equal to the product of
(a) the Lease Balance on the date of such Casualty (or the date
of determination for purposes of Section 6.1(a) of the
Participation Agreement) and (b) the Allocation Fraction of such
Vehicle.
"Casualty Notice" shall have the meaning provided in
Section 6.1 of the Lease.
"Casualty Proceeds" shall have the meaning provided in
Section 6.2 of the Lease.
"Casualty Settlement Date" shall have the meaning provided
in Section 6.1(a) of the Lease.
"CD Rate" means, relative to any Rent Period with respect
to the Lease Balance and each Supplement Balance, the rate of
interest determined by the Agent to be the arithmetic average
(rounded upwards, if necessary, to the nearest 1/16 of 1%) of
the prevailing rates per annum bid at 10:00 a.m., San Francisco
time (or as soon thereafter as practicable), on the first day of
such Rent Period by two or more certificate of deposit dealers
of recognized standing located in San Francisco, California for
the purchase at face value from ABN AMRO Bank N.V. of its
certificates of deposit in an amount approximately equal to the
Lease Balance at the beginning of such Rent Period and having a
maturity approximately equal to such Rent Period plus 115 basis
points.
"Certificate of Title" shall mean a certificate of title,
certificate of ownership, manufacturer's certificate of origin
or any similar equivalent instrument issued by any applicable
Authority evidencing title, or an interest in title, to a
Vehicle.
"CFI Revolving Credit Agreement" shall mean that certain
Amended and Restated Credit Agreement dated as of January 10,
1995 among Consolidated Freightways, Inc., the Banks listed
therein, the LC Issuing Banks listed therein, the Co-Agents
listed therein and Morgan Guaranty Trust Company of New York as
Agent, as amended, restated, replaced, refinanced, supplemented
or otherwise in effect from time to time, including any
successor agreement or agreements or arrangement or arrangements
providing for revolving or working capital indebtedness, whether
or not secured.
"Charges" shall mean (a) freight, installation and other
similar costs with respect to any Vehicle and (b) applicable
sales, use or similar taxes imposed upon any Vehicle.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean all of Lessee's right, title and
interest in and to each of the following, whether now existing
or hereafter arising or acquired, and wherever located:
(a) the Vehicles and the Intellectual
Property Collateral;
(b) the Subleases;
(c) all contracts necessary to purchase, operate
and maintain the Vehicles, including all warranties;
(d) any rebate, offset or other similar rights
under a purchase order, invoice or purchase agreement
with any manufacturer of any Vehicle;
(e) all books, manuals, logs, records, writings,
data bases, information and other property relating to,
used or useful in connection with, evidencing, embodying
or incorporating any of the foregoing; and
(f) all products, accessions and proceeds of and
from any and all of the foregoing Collateral (including
proceeds which constitute property of the types
described in subsections (a), (b), (c), (d) and (e)
above and, to the extent not otherwise included, all
payments under insurance (whether or not Lessor is the
loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing
Collateral.
"Commitment(s)" for each Lessor shall mean the amount set
forth in Schedule I to the Participation Agreement across from
the name of such Lessor.
"Commitment Fee" shall have the meaning specified in
Section 2.5 of the Participation Agreement.
"Commitment Percentage" shall mean, with respect to each
Lessor, the quotient (expressed as a percentage) of such
Lessor's Commitment divided by the Total Commitment.
"Consolidated Debt" shall mean, at any date, the Debt of
Lessee and its Consolidated Subsidiaries, determined on a
consolidated basis as of such date.
"Consolidated EBITDAR" shall mean, in respect of any
period, Consolidated Net Income, increased by extraordinary
losses, decreased by extraordinary gains, and increased by
interest (including the portion of payments under any Operative
Agreements that may be characterized for GAAP purposes as
interest), federal and state income taxes, depreciation,
amortization and Consolidated Rental Expense, all for such
period.
"Consolidated Interest Expense" shall mean, for any period,
the interest expense of Lessee and its Consolidated
Subsidiaries, determined on a consolidated basis for such
period.
"Consolidated Net Income" means, for any period, the net
income of Lessee and its Consolidated Subsidiaries for such
period determined in accordance with GAAP provided, however,
that in determining Consolidated Net Income, there shall not be
included the following: if the Lessee shall have acquired the
assets and business of any Person or any substantial part of the
assets and business of any Person, any revenues and expenses
properly attributable to such assets and business or part
thereof prior to the date of such acquisition.
"Consolidated Rental Expense" shall mean, for any period,
the rental expense for operating leases of Lessee and its
Consolidated Subsidiaries, determined on a consolidated basis
for such period.
"Consolidated Subsidiary" shall mean, at any date, any
subsidiary or other entity the accounts of which would be
consolidated with those of Lessee in its consolidated financial
statements if such statements were prepared as of such date.
"Consolidated Tangible Net Worth" shall have the same
meaning as "CFI investment and advances" as such term is used in
the Consolidated Freightways Corporation of Delaware and
Subsidiaries Consolidated Balance Sheets. until such time as
Lessee shall cease to be a subsidiary of Consolidated
Freightways, Inc., at which point "Consolidated Tangible Net
Worth" shall mean at any date the Shareholders' Equity of Lessee
and its Consolidated Subsidiaries, determined on a consolidated
basis, less Intangible Assets, all determined as of such date.
For purposes of this definition, "Intangible Assets" means the
amount (to the extent reflected in determining such
Shareholders' Equity) of (i) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of
assets of a going concern business made within twelve months
after the acquisition of such business) subsequent to
September 30, 1995 in the book value of any asset owned by
Lessee, (ii) all equity investments in Persons (except invest
ments in publicly traded marketable equity securities) and
(iii) all unamortized debt discount and expense, goodwill,
patents, trademarks, service marks, trade names, copyrights,
organization or developmental expenses and other intangible
assets (it being understood that unamortized deferred charges
and deferred income tax assets are not deemed to be intangible
assets for purposes hereof).
"Debt" of any Person shall mean at any date, without dupli
cation, (i) all obligations of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, deben
tures, notes or other similar instruments, (iii) all obligations
of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as
lessee which are capitalized in accordance with GAAP, (v) non-
real estate minimum operating lease commitments (present valued
at ten percent (10%)); (vi) all obligations of such Person to
reimburse banks for drawings under letters of credit or payments
with respect to bankers' acceptances, which obligations remain
unpaid for more than three Business Days after they become due,
or, if later, after such Person is notified of the due date
thereof, (vii) all obligations of the types referred to in
clauses (i) to (v), inclusive, of this definition which are
secured by a Lien on any asset of such Person, whether or not
such obligations are otherwise obligations of such Person, and
(viii) all obligations of others of the types referred to in
clauses (i) to (v), inclusive, of this definition which are
guaranteed by such Person; provided, however, if any of the
obligations described in clause (viii) above are also guaranteed
by Person(s) other than such Person (the "Additional
Guarantors"), the amount of such obligations which shall be
included as Debt of such Person shall be equal to the product of
(i) the amount of such obligations times (ii) such Person's
Percentage Shareholders' Equity. As used herein, the term
"Percentage Shareholders' Equity" shall be a fraction, the
numerator of which is the Shareholders' Equity of such Person
and the denominator of which is the sum of the Shareholders'
Equity of such Person and of all Additional Guarantors; provided
however that this clause (viii) shall not apply to guarantee
obligations of Lessee that in the aggregate are less than five
million dollars ($5,000,000) or relate to guarantee obligations
in respect of the CFI Revolving Credit Agreement.
"Defaulted Amount" shall have the meaning provided in
Section 2.1(c) of the Participation Agreement.
"Defaulting Lessor" shall have the meaning provided in
Section 2.1(c) of the Participation Agreement.
"Default Rate" shall mean, at any time, the rate per annum
which is two percent (2%) higher than the Interest Rate then in
effect.
"Delivery Date(s)" shall mean each of the actual dates on
or prior to December 29,> 1995 on which the transactions
contemplated in Article II of the Participation Agreement are
completed.
"Delivery Date Closing" shall mean, with respect to a
Delivery Date, the completion of those transactions described in
Article II of the Participation Agreement.
"Delivery Date Notice" shall have the meaning provided in
Section 3.1 of the Participation Agreement.
"Deposit Account" shall have the meaning provided in
Section 6.2 of the Lease.
"Dollar" and the sign "$" mean lawful money of the United
States.
"Environmental Laws" shall mean all applicable Federal,
state, local or foreign statutes, laws, ordinances, codes,
rules, regulations and orders (including consent decrees)
relating to public health and safety and protection of the
environment.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"Event of Default" shall have the meaning provided in
Section 8.1 of the Lease.
"Fixed Rent" shall mean, for each Payment Date during the
Base Period and each Renewal Term, that portion of the
installment of Rent payable on such Payment Date set forth under
the heading "Fixed Rent Payment" on Schedule II to each Lease
Supplement.
"Funding" shall have the meaning assigned to that term in
Section 2.1 of the Participation Agreement.
"GAAP" shall mean generally accepted accounting principles
in the United States of America in effect from time to time,
applied on a consistent basis both as to classification of items
and amounts.
"Impositions" shall mean all fees (including, but not
limited to, license, documentation, recording or registration
fees) and taxes (including but not limited to all income, sales,
use, lease, sublease, gross receipts, personal property,
occupational, value added or other taxes, levies, imposts,
duties, assessments, charges or withholdings of any nature
whatsoever), together with any penalties, fines or additions to
tax or interest thereon.
"Incipient Default" shall mean an event or condition which,
with the giving of notice or the passage of time or both, would
constitute an Event of Default.
"Indemnitee(s)" shall mean Agent in both its individual and
agent capacity, the Lessors, any Affiliate of any of them and
any assignee, officer, director, employee, attorney or agent of
any of them.
"Initial Delivery Date" shall mean the first Delivery Date
completed pursuant to Article II of the Participation Agreement.
"Intellectual Property Collateral" shall mean:
(a) all software programs (including
both source code, object code and all related applications and
data files), whether now owned, licensed or leased or hereafter
acquired by Lessee, designed for use on any computers and
electronic data processing hardware constituting part of and not
readily removable from the Vehicles and necessary for the
operation and maintenance of the Vehicles; provided that with
respect to any licensed or leased software program the foregoing
shall be included in "Intellectual Property Collateral" only to
the extent that a grant of a security interest is not prohibited
by the terms of the license or lease;
(b) all firmware associated therewith;
(c) all documentation (including flow charts,
logic diagrams, manuals, guides and specifications) with
respect to such hardware, software and firmware
described in the preceding clauses (a) and (b); and
(d) all rights with respect to all of the
foregoing, including, without limitation, any and all
copyrights, licenses, options, warranties, service
contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal
rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of
the foregoing.
"Interest Rate" means, with respect to any Rent Period or
any Interim Period under any Lease Supplement, the rate per
annum equal to the sum of the LIBO Rate for such Rent Period or
Interim Period plus 115 basis points, unless and to the extent
that the CD Rate shall apply as a result of the application of
provisions of Section 7.4 of the Participation Agreement.
"Interim Period" shall mean, as to each Lease Supplement,
the period, if any, commencing on the Delivery Date of such
Lease Supplement and continuing to and ending (but not
including) the Lease Commencement Date.
"Interim Rent" shall mean all payments, if any, due and
payable by Lessee under each Lease Supplement on the last day of
the applicable Interim Period. The Interim Rent payable under
each Lease Supplement, if any, is set forth under the heading
"Interim Rent" on Schedule II to such Lease Supplement.
"International Registration Plan" shall mean the
reciprocity agreement among various states, including Oregon and
Illinois, and Canadian provinces, pursuant to which fleets of
motor vehicles used in interstate commerce are registered and
licensed for operation within and among the signatory states and
provinces.
"interstate" or "intrastate" shall refer to interstate or
intrastate activity within the United States.
"Investment Percentage" shall mean, with respect to each
Lessor as of any date of determination, the quotient (expressed
as a percentage) of such Lessor's Outstanding Investment divided
by the Lease Balance.
"Invoice Cost" with respect to any Vehicle shall mean the
aggregate cost of such Vehicle (exclusive of Charges) reflected
on the invoice therefor delivered to Agent pursuant to Section
3.1 of the Participation Agreement.
"IRS" shall mean the Internal Revenue Service.
"Lease" shall mean that certain Master Lease Intended as
Security, dated as of December 22, 1995, by and between Agent
and Lessee, substantially in the form of Exhibit A to the
Participation Agreement, as amended, modified or supplemented
from time to time in accordance with the Participation
Agreement.
"Lease Balance" shall mean, as of any determination date,
the aggregate Purchase Price of all of the Vehicles, minus all
amounts of Fixed Rent actually paid to the date of determination
and all Reduction Amounts actually paid to the date of
determination.
"Lease Commencement Date" shall have the meaning provided
in Section 2.2 of the Lease.
"Lease Supplement" shall have the meaning provided in
Section 3.5 of the Participation Agreement.
"Lease Supplement Lessee Risk Amount" shall mean, for any
Lease Supplement on any date, an amount equal to the product of
(i) the percentage (expressed as a decimal) set forth opposite
such date under the heading "Lease Supplement Lessee Risk
Percentage" on Schedule II to such Lease Supplement times
(ii) the aggregate Purchase Price of all Vehicles subject to
such Lease Supplement.
"Lease Supplement Lessor Risk Amount" shall mean, for any
Lease Supplement on any date, an amount equal to the product of
(i) the percentage (expressed as a decimal) set forth opposite
such date under the heading "Lease Supplement Lessor Risk
Percentage" on Schedule II to such Lease Supplement times
(ii) the aggregate Purchase Price of all Vehicles subject to
such Lease Supplement.
"Lease Supplement Termination Value" shall mean, for any
Lease Supplement on any date, an amount equal to the product of
(i) the percentage (expressed as a decimal) set forth opposite
such date under the heading "Lease Supplement Termination
Percentage" on Schedule II to such Lease Supplement times
(ii) the aggregate Purchase Price of all Vehicles subject to
such Lease Supplement.
"Lease Term" shall mean the Interim Period, if any, the
Base Period and all exercised Renewal Terms.
"Lessee" shall mean Consolidated Freightways Corporation of
Delaware, a Delaware corporation.
"Lessee Purchase Option" shall have the meaning provided in
Section 11.1(b) of the Lease.
"Lessee Risk Amount" shall mean, on any date, the sum of
the Lease Supplement Lessee Risk Amounts for all Lease
Supplements then in effect.
"Lessors" shall mean each of the Persons identified as a
Lessor in Schedule I to the Participation Agreement and those
Persons to whom the interests in the Lease and the Collateral
shall have been transferred or assigned from time to time in
accordance with the provisions of the Lease and the
Participation Agreement.
"Lessor Commitment" shall mean, with respect to each
Lessor, the amount set forth opposite such Lessor's name on
Schedule I to the Participation Agreement.
"Lessor Liens" shall mean Liens or other conveyances result
ing from any act of or claim against Agent in its individual
capacity (or any Person claiming by, through or under Agent in
its individual capacity) or any Lessor, in each case arising out
of any event or condition not related to the exercise of such
Person's rights or the performance of its duties expressly
provided under any Operative Agreement.
"Lessor Risk Amount" shall mean, on any date, the sum of
the Lease Supplement Lessor Risk Amounts for all Lease
Supplements then in effect.
"LIBO Rate" means, relative to any Rent Period with respect
to the Lease Balance and each Supplement Balance, the rate per
annum determined by Agent to be:
(a) the offered rate per annum at
which deposits in United States Dollars appear on the Telerate
Page 3750 (or any successor page), or
(b) if such offered rate is not available, then
the rate per annum at which deposits in United States
Dollars appear on the Reuters Screen LIBO Page (or any
successor page), or
(c) if neither of the foregoing offered rates is
available, the average (rounded upwards, if necessary,
to the nearest 1/16 of 1%) of the rates per annum at
which Dollar deposits in immediately available funds are
offered to The Industrial Bank of Japan, Limited's LIBOR
Office in the London interbank market,
determined in any case as of 11:00 a.m. (London time) two
Business Days prior to the beginning of such Rent Period for
delivery on the first day of such Rent Period, and in an amount
approximately equal to the amount of the Lease Balance or the
applicable Supplement Balance and for a period approximately
equal to such Rent Period.
"LIBOR Office" shall mean ABN AMRO Bank N.V., London,
England branch, or such other office of ABN AMRO Bank N.V. as
designated from time to time by notice from Agent to Lessee,
whether or not outside the United States, which shall be used
for purposes of establishing LIBO Rates hereunder.
"Lien" shall mean: (a) any interest in property securing
an obligation owed to, or claimed by, a Person other than the
owner of the property, whether such interest is based on the
common law, statute or contract, and including, without
limitation, any judgment lien, security interest, mortgage,
encumbrance, pledge, conditional sale, right of distraint or
trust receipt or a lease, consignment or bailment for security
purposes; or (b) any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease
or other title exception or defect, cloud on title or
encumbrance affecting property.
"Material Adverse Effect" shall mean any change or changes,
effect or effects or condition or conditions that individually
or in the aggregate are or are reasonably likely to be
materially adverse to (i) the business, consolidated financial
position or consolidated results of operations of Lessee and its
Consolidated Subsidiaries taken as a whole, (ii) the
transactions contemplated by the Operative Agreements, (iii) the
ability of Lessee to perform its respective obligations under
the Operative Agreements or (iv) the validity or enforceability
of any of the Operative Agreements or any rights or remedies
under any thereof.
"Multiemployer Plan" shall have the meaning assigned to the
term "multiemployer plan" in Section 3(37) of ERISA.
"Non-Defaulting Lessor" shall have the meaning provided in
Section 2.1(c) of the Participation Agreement.
"Officer's Certificate" shall mean a certificate executed
on behalf of any entity by its President, one of its Vice
Presidents, its Chief Financial Officer, its Treasurer, its
Assistant Treasurer or its Controller.
"Operative Agreement(s)" shall mean the Participation
Agreement, the Lease, the Lease Supplements, the Delivery Date
Notices, the Subleases, any Assumption Agreement, each
Certificate of Title and each UCC financing statement filed or
to be filed from time to time with respect to the security
interests created pursuant to the Lease.
"Outstanding Investment" of any Lessor as of any date of
determination shall mean the aggregate amount funded by such
Lessor pursuant to Section 2.1 of the Participation Agreement
(but excluding amounts returned to such Lessor pursuant to
Section 2.4 of the Participation Agreement), reduced by all
Fixed Rent paid to Agent for the account of such Lessor and all
Reduction Amounts paid to Agent for the account of such Lessor.
"Part(s)" shall mean all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of
whatever nature that may from time to time be incorporated or
installed in or attached to any Vehicle.
"Partial Casualty" shall mean any loss, damage,
destruction, taking by eminent domain, loss of use or theft of
any portion of a Vehicle which does not constitute a Casualty.
"Participant(s)" shall mean any or all of the parties to
the Participation Agreement.
"Participation Agreement" shall mean the Participation
Agreement, dated as of December 22, 1995, entered into between
Lessee, Agent and Lessors, as amended, modified or supplemented
from time to time in accordance with its terms.
"Payment Date" shall mean the last day of each Rent Period.
"Payment Default" shall mean an Event of Default described
in Section 8.1(a) of the Lease.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean, with respect to any Person, a
"pension plan" as such term is defined in section 3(2) of ERISA
which is subject to Title IV of ERISA and to which such Person
may have any liability or contingent liability, including, but
not limited to, liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time
during the preceding five years, or by reason or being deemed to
be a contributing sponsor under section 4069 of ERISA.
"Permitted Contest" shall mean actions taken by a Person to
contest in good faith, by appropriate proceedings initiated
timely and diligently prosecuted, the legality, validity or
applicability to the Vehicles or any interest therein of any
Person of: (a) any law, regulation, rule, judgment, order, or
other legal provision or judicial or administrative require
ments; (b) any term or condition of, or any revocation or
amendment of, or other proceeding relating to, any authorization
or other consent, approval or other action by any Authority; or
(c) any Lien or Imposition; provided that the initiation and
prosecution of such contest would not: (i) result in, or
materially increase the risk of, the imposition of any criminal
liability on any Indemnitee; (ii) materially and adversely
affect the security interests created by the Lease or the right,
title or interest of Agent or any Lessor in or to any of the
Vehicles or the right of Agent to receive payment of Rent or the
Lease Balance or any interest therein; or (iii) materially and
adversely affect the fair market value, utility or remaining
useful life of the Vehicles or any interest therein or the
continued economic operation thereof; and provided further that
in any event adequate reserves in accordance with GAAP are
maintained against any adverse determination of such contest.
"Permitted Lessor Liens" shall mean Lessor Liens: (a) for
Taxes of Agent or a Lessor either not yet due or being chal
lenged by a Permitted Contest; (b) arising out of judgments or
awards against Agent or a Lessor with respect to which at the
time an appeal or proceeding for review is being prosecuted by a
Permitted Contest; and (c) arising out of Liens arising volun
tarily in the ordinary course of business of Agent or a Lessor
for amounts the payment of which is either not delinquent or is
being contested by a Permitted Contest.
"Permitted Liens" shall mean: (i) any rights in favor of
Lessors under the Operative Agreements and any rights of any
Persons entitled to use of the Collateral in accordance with
Section 5.2 of the Lease; (ii) any Lien, (including, without
limitation, Liens of landlords, carriers, warehousemen,
mechanics or materialmen) in favor of any Person securing
payment of the price of goods or services provided in the
ordinary course of business for amounts the payment of which is
not overdue or is being contested in good faith by appropriate
proceedings promptly initiated and diligently prosecuted, so
long as such proceedings do not involve any reasonable danger of
sale, forfeiture or loss of all or any material part of the
Collateral and do not materially adversely affect any Lien
created in favor of Lessor under the Lease; (iii) any Lessor
Lien or any Lien arising out of any breach by any Lessor of its
obligations under the Operative Agreements; (iv) any Lien for
current taxes, assessments or other governmental charges which
are not delinquent or the validity of which is being contested
by a Permitted Contest; (v) attachments, judgments and other
similar Liens arising in connection with court proceedings,
provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured hereby are being
contested in good faith and by appropriate proceedings;
(vi) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases,
zoning and land use restrictions and other similar title
exceptions or encumbrances affecting real property that were not
incurred in connection with the incurrence of indebtedness, so
long as such Liens do not involve a reasonable danger of sale,
forfeiture or loss of all or any material portion of the
Collateral and do not materially adversely affect any Lien
created in favor of Lessor under the Lease; and (vii) any Lien
incurred in the ordinary course of business to secure
performance of statutory obligations.
"Person" shall mean any individual, partnership, corpora
tion, trust, unincorporated association or joint venture, a
government or any department or agency thereof or any other
legal entity.
"Plan" shall mean an "employee benefit plan" as defined in
section 3(3) of ERISA.
"Proceeds" shall have the meaning provided in Section
11.1(c) of the Lease.
"Purchase Price" shall mean, for any Vehicle, the sum of
the Invoice Cost of such Vehicle plus Charges; provided that the
items described in clause (a) of the definition of "Charges"
shall not exceed 3% of the Purchase Price of such Vehicle and
the items described in clause (b) of the definition of "Charges"
shall not exceed 12% of the Purchase Price of such Vehicle, and
provided, further, that the Purchase Price shall in no event
exceed the sum of the Appraised Value of such Vehicle as of its
Delivery Date plus Charges (subject to the preceding proviso).
"Reduction Amount" shall mean amounts paid by Lessee to
Agent, for the benefit of the Lessors, for the purchase of any
Vehicle pursuant to Section 6.1 or 6.2 of the Lease or
Section 6.1(g) of the Participation Agreement, provided that
"Reduction Amounts" shall not include any Rent, Administrative
Charges or any costs, expenses or taxes to be paid by Lessee in
connection with any such purchase, sale or transfer.
"Related Person" shall mean, with respect to any Person,
any trade or business (whether or not incorporated) which,
together with such Person, is under common control as described
in section 414 of the Code.
"Renewal Option" shall mean the meaning provided in Section
11.1(a) of the Lease.
"Renewal Rent" shall mean, with respect to the Lease or any
Lease Supplement (as the context may require), all payments of
Fixed Rent and Variable Rent due and payable by Lessee on each
Payment Date during the applicable Renewal Term.
"Renewal Term" shall have the meaning provided in
Section 2.3 of the Lease.
"Rent" shall mean, with respect to the Lease or any Lease
Supplement, Interim Rent, if any, Basic Rent, and/or Renewal
Rent, as the context may require.
"Rent Period" shall mean, for the Base Period or any
Renewal Term the period beginning on the first day of the Base
Period and ending on (but excluding) the date which numerically
corresponds to such date three months thereafter and each
consecutive three-month period thereafter, with each such period
ending on the date which numerically corresponds to the date on
which such period commenced; provided, however, that (a) if such
Rent Period would otherwise end on a day which is not a Business
Day, then such Rent Period would otherwise end on a day which is
not a Business Day, then such Rent Period shall end on the next
following Business Day, unless (solely for purposes of
determining Rent Periods in connection with calculating Variable
Rent on a LIBO Rate basis) such next following Business Day is
the first Business Day of a calendar month, in which case such
Rent Period shall end on the Business Day immediately preceding
such numerically corresponding day, and (b) no Rent Period may
end later than the last day of the Lease Term.
"Replaced Part" shall have the meaning provided in
Section 5.4(a) of the Lease.
"Replacement Part" shall have the meaning provided in
Section 5.4(a) of the Lease.
"Replacement Vehicle" shall mean any Vehicle duly
substituted for another Vehicle in accordance with the
provisions of the Operative Agreements, as contemplated by
Sections 6.1 and 6.2 of the Lease and Section 6.1(g) of the
Participation Agreement.
"Reportable Event" shall mean a "reportable event"
described in Section 4043(b) of ERISA and the regulations
thereunder.
"Required Lessors" shall mean, at a particular time, the
holders of at least 60% of the Outstanding Investment.
"Responsible Officer" of the Person shall mean: (i) in the
case of any business corporation, the chairman of the board of
directors of such corporation if such chairman is an officer of
such corporation, the president, any vice president or any
assistant vice president of such corporation, the secretary or
any assistant secretary of such corporation or the treasurer or
any assistant treasurer of such corporation; (ii) in the case of
any partnership, a general partner (if such general partner is
an individual), or a Responsible Officer of a corporate general
partner, of such partnership or the general manager of such
partnership or any assistant general manager of such
partnership; and (iii) in the case of any commercial bank or
trust company, the chairman or vice chairman of the board of
directors or trustees of such bank or trust company, the
chairman or vice chairman of the executive committee of the
board of directors or trustees of such bank or trust company,
the president, any vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier,
any assistant cashier, any trust officer or any assistant trust
officer of such bank or trust company, the controller or any
assistant controller of such bank or trust company, any
executive or senior assistant or second vice president of such
bank or trust company or any other individual who is employed by
such bank or trust company and customarily performs functions
similar to those performed by any of the other officers of such
bank or trust company referred to herein.
"Sale Option" shall have the meaning provided in Section
11.1(c) of the Lease.
"Schedule X" shall mean this Schedule to the Participation
Agreement.
"Securities Act" shall have the meaning provided in
Section 5.1(aa) of the Participation Agreement.
"Shareholder's Equity" shall mean the total shareholder's
equity of Lessee and its Consolidated Subsidiaries, determined
in accordance with GAAP.
"Sublease" shall mean a sublease of Vehicles entered into
in accordance with Section 5.2 of the Lease.
"Sublessee" shall mean the lessees or sublessee under any
Sublease.
"Subsequent Delivery Date" shall mean each of the dates
scheduled for a Delivery Date Closing pursuant to a Delivery
Date Notice occurring following the Initial Delivery Date.
"Subsequent Delivery Date Closing" shall mean the Delivery
Date Closing relating to a Subsequent Delivery Date.
"Subsequent Delivery Date Notice" shall mean a Delivery
Date Notice relating to a Subsequent Delivery Date.
"Subsidiary" shall mean, with respect to any Person, any
corporation, association, partnership, joint venture or other
business entity more than 50% (by number of votes) of the stock
of any class or classes (or equivalent interests) of which is at
the time owned by such Person or by one or more Subsidiaries of
such Person; if the holders of the stock of such class or
classes (or equivalent interests) (a) are ordinarily, in the
absence of contingencies, entitled to vote for the election of a
majority of the directors (or Persons performing similar
functions) of such business entity, even though the right so to
vote has been suspended by the happening of such a contingency,
or (b) at the time entitled, as such holders, to vote for the
election of a majority of the directors (or Persons performing
similar functions) of such business entity, whether or not the
right so to vote exists by reason of a happening of a
contingency.
"Supplement Balance" shall mean, as of any determination
date, the aggregate Purchase Price of all of the Vehicles
subject to such Lease Supplement, minus all amounts of Fixed
Rent actually paid to the date of determination pursuant to such
Lease Supplement and all Reduction Amounts with respect to such
Lease Supplement actually paid with respect to such Vehicles to
the date of determination.
"Termination Date" shall mean the date the Lease Term
including any Renewal Term, ends pursuant to (a) Article VIII of
the Lease relating to termination as a result of an Event of
Default, (b) Article X of the Lease relating to early
termination, or (c) Section 11.1 of the Lease relating to the
exercise of Lessee Purchase Option or Sale Option.
"Termination Value" shall mean, on any date, the sum of the
Lease Supplement Termination Values for such date for all Lease
Supplements then in effect.
"Total Commitment" shall mean $65,000,000.
"Transaction Costs" shall mean, without duplication,
(i) the Commitment Fee;
(ii) a fee in respect of legal fees of Pillsbury
Madison & Sutro reasonably incurred on behalf of Agent
through the Initial Delivery Date in connection with the
negotiation, execution and delivery of the Operative
Agreements, and the transactions contemplated thereby,
and the reasonable out-of-pocket expenses of Pillsbury
Madison & Sutro in connection with the foregoing;
(iii) the fees and expenses of the Appraiser;
(iv) the Upfront Fee; and
(v) all costs of lien searches and perfection of a
first priority security interest in the Vehicles.
"UCC" shall mean the Uniform Commercial Code, as in effect
from time to time in any applicable jurisdiction.
"Upfront Fee" shall mean that amount referred to in a
letter agreement dated December 19, 1995 from ABN AMRO North
America, Inc. to Lessee.
"Variable Rent" shall mean, with respect to each Rent
Period, an amount equal to interest accrued on the Lease Balance
(or, with respect to a Lease Supplement, on the Supplement
Balance) outstanding during such period at the Interest Rate
and, for purposes of the Interim Period, shall mean the Interim
Rent.
"Vehicle" shall mean each tractor listed on Schedule I to
each Lease Supplement, and any substitutions therefor, replace
ments thereof and additions thereto from time to time pursuant
to the Operative Agreements.
"Welfare Plan" shall mean, with respect to any Person, a
"welfare plan" as such term is defined in section 3(1) of ERISA
to which such Person or any Related Person to such Person may
have any liability or contingent liability
MASTER LEASE INTENDED AS SECURITY
Dated as of December 22, 1995
between
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE
as Lessee
and
ABN AMRO BANK N.V.
not individually, but solely
as Agent for the Lessors from
time to time under the
Participation Agreement
TABLE OF CONTENTS
Page
ARTICLE I Delivery and Acceptance 1
Section 1.1 Transfer 1
Section 1.2 Acceptance Procedure 2
ARTICLE II Lease Term 2
Section 2.1 Interim and Base Periods 2
Section 2.2 Lease Commencement Date 2
Section 2.3 Lease Renewal 2
ARTICLE III Rent; Other Economic Provisions 3
Section 3.1 Rent Payments 3
Section 3.2 Place and Manner of Payment 3
Section 3.3 Net Lease 4
ARTICLE IV Warranties 5
Section 4.1 Warranty Disclaimer 5
Section 4.2 Quiet Enjoyment 5
ARTICLE V Possession, Assignment, Use and Maintenance of Vehicles 5
Section 5.1 Restriction on Lessee's Possession and Use 5
Section 5.2 Subleases 6
Section 5.3 Maintenance 7
Section 5.4 Repair, Replacement and Substitution 8
Section 5.5 Alterations, Modifications and Additions;
Removable Parts 9
Section 5.6 Inspection of Collateral 10
ARTICLE VI Risk of Loss; Replacement; Waiver and Indemnity 10
Section 6.1 Casualty 10
Section 6.2 Casualty Proceeds 11
ARTICLE VII Insurance 11
Section 7.1 Required Coverages 11
Section 7.2 Delivery of Insurance Certificates 13
ARTICLE VIII Default 13
Section 8.1 Events of Default 13
Section 8.2 Remedies 15
Section 8.3 Additional Remedies 17
Section 8.4 Proceeds of Sale; Deficiency 17
Section 8.5 Right to Perform Lessee's Agreements 18
ARTICLE IX Return of Vehicles 19
ARTICLE X Early Termination 19
Section 10.1 Early Termination as to all Vehicles 19
Section 10.2 Early Termination as to a Vehicle 20
ARTICLE XI Lease Termination 20
Section 11.1 Options 20
Section 11.2 Lessee Purchase Option 21
Section 11.3 Sale Option 21
ARTICLE XII Ownership, Grant of Security Interest to
Lessor and Further Assurances 22
Section 12.1 Grant of Security Interest 22
Section 12.2 Retention of Proceeds in the Case of Default 23
Section 12.3 Attorney-in-Fact 24
Section 12.4 Release of Liens 24
ARTICLE XIII Miscellaneous 24
Section 13.1 No Waiver 24
Section 13.2 Survival of Covenants 25
Section 13.3 APPLICABLE LAW 25
Section 13.4 Effect and Modification of Lease 25
Section 13.5 Notices 25
Section 13.6 Counterparts 25
Section 13.7 Severability 25
Section 13.8 Successors and Assigns:
Benefit of Agreement 26
Section 13.9 Assignment by Agent 26
Section 13.10 Assignment by Lessee 26
Section 13.11 Jury Trial 26
Section 13.12 Section Headings: Table of Contents 26
Section 13.13 Final Agreement 26
Section 13.14 Timeliness of Performance 26
MASTER LEASE INTENDED AS SECURITY
THIS MASTER LEASE INTENDED AS SECURITY (as amended, modi
fied, restated or supplemented from time to time, this "Lease")
dated as of December 22, 1995 is between CONSOLIDATED
FREIGHTWAYS CORPORATION OF DELAWARE, a Delaware corporation, as
Lessee ("Lessee"), with its principal office at Menlo Park,
California, and ABN AMRO BANK N.V., a bank organized under the
laws of the Netherlands, not in its individual capacity, but
solely in its capacity as agent ("Agent") for the benefit of the
Lessors.
WHEREAS, pursuant to the terms and conditions set forth
herein and in that certain Participation Agreement, dated as of
December 22, 1995 (the "Participation Agreement"), by and among
Lessee, Agent and the Lessors named therein, the Participants
have agreed that Agent, on behalf of the Lessors, will lease to
Lessee and Lessee will lease from Agent, on behalf of the
Lessors, certain personal property described in Schedule I
hereto and replacements thereto;
WHEREAS, capitalized terms used but not otherwise defined
herein (including those used in the foregoing recitals) shall
have the meanings specified in Schedule X to the Participation
Agreement, unless the context otherwise requires;
WHEREAS, Lessee may from time to time enter into a Lease
Supplement with Agent, on behalf of the Lessors, covering
certain of the Vehicles identified on Schedule I hereto;
WHEREAS, each Lease Supplement executed from time to time
by Agent, on behalf of the Lessors, and Lessee shall be
incorporated herein by reference;
WHEREAS, to secure Lessee's obligations under this Lease
and the other Operative Agreements, Lessee will grant to Agent,
on behalf of the Lessors, a security interest in the Collateral.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Paragraph Definition here. ARTICLE I
Delivery and Acceptance
Section I.1 Transfer, Acceptance and Lease of Vehicles.
On each Delivery Date, subject to the satisfaction or waiver of
the conditions set forth in Article III of the Participation
Agreement, (a) Lessee hereby grants, assigns, transfers and sets
over unto Agent, on behalf of the Lessors, an interest in the
Vehicles to be delivered on such Delivery Date and covered by
each Lease Supplement, (b) Agent hereby agrees to accept
delivery on such Delivery Date of the interest in the Vehicles
to be so delivered pursuant to the terms of the Participation
Agreement and simultaneously to lease such Vehicles to Lessee
under this Lease and the applicable Lease Supplement, and
(c) Lessee hereby agrees, expressly for the direct benefit of
Agent and the Lessors, to lease from Agent hereunder, for the
Lease Term, such Vehicles to be delivered on such Delivery Date.
Section I.2 Acceptance Procedure. Agent hereby authorizes
one or more employees of Lessee, as the authorized representa
tive or representatives of Agent to accept delivery of the
Vehicles identified on Schedule I to each Lease Supplement
executed by Lessee on each Delivery Date. Lessee hereby agrees
that such acceptance of delivery by such authorized representa
tive or representatives and the execution and delivery by Lessee
on each Delivery Date of a Lease Supplement shall, without
further act, constitute the irrevocable acceptance by Lessee of
the Vehicles which are the subject thereof for all purposes of
this Lease and the other Operative Agreements on the terms set
forth therein and herein.
ARTICLE II
Lease Term
Section II.1 Interim and Base Periods. Unless earlier
terminated, the term of this Lease shall consist of (a) an
interim period commencing, with respect to each Lease Supple
ment, on and including the applicable Delivery Date of such
Lease Supplement, and ending on but not including the Lease
Commencement Date (the "Interim Period"), (b) a base period,
commencing on and including the Lease Commencement Date and
ending on but not including the second anniversary thereof (the
"Base Period") and (c) any Renewal Terms (collectively, the
"Lease Term").
Section II.2 Lease Commencement Date. The lease commence
ment date shall be December 28, 1995 (the "Lease Commencement
Date").
Section II.3 Lease Renewal. Lessee may elect to renew
this Lease for up to three successive one-year renewal terms
with respect to all, but not less than all, of the Vehicles
subject to all then-existing Lease Supplements (each, a "Renewal
Term") as provided in Article XI.
ARTICLE III
Rent; Other Economic Provisions
Section III.1 Rent Payments. Lessee shall pay to Agent,
for the benefit of the Lessors, the amounts of Interim Rent,
Basic Rent or Renewal Rent, as applicable, determined in
accordance with this Section 3.1 and each Lease Supplement.
Scheduled installments of Basic Rent and Renewal Rent may be
adjusted pursuant to Section 6.1. All computations of interest
pursuant to the Operative Agreements shall be made on the basis
of actual number of days elapsed in a 360-day year.
(a) Interim Rent. With respect to the Interim Period (if
any) for the Lease, Lessee shall pay to Agent, for the benefit
of the Lessors, the amount of Interim Rent set forth on Schedule
II to each Lease Supplement to which Lessee is a party. Interim
Rent under each Lease Supplement shall consist of interest
accrued on the Supplement Balance of such Lease Supplement at
the Interest Rate for the Interim Period of such Lease
Supplement and shall be payable on the Lease Commencement Date.
(b) Basic Rent. On each Payment Date during the Base
Period, Lessee shall pay to Agent, for the benefit of the
Lessors, Basic Rent under each Lease Supplement to which Lessee
is a party, consisting of the amount of Fixed Rent set forth
opposite the applicable Payment Date on Schedule II to each such
Lease Supplement and Variable Rent accrued on the Supplement
Balance of each such Lease Supplement during the Rent Period
ended on such Payment Date.
(c) Renewal Rent. On each Payment Date during any Renewal
Term in effect, Lessee shall pay to Agent, for the benefit of
the Lessors, Renewal Rent under each Lease Supplement to which
Lessee is a party, consisting of the amount of Fixed Rent set
forth opposite the applicable Payment Date on Schedule II to
each such Lease Supplement and Variable Rent accrued on the
Supplement Balance of each such Lease Supplement during the Rent
Period ended on such Payment Date.
Section III.2 Place and Manner of Payment. Rent and all
other sums due to Agent or any Lessor hereunder shall be paid in
immediately available funds and if payable to Agent, at the
Agent's Corporate Office, and if payable to a Lessor at the
office of Lessor as it may from time to time specify to Lessee
in a notice pursuant to this Lease. All such payments shall be
received by Agent or Lessor, as applicable, not later than
11:00 a.m., San Francisco time, on the date due; funds received
after such time shall for all purposes under the Operative
Agreements be deemed to have been received by Lessor on the next
succeeding Business Day. Any payments received by Agent not
later than 11:00 a.m. San Francisco time, shall be paid by Agent
to the Lessors in immediately available funds no later than
1:00 p.m. San Francisco time on the same day and any payments
received by Agent from or on behalf of Lessee after 11:00 a.m.
San Francisco time, shall be paid to Lessors as soon after
receipt as practicable, but not later than 1:00 p.m. San
Francisco time on the next succeeding Business Day. Lessee
shall pay to Agent, for the benefit of the Lessors, or to a
Lessor in the case of payments to a Lessor, on demand, interest
at the rate per annum which is 2% above the Interest Rate in
effect from time to time on any overdue amount of Rent, or any
other payment due under this Lease and (to the extent permitted
by applicable law) interest from the date due (not taking into
account any grace period) until payment is made.
Section III.3 Net Lease. This Lease is a net lease and
Lessee's obligation to pay all Rent, indemnities and other
amounts payable hereunder shall be absolute and unconditional
under any and all circumstances and, without limiting the
generality of the foregoing, Lessee shall not be entitled to any
abatement or reduction of Rent or any setoff against Rent,
indemnity or other amount, whether arising by reason of any
past, present or future claims of any nature by Lessee against
Agent or any Lessor, or otherwise. Except as otherwise
expressly provided herein, this Lease shall not terminate, nor
shall the obligations of Lessee be otherwise affected: (a) by
reason of any defect in, damage to, or loss of possession or
use, obsolescence or destruction, of any or all of the Vehicles,
however caused; or (b) by the taking or requisitioning of any or
all of the Vehicles by condemnation or otherwise; or (c) by the
invalidity or unenforceability or lack of due authorization by
Lessor or Lessee or other infirmity of this Lease; or (d) by
lack of power or authority of Agent to enter into this Lease or
any other Operative Agreement; or (e) by the attachment of any
Lien of any third party to any Vehicle; or (f) by any
prohibition or restriction of or interference with Lessee's use
of any or all of the Vehicles by any Person; or (g) by the
insolvency of or the commencement by or against Lessor of any
bankruptcy, reorganization or similar proceeding; or (h) by any
other cause, whether similar or dissimilar to the foregoing, any
present or future law to the contrary notwithstanding. It is
the intention of the parties that all Rent, indemnities and
other amounts payable by Lessee hereunder shall be payable in
all events in the manner and at the times herein provided unless
Lessee's obligations in respect thereof have been terminated or
modified pursuant to the express provisions of this Lease. To
the extent permitted by applicable law, Lessee hereby waives any
and all rights which it may now have or which may at any time be
conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease, in whole or in part,
except strictly in accordance with the express terms hereof.
Each rental, indemnity or other payment made by Lessee hereunder
shall be final, and Lessee shall not seek to recover (except as
expressly provided in this Lease) all or any part of such
payment from Lessor for any reason whatsoever. Without
affecting Lessee's obligation to pay Rent, or other amounts
payable hereunder, Lessee may seek damages for a breach by Agent
or any Lessor of its obligations under this Lease or the
Participation Agreement.
ARTICLE IV
Warranties
Section IV.1 Warranty Disclaimer. LESSEE ACKNOWLEDGES AND
AGREES THAT: (a) EACH OF THE VEHICLES IS LEASED AS-IS AND
WHERE-IS; (b) EACH OF THE VEHICLES LEASED BY IT IS OF A SIZE,
DESIGN, CAPACITY AND MANUFACTURE SELECTED BY LESSEE; (c) LESSEE
IS SATISFIED THAT THE SAME IS SUITABLE FOR ITS PURPOSES;
(d) LESSOR IS NOT A MANUFACTURER THEREOF OR A DEALER IN PROPERTY
OF SUCH KIND; AND (e) LESSOR HAS NOT MADE NOR SHALL IT BE DEEMED
TO HAVE MADE: (i) ANY REPRESENTATION OR WARRANTY OR COVENANT
WITH RESPECT TO THE TITLE, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, CONDITION, QUALITY, DESCRIPTION, DURABILITY
OR SUITABILITY OF ANY VEHICLE IN ANY RESPECT OR IN CONNECTION
WITH OR FOR THE PURPOSES AND USES OF LESSEE; OR (ii) ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY VEHICLE.
Section IV.2 Quiet Enjoyment. In the absence of an Event
of Default, neither any Lessor nor the Agent nor any Person
acting by, through or under any of such Persons, shall take any
actions to interfere with Lessee's quiet enjoyment of the
Vehicles during the Lease Term.
ARTICLE V
Possession, Assignment, Use and
Maintenance of Vehicles
Section V.1 Restriction on Lessee's Possession and Use.
Lessee shall not nor shall Lessee permit any Sublessee to:
(a) use, operate, maintain or store any Vehicle or any portion
thereof: (i) except in accordance with Section 5.3; or (ii) in
violation of any applicable insurance policy or law or regula
tion of any Authority; (b) except as permitted by Section 6.1,
abandon any Vehicle; (c) except as permitted by Section 5.2,
sublease or assign, without the prior written consent of Agent,
any Vehicle or permit the operation thereof by anyone other than
Lessee; (d) except as set forth in Section 5.2, sell, assign or
transfer any of its rights hereunder or in any Vehicle, or
directly or indirectly create, incur or suffer to exist any
Lien, on any of its rights hereunder or in any Vehicle, except
for Permitted Liens; (e) permit any Vehicle to be titled in any
jurisdiction other than the jurisdiction in which it was titled
on its the Delivery Date, except as permitted under Section
6.1(f) of the Participation Agreement; and (f) use, operate,
maintain or store any Vehicle or any portion thereof outside of
the United States except that Lessee may (and may permit any
Sublessee to) use, maintain and operate any Vehicle outside of
the United States on trips to and from a point of embarkation
located within the United States. Lessee will defend the
transfer of the Vehicles by Lessee to Agent, for the benefit of
the Lessors or Agent against the claims or demands of all
Persons (other than Lessor Liens).
Section V.2 Subleases. So long as no Event of Default
shall have occurred and be continuing, Lessee may sublease one
or more Vehicles (i) to a wholly-owned Subsidiary of Lessee
without the prior written consent of Lessors and (ii) to any
other corporation organized under the laws of the United States
or any State thereof with the prior written consent of each of
the Lessors, which consent shall not be unreasonably withheld;
provided, that any Sublease entered into pursuant to this
Section 5.2 shall satisfy each of the following conditions:
(a) such Sublease shall automatically expire upon the
termination of the Lease Supplement governing the Vehicle
subleased under such Sublease and shall be expressly subordinate
and subject to this Lease and the Liens created hereunder, and
to the applicable Lease Supplement;
(b) such Sublease shall be in writing and shall expressly
prohibit any further assignment, sublease or transfer;
(c) such Sublease shall not contain a purchase option in
favor of the Sublessee or any other provision pursuant to which
the Sublessee may obtain record or beneficial title to the
Vehicle leased thereunder from Lessee of such Vehicle;
(d) such Sublease shall prohibit the Sublessee from making
any alterations or modifications to the Vehicle that would
violate this Lease;
(e) such Sublease shall require the Sublessee to maintain
the Vehicle in accordance with Section 5.3;
(f) on or before execution and delivery of such Sublease,
Lessee shall execute and deliver to Agent a security agreement,
in a form approved by Agent, whereby Lessee grants to Agent, for
the benefit of the Lessors, a security interest in all of
Lessee's rights, title and interest in, to and under such
Sublease, as Collateral for Lessee's obligations under the
Operative Agreements. Such Sublease shall provide that such
sublessee shall make all payments under such Sublease directly
to Agent, at an account specified by Agent, upon the occurrence
of any of the events specified in Section 6.1(j) of the
Participation Agreement. In connection therewith, Lessee shall
deliver to Agent an executed original counterpart of such
Sublease upon the execution and delivery thereof, marked as the
sole original execution counterpart for Uniform Commercial Code
purposes, and Lessee shall, at its own cost and expense, do any
further act and execute, acknowledge, deliver, file, register
and record any further documents which Agent may reasonably
request in order to create, perfect, preserve and protect
Agent's and Lessor's security interest in such Sublease. Any
payments received by Agent from Sublessee pursuant to this
Section shall be credited to those amounts owing by Lessee under
the Lease;
(g) Lessee shall not, without Agent's prior written
consent, permit or consent to any renewal or extension of a
Sublease at any time when an Event of Default has occurred and
is continuing;
(h) Lessee shall notify Agent and each Lessor in writing
not less than 30 days prior to entering into any Sublease, which
notice shall include (i) a description of the Vehicle or
Vehicles to be leased thereunder, and (ii) the street address,
city, county and State where such Vehicle or Vehicles will be
located during the term of such Sublease, and Lessee shall
provide copies of each Sublease to Agent upon request, provided
that if such Sublease will require that the Vehicle be titled or
registered in a different jurisdiction, then Lessee must comply
with Section 6.1(f) of the Participation Agreement in connection
with such titling and registration.
The liability of Lessee with respect to this Lease, the Lease
Supplements and each of the other Operative Agreements shall not
be altered or affected in any way by the existence of any
Sublease.
Section V.3 Maintenance. At all times during the term of
this Lease, Lessee shall at its expense or shall cause each
Sublessee to: (a) maintain, manage and monitor the Vehicles in
compliance in all material respects with all applicable require
ments of law, Authority and/or insurance policies; (b) maintain
the Vehicles (or cause the Vehicles to be maintained) in as good
operating order, repair and condition as it was on the date such
Vehicles became subject to this Lease (assuming that, as of such
date, each such Vehicle was in good operating order, repair and
condition), ordinary wear and tear excepted; (c) maintain,
manage and monitor the Vehicles in accordance with the terms of
all applicable contracts (including, without limitation, service
contracts and insurance contracts) in a manner consistent with
Lessee's customary practices; and (d) conduct all scheduled
maintenance of the Vehicles in conformity with Lessee's mainte
nance procedures then in effect for similar equipment owned or
leased by Lessee, and applicable warranty guidelines. Lessee
shall in any event maintain the Vehicles (or cause the Vehicles
to be maintained) in at least as good a condition as comparable
equipment owned or leased by Lessee or any of its Subsidiaries.
Lessee will maintain or cause to be maintained, and shall permit
Agent and Lessors to inspect, any records, logs and other
materials required by any Authority having jurisdiction to be
maintained or filed in respect of any Vehicle.
Section V.4 Repair, Replacement and Substitution.
(a) As soon as practicable after a Partial Casualty to a
Vehicle, Lessee shall repair and rebuild the affected portions
of such Vehicle (or cause such affected portions to be repaired
and rebuilt) to the condition required to be maintained by
Section 5.3. In the event that any Part which may from time to
time be incorporated or installed in or attached to any Vehicle
becomes at any time worn out, damaged or permanently rendered
unfit for use for any reason whatsoever (unless such event
constitutes a Casualty, in which event the provisions of
Section 6.1 hereof shall apply), Lessee, at its own cost and
expense, will promptly replace, or cause to be replaced, such
Part with a replacement Part (a "Replacement Part") in
accordance with Lessee's customary practices, but in any event
subject to Section 5.3. In addition, Lessee may, at its own
cost and expense, remove in the ordinary course of maintenance,
service, repair, overhaul or testing, any Part, whether or not
worn out, destroyed, seized, confiscated, damaged beyond repair
or permanently rendered unfit for use; provided, that Lessee
will, at its own cost and expense, replace such Part with a
Replacement Part as promptly as is commercially reasonable. All
Replacement Parts shall be free and clear of all Liens (other
than Permitted Liens) and shall be in as good operating
condition as, and shall have a value and utility at least equal
to, the Parts replaced, assuming such replaced Parts and the
Vehicles were in the condition and repair required to be
maintained by the terms of Section 5.3. Any Part at any time
removed from any Vehicle shall remain the property of Agent, for
the benefit of the Lessors (subject to this Lease), no matter
where located, until such time as such Part shall be replaced by
a Part which has been incorporated or installed in or attached
to such Vehicle and which meets the requirements for a
Replacement Part specified above. Immediately upon any
Replacement Part becoming incorporated or installed in or
attached to any such Vehicle as above provided, without further
act: (i) title to the replaced Part (the "Replaced Part") shall
thereupon vest in Lessee of such Vehicle, free and clear of all
rights of Agent, for the benefit of the Lessors, and shall no
longer be deemed a Part hereunder; (ii) such Replacement Part
shall thereupon vest in Lessor, as provided in Section 12.1 (in
the same manner as the underlying Vehicle); and (iii) such
Replacement Part shall become subject to this Lease, the
security interest created hereunder, and the applicable Lease
Supplement, and shall be deemed part of such Vehicle for all
purposes hereof to the same extent as the Parts incorporated or
installed in or attached to such Vehicle on the date such
Vehicle became subject to this Lease.
(b) Upon the satisfaction of the conditions specified in
Section 5.4(a), and the Replacement Part becoming subject to
this Lease and the security interest created hereunder, Agent,
on behalf of the Lessors, shall execute and deliver to Lessee
such documents as may be reasonably necessary to release the
Replaced Part from the terms and scope of this Lease (but
without representations or warranties, except that the Replaced
Part is free and clear of all Lessor Liens), in such form as may
be reasonably requested by Lessee and are in form and substance
satisfactory to the Required Lessors, all at the expense of
Lessee.
Section V.5 Alterations, Modifications and Additions;
Removable Parts.
(a) Except as provided in Sections 5.3 and 5.4, Lessee
shall not remove, replace or alter any Vehicle or affix or place
any accessory, equipment or device on any Vehicle (such actions
shall be hereafter referred to collectively as "alter") if such
removal, replacement, alteration or addition would materially
impair the originally intended function or use or materially
reduce the value or useful life of such Vehicle; provided, that
Lessee, at its own expense, will make, or cause to be made, any
alteration, improvement, modification or addition to or in
respect of any Vehicle that may be necessary, from time to time,
to comply in all material respects with any applicable law,
governmental rule or regulation or any provision of any
insurance policy required to be maintained under Section 7.1
(any Parts being used to comply with this provision shall be
hereafter referred to as "Mandatory Parts"). All Parts affixed
to or installed as a part of any Vehicle, excluding temporary
replacements, shall thereupon become subject to the security
interest under this Lease. If no Event of Default shall exist,
Lessee may remove, at its expense, any Part at any time during
the term of this Lease (such Part, a "Removable Part"):
(i) which is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed
in or attached to a Vehicle on the date such item became subject
to this Lease or any Part in replacement of or substitution for
any such Part originally incorporated or installed or attached
to such Vehicle; (ii) which is not a Mandatory Part; and
(iii) which can be removed from any Vehicle without causing
damage to such Vehicle or diminishing or impairing the value,
utility or condition which such Vehicle would have had at such
time had such addition not occurred; provided, that: (x) such
removal will not materially impair the value, use or useful life
which the Vehicle would have had at such time had such Part not
been affixed or placed to or on such Vehicle; and (y) such Part
is not necessary for the continued normal use of such Vehicle.
Lessee shall repair all damage to any Vehicle resulting from any
alteration so as to restore such Vehicle to the condition in
which it existed prior to such alteration (ordinary wear and
tear excepted). Neither Agent nor any Lessor shall have any
obligation to pay for or to reimburse Lessee for any alteration
required or permitted by this Section 5.5.
(b) As provided in Section 4.1 of the Participation
Agreement and Section 12.1 of this Lease, all Parts incorporated
or installed in or attached or added to any Vehicle as the
result of alterations, modifications or additions under this
Section 5.5, except Removable Parts, shall, without further act,
vest in Agent, for the benefit of the Lessors, to secure
Lessee's performance of its obligations under the Operative
Agreements, in the manner provided in clause (ii) of
Section 5.4(a) and the other applicable provisions of
Section 5.4 shall apply with respect to such Parts. Upon the
removal by Lessee of any Removable Part as provided herein, such
Removable Part shall no longer be deemed part of the Vehicle
from which it was removed. Any Removable Part not removed by
Lessee as provided herein prior to the end of the Lease Term
shall become the property of Lessor at such time.
Section V.6 Inspection of Collateral. Agent, the Lessors
and each of their agents and representatives shall have the
right at all reasonable times, upon reasonable notice, to
inspect any Collateral, including without limitation any
Certificate of Title or documentation related to the Collateral.
Lessee shall maintain: any Certificate of Title, microfiche
containing Vehicle registration documents and executed blank
powers of attorney enabling the Agent to reregister the
Vehicles, each of them to be maintained in Lessee's records in a
separate file entitled "ABN AMRO Documentation."
ARTICLE VI
Risk of Loss; Replacement; Waiver and Indemnity
Section VI.1 Casualty. Upon a Casualty, Lessee shall give
prompt written notice thereof (a "Casualty Notice") to Agent,
which notice shall specify whether Lessee will:
(a) repay a portion of the Lease Balance equal to the
Casualty Amount together with all Variable Rent accrued on such
portion of the Lease Balance to the date of payment, which
repayment shall be made no later than the next scheduled Payment
Date occurring after such Casualty or, if such Casualty occurs
during the last 5 Business Days of a Rent Period, then no later
than the second Payment Date occurring after such Casualty,
provided that in any event such repayment shall be made no later
than the last day of the Lease Term (the "Casualty Settlement
Date"); or
(b) replace the Vehicle with respect to which the Casualty
has occurred pursuant to the provisions of Section 5.4 (treating
such Vehicle, for these purposes, in the same manner as a Part),
provided that upon the occurrence and during the continuance of
an Event of Default or an Incipient Default, Lessee shall be
obligated, at the option of the Required Lessors, to make the
payments referred to in clause (a) above and shall not be
entitled to exercise any right or election of replacement as set
forth in this clause (b).
If Lessee has elected, or is required, to pay the Casualty
Amount pursuant to clause (a) above, Lessee shall continue to
make all payments of Rent due under the applicable Lease
Supplement until and including the Casualty Settlement Date.
Upon payment of the Casualty Amount in respect of any Vehicle
suffering a Casualty on such Casualty Settlement Date, the
remaining scheduled payments of Fixed Rent, if any, shall each
be reduced by an amount equal to the product of the scheduled
amount of such Fixed Rent prior to the receipt of such payment
by Agent multiplied by the Allocation Fraction under such Lease
Supplement of the Vehicle suffering such Casualty.
Section VI.2 Casualty Proceeds. All proceeds of any
casualty insurance or condemnation proceeds ("Casualty
Proceeds") paid or payable to Lessee or any Affiliate of Lessee
by reason of a Casualty or Partial Casualty to a Vehicle shall
be deposited into a deposit account established by Agent, for
the benefit of the Lessors, (the "Deposit Account"), unless
Lessee shall have already complied with the applicable
provisions of Section 5.4 or 6.1 with respect to such Casualty
or Partial Casualty. Any Casualty Proceeds paid to Agent with
respect to a Vehicle suffering a Casualty or a Partial Casualty
shall also be deposited in the Deposit Account. Any moneys in
the Deposit Account attributable to a Casualty or Partial
Casualty shall be remitted promptly to Lessee after Lessee's
full compliance with Section 6.1 or Section 5.4, as applicable.
Notwithstanding the foregoing provisions of this Section 6.2,
and provided that no Incipient Default consisting of an event
described in Section 8.1 (a) or (g) or an Event of Default shall
exist, if the aggregate amount of Casualty Proceeds at any one
time outstanding is $250,000 or less, then Lessee may receive
such Casualty Proceeds directly, without delivery to Agent;
provided, that such Casualty Proceeds are applied in accordance
with the requirements of Section 6.1 or Section 5.4, as
applicable. Notwithstanding any Casualty, all of Lessee's
obligations under this Lease and each Lease Supplement
(including its obligation to make all payments of Rent as they
become due) shall continue unabated and in full force and effect
as provided in this Lease. Without limiting the foregoing,
Lessee's obligations under Section 5.4 shall not be affected by
the amount of any Casualty Proceeds received by Lessee.
ARTICLE VII
Insurance
Section VII.1 Required Coverages. At its own expense,
Lessee will maintain the following insurance coverages:
(a) primary automobile and general liability insurance of
not less than $3,000,000 per occurrence, with excess coverages
of not less than $5,000,000 per occurrence and $95,000,000 in
the aggregate, in each case naming Agent and Lessors as
additional insureds; and
(b) insurance against all risks of loss or physical damage
to the Vehicles in a primary amount of not less than $250,000
per occurrence and excess "all risk" coverage on the Vehicles in
a blanket amount of not less than $100,000,000, which insurance
shall name Agent and Lessors as the sole loss payees.
So long as CF Financial Services Corporation or an insurer which
is an Affiliate of Lessee (the "Insurer") shall (i) maintain its
good standing as an insurer, (ii) be financially sound in the
reasonable judgment of the Required Lessors and (iii) be in
compliance with all applicable regulatory requirements, Lessee
may obtain primary insurance coverage from the Insurer, with
retained liability for physical damage to the Vehicles and for
liability coverage required under clause (a) above, which
retained liability amounts, in both such cases, shall be in
amounts not greater than amounts customary for similarly
situated companies operating comparable equipment in the same
industry as Lessee. Lessee shall obtain its excess insurance
and, if Insurer does not meet the criteria set forth in the
preceding sentence or is no longer providing Lessee's insurance,
its primary insurance, from financially responsible companies
selected by Lessee and having an A.M. Best rating of "A" or
better or otherwise acceptable to the Required Lessors.
Such insurance shall (i) name Agent and Lessors as
additional insured parties thereunder as specified above
(without any representation or warranty by, or obligation upon,
Agent or any Lessor) as their respective interests may appear,
(ii) contain the agreement by the Insurer that any loss
thereunder shall be payable to Agent and Lessors notwithstanding
any action, inaction or breach of representation or warranty by
Lessee or any other Person having an interest in any Vehicle
(including, without limitation, Agent or any Lessor), (iii) pro
vide that there shall be no recourse against Agent or any Lessor
for payment of premiums or other amounts with respect thereto,
(iv) provide that Insurer shall give Agent and each Lessor at
least 30 days' prior written notice of cancellation, lapse or
reduction of limits, (v) be primary with respect to any other
insurance carried by or available to Agent and the Lessors,
(vi) provide that the insurer shall waive any right of
subrogation, setoff, counterclaim, or other deduction, whether
by attachment or otherwise, against Agent or any Lessor, and
(vii) contain a cross-liability clause providing for coverage of
Agent and each Lessor as if separate policies had been issued to
each of them, provided, however, that such provision shall not
increase the total limits of liability over those specified
herein. Lessee will notify Agent and Lessors promptly of any
policy cancellation, reduction in policy limits, modification or
amendment.
Section VII.2 Delivery of Insurance Certificates. On or
before the Initial Delivery Date and thereafter on each
Subsequent Delivery Date, Lessee shall deliver to Agent
certificates of insurance satisfactory to Agent and Lessors
evidencing the existence of all insurance required to be
maintained hereunder and setting forth the respective coverages,
limits of liability, carrier, policy number and period of
coverage. Thereafter, throughout the Lease Term, at the time
each of Lessee's insurance policies is renewed (but in no event
less frequently than once each year), Lessee shall deliver to
Agent and each Lessor certificates of insurance evidencing that
all insurance required by Section 7.1 to be maintained by Lessee
with respect to the Vehicles is in effect.
ARTICLE VIII
Default
Section VIII.1 Events of Default. The following shall
constitute events of default (each an "Event of Default")
hereunder and under each Lease Supplement then in effect
(whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any Authority):
(a) any payment of Rent, or any other payment payable by
Lessee hereunder or by Lessee under any other Operative
Agreement (including without limitation, any amount payable
pursuant to Article VII or VIII of the Participation Agreement)
shall not be paid when due, and such payment shall be overdue
for a period of three Business Days;
(b) any representation or warranty made by or on behalf of
Lessee contained in any Operative Agreement or in any certifi
cate, letter or other writing or instrument furnished or
delivered to Agent or Lessors, pursuant thereto shall at any
time prove to have been incorrect in any material respect when
made, deemed made or reaffirmed, as the case may be;
(c) Lessee shall default in the performance or observance
of any term, covenant, condition or agreement on its part to be
performed or observed under Article XI or Section 13.10 of this
Lease or under Section 6.1(c), (f), (g) of the Participation
Agreement (except to the extent that Section 13.10 incorporates
Section 5.2, in which case clause (e) of this Section 8.1 shall
apply);
(d) Lessee shall default in any material respect in the
performance or observance of any term, covenant, condition or
agreement on its part to be performed or observed under
Section 7.1;
(e) Lessee shall default in any material respect in the
performance or observance of any other term, covenant, condition
or agreement on its part to be performed or observed hereunder
or under any other Operative Agreement (and not constituting an
Event of Default under any other clause of this Section 8.1),
and such default shall continue unremedied for a period of 30
days after the earlier to occur of (i) written notice thereof by
Agent or any Lessor to Lessee or (ii) Lessee has Actual
Knowledge thereof;
(f)(i) Lessee shall generally fail to pay, or admit in
writing its inability to pay, its debts as they become due, or
shall voluntarily commence any case or proceeding or file any
petition under any bankruptcy, insolvency or similar law or
seeking dissolution, liquidation or reorganization or the
appointment of a receiver, agent, custodian or liquidator for
itself or a substantial portion of its property, assets or
business or to effect a plan or other arrangement with its
creditors, or shall file any answer admitting the jurisdiction
of the court and the material allegations of any involuntary
petition filed against it in any bankruptcy, insolvency or
similar case or proceeding, or shall be adjudicated bankrupt, or
shall make a general assignment for the benefit of creditors, or
shall consent to, or acquiesce in the appointment of, a
receiver, agent, custodian or liquidator for itself or a
substantial portion of its property, assets or business; or
(ii) corporate action shall be taken by Lessee for the purpose
of effectuating any of the foregoing;
(g) involuntary proceedings or an involuntary petition
shall be commenced or filed against Lessee under any bankruptcy,
insolvency or similar law or seeking the dissolution, liquida
tion or reorganization of Lessee or the appointment of a
receiver, agent, custodian or liquidator for Lessee or of a
substantial part of the property, assets or business of Lessee,
or any writ, judgment, warrant of attachment, execution or
similar process shall be issued or levied against a substantial
part of the property, assets or business of Lessee, and such
proceedings or petition shall not be dismissed or stayed, or
such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded, within
60 days after commencement, filing or levy, as the case may be;
(h) any one or more of the following shall occur and the
liability of Lessee and its Subsidiaries on a consolidated basis
shall exceed, individually or in the aggregate, $20,000,000:
(i) a contribution failure occurs with respect to any Pension
Plan (other than a Multi-employer Plan) sufficient to give rise
to a lien under Section 302(f) of ERISA or Section 412(n) of the
Code with respect to any Pension Plan (other than a Multi-
employer Plan) as to which Lessee or any Related Person to
Lessee may have any liability, (ii) there shall exist an
unfunded current liability (as defined in 302(d)(8) of ERISA)
with respect to any Pension Plan, (iii) steps are undertaken to
terminate any Pension Plan, (iv) any Reportable Event occurs
with respect to a Pension Plan for which notice to the PBGC has
not been waived, (v) any action is taken with respect to a
Pension Plan which could result in the requirement that Lessee
or any Related Person to Lessee furnish a bond or other security
to the PBGC or such Pension Plan, (vi) the occurrence of any
event which could cause Lessee or any Related Person to Lessee
to incur any liability, fine or penalty with respect to any
Pension Plan or any increase in liability with respect to any
Pension Plan, or (vii) the occurrence of any event that could
result in any increase in the liability (or contingent
liability) of Lessee or any Related Person to Lessee with
respect to post-retirement benefits under any Welfare Plan;
(i) any Operative Agreement or the security interest
granted under this Lease shall (except in accordance with its
terms), in whole or in part, terminate, cease to be effective or
cease to be the legally valid, binding and enforceable
obligation of Lessee or any Affiliate, directly or indirectly,
contest in any manner in any court the effectiveness, validity,
binding nature or enforceability thereof; or the security
interest securing Lessee's obligations under the Operative
Agreements shall, in whole or in part, cease to be a perfected
first priority security interest;
(j) there shall have occurred any event of default (after
giving effect to any applicable grace or cure period) in the
performance or observance of any obligation or condition with
respect to any Debt owing by or guaranteed by Lessee having an
aggregate principal amount in excess of $20,000,000; provided
that should such event of default be subsequently cured or
waived, it shall no longer constitute an Event of Default
hereunder; or
(k) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against Lessee, and such judgment or judgments remain
undischarged or unstayed for a period (during which execution
shall not be effectively stayed) of 30 days; provided, that the
aggregate of all such judgments exceeds $20,000,000.
Section VIII.2 Remedies. If any Event of Default has
occurred and is continuing, Agent may exercise in any order one
or more or all of the remedies set forth in this Section 8.2 (it
being understood that no remedy herein conferred is intended to
be exclusive of any other remedy or remedies, but each and every
remedy shall be cumulative and shall be in addition to every
other remedy given herein or now or hereafter existing at law or
in equity or by statute):
(a) Agent may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by
Lessee of the applicable covenants of this Lease or to recover
damages for the breach thereof;
(b) Agent may by notice in writing to Lessee terminate
this Lease, but Lessee shall remain liable as hereinafter
provided; and Agent may, at its option, do any one or more of
the following: (i) declare the Lease Balance, all accrued
Variable Rent, all other amounts then payable by Lessee under
this Lease and the other Operative Agreements to be immediately
due and payable, and recover any other damages and expenses
(including the costs and expenses described in Article VII and
Section 11.5 of the Participation Agreement) in addition thereto
which Agent or any Lessor shall have sustained by reason of such
Event of Default; (ii) enforce the security interest given
hereunder pursuant to the Uniform Commercial Code or any other
law; (iii) enter upon the premises where any Vehicle may be and
either remove such Vehicle, with any damage to the improvements
on such premises to be borne by Lessee (except to the extent
such damage is due to the willful misconduct or gross negligence
of Agent or its representatives), or take possession of such
Vehicle; and (iv) require Lessee to return the Vehicles as
provided in Article IX; or
(c) Agent may require Lessee immediately to purchase the
Vehicles for an aggregate purchase price equal to the applicable
Termination Value as of the most recent Payment Date. Lessee
shall also pay to Agent (i) all accrued unpaid Rent payable on
or prior to such Payment Date; (ii) the pro rata Variable Rent
from the most recent Payment Date to the date of such purchase;
and (iii) all other fees and expenses and other amounts then due
and payable pursuant to this Lease and the other Operative
Agreements.
Notwithstanding the foregoing, and provided that no event
of default has occurred and is continuing under any documents
evidencing obligations for borrowed money in excess of twenty
million dollars ($20,000,000) to which Consolidated Freightways,
Inc. is a party, upon the occurrence of any Event of Default
resulting from a default in the performance or observance of any
term, covenant, condition or agreement on Lessee's part to be
performed or observed under 6.1(i) of the Participation
Agreement, and upon notice by the Agent to Lessee that the Agent
seeks to pursue any of the remedies described in Section 8.2,
Lessee may, within one (1) Business Day from receipt of such
notice, cause Consolidated Freightways, Inc. to enter into a
Guarantee, the form of which is attached hereto as Exhibit B,
the effect of which shall cure such Event of Default and such
Guarantee shall remain in effect until such time as Lessee is in
compliance with all financial covenants referred to in Section
6.1(i) of the Participation Agreement.
Notwithstanding the foregoing, upon the occurrence of any
Event of Default described in subsections (a) through (e) and
(h) through (k) of Section 8.1, and upon notice by the Agent to
Lessee that the Agent seeks to pursue any of the remedies
described in Section 8.2, Lessee may, within one (1) Business
Day from the receipt of such notice, elect to purchase all of
the Vehicles for an amount equal to the applicable Termination
Value as of the most recent Payment Date. Lessee shall also pay
to Agent (i) all accrued unpaid Rent payable on or prior to such
Payment Date; (ii) the pro rata Variable Rent from the most
recent Payment Date to the date of such purchase; and (iii) all
other fees and expenses and other amounts then due and payable
pursuant to this Lease and the other Operative Agreements. The
purchase of all Vehicles by Lessee pursuant to the preceding two
sentences shall be in immediately available funds within three
(3) Business Days from the date of Lessee's election to purchase
the Vehicles.
Notwithstanding the foregoing, upon the occurrence of any
Event of Default described in subsection (f) or (g) of
Section 8.1, Lessee shall automatically and immediately be
required to purchase all of the Vehicles for an amount equal to
the applicable Termination Value as of the most recent Payment
Date. Lessee shall also pay to Agent (i) all accrued unpaid
Rent payable on or prior to such Payment Date; (ii) the pro rata
Variable Rent from the most recent Payment Date to the date of
such purchase; and (iii) all other fees and expenses and other
amounts then due and payable pursuant to this Lease and the
other Operative Agreements.
Except for notices expressly otherwise provided for in the
Operative Agreements, Lessee hereby waives presentment, demand,
protest and notice of any kind including, without limitation,
notices of default, notice of acceleration and notice of intent
to accelerate.
Section VIII.3 Additional Remedies. In addition to the
remedies set forth in Section 8.2, if any Event of Default shall
occur, the Agent (at the direction of the Required Lessors) may,
but is not required to, sell the Collateral in one or more
sales. Lessor may purchase all or any part of the Collateral at
such sale. Lessee acknowledges that sales for cash or on credit
to a wholesaler, retailer or user of such Collateral, at a
public or private auction, are all commercially reasonable. Any
notice required by law of intended disposition by the Agent
shall be deemed reasonable and properly given if given at least
10 days before such disposition.
Section VIII.4 Proceeds of Sale; Deficiency. All payments
received and amounts held or realized by the Agent at any time
when an Event of Default shall have occurred and be continuing
and after, pursuant to Section 8.2, the Lease Balance shall have
been accelerated or Lessee is required to purchase the Vehicles,
as well as all payments or amounts then held or thereafter
received by the Agent shall be distributed forthwith upon
receipt by the Agent in the following order of priority:
first: (i) so much of such payments or amounts
as shall be required to reimburse first the Agent and
then any Lessor for any tax (other than any income tax
payable on interest and on fees and other compensation
of the Agent), expense or other amount owed to the
Agent or any Lessor in connection with the collection
or distribution of such payments or amounts to the
extent not previously reimbursed by Lessee (including,
without limitation, the expenses of any sale, taking
or other proceeding, expenses in connection with
realizing on any of the Collateral, reasonable
attorneys' fees and expenses (including the allocated
costs of internal counsel), court costs and any other
reasonable expenditures incurred or reasonable
expenditures or advances made by the Agent or any
Lessor in the protection, exercise or enforcement of
any right, power or remedy upon such Event of Default
whether pursuant to Section 8.2 or otherwise) shall be
so applied by the Agent first to itself and then to
such Lessors; and (ii) so much of such payments or
amounts as shall be required to pay the reasonable
fees and compensation of the Agent in connection with
acting as Agent not previously paid by Lessee, shall
be distributed to the Agent;
second: so much of such payments or amounts
except those specified in clause third below, which
under the terms of this Lease and the other Operative
Agreements have accrued, including, without limita
tion, such amounts as shall be required to reimburse
the then existing or prior Lessors for payments made
by them to Agent pursuant to Section 9.4 of the
Participation Agreement (to the extent not previously
reimbursed);
third: so much of such payments or amounts
remaining as shall be required to pay in full, in the
following order of application, (a) all accrued unpaid
Variable Rent (including, to the extent permitted by
applicable law, interest on interest) and (b) the
aggregate unpaid Lease Balance, and in case the
aggregate amount so to be distributed shall be
insufficient to pay any of the foregoing in full all
as aforesaid then, ratably to the Lessors in
accordance with their respective Commitment
Percentages; and
fourth: so much of such payments or amounts as
shall remain shall be distributed to Lessee.
Section VIII.5 Right to Perform Lessee's Agreements. If
Lessee fails to perform any of its agreements contained herein
or in any other Operative Agreement within the time period
specified therefor, whether or not an Event of Default has
occurred and is continuing, Agent, upon written instructions
from Required Lessors and receipt by Agent of indemnification
satisfactory to it, and, upon 3 Business Days' prior notice to
Lessee, may perform such agreement and the fees and expenses
incurred by Agent (or one or more Lessors) in connection with
such performance together with interest thereon shall be payable
by Lessee upon demand. Interest on fees and expenses so
incurred by Agent (or one or more Lessors) shall accrue at the
rate provided in Section 3.2 for overdue payments.
ARTICLE IX
Return of Vehicles
If Agent has terminated this Lease pursuant to Section 8.2,
and Lessee has not elected to purchase the Vehicles pursuant to
Articles X or XI, Lessee shall (a) maintain (or cause to be main
tained) the Vehicles in the condition required by Section 5.3,
store the Vehicles without cost to Agent or any Lessor and keep
all of the Vehicles insured in accordance with Article VII, and
(b) upon such termination forthwith package and deliver
exclusive possession of such Vehicles to Agent, for the benefit
of the Lessors, at a location designated by Agent, together with
a copy of an inventory list of the Vehicles then subject to the
Lease, all then current plans, specifications and operating,
maintenance and repair manuals relating to the Vehicles that
have been received or prepared by Lessee, appropriately
protected and in the condition required by Section 5.3 (and in
any event in condition to be placed in immediate service), to
Agent. This Article IX shall survive termination of this Lease.
ARTICLE X
Early Termination
Section X.1 Early Termination as to all Vehicles. On any
scheduled Payment Date Lessee may, at its option, upon at least
30 days' advance written notice from Lessee to Agent and the
Lessors, purchase all, but not less than all, of the Vehicles
subject to all Lease Supplements then in effect in immediately
available funds in an amount equal to the applicable Termination
Value as of such Payment Date. Lessee shall also pay to Agent
(i) all accrued unpaid Rent payable on or prior to such Payment
Date and (ii) all other fees and expenses and other amounts then
due and payable pursuant to this Lease and the other Operative
Agreements. Upon the indefeasible payment of such sums by
Lessee in accordance with the provisions of the preceding
sentence, the obligation of Lessee to pay Rent hereunder shall
cease, the term of this Lease shall end on the date of such
payment and Agent, on behalf of Lessors, shall execute and
deliver to Lessee such documents as may be reasonably required
to release the Vehicles from the terms and scope of this Lease
(without representations or warranties, except that the Vehicles
are free and clear of Lessor Liens), in such form as may be
reasonably requested by Lessee, all at Lessee's sole cost and
expense.
Section X.2 Early Termination as to a Vehicle. Lessee
may, at its option, at any time and from time to time, purchase
any Vehicle for an amount equal to the Casualty Amount of such
Vehicle, together with all accrued but unpaid Variable Rent on
the portion of the Lease Balance represented by such Casualty
Amount, whereupon Agent shall transfer its interest in such
Vehicle to Lessee in accordance with the last two sentences of
Section 12.1; provided, however, that Lessee shall not have such
option to purchase a Vehicle pursuant to this Section 10.2, if
as a result of such purchase, all Vehicles theretofore purchased
under this Section 10.2 together with the Vehicle to be
purchased would have an aggregate Purchase Price in excess of
$4,000,000.
ARTICLE XI
Lease Termination
Section XI.1 Options. Not later than 90 days prior to the
last day of the Base Period or any Renewal Term then in effect,
Lessee shall, by delivery of written notice to Agent (except in
the case of clause (a)), exercise one of the following options:
(a) unless Lessee delivers written notice to the contrary,
except in the case of the last Renewal Term, renew this Lease
with respect to all, but not less than all, of the Vehicles then
subject hereto for an additional one year Renewal Term (the
"Renewal Option") on the terms and conditions set forth herein
and the other Operative Agreements; or
(b) purchase in immediately available funds in an amount
equal to the applicable Termination Value all, but not less than
all, of the Vehicles then subject to this Lease on the last day
of the Base Term or Renewal Term with respect to which such
option is exercised, on the terms and conditions set forth in
Section 11.2. (the "Lessee Purchase Option"); or
(c) sell on behalf of the Lessors to a purchaser or
purchasers not in any way affiliated with Lessee all, but not
less than all, of the Vehicles then subject to this Lease on the
last day of the Base Period or of any Renewal Term then in
effect with respect to which such option is exercised, on the
terms and conditions set forth in Section 11.3 (the "Sale
Option").
Paragraph set at margin without indent per J. Berg's
instruction.Lessee's election of the Lessee Purchase Option will
be irrevocable at the time made, but if Lessee fails to make a
timely election, Lessee will be deemed, in the case of the Lease
Term and each Renewal Term then in effect (other than the last
Renewal Term) to have irrevocably elected the Renewal Option
and, in the case of the last Renewal Term, Lessee will be deemed
to have irrevocably elected the Lessee Purchase Option. In
addition, the Sale Option shall automatically be revoked if
there exists an Incipient Default or Event of Default at anytime
after the Sale Option is properly elected and Agent shall be
entitled to exercise all rights and remedies provided in
Article VIII. Lessee may not elect the Sale Option if there
exists on the date the election is made an Event of Default or
an Incipient Default.
Section XI.2 Lessee Purchase Option. If Lessee elects the
Lessee Purchase Option, then on the Termination Date, Lessee
shall purchase all (but not less than all) of the Vehicles for
an amount equal to the applicable Termination Value. Lessee
shall also pay to Agent all accrued unpaid Rent and all other
amounts, if any then due and owing hereunder. Upon the
indefeasible payment of such sums by Lessee in accordance with
the provisions of the preceding sentence, the obligation of
Lessee to pay Rent hereunder shall cease, the term of this Lease
shall end on the date of such payment and Agent, on behalf of
Lessors, shall execute and deliver to Lessee such documents as
may be reasonably required to release the Vehicles from the
terms and scope of this Lease (without representations or
warranties, except that the Vehicles are free and clear of
Lessor Liens), in such form as may be reasonably requested by
Lessee, all at Lessee's sole cost and expense.
Section XI.3 Sale Option. If Lessee elects the Sale
Option, then during the period prior to the Termination Date,
Lessee, as agent for Agent and Lessors and at no expense to
Agent and Lessors, shall use its commercial best efforts to
obtain bids for the purchase in immediately available funds on
the Termination Date of the Vehicles from prospective purchasers
which are unaffiliated with Lessee and are financially capable
of purchasing the Vehicles ("Qualified Purchasers"). The Agent
may also, if it so desires, seek to obtain such bids. All bids
received by Lessee or Agent, within five Business Days after
receipt thereof, shall be certified to the other in writing
setting forth the name and address of the party submitting each
such bid and the amount and terms thereof.
If any bid is received from a Qualified Purchaser for an
amount in excess of the Lessor Risk Amount, or if Agent agrees
in its sole and absolute discretion to accept a bid for less
than the Lessor Risk Amount, then on the Termination Date
(i) the Vehicles shall be sold on an "as-is," "where-is" basis
(without recourse to or warranty from Agent and Lessors, except
that the Vehicles are free of Lessor Liens), to the bidder,
which is a Qualified Purchaser, selected by Lessee after
consultation with Agent (the "Purchaser"), provided, however,
that Lessee may not reject the highest bidder if the next
highest bid is not at least equal to the Lessor Risk Amount;
(ii) Lessee shall make the Vehicles available to the Purchaser
in the same manner and in the same condition and otherwise in
accordance with this Lease as if delivery were made to Agent
pursuant to Article IX, (iii) such Purchaser shall pay the sale
proceeds in immediately available funds to Agent for the benefit
of Lessors, (iv) Lessee shall pay to Agent, for the benefit of
the Lessor, in immediately available funds (x) all accrued
unpaid Rent and all other amounts, if any then due and owing
under this Lease, and (y) an amount equal to the excess, if any,
of (A) the Termination Value as of the Termination Date over
(B) the sale proceeds (but in no event shall such amount payable
by Lessee under this clause (y) exceed the applicable Lessee
Risk Amount), (v) title to the Vehicles shall be transferred to
such Purchaser free, and clear of Lessor Liens, and (vi) Agent,
on behalf of Lessors, shall execute and deliver to Purchaser
such documents as may be reasonably required to release the
Vehicles from the terms and scope of this Lease (without
representations or warranties, except that the Vehicles are free
and clear of Lessor Liens), in such form as may be reasonably
requested by Purchaser.
If (x) Agent does not receive any bid in excess of the
applicable Lessor Risk Amount from a Qualified Purchaser or
Agent does not accept any bids received for less than the Lessor
Risk Amount prior to the Termination Date or (y) the proposed
sale to the Purchaser is not consummated prior to the
Termination Date, Lessee shall have the option to purchase the
Vehicles by paying to Agent within ten (10) Business Days of the
Termination Date, in immediately available funds an amount equal
to the applicable Termination Value as of the Termination Date.
Lessee shall also pay to Agent (i) all accrued unpaid Rent
payable on the Termination Date; (ii) the pro rata Variable Rent
from the Termination Date to the date of such purchase; and
(iii) all other fees and expenses and other amounts then due and
payable pursuant to this Lease and the other Operative
Agreements. If Lessee does not so elect to purchase the
Vehicles pursuant to the immediately preceding sentence, Lessee
shall pay to Agent an amount equal to the Lessee Risk Amount,
Agent shall retain title to the Vehicles (or, if at such time
Lessee holds title to the Vehicles, Lessee shall transfer title
to Vehicles to Agent, without recourse, representations or
warranties, except that the Vehicles are free and clear of
Lessor Liens) and Lessee shall return the Vehicles to Agent in
accordance with Article IX.
ARTICLE XII
Ownership, Grant of Security
Interest to Lessor and Further Assurances
Section XII.1 Grant of Security Interest. Lessee hereby
assigns, grants and pledges to Agent, for the benefit of the
Lessors, a security interest in all of Lessee's right, title and
interest, whether now or hereafter existing or acquired, in the
Collateral, to secure the payment and performance of all
obligations of Lessee now or hereafter existing under this Lease
or any other Operative Agreement. Lessee shall, at its expense,
do any further act and execute, acknowledge, deliver, file,
register and record any further documents which Agent or any
Lessor may reasonably request in order to protect its title to
and perfected security interest in the Collateral, subject to no
Liens other than Permitted Liens, and Agent's rights and
benefits under this Lease. Lessee shall promptly and duly
execute and deliver to Agent such documents and assurances and
take such further action as Agent or any Lessor may from time to
time reasonably request in order to carry out more effectively
the intent and purpose of this Lease and the other Operative
Agreements, to establish and protect the rights and remedies
created or intended to be created in favor of Agent hereunder
and thereunder, and to establish, perfect and maintain the
right, title and interest of Agent, for the benefit of the
Lessors, in and to the Vehicles, subject to no Lien other than
Permitted Liens, or of such financing statements or fixture
filings or other documents with respect hereto as Agent or any
Lessor may from time to time reasonably request, and Lessee
agrees to execute and deliver promptly such of the foregoing
financing statements and fixture filings or other documents as
may require execution by Lessee. Without limiting the
foregoing, on and after the date Lessee elects or is deemed to
have elected the Lessee Purchase Option or the Sale Option,
Agent shall have the unconditional right to demand the execution
and delivery by Lessee of bills of sale with respect to the
Vehicles leased by Lessee or such documentation as may be
necessary to cause title to the Vehicles to be recorded in the
name of Agent, for the benefit of the Lessors. To the extent
permitted by applicable laws, Lessee hereby authorizes any such
financing statements and other documents to be filed without the
necessity of the signature of Lessee, if Lessee has failed to
sign any such instrument within 10 days after request therefor
by Agent or any Lessor. Upon Lessee's request, Agent shall at
such time as all of the obligations of Lessee under this Lease
or any other Operative Agreements have been indefeasibly paid or
performed in full (other than Lessee's contingent obligations,
if any, under Articles VII and VIII of the Participation
Agreement), execute and deliver termination statements and other
appropriate documentation reasonably requested by Lessee, all at
Lessee's expense, to evidence Agent's release of its security
interest in the Collateral. At such time, Agent shall execute
and deliver to Lessee such documents as may be reasonably
necessary (without representations or warranties, except that
the Vehicles are free and clear of Lessor Liens) to release
Agent's security interest in the Vehicles. Any such sale of the
Vehicles to either Lessee or a third party shall be on an AS-IS,
WHERE-IS basis (without representations or warranties, except
that the Vehicles are free and clear of Lessor Liens).
Section XII.2 Retention of Proceeds in the Case of
Default. If Lessee would be entitled to any amount (including
any Casualty Proceeds or Partial Casualty Proceeds) but for the
existence of any Event of Default or Incipient Default, Agent
shall hold such amount as part of the Collateral and shall be
entitled to apply such amounts against any amounts due
hereunder; provided, that Agent shall distribute such amount or
transfer such Vehicle in accordance with the other terms of this
Lease if and when no Event of Default or Incipient Default
exists.
Section XII.3 Attorney-in-Fact. Lessee hereby irrevocably
appoints Agent as Lessee's attorney-in-fact, with full authority
in the place and stead of Lessee and in the name of Lessee or
otherwise, from time to time in Agent's discretion, upon the
occurrence and during the continuance of an Event of Default, to
take any action (including any action that Lessee is entitled to
take) and to execute any instrument which Agent or the Required
Lessors may deem necessary or advisable to accomplish the
purposes of this Lease (subject to any limitations set forth in
the Operative Agreements), including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for money due and to
become due under or in connection with the Collateral;
(b) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with the
foregoing clause (a);
(c) to file any claim or take any action or institute any
proceedings which Agent may deem to be necessary or advisable
for the collection thereof or to enforce compliance with the
terms and conditions of any Collateral; and
(d) to perform any affirmative obligations of Lessee
hereunder.
Lessee hereby acknowledges, consents and agrees that the power
of attorney granted pursuant to this Section 12.3 is irrevocable
and coupled with an interest.
Section XII.4 Release of Liens. Upon the replacement or
substitution of any Vehicle or Part or Sublease, or the payment
of all amounts required pursuant to Section 6.1 in connection
with a Casualty, in each case in compliance with the applicable
provisions of the Lease, such Vehicle or Part or Sublease shall
be released from the security interest created hereunder as
provided in Section 5.4(b).
ARTICLE XIII
Miscellaneous
Section XIII.1 No Waiver. No delay or omission in the
exercise of any right, power or remedy accruing to Agent and/or
the Lessors upon any breach or default of Lessee hereunder shall
impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or an
acquiescence therein or of or in any similar breach or default
thereafter occurring, nor shall any single or partial exercise
of any right, power or remedy preclude other or further exercise
thereof, or the exercise of any other right, power or remedy,
nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind
or character on the part of Agent or the Lessors of any breach
or default under this Lease must be specifically set forth in
writing and must satisfy the requirements set forth in Article X
of the Participation Agreement with respect to approval by Agent
or the Lessors.
Section XIII.2 Survival of Covenants. All claims
pertaining to the representations, warranties and covenants of
Lessee under Articles II, III, IV, V, VI, VII, X, XI and XIII
shall survive the termination of this Lease to the extent such
claims arose out of events occurring or conditions existing
prior to any such termination.
Section XIII.3 APPLICABLE LAW. THIS LEASE SHALL BE
GOVERNED BY AND CONSTRUED UNDER THE LAWS OF CALIFORNIA, WITHOUT
REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF.
Section XIII.4 Effect and Modification of Lease. No
variation, modification, amendment or waiver of this Lease,
including any schedules or exhibits hereto, or any other
Operative Agreement to which Agent or any Lessor is a party
shall be valid unless the same shall have been entered into in
accordance with Article X of the Participation Agreement.
Section XIII.5 Notices. All notices, demands, requests,
consents, approvals and other instruments hereunder shall be in
writing and shall be deemed to have been properly given if given
as provided for in Section 11.4 of the Participation Agreement.
Section XIII.6 Counterparts. This Lease has been executed
in several counterparts. One counterpart has been prominently
marked "Agent's Copy." Only the counterpart marked "Agent's
Copy" shall evidence a monetary obligation of or shall be deemed
to be an original or to be chattel paper for purposes of the
Uniform Commercial Code, and such copy shall be held by Agent.
Section XIII.7 Severability. Whenever possible, each
provision of this Lease shall be interpreted in such manner as
to be effective and valid under applicable law; but if any
provision of this Lease shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
this Lease.
Section XIII.8 Successors and Assigns: Benefit of
Agreement. This Lease shall be binding upon each of the parties
hereto and, subject to Sections 13.9 and 13.10 hereof, its
respective successors and assigns, and shall inure to the
benefit of each of the parties hereto and its respective
successors and permitted assigns.
It is expressly understood and agreed that Agent is
entering into this Lease for the benefit of the Lessors, who are
third party beneficiaries of this Lease and each Lease
Supplement.
Section XIII.9 Assignment by Agent. Agent shall not sell,
assign, transfer or otherwise dispose of its rights or delegate
its obligations under this Lease to any other Person except as
permitted or required by the Participation Agreement.
Section XIII.10 Assignment by Lessee. Lessee shall not
sell, assign, transfer or otherwise dispose of its rights or
delegate its obligations under this Lease to any other Person,
except as permitted or required by Section 5.2 hereof or the
Participation Agreement.
Section XIII.11 Jury Trial. LESSEE WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS LEASE OR ANY RELATED DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THERE
WITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION
WITH THIS LEASE OR ANY RELATED DOCUMENT AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
Section XIII.12 Section Headings: Table of Contents.
Section headings and the table of contents used in this Lease
(including the schedule) are for convenience of reference only
and shall not affect the construction of this Lease.
Section XIII.13 Final Agreement. THIS LEASE, TOGETHER
WITH THE OTHER OPERATIVE AGREEMENTS, REPRESENTS THE ENTIRE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY THE LEASE AND THE OTHER OPERATIVE AGREEMENTS.
THIS LEASE CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED, RESCINDED
OR CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSE
QUENT ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN INSTRUMENT IN
WRITING SIGNED BY THE PARTIES HERETO IN ACCORDANCE WITH THE
TERMS OF THE PARTICIPATION AGREEMENT. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
Section XIII.14 Timeliness of Performance. The provisions
of Articles VIII and XI pertaining to the delivery of notice and
[Remainder of page intentionally left blank.]
the performance of certain events on dates required by Articles
VIII and XI are to be strictly adhered to by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Lease to be executed and delivered as of the date first above
written.
CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE, as
Lessee
By /s/D. F. Morrison
Name Printed: D.F. Morrison
Title: Assistant Treasurer
ABN AMRO BANK N.V., not individually
but solely as Agent for the
Lessors
By /s/Jeffery A. French
Name Printed: Jeffery A. French
Title: Vice President
By /s/L.T. Osborne
Name Printed: L.T. Osborne
Title: Group Vice President
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
AND MASTER LEASE INTENDED AS SECURITY
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT AND MASTER
LEASE INTENDED AS SECURITY (this "First Amendment") dated as of
this 25th day of March, 1996, by and among CONSOLIDATED
FREIGHTWAYS CORPORATION OF DELAWARE, a Delaware corporation, as
Lessee ("Lessee"), ABN AMRO BANK N.V., a bank organized under the
laws of the Netherlands, not in its individual capacity, but
solely as Agent for the Lessors (the "Agent"), and the several
Lessors signatory hereto (together with their respective
permitted successors, assigns and transferees, each a "Lessor"
and collectively the "Lessors"),
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain
Participation Agreement, dated as of December 22, 1995 (the
"Participation Agreement"); and
WHEREAS, pursuant to the Participation Agreement, the Agent
and the Lessee entered into that certain Master Lease Intended as
Security, dated as of December 22, 1995 (the "Lease"); and
WHEREAS, the parties hereto desire to amend the
Participation Agreement and the Lease to, among other things,
permit the Lessee to enter into certain secured interest rate
hedging transactions;
NOW THEREFORE, in consideration of the premises set forth
above and other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined herein shall have the meanings given to such
terms in the Participation Agreement.
2. Amendments to Participation Agreement.
(a) The following new definition is hereby added to
Schedule X to the Participation Agreement:
"Permitted Interest Rate Hedging Liens" shall mean
Liens incurred to secure the obligations of the Lessee
under interest rate swap agreements entered into by
Lessee with respect to the Variable Rent.
(b) The definition of "Permitted Liens" contained in
Schedule X to the Participation Agreement is hereby deleted in
its entirety and replaced with the following new definition:
"Permitted Liens" shall mean: (i) any rights in
favor of Lessors under the Operative Agreements and any
rights of any Persons entitled to use of the Collateral
in accordance with Section 5.2 of the Lease; (ii) any
Lien, (including, without limitation, Liens of landlords,
carriers, warehousemen, mechanics or materialmen) in
favor of any Person securing payment of the price of
goods or services provided in the ordinary course of
business for amounts the payment of which is not overdue
or is being contested in good faith by appropriate
proceedings promptly initiated and diligently prosecuted,
so long as such proceedings do not involve any reasonable
danger of sale, forfeiture or loss of all or any material
part of the Collateral and do not materially adversely
affect any Lien created in favor of Lessor under the
Lease; (iii) any Lessor Lien or any Lien arising out of
any breach by any Lessor of its obligations under the
Operative Agreements; (iv) any Lien for current taxes,
assessments or other governmental charges which are not
delinquent or the validity of which is being contested by
a Permitted Contest; (v) attachments, judgments and other
similar Liens arising in connection with court
proceedings, provided the execution or other enforcement
of such Liens is effectively stayed and the claims
secured hereby are being contested in good faith and by
appropriate proceedings; (vi) reservations, exceptions,
encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, zoning and land use
restrictions and other similar title exceptions or
encumbrances affecting real property that were not
incurred in connection with the incurrence of
indebtedness, so long as such Liens do not involve a
reasonable danger of sale, forfeiture or loss of all or
any material portion of the Collateral and do not
materially adversely affect any Lien created in favor of
Lessor under the Lease; (vii) any Lien incurred in the
ordinary course of business to secure performance of
statutory obligations; and (viii) Permitted Interest Rate
Hedging Liens.
3. Amendments to Lease.
(a) The following new Section 12.5 is hereby added to the
Lease:
Section 12.5 Permitted Interest Rate Hedging Liens.
Notwithstanding anything contained herein to the
contrary, in no event shall any Permitted Interest Rate
Hedging Lien on the Collateral be prior to the security
interest of the Agent in the Collateral granted pursuant
to Section 12.1 above; provided, however, that Permitted
Interest Rate Hedging Liens may be pari passu ratably
with such security interest, subject to documentation of
such pari passu status in form and substance acceptable
to Agent in its sole discretion.
(b) The first paragraph immediately following paragraph (c)
of Section 8.2 of the Lease is hereby deleted in its entirety and
replaced with the following new paragraph:
Notwithstanding the foregoing, and provided that no
event of default has occurred and is continuing under any
documents evidencing obligations for borrowed money in
excess of twenty million dollars ($20,000,000) to which
Consolidated Freightways, Inc. is a party, (i) upon the
occurrence of any Event of Default resulting from a
default in the performance or observance of any term,
covenant, condition or agreement on Lessee's part to be
performed or observed under Section 6.1(i) of the
Participation Agreement, or (ii) in the event that Lessee
anticipates that such a default or Event of Default is
likely to occur, Consolidated Freightways, Inc. may elect
to enter into a Guarantee, the form of which is attached
hereto as Exhibit B, the effect of which shall be to
prevent the occurrence of any such anticipated default or
Event of Default, or to cure any such actual Event of
Default; provided, however, the Agent and the Lessors
shall have no obligation to accept the Guarantee as a
cure for any actual Event of Default if the Agent gives
notice to Lessee that the Agent seeks to pursue any of
the remedies described in Section 8.2 and Consolidated
Freightways, Inc. does not deliver the Guarantee within
one (1) Business Day after Lessee's receipt of such
notice; and provided, further, that no Guarantee shall be
effective for purposes of this provision unless
Consolidated Freightways, Inc. shall have delivered to
the Agent certified resolutions of its Board of Directors
authorizing such Guarantee, an incumbency certificate and
a legal opinion opining as to such matters related to
such Guarantee as the Agent shall reasonably request, in
form and substance satisfactory to Agent in its
reasonable discretion, and such other evidence of the
authority of Consolidated Freightways, Inc. to enter into
such Guarantee as Agent shall reasonably request. Any
such Guarantee shall remain in effect until receipt of
notice by the Agent from Consolidated Freightways, Inc.
of termination of the Guarantee; provided, however, that
no such notice will be effective unless (i) Lessee is in
compliance with all financial covenants referred to in
Section 6.1(i) of the Participation Agreement as of the
end of the fiscal quarter immediately preceding Agent's
receipt of the notice, and (ii) with respect to any
Guarantee given in anticipation of a default or Event of
Default, the Guarantee has been in effect through the end
of at least one fiscal quarter for which Lessee was in
compliance with all such financial covenants.
(c) Exhibit B to the Lease is hereby deleted in its
entirely and replaced with the new Exhibit B attached hereto as
Exhibit A.
4. Ratification of Agreements. Except as amended hereby,
all the provisions set forth in the Participation Agreement and
the Lease remain in full force and effect. From and after the
date hereof, (i) any reference in the Participation Agreement to
"this Participation Agreement" shall mean the Participation
Agreement as amended by this First Amendment, and (ii) any
reference in the Lease to "this Lease" shall mean the Lease as
amended by this First Amendment.
5. Severability. If any provision of this First Amendment
shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
6. Governing Law. This First Amendment shall be governed
by and construed in accordance with the internal laws of the
State of California.
7. Counterparts. This First Amendment may be executed in
any number of counterparts, all of which together shall consti
tute a single instrument, and it shall not be necessary that any
counterpart be signed by all the parties hereto.
8. Headings. The headings hereof are for convenience only
and are not intended to affect the meaning or interpretation of
this First Amendment.
9. Benefit of Agreement. This First Amendment shall inure
to the benefit of, and be enforceable by Lessee, Agent, Lessors,
and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this First
Amendment to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above
written.
CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE
By /s/ Howard A. Young
Name Printed: Howard A.
Young
Title: Assistant Treasurer
ABN AMRO BANK N.V., not
individually but solely as
Agent for the Lessors
By /s/Linda Beardman
Name Printed: Linda
Beardman
Title: Vice President and
Director
By /s/Prorile Anand
Name Printed: Prorile
Anand
Title: Vice President and
Director
LESSORS:
ABN AMRO BANK N.V.
By /s/Linda Beardman
Name Printed: Linda
Beardman
Title: Vice President and
Director
By /s/Prorile Anand
Name Printed: Prorile
Anand
Title: Vice President and
Director
SECOND AMENDMENT TO PARTICIPATION AGREEMENT
AND MASTER LEASE INTENDED AS SECURITY
THIS SECOND AMENDMENT TO PARTICIPATION AGREEMENT AND
MASTER LEASE INTENDED AS SECURITY, dated as of January 23, 1997
(this "Amendment"), by and among CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE, a Delaware corporation, as lessee
("Lessee"), and ABN AMRO BANK N.V., a bank organized under the
laws of the Netherlands, not in its individual capacity, but
solely in its capacity as agent ("Agent"), and the several
Lessors signatory hereto (together with their respective
permitted successors, assigns, and transferees, each a "Lessor"
and collectively the "Lessors").
WHEREAS, the parties hereto are parties to that
certain Participation Agreement dated as of December 22, 1995,
as amended by an amendment thereto dated as of March 25, 1996
(said Participation Agreement as so amended being, the
"Participation Agreement");
WHEREAS, pursuant to the Participation Agreement, the
Agent and the Lessee entered into that certain Master Lease
Intended as Security, dated as of December 22, 1995, as amended
by an amendment thereto dated as of March 25, 1996 (said Master
Lease Intended as Security as so amended being the "Lease"); and
WHEREAS, the parties hereto desire to amend the
Participation Agreement and the Lease to, among other things,
reflect the spin-off of the Lessee from Consolidated Freightways
Inc. (the "Parent"), to release the Parent from its guarantee of
the obligations of the Lessee under the Participation Agreement,
the Lease and other Operative Agreements and to provide for the
granting of additional security by the Lessee to the Agent and
the Lessors to further secure such obligations;
NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. All capitalized terms used
herein and not otherwise defined herein shall have the meanings
given to such terms in the Participation Agreement.
SECTION 2. Amendments to Participation Agreement.
The Participation Agreement is, effective as of the date hereof
or on such later date on which all of the conditions precedent
set forth in Section 4 hereof have been satisfied, hereby
amended as follows:
(a) Section 5.1(j) is deleted in full and replaced
with the following:
"(j) Location of Offices. The principal place of
business and chief executive office (as such term is used in
Article 9 of the UCC) of Lessee is located at 175 Linfield
Drive, Menlo Park, California 94025."
(b) Section 6.1(i) is deleted in full and replaced
with the following:
"(i) Financial Tests. Lessee shall:
(i) not permit Adjusted Net Earnings for
the fiscal periods specified below, determined as of
the last day of each fiscal quarter set forth below on
a year-to-date basis for each fiscal quarter in 1997
and thereafter for the twelve-month period ending the
last day of the respective fiscal quarter, to be less
than the amount set forth below listed opposite such
fiscal quarter:
Fiscal Quarter Ending:
March 1997 $ 5,000,000
June 1997 $15,000,000
September 1997 $27,000,000
December 1997 $40,000,000
March 1998 $43,000,000
June 1998 $45,000,000
September 1998 $48,000,000
December 1998 $52,000,000
March 1999 $54,000,000
June 1999 $56,000,000
September 1999 $58,000,000
December 1999 and each
fiscal quarter thereafter $60,000,000
(ii) not permit Adjusted Tangible Net Worth,
calculated without regard to the increase, not in
excess of $10,000,000 (after giving effect to income
taxes), in the worker's compensation accrual reserve
over and above the level of such reserve reflected in
the management projections dated as of September 9,
1996 heretofore delivered to Agent, determined as of
the last day of each fiscal quarter set forth below,
to be less than the amount set forth below listed
opposite such fiscal quarter:
Fiscal Quarter Ending: Adjusted Tangible
Net Worth:
December 1996 $210,000,000
March 1997 through December 1997 $195,000,000
March 1998 through September 1988 $190,000,000
December 1998 $195,000,000
March 1999 through September 1999 $190,000,000
December 1999 and each fiscal
quarter thereafter $200,000,000
(iii) not permit the Fixed Charge
Coverage Ratio, determined as of the last day of each
fiscal quarter set forth below, on a year-to-date
basis for each fiscal quarter in 1997 and thereafter
for the twelve-month period ending on the last day of
the respective fiscal quarter, to be less than the
ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ending: Fixed Charge
Coverage Ratio
March 1997 .5 to 1
June 1997 .8 to 1
September 1997 1.0 to 1
December 1997 to June 1999 1.1 to 1
September 1999 1.15 to 1
December 1999 and each fiscal
quarter thereafter 1.2 to 1
(iv) not make or incur, or permit any of its
Subsidiaries to make or incur, any Capital Expenditure
if, after giving effect thereto, the aggregate amount
of all such Capital Expenditures, net of proceeds from
sales of fixed assets, would exceed $30,000,000 for
Fiscal Year 1997, $35,000,000 for Fiscal Year 1998 and
$60,000,000 for Fiscal Year 1999, provided however,
that up to $15,000,000 of permitted Capital
Expenditures unused in one year may be carried over to
the following year."
(c) Subsection 6.1(k) is amended by adding "or" before
"(iii)" in the seventh line thereof, adding a period at the end
of such clause (iii) and deleting the portion of such subsection
beginning with "; or (iv)" in the eighth line thereof through
the remainder of such subsection.
(d) Section 6.1 is amended by adding at the end thereof
new subsections to read as follows:
"(q) Acquisitions. Lessee shall not acquire
any Person or assets or merge or consolidate with any
Person, or permit any of its Subsidiaries to do any of
the foregoing, if for any such transaction the
aggregate of (i) the sum of (A) cash paid by the
Lessee or such Subsidiary in connection with such
transaction plus (B) the amount of obligations issued
or assumed by the Lessee or such Subsidiary in
connection with such transaction which are payable
within twelve months of the date of issuance or
assumption, as the case may be, and (ii) the sum of
(C) the aggregate amount of cash paid by the Lessee
and all of its Subsidiaries in connection with all
other acquisitions, mergers and consolidations
theretofore consummated during the term of this
Agreement plus (D) the aggregate amount of obligations
issued or assumed by the Lessee and its Subsidiaries
in connection with all such other acquisitions,
mergers and consolidations which are payable within
twelve months of the respective date of issuance or
assumption, as the case may be, is greater than
$50,000,000.
(r) Other Covenants. Lessee will not enter
into any other Synthetic Lease which contains more
burdensome financial covenants than are contained in
Subsection 6.1(i).
(s) Letter of Credit. Lessee shall
(i) maintain in effect at all times a letter of
credit, in form and substance satisfactory to the
Lessors, issued by NationsBank of Texas, N.A., or
such other financial institution satisfactory to the
Lessors, for the benefit of the Agent and in a face
amount not less than the maximum Rent payable under
the Lease in any quarter and (ii) shall cause such
letter of credit to be delivered to the Agent. The
proceeds of any drawing under any such letter of
credit shall be deposited in the Deposit Account (as
defined in Section 5(f)(i) of the Security Agreement),
and held (together with all earnings therein) as
security for the obligations of the Lessee under the
Lease and for the benefit of the Agent and the ratable
benefit of the Lessors, and all funds in the Deposit
Account shall be applied to Rent payments when due in
the order of maturity, provided that during the
continuance of an Event of Default, all such funds,
including any earnings thereon, shall be applied to
any amounts owing under the Lease, with the allocation
thereof to be made as the Agent determines in its sole
discretion. All such funds, and earnings thereon,
shall remain in the Deposit Account until all
obligations (other than Surviving Indemnities) under
the Lease are paid in full. Notwithstanding the
provisions of any such letter of credit, in lieu of
any automatic renewal of such letter of credit, Lessee
may cause the letter of credit to be renewed (i) in a
decreased face amount so long as the face amount is
not less than the maximum Rent payable under the Lease
in any future quarter, and/or (ii) with a renewal
period in excess of six months (or, if shorter, for a
period extending 30 days beyond the maximum Lease Term
as then permitted under the terms of the Lease). Upon
termination of the Lease and the payment in full of
all obligations (other than Surviving Indemnities)
under the Lease, the Agent shall return any such
letter of credit, to the extent undrawn, to the issuer
thereof for cancellation. Any such letter of credit
shall not be drawn solely because of nonrenewal if the
Lease is due to terminate at least 30 days prior to
the expiration date of the letter of credit."
(e) Section 9.10 is amended to read in its entirety
as follows: "As compensation for the performance of Agent's
obligations hereunder, Lessee shall pay to Agent (a) for the
first year of the Lease Term, on the Initial Delivery Date, a
fee in the amount of $15,000 and (b) for each year thereafter
during the Lease Term, on each anniversary of the Initial
Delivery Date an annual fee in the amount of $20,000 (such fee
as payable from time to time being the 'Agency Fee')."
(f) Section 11.4 is amended by deleting the reference
therein to "Consolidated Freightways, Inc., 3240 Hillview
Avenue, Palo Alto, California 94304, Attn: Treasurer Fax:
415/856-1685."
(g) The definition of "Interest Rate" in Schedule X
is amended by deleting the phrase "115 basis points" therein and
substituting for such phrase the phrase "175 basis points."
(h) Schedule X is amended by adding the following
definitions:
"'Adjusted Net Earnings' means, with respect to any
fiscal period of the Lessee, the Adjusted Net Earnings from
Operations for such fiscal period plus the sum of the
following to the extent deducted in computing Adjusted Net
Earnings from Operations; (a) interest expense, (b) accrued
income taxes, (c) depreciation and amortization expenses,
and (d) miscellaneous expenses (including Letter of Credit
Fees) less miscellaneous income for such period.
'Adjusted Net Earnings from Operations' shall mean,
with respect to any fiscal period of the Lessee, the
Parent's, the Lessee's and their Subsidiaries' consolidated
net income after provision for income taxes for such fiscal
period, as determined in accordance with GAAP and reported
to the Agent hereunder for such period, excluding any and
all of the following included in such net income: (i) gain
or loss arising from the sale of any capital assets
(excluding Revenue Equipment), (ii) gain arising from any
write-up in the book value of any asset, (iii) earnings of
any corporation, substantially all the assets of which have
been acquired by the Parent or the Lessee or any of their
Subsidiaries in any manner, to the extent realized by such
other corporation prior to the date of acquisition, (iv)
earnings of any business entity in which the Parent or the
Lessee or any of their Subsidiaries has an ownership
interest (other than such Subsidiaries) unless (and only to
the extent) such earnings shall actually have been received
by the Parent or the Lessee or any of their Subsidiaries in
the form of cash distributions, (v) earnings of any Person
into which the Parent or the Lessee or any of their
Subsidiaries shall have been merged, or which has been a
party with the Parent or the Lessee or any of their
Subsidiaries to any consolidation or other form of
reorganization, prior to the date of such transaction, (vi)
gain arising from the acquisition of debt or equity
securities of the Parent or the Lessee or their
Subsidiaries or from cancellation or forgiveness of Debt,
and (vii) gain arising from extraordinary items, as
determined in accordance with GAAP, or gain from any other
non-recurring transaction.
'Adjusted Tangible Assets' shall mean all of the
Parent's, the Lessee's and their Subsidiaries' assets
except: (i) deferred assets, other than deferred tax
assets, prepaid insurance, and prepaid taxes, (ii) patents,
copyrights, trademarks, trade names, franchises, goodwill
and other similar intangibles, (iii) unamortized debt
discount and expense, and (iv) fixed assets to the extent
of any write-up in the book value thereof resulting from a
revaluation effective after November 27, 1996.
'Adjusted Tangible Net Worth' shall mean, at any date:
(a) the book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper
reserves as determined in accordance with GAAP) at which
the Adjusted Tangible Assets would be shown on a
consolidated balance sheet of the Parent, the Lessee and
their Subsidiaries at such date prepared in accordance with
GAAP, less (b) the amount at which the Parent's, the
Lessee's and their Subsidiaries' liabilities would be shown
on such balance sheet, including as liabilities all
reserves for contingencies and other potential liabilities
which would be required to be shown on such balance sheet.
'BABC Agreement' means the Loan and Security Agreement
dated as of November 27, 1996 among BankAmerica Business
Credit, Inc., as agent, NationsBank of Texas, N.A., as
letter of credit issuer, the lenders party thereto,
Consolidated Freightways Corporation, Leland James Service
Corporation and the Lessee, as in effect on January 23,
1997.
'Capital Expenditure' means all payments due (whether
or not paid) in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition
thereto, which has a useful life of more than one year,
including, without limitation, those costs arising in
connection with the direct or indirect acquisition of such
asset by way of increased product or service charges or
offset items or in connection with a Capital Lease on a
Synthetic Lease.
'Capital Lease' means any lease of Property of the
Lessee which, in accordance with GAAP, is or should be
capitalized on the Lessee's balance sheet or for which the
amount of the asset and liability thereunder, as if so
capitalized, should be disclosed in a footnote to such
balance sheet.
'Debt for Borrowed Money' means Debt for borrowed
money or as evidenced by notes, bonds, debentures or
similar evidences of any such Debt of such Person, the
deferred and unpaid purchase price of any Property or
business (other than trade accounts payable incurred in the
ordinary course of business and constituting current
liabilities) and all obligations under Capital Leases or
Synthetic Leases.
'Fixed Charge Coverage Ratio' means, for any period,
the ratio of (a) Adjusted Net Earnings for such period, to
(b) the sum of the following: (i) total principal and
interest payments made or required to be made (without
duplication) during such period by the Parent, the Lessee
and their Subsidiaries on Debt for Borrowed Money plus any
Letter of Credit Fees during such period, (ii) Capital
Expenditures net of asset sales and (iii) accrued income
taxes during such period.
'Letter of Credit Fees' means the letter of credit
fees paid pursuant to the BABC Agreement.
'Moody's' means Moody's Investor Service, Inc. and its
successors.
'Parent' means Consolidated Freightways Corporation, a
Delaware corporation.
'Property' means any interest in any kind of property
or asset, whether real, personal or mixed, or tangible or
intangible.
'Revenue Equipment' has the meaning provided therefor
in the BABC Agreement.
'State' means the District of Columbia or any State of
the United States of America.
'Surviving Indemnities' means any obligation in
the nature of an indemnity or hold harmless by the
Lessee in favor of the Agent and/or any Lessor,
arising under or pursuant to the Lease, the
Participation Agreement or any of the other Operative
Agreements, which by its terms survives the latest of
(the 'Cut-off Date'):
(i) the termination of the Lease, and
(ii) the payment of all rent, fees and
all other obligations of Lessee (not in the
nature of an indemnity or hold harmless) due to
the Agent or any Lessor at the time of such
payment under the Lease and the Operative
Agreements;
provided, that there shall be excluded from such
indemnity or hold harmless obligations all amounts that
are due and payable thereunder upon the Cut-off Date.
'S&P' means Standard & Poor's Rating Group, a division
of McGraw-Hill Corporation, and its successors.
'Synthetic Leases' means a lease (and related
documents) entered into in connection with the financing of
equipment which qualifies as an operating lease for
accounting purposes but which permits the lessee to be
treated as the owner of equipment for tax purposes,
including without limitation the Lease and the lease
entered into on or about September 30, 1994 by the Lessee
(and certain other Persons) with BankAmerica Leasing &
Capital Corp., as agent.
SECTION 3. Amendments to Lease. The Lease is,
effective as of the date hereof or on such later date on which
all of the conditions precedent set forth in Section 4 hereof
have been satisfied, hereby amended as follows:
(a) Section 8.1(k) is amended by deleting the figure
"$20,000,000" therein and substituting for such figure the
figure "$10,000,000" and deleting the period at the end
thereof and substituting therefor a semicolon followed by
the word "or";
(b) Section 8.1 is amended by adding the following
subsection (l) following subsection 8.1(k) thereof:
"(l) Lessee shall default in any material respect
in the performance or observance of any other term,
covenant, condition or agreement on its part to be
performed or observed under the Security Agreement
dated as of January 23, 1997 from the Lessee to the
Agent, and such default shall continue unremedied for
a period of 30 days after the earliest to occur of (i)
written notice thereof by the Agent or any Lessor to
the Lessee or (ii) the Lessee has Actual Knowledge
thereof."
(c) The first paragraph immediately following
paragraph (c) of Section 8.2 is deleted in full.
(d) Exhibit B to the Lease, "Form of Guarantee," is
hereby deleted in its entirety.
SECTION 4. Conditions of Effectiveness. This Amendment
shall become effective when, and only when, on or before January
30, 1997 the Agent shall have received:
(a) Counterparts of this Amendment executed by the
Lessee and the Required Lessors, or advice satisfactory to
the Agent that such Lessors have executed this Amendment;
(b) (i) A Security Agreement (the "Security
Agreement") in substantially the form of Exhibit A duly
executed by the Lessee, together with a duly executed
Officer's Certificate from the Lessee, certifying that the
Lessee has submitted to the Illinois Motor Vehicle
Authority with respect to each Vehicle subject to the
Security Agreement which is titled in Illinois, such
certificates, documents and fees as may be required by such
Authority to perfect the security interest of the Agent, on
behalf of the Lessors, in such Vehicles, together with, for
each such Vehicle, copies of each application for vehicle
title and certificate of title of a vehicle reflecting the
recorded security interest of the Agent, and (ii) evidence
of the completion of all other recordings and filings,
including without limitation the filing of appropriately
completed UCC financing statements for all Vehicles and the
other Collateral subject to the Security Agreement with
evidence of filing in the jurisdiction in which the Lessee
has its principal office and in each other jurisdiction in
which any such vehicle is to be titled, with respect to the
Security Agreement that the Agent may deem necessary or
desirable in order to perfect and protect the liens created
thereby;
(c) A letter of credit, in form and substance
satisfactory to the Agent and issued by NationsBank of
Texas, N.A., for the account of the Lessee and for the
benefit of the Agent, on behalf of the Lessors, in a face
amount not less than the maximum Rent payable under the
Lease in any quarter;
(d) Certified resolutions of the Board of Directors
of the Lessee approving this Amendment, the Security
Agreement and the transactions contemplated hereby and
thereby together with an incumbency certificate with
respect to the officers of the Lessee executing this
Amendment and the Security Agreement;
(e) Opinions of counsel to the Lessee in
substantially the forms of Exhibits B-1, B-2 and B-3;
(f) An amendment fee as provided in a letter
agreement dated as of January 23, 1997 between the Agent
and Consolidated Freightways, Inc.; and
(g) Such other approvals, opinions or documents as
any Lessor through the Agent may reasonably request.
The Agent shall notify the Lessee and the Lessors after the
conditions set forth above have been satisfied or waived and the
date this Amendment is effective.
SECTION 5. Maintenance of Certificates of Title.
The Agent and the Lessors agree that, until notice from the
Agent, the Lessee shall hold and maintain the originals of all
certificates of title for the Vehicles subject to the Security
Agreement and shall only be required to deliver copies thereof
to the Agent. Upon notice from the Agent, the Lessee shall
promptly deliver all such originals to the Agent.
SECTION 6. Representations and Warranties of the
Lessee. The Lessee represents and warrants as follows:
(a) The Lessee is a corporation duly incorporated,
validly existing and in good standing under the laws of
Delaware.
(b) The Lessee has all requisite corporate power and
authority to execute, deliver and perform its obligations
under this Amendment, the Security Agreement and each
Operative Agreement, as amended hereby.
(c) The execution, delivery and performance by the
Lessee of this Amendment, the Security Agreement and the
Operative Agreements, as amended hereby, and the
performance by the Lessee of its respective obligations
hereunder and thereunder, have been duly authorized by all
necessary corporate action and do not and will not:
(i) violate any provision of the Lessee's certificate of
incorporation or by-laws; (ii) violate any provision of any
law, rule or regulation presently in effect applicable to
the Lessee, which violation or violations would have
individually or in the aggregate, a Material Adverse
Effect; (iii) result in a breach of, or constitute a
default under, any indenture, loan or credit agreement, or
any other agreement or instrument to which the Lessee is a
party or by which Lessee or its properties may be bound or
affected, which breaches or defaults would have,
individually or in the aggregate, a Material Adverse
Effect; or (iv) result in, or require the creation of
imposition of, any Lien of any nature upon or with respect
to any of the properties now owned or hereafter acquired by
Lessee (other than the security interest contemplated by
the Lease and by the Security Agreement).
(d) No authorization, consent, license, approval or
other action by or formal exemption from, and no notice to
or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and
performance by the Lessee of this Amendment, the Security
Agreement or any of the Operative Agreements, as amended
hereby, except as referred to in Section 4(b).
(e) This Amendment, the Security Agreement and each
of the other Operative Agreements, as amended hereby,
constitute legal, valid and binding obligations of the
Lessee enforceable against the Lessee in accordance with
their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, arrangement,
reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by
general principles of equity.
(f) There is no pending or, to the knowledge of
Lessee, threatened action or proceeding affecting the
Lessee or any of its Subsidiaries before any court,
governmental agency or arbitrator, in which there is a
reasonable probability of an adverse decision which, if
adversely determined, would have a Material Adverse Effect
or which purports to affect the legality, validity or
enforceability of this Amendment, the Security Agreement or
any of the Operative Agreements, as amended hereby.
SECTION 7. Reference to and Effect on the Operative
Agreements. (a) Upon the effectiveness of this Amendment, on
and after the date hereof each reference in the Participation
Agreement to "this Agreement," "hereunder," "hereof" or words of
like import referring to the Participation Agreement, and each
reference in the other Operative Agreements to "the
Participation Agreement," "thereunder," "thereof" or words of
like import referring to the Participation Agreement, shall mean
and be a reference to the Participation Agreement as amended
hereby and each reference in the Lease to "this Lease,"
"hereunder," "hereof" or words of like import referring to the
Lease, and each reference in the other Operative Agreements to
"the Lease," "thereunder," "thereof" or words of like import
referring to the Lease, shall mean and be a reference to the
Lease as amended hereby.
(b) Except as specifically amended above, the
Participation Agreement and the Lease, and all other Operative
Agreements, are and shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Lessor
or the Agent under any of the Operative Agreements, nor
constitute a waiver of any provision of any of the Operative
Agreements.
SECTION 8. Consent to Security Interest. The Agent
and the Lessors hereby consent to the grant of a security
interest by the Lessee to BankAmerica Business Credit, Inc.
("BABC") as agent under the Loan and Security Agreement dated as
of November 27, 1996 among BABC, as agent, NationsBank of Texas,
N.A., as letter of credit issuer, the lenders party thereto,
Consolidated Freightways Corporation, Leland James Service
Corporation and the Lessee, for the ratable benefit of BABC, as
agent, the Letter of Credit Issuer thereunder and such lenders,
in Lessee's rights as "Lessee" under the Operative Documents.
SECTION 9. Termination of the Guarantee. The Agent
and the Lessors hereby agree that upon the effectiveness of this
Amendment, the obligations and liabilities of the Parent under
that certain Guarantee, dated as of March 25, 1996 (the
"Guarantee"), by the Parent in favor of the Agent, on behalf of
the Lessors, shall be fully and finally discharged and the
Guarantee shall thereby terminate without any further action.
SECTION 10. Costs, Expenses and Taxes. The Lessee
agrees to pay on demand all costs and expenses of the Agent in
connection with the preparation, execution, delivery,
administration, modification, amendment and enforcement of this
Amendment and the other instruments and documents to be
delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities hereunder and
thereunder. In addition, the Lessee shall pay any and all stamp
and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder.
SECTION 11. Execution in 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 and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the
same agreement.
SECTION 12. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the
State of California.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE, as Lessee
By: /s/Robert E. Wrightson
Name: Robert E. Wrightson
Title: Senior Vice President
and Controller
ABN AMRO BANK NORTH AMERICA, INC.,
as agent for
ABN AMRO BANK N.V., not individually,
but solely as Agent for the Lessors.
By: /s/R. Clay Jackson
Name: R. Clay Jackson
Title: Senior Vice President
By: /s/L.T. Osborne
Name: L.T. Osborne
Title: Group Vice President
LESSORS:
ABN AMRO NORTH AMERICA, INC.,
as agent for
ABN AMRO BANK N.V.
By: /s/R. Clay Jackson
Name: R. Clay Jackson
Title: Senior Vice President
By: /s/L.T. Osborne
Name: L.T. Osborne
Title: Group Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Amy R. Fahey
Name: Amy R. Fahey
Title: Vice President
EXHIBIT A
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 23, 1997 (this
"Security Agreement") made by CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE, a Delaware corporation ("Grantor"), in
favor of ABN AMRO BANK N.V., a bank organized under the laws of
the Netherlands, not in its individual capacity, but solely in
its capacity as agent ("Agent") for its benefit and the ratable
benefit of the lessors (the "Lessors") parties to the Lease (as
hereinafter defined);
WHEREAS, the Grantor and the Agent have entered into a
Master Lease Intended as Security dated as of December 22, 1995,
and amendments thereto dated as of March 25, 1996 and as of the
date hereof (said Master Lease Intended as Security, as so
amended, being the "Lease"); and
WHEREAS, the terms defined in Schedule X to the
Participation Agreement referred to in the Lease being used
herein as so defined unless otherwise provided herein; and
WHEREAS, the Grantor has requested that the Agent
agree to certain amendments to the Lease and the related
Participation Agreement and in connection therewith has agreed
to grant the Agent additional collateral as provided herein to
secure the Grantor's obligations under the Lease;
NOW, THEREFORE, in consideration of the premises and
in order to induce the Agent to enter in such amendments, the
Grantor hereby agrees with the Agent for its benefit and the
ratable benefit of the Lessors as follows:
SECTION 1. Grant of Security. The Grantor hereby
assigns, grants and pledges to the Agent for its benefit and the
ratable benefit of the Lessors a security interest in all of the
Grantor's right, title and interest in and to the following,
whether now owned or hereafter acquired (the "Collateral"):
(a) all of the Grantor's right, title and interest in
all vehicles listed on Schedule I hereto and any
substitutions therefor, replacements thereof and additions
thereto, in each case from time to time pursuant to the
provisions of this Agreement (collectively, the
"Vehicles");
(b) all contracts necessary to purchase, operate and
maintain the Vehicles, including all warranties;
(c) any rebate, offset or similar rights under a
purchase order, invoice or purchase agreement with any
manufacturer of any Vehicle;
(d) all books, manuals, logs, records, writing, data
bases, information and other property relating to, used or
useful in connection with, evidencing, embodying or
incorporating any of the foregoing; and
(e) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds that
constitute property of the types described in any of the
foregoing clauses of this Section 1) and, to the extent not
otherwise included, all payments under insurance (whether
or not the Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the
foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement
secures the payment of all obligations of the Grantor now or
hereafter existing under the Lease, whether for rent, fees,
expenses or otherwise, and all obligations of the Grantor now or
hereafter existing under this Agreement (all such obligations
being the "Obligations"). Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by
the Grantor to the Agent or the Lessors under the Lease but for
the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding
involving the Grantor.
SECTION 3. Representations and Warranties. The
Grantor represents and warrants as follows:
(a) The chief place of business and chief executive
office of the Grantor is 175 Linfield Drive, Menlo Park,
California 94025.
(b) The Grantor has record title to each of the
Vehicles, and each of the Vehicles and all of the other
Collateral is free and clear of any Lien except for the
security interest created by this Agreement and (i) any
Lien (including, without limitation, Liens of landlords,
carriers, warehousemen, mechanics or materialmen) in favor
of any Person securing payment of the price of goods or
services provided in the ordinary course of business for
amounts the payment of which is not overdue or is being
contested in good faith by appropriate proceedings promptly
initiated and diligently prosecuted, so long as such
proceedings do not involve any reasonable danger of sale,
forfeiture or loss of all or any material part of the
Collateral and do not materially adversely affect any Lien
created in favor of the Agent hereunder; (ii) any Lien for
current taxes, assessments or other governmental charges
which are not delinquent or the validity of which is being
contested by a Permitted Contest (as hereinafter defined);
(iii) attachments, judgments and other similar Liens
arising in connection with court proceedings, provided the
execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are being contested
in good faith and by appropriate proceedings; (iv)
reservations, exceptions, encroachments, easements, rights-
of-way, covenants, conditions, restrictions, leases, zoning
and land use restrictions and other similar title
exceptions or encumbrances affecting real property that
were not incurred in connection with the incurrence of
indebtedness, so long as such Liens do not involve a
reasonable danger of sale, forfeiture or loss of all or any
material portion of the Collateral and do not materially
adversely affect any Lien created in favor of Agent or
Lessor hereunder; (v) any Lien incurred in the ordinary
course of business to secure performance of statutory
obligations and (vi) any Lien in favor of BankAmerica
Business Credit, Inc., as Agent, under the BABC Agreement
in the Collateral described in Section 1(d) hereof to the
extent that such Collateral applies both to Vehicles and to
vehicles in which BankAmerica Business Credit, Inc., as
Agent, has a security interest in connection with the BABC
Agreement (all such Liens set forth in clauses (i) through
(vi) hereinafter referred to as "Permitted Liens").
"Permitted Contest" shall mean actions taken by a Person to
contest in good faith, by appropriate proceedings initiated
timely and diligently prosecuted, the legality, validity or
applicability to the Vehicles or any interest therein of
any Person of: (a) any law, regulation, rule, judgment,
order, or other legal provision or judicial or
administrative requirements; (b) any term or condition of,
or any revocations or amendments of, or other proceeding
relating to, any authorization or other consent, approval
or other action by any Authority; or (c) any Lien or
Imposition; provided that the initiation and prosecution of
such contest would not: (i) result in, or materially
increase the risk of, the imposition of any criminal
liability on any Indemnitee; (ii) materially and adversely
affect the security interests created hereunder or the
right, title or interest of Agent or any Lessor in or to
any of the Vehicles; or (iii) materially and adversely
affect the fair market value, utility or remaining useful
life of the Vehicles or any interest therein or the
continued economic operation thereof; and provided further
that in any event adequate reserves in accordance with GAAP
are maintained against any adverse determination of such
contest.
(c) No filing, recordation or registration is
necessary or advisable in order to perfect the security
interest of the Agent, for its benefit and the ratable
benefit of the Lessors, in the Vehicles and other
Collateral other than the filing or recording of financing
statements under Article 9 of the applicable UCC in
Illinois, Ohio, Pennsylvania, Washington, New Jersey,
Georgia, Michigan, Minnesota, North Carolina and Wisconsin
(the "Original States") and in California, and the
recordation on the Certificate of Title for each Vehicle
with the applicable governmental authority of the security
interest of the Agent for its benefit and the ratable
benefit of the Lessors in the respective Original State,
and upon the actions described in the foregoing clause the
security interests in the Vehicles and the other Collateral
are enforceable, properly perfected, first-priority Liens,
subject only to Permitted Liens; provided, however, that
such actions may not be effective to perfect such security
interest in certain items described in clause (d) of the
definition of "Collateral" to the extent such items are
stored in (but not made a part of) a Vehicle and located
from time to time in jurisdictions where no such filing has
been made or to the extent that any such item consists of a
type of collateral in which a security interest cannot be
perfected by taking such actions.
(d) Certain Vehicle Matters.
(i) Each Vehicle is properly registered
pursuant to the International Registration Plan as in
effect in the State in which such Vehicle is titled.
(ii) Except as set forth on Schedule I
hereto, each Vehicle has a gross weight rating of more
than 16,000 pounds, and none of the Vehicles has been
specifically constructed, built, reconstituted or
assembled.
(iii) The Grantor is not in the business
of selling Vehicles and the Vehicles do not constitute
"inventory" under any applicable UCC.
(e) Registration of Vehicles. Each Vehicle is either
(i) used in interstate commerce, titled in one of the
Original States and registered in a State which is a party
to the International Registration Plan or (ii) used in
intrastate commerce, registered in the State in which it is
so used and titled in one of the Original States.
(f) Intellectual Property. To the Grantor's
knowledge or as represented in writing by a vendor of the
Vehicles which writing has been provided to the Agent,
there are no patents, patent rights, trademarks, service
marks, trade names, copyrights, licenses or other
intellectual property rights with respect to the Vehicles,
or proprietary, patented or patentable modifications or
Parts (as hereinafter defined) used in connection with the
Vehicles, the unavailability of which would have a material
adverse effect on the current fair market value of the
Vehicles. "Parts" means all appliances, parts,
instruments, appurtenances, accessories, furnishings and
other equipment of whatever nature that may from time to
time be incorporated in or installed in or attached to any
Vehicle.
(g) Insurance. All insurance coverage required by
Section 6 hereof are in full force and effect and there are
no past due premiums in respect of any such insurance.
SECTION 4. Further Assurances. (a) The Grantor
agrees that from time to time, at the expense of the Grantor,
the Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may
be necessary or desirable, or that the Agent or any Lessor may
reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable
the Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will execute and file
such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Agent may reasonably request,
in order to perfect and preserve the security interest granted
or purported to be granted hereby, including with respect to any
replaced Vehicle or any Replaced Part (as hereinafter defined).
In addition, the Grantor shall record or file, or cause to be
recorded or filed, and pay all applicable filing or recording
fees within fifteen days after the date of delivery of this
Agreement to the Agent in respect of each Vehicle subject to
this Agreement on such date (except all such Vehicles titled in
the State of Illinois), and within fifteen days after any other
Vehicle becomes subject to this Agreement, an appropriate
Certificate of Title in the appropriate jurisdiction in order to
perfect the security interest therein created hereby, and in
each case deliver to the Agent copies of all such Certificates
with the security interest of the Agent reflected thereon.
(b) The Grantor hereby authorizes the Agent to file
one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without
the signature of the Grantor where permitted by law, if Grantor
has failed to sign any such instrument within 10 days after
request therefor by the Agent or any Lessor. A photocopy or
other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient
as a financing statement where permitted by law.
(c) The Grantor will furnish to the Agent from time
to time statements and schedules further identifying and
describing the Collateral and such other reports in connection
with the Collateral as the Agent may reasonably request, all in
reasonable detail.
(d) If Grantor would be entitled to any amount
(including any Casualty Proceeds (as hereinafter defined)) but
for the existence of any Event of Default or Incipient Default,
Agent shall hold such amount as part of the Collateral and shall
be entitled to apply such amounts against any amounts due
hereunder; provided that Agent shall distribute such amount in
accordance with the other terms hereof if and when no Event of
Default or Incipient Default exists.
SECTION 5. Possession, Assignment, Use and
Maintenance of Vehicles.
(a) Restriction on Possession and Use. Grantor shall
not (a) use, operate, maintain or store any Vehicle or any
portion thereof: (i) except in accordance with Section 5(b)
hereof; or (ii) in violation of any applicable insurance policy
or law or regulation of any Authority; (b) except as permitted
by Section 5(f)(i) hereof, abandon any Vehicle; (c) except for
the temporary loan of Vehicles to other carriers pursuant to
interchange agreements in the ordinary course of business, lease
or assign any Vehicle or permit the operation thereof by anyone
other than Grantor; (d) sell, assign or transfer any of its
rights in any Vehicle, or directly or indirectly create, incur
or suffer to exist any Lien, on any of its rights in any
Vehicle, except for Permitted Liens; (e) unless the security
interest of the Agent is noted in the certificate of title in
the new jurisdiction and Grantor notifies Agent within three
business days of any retitling in any jurisdiction other than
any of the Original States, permit any Vehicle to be titled in
any jurisdiction other than the jurisdiction in which it is
titled on the date hereof; or (f) use, operate, maintain or
store any Vehicle or any portion thereof outside of the United
States except that Grantor may use, maintain and operate any
Vehicle outside of the United States on trips to and from a
point of embarkation located within the United States.
(b) Maintenance. Until the payment in full of
the Obligations, Grantor shall at its expense: (a) maintain,
manage and monitor the Vehicles in compliance in all
material respects with all applicable requirements of law,
Authority and/or insurance policies; (b) maintain each
Vehicle (or cause each Vehicle to be maintained) in as good
operating order, repair and condition as it was on the date
such Vehicle became subject to this Security Agreement (to
the extent that, as of such date, each such Vehicle was in
good operating order, repair and condition), ordinary wear
and tear excepted; (c) maintain, manage and monitor the
Vehicles in accordance with the terms of all applicable
contracts (including, without limitation, service contracts
and insurance contracts) in a manner consistent with
Grantor's customary practices; and (d) conduct all scheduled
maintenance of the Vehicles in conformity with Grantor's
maintenance procedures then in effect for similar equipment
owned or leased by Grantor, and applicable warranty
guidelines. Grantor shall in any event maintain the
Vehicles (or cause the Vehicles to be maintained) in at
least as good a condition as comparable equipment owned or
leased by Grantor or any of its Subsidiaries. Grantor will
maintain or cause to be maintained, and shall permit Agent
and Lessors to inspect, any records, logs and other
materials required by Authority having jurisdiction to be
maintained or filed in respect of any Vehicle.
(c) Repair, Replacement and Substitution.
(i) As soon as practicable after a Partial
Casualty (as hereinafter defined) to a Vehicle, Grantor
shall repair and rebuild the affected portions of such
Vehicle (or cause such affected portions to be repaired and
rebuilt) to the condition required to be maintained by
Section 5(b) hereof. In the event that any Part which may
from time to time be incorporated or installed in or
attached to any Vehicle becomes at any time worn out,
damaged or permanently rendered unfit for use for any reason
whatsoever (unless such event constitutes a Casualty (as
hereinafter defined), in which event the provisions of
Section 5(f) hereof shall apply instead of this
Section 5(c)), Grantor, at its own cost and expense, will
promptly replace, or cause to be replaced, such Part with a
replacement Part (a "Replacement Part") in accordance with
Grantor's customary practices, but in any event subject to
Section 5(b) hereof. In addition, Grantor may, at its own
cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Part,
whether or not worn out, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use;
provided, that Grantor will, at its own cost and expense,
replace such Part with a Replacement Part as promptly as is
commercially reasonable. All Replacement Parts shall be
free and clear of all Liens (other than Permitted Liens) and
shall be in as good operating condition as, and shall have a
value and utility at least equal to, the Parts replaced,
assuming such replaced Parts and the Vehicles were in the
condition and repair required to be maintained by the terms
of Section 5(b) hereof. Any Part at any time removed from
any Vehicle shall remain subject to this Security
Agreement, no matter where located, until such time as such
Part shall be replaced by a Part which has been incorporated
or installed in or attached to such Vehicle and which meets
the requirements for a Replacement Part specified above.
Immediately upon any Replacement Part becoming incorporated
or installed in or attached to any such Vehicle as above
provided, without further act: (i) the replaced part (the
"Replaced Part") shall be released from the security
interest covered hereby and shall no longer be a part of the
Collateral; and (ii) such Replacement Part shall become
subject to this Security Agreement, and the security
interest created hereunder, and shall be deemed part of such
Vehicle for all purposes hereof to the same extent as the
Parts incorporated or installed in or attached to such
Vehicle on the date such Vehicle became subject to this
Security Agreement. "Partial Casualty" means any loss,
damage, destruction, taking by eminent domain, loss of use
or theft of any portion of a Vehicle which does not
constitute a Casualty. "Casualty" means any of the
following events in respect of any Vehicle: (a) the loss of
such Vehicle or the use thereof due to theft, disappearance,
destruction, damage beyond repair or rendition of such
Vehicle permanently unfit for normal use for any reason
whatsoever; (b) any damage to such Vehicle which results in
any insurance settlement with respect to such Vehicle on the
basis of a total loss; (c) the permanent condemnation,
confiscation or seizure of, or requisition of title to or
use of, such Vehicle; (d) as a result of any rule,
regulation, order or other action by any Authority, the use
of such Vehicle in the normal course of business shall have
been prohibited, directly or indirectly, for a period of six
consecutive months, unless Grantor, prior to the expiration
of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or
desirable to permit the normal use of such Vehicle by
Grantor thereof or, in any event, if use of such Vehicle
shall have been prohibited, directly or indirectly, for a
period of twelve consecutive months; or (e) the operation or
location of such Vehicle, while under requisition for use by
any Authority, in any area excluded from coverage by any
insurance policy then in effect with respect to such Vehicle
required by the terms of Section 6 hereof, if Grantor shall
be unable to obtain indemnity in lieu thereof from such
Authority.
(ii) Upon the satisfaction of the conditions
specified in Section 5(c)(i) hereof, and the Replacement
Part becoming subject to this Security Agreement and the
security interest created hereunder, Agent, on behalf of the
Lessors, shall execute and deliver to Grantor such documents
as may be reasonably necessary to release the Replaced Part
from the terms and scope of this Security Agreement, in such
form as may be reasonably requested by Grantor, and are in
form and substance satisfactory to the Required Lessors, all
at the expense of Grantor.
(d) Alterations, Modifications and Additions;
Removable Parts. Except as provided in Sections 5(b) and
5(c) hereof, Grantor shall not remove, replace or alter any
Vehicle or affix or place any accessory, equipment or device
on any Vehicle (such actions shall be hereafter referred to
collectively as "alteration") if such alteration would
materially impair the originally intended function or use or
materially reduce the value or useful life of such Vehicle;
provided, that Grantor, at its own expense, will make, or
cause to be made, any alteration to or in respect of any
Vehicle that may be necessary, from time to time, to comply
in all material respects with any applicable law,
governmental rule or regulation or any provision of any
insurance policy required to be maintained under Section 6
hereof (any Parts being used to comply with this provision
shall be hereafter referred to as "Mandatory Parts"). All
Parts affixed to or installed as a part of any Vehicle,
excluding temporary replacements, shall thereupon become
subject to the security interest under this Security
Agreement. If no Event of Default shall exist, Grantor may
remove, at its expense, any Part at any time during the term
of this Security Agreement (such Part, a "Removable Part")
(i) which is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or
installed in or attached to a Vehicle on the date such
Vehicle became subject to this Security Agreement or any
Part in replacement of or substitution for any such Part
originally incorporated or installed or attached to such
Vehicle; (ii) which is not a Mandatory Part; and (iii) which
can be removed from any Vehicle without causing damage to
such Vehicle or diminishing or impairing the value, utility
or condition which such Vehicle would have had at such time
had such addition not occurred; provided, that: (x) such
removal will not materially impair the value, use or useful
life which the Vehicle would have had at such time had such
Part not been affixed or placed to or on such Vehicle; and
(y) such Part is not necessary for the continued normal use
of such Vehicle. Grantor shall repair all damage to any
Vehicle resulting from any alteration so as to restore such
Vehicle to the condition in which it existed prior to such
alteration (ordinary wear and tear excepted). Neither Agent
nor any Lessor shall have any obligation to pay for or to
reimburse Grantor for any alteration required or permitted
by this Section 5(d) hereof.
(e) Inspection of Collateral. Agent, the Lessors
and each of their agents and representatives shall have the
right at all reasonable times, upon reasonable notice, to
inspect any Collateral, including without limitation any
certificate of title, certificate of ownership,
manufacturer's certificate of origin or any similar
equivalent instrument issued by any applicable Authority
evidencing title, or an interest in title, to a Vehicle
("Certificate of Title") or documentation related to the
Collateral. Grantor shall maintain: any Certificate of
Title, microfiche containing Vehicle registration documents
and executed blank powers of attorney enabling the Agent to
reregister the Vehicles, each of them to be maintained in
Grantor's records in a separate file entitled "ABN AMRO
Documentation."
(f) Risk of Loss; Replacement; Waiver and
Indemnity.
(i) Casualty. Grantor shall have no obligation
to replace any Vehicle or repay any portion of the Lease
Balance in respect of any Casualty so long as the number of
Vehicles which would be considered a Casualty do not exceed
in any year five percent of the number of Vehicles subject
to this Security Agreement on the date hereof (the "Initial
Vehicle Number") or exceed on a cumulative basis from the
date hereof to the date of determination ten percent of the
Initial Vehicle Number. Upon the happening of any Casualty
not included within the limits set forth in the preceding
sentence, Grantor either shall replace the Vehicle with
respect to which the Casualty has occurred pursuant to the
provisions of Section 5(c) hereof (treating such Vehicle,
for these purposes, in the same manner as a Part), or
deposit within 10 days of such Casualty into a deposit
account established by the Agent for its benefit and the
ratable benefit of the Lessors, as security for the Lessee's
obligations under the Lease (the "Deposit Account") an
amount equal to the Casualty Proceeds, provided, that upon
the occurrence and during the continuance of an Event of
Default or an Incipient Default, Grantor shall be obligated,
at the option of the Required Lessors, to make the deposit
as provided herein and shall not be entitled to exercise any
right of replacement as set forth in this subclause (i).
All funds in the Deposit Account, including any earnings
thereon, shall be applied to Rent payments when due in the
order of maturity, provided that during the continuance of
an Event of Default, all such funds, including any earnings
thereon, shall be applied to any amounts owing under the
Lease, with the allocation thereof to be made as the Agent
determines in its sole discretion. All such funds, and
earnings thereon, shall remain in the Deposit Account until
all Obligations (other than Surviving Indemnities) are paid
in full. All funds in the Deposit Account shall be
invested, as the Agent determines in its sole discretion in
one or more of the following:
(a) securities issued or fully guaranteed or
insured by the United States Government or any agency
thereof and backed by the full faith and credit of the
United States maturing not more than one year from the
date of acquisition;
(b) certificates of deposit, time deposits,
Eurodollar time deposits, bankers' acceptances or
deposit accounts having in each case a remaining term
to maturity of not more than one year, which are either
(i) fully insured by the Federal Deposit Insurance
Corporation or (ii) issued by any commercial bank under
the laws of any State or any national banking
association that has combined capital and surplus of
not less than $800,000,000 and whose short-term
securities are rated at least A-1 by S&P or P-1 by
Moody's;
(c) commercial paper that is rated at least A-1
by S&P or P-1 by Moody's, issued by a company that is
incorporated under the laws of the United States or of
any State and directly issues its own commercial paper,
and has a remaining term to maturity of not more than
one year; and
(d) any money market or other investment fund the
investments of which are limited to investments
described in clauses (a), (b) and (c) above and which
is managed by (i) a commercial bank that is organized
under the laws of any State or any national banking
association and that has total assets of at least
$1,000,000,000, or (ii) an investment bank that is
organized under the laws of any State and that has
total assets of at least $1,000,000,000.
(ii) Casualty Proceeds. Subject to Section
5(f)(i) hereof, all proceeds of any casualty insurance or
condemnation proceeds ("Casualty Proceeds") paid or payable
to Grantor or any Affiliate of Grantor by reason of a
Casualty or Partial Casualty to a Vehicle shall be deposited
into the Deposit Account, unless Grantor shall have already
complied with the applicable provisions of Section 5(c) or
5(f)(i) hereof with respect to such Casualty or Partial
Casualty. Any Casualty Proceeds paid to Agent with respect
to a Vehicle suffering a Casualty or a Partial Casualty
shall also be deposited in the Deposit Account. Any moneys
in the Deposit Account attributable to a Casualty or Partial
Casualty shall be remitted promptly to Grantor after
Grantor's full compliance with Section 5(f)(i) or 5(c)
hereof, as applicable. Notwithstanding the foregoing
provisions of this Section 5(f)(ii) hereof, and provided
that no Incipient Default consisting of an event described
in Section 8.1 (a) or (g) of the Lease or an Event of
Default shall exist, if the aggregate amount of Casualty
Proceeds at any one time outstanding is $250,000 or less,
then Grantor may receive such Casualty Proceeds directly,
without delivery to Agent; provided, that such Casualty
Proceeds are applied in accordance with the requirements of
Section 5(f)(i) or Section 5(c) hereof, as applicable.
Notwithstanding any Casualty, all of Grantor's obligations
under the Lease shall continue unabated and in full force
and effect as provided in the Lease. Without limiting the
foregoing, Grantor's obligations under Section 5(c) hereof
shall not be affected by the amount of any Casualty Proceeds
received by Grantor.
SECTION 6. Insurance.
(a) Required Coverage. At its own expense,
Grantor will maintain the.following insurance coverage with
respect to the Vehicles:
1. primary automobile and general
liability insurance of not less than $3,000,000
per occurrence, with excess coverage of not less
than $5,000,000 per occurrence and $95,000,000 in
the aggregate, in each case naming Agent and
Lessors as additional insured; and
2. insurance against all risks of loss
or physical damage to the Vehicles in a primary
amount of not less than $250,000 per occurrence
and excess "all risk" coverage on the Vehicles in
a blanket amount of not less than $100,000,000,
which insurance shall name Agent and Lessors as
the sole loss payees.
So long as an insurer which is an Affiliate of Grantor (the
"Insurer") shall (i) maintain its good standing as an
insurer, (ii) be financially sound in the reasonable
judgment of the Agent and (iii) be in compliance with all
applicable regulatory requirements, Grantor may obtain
primary insurance coverage from the Insurer, with retained
liability for physical damage to the Vehicles and for
liability coverage required under clause (a) above, which
retained liability amounts, in both such cases, shall be in
amounts not greater than amounts customary for similarly
situated companies operating comparable equipment in the
same industry as Grantor. Grantor shall obtain its excess
insurance and, if Insurer does not meet the criteria set
forth in the preceding sentence or is no longer providing
Grantor's insurance, its primary insurance, from financially
responsible companies selected by Grantor and having an A.M.
Best rating of "A" or better or otherwise acceptable to the
Agent.
Such insurance shall (i) name Agent and Lessors as
additional insured parties thereunder and loss payees as
specified above (without any representation or warranty by,
or obligation upon, Agent or any Lessor) as their respective
interests may appear, (ii) contain the agreement by the
Insurer that any loss thereunder shall be payable to Agent
and Lessors notwithstanding any action, inaction or breach
of representation or warranty by Grantor or any other entity
having an interest in any Vehicle (including, without
limitation, Agent or any Lessor), (iii) provide that there
shall be no recourse against Agent or any Lessor for payment
of premiums or other amounts with respect thereto,
(iv) provide that Insurer shall give Agent and each Lessor
at least 30 days' prior written notice of cancellation,
lapse or reduction of limits, (v) be primary with respect to
any other insurance carried by or available to Agent and the
Lessors, (vi) provide that the Insurer shall waive any right
of subrogation, setoff, counterclaim, or other deduction,
whether by attachment or otherwise, against Agent or any
Lessor, and (vii) contain a cross-liability clause providing
for coverage of Agent and each Lessor as if separate
policies had been issued to each of them, provided, however,
that such provision shall not increase the total limits of
liability over those specified herein. Grantor will notify
Agent and Lessors promptly of any policy cancellation,
reduction in policy limits, modification or amendment.
(b) Delivery of Insurance Certificates. Lessee
has heretofore delivered to Agent certificates of insurance
satisfactory to Agent and Lessors evidencing the existence
of all insurance required to be maintained hereunder and
setting forth the respective coverage, limits of liability,
carrier, policy number and period of coverage. Thereafter,
at the time each of Lessee's insurance policies is renewed
(but in no event less frequently than once each year),
Lessee shall deliver to Agent and each Lessor certificates
of insurance evidencing that all insurance required by this
Section to be maintained by Lessee with respect to the
Vehicles is in effect.
SECTION 7. Place of Perfection The Grantor shall
keep its chief place of business and chief executive office
at the location therefor specified in Section 3(a) hereof
and shall keep the office where it maintains its records
concerning the collateral at 1717 N.W. 21st Street,
Portland, Oregon 97209 or, in either case, upon 30 days'
prior written notice to the Agent, at such other locations
in a jurisdiction where all actions required by Section 4
herein shall have been taken with respect to the Collateral.
SECTION 8. Release of Liens. Upon the
replacement or substitution of any Vehicle or Part, or the
payment of all amounts required pursuant to Section 5(f)(i)
in connection with a Casualty, in each case in compliance
with the applicable provisions hereof, such Vehicle or Part
shall be released from the security interest created
hereunder.
SECTION 9. Attorney-in-Fact. Grantor hereby
irrevocably appoints Agent as Grantor's attorney-in-fact,
with full authority in the place and stead of Grantor and in
the name of Grantor or otherwise, from time to time in
Agent's discretion, upon the occurrence and during the
continuance of an Event of Default, to take any action
(including any action that Grantor is entitled to take) and
to execute any instrument which Agent or the Required
Lessors may deem necessary or advisable to accomplish the
purposes of this Security Agreement (subject to any
limitations set forth in the Operative Agreements),
including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
money due and to become due under or in connection with the
Collateral;
(b) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection
with the foregoing clause (a);
(c) to file any claim or take any action or
institute any proceedings which Agent may deem to be
necessary or advisable for the collection thereof or to
enforce compliance with the terms and conditions of any
Collateral; and
(d) to perform any affirmative obligations of
Grantor hereunder.
Grantor hereby acknowledges, consents and agrees that the
power of attorney granted pursuant to this Section 9 is
irrevocable and coupled with an interest.
SECTION 10. Agent May Perform. If the Grantor
fails to perform any agreement contained herein, the Agent
may itself perform, or cause performance of, such agreement,
and the expenses of the Agent incurred in connection
therewith shall be payable by the Grantor under Section 13.
SECTION 11. The Agent's Duties. The powers
conferred on the Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the
Agent shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any
Collateral. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Agent
accords its own property.
SECTION 12. Remedies. If any Event of Default
shall have occurred and be continuing:
(a) The Agent may exercise in respect of the
Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default
under the Uniform Commercial Code in effect in the
State of California at that time (the "Code") (whether
or not the Code applies to the affected Collateral),
and also may (i) require the Grantor to, and the
Grantor hereby agrees that it will at its expense and
upon request of the Agent forthwith, assemble all or
part of the Collateral as directed by the Agent and
make it available to the Agent at a place to be
designated by the Agent which is reasonably convenient
to both parties, (ii) without notice except as
specified below, sell the Collateral or any part
thereof in one or more parcels at public or private
sale, at any of the Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such
other terms as the Agent may deem commercially
reasonable, including public sales to the Agent or the
Lessors or one or more of their designees, and (iii)
enter upon the premises where any Vehicle may be and
either remove such Vehicle, with any damage to the
improvements on such premises to be borne by Grantor
(except to the extent such damage is due to the willful
misconduct or gross negligence of Agent or its
representatives), or take possession of such Vehicle.
The Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to
the Grantor of the time and place of any public sale or
the time after which any private sale is to be made
shall constitute reasonable notification. The Agent
shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The
Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be
made at the time and place to which it was so
adjourned. Grantor acknowledges that sales for cash or
on credit to a wholesaler, retailer or user of
Collateral, at a public or private sale, are in each
case commercially reasonable.
(b) Any cash held by the Agent as Collateral and
all cash proceeds received by the Agent in respect of
any sale of, collection from, or other realization upon
all or any part of the Collateral may, in the
discretion of the Agent, be held by the Agent as
collateral for, and/or then or at any time thereafter
be applied (after payment of any amounts payable to the
Agent pursuant to Section 13) in whole or in part by
the Agent for the ratable benefit of the Lessors
against, all or any part of the Obligations in such
order as the Agent shall elect. Any surplus of such
cash or cash proceeds held by the Agent and remaining
after payment in full of all the Obligations shall be
paid over to the Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 13. Indemnity and Expenses. (a) The
Grantor agrees to indemnify the Agent from and against any
and all claims, losses and liabilities (including reasonable
attorneys' fees) growing out of or resulting from this
Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities
resulting from the Agent's gross negligence or willful
misconduct.
(b) The Grantor will upon demand pay to the Agent
the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any
experts and agents, which the Agent may incur in connection
with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the
rights of the Agent or the Lessors hereunder or (iv) the
failure by the Grantor to perform or observe any of the
provisions hereof.
SECTION 14. Amendments; Etc. No amendment or
waiver of any provision of this Agreement, and no consent to
any departure by the Grantor herefrom, shall in any event be
effective unless the same shall be in writing and signed by
the Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
SECTION 15. Addresses for Notices. All notices
and other communications provided for hereunder shall be in
writing (including telecopier communication) and mailed,
telecopied or delivered to it, if to the Grantor or to the
Agent, at its address specified in the Lease, or, as to
either party, at such other address as shall be designated
by such party in a written notice to the other party. All
such notices and other communications shall, when mailed or
telecopied be effective when deposited in the mails or
telecopied, respectively.
SECTION 16. Continuing Security Interest;
Assignments under Lease. This Agreement shall create a
continuing security interest in the Collateral and shall (i)
remain in full force and effect until the payment in full of
the Obligations (other than Surviving Indemnities) and all
other amounts payable under this Agreement, (ii) be binding
upon the Grantor, its successors and assigns, and (iii)
inure to the benefit of, and be enforceable by, the Agent,
the Lessors and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing
clause (iii), any Lessor may assign or otherwise transfer
all or any portion of its rights and obligations under the
Lease to any other person or entity, and such other person
or entity shall thereupon become vested with all the
benefits in respect thereof granted to such Lessor herein or
otherwise, subject, however, to the provisions of Section
11.8 of the Participation Agreement. Upon the payment in
full of the Obligations (other than Surviving Indemnities)
and all other amounts payable under this Agreement, the
security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the Grantor. Upon
any such termination, the Agent will, at the Grantor's
expense, execute and deliver to the Grantor such documents
as the Grantor shall reasonably request to evidence such
termination.
SECTION 17. Governing Law; Terms. This Agreement
shall be governed by and construed in accordance with the
laws of the State of California, except to the extent that
the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any
particular Collateral are governed by the laws of a
jurisdiction other than the State of California. Unless
otherwise defined herein, terms used in Division 9 of the
Code are used herein as therein defined.
SECTION 18. JURY TRIAL. THE GRANTOR AND THE
AGENT AND THE LESSORS (BY THEIR ACCEPTANCE OF THIS AGREEMENT
AND THE BENEFITS HEREUNDER) WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
IN WITNESS WHEREOF, the Grantor has caused this
Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above
written.
CONSOLIDATED FREIGHTWAYS
CORPORATION OF DELAWARE
By/s/Robert E. Wrightson
Title: Senior Vice President and
Controller
Exhibit 10.2
PARTICIPATION AGREEMENT
Dated as of September 30, 1994
Entered Into Among
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE,
CON-WAY CENTRAL EXPRESS, INC.,
CON-WAY INTERMODAL, INC.,
CON-WAY SOUTHERN EXPRESS, INC.,
CON-WAY SOUTHWEST EXPRESS, INC.,
CON-WAY TRANSPORTATION SERVICES, INC.,
CON-WAY WESTERN EXPRESS, INC.,
as Lessees,
CONSOLIDATED FREIGHTWAYS, INC., as Guarantor
and as Lessees' Representative
BA LEASING & CAPITAL CORPORATION,
not individually, except as expressly
set forth herein, but as Agent
and
The Lessors Listed on
Schedule I Hereto
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 1
ARTICLE II
PURCHASE AND LEASE OF VEHICLES 2
Section 2.1 Fundings; Payment of
Purchase Price 2
Section 2.2 Application of Funds; Sale
and Lease of Vehicles 3
Section 2.3 Time and Place of Delivery
Dates 4
Section 2.4 Postponement of Delivery
Date 4
Section 2.5 Non-Utilization Fee 5
ARTICLE III
CONDITIONS TO DELIVERY DATE CLOSINGS 5
Section 3.1 Delivery Date Notice;
Invoices 5
Section 3.2 Appraisal 6
Section 3.3 Participation Agreement 7
Section 3.4 Lease 7
Section 3.5 Lease Supplements 7
Section 3.6 Guarantee 8
Section 3.7 Financing Statements 8
Section 3.8 Certificates of Title 8
Section 3.9 Transaction Costs; Fees 8
Section 3.10 Opinions of Counsel 8
Section 3.11 Corporate Status and
Proceedings 9
Section 3.12 Consents and Approvals 9
Section 3.13 Payment of Impositions 9
Section 3.14 Search Reports 9
Section 3.15 Collateral Agency 9
Section 3.16 Insurance 10
Section 3.17 Proceedings Satisfactory,
Etc. 10
Section 3.18 Absence of Material Adverse
Effect 10
Section 3.19 Representations and
Warranties True; Absence of Defaults 10
ARTICLE IV
GENERAL PROVISIONS 10
Section 4.1 Nature of Transaction 10
Section 4.2 Waiver 11
Section 4.3 Replacements 11
Section 4.4 Nature of Lessees'
Obligations 11
Section 4.5 Guarantor as Lessees'
Representative 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES 13
Section 5.1 Representations and
Warranties of Lessees and Guarantor 13
Section 5.2 Representations and
Warranties of Lessors 19
Section 5.3 Representations and
Warranties of Agent 19
ARTICLE VI
COVENANTS 21
Section 6.1 Covenants of Lessees 21
Section 6.2 Covenants of Guarantor 25
Section 6.3 Covenants of Agent and
Lessors 29
ARTICLE VII
GENERAL INDEMNITIES 29
Section 7.1 Indemnity 29
Section 7.2 Excessive Use Indemnity 31
Section 7.3 Increased Capital Costs 31
Section 7.4 LIBO Rate Unlawful 31
Section 7.5 Funding Losses 32
Section 7.6 Actions of Affected Lessors 32
ARTICLE VIII
GENERAL TAX INDEMNITY 33
Section 8.1 General Tax Indemnity 33
Section 8.2 Contest 33
Section 8.3 Gross Up 35
Section 8.4 Tax Returns 35
Section 8.5 Withholding Tax Exemption 36
ARTICLE IX
AGENT 37
Section 9.1 Appointment of Agent; Powers
and Authorization to Take Certain Actions 37
Section 9.2 Reliance 38
Section 9.3 Action Upon Instructions
Generally 39
Section 9.4 Indemnification 39
Section 9.5 Independent Credit
Investigation 40
Section 9.6 Refusal to Act 40
Section 9.7 Resignation or Removal of
Agent; Appointment of Successor 41
Section 9.8 Separate Agent 41
Section 9.9 Termination of Agency 42
Section 9.10 Compensation of Agency 42
Section 9.11 Limitations 42
ARTICLE X
AMENDMENTS TO OPERATIVE AGREEMENTS 43
Section 10.1 Amendments to Operative
Agreements With Consent of Lessors 43
Section 10.2 Amendments to Operative
Agreements Affecting Agent 44
ARTICLE XI
MISCELLANEOUS 44
Section 11.1 Survival of Covenants 44
Section 11.2 APPLICABLE LAW 44
Section 11.3 Distribution and
Application of Rents and Other Payments. 44
Section 11.4 Notices 45
Section 11.5 Transaction Costs; Other
Expenses 45
Section 11.6 Counterparts 46
Section 11.7 Severability 46
Section 11.8 Successors and Assigns 46
Section 11.9 JURY TRIAL 48
Section 11.10 Captions; Table of Contents 48
Section 11.11 FINAL AGREEMENT 48
Section 11.12 No Third-Party
Beneficiaries 49
Section 11.13 Further Assurances 49
Section 11.14 Reproduction of Documents 49
Section 11.15 Consideration for Consents
to Waivers and Amendments 49
Section 11.16 Submission to Jurisdiction 50
LIST OF SCHEDULES AND EXHIBITS
Schedule I - Commitments of Lessors; Payment
Instructions
Schedule II - Description of Vehicles
Part A - Group A Vehicles
Part B - Group B Vehicles
Schedule X - Definitions
Exhibit A - Form of Lease
Schedule I - Description of Vehicles
Exhibit A - Form of Group A Lease Supplement
Exhibit B - Form of Group B Lease Supplement
Exhibit B - Form of Delivery Date Notice
Schedule I - Vehicle List and Purchase Price
Exhibit C - Form of Lessee's and Guarantor's
Opinion of Counsel
Exhibit D - Form of Officer's Certificate
Exhibit E - Form Guarantee
Exhibit F - Form of Investor's Letter
Exhibit G - Form of Assumption Agreement
Exhibit H - Form of Collateral Agency Agreement
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, dated as of September 30, 1994
(this "Participation Agreement"), is entered into among: (a) Con-
Way Central Express, Inc., a Delaware corporation, Con-Way
Intermodal, Inc., a Delaware corporation, Con-Way Southern
Express, Inc., a Delaware corporation, Con-Way Southwest Express,
Inc., a Delaware corporation, Con-Way Transportation Services,
Inc., a Delaware corporation, Con-Way Western Express, Inc., a
Delaware corporation, and Consolidated Freightways Corporation of
Delaware, a Delaware corporation ("CFCD"), as Lessees (each a
"Lessee" and collectively, the "Lessees"; the Lessees other than
CFCD are sometimes referred to herein as the "Con-Way Lessees"),
(b) Consolidated Freightways, Inc., a Delaware corporation, as
Guarantor ("Guarantor" or "Lessees' Representative", as the
context may require), (c) BA Leasing & Capital Corporation, a
California corporation, not in its individual capacity, except as
otherwise expressly provided herein, but solely as Agent for the
Lessors (the "Agent"), and (d) the several Lessors listed on
Schedule I hereto (together with their respective permitted
successors, assigns and transferees, each a "Lessor" and
collectively the "Lessors").
WHEREAS, on each Delivery Date, Lessees will transfer to
Agent, for the benefit of Lessors, and Agent, on behalf of
Lessors, will purchase and receive from Lessees, an interest in
certain of the Vehicles described on Schedule II hereto;
AND WHEREAS, upon the transfer of the Vehicles on each
Delivery Date, Agent, on behalf of Lessors, will lease such
Vehicles to Lessees and Lessees will lease such Vehicles from
Agent, for the benefit of Lessors, pursuant to the terms of the
Lease substantially in the form of Exhibit A hereto and one or
more Lease Supplements, each such Lease Supplement being, in the
case of Group A Vehicles, substantially in the form of Exhibit A
to the Lease, and, in the case of Group B Vehicles, substantially
in the form of Exhibit B to the Lease;
NOW THEREFORE, in consideration of the mutual terms and
conditions herein contained, the parties hereto agree as follows:
AI DEFINITIONS
Capitalized terms used but not defined herein (including
those used in the foregoing recitals) shall have the meanings
specified in Schedule X hereto unless the context otherwise
requires, which Schedule X shall for all purposes constitute a
part of this Participation Agreement.
AII PURCHASE AND LEASE OF VEHICLES
S1 Fundings; Payment of Purchase Price.
(a) Subject to the terms and conditions hereinafter
set forth, and in reliance on the representations and
warranties contained herein or made pursuant hereto, upon
receipt of each Delivery Date Notice, each Lessor shall
transfer to Agent on the specified Delivery Date an amount
equal to the product of the aggregate Purchase Price of the
Vehicles specified in such Delivery Date Notice, multiplied
by such Lessor's Commitment Percentage (each such transfer
being referred to herein as a "Funding"). In no event shall
any Lessor be required to provide funds under this
Participation Agreement in an aggregate amount exceeding
such Lessor's Commitment.
(b) Remittances pursuant to this Section 2.1 shall be
made in immediately available federal funds by wire transfer
to the account of Agent set forth below (or as otherwise
specified by Agent to each Lessor from time to time not less
than three Business Days prior to the date of the requested
Funding) and must be received by Agent by 11:00 a.m., San
Francisco time on the applicable Delivery Date:
(c) If the Agent determines that any Lessor (a
"Defaulting Lessor") will not make available the amount (the
"Defaulted Amount") which would constitute its Commitment
Percentage of the total Purchase Price of the Vehicles
specified in a Delivery Date Notice, Agent shall promptly
notify each other Lessor (each, a "Non-Defaulting Lessor")
and specify the additional amounts required to be funded by
each Non-Defaulting Lessor. Each Non-Defaulting Lessor, as
soon as practical after receipt of notice but not before the
Delivery Date, shall transfer to the Agent, in immediately
available funds, its pro rata share of the Defaulted Amount,
determined in the same proportion that such Non-Defaulting
Lessor's Commitment bears to the aggregate Commitments of
all Non-Defaulting Lessors; provided that such amount,
together with all amounts previously funded by each
Non-Defaulting Lessor, shall not exceed the Non-Defaulting
Lessor's Commitment. If the Defaulted Amount cannot be
fully funded by the Non-Defaulting Lessors, Agent shall so
notify the Non-Defaulting Lessors and give to all
Non-Defaulting Lessors the opportunity to increase their
respective Commitments by notice in writing to the Agent;
provided that should the aggregate proposed increased
Commitments by one or more Non-Defaulting Lessors exceed the
Defaulted Amount, Agent shall increase the Commitments of
the participating Non-Defaulting Lessors on a pro-rata basis
in accordance with the respective amounts by which such
Non-Defaulting Lessors have offered to participate, it being
understood that in no event shall the aggregate amount
funded by any Lessor exceed the amount of such Lessor's
Commitment, after giving effect to any increase in such
Commitment pursuant to this sentence.
In the event of any funding of all or a portion of the
Defaulted Amount by the Non-Defaulting Lessors, the
following rules shall apply notwithstanding any other
provision in any Operative Agreement:
(i) The Commitment of the Defaulting
Lessor shall be decreased in an amount equal to
the total aggregate increase in the Commitments
of the Non-Defaulting Lessors pursuant to this
Section 2.1(c);
(ii) A Defaulting Lessor shall be obligated
to fund any deliveries occurring after its
default based upon its revised Commitment
Percentage;
(iii) A Defaulting Lessor shall not have the
right to fund its Defaulted Amount without the
written consent of the Agent and the Lessees'
Representative and then only to the extent such
Defaulted Amount has not been funded by the
Non-Defaulting Lessors;
(iv) If and to the extent that the
Defaulted Amount is not funded by the
Non-Defaulting Lessors, Agent may delete
Vehicles from the Delivery Date Notice so that
the total Purchase Price of the Vehicles
specified in the Delivery Date Notice equals the
aggregate revised Fundings for the Delivery
Date; and
(v) The Defaulting Lessor shall not be
responsible for any consequential damages
suffered by any Lessee or any of Lessee's
Affiliates as a result of its failure to so
fund.
S2 Application of Funds; Sale and Lease of Vehicles. On each
Delivery Date, upon (a) receipt by Agent of all amounts to be
paid by the Lessors pursuant to Section 2.1, and (b) satisfaction
or waiver of each of the conditions set forth in Article III,
(i) Agent shall purchase, for the benefit of the Lessors, an
interest in the Vehicles to be acquired on such Delivery Date, as
specified in the relevant Delivery Date Notice delivered pursuant
to Section 3.1, (ii) in consideration therefor, Agent, on behalf
of the Lessors, shall pay, from the funds made available by the
Lessors pursuant to Section 2.1, an amount equal to the aggregate
Purchase Price of the interest in the Vehicles being so sold and
purchased in immediately available federal funds remitted by wire
transfer to the account specified by Lessees in the relevant
Delivery Date Notice, and (iii) Agent, on behalf of the Lessors,
shall lease to Lessees the Vehicles so purchased by Agent and
Lessees shall accept delivery of and lease from Agent such
Vehicles pursuant to the Lease. Each Lessor shall hold an
undivided interest in the Vehicles equal to such Lessor's
Investment Percentage.
S3 Time and Place of Delivery Dates. Each Delivery Date
Closing shall take place on the Delivery Date set forth in the
relevant Delivery Date Notice, commencing at 9:00 a.m. Los
Angeles time, at Mayer, Brown & Platt, 350 South Grand Avenue,
Suite 2500, Los Angeles, California 90071, subject to the
following:
(i) no more than four Fundings and four
Delivery Dates may occur;
(ii) each Funding and each Delivery Date
shall occur on a Business Day on or after the date
hereof and not later than December 15, 1994, it being
understood that there may be a Funding without a
Delivery Date Closing if Lessees have postponed the
Delivery Date pursuant to Section 2.4, so long as such
Delivery Date occurs not later than December 15, 1994;
(iii) each Funding shall provide for
financing of Vehicles having an aggregate Purchase
Price which equals or exceeds, except in the case of
the final Funding, $10,000,000;
(iv) in no event shall the aggregate amount
funded to CFCD exceed $17,000,000; and
(v) in no event shall the aggregate amount
advanced by the Lessors exceed the Total Commitment.
S4 Postponement of Delivery Date. In the event that the
Lessors shall make the Funding requested pursuant to any Delivery
Date Notice and the relevant Delivery Date Closing shall not have
occurred on the date specified in such Delivery Date Notice,
Lessees shall pay to Agent, for the benefit of Lessors, interest
on the amount funded by each Lessor at the Assumed Interest Rate,
less any interest earned by investing such funded amounts, which
interest shall be for the ratable benefit of the Lessors;
provided that this provision shall not be construed to require
Agent to invest such funds in interest-bearing accounts. Such
interest shall be due and payable by Lessees upon the occurrence
of such Delivery Date and such payment shall be an additional
condition precedent to such Delivery Date Closing; provided,
however, that no additional Delivery Date Notice shall be
required to be given if a Delivery Date Closing is postponed and
thereafter consummated; and provided, further, that if such
Delivery Date Closing shall not have occurred by the first to
occur of (a) the fifth (5th) Business Day following the Funding
in respect thereof and (b) December 15, 1994, then all such
interest shall be due and payable on such date, and Agent shall
refund to each Lessor all amounts funded by such Lessor, plus any
other amounts due under Section 7.5.
S5 Non-Utilization Fee. On the Lease Commencement Date, in
the event that the outstanding Lease Balance is less than 95% of
the Total Commitment (after giving effect to any Delivery Date
Closing that may have occurred on such date), Lessees shall pay
to Agent, for the benefit of the Lessors, a non-utilitzation fee
equal to the amount accrued on the unfunded portion of the Total
Commitment from the Initial Delivery Date through the Lease
Commencement Date at the rate of .25% per annum.
AIII CONDITIONS TO DELIVERY DATE
CLOSINGS
The obligation of each Lessor and Agent to perform its
obligations on any Delivery Date, and of each Lessor to make its
Funding, shall be subject to the fulfillment to the satisfaction
of (including, with respect to writings, such writings being in
form and substance reasonably satisfactory to the addressee or
beneficiary thereof), or the waiver in writing by, such
Participant of the conditions precedent set forth in this Article
III on or prior to such Delivery Date (except that the obligation
of any party hereto shall not be subject to the performance or
compliance of such party or of any of such party's Affiliates).
S1 Delivery Date Notice; Invoices. Lessees shall have
delivered to Agent and each Lessor, not later than 1:00 p.m. San
Francisco time not earlier than the tenth (10th) and not later
than the third (3rd) Business Day prior to the proposed Delivery
Date (or, solely with respect to the Initial Delivery Date, not
later than the second (2nd) Business Day prior to such Delivery
Date), an irrevocable notice (a "Delivery Date Notice")
substantially in the form of Exhibit B, specifying (i) the
proposed Delivery Date, (ii) a description (including model,
make, serial number and registration) of each Vehicle to be
purchased on such Delivery Date and a representation and warranty
that as of the date the relevant Lessee takes possession of each
such Vehicle and at all times thereafter, such Vehicle will
either be (a) used in interstate commerce, titled in a State with
respect to which Agent and Lessors have received an opinion in
the form of Exhibit C-1 and registered in a State which is a
party to the International Registration Plan or (b) used in
intrastate commerce, registered in the State in which it is so
used and titled in a State with respect to which Agent and
Lessors have received an opinion in the form of Exhibit C-1,
(iii) the respective Purchase Prices of such Vehicles, (iv) as to
each such Vehicle, which Lessee is to be the Lessee thereof, and
(v) wire transfer instructions for the disbursement of funds.
Concurrently with each Delivery Date Notice, Lessees'
Representative shall deliver to Agent true and correct copies of
the manufacturer's or dealer's invoice for each Vehicle to be
delivered on such Delivery Date, which invoices shall set forth
the Invoice Cost of each such Vehicle.
S2 Appraisal. At least 2 Business Days prior to the Initial
Delivery Date, Agent and each Lessor shall have received an
Appraisal to their reasonable satisfaction opining:
(a) that the Appraised Value of the Group A Vehicles is
reasonably expected to be as follows:
Date Value
Sum of Fair Market Value of Group A
Vehicles on the Initial Delivery Date $48,808,580
End of Base Period $36,165,234
End of First Renewal Term $31,605,500
End of Second Renewal Term $27,467,805
End of Third Renewal Term $22,338,641
End of Fourth Renewal Term $17,152,771;
(b) that the Appraised Value of the Group B Vehicles is
reasonably expected to be as follows:
Date Value
Sum of Fair Market Value of Group B
Vehicles on the Initial Delivery Date $11,554,425
End of Base Period $8,839,136
End of First Renewal Term $8,054,221
End of Second Renewal Term $6,743,908
End of Third Renewal Term $5,628,095
End of Fourth Renewal Term $4,464,958
End of Fifth Renewal Term $3,383,159;
(c) that the remaining economic useful life of each
Group A Vehicle is not less than ten (10) years;
(d) that the remaining economic useful life of each
Group B Vehicle is not less than twelve (12) years; and
(e) that the values set forth in clauses (a) and (b)
above assume an increase for inflation of 2% per annum, and
that such inflation assumption is reasonable.
S3 Participation Agreement. On or prior to the Initial
Delivery Date, each of the Participants shall have received a
fully executed counterpart of this Participation Agreement.
S4 Lease. On or prior to the Initial Delivery Date, each
Participant shall have received a fully executed counterpart of
the Lease; provided, however, only Agent shall receive the Lease
marked "Counterpart No. 1 - Agent's Original Copy".
S5 Lease Supplements. On each Delivery Date, each Lessee
accepting Vehicles for lease on such Delivery Date shall execute
and deliver to Agent and each Lessor one or more Lease
Supplements in form and substance reasonably satisfactory to
Lessors and substantially in the form of Exhibit A to the Lease
in the case of Group A Vehicles or substantially in the form of
Exhibit B to the Lease in the case of Group B Vehicles (each a
"Lease Supplement"); provided, however, only Agent shall receive
the Lease Supplement marked "Counterpart No. 1 - Agent's Original
Copy". Each Lease Supplement to be executed and delivered by a
Lessee on each Delivery Date shall set forth:
(a) in Schedule I thereto, a description of and the
Purchase Price for the Vehicles; and
(b) in Schedule II thereto, the Interim Rent, the
Applicable Percentage Amounts, a schedule of the
installments of Fixed Rent, the Payment Dates therefor
payable during the Base Period and during each Renewal Term,
the Supplement Balance of such Lease Supplement as of the
Delivery Date therefor and as of each Payment Date in the
Base Term and each Renewal Term, assuming in each case that
all installments of Fixed Rent due and payable thereunder to
and including such Payment Date have been paid.
Each Lease Supplement shall provide for level payments of Fixed
Rent during the Base Term and the first two Renewal Terms. The
payments of Fixed Rent under each Lease Supplement shall be in
amounts such that, at the end of the second Renewal Term and each
Renewal Term thereafter, the Supplement Balance of such Lease
Supplement shall be equal to the Appraised Value at such date of
the Vehicles subject to such Lease Supplement. Schedules I and
II to each Lease Supplement shall be prepared by Agent, and the
items set forth by Agent in such Schedules shall be conclusive
and binding upon each Lessee for all purposes hereunder.
S6 Guarantee. On or prior to the Initial Delivery Date,
Guarantor shall have duly executed and delivered the Guarantee to
Agent and each Lessor.
S7 Financing Statements. On or prior to each Delivery Date,
Agent shall have received from each Lessee duly executed UCC
financing statements identifying each Lessee as debtor and Agent
as secured party for the benefit of the Lessors, and describing
the Lease as a secured transaction, and such financing statements
shall have been filed in (a) each jurisdiction in which any
Lessee has its principal office and (b) each jurisdiction in
which any Vehicle being delivered on such Delivery Date is to be
titled.
S8 Certificates of Title. On or prior to each Delivery Date,
Agent and each Lessor shall have received a duly executed
Officer's Certificate from Lessees' Representative, certifying
that (a) Lessees have submitted to each applicable motor vehicle
Authority the Certificate of Title for each Vehicle to be
delivered on such Delivery Date, together with (i) applications
duly completed by each Lessee requesting that such Authority
record the interests of Agent and Lessors as lienholder on each
such Certificate of Title and (ii) payment of all applicable fees
and charges and (b) as so submitted, such Certificates of Title
do not evidence title, or any interest in or Lien against title,
in any such Vehicle in any Person other than the Lessee of such
Vehicle.
S9 Transaction Costs; Fees. On or prior to each Delivery
Date, Lessees shall have paid to Agent, for the benefit of Agent
and the Lessors, any Transaction Costs invoiced and not
previously paid. Such payment shall be made by wire transfer of
immediately available funds to the account specified for Agent at
Schedule I. On or prior to the Initial Delivery Date, Lessees
shall have paid to BA Leasing & Capital Corporation (in its
individual capacity, "BALCAP") the arrangement fee provided for
in that certain letter agreement dated August 30, 1994, between
Guarantor and BALCAP.
S10 Opinions of Counsel. On or prior to the Initial Delivery
Date, each Lessor and Agent shall have received the opinions of
(a) Morrison & Foerster, as counsel to Lessees and Guarantor,
substantially to the effect of the matters set forth in Exhibit C-
1, and (b) general counsel to Lessees and Guarantor,
substantially to the effect of the matters set forth in Exhibit C-
2. By their execution hereof, Lessees and Guarantor expressly
instruct Morrison & Foerster and such general counsel to execute
and deliver such opinions to Agent and the Lessors. To the
extent that any Vehicle to be delivered on any Delivery Date is
titled in a jurisdiction with respect to which Agent and the
Lessors have not previously received a satisfactory opinion or
memorandum of counsel establishing to their satisfaction that
title to such Vehicle may be held in the name of the Lessee
thereof, with the interest of Agent, as lienholder on behalf of
the Lessors, noted on the Certificate of Title (and that the Lien
of Agent is thereby perfected), then Lessees shall cause such an
opinion or memorandum satisfactory to the Lessors to be delivered
to Agent and each Lessor on or prior to such Delivery Date.
S11 Corporate Status and Proceedings. On or prior to the
Initial Delivery Date, Agent shall have received:
(a) certificates of existence and good standing with
respect to each Lessee and Guarantor from the Secretaries of
State of the States of their incorporation, dated no earlier
than the 15th day prior to the Initial Delivery Date; and
(b) with respect to Guarantor and each Lessee, an
Officer's Certificate substantially in the form of
Exhibit D, dated the Initial Delivery Date, with respect to
such Person's governing documents, resolutions and incumbent
officers, representations and warranties and absence of
defaults.
S12 Consents and Approvals. On or prior to the Initial
Delivery Date, all necessary consents, approvals and
authorizations of, and declarations, registrations and filings
with, Authorities and nongovernmental Persons required to
consummate the transactions contemplated by this Agreement and
the other Operative Agreements shall have been obtained or made
by each Lessee and Guarantor and shall be in full force and
effect.
S13 Payment of Impositions. All Impositions other than
Charges payable on or prior to each Delivery Date in connection
with the execution, delivery, recording or filing of any of the
Operative Agreements, in connection with the filing of any of the
financing statements, any applications regarding certificates of
title and any other documents, in connection with the
consummation of any other transactions contemplated hereby or by
any of the other Operative Agreements, shall have been paid in
full by Lessees.
S14 Search Reports. Prior to each Delivery Date, Agent shall
have received reports acceptable to Agent and counsel to the
Lessors as to each Lessee by the office of the Secretaries of
State and the appropriate county filing or recording offices of
each jurisdiction contemplated by Section 3.7, each dated as
close to the relevant Delivery Date as practicable, in respect of
a search of the applicable UCC files and any indices of Liens
maintained by such offices (including, if applicable, indices of
judgment, revenue and tax liens).
S15 Collateral Agency. On or prior to the second Delivery
Date, Agent, each Lessor, each Lessee, Lessees' Representative
and the Collateral Agent shall have executed and delivered the
Collateral Agency Agreement, as provided in Section 6.1(f)(ii).
S16 Insurance. On or prior to the Initial Delivery Date,
Agent shall have received (and each Lessor shall have received a
copy of) a current certificate to the effect that insurance
complying with Section 7.1 of the Lease is in full force and
effect, and there shall be no past due premiums in respect of any
such insurance.
S17 Proceedings Satisfactory, Etc. All proceedings taken in
connection with such Delivery Date and all documents relating
thereto shall be reasonably satisfactory to each Participant and
its counsel, and each Participant and its counsel shall have
received copies of such documents as such Participant or its
counsel may reasonably request in connection therewith, all in
form and substance reasonably satisfactory to such Participant
and its counsel.
S18 Absence of Material Adverse Effect. Since June 30, 1994,
no Material Adverse Effect shall have occurred.
S19 Representations and Warranties True; Absence of Defaults.
Each of the representations and warranties made by or on behalf
of each Lessee and Guarantor under the Operative Agreements shall
be true on and as of each Delivery Date, and no Incipient Default
or Event of Default shall have occurred and be continuing on and
as of each Delivery Date.
AIV GENERAL PROVISIONS
S1 Nature of Transaction. It is the intent of the
Participants that: (a) the transaction contemplated hereby
constitutes an operating lease from Agent and Lessors to Lessees
for purposes of each Lessee's financial reporting, (b) the
transaction contemplated hereby preserves ownership in the
Vehicles to Lessees for purposes of Federal and state income tax,
bankruptcy and UCC purposes, (c) the Lease grants a security
interest in the Vehicles and the other Collateral to Agent for
the benefit of Agent and the Lessors, and (d) the obligations of
Lessees to pay Fixed Rent and Variable Rent shall be treated as
payments of principal and interest, respectively. Nevertheless,
each Lessee and Guarantor acknowledge and agree that neither
Agent nor any Lessor has made any representations or warranties
concerning the tax, accounting or legal characteristics of the
Operative Agreements and that each Lessee and Guarantor has
obtained and relied upon such tax, accounting and legal advice
concerning the Operative Agreements as they deem appropriate.
Except as specifically provided for herein or in the Lease,
Agent, for the benefit of the Lessors, shall retain an interest
in the Vehicles, free and clear of all Liens other than Permitted
Liens, as security for the obligations of Lessees under the
Operative Agreements. Lessees shall not have any right, title or
interest in the Vehicles except as expressly set forth in this
Agreement or in the Lease. Without limiting the foregoing, each
Lessee shall be permitted to be named as the record owner of each
Vehicle leased by such Lessee on the Certificate of Title and the
registration issued for such Vehicle by each applicable Authority
so long as Agent is listed on the same Certificate of Title as
having a security interest in the Vehicle or Lessee has taken
such other steps as may be necessary to perfect Agent's security
interest, on behalf of the Lessors, in such Vehicle. Other than
Agent, who will hold a security interest on behalf of the
Lessors, and the Lessors, no Person shall be named on the
Certificate of Title of any Vehicle as having a security interest
in such Vehicle.
S2 Waiver. As a material inducement to Agent and each Lessor
to engage in the transactions contemplated by the Operative
Agreements, Lessee hereby unconditionally and irrevocably waives
any and all benefits under California Civil Code Sections 2819
and 2822.
S3 Replacements. Lessors hereby agree that they shall
instruct Agent to release a Part or Vehicle from the Lease and
evidence such release by the execution and delivery of a
termination statement release, a release of Lien from the
applicable Certificate of Title and such other documents as may
be required to release the replaced Part or Vehicle from the
Lease and which are in form and substance satisfactory to the
Required Lessors subject to the satisfaction of the conditions
set forth in the Lease with respect to the release of such Part
or Vehicle.
S4 Nature of Lessees' Obligations. Each of the Con-Way
Lessees hereby covenants and agrees that their obligations under
this Agreement, the Lease, the Lease Supplements and each of the
other Operative Agreements to which any of them is a party shall
be joint and several, and that Agent and each Lessor may look to
any one or more of the Con-Way Lessees for payment and
performance of such obligations, except that each Con-Way Lessee
shall be primarily liable with respect to each Lease Supplement
to which it is a party and secondarily liable with respect to
each Lease Supplement to which any other Con-Way Lessee is a
party. Each Con-Way Lessee hereby irrevocably waives any claim
or other rights which it may now or hereafter acquire against any
other Con-Way Lessee arising from the existence, payment,
performance or enforcement of such Con-Way Lessee's obligations
under the Operative Agreements, including any right of
subrogation, reimbursement, exoneration, or indemnification, any
right to participate in any claim or remedy of any Lessor against
any Con-Way Lessee or any property or assets of any Con-Way
Lessee, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law, including the
right to take or receive from any Con-Way Lessee, directly or
indirectly, in cash or other property or by set-off or in any
manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Con-Way Lessee in
violation of the preceding sentence and the obligations owed to
the Lessors under the Operative Agreements shall not have been
indefeasibly paid in cash, such amount shall be deemed to have
been paid to such Con-Way Lessee for the benefit of, and held in
trust for, the Lessors, and shall forthwith be paid to Agent to
be credited and applied pursuant to the terms of the Operative
Agreements. Each Con-Way Lessee acknowledges that it will
receive direct and indirect benefits from the financing
arrangements contemplated by this Agreement and that the waiver
set forth in this paragraph is knowingly made in contemplation of
such benefits. Each Con-Way Lessee hereby absolutely,
unconditionally and irrevocably waives and agrees not to assert
or take advantage of any defense based upon an election of
remedies by Agent or any Lessor. In any action or proceeding
involving any state corporate law, or any state or federal
bankruptcy, insolvency, reorganization or any other law affecting
the rights of creditors generally, if the obligations of any Con-
Way Lessee under the Operative Agreements would otherwise be held
or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of
the amount of its liability under the Operative Agreements, then,
notwithstanding any other provision hereof to the contrary, the
amount of such liability shall, without any further action by
such Con-Way Lessee or any other Person, be automatically limited
and reduced to the highest amount which is valid and enforceable
and not subordinated to the claims of other creditors as
determined in such action or proceeding. No Con-Way Lessee shall
be liable for (nor shall any Collateral pledged by any Con-Way
Lessee secure) the payment or performance of the obligations of
CFCD under the Operative Agreements, and CFCD shall not be liable
for (nor shall any Collateral pledged by CFCD secure) the payment
or performance of the obligations of any Con-Way Lessee under the
Operative Agreements. Each undertaking, covenant and agreement
made by the Lessees collectively under any Operative Agreement
shall be subject to this Section 4.4.
S5 Guarantor as Lessees' Representative. Each Lessee hereby
appoints Guarantor as its representative ("Lessees'
Representative") for receipt of any payment, notice or other
communication directed to Lessees, or any Lessee, pursuant to any
of the Operative Agreements, and for the taking of any action
(including the making of any representations and covenants) which
a Lessee is required or permitted to undertake or make pursuant
to the Operative Agreements. Each Lessor and Agent may regard
any notice or other communication pursuant to any Operative
Agreement (including a Delivery Date Notice) from Guarantor as a
notice or communication from the Lessees. Without limiting the
foregoing, Agent shall make all payments of Purchase Price on
each Delivery Date to Guarantor, for the benefit of the
applicable Lessee or Lessees, to an account specified by
Guarantor in the applicable Delivery Date Notice, and such
payment to Guarantor shall constitute payment to such Lessee or
Lessees for all purposes under the Operative Agreements.
Guarantor hereby accepts such appointment and agrees that it
shall not resign from its duties as Lessees' Representative
without the written consent of the Required Lessors. Each Lessee
hereby covenants and agrees that each representation and
warranty, covenant, agreement and undertaking made in its name or
on its behalf by Lessees' Representative shall be deemed for all
purposes to have been made by such Lessee and shall be binding
upon and enforceable against such Lessee to the same extent as if
the same had been made directly by such Lessee.
AV REPRESENTATIONS AND WARRANTIES
S1 Representations and Warranties of Lessees and Guarantor.
As of each Delivery Date, each Lessee and Guarantor jointly and
severally make the representations and warranties set forth in
this Section 5.1 to Agent and each Lessor.
(a) Title. Each Lessee has record title to each of
the Vehicles listed opposite such Lessee's name on
Schedule I to the applicable Delivery Date Notice (or has
beneficial title to such Vehicle with record title being
subject only to the issuance in the ordinary course of the
original Certificate of Title, for which an application has
already been submitted to the appropriate titling Authority)
and each of the Vehicles and all of the other Collateral is
free from all Liens except for Permitted Liens.
(b) Perfection of Security Interests. No filing,
recordation or registration is necessary or advisable in
order to perfect the security interest of Agent, for the
benefit of the Lessors, in the Vehicles and other Collateral
referred to in the foregoing subsection (a), other than (i)
the filing or recording of financing statements under
Article 9 of the applicable UCC in the jurisdictions
contemplated by Section 3.7, and the recordation on the
Certificate of Title for each Vehicle of the security
interest of Agent, on behalf of the Lessors or (ii) in the
case of any Sublease, the delivery to Agent of the chattel
paper original of such Sublease, and upon the actions
described in the foregoing clauses (i) and (ii), the
security interests in the Vehicles and the other Collateral
are enforceable, properly perfected, first-priority Liens,
subject only to Permitted Liens; provided, however, that
such actions may not be effective to perfect such security
interest in certain Intellectual Property Collateral that
can only be perfected by filing with the United States
Patent and Trademark Office and certain items described in
clause (e) of the definition of "Collateral" to the extent
such items are stored in (but not made a part of) a Vehicle
and located from time to time in jurisdictions where no such
filing has been made or to the extent that any such item
consists of a type of collateral in which a security
interest cannot be perfected by taking such actions.
(c) Appraisal Data. The information provided by each
Lessee and Guarantor to the Appraiser and forming the basis
for the conclusions set forth in the Appraisal, taken as a
whole, was true and correct in all material respects and did
not omit any information necessary to make the information
provided not materially misleading.
(d) Corporate Existence. Each of the Lessees and
Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, and each such Person is duly qualified or licensed
and in good standing as a foreign corporation authorized to
do business in each state where, because of the nature of
its activities or properties, such qualification or
licensing is required, except for such jurisdictions where
the failure to be so qualified or licensed would not have a
Material Adverse Effect.
(e) Corporate Authority. Each of the Lessees and
Guarantor has all requisite corporate power and authority to
execute, deliver, and perform its respective obligations
under each Operative Agreement to which it is a party.
(f) Authorization; Non-Contravention. The execution
and delivery by each of Lessees and Guarantor of the
Operative Agreements to which it is a party, and the
performance by each such Person of its respective
obligations under such Operative Agreements, have been duly
authorized by all necessary corporate action (including any
necessary stockholder action) on its part, and do not and
will not: (i) violate any provision of any law, rule or
regulation presently in effect having applicability to any
Lessee or Guarantor or of any order, writ, judgment, decree,
determination or award presently in effect having
applicability to any Lessee or Guarantor, which violation or
violations would have, individually or in the aggregate, a
Material Adverse Effect; (ii) violate any provision of the
charter or bylaws of any Lessee or Guarantor; (iii) result
in a breach of or constitute a default under any indenture,
loan or credit agreement, or any other agreement or
instrument to which any Lessee or Guarantor is a party or by
which any of such Persons or their respective properties may
be bound or affected, which breaches or default would have,
individually or in the aggregate, a Material Adverse Effect;
or (iv) result in, or require, the creation or imposition of
any Lien of any nature upon or with respect to any of the
properties now owned or hereafter acquired by any Lessee or
Guarantor (other than the security interest contemplated by
the Lease); and none of the Lessees or Guarantor is in
default under or in violation of its respective charter or
bylaws.
(g) Binding Effect. Each of the Operative Agreements
to which any Lessee or Guarantor is a party constitutes the
legal, valid and binding obligation of such Person,
enforceable against such Person, in accordance with its
terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and
by general principles of equity.
(h) Absence of Litigation, etc. There is no
litigation (including, without limitation, derivative
actions), arbitration or governmental proceedings pending
or, to the knowledge of Guarantor or any Lessee, threatened
against Guarantor or any Lessee in which there is a
reasonable possibility of an adverse decision which, if
adversely determined, would have a Material Adverse Effect.
(i) Consents, etc. No authorization, consent,
approval, license or formal exemption from, nor any filing,
declaration or registration with, any Authority, including,
without limitation, the Securities and Exchange Commission,
or with any securities exchange, is or will be required in
connection with the execution and delivery by any Lessee or
Guarantor of the Operative Agreements to which they are
party, the performance by any Lessee or Guarantor of their
respective obligations under such Operative Agreements or
the ownership, operation and maintenance of the Vehicles as
contemplated by the Operative Agreements, except as
described in Section 5.1(b).
(j) Location of Offices. The principal place of
business and chief executive office (as such term is used in
Article 9 of the UCC) of each Con-Way Lessee is located at
2882 Sand Hill Road, Suite 210, Menlo Park, California
94025, and of CFCD is located at 175 Linfield Road, Menlo
Park, California 94025.
(k) ERISA. Relying upon the accuracy of the
representations in Section 5.2(a) hereof, the execution and
delivery of the Operative Agreements by Lessees and
Guarantor will not involve any prohibited transaction within
the meaning of ERISA or Section 4975 of the Internal Revenue
Code of 1986, as amended.
(l) Taxes. Each Lessee and Guarantor has filed or
caused to be filed all United States Federal and all other
material tax returns that are required to be filed by each
such Person, and has paid or caused to be paid all taxes
shown to be due and payable on such returns or on any
assessment received by any Lessee or Guarantor to the extent
that such taxes have become due and payable except to the
extent that taxes due, but unpaid, are being contested in
good faith by such Lessee or Guarantor by appropriate action
or proceeding and, to the extent (if any) that such taxes
are not due and payable, has established or caused to be
established reserves that are adequate for the payment
thereof in accordance with GAAP.
(m) Compliance with Laws. The Vehicles, the
properties from which they are operated and serviced and the
current operation thereof and thereon do not violate any
laws, rules, regulations, or orders of any Authorities that
are applicable thereto, including, without limitation, any
thereof relating to matters of occupational safety and
health or Environmental Laws, or motor vehicles or the
titling or registration thereof, except for such violations
as would not have, individually or in the aggregate, a
Material Adverse Effect.
(n) Disclosure. Taken as a whole, neither this
Participation Agreement, nor any offering materials, nor the
other Operative Agreements to which each Lessee or Guarantor
is or will be a party nor the other documents and
certificates furnished pursuant to this Participation
Agreement to Agent, or the Lessors in connection with the
transactions contemplated by this Participation Agreement,
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the
statements contained herein and therein, in the light of the
circumstances under which they were made, not misleading.
(o) Impositions. No sales, use, excise, transfer or
other tax, fee or imposition shall result from the titling,
registration or delivery of a Vehicle on or before any
Delivery Date, except such taxes, fees or impositions that
have been paid in full on or prior to the applicable
Delivery Date, except with respect to sales and use taxes
owing in connection with a transfer which shall be paid
monthly or quarterly as due and payable.
(p) Certain Vehicle Matters.
(i) Each Vehicle accepted by the Lessors on a
Delivery Date which is to be used in interstate
commerce will be properly registered pursuant to the
International Registration Plan as in effect in the
state in which such Vehicle is titled on such Delivery
Date.
(ii) Each Vehicle has a gross weight rating
of more than 16,000 pounds, and none of the Vehicles
has been specially constructed, rebuilt, reconstituted
or assembled.
(iii) No Lessee is in the business of selling
vehicles and the Vehicles do not constitute "inventory"
under any applicable UCC.
(iv) Each Vehicle is manufactured within the
United States of America.
(v) In connection with the submission of each
application to have the Lien of Agent, for the benefit
of the Lessors, listed on each Certificate of Title,
the applicable Lessee has submitted sufficient evidence
of ownership of the applicable Vehicle to the relevant
motor vehicle titling Authority.
(q) Registration of Vehicles Used in Intrastate or
Interstate Commerce. Each Vehicle accepted by the Lessors
on a Delivery Date will be, when the applicable Lessee takes
possession thereof and at all times thereafter, either (i)
used in interstate commerce, titled in a State with respect
to which Agent and Lessors have received an opinion in the
form of Exhibit C-1 and registered in a State which is a
party to the International Registration Plan or (ii) used in
intrastate commerce, registered in the State in which it is
so used and titled in a State with respect to which Agent
and Lessors have received an opinion in the form of Exhibit
C-1.
(r) Holding Company. Neither any Lessee nor Guarantor
is subject to regulation as a "holding company," an
"affiliate" of a "holding company", or a "subsidiary
company" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
(s) Investment Company Act. Neither any Lessee nor
Guarantor is an "investment company" or a company
"controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(t) Intellectual Property. There are no patents,
patent rights, trademarks, service marks, trade names,
copyrights, licenses or other intellectual property rights
with respect to the Vehicles, or proprietary, patented or
patentable modifications or Parts used in connection with
the Vehicles, the unavailability of which would have a
material adverse effect on the current Fair Market Value of
the Vehicles.
(u) Subjection to Regulation. Neither Agent nor
any Lessor will, solely by reason of entering into the
Operative Agreements or the consummation and performance of
the transactions contemplated thereby (other than upon the
exercise of remedies under the Lease) (i) be required to
qualify to do business in any jurisdiction, (ii) become
subject to ongoing regulation by any Authority as a company
engaged in the business of any Lessee in any jurisdiction or
(iii) to the best knowledge of each Lessee and Guarantor,
become subject to any other ongoing regulation of its
operations by any Authority (other than any taxing
Authority).
(v) Use of Proceeds. The use of the proceeds from the
transaction contemplated by the Operative Agreements will
not violate or result in any violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any
regulations issued pursuant thereto, including, without
limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.
(w) Absence of Defaults. No Incipient Default or
Event of Default has occurred and is continuing, and since
June 30, 1994 there has occurred no Material Adverse Effect.
(x) Absence of Casualty. No Casualty has occurred
with respect to the Vehicles being delivered on such
Delivery Date.
(y) Solvency. The transfer of Vehicles made by Lessee
on the relevant Delivery Date will not render any Lessee
insolvent, nor will it be made in contemplation of any
Lessee's insolvency; the value of the assets and properties
of each Lessee at fair valuation and at their then present
fair salable value is and, after such transfers, will be
greater than such Lessee's total liabilities, including
contingent liabilities, as they become due; the property
remaining in the hands of each Lessee after such transfers
was not and will not be an unreasonably small amount of
capital.
(z) Insurance. All insurance coverages required by
Section 7.1 of the Lease are in full force and effect and
there are no past due premiums in respect of any such
insurance.
(aa) SEC Reports. At least three (3) Business Days
prior to the Initial Delivery Date, Guarantor shall have
delivered to Agent and Lessors copies of its most recent
Annual Report on Form 10-K and its 2 most recent Quarterly
Reports on Form 10-Q, in each case as filed with the
Securities and Exchange Commission; the consolidated
financial statements set forth in such Reports have been
prepared in accordance with GAAP, applied on a consistent
basis throughout the periods covered thereby and on a basis
consistent with prior periods; and such consolidated
financial statements fairly present the consolidated
financial condition of Guarantor and its consolidated
subsidiaries at such dates and the consolidated results of
their operations for such periods.
(bb) Private Offering. Neither any Lessee nor
Guarantor, nor anyone acting on behalf of either of them,
has taken or will take any action which will subject the
issue and sale of any interest being acquired by the Lessors
under the Operative Agreements to the requirements of
Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), and, assuming the truth and accuracy of
the representations set forth in Section 5.2(b), the
issuance, sale and delivery of such interests under the
circumstances contemplated by this Agreement do not require
the registration of such interests under the Securities Act
or the qualification of any of the Operative Agreements
under the Trust Indenture Act of 1939, as amended.
(cc) Brokers, etc. Neither any Lessee nor Guarantor
has engaged or authorized any broker, finder, investment
banker or other third party to act on its behalf, directly
or indirectly, as a broker, finder, investment banker, agent
or in any other like capacity in connection with any of the
Operative Agreements or the transactions contemplated
thereby, other than BALCAP. Each Lessee shall be
responsible for, and shall indemnify, defend and hold each
Lessor harmless from and against any and all claims,
liabilities or demands by any Person for broker's, finder's,
investment banker's or agent's fees, commissions or other
entitlements with respect the Operative Agreements and the
transactions contemplated thereby (except to the extent
arising from a breach of Section 5.2(c) or Section 5.3(f),
or from any claim made by BALCAP).
S2 Representations and Warranties of Lessors. Each of the
Lessors hereby represents and warrants severally but not jointly
to the other Participants as set forth in this Section 5.2.
(a) ERISA. Such Lessor is not and will not be funding
any of its Commitment or performing any of its obligations
under the Operative Agreements with the assets of an
"employee benefit plan" (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA, or a "plan" (as
defined in Section 4975(e)(1) of the Code.
(b) Investment. The interest being acquired by such
Lessor under the Operative Agreements is being acquired for
its own account, without any view to the distribution
thereof or any interest therein, provided that such Lessor
shall be entitled to assign, transfer or convey its interest
in accordance with Section 11.8.
(c) Brokers, etc. Such Lessor has not engaged or
authorized any broker, finder, investment banker or other
third party to act on its behalf, directly or indirectly, as
a broker, finder, investment banker, agent or in any other
like capacity in connection with any of the Operative
Agreements or the transactions contemplated thereby, other
than BALCAP.
S3 Representations and Warranties of Agent. BA Leasing &
Capital Corporation, in its individual capacity, hereby
represents and warrants to the other Participants as set forth in
this Section 5.3.
(a) Organization and Authority. Agent is a
corporation duly organized and validly existing in good
standing under the laws of California and has the corporate
power and authority to enter into and perform its
obligations under the Operative Agreements.
(b) Authorization; Binding Effect. The Operative
Agreements to which Agent is or will be a party have been or
will be, on the date required to be delivered hereby, duly
authorized, executed and delivered by Agent, and this
Participation Agreement is, and such other Operative
Agreements are, or, when so executed and delivered by Agent
will be, valid, legal and binding agreements of Agent,
enforceable against Agent in accordance with their
respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
(c) Non-Contravention. Neither the execution and
delivery by Agent of the Operative Agreements to which it is
or will be a party, either in its individual capacity, as
Agent, or both, nor compliance with the terms and provisions
thereof, conflicts with, results in a breach of, constitutes
a default under (with or without the giving of notice or
lapse of time or both), or violates any of the terms,
conditions or provisions of: (i) the articles of
incorporation or by-laws of Agent; (ii) any bond, debenture,
note, mortgage, indenture, agreement, lease or other
instrument to which Agent, either in its individual
capacity, as Agent, or both, is now a party or by which it
or its property, either in its individual capacity, as
Agent, or both, is bound or affected, where such conflict,
breach, default or violation would be reasonably likely to
materially and adversely affect the ability of Agent, either
in its individual capacity, as Agent or both, to perform its
obligations under any Operative Agreement to which it is or
will be a party, either in its individual capacity, as
Agent, or both; or (iii) any of the terms, conditions or
provisions of any law, rule, regulation, order, injunction
or decree of any Authority applicable to it in its
individual capacity, as Agent, or both, where such conflict,
breach, default or violation would be reasonably likely to
materially and adversely affect the ability of Agent, either
in its individual capacity, as Agent or both, to perform its
obligations under any Operative Agreement to which it is or
will be a party.
(d) Absence of Litigation, etc. There is no
litigation (including, without limitation, derivative
actions), arbitration or governmental proceedings pending
or, to the best knowledge of Agent, threatened against it
which would be reasonably likely to adversely affect Agent's
ability to perform its obligations under the Operative
Agreements to which it is party.
(e) Consents, etc. No authorization, consent,
approval, license or formal exemption from, nor any filing,
declaration or registration with, any Authority, is or will
be required in connection with the execution and delivery by
Agent of the Operative Agreements to which it is party or
the performance by Agent of its obligations under such
Operative Agreements.
(f) Brokers, etc. Agent has not engaged or authorized
any broker, finder, investment banker or other third party
(other than Bank of America, National Trust and Savings
Association) to act on its behalf, directly or indirectly,
as a broker, finder, investment banker, agent or in any
other like capacity in connection with any of the Operative
Agreements or the transactions contemplated thereby.
AVI COVENANTS
S1 Covenants of Lessees. Each of the Lessees, jointly and
severally, covenants and agrees with the Lessors and Agent that
during the Lease Term, and, if Lessees have not purchased the
Vehicles pursuant to the Lease, for 90 days thereafter, each
Lessee shall comply with each of the following provisions of this
Section 6.1.
(a) Corporate Existence, etc. Subject to Section 6.1(c)
and any merger permitted thereby pursuant to which any Lessee
ceases to exist (in which case this subsection (a) shall apply to
the surviving corporation of such merger), each Lessee shall do
or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights and powers
and franchises and its power and authority to perform its
obligations under the Operative Agreements, including, without
limitation, any necessary qualification or licensing in any
foreign jurisdiction, except where the failure to be so qualified
would not have a Material Adverse Effect.
(b) Compliance With Laws. Each Lessee shall comply with
all applicable statutes, regulations, franchises, and orders of,
and all applicable restrictions imposed by, any Authority, in
respect of the conduct of its business and the ownership of its
properties (including, without limitation, applicable statutes,
rules, ordinances, regulations and orders relating to
Environmental Laws), except for such instances of non-compliance
which would not have, individually or in the aggregate, a
Material Adverse Effect. Without limiting the foregoing, Lessees
shall at all times be responsible for, and shall comply with, all
provisions of any Authority with respect to the titling and
registration of Vehicles.
(c) Mergers, Consolidations, Dispositions. No Lessee shall
consolidate with or merge into any other Person, or convey,
transfer or lease all or substantially all of its assets to any
other Person (other than another Lessee), unless:
(i) subject to compliance with Section 6.2(c), the
Person resulting from such consolidation or merger, or the
Person which acquires all or substantially all of a Lessee's
assets (the "Surviving Corporation"), is a corporation
organized under the laws of the United States of America or
any State thereof which is a Subsidiary of Guarantor, and
executes and delivers to Agent and each Lessor an Assumption
Agreement substantially in the form of Exhibit G hereto,
pursuant to which the Surviving Corporation shall succeed to
and assume all of the obligations of the Lessee with which
it is so merged or whose assets it so acquires under the
Operative Agreements and for all purposes thereafter be
deemed to be such Lessee thereunder;
(ii) Guarantor shall execute the aforementioned
Assumption Agreement in reaffirmation of the Guarantee;
(iii) at the time of, and immediately after giving
effect to, such transaction, there shall exist no Incipient
Default or Event of Default;
(iv) promptly upon the consummation of such
transaction, such Surviving Corporation shall cause the
Certificate of Title for each Vehicle acquired by it
pursuant to such transaction to be reissued with such
Surviving Corporation listed as the holder of title to each
such Vehicle (unless it has provided to Agent and each
Lessor, prior to the consummation of such transaction, an
opinion of counsel acceptable to Agent to the effect that
such re-titling is not required under applicable law), with
the interests of Agent and Lessors as lienholders duly noted
thereon, and such Surviving Person shall comply with the
provisions of Sections 6.1(f) and (g) in connection
therewith, for such purposes treating the date of
consummation of such transaction as a "Delivery Date"; and
(v) promptly upon the consummation of such transaction,
each Lessor and Agent shall have received an opinion of
counsel to such Surviving Corporation and Guarantor with
respect to the validity of such transaction and as to the
enforceability of the Assumption Agreement and the other
Operative Agreements against such Surviving Corporation and
as to the continued enforceability of the Guarantee.
(d) Liens. No Lessee shall incur or suffer to exist any
Lien on any of the Collateral other than Permitted Liens.
Without limiting the foregoing, no Lessee shall assign or pledge
any of its rights under any Sublease to any Person other than
Agent.
(e) Change of Name or Location. Each Lessee shall furnish
to Agent notice on or before the 30th day prior to any relocation
of its chief executive office or principal place of business, or
change of its name.
(f) Perfection and Maintenance of Security Interest.
(i) Lessees, at their expense, shall cause, as soon as
possible, but in any event no later than the 10th day
after any request, financing statements (and
continuation statements with respect thereto) and all
other documents necessary or reasonably requested by
Agent in connection with the establishment and
perfection of the interest of Agent in the Collateral,
to be recorded or filed at the locations contemplated
by Section 3.7, and in such manner, and, at its
expense, shall take, or shall cause to be taken, all
such other action as may be necessary or reasonably
requested by Agent or the Required Lessors in order to
establish, preserve, protect and perfect the rights,
titles and interests of Agent, on behalf of the
Lessors, to the Collateral.
(ii) Within 15 days following the Initial Delivery
Date, and in any event on or prior to the second
Delivery Date, Agent, Lessors, Lessees and Lessees'
Representative shall have entered into a Collateral
Agency Agreement with a Collateral Agent, which
Collateral Agency Agreement shall be substantially in
the form of Exhibit H with only such changes as the
Required Lessors may approve, but in no event involving
a diminution of the duties of the Collateral Agent from
those set forth in Exhibit H.
(iii) All Certificates of Title relating to
Vehicles delivered on the Initial Delivery Date shall
indicate the address of Agent set forth in Section 11.4
as the address of the lienholder thereon, and all
Certificates of Title relating to Vehicles delivered
following the consummation of the Collateral Agency
Agreement shall indicate the address of the Collateral
Agent set forth in the Collateral Agency Agreement as
the address of the lienholder thereon.
(iv) Lessees shall, no later than seventy-five (75)
days following each Delivery Date, have delivered to
the Collateral Agent for inspection and custody
pursuant to the Collateral Agency Agreement the
originals of all Certificates of Title to the Vehicles
purchased on such Delivery Date of which CFCD or Con-
Way Intermodal, Inc. is Lessee, showing CFCD or Con-Way
Intermodal, Inc., as the case may be, as owner of
record, naming Agent, on behalf of the Lessors (and
Lessors to the extent permitted under applicable law
and procedure to be so named), on the face of such
Certificates of Title as having a perfected first
security interest in such Vehicles, and reflecting no
other Liens.
(v) With respect to Certificates of Title for Vehicles
other than those described in the foregoing clause
(iv), Lessees' Representative shall, no later than
seventy-five (75) days following each Delivery Date,
have delivered to Agent and each Lessor an Officer's
Certificate certifying that each such Certificate of
Title is in the possession of Lessees' Representative,
shows a Lessee as owner of record, and names Agent, on
behalf of the Lessors (and Lessors to the extent
permitted under applicable law and procedure to be so
named), on the face of such Certificates of Title as
having a perfected first security interest in such
Vehicles, and reflecting no other Liens. All
Certificates of Title so held by Lessees'
Representative shall be available for inspection by
Agent during normal business hours, and Lessees'
Representative shall deliver possession of such
Certificates of Title to Agent immediately upon Agent's
request therefor. Not later than January 2, 1995 (or
in the event the Mergers are consummated, upon receipt
of the Certificates of Title from the applicable
titling Authority but in no event later than the 75th
day following the consummation of the Mergers), Lessees
shall deliver each Certificate of Title described in
this clause (v) to the Collateral Agent for custody and
inspection pursuant to the terms of the Collateral
Agency Agreement, which Certificate of Title shall
reflect the interests of the applicable Lessee and
Agent (or Agent and the Lessors) as described in the
first sentence of this clause (v)).
(vi) Notwithstanding the foregoing, if naming Agent
(and, if permitted as aforesaid, Lessors) as a secured
party on such Certificate or Certificates of Title as
hereinabove contemplated is not adequate to perfect the
first priority security interest of Agent, for the
benefit of the Lessors, then Lessees shall, within the
applicable time period specified above, deliver to
Agent, in addition to the original Certificates of
Title, all such other documents or filings as
reasonably required by Agent or the Required Lessors to
ensure that Agent, on behalf of the Lessors, has a
perfected first priority security interest in such
Vehicles.
Without limiting the foregoing, in the event that any
application for registration of such Lien on the Certificate of
Title to any Vehicle shall be rejected by the applicable
Authority, Lessees shall make such corrections as may be
necessary in order that such registration shall be re-submitted
to the applicable Authority not more than fifteen (15) days
following the initial rejection thereof, and duly completed not
more than sixty (60) days following such re-submission.
Following delivery of any Certificate of Title to Collateral
Agent pursuant to this Section 6.1(f), or following receipt by
Lessees' Representative of any Certificate of Title as
contemplated by clause (v) hereof, no Lessee nor Lessees'
Representative shall, without the prior written approval of
Agent, change the State of title or the Certificate of Title of
any Vehicle, apply for an additional Certificate of Title for any
Vehicle, or otherwise modify such Certificate of Title (except in
connection with the Mergers, with respect to which Lessees or
Lessees' Representative shall comply with all of the other
provisions of clause (v) and of Section 6.1(c)). The Required
Lessors shall instruct Agent to grant such written approval upon
Lessees' satisfaction of the provisions of this Section 6.1(f)
with respect to the perfection of Agent's security interest, on
behalf of the Lessors, in such Vehicle (or any Replacement
Vehicle) and upon receipt by Agent and each Lessor of an opinion
of counsel substantially to the effect of the matters set forth
in Exhibit C-1 with respect to the jurisdiction in which such
Vehicle is to be titled or registered (to the extent that Agent
and Lessors have not previously received such an opinion of
counsel with respect to such jurisdiction). The security
interest of Agent, on behalf of the Lessors, on any Certificate
of Title shall not be removed therefrom, nor shall any other
security interest be noted thereon, unless and until such Vehicle
is to be released from the Lien created by the Lease in
accordance with the applicable provisions of the Operative
Agreements. No Lessee shall, without the prior written approval
of Agent, register any Vehicle in any manner that would render
Section 5.1(q) untrue with respect to such Vehicle as of any date
of determination.
It is expressly understood that to the extent that any
Certificate of Title is in the possession of any Lessee or
Lessees' Representative, such possession shall be strictly for
the benefit of Agent and the Lessors and solely in accordance
with the provisions of the Operative Agreements.
(g) Mandatory Purchase Following a Delivery Date. If
Lessees shall upon the expiration of the applicable time period
set forth in Section 6.1(f) fail to deliver the Officer's
Certificate described in Section 6.1(f)(v) with respect to any
Vehicle or fail to deliver to the Collateral Agent the original
Certificate of Title for any Vehicle, evidencing no other Liens
other than that of Agent, for the benefit of the Lessors, then
Lessees shall, on the Payment Date immediately following the
expiration of such time period, purchase each of the Vehicles for
which Lessees have failed to satisfy any such requirement and pay
to Agent, for the benefit of the Lessors, on such Payment Date a
portion of the Lease Balance equal to the Casualty Amount for
each such Vehicle, plus the applicable Administrative Charge on
such portion of the Lease Balance. Upon Lessors' receipt of the
payments described in the preceding sentence and all Rent then
due and payable under the Lease and each of the Lease
Supplements, Agent shall transfer its interest in such Vehicle or
Vehicles to the Lessee of each such Vehicle in accordance with
the last two sentences of Section 12.1 of the Lease.
Notwithstanding the foregoing, if the amount of the Lease Balance
repaid from the Initial Delivery Date to any date of
determination pursuant to this Section 6.1(g) and the last
sentence of Article X of the Lease exceeds $4,000,000 in the
aggregate, Lessee shall be required to repay the entire
outstanding Lease Balance, together with the applicable
Administrative Charge and all accrued but unpaid Variable Rent to
the date of such repayment.
(h) Collateral Agency. Lessees and Lessees' Representative
shall comply with all of the terms and provisions of the
Collateral Agency Agreement.
(i) Additional Information. Promptly upon receipt of a
written request from Agent or any Lessor, Lessees shall deliver
to such requesting party such other data and information as from
time to time may be reasonably requested.
(j) Reports to Lessors. Each Lessee shall, concurrently
with any notice, delivery or other communication required to be
delivered to Agent pursuant to any Operative Agreement, deliver a
copy of such notice, delivery or other communication to each
Lessor at such Lessor's current address.
S2 Covenants of Guarantor. Guarantor covenants and agrees
with Agent and each of the Lessors that during the Lease Term
and, if Lessees have not purchased the Vehicles pursuant to the
Lease, for 90 days thereafter, that Guarantor shall comply with
the following provisions of this Section 6.2.
(a) Corporate Existence, etc. Subject to Section 6.2(b)
and any merger permitted thereby pursuant to which Guarantor
ceases to exist (in which case this subsection (a) shall apply to
the surviving corporation of such merger), Guarantor shall, and
(subject to Section 6.1(c)) shall cause each Lessee to, at all
times maintain its corporate existence, and Guarantor shall do or
cause to be done all things necessary to preserve and keep in
full force and effect its and Lessee's full corporate power and
authority to perform their respective obligations under each
Operative Agreement to which each of them is or will be a party.
(b) Mergers, Consolidations, Dispositions. Guarantor shall
not, and shall not permit any of its Subsidiaries to (except as
permitted by Section 6.1(c)), consolidate with or merge into any
other Person, or convey, transfer or lease all or substantially
all of its assets to any other Person, unless:
(i) the Person resulting from any such consolidation or
merger to which Guarantor is a party, or the Person which
acquires all or substantially all of Guarantor's assets, is
a corporation organized under the laws of the United States
of America or any State thereof, and executes and delivers
an agreement in form and substance satisfactory to Agent
containing an assumption by such Person of the due and
punctual performance and observation of each covenant,
condition and agreement of Guarantor under this Agreement,
the Guarantee and each of the other Operative Agreements to
which Guarantor is a party; and
(ii) at the time of, and immediately after giving
effect to, such transaction, there shall exist no Incipient
Default or Event of Default.
(c) Ownership of Lessees; Compliance. Guarantor shall at
all times be the sole record and beneficial owner, directly or
indirectly, of at least 80% of the issued and outstanding shares
of capital stock (on a fully diluted basis) of each Lessee.
Guarantor shall not permit any Liens to exist on any such capital
stock, or, except as permitted by Section 6.1(c), any liquidation
or dissolution of any Lessee. Guarantor shall cause each Lessee
to comply with the covenants of the Lessees set forth in the
Operative Agreements.
(d) Revolving Credit Facility. Guarantor shall at all
times comply, and shall cause each of its Subsidiaries to comply,
with the Financial Covenants set forth in the Revolving Credit
Facility (giving effect to any applicable grace and cure
periods), and in determining compliance with such covenants for
purposes of this Agreement at any time following the termination
of such facility, any action that would require consent or
approval thereunder shall require the consent or approval of
Agent at the direction of the Required Lessors.
(e) ERISA Events. Promptly upon any Lessee's or
Guarantor's becoming aware of the occurrence of any matter or
matters referred to in the following clauses (i), (ii) and (iii)
involving liability that may reasonably be expected to exceed,
individually or in the aggregate, $30,000,000, Guarantor shall
notify Agent and each of the Lessors in writing specifying the
nature thereof, what action Guarantor or the Related Person is
taking or proposes to take with respect thereto, and, when known,
any action taken by the Internal Revenue Service with respect
thereto: (i) a "Reportable Event" as such term is defined in
Section 4043 of ERISA, (ii) an "Accumulated Funding Deficiency"
as such term is defined in Section 302 of ERISA, or (iii) a
"Prohibited Transaction", as such term is defined in 4975 of the
Code or described in Section 406 of ERISA, in connection with any
Pension Plan (or any trust created thereunder).
(f) Notice of Defaults. Promptly upon, but in no event
later than five (5) days after any Lessee or Guarantor shall have
obtained Actual Knowledge thereof, Guarantor shall notify Agent
and each Lessor in writing of the existence of an Incipient
Default, Event of Default, or any other matter which has resulted
in or could reasonably be expected to have a Material Adverse
Effect, which notice shall describe the nature of such Incipient
Default, Event of Default or other matter and the action any
Lessee or Guarantor is taking with respect thereto.
(g) Notice of Proceedings. Promptly upon any Lessee's or
Guarantor's becoming aware of (i) any proposed or pending
investigation of Guarantor, any Lessee, or any of their
Subsidiaries by any Authority, (ii) any court or administrative
proceeding involving any Person described in the foregoing clause
(i), or (iii) any notice, claim or demand from any Authority
which alleges that any such Person is in violation of any law or
has failed to comply with any order issued pursuant to any
Federal, state or local statute regulating its operation and
business, which in any such case involves (A) one or more claims
involving an aggregate amount of $30,000,000 or more with respect
to Guarantor and the Lessees taken as a whole, or
(B) individually or in the aggregate, the reasonable expectation
of a Material Adverse Effect, Guarantor shall notify Agent and
each of the Lessors specifying its nature and the action any
Lessee or Guarantor is taking with respect thereto.
(h) Periodic Reporting. Guarantor shall deliver to Agent:
(i) promptly following such delivery or filing (but in
no event more than 45 days following the end of each fiscal
quarter in the case of Quarterly Reports and no more than
120 days following the end of each fiscal year in the case
of Annual Reports), a copy of each Quarterly Report on Form
10-Q or any Annual Report on Form 10-K in either case as
filed with the Securities and Exchange Commission or any
successor agency, and a copy of any other report or
statement required by any applicable law, authority or
regulatory body to be delivered to Guarantor's stockholders,
any regular or periodic report and any Current Report on
Form 8-K filed by Guarantor with any securities exchange or
with the Securities and Exchange Commission or any successor
agency, provided that if at any time Guarantor shall cease
to be subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934 this provision shall be modified to
require the delivery of quarterly and annual balance sheets
and financial statements of Guarantor (which, in the case of
annual balance sheets and financial statements, shall be
audited) comparable to those included in the aforementioned
Annual Reports and Quarterly Reports;
(ii) concurrently with each delivery pursuant to the
foregoing paragraph (i), but in any event not later than the
45th day after the end of each quarterly accounting period
in each fiscal year of Guarantor, an Officer's Certificate
of Guarantor stating that such officer has reviewed the
activities of Lessees and Guarantor during such period and
that, to the best of such officer's knowledge, during such
period Lessees and Guarantor have performed and fulfilled
each and every covenant, obligation and condition contained
in the Operative Agreements, no Incipient Default, Event of
Default or Casualty exists under any of the Operative
Agreements, or if such condition shall exist, specifying the
nature and status thereof; and
(iii) if (A) Guarantor shall cease to be subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934,
and (B) Agent or any Lessor at the time outstanding shall
request that Guarantor deliver to Agent, or to such Lessor,
information with respect to Guarantor that meets the
requirements of Rule 144A(d)(4)(i) of such Act (or any
successor provision), then: (x) promptly following the
receipt by Guarantor of that request, Guarantor shall
deliver such information to Agent, or to such Lessor, and
(y) such information shall, at the time of such delivery, be
as of a date so as to be entitled to the presumption that
such information is "reasonably current" within the meaning
of Rule 144A(d)(4)(ii) of such Act (or any successor
provision.
In addition to the foregoing, Guarantor shall deliver
to Agent and each Lessor, together with each delivery
pursuant to the foregoing clause (i), a copy of any
compliance certificate required to be delivered pursuant to
the Revolving Credit Facility with respect to any Financial
Covenant, accompanied by an Officer's Certificate of
Guarantor authorizing Agent and each Lessor to rely on such
compliance certificate. Guarantor shall provide Agent with
a current copy of the Revolving Credit Agreement as in
effect from time to time, including all amendments,
modifications and supplements thereto and waivers
thereunder.
(i) Additional Information. Promptly upon receipt of a
written request from Agent or any Lessor, Guarantor shall deliver
to such requesting party such other data and information as from
time to time may be reasonably requested.
(j) Reports to Lessors. Guarantor shall, concurrently with
any notice, delivery or other communication to Agent pursuant to
any Operative Agreement, deliver a copy of such notice, delivery
or other communication to each Lessor at such Lessor's current
address.
S3 Covenants of Agent and Lessors. Agent, in its individual
capacity, and each of the Lessors, covenants and agrees with each
of the other parties that: (a) it will not directly or
indirectly create, incur, assume or suffer to exist any Lessor
Liens arising by, through or under it on the Collateral, other
than Permitted Lessor Liens; (b) it will, at its own cost and
expense, promptly take such action in its individual capacity as
may be necessary to discharge fully such Lessor Liens created by
it on the Collateral, other than Permitted Lessor Liens; and (c)
it will not, except in compliance with the Operative Agreements,
sell, transfer or otherwise dispose of all or any part of the
Vehicles or the other Collateral.
AVII GENERAL INDEMNITIES
S1 Indemnity. Whether or not the transactions contemplated
hereby are consummated, to the fullest extent permitted by
applicable law, Lessees and Guarantor waive and release any
claims now or hereafter existing against Indemnitees on account
of, and shall jointly and severally indemnify, reimburse and hold
the Indemnitees harmless (subject to Section 8.3) from, any and
all claims by third parties (including, but not limited to,
claims relating to trademark or patent infringement and claims
based upon negligence, strict liability in tort, violation of
laws, including, without limitation, Environmental Laws,
statutes, rules, codes or orders or claims arising out of any
loss or damage to any property or death or injury to any Person),
any losses, damages or obligations owing to third parties, any
penalties, liabilities, demands, suits, judgments or causes of
action, and all legal proceedings (either administrative or
judicial), in each case whether or not the Indemnitee is a party
thereto, and any costs or expenses in connection therewith
(including costs incurred in connection with discovery) or in
connection with the enforcement of this indemnity (including
reasonable attorneys' fees and expenses, and fees and expenses of
internal counsel, incurred by the Indemnitees), including, in
each case, matters based on or arising from the negligence of
Indemnitees (subject to the proviso below), which may be imposed
on, incurred by or asserted against the Indemnitees by Persons
other than Lessees and Guarantor (except to the extent arising by
or through a claim of a third party) in any way relating to or
arising in any manner out of:
(a) the registration, purchase, taking or foreclosure
of a security interest in, ownership, delivery, condition,
lease, sublease, assignment, storage, transportation,
possession, use, operation, return or other disposition of
any of the Vehicles, or any defect in any such Vehicle,
arising from the material or any article used therein or
from the design, testing or use thereof, or from any
maintenance, service, repair, overhaul or testing of
any such Vehicle regardless of when such defect shall
be discovered, whether or not such Vehicle is in the
possession of any Lessee or Guarantor and no matter where it
is located; or
(b) this Participation Agreement, any other Operative
Agreement or any document or certificate delivered in
connection therewith, the enforcement hereof or thereof or
the consummation of the transactions contemplated hereby or
thereby;
provided that Lessees and Guarantor shall not be obligated to
indemnify an Indemnitee for any such claim, loss, damage,
liability, obligation, penalty, demand or suit to the extent the
same results directly from
(c) the willful misconduct or gross negligence of such
Indemnitee;
(d) the incorrectness in any material respect of any
representation or warranty made by such Indemnitee in the
Operative Agreements;
(e) the creation or existence of a Lessor Lien
attributable to such Indemnitee;
(f) a disposition by such Indemnitee of any Vehicle
following the purchase of such Vehicle by such Indemnitee
from Agent in a foreclosure sale or any use or operation of
such Vehicle following such disposition (other than use or
operation by any Lessee or Sublessee or an Affiliate, agent
or representative of any Lessee); or
(g) any Impositions described in Section 8.1 except
any amount necessary under this Section 7.1 to hold the
Indemnitee harmless (subject to Section 8.3) from all
Impositions required to be paid by such Indemnitee with
respect to the receipt or accrual of such indemnity under
the laws of any Authority in the United States;
provided, however, that nothing in the preceding proviso shall be
deemed to exclude or limit any claim that any Indemnitee may have
under any Operative Agreement or applicable laws from Lessees or
Guarantor for breach of their representations, warranties or
covenants.
S2 Excessive Use Indemnity. In the event that at the end of
the Lease Term: (a) Lessees elect the Sale Option; and (b) after
paying to Agent any amounts due under Section 11.1(c) of the
Lease, Proceeds and the Sale Recourse Amount, Agent does not have
sufficient funds to reduce the Lease Balance to zero, then
Lessees shall promptly pay over to Agent the shortfall unless
Lessees deliver a report from the Appraiser in form and substance
satisfactory to the Required Lessors which establishes that the
decline in value in each Vehicle which was sold pursuant to the
Sale Option from that amount anticipated for such date in the
Appraiser's report delivered with respect to such Vehicle on the
applicable Delivery Date was not due to extraordinary use,
failure to maintain or replace, failure to use, workmanship or
method of installation or removal or any other cause or condition
within the power of Lessees to control or effect (each an
"Excessive Use").
S3 Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having
the force of law) of any court, central bank regulator or other
Authority ("Change in Law") affects or would affect the amount of
capital required or expected to be maintained by any Lessor
directly or by its parent company (including, without limitation,
any reserve requirements specified under regulations issued from
time to time by the Board of Governors of the Federal Reserve
System and then applicable to assets or liabilities consisting of
and including "Eurocurrency Liabilities" as defined in Regulation
D of such Board of Governors) and such Lessor determines (in its
sole and absolute discretion) that the rate of return on it or
its parent's capital as a consequence of the Funding made by such
Lessor hereunder to pay its share of the Purchase Price is
reduced to a level below that which such Lessor or its parent
could have achieved but for the occurrence of any such
circumstances, then, in any such case, upon written notification
from time to time by such Lessor to Lessees' Representative,
Lessees shall, within five (5) Business Days following receipt of
the statement referred to in the next sentence, pay directly to
such Lessor additional amounts sufficient to compensate Lessor or
its parent for such reduction in rate of return (subject to
Section 8.3). A statement of a Lessor as to any such additional
amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive
and binding on Lessees. In determining such amount, each Lessor
shall use any method of averaging or attribution that it (in its
reasonable discretion) shall deem applicable. Notwithstanding
the foregoing, any demand by a Lessor pursuant to this Section
7.3 shall be made in writing within 120 days after such Lessor
receives actual notice or obtains actual knowledge of the matter
giving rise to such demand. In the event such Lessor fails to
make such demand within such 120 day period, Lessees shall have
no obligation to pay any portion of the demanded payment accruing
prior to the 120th day preceding such demand.
S4 LIBO Rate Unlawful. If any Lessor shall determine in good
faith (which determination shall, upon notice thereof to Lessees'
Representative, be conclusive and binding on Lessee) that a
Change in Law makes it unlawful, or the central bank or other
Authority asserts that it is unlawful, for such Lessor to make,
continue or maintain any amount of such Lessor's Funding on a
LIBO Rate basis, the obligations of such Lessor to make, continue
or maintain any such Funding shall, upon such determination,
forthwith be suspended until such Lessor shall notify Lessees'
Representative that the circumstances causing such suspension no
longer exist, and all Variable Rent allocable to such Lessor,
commencing with the Rent Period in which such notice is given,
shall automatically be determined on a Base Rate basis beginning
on the next immediately succeeding Payment Date with respect
thereto or sooner, if required by such law or assertion.
S5 Funding Losses. Lessees agree to reimburse any Lessor for
any loss or expense incurred (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Lessor to make, continue or
maintain any portion of its Outstanding Investment as a LIBO Rate
financing) as a result of (i) the failure of the transaction
contemplated by Article I of the Lease to occur on or before the
Delivery Date specified in the Delivery Date Notice or (ii) any
payment of all or any portion of the Lease Balance for any reason
on a date other than a Payment Date. Lessor shall promptly
notify Lessees' Representative in writing of the amount of any
claim under this Section 7.5, the reason or reasons therefor and
the additional amount required fully to compensate such Lessor
for such loss or expense. Such written notice (which shall
include calculations in reasonable detail) shall, in the absence
of manifest error, be conclusive and binding on Lessees.
S6 Actions of Affected Lessors. Each Lessor shall use
reasonable efforts (including reasonable efforts to change the
booking office for this transaction) to avoid or minimize any
amounts which might otherwise be payable pursuant to Section 7.3;
provided, however, that such efforts shall not be deemed by such
Lessor, in its sole discretion, to be disadvantageous to it. In
the event that such reasonable efforts are insufficient to avoid
or minimize such amounts that might be payable pursuant to
Section 7.3, then such Lessor (the "Affected Lessor") shall use
its reasonable efforts to transfer to any other Lessor approved
by Lessees' Representative (which itself is not then an Affected
Lessor) its rights and obligations hereunder; provided, however,
that such transfer shall not be deemed by such Affected Lessor,
in its sole discretion, to be disadvantageous to it (other than
the economic disadvantage of ceasing to be a Lessor). In the
event that the Affected Lessor is unable, or otherwise is
unwilling, so to transfer its rights and obligations, Lessees'
Representative may designate an alternate financial institution
to purchase the Affected Lessor's rights and obligations
hereunder, at the amount of such Lessor's Outstanding Investment
plus accrued Variable Rent, indemnities, and other amounts owing
to such Lessor and, subject to the provisions of Sections 7.5 and
11.8, the Affected Lessor shall transfer its rights and
obligations to such alternate financial institution and such
alternate financial institution shall become a Lessor hereunder.
AVIII GENERAL TAX INDEMNITY
S1 General Tax Indemnity. Lessees and Guarantor agree to pay
or reimburse Indemnitees for, and to indemnify and hold
Indemnitees harmless from, all Impositions arising at, or
relating to, any time prior to or during the Base Period or
Renewal Terms, or upon any termination of the Lease or prior to,
or upon the return of, the Vehicles to Agent, and levied or
imposed upon Indemnitees directly or otherwise, by any Federal,
state or local government or taxing authority in the United
States or by any foreign country or foreign or international
taxing authority upon or with respect to: (a) the Vehicles or any
other Collateral; (b) the exportation, importation, registration,
purchase, ownership, delivery, condition, lease, sublease,
assignment, storage, transportation, possession, use, operation,
maintenance, repair, return, sale (including to Agent or any
Lessee pursuant to the Operative Agreements), transfer of title
or other disposition thereof; (c) the rentals, receipts, or
earnings arising from any of the Vehicles; or (d) the Lease or
any payment made thereunder; provided that this Section 8.1 shall
not apply to: (i) Impositions which are based upon or measured
by the Indemnitee's net income, or which are expressly in
substitution for, or relieve Indemnitee from, any actual
Imposition based upon or measured by Indemnitee's net income;
(ii) Impositions characterized under local law as franchise, net
worth, or shareholder's capital (excluding, however, any value-
added, license, property or similar Impositions); and
(iii) Impositions based upon the voluntary transfer, assignment
or disposition by Agent or any Lessor of any interest in any of
the Vehicles (other than a transfer pursuant to the exercise of
remedies under the Operative Agreements, transfers pursuant to
the exercise of the Sale Option or Fixed Price Purchase Option, a
transfer to Lessees or otherwise pursuant to the Lease).
Notwithstanding the foregoing provisions of this Section 8.1,
Lessees shall pay or reimburse, and indemnify and hold harmless,
any Lessor which is not incorporated under the laws of the United
States, or a state thereof, and which has complied with
Section 8.5, from any deduction or withholding of any United
States Federal income tax.
S2 Contest. Lessees shall pay on or before the time or times
prescribed by law any Impositions (except any Impositions
excluded by Section 8.1); provided, however, that Lessees shall
be under no obligation to pay any such Imposition so long as the
payment of such Imposition is not delinquent or is being
contested by a Permitted Contest. If any claim or claims is or
are made against any Indemnitee solely for any Imposition which
is subject to indemnification as provided in Section 8.1,
Indemnitee shall as soon as practicable, but in no event more
than 20 days after receipt of formal written notice of the
Imposition or proposed Imposition, notify Lessees' Representative
and if, in the reasonable opinion of Lessees' Representative and
(in the case of any Imposition which may reasonably be expected
to exceed $100,000 in the aggregate) tax counsel acceptable to
the Indemnitee, there exists a reasonable basis to contest such
Imposition (and if the provisos of the definition of "Permitted
Contest" continues to be satisfied and so long as no Event of
Default exists), Lessees at their expense may, to the extent
permitted by applicable law, contest such Imposition, and
subsequently may appeal any adverse determination, in the
appropriate administrative and legal forums; provided that in all
other circumstances, upon notice from Lessees' Representative to
such Indemnitee that there exists a reasonable basis to contest
any such Imposition (as supported by an opinion of tax counsel to
Lessees reasonably acceptable to the Indemnitee), the Indemnitee,
at Lessees' expense, shall contest any such Imposition. Lessees
shall pay all expenses incurred by the Indemnitee in contesting
any such Imposition (including, without limitation, all
reasonable attorneys' and accountants' fees, including the
allocated costs of internal counsel), upon demand by the
Indemnitee. Lessees shall have the right to participate in the
conduct of any proceedings controlled by the Indemnitee to the
extent that such participation by such Person does not interfere
with the Indemnitee's control of such contest and Lessees shall
in all events be kept informed, to the extent practicable, of
material developments relative to such proceedings. The
Indemnitee shall have the right to participate in the conduct of
any proceedings controlled by Lessees and the Indemnitee shall in
all events be kept informed, to the extent practicable, of
material developments relative to such proceedings. The
Indemnitees agree that a contested claim for which Lessees would
be required to make a reimbursement payment hereunder will not be
settled or compromised without Lessees' Representative's prior
written consent (which consent shall neither be unreasonably
delayed nor withheld other than in good faith), unless the
provisos of the definition of "Permitted Contest" would not
continue to be satisfied. Indemnitee shall endeavor to settle or
compromise any such contested claim in accordance with written
instructions received from Lessees' Representative, provided
that: (x) Lessees on or before the date the Indemnitee execute a
settlement or compromise pays the contested Imposition to the
extent agreed upon or makes an indemnification payment to the
Indemnitee in an amount acceptable to the Indemnitee; and (y) the
settlement or compromise does not, in the reasonable opinion of
the Indemnitee materially adversely affect the right of such
Lessor to receive Rent or the Lease Balance or any other payment
pursuant to the Operative Agreements, or involve a material risk
of sale, forfeiture or loss of any of the Vehicles or any
interest therein or any matter described in the provisos to the
definition of "Permitted Contest". The failure of an Indemnitee
to timely contest a claim against it for any Imposition which is
subject to indemnification under Section 8.1 and for which it has
an obligation to Lessees to contest under this Section 8.2 in the
manner required by applicable law or regulations where Lessees'
Representative has timely requested that such Indemnitee contest
such claim shall relieve Lessees of their obligations to such
Indemnitee under Section 8.1 with respect to such claim to the
extent such failure results in the loss of an effective contest.
If applicable law requires the payment of a contested Imposition
as a condition to, or regardless of, its being contested, and
Lessees choose to contest such Imposition or to direct the
Indemnitee to contest such Imposition in accordance with this
Section, then Lessees shall provide the Indemnitee with the funds
to pay such Imposition, such provision of funds to be deemed a
non-interest bearing loan by Lessees to the Indemnitee to be
repaid by any recovery of such Imposition from such contest and
any remaining unpaid amount not recovered to offset Lessees'
obligation to indemnify the Indemnitee for such Imposition. In
the event that the Indemnitee receives a refund (or like
adjustment) in respect of any Imposition for which the Indemnitee
has been reimbursed by Lessees, the Indemnitee shall immediately
remit the amount of such refund (or like adjustment) to Lessees'
Representative, net of all costs and expenses incurred by such
Indemnitee.
S3 Gross Up. If an Indemnitee shall not be entitled to a
corresponding and equal deduction with respect to any payment or
Imposition which Lessees are required to pay or reimburse under
Article VII, Section 8.1 or Section 8.2 (each such payment or
reimbursement under Article VII, Section 8.1 or Section 8.2, an
"original payment") and which original payment constitutes income
to such Indemnitee, then Lessees shall pay to such Indemnitee on
demand the amount of such original payment on a gross-up basis
such that, after subtracting all Impositions imposed on such
Indemnitee with respect to such original payment by Lessees
(including any Impositions otherwise excluded by Section 8.1 and
assuming for this purpose that such Indemnitee was subject to
taxation at the applicable Federal, state or local marginal rates
used to compute such Indemnitee's tax return for the year in
which such income is taxable), such payments shall be equal to
the original payment to be received (net of any credits,
deductions or other tax benefits then actually recognized that
arise from the payment by such Indemnitee of any amount,
including taxes, for which the payment to be received is made).
S4 Tax Returns. Except as otherwise provided in the third
sentence below, Lessees shall prepare and file (whether or not it
is a legal obligation of an Indemnitee) all tax returns or
reports that may be required with respect to any Impositions
assessed, charged or imposed on the Vehicles or the Lease,
including, but not limited to sales and use taxes, property taxes
(ad valorem and real property) and any other tax or charge based
upon the ownership, leasing, subleasing, rental, sale, purchase,
possession, use, operation, delivery, return or other disposition
of any of the Vehicles or upon the rentals or the receipts
therefrom (excluding, however, any tax based upon the net income
of an Indemnitee or any tax which is in substitution for or
relief of a tax imposed upon or measured by the net income of an
Indemnitee). Lessees may notify in writing all applicable
Authorities having jurisdiction with respect to personal property
taxes that one of the Lessees is the appropriate party for
receiving notices of (or copies of, if such Authority is required
by law to notify Agent) assessment, appeal and payment with
respect to the Vehicles. If an Indemnitee is obligated by law to
file any such reports or returns, then Lessees shall, at least 10
days before the same are due, prepare the same and forward them
to the Indemnitee, as appropriate, with detailed instructions as
to how to comply with all applicable filing requirements,
together with funds in the amount of any payment required
pursuant thereto. Indemnitee shall forward to Lessees'
Representative at its address listed in Section 11.4 copies of
all assessment and valuation notices it receives within 10 days
of receipt; provided that Indemnitee's failure to deliver such
notices on a timely basis shall not relieve Lessees of any
obligations hereunder. The Participants agree that neither they
nor any corporation controlled by them, or under common control
with them, directly or indirectly will at any time take any
action or fail to take any action with respect to the filing of
any income tax return, including an amended income tax return,
inconsistent with the intention of the parties expressed in
Section 4.1.
S5 Withholding Tax Exemption. (a) At least five (5) Business
Days prior to the first date on which any Rent is payable
hereunder or under any other Operative Agreement for the account
of any Lessor not incorporated under the laws of the United
States or a state thereof, such Lessor agrees that it will have
delivered to Lessees' Representative and Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lessor is entitled to
receive payments under this Agreement and the other Operative
Agreements without deduction or withholding of any United States
Federal income taxes. Each Lessor which so delivers a Form 1001
or 4224 further undertakes to deliver to Lessees' Representative
and Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently,
three successive calendar years for Form 1001 and one calendar
year for Form 4224) or becomes obsolete or after the occurrence
of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by Lessees'
Representative or Agent, in each case certifying that such Lessor
is entitled to receive payments under this Agreement and the
other Operative Agreements without deduction or withholding of
any United States Federal income taxes, unless prior to the date
on which any such delivery would otherwise be required any change
in treaty, law or regulation or in the interpretation thereof by
the applicable taxing Authority occurring after such Lessor
became a Lessor hereunder has rendered all such forms
inapplicable or has prevented such Lessor from duly completing
and delivering any such form with respect to it and such Lessor
advises Lessees' Representative and Agent that, as a result of
such change in treaty, law, regulation or interpretation, it is
not capable of receiving payments without any withholding of
United States Federal income tax.
(a) At least five (5) Business Days prior to the first date
on which any Rent is payable hereunder or under any other
Operative Agreement for the account of any Lessor who does not
have a street address in the State of California , such Lessor
agrees that it will have delivered to Lessees' Representative and
Agent two duly completed copies of California Form 587 or 590,
certifying in either case that such Lessor is entitled to receive
payments under this Agreement and the other Operative Agreements
without deduction or withholding of any California income taxes.
Each Lessor which so delivers a Form 587 or 590 further
undertakes to deliver to Lessees' Representative and Agent two
additional copies of such form (or a successor form) on or before
the date that such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent
forms so delivered by it (including, without limitation, any
change in residency or address), and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by
Lessees' Representative or Agent, in each case certifying that
such Lessor is entitled to receive payments under this Agreement
and the other Operative Agreements without deduction or
withholding of any California income taxes, unless prior to the
date on which any such delivery would otherwise be required any
change in treaty, law or regulation or in the interpretation
thereof by the applicable taxing Authority occurring after such
Lessor became a Lessor hereunder has rendered all such forms
inapplicable or has prevented such Lessor from duly completing
and delivering any such form with respect to it and such Lessor
advises Lessees' Representative and Agent that, as a result of
such change in treaty, law, regulation or interpretation, it is
not capable of receiving payments without any withholding of
California income tax.
AIX AGENT
S1 Appointment of Agent; Powers and Authorization to Take
Certain Actions.
(a) Each Lessor irrevocably appoints and authorizes BA
Leasing & Capital Corporation to act as its agent hereunder,
with such powers as are specifically delegated to Agent by
the terms hereof, together with such other powers as are
reasonably incidental thereto. Each Lessor authorizes and
directs Agent to, and Agent agrees for the benefit of the
Lessors, that, on the Initial Delivery Date it will accept
the documents described in Article III of this Participation
Agreement. Agent accepts the agency hereby created
applicable to it and agrees to receive all payments and
proceeds pursuant to the Operative Agreements and disburse
such payments or proceeds in accordance with the Operative
Agreements. Agent shall have no duties or responsibilities
except those expressly set forth in the Lease and this
Participation Agreement. Agent shall not be responsible to
any Lessor (or to any other Person) (i) for any recitals,
statements, representations or warranties of any party
contained in the Lease, this Participation Agreement, or in
any certificate or other document referred to or provided
for in, or received by any of them under, the Operative
Agreements, other than the representations and warranties
made by Agent in Section 5.3, or (ii) for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of the Collateral or the title thereto (subject
to Agent's obligations under Section 6.3) or of the Lease or
any other document referred to or provided for therein or
(iii) for any failure by any Lessee, Guarantor, any Lessor
or any other third party (other than Agent) to perform any
of its obligations under any Operative Agreement. Agent may
employ agents, trustees or attorneys-in-fact, may vest any
of them with any property, title, right or power deemed
necessary for the purposes of such appointment and shall not
be responsible for the negligence or misconduct of any of
them selected by it with reasonable care. Neither Agent nor
any of its directors, officers, employees or agents shall be
liable or responsible for any action taken or omitted to be
taken by it or them hereunder, or in connection herewith,
except for its or their own gross negligence or willful
misconduct.
(b) Agent shall not have any duty or obligation to
manage, control, use, operate, store, lease, sell, dispose
of or otherwise deal with any Vehicle, any other Collateral
or the Lease, or to otherwise take or refrain from taking
any action under, or in connection with, this Agreement, the
Lease or any related document to which Agent is a party,
except as expressly provided by the terms hereof, and no
implied duties of any kind shall be read into any Operative
Agreement against Agent. The permissive right of Agent to
take actions enumerated in this Agreement and the Lease
shall never be construed as a duty, unless Agent is
instructed or directed to exercise, perform or enforce one
or more rights by the Required Lessors (provided that Agent
has received indemnification reasonably satisfactory to it).
Subject to Section 9.1(c) below, no provision of the
Operative Agreements shall require Agent to expend or risk
its own funds or otherwise incur any financial liability in
the performance of any of its obligations under the
Operative Agreements, or in the exercise of any of its
rights or powers thereunder. It is understood and agreed
that the duties of Agent are ministerial in nature.
(c) Except as specifically provided herein, Agent is
acting hereunder solely as agent and, except as specifically
provided herein, is not responsible to any party hereto in
its individual capacity, except with respect to any claim
arising from Agent's gross negligence or willful misconduct
or any breach of a representation or covenant made in its
individual capacity.
(d) Agent may accept deposits from, lend money to and
otherwise deal with Lessees or any of their Affiliates with
the same rights as it would have if it were not the named
Agent hereunder.
S2 Reliance. Agent may rely upon, and shall not be bound or
obligated to make any investigation into the facts or matters
stated in, any certificate, notice or other communication
(including any communication by telephone, telecopy, telex,
telegram or cable) reasonably believed by it to be genuine and
correct and to have been made, signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected
by Agent with due care (including any expert selected by Agent to
aid Agent in any calculations required in connection with its
duties under the Operative Agreements).
S3 Action Upon Instructions Generally. Subject to Sections
9.4 and 9.6, upon written instructions of the Required Lessors,
Agent shall, on behalf of the Lessors, give such notice or
direction, exercise such right, remedy or power hereunder or in
respect of any Vehicle, and give such consent or enter into such
amendment to any document to which it is a party as Agent as may
be specified in such instructions. Agent shall deliver to each
Lessor a copy of each notice, report and certificate received by
Agent pursuant to the Operative Agreements. Agent shall have no
obligation to investigate or determine whether there has been an
Event of Default or an Incipient Default. Agent shall not be
deemed to have notice or knowledge of an Event of Default or
Incipient Default unless a Responsible Officer of Agent is
notified in writing of such Event of Default or Incipient
Default, provided that Agent shall be deemed to have been
notified in writing of any failure of Lessees to pay Rent in the
amounts and at the times set forth in Article III of the Lease.
If Agent receives notice of an Event of Default, Agent shall give
prompt notice thereof, at Lessees' expense, to each Lessor.
Subject to Sections 9.4 and 9.6 and Article X, Agent shall take
action or refrain from taking action with respect to such Event
of Default as directed by the Required Lessors or, in the case of
a Payment Default, as directed by any Lessor; provided that,
unless and until Agent receives such directions, Agent may
refrain from taking any action, or may act in its discretion,
with respect to such Event of Default or Payment Default. Prior
to the date the Lease Balance shall have become due and payable
by acceleration pursuant to Section 8.2 of the Lease, Required
Lessors may deliver written instructions to Agent to waive, and
Agent shall waive pursuant thereto, any Event of Default and its
consequences; provided that in the absence of written
instructions from all Lessors, Agent shall not waive any
(i) Payment Default or (ii) covenant or provision which, under
Section 10.1, cannot be modified or amended without the consent
of all Lessors. As to any matters not expressly provided for by
this Agreement, Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance
with instructions signed by the Required Lessors and such
instructions of the Required Lessors and any action taken or
failure to act pursuant thereto shall be binding on each Lessor.
S4 Indemnification. Each Lessor shall reimburse and hold
Agent harmless, ratably in accordance with its Outstanding
Investment at the time the indemnification is required to be
given, (but only to the extent that any such indemnified amounts
have not in fact been paid to Agent by, or on behalf of, Lessees
in accordance with Section 7.1) from any and all claims, losses,
damages, obligations, penalties, liabilities, demands, suits,
judgments, or causes of action, and all legal proceedings, and
any reasonable costs or expenses in connection therewith,
including allocated charges, costs and expenses of internal
counsel of Agent and all other reasonable attorneys' fees and
expenses incurred by Agent, in any way relating to or arising in
any manner out of (i) any Operative Agreement, the enforcement
hereof or thereof or the consummation of the transactions
contemplated thereby, or (ii) instructions from the Required
Lessors (including, without limitation, the costs and expenses
that Lessees are obligated to and does not pay hereunder, but
excluding normal administrative costs and expenses incident to
the performance by Agent of its agency duties hereunder other
than materially increased administrative costs and expenses
incurred as a result of an Event of Default), provided that no
Lessor shall be liable for any of the foregoing to the extent
they arise from (a) the gross negligence or willful misconduct of
Agent, (b) the inaccuracy of any representation or warranty or
breach of any covenant given by Agent in Section 5.3 or
Section 6.3 hereof or in the Lease, (c) in the case of Agent's
handling of funds, the failure to act with the same care as Agent
uses in handling its own funds or (d) any taxes, fees or other
charges payable by Agent based on or measured by any fees,
commissions or compensation received by it for acting as Agent in
connection with the transactions contemplated by the Operative
Agreements.
S5 Independent Credit Investigation. Each Lessor by entering
into this Agreement agrees that it has, independently and without
reliance on Agent or any other Lessor and based on such documents
and information as it has deemed appropriate, made its own credit
analysis of Lessees and its own decision to enter into this
Agreement and each of the other Operative Agreements to which it
is a party and that it will, independently and without reliance
upon Agent or any other Lessor, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking action under this
Agreement and any related documents to which it is a party.
Agent shall not be required to keep itself informed as to the
performance or observance by Lessees of any other document
referred to (directly or indirectly) or provided for herein or to
inspect the properties or books of Lessees. Except for notices
or statements which Agent is expressly required to give under
this Agreement and for notices, reports and other documents and
information expressly required to be furnished to Agent alone
(and not also to each Lessor, it being understood that Agent
shall forward copies of same to each Lessor) hereunder or under
any other Operative Agreement, Agent shall not have any duty or
responsibility to provide any Lessor with copies of notices or
with any credit or other information concerning the affairs,
financial condition or business of Lessees (or any of its
affiliates) that may come into the possession of Agent or any of
its Affiliates.
S6 Refusal to Act. Except for notices and actions expressly
required of Agent hereunder and except for the performance of its
covenants in Section 6.3, Agent shall in all cases be fully
justified in failing or refusing to act unless (a) it is
indemnified to its reasonable satisfaction by the Lessors against
any and all liability and reasonable expense which may be
incurred by it by reason of taking or continuing to take any such
action (provided that such indemnity shall not be required to
extend to liability or expense arising from any matter described
in clauses (a) through (d) of Section 9.4, it being understood
that no action taken by Agent in accordance with the instructions
of the Required Lessors shall be deemed to constitute any such
matter) and (b) it is reasonably satisfied that such action is
not contrary to any Operative Agreement or to any applicable law.
S7 Resignation or Removal of Agent; Appointment of Successor.
Subject to the appointment and acceptance of a successor Agent as
provided below, Agent may resign at any time by giving notice
thereof to each Lessor and Lessees or may be removed at any time
by written notice from the Required Lessors. Upon any such
resignation or removal, the Required Lessors at the time of the
resignation or removal shall have the right (with the reasonable,
prompt approval of Lessees' Representative unless an Event of
Default shall be continuing) to appoint a successor Agent which
shall be a financial institution having a combined capital and
surplus of not less than $75,000,000. If, within 30 calendar
days after the retiring Agent's giving of notice of resignation
or receipt of a written notice of removal, a successor Agent is
not so appointed and does not accept such appointment, then the
retiring or removed Agent may appoint a successor Agent and
transfer to such successor Agent all rights and obligations of
the retiring Agent. Such successor Agent shall be a financial
institution having combined capital and surplus of not less than
$75,000,000. 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 or removed Agent
and the retiring or removed Agent shall be discharged from duties
and obligations as Agent thereafter arising hereunder and under
any related document. If the retiring Agent does not appoint a
successor, any Lessor shall be entitled to apply to a court of
competent jurisdiction for such appointment, and such court may
thereupon appoint a successor to act until such time, if any, as
a successor shall have been appointed as above provided.
S8 Separate Agent. The Required Lessors may, and if they
fail to do so at any time when they are so required, Agent may,
for the purpose of meeting any legal requirements of any
jurisdiction in which any Vehicle or Collateral may be located,
appoint one or more individuals or corporations either to act as
co-agent jointly with Agent or to act as separate agent of all or
any part of the Vehicles or Collateral or the Lease, and vest in
such individuals or corporations, in such capacity, such title to
the Vehicles or Collateral or the Lease or any part thereof, and
such rights or duties as Agent may consider necessary or
desirable. Agent shall not be required to qualify to do business
in any jurisdiction where it is not now so qualified. Agent
shall execute, acknowledge and deliver all such instruments as
may be required by any such co-agent or separate agent more fully
confirming such title, rights or duties to such co-agent or
separate agent. Upon the acceptance in writing of such
appointment by any such co-agent or separate agent, it, she or he
shall be vested with such interest in the Vehicles or Collateral
and the Lease or any part thereof, and with such rights and
duties, not inconsistent with the provisions of the Operative
Agreements, as shall be specified in the instrument of
appointment, jointly with Agent (except insofar as local law
makes it necessary for any such co-agent or separate agent to act
alone), subject to all terms of the Operative Agreements. Any
co-agent or separate agent, to the fullest extent permitted by
legal requirements of the relevant jurisdiction, at any time, by
an instrument in writing, shall constitute Agent its
attorney-in-fact and agent, with full power and authority to do
all acts and things and to exercise all discretion on its behalf
and in its name. If any co-agent or separate agent shall die,
become incapable of acting, resign or be removed, the interest in
the Vehicles or Collateral and the Lease and all rights and
duties of such co-agent or separate agent shall, so far as
permitted by law, vest in and be exercised by Agent, without the
appointment of a successor to such co-agent or separate agent.
S9 Termination of Agency. The agency created hereby shall
terminate upon the final disposition by Agent of all Collateral
at any time subject hereto and the final distribution by Agent of
all monies or other property or proceeds received pursuant to the
Lease in accordance with its terms, provided that at such time
Lessees shall have complied fully with all the terms hereof.
S10 Compensation of Agency. Lessees shall pay Agent its
reasonable fees, costs and expenses for the performance of
Agent's obligations hereunder, in accordance with the terms of
the Fee Letter.
S11 Limitations. It is expressly understood and agreed by and
among the parties hereto that, except as otherwise provided
herein or in the other Operative Agreements: (a) this
Participation Agreement and the other Operative Agreements to
which Agent is a party are executed by Agent, not in its
individual capacity (except with respect to the representations
and covenants of Agent in Sections 5.3 and 6.3), but solely as
Agent under the Operative Agreements in the exercise of the power
and authority conferred and vested in it as such Agent; (b) each
and all of the undertakings and agreements herein made on the
part of Agent are each and every one of them made and intended
not as personal undertakings and agreements by Agent, or for the
purpose or with the intention of binding Agent personally, but
are made and intended for the purpose of binding only the
Collateral unless expressly provided otherwise; (c) actions to be
taken by Agent pursuant to its obligations under the Operative
Agreements may, in certain circumstances, be taken by Agent only
upon specific authority of the Lessors; (d) nothing contained in
the Operative Agreements shall be construed as creating any
liability on Agent, individually or personally, or any
incorporator or any past, present or future subscriber to the
capital stock of, or stockholder, officer or director, employee
or agent of, Agent to perform any covenants either express or
implied contained herein, all such liability, if any, being
expressly waived by the other parties hereto and by any Person
claiming by, through or under them; and (e) so far as Agent,
individually or personally, is concerned, the other parties
hereto and any Person claiming by, through or under them shall
look solely to the Collateral and Lessees (and Guarantor, if
appropriate) for the performance of any obligation under any of
the instruments referred to herein; provided, however, that
nothing in this Section 9.11 shall be construed to limit in scope
or substance the general corporate liability of Agent in respect
of its gross negligence or willful misconduct or those
representations, warranties and covenants of Agent in its
individual capacity set forth herein or in any of the other
agreements contemplated hereby.
AX AMENDMENTS TO OPERATIVE
AGREEMENTS
S1 Amendments to Operative Agreements With Consent of
Lessors. This Participation Agreement and each of the other
Operative Agreements shall be changed, waived, discharged or
terminated with respect to each Lessee, Guarantor and each Lessor
upon the ratification in writing of such change, waiver,
discharge or termination by Lessee, Guarantor and the Required
Lessors, in which case such change, waiver, discharge or
termination shall be effective as to each Lessor, each Lessee and
Guarantor; provided no such change, waiver, discharge or
termination shall, without the written ratification of each
Lessor:
(i) modify any of the provisions of this Section 10.1
or Article III, change the definitions of "Commitment",
"Commitment Percentage", "Total Commitment" or "Required
Lessors" or modify or waive any provision of an Operative
Agreement requiring action by the foregoing, or release any
Collateral (except as otherwise specifically provided in any
Operative Agreement);
(ii) modify, amend, waive or supplement any of the
provisions of Articles III, VII, VIII (except as otherwise
expressly provided in Section 9.3 hereof), X or XI, Sections
13.09 or 13.10 of the Lease or Section 11.3 hereof, provided
that the Required Lessors may waive an Event of Default
other than a Payment Default;
(iii) reduce, modify, amend or waive any indemnities
in favor of any Participant, whether pursuant to Articles
VII or VIII or otherwise (except that any Person may consent
to any reduction, modification, amendment or waiver of any
indemnity payable to it);
(iv) modify, postpone, reduce or forgive, in whole or
in part, any payment of Rent (other than pursuant to the
terms of any Operative Agreement), Lease Balance, Purchase
Option Exercise Amount, Recourse Deficiency Amount,
Applicable Percentage Amount, interest or, subject to
clause (iii) above, any other amount payable under the Lease
or Participation Agreement, or modify the definition or
method of calculation of any payment of Rent (other than
pursuant to the terms of any Operative Agreement), Lease
Balance, Purchase Option Exercise Amount, Recourse
Deficiency Amount, Applicable Percentage Amount or other
amount payable hereunder;
(v) consent to any assignment of the Lease releasing
any Lessee from its obligations in respect of the payments
due pursuant to the Operative Agreements or changing the
absolute and unconditional character of such obligations, or
any similar assignment of the Guarantee similarly releasing
Guarantor, or any other release of Guarantor; or
(vi) permit the creation of any Lien on the Collateral
or any part thereof except as contemplated in the Operative
Agreements, or deprive any Lessor of the benefit of the
security interest in the Collateral granted by Lessees.
S2 Amendments to Operative Agreements Affecting Agent.
Without the prior written consent of Agent, no amendment of,
supplement to, or waiver or modification of, any Operative
Agreement shall adversely affect Agent's rights or immunities or
modify or increase the duties or obligations of Agent with
respect to any Operative Agreement.
AXI MISCELLANEOUS
S1 Survival of Covenants. All claims pertaining to the
representations, warranties, covenants or indemnities of the
Participants shall survive the termination of the Lease to the
extent such claims arose out of events occurring or conditions
existing prior to any such termination. Without limiting the
foregoing, the provisions of Article VII and Article VIII hereof
shall survive the termination of the Lease.
S2 APPLICABLE LAW. THIS PARTICIPATION AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED UNDER THE LAWS OF CALIFORNIA WITHOUT
REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF.
S3 Distribution and Application of Rents and Other Payments.
Except as otherwise specifically provided for in the Lease or in
Articles VII and VIII hereof, all amounts of money received or
realized by Agent pursuant to the Lease which are to be
distributed to the Lessors (after payment of accrued but unpaid
fees and expenses and indemnification payments payable to Agent
in its capacity as Agent that remain unpaid for 30 days or more)
shall be distributed to each Lessor pro rata, in accordance with
each Lessor's Outstanding Investment and without preference or
priority of any Lessor over another; provided, however, that in
the case such moneys are insufficient to pay in full the whole
amount due, owing and unpaid, then application shall be made in
the manner set forth in Section 8.4 of the Lease. All payments
to the Lessors shall be made in accordance with Section 3.2 of
the Lease.
S4 Notices. All notices, demands, declarations, consents,
directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof shall be
in writing and shall be deemed to have been duly given when
delivered personally, by facsimile (and confirmed, which
confirmation may be mechanical), nationally recognized overnight
courier or otherwise actually received or 5 Business Days after
being deposited in the United States mail certified, postage
prepaid, addressed as follows:
If to any Lessee:
c/o Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, California 94304
Attn: Treasurer
Fax: 415-856-1685
If to Guarantor:
Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, California 94304
Attn: Treasurer
Fax: 415-856-1685
If to Agent:
BA Leasing & Capital Corporation
Four Embarcadero Center, 12th Floor
San Francisco, CA 94111
Attn: Contract Administration
Fax: 415-765-7373
If to the Lessors, to their respective addresses set forth
on Schedule I hereto or at such other place as any such party may
designate by notice given in accordance with this Section 11.4.
S5 Transaction Costs; Other Expenses. Lessees shall pay all
Transaction Costs whether or not the transactions contemplated
hereby close. In addition, Lessees shall pay or reimburse Agent
and the Lessors for all other out-of-pocket costs and expenses
(including allocated fees of internal counsel) reasonably
incurred in connection with: (a) entering into, or the giving or
(in the case of any amendments, supplements, waivers or consents
proposed by Lessees or Guarantor) withholding of, any future
amendments, supplements, waivers or consents with respect to the
Operative Agreements (including without limitation any legal
services rendered in connection with or arising under Sections
6.1 and 6.2 hereof), it being understood that Lessees shall only
be required to pay for one firm of legal counsel to Agent and
Lessors in respect of any transaction under this clause (a);
(b) any Casualty or termination of the Lease or any other
Operative Agreement; (c) the negotiation and documentation of any
restructuring or "workout," whether or not consummated, of any
Operative Agreement; (d) the enforcement of the rights or
remedies under the Operative Agreements; (e) further assurances
requested pursuant to Section 11.13 hereof or any similar
provision in other Operative Agreements; (f) any transfer by
Agent or a Lessor of any interest in the Operative Agreements
during the continuance of an Event of Default; and (g) the
ongoing fees and expenses of Agent under the Operative Agreements
in accordance with the Fee Letter.
S6 Counterparts. This Participation Agreement may be
executed in any number of counterparts and by different parties
hereto on separate counterparts, each executed counterpart
constituting an original but all together one agreement.
S7 Severability. Whenever possible, each provision of this
Participation Agreement shall be interpreted in such manner as to
be effective and valid under applicable law; but if any provision
of this Participation Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
this Participation Agreement.
S8 Successors and Assigns; Transfers. This Participation
Agreement shall be binding upon the parties hereto and their
respective successors and assigns, and shall inure to the benefit
of the parties hereto and their respective successors and
permitted assigns. None of Lessees or Guarantor may assign any
of their respective rights and obligations under any Operative
Agreement except as expressly provided in the Operative
Agreements.
No Lessor shall assign, convey or otherwise transfer
(including pursuant to a participation) all or any portion of its
right, title or interest in, to or under any of the Operative
Agreements, any Collateral and its interest in the Vehicles,
except that without the prior written consent of Agent or
Lessees' Representative (x) any bank or similar financial or
commercial lending institution may pledge its interest in the
ordinary course of its business without the consent of Lessees'
Representative or Agent, provided, that no transfer upon a
foreclosure pursuant to such a pledge may occur unless the other
provisions of this Section are complied with, (y) any Lessor may
transfer all or any portion of its interest to any other existing
Lessor and (z) any Lessor may transfer any or all of such right,
title and interest upon the satisfaction of each of the following
conditions:
(a) Required Notice and Effective Date. Any Lessor
desiring to effect a transfer of its interest hereunder
shall give written notice of each such proposed transfer to
Lessees' Representative and Agent at least ten (10) days
prior to such proposed transfer, setting forth the name of
such proposed transferee, the percentage or interest to be
retained by such Lessor, if any, and the date on which such
transfer is proposed to become effective. All reasonable
out-of-pocket costs incurred by Agent in connection with any
such disposition by a Lessor under this Section 11.8 shall
be borne by such Lessor, unless such transfer is being made
pursuant to Section 7.6, in which case such costs shall be
borne by Lessees. In the event of a transfer under this
Section 11.8, any expenses incurred by the transferee in
connection with its review of the Operative Agreements and
its investigation of the transactions contemplated thereby
shall be borne by such transferee or the relevant Lessor, as
they may determine, but shall not be considered costs and
expenses which Lessees are obligated to pay or reimburse
under Section 11.5, unless such transfer is being made
pursuant to Section 7.6.
(b) Assumption of Obligations. Any transferee
pursuant to this Section 11.8 shall have executed and
delivered to Agent a letter substantially in the form of the
Investor's Letter attached hereto as Exhibit F, and
thereupon the obligations of the transferring Lessor under
the Operative Agreements shall be proportionately released
and reduced to the extent of such transfer. Upon any such
transfer as above provided, the transferee shall be deemed
to be bound by all obligations (whether or not yet accrued)
under, and to have become a party to, all Operative
Agreements to which its transferor was a party, shall be
deemed the pertinent "Lessor" for all purposes of the
Operative Agreements and shall be deemed to have made that
portion of the payments pursuant to the Participation
Agreement previously made or deemed to have been made by the
transferor represented by the interest being conveyed; and
each reference herein and in the other Operative Agreements
to the pertinent "Lessor" shall thereafter be deemed a
reference to the transferee, to the extent of such transfer,
for all purposes. Upon any such transfer, Agent shall
deliver to each Lessor and Lessees a new Schedule I to this
Participation Agreement, revised to reflect the relevant
information for such new Lessor and the Commitment of such
new Lessor (and the revised Commitment of the transferor
Lessor if it shall not have transferred its entire
interest).
(c) Employee Benefit Plans. No Lessor may make any
such assignment, conveyance or transfer to or in connection
with any arrangement or understanding in any way involving
any employee benefit plan (or its related trust), as defined
in Section 3(3) of ERISA, or with the assets of any such
plan (or its related trust), as defined in Section
4975(e)(1) of the Code (other than a governmental plan, as
defined in Section 3(32) of ERISA), with respect to which
any Lessee or such Lessor or any of their Affiliates is a
party in interest within the meaning of ERISA or a
"disqualified person" within the meaning of the Code.
(d) Amount of Commitment. No Lessor may make any such
assignment, conveyance or transfer if, as a consequence
thereof, the transferor (if such Lessor retains any part of
its Commitment) or transferee Lessor would have an
Outstanding Investment of less than 15% of the Lease
Balance.
(e) Representations and Warranties. Notwithstanding
anything to the contrary set forth above, no Lessor may
assign, convey or transfer its interest to any Person,
unless such Person shall have delivered to Agent and Lessees
a certificate confirming the accuracy of the representations
and warranties set forth in Section 5.2 with respect to such
Person (other than as such representation or warranty
relates to the execution and delivery of Operative
Agreements).
(f) Financial Condition. Any transferee pursuant to
this Section 11.8 shall be a financial institution having
combined capital and surplus of at least $75,000,000.
Each transferee of a Lessor pursuant to this Section 11.8
shall be entitled to the benefits of Sections 7.3, 7.4 and 7.5;
provided that no such transferee shall be entitled to receive any
greater amount pursuant to such Sections than the transferor
Lessor would have been entitled to receive in respect of the
amount of the Commitment transferred by such transferor Lessor to
such transferee if such transfer had not occurred.
S9 JURY TRIAL. EACH LESSEE AND GUARANTOR WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS PARTICIPATION AGREEMENT OR ANY OTHER
OPERATIVE AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP
EXISTING IN CONNECTION WITH THIS PARTICIPATION AGREEMENT OR ANY
OPERATIVE AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
S10 Captions; Table of Contents. Section captions and the
table of contents used in this Participation Agreement (including
the exhibits and schedules) are for convenience of reference only
and shall not affect the construction of this Participation
Agreement.
S11 FINAL AGREEMENT. THIS PARTICIPATION AGREEMENT, TOGETHER
WITH THE OTHER OPERATIVE AGREEMENTS, REPRESENT THE ENTIRE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY AND IN THE OTHER OPERATIVE AGREEMENTS. THIS
PARTICIPATION AGREEMENT CANNOT BE MODIFIED, SUPPLEMENTED,
AMENDED, RESCINDED OR CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES,
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
S12 No Third-Party Beneficiaries. Nothing in this
Participation Agreement or the other Operative Agreements shall
be deemed to create any right in any Person not a party hereto or
thereto (other than the permitted successors and assigns of
Lessors, Agent, Lessees and Guarantor), and such agreements shall
not be construed in any respect to be a contract in whole or in
part for the benefit of any third party except as aforesaid.
S13 Further Assurances. Each Lessee, at its expense, will
promptly and duly execute and deliver all such documents and take
such further action as may be necessary or appropriate in order
to effect the intent or purpose of this Participation Agreement
and the other Operative Agreements and to establish and protect
the rights and remedies created or intended to be created in
favor of the Lessors and Agent for the benefit of the Lessors,
including, without limitation, if requested by Required Lessors
at the expense of Lessees, the recording or filing of any
Operative Agreement or any other document in accordance with the
laws of the appropriate jurisdictions.
S14 Reproduction of Documents. This Participation Agreement,
all documents constituting Schedules or Exhibits hereto, and all
documents relating hereto received by a party hereto, including,
without limitation: (a) consents, waivers and modifications that
may hereafter be executed; (b) the Certificates of Title and all
other documents received by the Lessors or Agent in connection
with the receipt and/or acquisition of the Vehicles; and
(c) financial statements, certificates, and other information
previously or hereafter furnished to Agent or any Lessor may be
reproduced by the party receiving the same by any photographic,
photostatic, microfilm, micro-card, miniature photographic or
other similar process. Each of the Participants agrees and
stipulates that, to the extent permitted by 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 such party in the regular course of
business) and that, to the extent permitted by law, any
enlargement, facsimile, or further reproduction of such
reproduction shall likewise be admissible in evidence.
S15 Consideration for Consents to Waivers and Amendments.
Each Lessee and Guarantor hereby jointly and severally agrees
that it will not, and that it will not permit any of its
Affiliates to, offer or give any consideration or benefit of any
kind whatsoever to any Lessor in connection with, in exchange
for, or as an inducement to, such Lessor's consent to any waiver
in respect of, any modification or amendment of, any supplement
to, or any other consent or approval under, any Operative
Agreement unless such consideration or benefit is offered ratably
to all Lessors.
S16 Submission to Jurisdiction. Any suit by Agent or any
Lessor to enforce any claim arising out of the Operative
Agreements may be brought in any state or Federal court located
in San Francisco, California having subject matter jurisdiction,
and with respect to any such claim, each Participant hereby
irrevocably: (a) submits to the jurisdiction of such courts; and
(b) consents to the service of process out of said courts by
mailing a copy thereof, by registered mail, postage prepaid, to
Lessees or Guarantor at their respective addresses specified in
this Participation Agreement, and agrees that such service, to
the fullest extent permitted by law: (i) shall be deemed in
every respect effective service of process upon it in any such
suit, action or proceeding; and (ii) shall be taken and held to
be valid personal service upon and personal delivery to it. Each
Lessee and Guarantor irrevocably waives, to the fullest extent
permitted by law: (A) any claim, or any objection, that it now
or hereafter may have, that venue is not proper with respect to
any such suit, action or proceeding brought in such a court
located in San Francisco, California including, without
limitation, any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum;
and (B) any claim that any Lessee or Guarantor is not subject to
personal jurisdiction or service of process in such forum. Each
Lessee and Guarantor agrees that any suit to enforce any claim
arising out of the Operative Agreements or any course of conduct
or dealing of Agent or any Lessor shall be brought and maintained
exclusively in any state or Federal court located in San
Francisco, California. Nothing in this Section 11.16 shall
affect the right of Agent or any Lessor to bring any action or
proceeding against any Lessee or Guarantor or any Vehicle or
other Collateral in the courts of any other jurisdiction. Each
Lessee and Guarantor agrees that a final judgment in any action
or proceeding in a state or Federal court within the United
States may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered as of the
date first above written.
CON-WAY CENTRAL EXPRESS, CON-WAY WESTERN EXPRESS,
INC., as Lessee INC.,as Lessee
By /s/Kevin C. Schick By /s/Kevin C. Schick
Name Printed: Kevin C. Schick Name Printed: Kevin C. Schick
Title:Treasurer Title: Treasurer
CON-WAY SOUTHERN EXPRESS, CON-WAY SOUTHWESTERN EXPRESS,
INC., as Lessee INC., as Lessee
By /s/Kevin C. Schick By /s/Kevin C. Schick
Name Printed: Kevin C. Schick Name Printed: Kevin C. Schick
Title: Treasurer Title: Treasurer
CON-WAY TRANSPORTATION CONSOLIDATED FREIGHTWAYS
SERVICES, INC., as Lessee CORPORATION OF DELAWARE, as
Lessee
By /s/Kevin C. Schick By /s/Robert E. Wrightson
Name Printed: Kevin C. Schick Name Printed: Robert E. Wrightson
Title: V.P. Controller and Treasurer Title: Senior V.P.,
Controller and Treasurer
CONSOLIDATED FREIGHTWAYS, INC. CON-WAY INTERMODAL, INC. as
Lessee
as Guarantor and Lessees'
Representative
By /s/R.Guy Kraines By /s/David F. Morrison
Name Printed: R. Guy Kraines Name Printed: David F. Morrison
Title: Assistant Treasurer Title: Treasurer
BA LEASING & CAPITAL CORPORATION,
not individually, but solely
as Agent for the Lessors
By /s/James F. Simpson
Name Printed: James F. Simpson
Title: Vice President
By /s/ Sara Fitch
Name Printed: Sara Fitch
Title: Vice President
LESSORS:
BA LEASING & CAPITAL ABN AMRO BANK N.V.
CORPORATION
By /s/James F. Simpson
Name Printed: James F. Simpson
Title: Vice President By /s/Jeffery A. French
Name Printed: Jeffery A. French
Title: Vice President
By /s/Sara Fitch
Name Printed: Sara Fitch
Title: Vice President
IBJTC LEASING CORPORATION CREDIT LYONNAIS
Cayman Island Branch
By /s/Hiroshi Suzuki By /s/Thierry F. Vincent
Name Printed: Hiroshi Suzuki Name Printed: Thierry F. Vincent
Title: Senior Vice President Title: Authorized Signatory
SCHEDULE I
TO
PARTICIPATION AGREEMENT
AGENT AND LESSOR ADDRESSES; LESSOR COMMITMENTS
AGENT: BA LEASING & CAPITAL CORPORATION (address set forth in
Section 11.4)
LESSORS:
1. BA LEASING & CAPITAL CORPORATION
Commitment: $30,000,000 Commitment Percentage: 50%
2. ABN AMRO BANK N.V.
Commitment: $10,000,000 Commitment Percentage: 16-2/3%
3. IBJTC LEASING CORPORATION
Commitment: $10,000,000 Commitment Percentage: 16-2/3%
4. CREDIT LYONNAIS CAYMAN ISLAND BRANCH
Commitment: $10,000,000 Commitment Percentage: 16-2/3%
EXHIBITS
TO
PARTICIPATION AGREEMENT
EXHIBIT A
TO
PARTICIPATION AGREEMENT
FORM OF
MASTER LEASE INTENDED AS SECURITY
Dated as of September 30, 1994
among
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE,
CON-WAY CENTRAL EXPRESS, INC.,
CON-WAY INTERMODAL, INC.,
CON-WAY SOUTHERN EXPRESS, INC.,
CON-WAY SOUTHWEST EXPRESS, INC.,
CON-WAY TRANSPORTATION SERVICES, INC.,
CON-WAY WESTERN EXPRESS, INC.,
as Lessees,
CONSOLIDATED FREIGHTWAYS, INC.,
as Lessees' Representative
and
BA LEASING & CAPITAL CORPORATION,
not individually, but solely as Agent
for the Lessors from time to time
under the Participation Agreement
MASTER LEASE INTENDED AS SECURITY
This MASTER LEASE INTENDED AS SECURITY (as amended,
modified, restated or supplemented from time to time, this
"Lease") dated as of September 30, 1994 is among (a) Con-Way
Central Express, Inc., a Delaware corporation, Con-Way
Intermodal, Inc, a Delaware corporation, Con-Way Southern
Express, Inc., a Delaware corporation, Con-Way Southwest Express,
Inc., a Delaware corporation, Con-Way Transportation Services,
Inc., a Delaware corporation, Con-Way Western Express, Inc., a
Delaware corporation, and Consolidated Freightways Corporation of
Delaware, a Delaware corporation, as Lessees (each a "Lessee" and
collectively, the "Lessees"), each with its principal office at
Menlo Park, California, (b) Consolidated Freightways, Inc., a
Delaware corporation ("Lessees' Representative"), and (c) BA
LEASING & CAPITAL CORPORATION, a California corporation, not in
its individual capacity, but solely in its capacity as agent
("Agent") for the benefit of the Lessors.
WHEREAS, pursuant to the terms and conditions set forth
herein and in that certain Participation Agreement, dated as of
September 30, 1994, (the "Participation Agreement") among
Consolidated Freightways, Inc., a Delaware corporation
("Guarantor"), Lessees, the several Lessors identified therein,
and Agent, the Participants have agreed that Agent, on behalf of
the Lessors, will lease to each Lessee and each Lessee will lease
from Agent, on behalf of the Lessors, certain personal property
described in Schedule I hereto and replacements thereto;
AND WHEREAS, capitalized terms used but not otherwise
defined herein (including those used in the foregoing recitals)
shall have the meanings specified in Schedule X to the
Participation Agreement, unless the context otherwise requires;
AND WHEREAS, each Lessee may from time to time enter into a
Lease Supplement with Agent for the benefit of the Lessors
covering certain of the Vehicles identified on Schedule I hereto;
AND WHEREAS, each Lease Supplement executed from time to
time by Agent and a Lessee shall be incorporated herein by
reference;
AND WHEREAS, each Con-Way Lessee shall be primarily liable
for the obligations incurred under each Lease Supplement to which
it is a party and shall be secondarily liable for all obligations
incurred under the Lease Supplements to which any other Con-Way
Lessee is a party;
AND WHEREAS, to secure Lessees' obligations under this Lease
and the other Operative Agreements, Lessees will grant to Agent,
for the benefit of the Lessors, a security interest in the
Collateral.
NOW THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DELIVERY AND ACCEPTANCE
Section 1.1. Transfer, Acceptance and Lease of Vehicles.
On each Delivery Date, subject to the satisfaction or waiver of
the conditions set forth in Article III of the Participation
Agreement, (a) each Lessee executing a Lease Supplement hereby
grants, assigns, transfers and sets over unto Agent, for the
benefit of the Lessors, an interest in the Vehicles to be
delivered on such Delivery Date and covered by the Lease
Supplement, (b) Agent hereby agrees to accept delivery on such
Delivery Date of the interest in the Vehicles to be so delivered
pursuant to the terms of the Participation Agreement and
simultaneously to lease such Vehicles to such Lessee under this
Lease and the applicable Lease Supplement, and (c) each such
Lessee hereby agrees, expressly for the direct benefit of Agent
and the Lessors, to lease from Agent hereunder, for the Lease
Term, such Vehicles to be delivered on such Delivery Date.
Section 1.2. Acceptance Procedure. Agent hereby authorizes
one or more employees of each Lessee, to be designated by
Lessees' Representative, as the authorized representative or
representatives of Agent to accept delivery of the Vehicles
identified on Schedule I to each Lease Supplement executed by
such Lessee on each Delivery Date. Lessees hereby agree that
such acceptance of delivery by such authorized representative or
representatives and the execution and delivery by a Lessee on
each Delivery Date of a Lease Supplement shall, without further
act, constitute the irrevocable acceptance by such Lessee of the
Vehicles which are the subject thereof for all purposes of this
Lease and the other Operative Agreements on the terms set forth
therein and herein.
ARTICLE II
LEASE TERM
Section 2.1. Interim and Base Periods. Unless earlier
terminated, the term of this Lease shall consist of (a) an
interim period commencing, with respect to each Lease Supplement,
on and including the applicable Delivery Date of such Lease
Supplement, and ending on but not including the Lease
Commencement Date (the "Interim Period"), (b) a base period,
commencing on and including the Lease Commencement Date and
ending on but not including the first anniversary thereof (the
"Base Period") and (c) any Renewal Terms (collectively, the
"Lease Term").
Section 2.2. Lease Commencement Date. The lease
commencement date shall be December 15, 1994 (the "Lease
Commencement Date").
Section 2.3. Lease Renewal. Lessees' Representative may
elect to renew this Lease for up to four successive one-year
renewal terms with respect to all, but not less than all, of the
Vehicles subject to all then-existing Lease Supplements, and,
solely with respect to Group B Vehicles, for a fifth renewal term
as to all, but not less than all, of the Group B Vehicles (each,
a "Renewal Term") as provided in Article XI.
ARTICLE III
RENT; OTHER ECONOMIC PROVISIONS
Section 3.1. Rent Payments. Lessees shall pay to Agent for
the benefit of the Lessors the amounts of Interim Rent, Basic
Rent or Renewal Rent, as applicable, determined in accordance
with this Section 3.1 and each Lease Supplement. Scheduled
installments of Basic Rent and Renewal Rent may be adjusted
pursuant to Section 6.1. All computations of interest pursuant
to the Operative Agreements shall be made on the basis of actual
number of days elapsed in a 360-day year.
(a) Interim Rent. With respect to the Interim
Period for the Lease, each Lessee shall pay to Agent, for
the benefit of the Lessors, the amount of Interim Rent set
forth on Schedule II to each Lease Supplement to which such
Lessee is a party. Interim Rent under each Lease Supplement
shall consist of interest accrued on the Supplement Balance
of such Lease Supplement at the Interest Rate for the
Interim Period of such Lease Supplement and shall be payable
on the Lease Commencement Date.
(b) Basic Rent. On each Payment Date during the
Base Period, each Lessee shall pay to Agent, for the benefit
of the Lessors, Basic Rent under each Lease Supplement to
which such Lessee is a party, consisting of the amount of
Fixed Rent set forth opposite the applicable Payment Date on
Schedule II to each such Lease Supplement and Variable Rent
accrued on the Supplement Balance of each such Lease
Supplement during the Rent Period ended on such Payment
Date.
(c) Renewal Rent. On each Payment Date during any
Renewal Term in effect, each Lessee shall pay to Agent, for
the benefit of the Lessors, Renewal Rent under each Lease
Supplement to which such Lessee is a party, consisting of
the amount of Fixed Rent set forth opposite the applicable
Payment Date on Schedule II to each such Lease Supplement
and Variable Rent accrued on the Supplement Balance of each
such Lease Supplement during the Rent Period ended on such
Payment Date.
Section 3.2. Place and Manner of Payment. Rent and all
other sums due to Agent or any Lessor hereunder shall be paid in
immediately available funds and if payable to Agent, at the
Agent's Corporate Office, and if payable to a Lessor, at the
office of Lessor as it may specify to Lessees herein, or at such
other office of Agent or Lessor as it may from time to time
specify to Lessees' Representative in a notice pursuant to this
Lease. All such payments shall be received by Agent or Lessor,
as applicable, not later than 11:00 a.m. San Francisco time, on
the date due; funds received after such time shall for all
purposes under the Operative Agreements be deemed to have been
received by Agent on the next succeeding Business Day. Any
payments received by Agent not later than 11:00 a.m. San
Francisco time, shall be paid by Agent to the Lessors in
immediately available funds no later than 1:00 p.m. San Francisco
time on the same day and any payments received by Agent from or
on behalf of Lessees after 11:00 a.m. San Francisco time, shall
be paid to Lessors as soon after receipt as practicable, but not
later than 1:00 p.m. San Francisco time on the next succeeding
Business Day. Lessees shall pay to Agent, for the benefit of the
Lessors, or to a Lessor in the case of payments to a Lessor, on
demand, interest at the rate per annum which is 2% above the
Interest Rate in effect from time to time on any overdue amount
of Rent, Administrative Charge or any other payment due under
this Lease and (to the extent permitted by applicable law)
interest from the date due (not taking into account any grace
period) until payment is made.
Section 3.3. Net Lease. This Lease is a net lease and each
Lessee's obligation to pay all Rent, Administrative Charges,
indemnities and other amounts payable hereunder shall be absolute
and unconditional under any and all circumstances and, without
limiting the generality of the foregoing, Lessees shall not be
entitled to any abatement or reduction of Rent or any setoff
against Rent, Administrative Charge, indemnity or other amount,
whether arising by reason of any past, present or future claims
of any nature by any Lessee against Agent or any Lessor, or
otherwise. Except as otherwise expressly provided herein, this
Lease shall not terminate, nor shall the obligations of Lessees
be otherwise affected: (a) by reason of any defect in, damage
to, or loss of possession or use, obsolescence or destruction, of
any or all of the Vehicles, however caused; or (b) by the taking
or requisitioning of any or all of the Vehicles by condemnation
or otherwise; or (c) by the invalidity or unenforceability or
lack of due authorization by Agent or any Lessee or other
infirmity of this Lease; or (d) by lack of power or authority of
Agent or any Lessor to enter into this Lease or any other
Operative Agreement; or (e) by the attachment of any Lien of any
third party to any Vehicle; or (f) by any prohibition or
restriction of or interference with Lessees' use of any or all of
the Vehicles by any Person; or (g) by the insolvency of or the
commencement by or against Agent or any Lessor of any bankruptcy,
reorganization or similar proceeding; or (h) by any other cause,
whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding. It is the intention
of the parties that all Rent, Administrative Charges, indemnities
and other amounts payable by Lessees hereunder shall be payable
in all events in the manner and at the times herein provided
unless Lessees' obligations in respect thereof have been
terminated or modified pursuant to the express provisions of this
Lease. To the extent permitted by applicable law, each Lessee
hereby waives any and all rights which it may now have or which
may at any time be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease, in whole or in
part, except strictly in accordance with the express terms
hereof. Each rental, indemnity or other payment made by Lessees
hereunder shall be final, and no Lessee shall seek to recover
(except as expressly provided in this Lease) all or any part of
such payment from Agent for any reason whatsoever. Without
affecting Lessees' obligation to pay Rent, Administrative Charges
or other amounts payable hereunder, Lessees may seek damages for
a breach by Agent or any Lessor of its obligations under this
Lease or the Participation Agreement.
ARTICLE IV
WARRANTIES
Section 4.1. Warranty Disclaimer. EACH LESSEE ACKNOWLEDGES
AND AGREES THAT: (a) EACH OF THE VEHICLES LEASED BY IT IS OF A
SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY SUCH LESSEE;
(b) EACH LESSEE IS SATISFIED THAT THE SAME IS SUITABLE FOR ITS
PURPOSES; (c) NEITHER AGENT NOR ANY LESSOR IS A MANUFACTURER
THEREOF OR A DEALER IN PROPERTY OF SUCH KIND; AND (d) NEITHER
AGENT NOR ANY LESSOR HAS MADE OR SHALL BE DEEMED TO HAVE MADE:
(i) ANY REPRESENTATION OR WARRANTY OR COVENANT WITH RESPECT TO
THE TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
CONDITION, QUALITY, DESCRIPTION, DURABILITY OR SUITABILITY OF ANY
VEHICLE IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES
AND USES OF ANY LESSEE; OR (ii) ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY
VEHICLE.
Section 4.2. Quiet Enjoyment. In the absence of an Event
of Default, neither any Lessor nor the Agent nor any Person
acting by, through or under any of such Persons, shall take any
actions to interfere with the Lessees' quiet enjoyment of the
Vehicles during the Lease Term.
ARTICLE V
POSSESSION, ASSIGNMENT, USE AND
MAINTENANCE OF VEHICLES
Section 5.1. Restriction on Lessees' Possession and Use.
No Lessee shall nor shall any Lessee permit any Sublessee to:
(a) use, operate, maintain or store any Vehicle or any portion
thereof: (i) except in accordance with Section 5.3; or (ii) in
violation of any applicable insurance policy or law or regulation
of any Authority; (b) except as permitted by Section 6.1, abandon
any Vehicle; (c) except as permitted by Section 5.2, sublease or
assign, without the prior written consent of Agent, any Vehicle
or permit the operation thereof by anyone other than a Lessee;
(d) except as set forth in Section 5.2, sell, assign or transfer
any of its rights hereunder or in any Vehicle, or directly or
indirectly create, incur or suffer to exist any Lien, on any of
its rights hereunder or in any Vehicle, except for Permitted
Liens; (e) permit any Vehicle to be titled in any jurisdiction
other than the jurisdiction in which it was titled on its the
Delivery Date, except as permitted under Section 6.1(f) of the
Participation Agreement; and (f) outside of the United States
except that each Lessee may (and may permit any Sublessee to)
use, maintain and operate any Vehicle outside of the United
States on trips to and from a point of embarkation located within
the United States. Each Lessee will defend the transfer of the
Vehicles by such Lessee to Agent, for the benefit of the Lessors,
against the claims or demands of all Persons (other than Lessor
Liens).
Section 5.2. Subleases. So long as no Event of Default
shall have occurred and be continuing, any Lessee may sublease
one or more Vehicles (i) to a wholly-owned Subsidiary of such
Lessee or to another Lessee without the prior written consent of
Lessors or Agent and (ii) to any other corporation organized
under the laws of the United States or any State thereof with the
prior written consent of each of the Lessors, which consent shall
not be unreasonably withheld; provided, that any Sublease entered
into pursuant to this Section 5.2 shall satisfy each of the
following conditions:
such Sublease shall automatically expire upon
the termination of the Lease Supplement governing the
Vehicle subleased under such Sublease and shall be expressly
subordinate and subject to this Lease and the Liens created
hereunder, and to the applicable Lease Supplement;
such Sublease shall be in writing and shall
expressly prohibit any further assignment, sublease or
transfer;
such Sublease shall not contain a purchase
option in favor of the Sublessee or any other provision
pursuant to which the Sublessee may obtain record or
beneficial title to the Vehicle leased thereunder from the
Lessee of such Vehicle;
such Sublease shall prohibit the Sublessee from
making any alterations or modifications to the Vehicle that
would violate this Lease;
such Sublease shall require the Sublessee to
maintain the Vehicle in accordance with Section 5.3;
all of the applicable Lessee's rights, title and
interest in, to and under such Sublease shall be pledged by
such Lessee to Agent, for the benefit of the Lessors, as
collateral for such Lessee's obligations under the Operative
Agreements, by delivery of an executed original counterpart
upon the execution and delivery thereof, marked as the sole
original execution counterpart for Uniform Commercial Code
purposes, to the Agent, and each Lessee shall, at its own
cost and expense, do any further act and execute,
acknowledge, deliver, file, register and record any further
documents which the Agent or Lessors may reasonably request
in order to create, perfect, preserve and protect Agent's
and Lessors' security interest in such Sublease;
no Lessee shall, without Agent's prior written
consent, permit or consent to any renewal or extension of a
Sublease at any time when an Event of Default has occurred
and is continuing; and
Lessees' Representative shall notify Agent and
each Lessor in writing not less than 30 days prior to
entering into any Sublease, which notice shall include (i) a
description of the Vehicle or Vehicles to be leased
thereunder, and (ii) the street address, city, county and
State where such Vehicle or Vehicles will be located during
the term of such Sublease, and Lessees' Representative shall
provide copies of each Sublease to Agent upon request,
provided that if such Sublease will require that the Vehicle
be titled or registered in a different jurisdiction, then
the applicable Lessee must comply with Section 6.1(f) of the
Participation Agreement in connection with such titling and
registration.
The liability of each Lessee with respect to this Lease, the
Lease Supplements and each of the other Operative Agreements
shall not be altered or affected in any way by the existence of
any Sublease.
Section 5.3. Maintenance. At all times during the term of
this Lease, Lessees shall at their expense or shall cause each
Sublessee to: (a) maintain, manage and monitor the Vehicles in
compliance in all material respects with all applicable
requirements of law, Authority and/or insurance policies; (b)
maintain the Vehicles (or cause the Vehicles to be maintained) in
as good operating order, repair and condition as it was on the
date such Vehicles became subject to this Lease (assuming that,
as of such date, each such Vehicle was in good operating order,
repair and condition), ordinary wear and tear excepted; (c)
maintain, manage and monitor the Vehicles in accordance with the
terms of all applicable contracts (including, without limitation,
service contracts and insurance contracts) in a manner consistent
with Lessees' customary practices; and (d) conduct all scheduled
maintenance of the Vehicles in conformity with Lessees'
maintenance procedures then in effect for similar equipment owned
or leased by Lessees, and applicable warranty guidelines.
Lessees shall in any event maintain the Vehicles (or cause the
Vehicles to be maintained) in at least as good a condition as
comparable equipment owned or leased by them or any of their
Subsidiaries. Lessees will maintain or cause to be maintained,
and shall permit Agent and Lessors to inspect, any records, logs
and other materials required by any Authority having jurisdiction
to be maintained or filed in respect of any Vehicle.
Section 5.4. Repair, Replacement and Substitution.
(a) As soon as practicable after a Partial Casualty,
the Lessee of the Vehicle suffering such Partial Casualty
shall repair and rebuild the affected portions of such
Vehicle (or cause such affected portions to be repaired and
rebuilt) to the condition required to be maintained by
Section 5.3. In the event that any Part which may from time
to time be incorporated or installed in or attached to any
Vehicle becomes at any time worn out, damaged or permanently
rendered unfit for use for any reason whatsoever (unless
such event constitutes a Casualty, in which event the
provisions of Section 6.1 hereof shall apply), the Lessee of
such Vehicle, at its own cost and expense, will promptly
replace, or cause to be replaced, such Part with a
replacement Part (a "Replacement Part") in accordance with
such Lessee's customary practices, but in any event subject
to Section 5.3. In addition, each Lessee may, at its own
cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Part,
whether or not worn out, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use;
provided, that such Lessee will, at its own cost and
expense, replace such Part with a Replacement Part as
promptly as is commercially reasonable. All Replacement
Parts shall be free and clear of all Liens (other than
Permitted Liens) and shall be in as good operating condition
as, and shall have a value and utility at least equal to,
the Parts replaced, assuming such replaced Parts and the
Vehicles were in the condition and repair required to be
maintained by the terms of Section 5.3. Any Part at any
time removed from any Vehicle shall remain the property of
Agent, for the benefit of the Lessors, no matter where
located, until such time as such Part shall be replaced by a
Part which has been incorporated or installed in or attached
to such Vehicle and which meets the requirements for a
Replacement Part specified above. Immediately upon any
Replacement Part becoming incorporated or installed in or
attached to any such Vehicle as above provided, without
further act: (i) title to the replaced Part (the "Replaced
Part") shall thereupon vest in the Lessee of such Vehicle,
free and clear of all rights of Agent and the Lessors, and
shall no longer be deemed a Part hereunder; (ii) such
Replacement Part shall thereupon vest in Agent, for the
benefit of the Lessors, as provided in Section 12.1 (in the
same manner as the underlying Vehicle); and (iii) such
Replacement Part shall become subject to this Lease, the
security interest created hereunder, and the applicable
Lease Supplement, and shall be deemed part of such Vehicle
for all purposes hereof to the same extent as the Parts
incorporated or installed in or attached to such Vehicle on
the date such Vehicle became subject to this Lease.
(b) Upon the satisfaction of the conditions
specified in Section 5.4(a), and the Replacement Part
becoming subject to this Lease and the security interest
created hereunder, Agent, on behalf of the Lessors, shall
execute and deliver to Lessees such documents as may be
reasonably necessary to release the Replaced Part from the
terms and scope of this Lease (but without representations
or warranties, except that the Replaced Part is free and
clear of all Lessor Liens), in such form as may be
reasonably requested by Lessees and are in form and
substance satisfactory to the Required Lessors, all at the
expense of the applicable Lessee.
Section 5.5. Alterations, Modifications and Additions;
Removable Parts.
(a) Except as provided in Sections 5.3 and 5.4, no
Lessee shall remove, replace or alter any Vehicle or affix
or place any accessory, equipment or device on any Vehicle
if such removal, replacement, alteration or addition would
materially impair the originally intended function or use or
materially reduce the value or useful life of such Vehicle;
provided, that each Lessee, at its own expense, will make,
or cause to be made, any alteration, improvement,
modification or addition to or in respect of any Vehicle
that may be necessary, from time to time, to comply in all
material respects with any applicable law, governmental rule
or regulation or any provision of any insurance policy
required to be maintained under Section 7.1 (any Parts being
used to comply with this provision shall be hereafter
referred to as "Mandatory Parts"). All Parts affixed to or
installed as a part of any Vehicle, excluding temporary
replacements, shall thereupon become subject to the security
interest under this Lease. If no Event of Default shall
exist, any Lessee may remove, at its expense, any Part at
any time during the term of this Lease (such Part, a
"Removable Part"): (i) which is in addition to, and not in
replacement of or substitution for, any Part originally
incorporated or installed in or attached to a Vehicle on the
date such item became subject to this Lease or any Part
inreplacement of or substitution for any such Part
originally incorporated or installed or attached to such
Vehicle; (ii) which is not a Mandatory Part; and (iii) which
can be removed from any Vehicle without causing damage to
such Vehicle or diminishing or impairing the value, utility
or condition which such Vehicle would have had at such time
had such addition not occurred; provided, that: (x) such
removal will not materially impair the value, use or useful
life which the Vehicle would have had at such time had such
Part not been affixed or placed to or on such Vehicle; and
(y) such Part is not necessary for the continued normal use
of such Vehicle. Lessees shall repair all damage to any
Vehicle resulting from any alteration so as to restore such
Vehicle to the condition in which it existed prior to such
alteration (ordinary wear and tear excepted). Neither Agent
nor any Lessor shall have any obligation to pay for or to
reimburse any Lessee for any alteration required or
permitted by this Section 5.5.
(b) As provided in Section 4.1 of the Participation
Agreement and Section 12.1 of this Lease, all Parts
incorporated or installed in or attached or added to any
Vehicle as the result of alterations, modifications or
additions under this Section 5.5, except Removable Parts,
shall, without further act, vest in Agent, for the benefit
of the Lessors, to secure Lessees' performance of their
obligations under the Operative Agreements, in the manner
provided in clause (ii) of Section5.4 (a) and the other
applicable provisions of Section 5.4 shall apply with
respect to such Parts. Upon the removal by a Lessee of any
Removable Part as provided herein, such Removable Part shall
no longer be deemed part of the Vehicle from which it was
removed. Any Removable Part not removed by a Lessee as
provided herein prior to the end of the Lease Term shall
become the property of Agent, for the benefit of the
Lessors, atsuch time.
Section 5.6. Inspection of Collateral. Agent, the Lessors,
and each of their agents and representatives shall have the right
at all reasonable times, upon reasonable notice, to inspect any
Collateral, including without limitation any Certificate of
Title.
ARTICLE VI
RISK OF LOSS; REPLACEMENT; WAIVER AND INDEMNITY
Section 6.1. Casualty. Upon a Casualty, Lessees'
Representative shall give prompt written notice thereof (a
"Casualty Notice") to Agent, which notice shall specify whether
the Lessee of the Vehicle suffering such casualty will:
(a) repay a portion of the Lease Balance equal to
the Casualty Amount together with all Variable Rent accrued
on such portion of the Lease Balance to the date of payment,
which repayment shall be made no later than the next
scheduled Payment Date occurring after such Casualty or, if
such Casualty occurs during the last 5 Business Days of a
Rent Period, then no later than the second Payment Date
occurring after such Casualty, provided that in any event
such repayment shall be made no later than the last day of
the Lease Term (the "Casualty Settlement Date"); or
(b) replace the Vehicle with respect to which the
Casualty has occurred pursuant to the provisions of Section
5.4 (treating such Vehicle, for these purposes, in the same
manner as a Part), provided that upon the occurrence and
during the continuance of an Event of Default or an
Incipient Default, such Lessee shall be obligated, at the
option of the Required Lessors, to make the payments
referred to in clause (a) above and shall not be entitled to
exercise any right or election of replacement as set forth
in this clause (b).
If a Lessee has elected, or is required, to pay the Casualty
Amount pursuant to clause (a) above, such Lessee shall continue
to make all payments of Rent due under the applicable Lease
Supplement until and including the Casualty Settlement Date.
Upon payment of the Casualty Amount in respect of any Vehicle
suffering a Casualty on such Casualty Settlement Date, the
remaining scheduled payments of Fixed Rent, if any, shall each be
reduced by an amount equal to the product of the scheduled amount
of such Fixed Rent prior to the receipt of such payment by Agent
multiplied by the Allocation Fraction under such Lease Supplement
of the Vehicle suffering such Casualty.
Section 6.2. Casualty Proceeds. All proceeds of any
casualty insurance or condemnation proceeds ("Casualty Proceeds")
paid or payable to any Lessee or any Affiliate of a Lessee by
reason of a Casualty or Partial Casualty to a Vehicle shall be
deposited into a deposit account established by Agent for the
benefit of the Lessors (the "Deposit Account"), unless the
applicable Lessee shall have already complied with the applicable
provisions of Section 5.4 or 6.1 with respect to such Casualty or
Partial Casualty. Any Casualty Proceeds paid to Agent with
respect to a Vehicle suffering a Casualty or a Partial Casualty
shall also be deposited in the Deposit Account. Any monies in
the Deposit Account attributable to a Casualty or Partial
Casualty shall be remitted promptly to Lessees' Representative
after the applicable Lessee's full compliance with Section 6.1 or
Section 5.4, as applicable. Notwithstanding the foregoing
provisions of this Section 6.2, and provided that no Incipient
Default consisting of an event described in Section 8.1(a) or (g)
or an Event of Default shall exist, if the aggregate amount of
Casualty Proceeds at any one time outstanding is $250,000 or
less, then Lessees' Representative (on behalf of the applicable
Lessee) may receive such Casualty Proceeds directly, without
delivery to Agent; provided, that such Casualty Proceeds are
applied in accordance with the requirements of Section 6.1 or
Section 5.4, as applicable. Notwithstanding any Casualty, all of
the applicable Lessee's obligations under this Lease and each
Lease Supplement (including its obligation to make all payments
of Rent as they become due) shall continue unabated and in full
force and effect as provided in this Lease. Without limiting the
foregoing, no Lessee's obligations under Section 5.4 shall be
affected by the amount of any Casualty Proceeds received by such
Lessee.
ARTICLE VII
INSURANCE
Section 7.1. Required Coverages. At their own expense,
Lessees will maintain the following insurance coverages:
(a) primary automobile and general liability
insurance of not less than $3,000,000 per occurrence, with
excess coverages of not less than $5,000,000 per occurrence
and $95,000,000 in the aggregate, in each case naming Agent
and Lessors as additional insureds; and
(b) insurance against all risks of loss or physical
damage to the Vehicles in a primary amount of not less than
$250,000 per occurrence and excess "all risk" coverage on
the Vehicles in a blanket amount of not less than
$100,000,000, which insurance shall name Agent and Lessors
as the sole loss payees.
So long as CF Financial Services (the "Insurer") shall (i)
maintain its good standing as an insurer, (ii) be financially
sound in the reasonable judgment of the Required Lessors and
(iii) be in compliance with all applicable regulatory
requirements, Lessees may obtain primary insurance coverage from
the Insurer, with retained liability for physical damage to the
Vehicles and for liability coverage required under clause (a)
above, which retained liability amounts, in both such cases,
shall be in amounts not greater than amounts customary for
similarly situated companies operating comparable equipment in
the same industry as Lessees. Lessees shall obtain their excess
insurance and, if Insurer does not meet the criteria set forth in
the preceding sentence or is no longer providing Lessees'
insurance, their primary insurance, from financially responsible
companies selected by Lessees and having an A.M. Best rating of
"A" or better or otherwise acceptable to the Required Lessors.
Such insurance shall (i) name Lessors and Agent as insured
parties thereunder as specified above (without any representation
or warranty by, or obligation upon, Agent or any Lessor) as their
interests may appear, (ii) contain the agreement by the Insurer
that any loss thereunder shall be payable to Agent and Lessors
notwithstanding any action, inaction or breach of representation
or warranty by any Lessee or any other Person having an interest
in any Vehicle (including, without limitation, Agent or any
Lessor), (iii) provide that there shall be no recourse against
Agent or any Lessor for payment of premiums or other amounts with
respect thereto, (iv) provide that Insurer shall give Agent and
each Lessor at least 30 days' prior written notice of
cancellation, lapse or reduction of limits, (v) be primary with
respect to any other insurance carried by or available to Agent
and the Lessors, (vi) provide that the insurer shall waive any
right of subrogation, setoff, counterclaim, or other deduction,
whether by attachment or otherwise, against Agent or any Lessor,
and (vii) contain a cross-liability clause providing for coverage
of Agent and each Lessor as if separate policies had been issued
to each of them. Lessees will notify Agent and Lessors promptly
of any policy cancellation, reduction in policy limits,
modification or amendment.
Section 7.2. Delivery of Insurance Certificates. On or
before the Initial Delivery Date and thereafter on each
Subsequent Delivery Date, Lessees' Representative shall deliver
to Agent certificates of insurance satisfactory to Agent and
Lessors evidencing the existence of all insurance required to be
maintained hereunder and setting forth the respective coverages,
limits of liability, carrier, policy number and period of
coverage. Thereafter, throughout the Lease Term, at the time
each of Lessee's insurance policies is renewed (but in no event
less frequently than once each year), Lessees' Representative
shall deliver to Agent and each Lessor certificates of insurance
evidencing that all insurance required by Section 7.1 to be
maintained by Lessees with respect to the Vehicles is in effect.
ARTICLE VIII
DEFAULT
Section 8.1. Events of Default. The following shall
constitute events of default (each an "Event of Default")
hereunder and under each Lease Supplement then in effect (whether
any such event shall be voluntary or involuntary or come about or
be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order,
rule or regulation of any Authority):
(a) any payment of Rent, Administrative Charge or
any other payment payable by any Lessee hereunder or by any
Lessee or Guarantor under any other Operative Agreement
(including without limitation, any amount payable pursuant
to Article VII or VIII of the Participation Agreement) shall
not be paid when due, and such payment shall be overdue for
a period of three Business Days;
(b) any representation or warranty made by or on
behalf of any Lessee or Guarantor contained in any Operative
Agreement or in any certificate, letter or other writing or
instrument furnished or delivered to Agent or Lessors or,
pursuant thereto shall at any time prove to have been
incorrect in any material respect when made, deemed made or
reaffirmed, as the case may be;
(c) any Lessee shall default in the performance or
observance of any term, covenant, condition or agreement on
its part to be performed or observed under Article XI or
Section 13.10 of this Lease or under Section 6.1(c), (f) or
(g) of the Participation Agreement (except to the extent
that Section 13.10 incorporates Section 5.2, in which case
clause (e) of this Section 8.1 shall apply);
(d) any Lessee shall default in any material respect
in the performance or observance of any term, covenant,
condition or agreement on its part to be performed or
observed under Section 7.1;
(e) any Lessee or Guarantor shall default in any
material respect in the performance or observance of any
other term, covenant, condition or agreement on its part to
be performed or observed hereunder or under any other
Operative Agreement (and not constituting an Event of
Default under any other clause of this Section 8.1), and
such default shall continue unremedied for a period of 30
days after the earlier to occur of (i) written notice
thereof by Agent or any Participant to any Lessee or
Guarantor or (ii) any Lessee or Guarantor has Actual
Knowledge thereof;
(f) (i) any Lessee or Guarantor shall generally fail
to pay, or admit in writing its inability to pay, its debts
as they become due, or shall voluntarily commence any case
or proceeding or file any petition under any bankruptcy,
insolvency or similar law or seeking dissolution,
liquidation or reorganization or the appointment of a
receiver, agent, custodian or liquidator for itself or a
substantial portion of its property, assets or business or
to effect a plan or other arrangement with its creditors, or
shall file any answer admitting the jurisdiction of the
court and the material allegations of any involuntary
petition filed against it in any bankruptcy, insolvency or
similar case or proceeding, or shall be adjudicated
bankrupt, or shall make a general assignment for the benefit
of creditors, or shall consent to, or acquiesce in the
appointment of, a receiver, agent, custodian or liquidator
for itself or a substantial portion of its property, assets
or business; or (ii) corporate action shall be taken by any
Lessee or Guarantor for the purpose of effectuating any of
the foregoing;
(g) involuntary proceedings or an involuntary
petition shall be commenced or filed against any Lessee or
Guarantor under any bankruptcy, insolvency or similar law or
seeking the dissolution, liquidation or reorganization of
any Lessee or Guarantor or the appointment of a receiver,
agent, custodian or liquidator for any Lessee or Guarantor
or of a substantial part of the property, assets or business
of any Lessee or Guarantor, or any writ, judgment, warrant
of attachment, execution or similar process shall be issued
or levied against a substantial part of the property, assets
or business of any Lessee or Guarantor, and such proceedings
or petition shall not be dismissed or stayed, or such writ,
judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded,
within 60 days after commencement, filing or levy, as the
case may be;
(h) any one or more of the following shall occur and
the liability of the Guarantor and its Subsidiaries on a
consolidated basis shall exceed, individually or in the
aggregate, $30,000,000: (i) a contribution failure occurs
with respect to any Pension Plan (other than a Multiemployer
Plan) sufficient to give rise to a lien under Section 302(f)
of ERISA or Section 412(n) of the Code with respect to any
Pension Plan (other than a Multiemployer Plan) as to which
any Lessee or any Related Person to any Lessee may have any
liability, (ii) there shall exist an unfunded current
liability (as defined in 302(d)(8) of the Code) with respect
to any Pension Plan, (iii) steps are undertaken to terminate
any Pension Plan, (iv) any Reportable Event occurs with
respect to a Pension Plan for which notice to the PBGC has
not been waived, (v) any action is taken with respect to a
Pension Plan which could result in the requirement that any
Lessee or any Related Person to any Lessee furnish a bond or
other security to the PBGC or such Pension Plan, (vi) the
occurrence of any event which could cause any Lessee or any
Related Person to any Lessee to incur any liability, fine or
penalty with respect to any Pension Plan or any increase in
liability with respect to any Pension Plan, or (vii) the
occurrence of any event that could result in any increase in
the liability (or contingent liability) of any Lessee or any
Related Person to any Lessee with respect to post-retirement
benefits under any Welfare Plan;
(i) any Operative Agreement or the security interest
granted under this Lease shall (except in accordance with
its terms), in whole or in part, terminate, cease to be
effective or cease to be the legally valid, binding and
enforceable obligation of any Lessee or Guarantor, as the
case may be, or any Lessee, Guarantor or any Affiliate of
any of them shall, directly or indirectly, contest in any
manner in any court the effectiveness, validity, binding
nature or enforceability thereof; or the security interest
securing Lessees' obligations under the Operative Agreements
shall, in whole or in part, cease to be a perfected first
priority security interest;
(j) Guarantor shall fail to perform in any material
respect any covenant or condition under the Guarantee, or
shall repudiate or revoke the Guarantee;
(k) there shall have occurred any event of default
in the performance or observance of any obligation or
condition with respect to any indebtedness owing by or
guaranteed by any Lessee or Guarantor having an aggregate
principal amount in excess of $30,000,000 the effect of
which is to cause the acceleration of the maturity of such
indebtedness prior to its expressed or stated maturity or
the acceleration of such guarantee;
(l) a final judgment or final judgments for the
payment of money are entered by a court or courts of
competent jurisdiction against any Lessee or Guarantor or
any Affiliate of any of them, and such judgment or judgments
remain undischarged or unstayed for a period (during which
execution shall not be effectively stayed) of 30 days;
provided, that the aggregate of all such judgments exceeds
$30,000,000; and
(m) Guarantor shall default in the performance or
observance of any term, covenant, condition or agreement on
its part to be performed or observed under Section 6.2(b),
(c) or (d) of the Participation Agreement.
Section 8.2. Remedies. If any Event of Default has
occurred and is continuing, Agent may exercise in any order one
or more or all of the remedies set forth in this Section 8.2 (it
being understood that no remedy herein conferred is intended to
be exclusive of any other remedy or remedies, but each and every
remedy shall be cumulative and shall be in addition to every
other remedy given herein or now or hereafter existing at law or
in equity or by statute).
(a) Agent may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance
by Lessees of the applicable covenants of this Lease or to
recover damages for the breach thereof;
(b) Agent may by notice in writing to Lessees
terminate this Lease, but Lessees shall remain liable as
hereinafter provided; and Agent may, at its option, do any
one or more of the following: (i) declare the Lease
Balance, all accrued Variable Rent, all other amounts then
payable by Lessees under this Lease and the other Operative
Agreements to be immediately due and payable, and recover
any other damages and expenses (including the costs and
expenses described in Article VII and Section 11.5 of the
Participation Agreement) in addition thereto which Agent or
any Lessor shall have sustained by reason of such Event of
Default; (ii) enforce the security interest given hereunder
pursuant to the Uniform Commercial Code or any other law;
(iii) enter upon the premises where any Vehicle may be and
either remove such Vehicle, with any damage to the
improvements on such premises to be borne by Lessees (except
to the extent such damage is due to the willful misconduct
or gross negligence of Agent or its representatives), or
take possession of such Vehicle; and (iv) require Lessees to
return the Vehicles as provided in Article IX; or
(c) Agent may require Lessees immediately to
purchase the Vehicles for an aggregate purchase price equal
to the sum of the Lease Balance, all accrued Variable Rent,
Administrative Charges and all other amounts then due and
payable under the Operative Agreements.
Notwithstanding the foregoing, upon the occurrence of any Event
of Default described in subsection (f) or (g) of Section 8.1,
Lessees shall automatically and immediately be required to
purchase all of the Vehicles for an amount equal to the entire
outstanding Lease Balance, together with all accrued unpaid Rent
and other amounts then due and payable under the Operative
Agreements and, to the extent lawful, the applicable
Administrative Charge, without presentment, demand, notice,
declaration, protest or other requirements of any kind, all of
which are hereby expressly waived.
Except for notices expressly otherwise provided for in the
Operative Agreements, each Lessee hereby waives presentment,
demand, protest and notice of any kind including, without
limitation, notices of default, notice of acceleration and notice
of intent to accelerate.
Section 8.3. Additional Remedies. In addition to the
remedies set forth in Section 8.2, if any Event of Default shall
occur, Agent (at the direction of the Required Lessors) may, but
is not required to, sell the Collateral in one or more sales.
Any Lessor or Agent may purchase all or any part of the
Collateral at such sale. Each Lessee acknowledges that sales for
cash or on credit to a wholesaler, retailer or user of such
Collateral, at a public or private auction, are all commercially
reasonable. Any notice required by law of intended disposition
by Agent shall be deemed reasonable and properly given if given
at least 10 days before such disposition.
Section 8.4. Proceeds of Sale; Deficiency. All payments
received and amounts held or realized by the Agent at any time
when an Event of Default shall have occurred and be continuing
and after, pursuant to Section 8.2, the Lease Balance shall have
been accelerated or Lessees are required to purchase the
Vehicles, as well as all payments or amounts then held or
thereafter received by the Agent, shall be distributed forthwith
upon receipt by the Agent in the following order of priority:
first: (i) so much of such payments or amounts as
shall be required to reimburse first the Agent and then any
Lessor for any tax (other than any income tax payable on
interest and on fees and other compensation of the Agent),
expense or other amount owed to the Agent or any Lessor in
connection with the collection or distribution of such
payments or amounts to the extent not previously reimbursed
by Lessees (including, without limitation, the expenses of
any sale, taking or other proceeding, expenses in connection
with realizing on any of the Collateral, reasonable
attorneys' fees and expenses (including the allocated costs
of internal counsel), court costs and any other reasonable
expenditures incurred or reasonable expenditures or advances
made by the Agent or any Lessor in the protection, exercise
or enforcement of any right, power or remedy upon such Event
of Default whether pursuant to Section 8.2 or otherwise)
shall be so applied by the Agent first to itself and then to
such Lessors; and (ii) so much of such payments or amounts
as shall be required to pay the reasonable fees and
compensation of the Agent in connection with acting as Agent
not previously paid by Lessees, shall be distributed to the
Agent;
second: so much of such payments or amounts except
those specified in clause third below, which under the terms
of this Lease and the other Operative Agreements have
accrued, including, without limitation, such amounts as
shall be required to reimburse the then existing or prior
Lessors for payments made by them to Agent pursuant to
Section 9.4 of the Participation Agreement (to the extent
not previously reimbursed);
third: so much of such payments or amounts remaining
as shall be required to pay in full, in the following order
of application, (a) any applicable Administrative Charge,
(b) all accrued unpaid Variable Rent (including, to the
extent permitted by applicable law, interest on interest)
and (c) the aggregate unpaid Lease Balance, and in case the
aggregate amount so to be distributed shall be insufficient
to pay any of the foregoing in full all as aforesaid then,
ratably to the Lessors in accordance with their respective
Commitment Percentages; and
fourth: so much of such payments or amounts as shall
remain shall be distributed to Lessees' Representative for
the benefit of the Lessees.
Section 8.5. Right to Perform Lessees' Agreements. If
Lessees fail to perform any of their agreements contained herein
or in any other Operative Agreement within the time period
specified therefor, whether or not an Event of Default has
occurred and is continuing, Agent, upon written instructions from
Required Lessors and receipt by Agent of indemnification
satisfactory to it, and with 3 Business Days' prior notice to
Lessees' Representative, may perform such agreement and the fees
and expenses incurred by Agent (or one or more Lessors) in
connection with such performance together with interest thereon
shall be payable by Lessees upon demand. Interest on fees and
expenses so incurred by Agent or one or more Lessors shall accrue
at the rate provided in Section 3.2 for overdue payments.
ARTICLE IX
RETURN OF VEHICLES
If Agent has terminated this Lease pursuant to Section 8.2,
Lessees shall (a) maintain (or cause to be maintained) the
Vehicles in the condition required by Section 5.3, store the
Vehicles without cost to Agent or any Lessor and keep all of the
Vehicles insured in accordance with Article VII, and (b) upon
such termination forthwith package and deliver exclusive
possession of such Vehicles to Agent, for the benefit of the
Lessors, at a location designated by Agent, together with a copy
of an inventory list of the Vehicles then subject to the Lease,
all then current plans, specifications and operating, maintenance
and repair manuals relating to the Vehicles that have been
received or prepared by Lessees, appropriately protected and in
the condition required by Section 5.3 (and in any event in
condition to be placed in immediate service), to Agent. This
Article IX shall survive termination of this Lease.
ARTICLE X
EARLY TERMINATION
If no Incipient Default or Event of Default shall exist, on
any scheduled Payment Date after the first Renewal Term, Lessees
may, at their option, upon at least 30 days' advance written
notice from Lessees' Representative to Agent and the Lessors,
purchase all, but not less than all, of the Vehicles subject to
all Lease Supplements then in effect for the sum of (i) accrued
Variable Rent payable on or prior to such Payment Date, (ii) the
Lease Balance, (iii) the applicable Administrative Charge, if
any, and (iv) all other fees and expenses and other amounts then
due and payable pursuant to this Lease and the other Operative
Agreements. Upon the indefeasible payment of such sums by
Lessees in accordance with the provisions of the preceding
sentence, the obligation of Lessees to pay Rent hereunder shall
cease, the term of this Lease shall end on the date of such
payment and Agent, on behalf of the Lessors, shall execute and
deliver to Lessees' Representative such documents as may be
reasonably required to release the Vehicles from the terms and
scope of this Lease (without representations or warranties,
except that the Vehicles are free and clear of Lessor Liens), in
such form as may be reasonably requested by Lessees'
Representative, all at Lessees' sole cost and expense.
Notwithstanding the foregoing, Lessees may, at their option, at
any time and from time to time, purchase any Vehicle for an
amount equal to the Casualty Amount of such Vehicle, together
with all accrued but unpaid Variable Rent on the portion of the
Lease Balance represented by such Casualty Amount plus the
applicable Administrative Charge thereon, whereupon Agent shall
transfer its interest in such Vehicle to the Lessee of such
Vehicle in accordance with the last two sentences of Section
12.1; provided that the amount of the Lease Balance repaid from
the Initial Delivery Date to any date of determination pursuant
to this sentence and pursuant to Section 6.1(g) of the
Participation Agreement shall not exceed $4,000,000 in the
aggregate.
ARTICLE XI
LEASE TERMINATION
Section 11.1. Lessees' Options. Not later than 360 days
prior to the last day of the Base Period or any Renewal Term then
in effect, Lessees shall, by delivery of written notice from
Lessees' Representative to Agent and the Lessors, exercise one of
the following options (provided that paragraph (a) below shall
not be applicable (i) with respect to Group A Vehicles in the
third Renewal Term and (ii) with respect to Group B Vehicles in
the fourth Renewal Term):
(a) renew this Lease with respect to all, but not
less than all, of the Vehicles then subject hereto for an
additional one year Renewal Term (the "Renewal Option") on
the terms and conditions set forth herein and the other
Operative Agreements; or
(b) purchase for cash for the Purchase Option
Exercise Amount all, but not less than all, of the Vehicles
then subject to this Lease on the last day of the Base Term
or Renewal Term with respect to which such option is
exercised (the "Fixed Price Purchase Option"), provided that
with respect to the Third Renewal Term, Lessee may exercise
the Fixed Price Purchase Option solely with respect to the
Group A Vehicles; or
(c) sell on behalf of the Lessors for cash to a
purchaser or purchasers not in any way affiliated with any
Lessee all, but not less than all, of the Vehicles then
subject to this Lease on the last day of the Base Period or
of any Renewal Term then in effect with respect to which
such option is exercised (the "Sale Option"); provided, that
if Lessees have exercised the Fixed Price Purchase Option
solely with respect to the Group A Vehicles pursuant to the
proviso of clause (b), then the Sale Option shall not be
available with respect to the Group B Vehicles.
Simultaneously with a sale pursuant to the Sale Option, each
Lessee shall pay to Agent, as supplemental Rent for the
benefit of the Lessors, from the gross proceeds of sale of
Vehicles subject to Lease Supplements to which such Lessee
is a party, without deductions or expense reimbursements
(the "Proceeds"), the aggregate Supplement Balances with
respect to Lease Supplements to which it is a party as of
the Termination Date (as determined after any payment of
Rent on such date). If the Proceeds exceed the aggregate
Supplement Balances under all Lease Supplements to which
such Lessee is a party, such Lessee will retain the portion
of the Proceeds in excess thereof. If the Proceeds are less
than the aggregate Supplement Balances as of such date under
all Lease Supplements to which such Lessee is a party, such
Lessee will pay or will cause to be paid to Agent, as
supplemental Rent for the benefit of the Lessors, on the
Termination Date, in addition to the Proceeds, the Sale
Recourse Amount, it being understood, however, that the
amount payable pursuant to this Section 11.1(c) shall in no
event be construed to limit any other obligation of a Lessee
under the Operative Agreements, including, without
limitation, pursuant to Articles VII and VIII and Section
11.5 of the Participation Agreement and Sections 11.3 and
11.4 of this Lease. A Lessee shall be treated as a party to
a Lease Supplement if such Lessee is primarily liable
thereunder at the time the sale pursuant to the Sale Option
is consummated, whether or not such Lessee was a party to
such Lease Supplement at the time it was entered into. The
"Sale Recourse Amount" applicable to any Lessee shall be, at
the option of the Required Lessors, (x) the aggregate
Applicable Percentage Amounts with respect to all Lease
Supplements to which such Lessee is a party or (y) the
aggregate Recourse Deficiency Amounts with respect to all
Lease Supplements to which such Lessee is a party; provided,
however, that in no event shall the Sale Recourse Amount
exceed the aggregate Supplement Balances of all Lease
Supplements to which such Lessee is a party (after taking
into account all payments of Rent and Proceeds applied
against such Supplemental Balances on the Termination Date).
Agent, on behalf of the Lessors, shall notify Lessees'
Representative in writing not later than five Business Days
prior to the Termination Date whether the Sale Recourse
Amount(s) applicable to a Lessee shall be determined
pursuant to clause (x) or clause (y) of the preceding
sentence. In addition to the amount determined to be
payable by each Lessee pursuant to the foregoing provisions
of this Section 11.1(c), such Lessee shall pay to Agent, for
the benefit of the Lessors, the applicable Administrative
Charge on the sum of the Proceeds and the Sale Recourse
Amount. The obligation of each Lessee to pay the amounts
determined pursuant to this Section 11.1(c) shall be a
recourse obligation of such Lessee and shall be payable on
the Termination Date. All amounts paid to Agent pursuant to
this Section 11.1(c) shall be distributed in accordance with
Section 11.3 of the Participation Agreement.
Section 11.2. Election of Options. Lessees' election of
the Fixed Price Purchase Option will be irrevocable at the time
made, but if Lessees fail to make a timely election, Lessees will
be deemed, in the case of the Lease Term and each Renewal Term
then in effect (other than the last Renewal Term) to have
irrevocably elected the Renewal Option and, in the case of the
last Renewal Term applicable to each Group of Vehicles, Lessees
will be deemed to have irrevocably elected the Fixed Price
Purchase Option with respect to such Group. In addition, the
Sale Option shall automatically be revoked if there exists an
Incipient Default or Event of Default at any time after the Sale
Option is properly elected and Agent shall be entitled to
exercise all rights and remedies provided in Article VIII.
Lessees may not elect the Sale Option if there exists on the date
the election is made an Event of Default or an Incipient Default.
Section 11.3. Sale Option Procedures. If Lessees elect the
Sale Option, each Lessee shall use its best commercial efforts to
obtain the highest all cash purchase price for the Vehicles
covered by Lease Supplements to which it is a party. All costs
related to such sale and delivery, including, without limitation,
the cost of sales agents, removal of the Vehicles, delivery of
documents and Vehicles, certification and testing of the Vehicles
in any location chosen by the buyer or prospective buyer, legal
costs, costs of notices, any advertisement or other similar
costs, or other information and of any parts, configurations,
repairs or modifications desired by a buyer or prospective buyer
shall be borne entirely by Lessees, without regard to whether
such costs were incurred by Agent, Lessees or any potentially
qualified buyer, and shall in no event be paid from any of the
Proceeds. Neither Agent nor any Lessor shall have any
responsibility for procuring any purchaser. If, nevertheless,
Agent, at the direction of the Required Lessors, or any Lessor,
undertakes any sales efforts, Lessees shall promptly reimburse
Agent and/or any such Lessor for any charges, costs and expenses
incurred in such effort, including any allocated time charges,
costs and expenses of internal counsel or other attorneys' fees.
Upon a sale pursuant to the Sale Option, the Vehicles shall be in
the condition required by Section 5.3 and shall have been
maintained in good appearance for comparable equipment of an
equivalent period of service. Agent, at the direction of the
Required Lessors, shall determine whether to accept the highest
all cash offer for the Vehicles, which determination shall be
made by the Required Lessors. Any purchaser or purchasers of the
Vehicles shall not in any way be affiliated with any Lessee or
Guarantor.
Section 11.4. Appraisals. If Lessees exercise the Sale
Option and the aggregate Proceeds from the sale of all Vehicles
subject to this Lease are less than the applicable Lease Balance,
Agent (upon direction from any Lessor) shall engage an appraiser
of nationally recognized standing, at Lessees' expense, to
determine (by appraisal methods satisfactory to the Lessors) the
Fair Market Value of the Vehicles that were subject to the Lease
as of (a) the first day of the Renewal Term in which the Sale
Option was elected, and (b) the Termination Date. The
Appraiser's conclusion relating to the first day of the Renewal
Term shall be used in calculating the "Recourse Deficiency
Amount." In addition, if the Appraisal concludes that the Fair
Market Value of such Vehicles as of the Termination Date was in
excess of the aggregate Proceeds from the sale of all Vehicles
subject to this Lease, Lessees shall promptly pay to Agent, for
the benefit of the Lessors, such excess, which together with such
aggregate Proceeds so paid to Lessors shall not exceed the Lease
Balance.
ARTICLE XII
OWNERSHIP, GRANT OF SECURITY
INTEREST TO AGENT AND FURTHER ASSURANCES
Section 12.1. Grant of Security Interest. Each Lessee
hereby assigns, grants and pledges to Agent, for the benefit of
the Lessors, a security interest in all of such Lessee's right,
title and interest, whether now or hereafter existing or
acquired, in the Collateral, to secure (subject to Section 4.4 of
the Participation Agreement) the payment and performance of all
obligations of Lessees or Guarantor now or hereafter existing
under this Lease or any other Operative Agreement. Each Lessee
shall, at its expense, do any further act and execute,
acknowledge, deliver, file, register and record any further
documents which Agent or any Lessor may reasonably request in
order to protect its title to and perfected security interest in
the Collateral, subject to no Liens other than Permitted Liens,
and Agent's rights and benefits under this Lease. Each Lessee
shall promptly and duly execute and deliver to Agent such
documents and assurances and take such further action as Agent or
any Lessor may from time to time reasonably request in order to
carry out more effectively the intent and purpose of this Lease
and the other Operative Agreements, to establish and protect the
rights and remedies created or intended to be created in favor of
Agent hereunder and thereunder, and to establish, perfect and
maintain the right, title and interest of Agent, for the benefit
of the Lessors, in and to the Vehicles, subject to no Lien other
than Permitted Liens, or of such financing statements or fixture
filings or other documents with respect hereto as Agent or any
Lessor may from time to time reasonably request, and Lessees
agree to execute and deliver promptly such of the foregoing
financing statements and fixture filings or other documents as
may require execution by any Lessee. Without limiting the
foregoing, on and after the date the Lessees elect or are deemed
to have elected the Fixed Price Purchase Option or the Sale
Option, Agent shall have the unconditional right to demand the
execution and delivery by each Lessee of bills of sale with
respect to the Vehicles leased by such Lessee or such
documentation as may be necessary to cause title to the Vehicles
to be recorded in the name of Agent, for the benefit of the
Lessors. To the extent permitted by applicable laws, each Lessee
hereby authorizes any such financing statements and other
documents to be filed without the necessity of the signature of
such Lessee, if such Lessee has failed to sign any such
instrument within 10 days after request therefor by Agent or any
Lessor. Upon Lessees' Representative's request, Agent shall at
such time as all of the obligations of each Lessee under this
Lease or any other Operative Agreements have been indefeasibly
paid or performed in full (other than Lessees' contingent
obligations, if any, under Articles VII and VIII of the
Participation Agreement), execute and deliver termination
statements and other appropriate documentation reasonably
requested by Lessees' Representative, all at Lessees' expense, to
evidence Agent's release of its security interest in the
Collateral. At such time, Agent shall execute and deliver to
Lessees' Representative such documents as may be reasonably
necessary (without representations or warranties except that the
Vehicles are free and clear of Lessor Liens) to release Agent's
security interest in the Vehicles.
Section 12.2. Retention of Proceeds in the Case of Default.
If any Lessee would be entitled to any amount (including any
Casualty Proceeds or Partial Casualty Proceeds) but for the
existence of any Event of Default or Incipient Default, Agent
shall hold such amount as part of the Collateral and shall be
entitled to apply such amounts against any amounts due hereunder;
provided, that Agent shall distribute such amount or transfer
such Vehicle in accordance with the other terms of this Lease if
and when no Event of Default or Incipient Default exists.
Section 12.3. Attorney-in-Fact. Each Lessee hereby
irrevocably appoints Agent as such Lessee's attorney-in-fact,
with full authority in the place and stead of such Lessee and in
the name of such Lessee or otherwise, from time to time in
Agent's discretion, upon the occurrence and during the
continuance of an Event of Default, to take any action (including
any action that such Lessee is entitled to take) and to execute
any instrument which Agent or the Required Lessors may deem
necessary or advisable to accomplish the purposes of this Lease
(subject to any limitations set forth in the Operative
Agreements), including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
money due and to become due under or in connection with the
Collateral;
(b) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection
with the foregoing clause (a);
(c) to file any claim or take any action or
institute any proceedings which Agent may deem to be
necessary or advisable for the collection thereof or to
enforce compliance with the terms and conditions of any
Collateral; and
(d) to perform any affirmative obligations any of
Lessee hereunder.
Each Lessee hereby acknowledges, consents and agrees that the
power of attorney granted pursuant to this Section 12.3 is
irrevocable and coupled with an interest.
Section 12.4. Release of Liens. Upon the replacement or
substitution of any Vehicle or Part or Sublease, or the payment
of all amounts required pursuant to Section 6.1 in connection
with a Casualty, in each case in compliance with the applicable
provisions of the Lease, such Vehicle or Part or Sublease shall
be released from the security interest created hereunder as
provided in Section 5.4(b).
ARTICLE XIII
MISCELLANEOUS
Section 13.1. No Waiver. No delay or omission in the
exercise of any right, power or remedy accruing to Agent and/or
the Lessors upon any breach or default of any Lessee hereunder
shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or an
acquiescence therein or of or in any similar breach or default
thereafter occurring, nor shall any single or partial exercise of
any right, power or remedy preclude other or further exercise
thereof, or the exercise of any other right, power or remedy, nor
shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind
or character on the part of Agent or the Lessors of any breach or
default under this Lease must be specifically set forth in
writing and must satisfy the requirements set forth in Article X
of the Participation Agreement with respect to approval by Agent
or the Lessors.
Section 13.2. Survival of Covenants. All claims pertaining
to the representations, warranties and covenants of Lessees under
Articles II, III, IV, V, VI, VII, X, XI and XIII shall survive
the termination of this Lease to the extent such claims arose
out of events occurring or conditions existing prior to any such
termination.
Section 13.3. APPLICABLE LAW. THIS LEASE SHALL BE GOVERNED
BY AND CONSTRUED UNDER THE LAWS OF CALIFORNIA, WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF.
Section 13.4. Effect and Modification of Lease. No
variation, modification, amendment or waiver of this Lease,
including any schedules or exhibits hereto, or any other
Operative Agreement to which Agent or any Lessor is a party shall
be valid unless the same shall have been entered into in
accordance with Article X of the Participation Agreement.
Section 13.5. Notices. All notices, demands, requests,
consents, approvals and other instruments hereunder shall be in
writing and shall be deemed to have been properly given if given
as provided for in Section 11.4 of the Participation Agreement.
Section 13.6. Counterparts. This Lease has been executed
in several counterparts. One counterpart has been prominently
marked "Agent's Copy". Only the counterpart marked "Agent's
Copy" shall evidence a monetary obligation of Lessees or shall be
deemed to be an original or to be chattel paper for purposes of
the Uniform Commercial Code, and such copy shall be held by
Agent.
Section 13.7. Severability. Whenever possible, each
provision of this Lease shall be interpreted in such manner as to
be effective and valid under applicable law; but if any provision
of this Lease shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Lease.
Section 13.8. Successors and Assigns; Benefit of Agreement.
This Lease shall be binding upon the parties hereto and, subject
to Sections 13.9 and 13.10 hereof, their respective successors
and assigns, and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns. It is
expressly understood and agreed that Agent is entering into this
Lease for the benefit of the Lessors, who are third party
beneficiaries of this Lease and each Lease Supplement.
Section 13.9. Assignment by Agent. Agent shall not sell,
assign, transfer or otherwise dispose of its rights or delegate
its obligations under this Lease to any other Person except as
permitted or required by the Participation Agreement.
Section 13.10. Assignment by Lessees. No Lessee shall
sell, assign, transfer or otherwise dispose of its rights or
delegate its obligations under this Lease to any other Person,
except as permitted or required by Section 5.2 hereof or the
Participation Agreement.
Section 13.11. JURY TRIAL. EACH LESSEE WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS LEASE OR ANY RELATED DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION
WITH THIS LEASE OR ANY RELATED DOCUMENT AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
Section 13.12. Section Headings; Table of Contents.
Section headings and the table of contents used in this Lease
(including the schedule) are for convenience of reference only
and shall not affect the construction of this Lease.
Section 13.13. FINAL AGREEMENT. THIS LEASE, TOGETHER WITH
THE OTHER OPERATIVE AGREEMENTS, REPRESENTS THE ENTIRE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY THE LEASE AND THE OTHER OPERATIVE AGREEMENTS.
THIS LEASE CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED, RESCINDED
OR CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO IN ACCORDANCE
WITH THE TERMS OF THE PARTICIPATION AGREEMENT. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 13.14. Timeliness of Performance. The provisions
of Articles VIII and XI pertaining to the delivery of notice and
the performance of certain events on dates required by Articles
VIII and XI are to be strictly adhered to by the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this
Lease to be executed and delivered as of the date first above
written.
CON-WAY CENTRAL EXPRESS, CON-WAY WESTERN EXPRESS,
INC., as Lessee INC.,as Lessee
By /s/Kevin C. Schick By /s/Kevin C. Schick
Name Printed: Kevin C. Schick Name Printed: Kevin C. Schick
Title:Treasurer Title: Treasurer
CON-WAY SOUTHERN EXPRESS, CON-WAY SOUTHWESTERN EXPRESS,
INC., as Lessee INC., as Lessee
By /s/Kevin C. Schick By /s/Kevin C. Schick
Name Printed: Kevin C. Schick Name Printed: Kevin C. Schick
Title: Treasurer Title: Treasurer
CON-WAY TRANSPORTATION CONSOLIDATED FREIGHTWAYS
SERVICES, INC., as Lessee CORPORATION OF DELAWARE, as
Lessee
By /s/Kevin C. Schick By /s/Robert E. Wrightson
Name Printed: Kevin C. Schick Name Printed: Robert E. Wrightson
Title: V.P. Controller
and Treasurer Title: Senior V.P.,
Controller and Treasurer
CONSOLIDATED FREIGHTWAYS, INC. CON-WAY INTERMODAL, INC. as
Lessee
as Guarantor and Lessees'
Representative
By /s/R.Guy Kraines By /s/David F. Morrison
Name Printed: R. Guy Kraines Name Printed: David F. Morrison
Title: Assistant Treasurer Title: Treasurer
BA LEASING & CAPITAL CORPORATION,
not individually, but solely
as Agent for the Lessors
By /s/Albert Z. Norona
Name Printed: Albert Z. Norona
Title: Assistant Vice President
By: /s/Sara Fitch
Name Printed: Sara Fitch
Title: Vice President
GUARANTEE
This GUARANTEE (the "Guarantee"), dated as of September 30,
1994, of CONSOLIDATED FREIGHTWAYS, INC., a Delaware corporation
(the "Guarantor"), is made in favor of BA LEASING & CAPITAL
CORPORATION, a California corporation, not individually, but
solely as agent for the benefit of the Lessors (the "Agent")
pursuant to that certain Participation Agreement, dated as of
September 30, 1994, among the Lessees identified therein,
Guarantor, Agent and the several Lessors identified therein.
Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to them in the Participation
Agreement, unless the context otherwise requires.
WHEREAS, on the date hereof, Guarantor is the direct
beneficial owner of all the issued and outstanding capital stock
of CFCD and Con-Way Transportation Services, Inc. ("CTS"), and
CTS is the direct beneficial owner of all the issued and
outstanding capital stock of each Con-Way Lessee;
AND WHEREAS, pursuant to the Lease and the Participation
Agreement, Agent has agreed, on behalf of Lessors, to purchase
the Vehicles from Lessees and concurrently leaseback such
Vehicles to Lessees pursuant to the Lease;
AND WHEREAS, Lessors are unwilling to enter into the
transactions contemplated by the Participation Agreement, and
Agent is unwilling to accept the appointment set forth in the
Participation Agreement unless Guarantor executes this Guarantee
and as an inducement to Lessors and Agent, Guarantor is entering
into this Guarantee and the guarantee provided for herein;
AND WHEREAS, it is in the best interest of Guarantor to
execute this Guarantee inasmuch as Guarantor will derive
substantial direct and indirect benefits from the transactions
contemplated by the Participation Agreement.
NOW, THEREFORE, Guarantor covenants and agrees as follows:
SECTION 1 Guarantee. Guarantor, as primary obligor and not
as surety, hereby unconditionally and irrevocably guarantees to
Agent (both individually and in its capacity as Agent), the
Lessors and each other Indemnitee and their respective successors
and assigns (individually, a "Beneficiary" and, collectively, the
"Beneficiaries") as their respective interests may appear: (a)
the due, punctual and full payment by Lessees of all amounts
(including, without limitation, amounts payable as damages in
case of default) to be paid by Lessees pursuant to the Lease, the
Participation Agreement, and/or any other Operative Agreement to
which any Lessee is or is to be a party whether such obligations
now exist or arise hereafter, as and when the same shall become
due and payable in accordance with the terms thereof; and (b) the
due, prompt and faithful performance of, and compliance with, all
other obligations, covenants, terms, conditions and undertakings
of Lessees contained in the Participation Agreement, the Lease or
any other Operative Agreements to which any of them is or is to
be a party in accordance with the terms thereof (such obligations
referred to in clauses (a) and (b) above being hereinafter called
the "Obligations"). Guarantor further agrees to pay any and all
costs and expenses (including reasonable fees and disbursements
of counsel) that may be paid or incurred by any Beneficiary in
collecting any Obligations and/or in preserving or enforcing any
rights under this Guarantee or under the Obligations.
The Guarantee is a guaranty of payment, performance and
compliance and not of collectability, is in no way conditioned or
contingent upon any attempt to collect from or enforce
performance or compliance by any Lessee or upon any other event,
contingency or circumstance whatsoever, and shall be binding upon
and against Guarantor without regard to the validity or
enforceability of the Lease, the Participation Agreement or any
other Operative Agreement.
If for any reason whatsoever Lessees shall fail or be unable
duly, punctually and fully to pay such amounts as and when the
same shall become due and payable or to perform or comply with
any such obligation, covenant, term, condition or undertaking,
Guarantor will immediately pay or cause to be paid such amounts
to the Person or Persons entitled to receive the same (according
to their respective interests) under the terms of the Operative
Agreements, as appropriate, or perform or comply with any such
obligation, covenant, term, condition or undertaking or cause the
same to be performed or complied with, together with interest on
any amount due and owing from the date the same shall have become
due and payable to the date of payment.
SECTION 2 Guarantor's Obligations Unconditional. The
covenants and agreements of Guarantor set forth in this Guarantee
shall be primary obligations of Guarantor, and such obligations
shall be continuing, absolute and unconditional, shall not be
subject to any counterclaim, setoff, deduction, diminution,
abatement, recoupment, suspension, deferment, reduction or
defense (other than full and strict compliance by Guarantor with
its obligations hereunder), whether based upon any claim that any
Lessee, Guarantor, or any other Person may have against any
Beneficiary or any other Person or otherwise, and shall remain in
full force and effect without regard to, and shall not be
released, discharged or in any way affected by, any circumstance
or condition whatsoever (whether or not Guarantor or any Lessee
shall have any knowledge or notice thereof) including, without
limitation:
(a) any amendment, modification, addition, deletion,
supplement or renewal to or of or other change in the
Obligations or any Operative Agreement or any of the
agreements referred to in any thereof, or any other
instrument or agreement applicable to any Operative
Agreement or any of the parties to such agreements, or
to the Vehicles, or any assignment, mortgage or
transfer thereof or of any interest therein, or any
furnishing or acceptance of additional security for,
guaranty of or right of offset with respect to, any of
the Obligations; or the failure of any security or the
failure of any Beneficiary to perfect or insure any
interest in any collateral; or the release or surrender
of possession by any Beneficiary of any collateral
(including without limitation any Certificate of
Title);
(b) any failure, omission or delay on the part of Lessees
or any Beneficiary to conform or comply with any term
of any instrument or agreement referred to in clause
(a) above;
(c) any waiver, consent, extension, indulgence, compromise,
release or other action or inaction under or in respect
of any instrument, agreement, guaranty, right of offset
or security referred to in clause (a) above or any
obligation or liability of Lessees or any Beneficiary,
or any exercise or non-exercise by any Beneficiary of
any right, remedy, power or privilege under or in
respect of any such instrument, agreement, guaranty,
right of offset or security or any such obligation or
liability;
(d) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or
similar proceeding with respect to any Lessee, any
Beneficiary or any other Person or any of their
respective properties or creditors, or any action taken
by any trustee or receiver or by any court in any such
proceeding;
(e) any limitation on the liability or obligations of any
Person under the Lease or any other Operative
Agreement, the Obligations, any collateral security for
the Obligations or any other guaranty of the
Obligations or any discharge, termination,
cancellation, frustration, irregularity, invalidity or
unenforceability, in whole or in part, of any of the
foregoing, or any other agreement, instrument, guaranty
or security referred to in clause (a) above or any term
of any thereof;
(f) any defect in the title, compliance with
specifications, condition, design, operation or fitness
for use of, or any damage to or loss or destruction of,
or any interruption or cessation in the use of the
Vehicles by Lessees or any other Person for any reason
whatsoever (including, without limitation, any
governmental prohibition or restriction, condemnation,
requisition, seizure or any other act on the part of
any governmental or military authority, or any act of
God or of the public enemy) regardless of the duration
thereof (even though such duration would otherwise
constitute a frustration of a lease), whether or not
resulting from accident and whether or not without
fault on the part of Lessee or any other Person;
(g) any merger or consolidation of any Lessee or Guarantor
into or with any other Person or any sale, lease or
transfer of any of the assets of any Lessee or
Guarantor to any other Person;
(h) any change in the ownership of any shares of capital
stock of any Lessee, or any corporate change in any
Lessee; or
(i) any other occurrence or circumstance whatsoever,
whether similar or dissimilar to the foregoing and any
other circumstance that might otherwise constitute a
legal or equitable defense or discharge of the
liabilities of a guarantor or surety or that might
otherwise limit recourse against Guarantor.
The obligations of Guarantor set forth herein constitute the
full recourse obligations of Guarantor enforceable against it to
the full extent of all its assets and properties, notwithstanding
any provision in the Participation Agreement or any other
agreements limiting the liability of any Beneficiary or any other
Person, or any agreement by any Lessor to look for payment with
respect thereto, solely to the Collateral.
SECTION 3 Waiver and Agreement. Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by any
Beneficiary upon this Guarantee or acceptance of this Guarantee,
and the Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred in reliance
upon this Guarantee. Guarantor unconditionally waives, to the
extent permitted by law: (a) acceptance of this Guarantee and
proof of reliance by any Beneficiary hereon; (b) notice of any of
the matters referred to in Section 2 hereof, or any right to
consent or assent to any thereof; (c) all notices that may be
required by statute, rule of law or otherwise, now or hereafter
in effect, to preserve intact any rights against Guarantor,
including without limitation, any demand, presentment, protest,
proof or notice of nonpayment under the Participation Agreement,
the Lease or any other Operative Agreement, and notice of default
or any failure on the part of any Lessee to perform and comply
with any covenant, agreement, term or condition of the
Participation Agreement, the Lease or any other Operative
Agreement; (d) any right to the enforcement, assertion or
exercise against any Lessee of any right, power, privilege or
remedy conferred in the Participation Agreement, the Lease or any
other Operative Agreement or otherwise; (e) any requirement of
diligence on the part of any Person; (f) any requirement of any
Beneficiary to take any action whatsoever, to exhaust any
remedies or to mitigate the damages resulting from a default by
any Person under the Participation Agreement, the Lease or any
other Operative Agreement; (g) any notice of any sale, transfer
or other disposition by any Person of any right under, title to
or interest in the Participation Agreement, the Lease any other
Operative Agreement or the Collateral; (h) any and all benefits
under California Civil Code Sections 2809, 2810, 2819, 2822,
2825, 2845, 2846, 2847, 2848, 2849, 2850, 2899 and 3433 and
California Code of Civil Procedure Sections 580a, 580b, 580d and
726; and (i) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge, release or
defense of a guarantor or surety, or that might otherwise limit
recourse against Guarantor.
Guarantor agrees that this Guarantee shall be automatically
reinstated if and to the extent that for any reason any payment
by or on behalf of Lessees is rescinded or must be otherwise
restored by any of the Beneficiaries, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise.
Guarantor further agrees that, without limiting the
generality of this Guarantee, if an Event of Default shall have
occurred and be continuing and Agent is prevented by applicable
law from exercising its remedies under the Lease, Agent shall be
entitled to receive hereunder from Guarantor, upon demand
therefor, the sums which would have otherwise been due from
Lessees had such remedies been exercised.
SECTION 4 Waiver of Subrogation. Guarantor hereby
irrevocably waives any claim or other rights which it may now or
hereafter acquire against any Lessee that arise from the
existence, payment, performance or enforcement of Guarantor's
obligations under this Guarantee or any other Operative Document,
including any right of subrogation, reimbursement, exoneration,
or indemnification, any right to participate in any claim or
remedy of the Beneficiaries against any Lessee or any Collateral
which Agent now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract,
statute or common law, including the right to take or receive
from any Lessee, directly or indirectly, in cash or other
property or by set-off or in any manner, payment or security on
account of such claim or other rights. If any amount shall be
paid to Guarantor in violation of the preceding sentence and the
Obligations shall not have been indefeasibly paid in cash, such
amount shall be deemed to have been paid to Guarantor for the
benefit of, and held in trust for, the Beneficiaries, and shall
forthwith be paid to Agent to be credited and applied pursuant to
the terms of the Participation Agreement and the Lease.
Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the
Participation Agreement and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits.
Guarantor hereby absolutely, unconditionally and irrevocably
waives and agrees not to assert or take advantage of any defense
based upon an election of remedies by Agent, including an
election to proceed by non-judicial rather than judicial
foreclosure, which destroys or impairs any right of subrogation
of Guarantor or the right of Guarantor to proceed against any
Person for reimbursement or both.
SECTION 5 Rights of the Beneficiaries. This Guarantee is
made for the benefit of, and shall be enforceable by, each
Beneficiary as its interest may appear.
SECTION 6 Term of Guarantee. This Guarantee and all
guaranties, covenants and agreements of Guarantor contained
herein shall continue in full force and effect and shall not be
discharged until such time as all the Obligations shall be
indefeasibly paid in full in cash and all the agreements of
Lessees and Guarantor hereunder and under the Lease, the
Participation Agreement and the other Operative Documents shall
have been duly performed. If, as a result of any bankruptcy,
dissolution, reorganization, insolvency, arrangement or
liquidation proceedings (or proceedings similar in purpose or
effect) or if for any other reason, any payment received by any
Beneficiary in respect of the Obligations is rescinded or must be
returned by such Beneficiary, this Guarantee shall continue to be
effective as if such payment had not been made and, in any event,
as provided in the preceding sentence.
SECTION 7 Notices, Amendments, etc. All notices, demands,
requests, consents, approvals and other instruments hereunder
shall be in writing and shall be deemed to have been properly
given if given as provided for in Section 11.4 of the
Participation Agreement. No provision of this Guarantee may be
amended, modified, supplemented or waived except as provided in
Section 10.1 of the Participation Agreement.
SECTION 8 Severability of this Guarantee. In case any
provisions of this Guarantee or any application thereof shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions and statements and any
other application thereof shall not in any way be affected or
impaired thereby. To the extent permitted by law, Guarantor
hereby waives any provision of law that renders any term or
provision hereof invalid or unenforceable in any respect.
SECTION 9 Further Assurances. Guarantor hereby agrees to
execute and deliver all such instruments and take all such action
as Agent or any other Beneficiary may from time to time
reasonably request in order to fully effectuate the purposes of
this Guarantee.
SECTION 10 Miscellaneous. THIS GUARANTEE SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICT
OF LAWS PRINCIPLES OF SUCH STATE. This Guarantee shall be
binding upon Guarantor and its successors, transferees and
assigns and inure to the benefit of and be enforceable by the
respective successors, transferees, and assigns of the
Beneficiaries, provided, however, that Guarantor may not assign
any of its obligations hereunder without the prior written
consent of Agent and each Lessor. The table of contents and
headings in this Guarantee are for purposes of reference only,
and shall not limit or otherwise affect the meaning hereof. This
Guarantee may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each executed
counterpart constituting an original, but all of which together
shall constitute one agreement.
IN WITNESS WHEREOF, Guarantor has caused this Guarantee to
be executed as of the date first above written.
CONSOLIDATED FREIGHTWAYS, INC.
By: /s/ R. Guy Kraines
Name Printed: R. Guy Kraines
Title: Assistant Treasurer
COLLATERAL AGENCY AGREEMENT
THIS COLLATERAL AGENCY AGREEMENT ("Agreement"), dated as of
October 21, 1994, is by and among (a) Con-Way Central Express,
Inc., a Delaware corporation, Con-Way Intermodal, Inc., a
Delaware corporation, Con-Way Southern Express, Inc., a Delaware
corporation, Con-Way Southwest Express, Inc., a Delaware
corporation, Con-Way Transportation Services, Inc., a Delaware
corporation, Con-Way Western Express, Inc., a Delaware
corporation, and Consolidated Freightways Corporation of
Delaware, a Delaware corporation, as Lessees (each a "Lessee" and
collectively, the "Lessees"), (b) Consolidated Freightways, Inc.,
a Delaware corporation, as Lessees' Representative ("Lessees'
Representative"), (c) the Lessors listed on Schedule I to the
Participation Agreement (as defined in Section 1.1) (the
"Lessors"), (d) BA Leasing & Capital Corporation, a California
corporation, not in its individual capacity, but solely in its
capacity as agent ("Agent") for the benefit of the Lessors and
First Interstate Bank of Oregon, N.A.("Bank"), as collateral
agent for Agent (the "Collateral Agent"). Terms used herein and
not defined herein shall have the meanings assigned such terms in
the Participation Agreement.
RECITALS
1. WHEREAS, Lessees now own, and will from time to time
hereafter acquire, certain Vehicles, which Vehicles may from time
to time be subject to the Lease;
2. WHEREAS, Lessees have granted to Agent on behalf of the
Lessors a Lien upon the Vehicles and Lessees have agreed that the
Collateral Agent shall have possession of the Certificates of
Title related to the Vehicles on behalf of and for the benefit of
Agent; and
3. WHEREAS, Bank has agreed to act as Collateral Agent, for
the benefit of Agent and the Lessors.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION I
CERTAIN DEFINITIONS
Section I.1 Certain Definitions. As used in this
Agreement, the following terms have the following meanings.
"Agreement" means this Collateral Agency Agreement, as
it may be amended, modified or supplemented from time to
time in accordance with its terms and the terms of the
Participation Agreement.
"Collateral Agent" has the meaning set forth in the
preamble, and includes any successor to Bank in its capacity
as Collateral Agent.
"Corporate Trust Office" means the principal corporate
trust office of the Collateral Agent, located at: First
Interstate Bank of Oregon, N.A., Trust Loan Servicing MP-2,
2701 N.W. Vaughn St., Portland, Oregon 97210, or at such
other address as the Collateral Agent may designate from
time to time by notice to Lessees' Representative and Agent.
"Participation Agreement" means that certain
Participation Agreement, dated as of September 30, 1994,
among Lessees, Lessees' Representative, Agent and the
Lessors listed on Schedule I thereto, as such agreement may
be amended, modified or supplemented from time to time in
accordance with its terms.
"Release Notice" has the meaning set forth in Section
5.1.
Section I.2 Interpretation and Construction. Unless the
context of this Agreement otherwise clearly requires, references
to the plural include the singular, to the singular include the
plural and to the part include the whole. The words "hereof",
"herein", "hereunder" and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision
of this Agreement. Unless otherwise stated in this Agreement, in
the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including"
and the words "to" and "until" each means "to but excluding".
Sections and other headings contained in this Agreement are for
reference purposes only and shall not control or effect the
construction of this Agreement or the interpretation hereof in
any respect. Section, subsection and exhibit references are to
this Agreement unless otherwise specified. As used in this
Agreement, the masculine, feminine or neuter gender shall each be
deemed to include the others whenever the context so indicates.
Terms not otherwise defined herein which are defined in the UCC
as in effect in the state of California on the date hereof shall
have the respective meanings as described as such terms therein
unless the context otherwise clearly requires.
SECTION II
APPOINTMENT AND DUTIES OF COLLATERAL AGENT
Section II.1 Appointment. Lessors and Agent hereby appoint
Bank as their Collateral Agent under and for purposes of this
Agreement. Lessors and Agent authorize the Collateral Agent to
act their behalf under this Agreement and to exercise such powers
hereunder as are specifically delegated to or required of the
Collateral Agent by the terms hereof and with such powers as may
be reasonably incidental thereto. Bank hereby accepts such
appointment and agrees that all of its right, title and interest
in and to the Certificates of Title shall be solely for the
benefit of Agent and the Lessors. The Collateral Agent shall
take all instructions hereunder from Agent, on behalf of the
Lessors. Lessees and Lessees' Representative hereby acknowledge
and accept the appointment of Bank as Collateral Agent under, and
for purposes of, this Agreement. The Collateral Agent shall not
be required to take any action other than as expressly set forth
herein, or to prosecute or defend any suit in respect of this
Agreement, unless it is indemnified to its satisfaction.
Section II.2 Possession of Certificates of Title. The
Collateral Agent shall maintain physical possession of the
Certificates of Title at its Corporate Trust Office in a secure,
fire-proof location, except as otherwise specified herein, as
custodian and bailee for the benefit of Agent and the Lessors.
The Collateral Agent shall segregate such Certificates of Title
in such a way that they may be readily identified and separated
from other certificates of title that the Collateral Agent may
hold. The Collateral Agent shall permit each Lessee (and any
representatives on their behalf) and Agent to inspect and make
copies of the Certificates of Title during normal business hours.
Section II.3 Agent to Provide Schedules. Agent shall
provide to the Collateral Agent from time to time notices (each
such notice a "Title Notice") attaching lists of Certificates of
Title to be held by the Collateral Agent pursuant to this
Agreement and to be delivered to the Collateral Agent by a date
specified in such Title Notice. Each list of Certificates of
Title attached to a Title Notice shall include the vehicle
identification number of each Vehicle and shall be organized by
state listing all Vehicles titled in each relevant state.
Section II.4 Collateral Agent to Provide Confirmation of
Receipt and Lien. Upon receipt of any Certificate of Title
(including any receipt of a Certificate of Title released on a
temporary basis pursuant to a Release Notice and subsequently
returned), the Collateral Agent shall immediately inspect such
Certificate of Title to confirm that (i) such Certificate of
Title is listed in a Title Notice or Release Notice and that the
Lessee designated as the owner of the relevant Vehicle in such
Title Notice or Release Notice is shown as the owner on such
Certificate of Title, (ii) the Lien of Agent (or of Agent and
Lessors) is properly reflected thereon in accordance with the
form of Certificate of Title for the relevant state set forth in
Exhibit A hereto (or such form for any additional state as Agent
may deliver to the Collateral Agent from time to time), and
(iii) no other Lien is reflected thereon. The Collateral Agent
shall notify Lessees' Representative and Agent immediately if any
matter set forth in preceding sentence is not true with respect
to any Certificate of Title, whereupon Lessees shall immediately
take such steps as are necessary in order to comply with the
terms of the Participation Agreement with respect to such
Certificate of Title. Not later than the date specified in the
applicable Title Notice or Release Notice, the Collateral Agent
shall provide to Agent and Lessees' Representative a report (a
"Summary Report"), which Summary Report shall:
(a) state that (except as disclosed pursuant to
paragraphs (b), (c) and (d) below) it has received all of
the Certificates of Title listed on the applicable Title
Notice or Release Notice and that each such Certificate of
Title names Agent (or Agent and the Lessors) as the only
lienholder(s),
(b) identifying any such Certificates of Title that it
has not received,
(c) identifying any such Certificates of Title on
which the lien of Agent (or of Agent and Lessors) is not
reflected, and
(d) identifying any such Certificates of Title on
which any lien other than the lien of Agent (or of Agent and
Lessors) is reflected.
Except as provided in this Section 2.4, the Collateral Agent
shall not be responsible for reviewing or correcting any
Certificates of Title that it receives.
Section II.5 Delivery of Certificates of Title. The
Collateral Agent shall deliver to Agent any Certificate or
Certificates of Title immediately upon Agent's request therefor.
SECTION III
EXPENSES; INDEMNITY
Section III.1 Compensation and Expenses. Lessees shall pay
to the Collateral Agent and any successor Collateral Agent
appointed hereunder, from time to time (i) reasonable
compensation for its services hereunder for administering the
Collateral generally as set forth on Schedule I hereto and (ii)
all reasonable fees and out-of-pocket expenses of the Collateral
Agent or any such successor Collateral Agent, (A) arising in
connection with the preparation, execution, delivery,
modification and/or termination of this Agreement and/or the
enforcement of any of the provisions hereof or (B) incurred in
connection with the administration of the Collateral and/or the
preservation, protection or defense of the Collateral Agent's, or
any such successor Collateral Agent's, rights under this
Agreement and in and to the Collateral.
Section III.2 Stamp and Other Similar Taxes. Lessees shall
indemnify and hold harmless the Collateral Agent from any present
or future claim for liability for any stamp or other similar tax
and any penalties or interest with respect thereto, that may be
assessed, levied or collected by any jurisdiction in connection
with this Agreement or any Collateral.
Section III.3 Filing Fees, Excise Taxes, Etc. Lessees
shall pay, or reimburse the Collateral Agent for, any and all
amounts in respect of, all search, filing, recording and
registration fees, taxes, excise taxes and other similar imposts
that may be payable or determined to be payable in respect of the
execution, delivery, performance and/or enforcement of this
Agreement.
Section III.4 Indemnification. Lessees shall pay, and
indemnify (which indemnity shall survive the termination of this
Agreement and the resignation or replacement of Bank as
Collateral Agent) and hold the Collateral Agent harmless from and
against, any and all liabilities, obligations, losses, damages,
claims, costs or expenses of any kind or nature whatsoever that
may at any time be imposed on, incurred by, or asserted against,
the Collateral Agent in any way relating to or arising out of the
execution, delivery, enforcement, performance and/or
administration of this Agreement, including reasonable attorneys'
fees and expenses; provided, however, that Lessees shall not be
liable for the payment of any portion of such liabilities,
obligations, losses, damages, claims, costs or expenses of the
Collateral Agent that resulted from the Collateral Agent's gross
negligence or willful misconduct.
SECTION IV
THE COLLATERAL AGENT
Section IV.1 Representations of Collateral Agent. Bank
hereby represents and warrants that (i) it is a national bank,
duly organized under the laws of the United States and validly
existing and in good standing under the laws of the State of
Oregon and has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement,
(ii) it has all licenses, consents and approvals (governmental,
regulatory and otherwise) to enter into and perform its
obligations under this Agreement, and (iii) the execution,
delivery and performance by it of this Agreement have been duly
authorized by all necessary corporate action on its part, and
this Agreement is the legal, valid and binding obligation of
Bank, enforceable against it in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors'
rights generally and by the application of equitable principles.
Section IV.2 Limitations on Duties of the Collateral Agent.
(a) The Collateral Agent undertakes to perform only the
duties expressly set forth herein.
(b) The Collateral Agent may exercise the rights and powers
granted to it by this Agreement, together with such powers as are
reasonably incidental thereto, but only pursuant to the terms of
this Agreement, and the Collateral Agent shall not be liable with
respect to any action taken or omitted by it in accordance with
the direction of Agent.
(c) The Collateral Agent shall not be under any obligation
to take any action that is discretionary on the part of the
Collateral Agent under the provisions hereof. The Collateral
Agent shall make available for inspection and copying by Agent
each certificate or other paper furnished to the Collateral Agent
by Lessees or Lessees' Representative under or in respect of this
Agreement or in respect of any of the Collateral.
(d) The Collateral Agent shall have no authority to grant,
convey or assign the Certificates of Title or change the notation
of a security interest thereon or deal with the Certificates of
Title in any other way except as expressly provided herein or as
directed by Agent.
Section IV.3 Resignation and Removal of Collateral Agent.
(a) The Collateral Agent may, at any time with or without
cause by giving 60 days' prior written notice to Lessees'
Representative and Agent, resign and be discharged of the
responsibilities hereby created, such resignation to become
effective upon the appointment of a successor Collateral Agent by
Agent, with the consent of Lessees' Representative, which consent
shall not be unreasonably withheld or delayed, and the acceptance
of such appointment by such successor Collateral Agent. The
Collateral Agent may be removed at any time (with or without
cause) and a successor Collateral Agent appointed by Agent, with
the consent of Lessees' Representative, which consent will not be
unreasonably withheld or delayed, provided that the Collateral
Agent shall be entitled to its reasonable fees and expenses to
the date of removal (if the Collateral Agent is removed without
cause), and the indemnification of Section 3.4 shall survive the
termination of the other provisions of this Agreement to the
benefit of the predecessor Collateral Agent. If no successor
Collateral Agent shall be appointed and approved within 30 days
from the date of the giving of the aforesaid notice of
resignation or within 30 days from the date of such removal, the
Collateral Agent or Agent may apply to any court of competent
jurisdiction to appoint a successor Collateral Agent to act until
such time, if any, as a successor Collateral Agent shall have
been appointed as above provided. Any successor Collateral Agent
so appointed by such court shall immediately and without further
act supersede any predecessor Collateral Agent.
(b) If at any time the Collateral Agent shall resign or
otherwise become incapable of acting, or if at any time a vacancy
shall occur in the office of the Collateral Agent for any other
cause, a successor Collateral Agent shall be appointed by Agent,
with the consent of Lessees' Representative, which consent will
not be unreasonably withheld or delayed, and the powers, duties,
authority and title of the predecessor Collateral Agent shall be
terminated and cancelled without procuring the resignation of
such predecessor Collateral Agent, and without any other
formality (except as may be required by applicable law) than
appointment and designation of a successor Collateral Agent in
writing, duly acknowledged, delivered to the predecessor
Collateral Agent and Lessees' Representative.
(c) The appointment and designation referred to in
Section 4.3(b) shall be full evidence of the right and authority
to make the same and of all the facts therein recited, and this
Agreement shall vest in such successor Collateral Agent, without
any further act, deed or conveyance, all of the estate and title
of its predecessors and the successor Collateral Agent shall
become fully vested with all the estates, properties, rights,
powers, trusts, duties, authority and title of its predecessors;
but any predecessor Collateral Agent shall, nevertheless on
payment of its charges and on the written request of Agent,
Lessees' Representative or any successor Collateral Agent
empowered to act as such at the time any such request is made,
execute and deliver an instrument without recourse or
representation transferring to such successor all the estates,
properties, rights, powers, trusts, duties, authority and title
of such predecessor hereunder and shall deliver all securities
and moneys held by it to such successor Collateral Agent. Should
any deed, conveyance or other instrument in writing from Lessees
be required by any successor Collateral Agent for more fully
vesting in such successor Collateral Agent the estates,
properties, rights, powers, trusts, duties, authority and title
vested or intended to be vested in the predecessor Collateral
Agent, any and all such deeds, conveyances and other instruments
in writing shall, on request of such successor Collateral Agent,
be executed, acknowledged and delivered by Lessees.
Section IV.4 Status of Successors to Collateral Agent.
Every successor to the Collateral Agent appointed pursuant to
Section 4.3 shall be a bank or trust company in good standing and
having power so to act and incorporated under the laws of the
United States or any State thereof or the District of Columbia,
and shall also have capital, surplus and undivided profits of not
less than $75,000,000, if there be such an institution with such
capital, surplus and undivided profits willing, qualified and
able to accept the trust upon reasonable or customary terms.
Section IV.5 Merger of the Collateral Agent. Any
corporation into which the Collateral Agent may be merged, or
with which it may be converted or consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Collateral Agent shall be a party
shall be the Collateral Agent under this Agreement without the
execution or filing of any paper or any further act on the part
of the parties hereto; provided that such resulting corporation
shall satisfy the provisions of Section 4.4.
Section IV.6 Indemnity for Lost Documents. Notwithstanding
any other provision of this Agreement, the Collateral Agent shall
indemnify Lessees, Agent and Lessors for, and hold Lessees, Agent
and Lessors harmless against, any losses, liabilities, claims and
damages that such person may incur as a result of the loss,
misplacement, destruction or mutilation of any Certificate of
Title that was previously delivered to the Collateral Agent and
not released by the Collateral Agent in accordance with this
Agreement.
Section IV.7 Collateral Agent Looks Solely to Lessees. The
Collateral Agent expressly acknowledges and agrees that neither
Agent nor any Lessor shall have any obligation or liability to
the Collateral Agent in respect of this Agreement, and the
Collateral Agent's sole recourse under this Agreement shall be to
Lessees.
SECTION V
RELEASE OF CERTIFICATES OF TITLE
Section V.1 Releases of Certificates of Title. From time
to time, the Collateral Agent may release one or more
Certificates of Title to Lessee's Representative upon the written
instructions of Agent (a "Release Notice"), it being understood
that Agent shall deliver a Release Notice with respect to any
Certificate of Title which under the applicable provisions of any
other Operative Agreement is entitled to be released, provided
that the terms of such release shall conform to such provisions
of the other Operative Agreement. Each Release Notice shall
specify, with respect to any Certificate of Title, whether such
Certificate of Title is to be released (a) permanently, (b)
temporarily, and if so, the date by which it is to be returned,
or (c) for replacement or substitution, and if so, identifying
the Certificate of Title that is to be delivered in replacement
or substitution therefor and the date by which such new
Certificate of Title is to be received.
Section 5.2 Termination of this Agreement. Upon receipt by
the Collateral Agent of a notice from Agent that all obligations
of Lessees under the Operative Agreements have been fully paid
and satisfied, the rights of Agent and Lessors hereunder shall
terminate and the Collateral Agent shall hold all Certificates of
Title for the benefit of Lessees and shall take such other action
with respect thereto as Lessees' Representative shall request.
Upon receipt by the Collateral Agent of a notice from Agent,
which notice shall set forth a representation from Agent that the
giving of such notice is permitted pursuant to the Participation
Agreement, to the effect that Agent has elected to terminate this
Agreement with respect to the Certificates of Title, this
Agreement shall terminate with respect to such Certificates of
Title. Upon such termination the Collateral Agent shall deliver
the applicable Certificates of Title to the Person designated in
such notice, and shall take such other action as Agent shall
request to evidence the termination of this Agreement with
respect to the Certificates of Title and the Collateral Agent's
interest therein, at Lessees' expense.
SECTION VI
MISCELLANEOUS
Section VI.1 Amendments, Supplements and Waivers. This
Agreement may be amended, waived or supplemented pursuant to a
writing executed by the Collateral Agent, Agent and Lessees'
Representative, it being understood that the execution and
delivery by Agent of any such writing shall be subject to the
provisions of the Participation Agreement.
Section VI.2 Notices. All notices, requests, demands and
other communications provided for or permitted hereunder shall,
unless otherwise stated herein, be in writing (including telex
and facsimile communications) and shall be sent by mail (by
registered or certified mail, return receipt requested), telex,
facsimile or hand delivery (a) if to the Collateral Agent, at
the address set forth below:
First Interstate Bank of Oregon, N.A.
U.S. Corporate, T-19
1300 S.W. Fifth Ave.
Portland, OR 97201
Fax: (503) 225-4898
Attention: Ronald J. Kallis,
Vice President & Senior
Relationship Manager
and (b) in the case of each other party hereto, at the address
for such party set forth in the Participation Agreement, or
(c) in any case, at such other address as shall be designated by
such party in a written notice to each other party hereto. Any
notice, if mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, or if
transmitted by facsimile shall be deemed given when received.
Section VI.3 Headings. Section, subsection and other
headings used in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
Section VI.4 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section VI.5 Counterparts. This Agreement may be executed
in separate counterparts and by the different parties on
different counterparts, each of which shall be an original and
all of which taken together shall constitute one and the same
instrument.
Section VI.6 Conflicts with Operative Agreements. The
parties agree that in the event of any conflict between the
provisions of this Agreement and the provisions of any other
Operative Agreement, the provisions of such other Operative
Agreement shall control.
Section VI.7 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of each of the parties
hereto and shall inure to the benefit of Agent and Lessors and
their respective successors and assigns, and nothing herein is
intended or shall be construed to give any other Person any
right, remedy or claim under, to or in respect of this Agreement
or the Collateral.
Section VI.8 Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO ANY
OTHERWISE APPLICABLE CONFLICT OF LAWS PRINCIPLES.
Section VI.9 Effectiveness. This Agreement shall become
effective on the execution and delivery hereof and shall remain
in effect so long as the Collateral Agent shall have any
obligations hereunder.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, each party hereto has executed this
Agreement or caused this Agreement to be duly executed by its
officer thereunto duly authorized as of the day and year first
above-written.
FIRST INTERSTATE BANK OF
OREGON, N.A., CONSOLIDATED FREIGHTWAYS, INC.,
as Collateral Agent as Lessees' Representative
By:/s/ Ronald J. Kallis By: /s/R. Guy Kraines
Name Printed: Ronald J. Kallis Name Printed: R. Guy Kraines
Title:Vice President Title: Assistant Treasurer
CON-WAY CENTRAL EXPRESS, CON-WAY WESTERN EXPRESS,
INC., as Lessee INC.,as Lessee
By /s/David F. Morrison By /s/David F. Morrison
Name Printed: David F. Morrison Name Printed: David F. Morrison
Title: Assistant Treasurer Title: Assistant Treasurer
CON-WAY SOUTHERN EXPRESS, CON-WAY SOUTHWESTERN EXPRESS,
INC., as Lessee INC., as Lessee
By /s/David F. Morrison By /s/David F. Morrison
Name Printed: David F. Morrison Name Printed: David F. Morrison
Title: Assistant Treasurer Title: Assistant Treasurer
CON-WAY INTERMODAL, INC., CON-WAY TRANSPORTATION
as Lessee SERVICES, INC., as Lessee
By /s/David F. Morrison By /s/David F. Morrison
Name Printed: David F. Morrison Name Printed: David F.
Morrison
Title: Assistant Treasurer Title: Assistant Treasurer
CONSOLIDATED FREIGHTWAYS BA LEASING & CAPITAL CORPORATION,
CORPORATION OF DELAWARE, not in its individual capacity,
but
as Lessee solely as agent for the Lessors
By/s/David F. Morrison By/s/James F. Simpson
Name Printed: David F. Morrison Name Printed: James F. Simpson
Title: Assistant Treasurer Title: Vice President
LESSORS:
BA LEASING & CAPITAL ABN AMRO BANK N.V.
CORPORATION
By /s/James F. Simpson By /s/Diane D. Waggoner
Name Printed: James F. Simpson Name Printed: Diane D. Waggoner
Title:Vice President Title: Vice President
By /s/Kim Lee By /s/J.P Kranendonk
Name Printed: Kim Lee Name Printed: J.P. Kranendonk
Title: Assistant Vice President Title: Assistant Vice President
IBJTC LEASING CORPORATION CREDIT LYONNAIS
Cayman Island Branch
By /s/Hiroshi Suzuki By /s/Thierry F. Vincent
Name Printed: Hiroshi Suzuki Name Printed: Thierry F. Vincent
Title: Senior Vice President Title: Authorized Signatory
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